Transcripts For CNBC Squawk On The Street 20240714

Tariffs yet. China and the u. S. Reach a truce and stocks are set to surge at the open we do have those new records within striking distance plus, President Trump easing restrictions on u. S. Companies from selling products to, of course, the Chinese Telecom giant Huawei Semiconductor stocks are rallying sharply ahead of the bell on that news. And oil prices, well, theyre up, this after russia and saudi arabia agree to extend opecs deal to cut Oil Production by another 6 to 9 months. Stocks rising around the globe the s p 500 poised to open at a record high after the u. S. And china agree to resume trade talks. President donald trump offered concessions to his chinese counterpart xi jinping over the weekend, when they met at the sidelines of the g20 summit in japan. They include no new tariffs, and an easing of restrictions on the Huge Technology Telecom Company huawei china did agree to make what are unspecified new purchases of u. S. Farm products and return to the negotiating table. Jim, some are saying, well, we didnt really get anything for giving up, we tide huawei clearly in here. And it is somewhat confusing as to what companies are able to sell to huawei now and not able to how you make decisions in terms of your longterm relationship there, given the back and forth but overall, of course, it is beingresponded to positively because we do have the prospect of new talks designed to actually reach an agreement. I think that even the president s people, many of them, didnt know that this huawei exemption would occur i think there were many people who felt this was the line in the sand about 5g. There would not be a deal on huawei because we were going to disable their opportunity to be a 5g force i think the president shocked people his own people, by saying, hey, were cool on that what do you do if youre a Semiconductor Company and youve been trying to adjust to the new world, where essentially you were not going to be able to sell to them any longer. They bought 11 billion worth of chips and other components from, i believe, it is u. S. Manufacturers. What do you do some are still some, of course, because the National Security side of it, you still cant. But others that arent, i dont know where you draw the line or how you draw the line in terms of what represents a National Security threat and what doesnt. I dont think they know, but i do think were lucky enough to have an unbelievably clear conference call. 200 million this quarter was suspended because of huawei. The vast majority of it they felt going to come right back. So, yes, the semiconductor rally is worthwhile. And i think that the one that i think david, if you want to know, well, the analysts want you to buy nxpi, less than important there. Clearly you should buy micron. It does matter they said year over year, a big increase in dram, even bigger perhaps than flash but, david, nvidia, nvidia and melon knox, wouldnt that be the natural if the chinese are something to give is to approve melon knox and thats why nvidia is up almost more than every other stock. Amazing how many things do get wound into it is vast. Lets talk about the broader ramifications. We see the market up this morning, we see oil up in part on that opec deal, but also because of just this belief that you potentially are going to have demand growth. Then on the other side, you probably have people saying, maybe the fed doesnt need to go 50 anymore, maybe it goes 25 basis points in this month were in july now. Maybe the way people say im monitoring, of course, you need to see the employment number but, look, it is a Huge Positive i always want to caution people that, yes, Everybody Knows that last 25 was unnecessary. The last raise. The last raise. Late last year. None of the numbers that we have been seeing is strong theyre not strong pmi is not good. Retail is not good we have animal spirits related to china obviously apple, it seems likely that apple will not be as hurt that was big win for apple the president said that hes heard from american manufacturers that mostly huawei i think mostly apple i think apple, it is a huge winner but i dont think, david, that at any time you can say this necessarily improves u. S. Economy. I think there are people who felt the next round of tariffs could impact lets not forget, of course, that we are a long way from potential agreement, nothing says it is going to be near. Right and hardliners, in my discussion with the hardliners, theyre saying, listen, shortterm, yeah, okay i think, david, the election has got to be talked about here. The farmers have been hurt now, i spoke with the ceo of agco, number two after deere, he cautioned you cant just get all the supply chain they got from brazil, which is where chinese went to, and switch it back to the u. S. But the farmers have been heard by the president and it is interesting, when youre a year away from an election, the farmers always get hurt. Yeah. Lets get a little bit more on whats going on between china and u. S. Reaction in beijing as well. Eunice yoon joins us from there. Thank you very much the chinese are generally relieved but cautious. Official statements as well as media reports, they are pleased with the delay of new tariffs, that there is no deadline for negotiations, and theyre especially happy that hometown tech champ huawei gets a reprieve in addition, the chinese side has been left with an impression that President Trump has agreed to chinas preconditions to a trade deal, known here as the three red lines. So they are lifting all the imposed tariffs, more realistic purchases of u. S. Goods and also balanced text in the final deal. And thats because President Trump, according to the foreign ministry, agreed to move forward on the basis of, quote, equality and mutual espect, despite the fresh direction, though, there is still a lot of apprehension as to whether or not a final agreement is actually going to come through sources who follow the trade talks closely on the chinese side have told me they have already noticed the pushback, that President Trump has had, from congress, as well as National Security community, on huawei and there is not a whole lot of trust that President Trump is going to stick to his new position there is also some interesting reporting in this state press because the state media has been reporting the outcome of the g20, but they have been not reporting that china agreed to buy more American Farm products or they have not reduced the current tariffs. Thats an indication of how sensitive the beijing leadership is to appearing as though it is weak or caving into pressure from the United States and it is also an indication that it is just going to be a lot more challenging for beijing to make compromises with the u. S. On even more significant compromises. Guys eunice, thank you eunice yoon in beijing for us, outlining some of the things we dont know right. And the difficulty in understanding where each side is coming from. I love eunices reporting again, i want to talk about the idea of what the hardliners thought would happen going in. And the people who are short here and the people who believe that there was not going to be an agreement i think are quite wrong. I think the president changes things the president what changes stance. There was a belief there would be a 10 tariff coming and that huawei was an outlaw for the president to turn around like this must have meant that there is something afoot if you dont think so, you really think that the president just got had, now the president did feel very had after buenos aires. It is hard for me to believe that hes going to let himself feel be had this time. Yeah. Hate him or like him, he knows he got had in buenos aires. And the idea this was not that important, which i meant over and over again, not that important, foolish foolish to say not that important. Had reporting, no contact with the people who believed that we were going to come in, guns blazing. No contact in with anyone who felt that huawei would be anything other than stepped up in terms of pay. Right well, again, back to the point, you know, reading a note on isa this morning, jim, we suspect the bureau of industry and security will issue a revised temporary general license to allow shipment of nonsensitive components for huaweis consumer business what is unclear to us is whether they will also allow shipments into huaweis 5g base station business does this fall under National Security caveat . Now, if thats the case, xilinx should not be up. Xilinx means base station. Xilinx means base station. So xilinx is up 20 points. It is up a lot today if you believe that, you should sell the xilinx. Micron is consumer all right. Now, i think the thing that shocks people, david, was huawei as important as apple. We sold i dont even know if the president knew how much huawei was an important client. Right we always there was a view that it was separate from the trade negotiations, and clearly its not it is part of it look, i think that you ignore what happened at your own risk i was shocked. I mean, shocked. I the president s people are shocked. Im telling theyre shocked at what there was wow, i mean, there was both the concessions and also the trip to north korea. Which, david, the dialogue i think there is Something Big afoot. Much bigger than anybody realizes big. Because, david, huawei, we came in thinking that huawei was there were going to be kicked out, they were going to do a Worldwide Campaign against huawei by the way, were now hearing germanys next no, they have no plan to go after merkel i have felt otherwise. Yes, you have. No plan quite a reversal. They did quite a reversal. Do you have confidence it wont reverse back maybe but everyones kind of shocked about what happened. Except for wall street how wrong has wall street been look at the s p. True. Wall street has been to your point, this could be a recordsetting morning for stocks. Housing yeah. Lets give you another look. I got to be more negative, david. People are going to just brand me as an optimist. Well, look at the s p it is going to be up a good deal, at least at the open, of course thats about 18 minutes from now. Well get that open, but we got a lot more before then right here on squawk on the street. Your brain changes as you get older. But prevagen helps your brain with an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. Healthier brain. Better life. Wanna take your xfi now you can with xfi advantage. Giving you enhanced performance and protection. When devices are connected to your homes wifi, theyre protected. Helping keep outsiders from getting inside. And if someone tries, well let you know. So you can stream, surf and game all you want, with confidence you can get coverage where you need it most. Thats xfi advantage. Make your xfi even better. Upgrade today. Call, click or visit a store. On the rise this morning after a solid public debut for the company on friday. It is an online luxury consignment retailer its stock jumped 45 from a 20 initial public offering, but the watch is on to see if the ipo market can continue that upward momentum second half of the year. Look 2019 is half over how did that happen . I dont know. As i get older, i feel like it was a day. Realreal, i think, is able to take advantage of the lack of execution by ebay. Okay. Should have been ebay, ebay could have created a high end business you say lack of execution should point out, ebay has been doing fairly well in terms of yes, because the activists, i think elliott in there. You had elliott in there. You have a ceo who is pretty focused. Hes really trying. But, look, the business it is a big market do you know macardio leibre was the number one performer there is webbased is away from amazon i like etsy. I like Shopify Shopify is a winner here. Shopify is the theyre the broad provider of anybody who wants to start a business, empowerment, empowerment. That is sustainability, this is summer sustainability empowerment, these are things that the millennials create. So it is another millennial stock. And they, by the way, they like they like to buy secondhand they do they love secondhand coach bags and stuff i dont know david, i am deeper into worldwide millennials now. Theyre throwbacks worldwide traveling the globe and meeting them in different places yes, theyre also, david, im not going to stop here on this beyond meat. What about it it is only up 542 since the ipo. Got a problem with that . Impossible is continental grain. Yeah. Nobody cares that theyre one of the largest private companies. Because there is room. Everywhere i go, people want to talk about beyond meat really . Everywhere you go . Except for this daria i went to in italy, chefs table, number one meat restaurant in the world. There they were not talking about beyond meat. Theyre not beyond meat yet. It is amazing that it is market cap all right, conagra had a bad day. A tough day. But, it is market cap is not below 13 billion below meat, 9 plus. They have a plantbased business that can be big. Right beyond meat is a millennial stock. David, heres what we dont realize. It is starting to bother me. Tell me do you know there are a lot of millennial moneying managers . No. Im not kidding they hate plastic with a passion. They hate plastic is coal, coal. It is not king coal. They think that beyond meat represents the future. They invest in the future. Everyone seems to be wanting to buy oil stocks today the millennials will be sellers of fossil because they believe fossil is has gone away. Esg has become a real oh, my gosh. Real power in terms of money flowing to it. Yes and a focus for certain managers, because it now will attract assets conceivably is it really a strategy . I dont know the world has changed people believe people believe that microsoft, best performer in the dow, is regarded as the good agent the sweet agent. The one that is not in the cross hairs of Elizabeth Warren and company. David, nardella comes in peace. Largest market cap company. Why even though why some of it is azure. Some of it is it is a beloved company now. It is sweet. It is capitalism with a human face up next, we got jims mad dash well count you down to that opening bell, ten minutes from now. One more look at futures were set up for what will be a higher open. A lot more squawk on the street from the nyse straight ahead. This is hal. This is hals heart. Its been broken. And put back together. This is also hals heart. And this is hals relief, knowing hes covered. This is hals heart. And its beating better than ever. This is what medicare from Blue Cross Blue Shield does for hal. And with easy access to quality healthcare, imagine what we can do for you. This is the benefit of blue. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Havent changed havent had much to say i still think them cats are great we will get a shortened week here, of course. We got the holiday on thursday Getting Started here in seven minutes. Where are you headed west lake . I choose west lake. Youre going to see it is down sharply. One of the reasons is people are looking for five bucks and change for the year fiscal year looks like it could be 350 this is the real economy there are huge problems in the Chemical Industry demand there is a lot of oversupply when you look at what theyre saying, youre kind of aghast, the margins are bad, the demand not so good. And this is a sign that, you know, you may think that everything is all well theyre not. I know really bad so i just keep this in mind that there are two economies. There is an economy that is, i would say, where the numbers keep coming down and people want to own them. And thats a mistake this would be the stock that normally you would think, wait a second, china is back. I got to buy a chemical company. This is a travel trust name well read right through it. Dow chemical it is hard for me not to believe the dow i think they have to. This is, again, keen sense of the obvious, were talking about a stock 110 bucks beginning of the year. I have i think the world of Jim Fetterling and dow. But, david, the chemical business is quite bad. And therefore i think that if you own dow, remember, you have a yield that can support it. West lake is a reach for the dow. Thats important because, remember, dowdupont, spinoff well look at dow on the other side not looking at it now. West lake will be a feature. We got more things to follow as well here. Shares of msg are going to be a little weak today. Oh, my. And how about the shares of barsen mcgehl, a few blocks away from my team i had season tickets for a long time. You gave them up, though. I did once they made the playoffs once the sixers came back. A lot more squawk on the stetrit teth re ghafr is squawk on the street. Were live from the Financial Capital of the world opening bell will ring in two minutes. Two minutes. Carl was in vietnam last week. Hes getting a well deserved rest this week jim, youre back, thankfully i can ask you this morning, so much to digest for investors, of course, given the news over the weekend, not just china trade, china u. S. , but also the oil markets. And any number of other sort of important things what is the key to this market i have to default to micron. Micron . Yeah, micron is a company, heavily shorted. Believed to be the big loser in china. I would go sky works secondly, but micron, more visible micron at 32 when they reported. Cut numbers. China, all worries david, it is up nine straight points it has caught all the analysts by surprise that i know of probably some that i dont and it has caught the Hedge Fund Community the wrong way. Right. I would have said apple, but apple was fridays i did not get to cover that. Sorry. A lot of people felt that was very significant for apple. The journal has a large piece, long piece on jony ive and indicating he would be disconnected from a certain extent from the team, from the company, not there as often physically just sort of talking about his importance, but the last couple of years, and really kind of a negative piece, actually. Yes i think the important thing is that china doesnt seem as china sales may not be as bad. American sales, now focus on do i really sell ahead of a 5g cycle that they are ready with qualcomm, ready with so i think that the conflict is this quarter bad versus how great it will be next year. The opening bell for this monday real Time Exchange we may see a record in fact on the s p right at the open. Here at the big board, ugi corporation, celebrating its 19th anniversary of listing. Over at nasdaq, Health Insurance innovations, a cloudbased Technology Platform and distributor of Health Insurance. And Life Insurance all right, we have a record on the s p. There we go a record. And that is thats the index we follow. I follow anyway. And the faber household we follow the s p nobody is allowed to mention the dow at the dining room table. I have the dows numbers, but they dont represent what happened in in chipotle very strong a lot of the companies written off made a major League Comeback i think we dont talk enough, the s p had some performers that were insane, insanely positive something related to Semiconductor Design very few cloudbased Companies Made the list. But micron said that the cloud remember there was a big big inventory overhang, thats got a lot of people very excited. And i think that the Semiconductor Design business has gotten to be maybe the strongest business out there we dont talk about it it is a mistake. No. Well, there is a broadbased strength as you might expect on the day in which the s p is up over 1 . Right now at the open, the nasdaq comp is up a lot more than that. Reflecting what youre just talking about, of course, the strength in Semiconductor Companies, particularly those who sell into huawei, who now may be able to continue to do so at least for certain parts of their product portfolio. As we said earlier, remains somewhat unclear as to what is allowed not. I want to talk about two stocks okay. Uber and facebook uber. So challenged in the first half facebook, pinata, uber, the most laughed about deal, had you bought uber at 12 00, on that terrible day of its ipo, you would be up. If you bought facebook into the teeth of the most horrible publicity including the New York Times piece talking about basically a war room, another opportunity. These stocks were spurned, it shows you the power of the market that facebook, so hated, uber, so mistrusted. And buys, buys that may be one place where theyre similar, but where theyre different is having one, a very proven Business Model that may face some strain, but has still incredible margins fairly significant growth. Obviously increased costs. The other one, just keeps losing money. Yeah. The other one, the question there is do people believe the idea that it is an ecosystem, overused word, of course, or cab company, cab Company Worth 20, ecosystem worth 80 ill tell you, david, facebook, your friends must say how cheap it is. They didnt where are the customers who are angry . Where are the customers who read the paper, are angry at at youtube. But i never hear any antipathy, facebook, the instagram, the stories, so loved. People check that instagram, universally loved. Where are the people who say im repulsed by instagram because of what it is something, the times said, they did something, the election, russia to your point, they have not lost certainly instagram is continuing to grow dramatically. Have to remind instagram is a part of facebook, yes, for those who might not be aware. The media hated facebook. But the users, you know what is kind of like it is like this. Media is not a fan of facebook in part because they put a lot of things out of business using content from other places and not paying anything for it we have dogs. Yes, you do. I could tell you, you know what, the dogs, they dont like blue buffalo but, you know if you give it to them, they dont say you know what, jim cramer doesnt like blue buffalo they like it theyre not sensitive to the idea that i dont like it. Well, i have eaten dog food on mad money in the earlier years, pepperoni, pupperoni and i threw up not becoming but it doesnt matter what we say. It tastes good i need a gif on twitter that shows you that they like it. The people who read instagram, the canines. The dogs will eat it. The dogs will eat it. They dont say the New York Times doesnt like it not seeing much weakness at all, a little bit in disney, a little bit in fox. Toy story 17 weakness in comcast, our Parent Company as well one of the reasons could be, im referencing a note at ubs out, actually last week, but it this has been discussed in the media world a bit, traditional video subdecline accelerating to 6. 1 year over year from 5 the first quarter, total video subs, including the streamers, falling 3. 4 year over year, up from 2. 3 in the first quarter. And ubs said this is, again, seven days ago, creating a tougher backdrop for traditional media. They do point to broadband strength, but this is kind of getting some pickup. Again, little late to telling people about this, should have done it day one. They buy roku a little bit of weakness, continued not that great follow through at least even with this rally and some of the names. What is the entertainment, love the entertainment play. Still just like loop disney made its move, fabulous move and then there is concern that fox is basically got to drop numbers. Thats whats been going on there. We havent talked very often about fox. It is out there as might travel trust owns viacom i think there is a belief that five years from now, you know what well be talking about, cbs and viacom, if theyll combine five years from now. Thats about the time, right i think it will be sooner no it wont be this week it wont be this week. It wont be this year it wont be this decade. All phone conversations this morning, the other person on the other end of the phone was not in new york city or anywhere else in their office look at tail not much going to happen this week next week, it is possible. Oh, please. Im telling you oh, please. I know. By the way, i dont blame you. Third time, they have yet to start. Here it is, it is july, but i will tell you they are very close to beginning to negotiate. Very, very close. Very close to nothing. You dont believe me . Sponge bob. Sponge bob is you believe when i say, you believe it you still do. Im just kidding. I know im getting together with you and i get it. A lot of people are going, what happened there why is it taking so long you know what, cbs has been moving very slowly, glacial pace in terms of their board, to a certain extent their ceo. How about they are interacting. And we do expect an not this week, but fairly soon. Perhaps as soon as next week they get around to actual discussion of Exchange Ratio what else . Hawk tan. Hawk tan. I talk about corvo, sky works, micron but hawk tan, hes back. Hes bigger than ever and i enjoy him. Hes confounding the bears. Right he just wont let the bears win. Didnt you love it tenacious. Hes tough. I would not go up against hawk tan. We dealt with hawk a lot during the scott barshe beat him. Qualcomm. Thats in reference to a lawyer we know who is brilliant, right . Wow did you just go out there and do advertisements for people it is not amazing. It is not like the the dog says they beat them, they beat them i would say actually more likely the general counsel at qualcomm that helped. That fellow is a smart fellow takes you back to National Security, takes you back to 5g, takes you back to huawei when you go talk about the u. S. Government saying no to the ability of broadcom to buy qualcomm is what were talking about here. They seem to be i dont know. Why is sipius. As of friday, huawei was banned, period. They were trying to bankrupt huawei yes. Now theyre, like, in favor of huawei. David, how close is the president to understanding the actual situation of huawei do i have to answer that question no, that was a rhetorical question, you can take the fifth. Let genesee and wyoming, short railroad, shortline railroad, selling out. Like b o. Brookfield infrastructure and gic will be acquiring its north American Rail business, a north American Rail business, they say, with significant scale. Prices, well, total price including debts, 8. 4 billion. Not that small a deal. 1. 12 in cash is the actual price. Gwr. Thats our deal of the morning not much to speak of specifically been out there as a potential name, you can see how much it moved up prior to the actual announcement and i did want to just look at msg. Started the show with brooklyn, brooklyn, down 2. 7 . The owner of the knicks and rangers, knicks had a bad day yesterday. Yeah, they did. They got rid of porzingas to clear space for durant or kyrie or one or two high profile free agents and they came away with yankees seem to win worldwide, doesnt matter where they play. Anywhere. Doesnt matter who you put on the field, if you put a yankee uniform on them, they win. Different than the team i support for doesnt really help no. Youre right no. All right now that we covered sports, we can get back to the markets, seema mody has more. First day of the month and record high for the s p 500. As expected. The Market Reaction to g20 and the talks over the weekend has been strong. Not just here, but overseas as well the shanghai composite closing higher by over 2 . Europe is up as well there is those traderelated names with heavy exposure to china, all rallying in early trade, industrial names like caterpillar and deere, large cap china tech names, alibaba up over 4 . And then chipmakers, broad kcom, qualcomm, higher after concessions were made to u. S. Companies that trade with huawei remember, we have seen the story before the s p 500 got a 1 pop the day after g20 talks in argentina took place back in december of 2018 that rally, as you can see, did not hold s p 500 losing about 8 that month. And then there is the debate over valuation the s p 500 has now gained about 18 this year. And already trading over 19 times, trailing earnings, well over a historical average of about 15 times a lot of things to take into account. One sector leading us higher today is energy. That 3 jump in oil prices, were seeing today, ahead of that opec decision, some headlines on iran helping the Energy Sector. Keep in mind, the s p 500 Energy Sector still trading 17 below the 52week high a number of safe haven related trades, if you look at gold, the japanese yen, the tenyear yield, all sort of unwinding today, even utilities, the only sector in the red as we kick off a new quarter. Keep in mind, gold did gain about 8 in the month of june. What to watch for july trade, the devil will be in the details as the u. S. China trade talks continue earnings season kicks off in two weeks, july 15th, thats when a number of the major banks report and then on the runup to the fed twoday policy meeting on july 30th. Ism manufacturing due at 9 45 a. M. Back to you. All right the merger is official been a long time it is tough to get these deals done Harrison Health one company as of today this is very exciting deal particularly for those of us that believe that are parts of Defense Budget that are lucrative and these gentlemen are at the heart of it so joining us now, new chairman and ceo of l 3 harris, and chris kubasic. You cover a lot of deals. Through moe explain how it works this is how it works. I think thats important. We dont see true moes. Merger of equals. This is a combination of two of the Fastest Growing parts of the Defense Budget, a remarkable combination from the point of view that there are analysts who keep thinking there is peakish numbers and then l3harris which seems far more ill say it a secular trend in all the important parts of military budget explain why that is. Were a Technology Company. And were a Mission Solutions provider we dont do ships. We dont do planes we provide equipment on the ships and planes that make them more or better new aircraft, new ships, as well as legacy aircraft and legacy ships. So we provide equipment that makes those platforms work better yeah. And, chris, i think one of the things when i think about l3 has been intelligence. The kind of surveillance, the things that lets say not only never go out of style, but more needed than ever in history of the company. Whether it is spacebased, whether it is on the high end aircraft or on the ground or the sea, were well positioned in all of the domains plus, cyber. We have a nice focus on cyber as well. I would like to ask you about both those things. Situational awareness, gps, i guess, figures prominently into that yes. How important is it for the Defense Industry and do we need sort of an upgrade to the next generation well beyond defense as we move potentially to grids with automated automobiles im glad you asked the question harris corporation, now l3harris, we have been on every gps satellite ever launched. We provide the Navigation System unit as well as the next generation called 3f, follow on, well be on the next 22 different spacecraft that will fly with gps more resiliency, more power, and m code to provide more resilience and capability to our war fighters, something we have a long history on. Never had a failure on orbit and wont expect one from here. Chris, the combination is going to yield extraordinary cash flow. In part because i think the only real divestiture was night vision goggles and you have a better night vision goggle, still the deal, good for them, good for you what are you going to do with all this cash . Zblif number one, research and development. We have an industry leading position, investing in r d well spend on integrating the business and then return cash to our shareholders this morning we announced a 10 dividend increase, 4 billion share repurchase, so that will be the focus the first two years. There are a number of smaller units at the company, there is the belief that there may be some divestitures over time. Is that correct . If so, where would you be focus focused . L3 and harris have a history of shaping our portfolios, making sure were investing capital on to the businesses that we believe are most strategic. Well see ourselves shaping our portfolio Going Forward. No decisions have been made. Were going to focus on places where technology can differentiate. Were a Technology Company i like to emphasize that with investors. Were we invest 4 of our revenue into technology. We stay in business, we can lead, we can generate great attractive returns for our owners no decision has been made. But clearly well see some activity in the next few years you mentioned cyber moments ago. Very important it would seem in terms of the future of warfare, frankly, though a lot of concern as well in terms of what the u. S. Is using offensively that it might not have previously how do you approach it in terms of the company and im curious as to your thoughts about the dangers as well. Yeah, a lot of our Mission Systems as bill mentioned are focused on communications. We want secured communications in contested and contested environments a lot of our artificial and intelligence and our cyber are built in to our systems. And i think it is just another tool in the toolbox for our military to have who are you competing with when you attract talent . For us, it is really goes across the defense and Aerospace Defense space. Sometimes the high tech companies, you know, but frankly i think what attracts people it to Companies Like l3harris is the mission. It is what we do for the war fighter, the things we provide for National Security, and that allows us to make a differentiator argument for why join a company like l3harris. Youre at the center of a lot of a bunch of things, Climate Change or the 737 max trainer. It seems you have a company not mentioned, voluntarily training pilots do you think it is necessary that there be more training for the 737 max, given the questions about the engine yeah, were seeing more interest both voluntarily from some of our airlines who want training on the 737 max. I think there will be probably some mandatory training. We have a couple of simulators in backlog were working on. I think thats a Growth Potential for us in the near term. Finally, at the outset, we mentioned mergers of equals. You guys sort of sort of split responsibilities youre ceo, but how are you getting along and how are the two organizations melding. I know ill get the answer great, did you know each other well we knew each other for several years. It was a seamless discussion leading up to the announcement but more importantly, since then, last eight and a half months, terrific partnership and really is a partnership and it goes beyond chris and i, goes across the board, the management team, 50,000 employees today everyone lined up. Were off on a great start here and it is we got good share, partnership, share responsibilities and things were going to do. When we put this merger together, for us, it was important to have leadership continuity through the Integration Period and thats a factor that we have done. Were over time we would be remiss not to mention a personal friend, fran lanza, what he created here, l3, great man. And hes not talked about enough he passed away suddenly. He did. Yeah. I think he would be proud of us oday, today. Yes. Absolutely. Gentlemen, thank you. William brown, chair manned ceo of the new l3harris and chris kubasik, Vice President , chairman, and coo. Thank you. We are staying on top of todays rally, including that record high for the s p 500. Squawk on the street will be right back woman my reputation was trashed online. I felt completely helpless. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. There it is. 20 years the s p i ha you have been here wifor all of them we are at a new alltime high. Were back right after this. Well, jim is back not just here but mad money tonight. We are going to speak to marty and get a good beat on the medium size employment numbers the end of this week. See you tomorrow right here. Great to be back. Coming up, a lot more of course on this recordsetting morning for stks ept reoc as your life grows, so do your needs. And with bank of america and merrill, the benefits you get can grow, too. As a preferred rewards member, you can enjoy Priority Service and exclusive discounts. So your growing life can be more rewarding, too. What would you like the power to do . Your daily dashboard from fidelity. A visual snapshot of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. Its a Beautiful Day good morning and welcome back to squawk on the street. Im david faber along with Morgan Brennan and mike santoli. We are live from post nine at the new york stock exchange. Carl quintanilla is off this morning. Lets get a look at the markets. We said it a number of times it bears repeating a new record high on the s p 2972 you see it right there the nasdaq obviously having a strong day as well. And that is where our roadmap for the hour begins. Stocks rallying. The s p hitting an alltime high after President Trump and president xi strike a trade truce. Plus an opec meeting underway in viana. The cartel set to set production curves. And hedge fund health. The wave of ipos a savior for some on the street who is benefiting and who is getting left out in the cold. The meeting of those ministers in vienna. Brian sullivan is there. He caught up with irans oil minister interesting conversation im sure brian. Reporter yeah, david, it was. I have never seen more interest around this. You have probably seen the posts. We ramble in a sfar well for an hour and a half boiling. Everyone usually runs to the saudis this year iran getting as much or perhaps more attention. Very frustrated with opec generally as well. I began by asking him basically if there was a chance that if we backed off the export sanctions that he foresaw the ability for iran and the United States to mend their fractured relationship under the pressure and the increasing pressure, iran is not ready to open discussion with the United States. If the United States and the administration wants to change that environment between two countries, firstly should leave all sanctions should put against iranian oil and other areas, then they would see significant change in the environment and then we can do many things. Reporter i know iran has denied the tanker. Is it safe for tankers in oman and the strait of hormuz is it safe for oil ships in the strait of hormuz and oman . I dont know who has gone against the ships in oman, but in iranian side during the more than 100 years we secure the market and we repeated it for many times that the market, oil market should be depoliticized and its our aim to mark the oil market should be depoliticized for all. And its not a tool to use against some countries to limit it to limit its export and others oil is oil please understand it please. Reporter so to summarize, guys, what we heard, basically depoliticize oil if you want to restart talks with the United States, we need to end our sanctions and dmieg knowledge of who might attacked those six tankers in the gulf of mexico by the way, i began by asking him about the news about enriched uranium i said was the decision to go over the enriched uranium limit a direct response to u. S. Sanctions and export sanctions, and he said you need to ask the head of the nuclear program. Im just the minister of oil we asked it. He deflected it. You heard his comments there on oil. They are negotiating that 1. 2 million barrel a day when we know, youll know. Brian sullivan making headlines from vienna with the opec meeting we will have more on that meeting and the moves in oil coming up. Staying with geopolitical tension, developments out of the g20 summit in japan over the weekend. President trump reaching a detante with china and north korea. There are plenty of hurdles in the way. Kayla is in d. C. With more reporter good morning. It is indeed after months of simmering tensions, talks with china and north korea are back on thanks to two hours of facetoface meetings with president xi jingping and chairman kim jong un in asia over the weekend. President trump stepping into north korea at kims invitation making history as deputies now strategize behind the scenes to restart negotiations and see whether pyongyang can make any strides towards denuclearization. Whats going to happen is over the next two or three weeks the teams are going to start working to see whether or not they can do something. But its the truce with china that has the market breathing a sigh of relief at least for now. The u. S. Striking a truce with china to essentially give huawei a reprieve on its business ban china is going to be buying Farm Products from the u. S. , and there will be no new tariffs perhaps most unique about this ceasefire is the fact that there is no deadline here. President trump can choose to end this truce bhfr he sees fit, or keep it open as long as he sees politically expedient heres what he told reporters in osaka. So were making a deal with china or were attempting, and if we dont well go back into, you know, we have a tremendous ripe field of tremendous money that would be coming into our country. But i have a feeling that over a period of time, and again im not rushed and i told him that, i want to get the deal right, its extremely i wouldnt say complicated, but very intricate. Its those intricacies that have proved elusive before, getting china to codify the enforcement of this deal with something they didnt agree to before chinas hardliners have dug in. There are hawks in washington not happy with the reprieve that President Trump gave to huawei we will see where this leaves us when the Trump Administration officials go to beijing next mike. Kayla, its david i have a question on huawei because you mentioned, of course, we are watching the nasdaq positively ted led by Semiconductor Companies that may now find they can sell once again to huawei. There seems to be a good deal of confusion of what is allowed, what will be allowed can you clarify any of it or are we just going to live with this for a while . We are waiting for details. Saturday President Trump said that he would be relaxing business to do with huawei that did not have any National Security implications, which is hard to see where exactly that would be considering that members of congress feel the entire company poses a National Security threat and the Commerce Department found many parts of huaweis business to be so problematic that they put the entire company on the entity list, the business blacklist we will see exactly what the details of this look like. I am told by the commerce secretary those licenses for u. S. Companies should be coming any day now. All right kayla, thank you relaxing as we wait and see. Pretty good description of what the market is up to. The s p 500 making a new record high on this opening pop, extending gains after having the best first half to a year in over 20 years. For a broader look at the markets as we head into the second half. David, ill start with you just to be a little bit facetious, there was a 1 discount on the s p 500 going into this weekend on the possibility maybe of reescalation of trade hoss till tea ties or new tariffs. Where can the market live . I think the market is in a happy mood whats really going on is i think the Federal Reserve indicating that they are going to cut Interest Rates has pushed longterm rates to such a low level that there is no real value in the bond market and that is pouring money towards u. S. Equities. Thats whats going on the other thing going on is the u. S. Is benefiting in relative terms to the rest of the world because this trade tension is really hurting Global Manufacturing. Its hurting Global Manufacturing more than u. S. Manufacturing. The u. S. Seems like the best in a deteriorating neighborhood i think thats helping u. S. Stocks. Lori, the base of low treasury yield, and they havent moved up much on this news today, as well as the relative attractiveness of stocks and the u. S. Economy hold it, is that enough to keep these markets moving ahead it sounds an awful lot like the setup in 2016 after brexit, lets say, where nothing was resolved but the market found a way. Yeah, there is still an incredible amount of resiliency in the consumers we had retail sales on a threemonth average basis for as high as they have been since 2003 you still have very low unemployment, very low inflation. You still have strong consumer sentiment. Its kind of this tension between Global Manufacturing and businesses and their sort of concerns about this and reluctance to invest versus consumers which seem very healthy and able to power the economy forward. David, you are seeing warning signs . I should point out Construction Spending coming in down 0. 8 when it was expected to be up. Absolutely. Its consumers are doing well. We are looking for 3. 5 Consumer Spending but i think the bigger issue is exports are really pretty weak and investment spending, which is what we were trying to increase with the tax cut last year, that is looking weak across the board Construction Spending is probably its part of that story here i think its an economy of two halves right here. When you put them together, tick because we have inventory overhang, Economic Growth 1 average in q2 and 3. We are not going in for a session at this point, but it looks quite slow in the United States. Does ma mean we get 50 papers basis points in july no, i think the fed has got to drawn a line somewhere. I think they will say weak inflation is a good enough reason to cut rates rights i think 25 basis points in july and 25 basis points probably the e end of october they are going vidto have to ho their ground if you head straight to zero again, you have nothing left i think the fed wants to avoid that. That raises a good question if you see the fed cut Interest Rates again, in the face of weakening Economic Data here in the u. S. , the fact that they have been so low so long, would it keep the u. S. Out of a recession . Look, i dont think there is really an issue we need to have lower rates to increase Credit Demand we are very, very low rates historically as we sit i think its more of a confidence building and what we have right now is the fed has taken away that concern that somehow they choke off the recovery so thats out of play now. Now the next move is going to be are they actually seeing something had the data that gives them cause for concern its a delicate balancing act. If they move too aggressively, too quickly they spook markets who may think they are seeing much more deterioration in the future than they are actually seeing. We saw Global Markets recover a little bit more than u. S makes sense, right the u. S. Market has already been at an alltime high. Do you think thats sustainable here in terms of the rest of the world having more capacity to have equity values go up despite the fact that thats really where the global weaknesses lie . Look, we still favor u. S. Markets. We think that they are the resiliency is there. Any fed delicate balancing act aside here, outside the u. S. You have other precious. You have brexit which has to be resolved and the eurozone has a lot of restructuring challenges ahead italy is a problem child there. There is not a lot to like in emerging market yet. Corporate earnings have disappointed time and time again. There is not a lot to like there. We think that you need to be selective. You need to be a bit more defensive in here. It will be interesting to see how Second Quarter earnings come in to give the market a little bit more of an opportunity to leg up from here david, 2969 on the s p right now. New record today what is your target the end of the year year over year like doing targets the end of the year to be honest. I think there is a better way to look at it if you start from here at 17 times earnings which is where we are this morning, its not great. I think you make about 5 per year from u. S. Equities. But i think you can make more on overseas equities. I know there is a Global Manufacturing slowdown now International Equities are cheap relative to the u. S. U. S. Is at full employment also the dollar. The dollar is too high and you think the administration is finally you know, there is only so many times you can tease about other companies keeping currency too low before it dawns on you maybe your currency is too high i think if Administration Rhetoric supporting a lower dollar over time along with fed rate cuts could bring the dollar down and enhance International Concerns relative to u. S. Returns. Thats not the policy of the United States. You fly your National Flag as high as possible. A dollar is a financial instrument you need it at a lower level its too high. The central bank in that respect. Thank you very much. Prish kbrat t. When we return we have a rally in oil and energy this morning. Of course u heard from Brian Sullivan at that opec media meeting underway in vienna a sigh of relief for chip stocks President Trump easing restrictions on u. S. Companies that sell products to huawei and that is seeing a very positive response from a number qu splrsupie sawk on the street coming right back all right. We are going to show you that rally in oil and energy this morning, what its doing to the xle, the oih, the xop. All of them are trading higher with crude oil coming off the best month since january we heard as well opec set to extend oil supply cuts joining us to discuss todays jump, director of energy and utilities at nasdaq corporate solutions, and founder and ceo at citizens for Affordable Energy the former president of shell oil. Any takeaways from what at least we have heard so far out of vienna and opec . Positive headlines from the supply and demand perspective. Its really just a question now of whether its six months or nine months. Obviously, some Forward Momentum between china and the u. S. Is important from a demand perspective. Those two being the most important economies for oil from a demand perspective certainly i think we will have a stronger week for oil. The question is whether the gains are sustainable based on the improvement in supply and demand, whether it translates to anything on the fundamental side we think there are problems in both areas. What are the problems supply is problematic manifold first of all, when opec ultimately does end their production agreement, whether it is in six months or nine months, they will go back to pumping and going back to a market share strategy they will be at a war with u. S. Shale. That dynamic hasnt gone away. 2020 looks particularly bearish from a supply perspective because youve got significant infrastructure in the u. S. Pipeline that will connect u. S. Shale to Global Markets. There is also other projects coming into play in norway and brazil so 2020 doesnt look so grea from a School Supply perspective. At the same time its great too have momentum with china i am not sure that it really addresses the markets lack of confidence from a demand perspective. We have seen that demand this year has slowed relative to last year we are still growing, just at slower levels. Production from the u. S. Is still set to outpace Global Demand growth. I think its stronger in q3. Whether we can sustain the gains in oil prices through the end of year is the open question. John, you can make the argument from 2014 to 2016 we saw a faceoff between u. S. Shale and opec yes, it was very painful i think for all involved now we are pumping record amounts of oil here in the u. S shale has continued to hang in there. When you look at the dynamics between russia and opec, iran and saudi within the cartel, can it continue to exist as it currently is i think for now the answer is yes, it can, because iran has no choice but to take a back seat to the saudis and to the russians the russians and the saudis have indicated with their agreement for the next six to nine months to go for revenue. They really do need the revenue to keep those governments afloat and to keep the quality of life that they are expecting from oil to be about what it has been, which is, you know, pretty luxurious because were paying for it theyre not. We are but i think with regard to shale, we should not be too overoptimistic on the success of shale because were still not making very much money producing shale. There are quite a number of producers still experiencing negative cash flow because their loan commitments really chew up all of the cash they make, and if they are not capital rich, then the idea of drilling new wells, because the decline rate is so high, is quiproblematic. I dont think we are out of the woods from the 201416 period. Its not a great rich experience for the u. S. Industry in the shame formations is that the reason why Energy Stocks and the s p have been the worst performing sector for the last three months . I think thats a big part of it also, the futures curve for oil, we are in a stage of backwardation. Energy is forwardlooking. If you look at prices in the 2022 environment are trading in the low 50s, thats break even levels for Shale Companies its difficult to edge had i think that is problematic. Also on your program you have talked about energy being a small component of the s p 500 so even if you are bullish on energy, if you make a material overweight position its still hard to beat your benchmark index if the underlying component stocks are such a small portion of that index. I think that will hamper individual energy equities, but i think that shale will continue to grow for 2019 at a level that exceeds Global Demand growth which is part of the problem for oil as a whole we are 5 now, right . Thats right. The s p 500. Double that yeah. Thank you both this morning appreciate it. Thank you. When we come back retailers off to a rough start for the year with four out of the 5 worst performancing s p stocks in that fwcategory what will the second half of 9 bring . And a look at the Top Performing stocks in the s p as it hits a new record stay with us is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. Every day, invesco combines ideas with technology, data with inspiration, investors with solutions. Because the possibilities of life and investing are greater when we come together. Pete it is one of the countrys top 100 traders. On tv we report on how we follow the smart money from wall streets elite who have the massive resources to get Market Information before the rest of us their unusual option activity tells us what they are starting to trade our strategy uncovers why they are trading it and how to follow along for the biggest returns. It works on stocks and options its the number one way we choose our trades. Many ask, how can you do it, too . We laid out our strategy. Today we are giving copies away for free. All you have to do is covering shipping shipping welcome back to squawk on the street. The s p hitting a record high today. So far its been a rough 2019 for retailers. Nordstrom, gap, kohls, macys down 25 year to date. So will the retail wreck continue joining us now is jan, ceo at j rogers niven worldwide enterprises. Great to have you. The names we just laid out, why are they underperforming and is there value to be had for investors here its tough to be a mallbased forry, right there is only 280 great malls in the country. A lot of these guys have stores in a lot more malls than that. So its difficult if you are mall based its difficult if you are trying to reinvest in the business to be a strong Online Player because they all are doing that. And so the other thing that came up is its difficult if everybodys in fear of tariffs for the investor to run your direction. You are seeing whats happening today. Tariffs dont look nearly as scary, although stocks are up. In the back half we will see a pretty good back half, but we are not going to see as good a back half as 2018. Its a short selling season in the back half of this year, and the effects of the tax cut are going to be less noticeable this year because the year over year change is a lot less we have a great consumer we have 50year lows in unemployment we have nonsupervisory wages up 3 we have record employment. Its a good consumer its a tough spot to be in retail because there is so much change going on. Rent the runway just became a unicorn. The realreal did an ipo that was well perceived they are growing at 40 or 50 a year and taking share from the rest of retail amazon is taking share from retail so is walmart and target. You made this point before, that retail is not lousy, but some retailers are lousy i am glad you brought up some of these ipos, revolve, the realreal both of those names surging when they went public how does this speak to the trends shaping retail for the future a future. I have been a fan of revolve for ten years now. They are curating product and they are an Online Player. So the world loves them. I have been a big fan of the the realreal i loss like poshmark and all the other people who are doing obviously like thread up and the resale part of online. So the resale is going to be a big business its already over 40 billion a year and growing probably at 40 . Its going to take share from other retail rent the runway is taking share from retail as well. I like things that are new and disruptive like we liked amazon. I dont know how much money they are going to make they are sure taking share that makes the rest of retail more difficult on the other side, of course, we are seeing mall traffic fall every month, every quarter, every day, and we have for years now. So if you are trapped in the mall, its going to be a lot harder to make it work some people can, but in general being in the mall has not been a positive for several years now and its not going to be a positive in the back half of fwooin either. Jan, the market has ranged itself along the lines you talk right here given the opportunities for the emerging ecommerce concepts, really buying the heck out of walmart and target as the net winners in the physical space, can that relationship get stretched in a world where target is valued at twice what kohls is, for example, or gap or Something Like that are we going to have to see some kind of coming together . I would have told you that amazon, walmart and target couldnt all win at the same time they have been winning at the same time. I still think its a harder road for target than it is for amazon or walmart so, yes, i think you may see some changes there the other thing you have to remember is nordstroms will win at pace, macys will win at space and kohls will win at space because everybody else is basically toast. But that doesnt mean they are going to be immediately investable because we dont know when that will start showing up. But all three of those are winning online and they are winning where they live. The bad news is where they live is a bad neighborhood. Jan niven, always get to get your thoughts on the space as we head into the second half of 2019 thank you. Lets head over to sue for a cnbc news update. Good morning everyone heres whats happening at this hour irans foreign minister Mohammed Zarif says iran has sur spassed the plilimit on how much nuclea fuel it can possess. It signals an intention to pressure european signatories to the deal to find a way of salvaging the agreement that the Trump Administration abandoned. Protesters in hong kong swarmed into the Legislature Building after breaking windows and prying open metal security curtains police appeared to back off as the protesters came, apparently trying to avoid a confrontation. They also sprayed graffiti on the walls. National security advisor john bolton says the u. S. Expects china to adhere to the International Obligations when it comes to handling matters relating to hong kong. He made the comments during a brief visit to mongolia. Policies on hong kong and taiwan are very well known, and in particular with respect to hong kong we expect china, like every other country, to adhere to its International Obligations. I think thats very clear. You are up to date. Thats the news update this hour guys, back downtown to you. Sue herera, thank you. Ipos continuing to flood the market the latest to make the debut, realreal jumping 50 in the first trading day. We are waiting on big names like we work and peloton. The wave isnt just benefiting investors. Ipos have become a savior for hedge funds. As you know, its been a rough go the last few years for the Hedge Fund Community, especially those that make bullish and bearish bets on stocks, but equity long short managers have found a certain reprieve in the first half of the year initial Public Offerings the final Second Quarter numbers have not been tallied, but people say ipos are expected to be a huge boost to returns for many Prominent Hedge Fund managers ipos have two deals, beyond meat and adaptive biotech nolgs doubling on their debut sadays 15 other companies surged more than 50 on day one. The best year to date performance in any comparable sponsor period by a long shot since the product was created. Not all hedge funds will benefit from in phenomenon ipo allocation is a game of relationships and favorites. They will divvy out shares had in the hottest deals to the most prized clients if a hedge fund doesnt have strong ties to the underwriters they donwont get to drive the p also the opposite side of the trade is shorting them so far that hasnt been a profitable bet for most ipos the lofty valuations, momentum and volatility from recent deals are attracting short sellers because of the small float these ipos are incredibly expensive to borrow still the opportunity for further gains may come in the second half with ipos of we work, peloton, casper and more expected the question is whether those deals will have the same type of performance we have seen in the first half of the year, guys. Yeah, leslie, you mentioned that allocation is a little bit of a game of favorites now you have at least a couple of big direct listings here. Right. Obviously, hedge funds have mu as much access to the funds. Perhaps not something thats a head start to a big pop. Thats a key distinction here if direct listings become more popular, institutional investors, namely those that have relationships with the underwriters, dont necessarily get to see the pop because there is no ipo allocation it being sent out to anyone so what we saw with slack and spotify and others, there wasnt really that big day pop we see with the traditional ipo that people who are in the Institution Community would otherwise see. They are investing along with else leslie, thank you when we come back investors feeling a bit of relief after that g20 summit we are seeing that reflected in the markets moving up this morning. Is that going to hold . We will break down the Political Risks for stocks in the second half of the year. And lets give you another check on where those major averages stand we are backing off our highs, but still up on the morning. We are back after this welcome back a record high for the s p 500 this morning as the u. S. And china call a trade truce president s trump and xi deciding to resume negotiations after meeting at the g20 here is what President Trump said over the weekend. We will be continuing to negotiate, and i promise that for at least the time being we are not going to be lifting tariffs on china we are going to work with china on where we left off to see if we can make a deal what are the chances of a deal, and how much is it priced into the markets joining us are ubs head of americas Asset Allocation and pimco head of public policy. Good morning both. Libby, what are the chances we get some sort of deal here snrjts i think its very important not to conflate the avoiding of an escalation with a deal because while, of course, this is a shortterm positive from the markets perspective, the uncertainty still exists, and many of the naughtier issues that led to the breakdown of talks in may were not addressed in this summit in japan. So, you know, we think that again shortterm positive, but from an uncertainty perspective, from a confidence perspective, this will continue to be we think a headwind from a markets perspective and potentially from an Economic Perspective as well. Jason, we are light on all of the details here it almost feels like over the past year the expectations have been rethought, reworked for the market in terms of trade between the u. S. And china where the dow is now rallying triple digits just because more additional tariffs on more additional goods arent being put in place. Do y how do you this i about it in this case not having bad news is good news. Just taking away some of the tailwinds on the downside is a positive we dont know the details of whats going to happen we dont have a clear idea of how the negotiations are going to take place. I think as an investor you calculate whats the incentive on both sides, weathhether its President Trump or president xi. On President Trumps side, this kind of negotiation takes place, the incentive to increase the tariffs actually declines because then you worry about the risk of a slow down in the economy going into next year, prior to the next election the window for them to actually increase tariffs without having an adverse effect on the economies and therefore the markets is pretty small. I think by taking away the tariffs, the market is responding to that this feels like you are on a path towards at least no sustained scalation. Libby, this process of trying to handicap the game theory of it all and how the incentives line up and we are going to, you know, read the minds of people leading into an election, you have heard plausible cases made this morning that this is great because the president can kind of keep this as an ongoing process. The same time, people say, wow, the end of this summer if he wants to release the economy into a new growth phase. Is there a productive way to think about this yeah. I think sa few things. One is that while the market is hopeful we are avoiding an eg escalation i would be a little bit skeptical of that thinking only because of a year ago sorted of referring to what morgan was saying is i dont think people thought we would have tariffs on 250 billion worth of chinese imports this president thinks he got a better deal on nafta 2. 0 he thinks he has gotten china to the negotiating table. I wouldnt necessarily discount the risk of escalation here. With that said, does he need some sort of redslution going into 2020 . Maybe. But is china convenient boogeyman going into 2020 as well yes. So i think that this kind of bottom line here is absolutely hard to handicap you look at what the president has done previously and again he likes he thinks tariffs work. So i dont think that we can say that this tail risk is off the table and i think that, you know, over the weekend, again nothing was clarified. Yes, there was a temporary truce. We didnt see a settlement. Speaking of lack of clarity, not that you are going to able to provide it, a lot of Market Participants are trying to figure out what huawei means in terms of the National Security threat or part of the overall trade agreement, mixed messages at this point. One message from the president and the rest of the administration saying something very different. Director kudlow came out on the sunday shows and was very clear we will not be making any concessions to huawei as it relates to National Security you know, how they sort of split that baby i think is going to be quite difficult. We do know for president xi this was sort of a nonnegotiable he wanted a concession on huawei how sincere President Trump was what that means remains to be seen so again i think in the end another reason to be skeptical that there could be an imminent deal or, you know, that this necessarily resolves itself. The key piece to watch with huawei, too, and im sure libby you have a lot of thoughts on this, there is broad based bipartisan support in congress to keep the pressure on huawei as a National Security threat. I dont know that goes away even if trade talks progress. Yeah, within hours of the announcement saturday morning you saw senator marco rubio coming out on twitter. You saw senator schumer, tim ryan you are absolutely right, morgan, this has a lot of support from a National Security perspective. Again this is why i think we should sort of believe it when we see it as it relates to restrictions on huawei. Jason, just from an investors perspective right now, if we can set it aside in terms of it being an immediate event risk in terms of new tariffs at least for the moment, where does that leave us we are still tracking exactly how much of a slowdown we have gotten to the middle of this year much of course the fed comes into that as potential countermeasure. Well, i think even before this weekend we kind of expected the tail risk to come down a little bit but not be taken off. The markets are going to focus on Going Forward the Economic Data we saw that this morning was fine, okay some parts a little bit better than other parts the focus will be on job growth Going Forward. Ultimately, what does this thmen for the fed and how much they might cut . Does the data show some kind of a little bit better instead of getting worse on the consumer side relatively strong what does it mean for the fed . If both are okay, then the outlook for equities and the markets overall are reasonably positive because the tail risk has come down, contained enough for the near term its the growth and fed that will decide the markets. In the second half of 2019 where should investors be putting their money right now . So i think still allocated to equities i think it will be a little more selective. The first half of this year sickles did better and then worse in may and early june. The Market Reaction this morning some of the cycliccals are doing better i wouldnt call it a rotation where you want to buy in cyclicle sectors the consumer is strong is one area you want to be kind of allocated and overweighted to and underweighted in some of the defensive sectors, underweight real estate, concern about how much they have performed this year if rates stabilize, rise a little bitte higher. Be judicious Going Forward but also a little bit defensive in parts of the portfolio. Lastly, libby, you mentioned china as a boogeyman we have this news out of north korea with the president taking steps across the border over the weekend and iran exceeding its uranium limit. How close should investors watch these developments that underscores one of the themes we except for the second half of 2019, is that domestic Political Risk but gee employopl risk will continue to be a headwind from a confidence perspective, a business confidence, Consumer Confidence and analyst spirits. Something absolutely to be monday monitoring and something we dont will get better thanks for joining us. When we come back, another day, another president ial tax plan joe biden targeting a loophole what it is and what he is planning to do about it. The major averages the s p 500 up under 1 . If it closed here it would be a record high. The all time interday high. And the nasdaq is the outperformer thanks to chip stocks squawk on the street back after this guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade tesla set to report delivery reporters this week. Find out more on trading nation at cnbc. Com. More squawk on the street right after this [ alarm beeping ] wake up theres a lot that needs to get done today. Small things. Big things. Too hard to do alone things. Day after day, you need to get it all done. And here to listen and help you through it all is bank of america. With the expertise and knowhow you need to reach that blissful state of doneness. So lets get after it. Everything is all right what would you like the power to do . ® all right joe biden and a growing number of other democratic president ial hopefuls are targeting a big tax loophole that is beloved by the wealthy and considered one of the biggest abuses in the tax code robert frank joins us now with more on that story. Good morning, david it is one of the favorite tax breaks of the wealthy and it costs the government more than 30 billion a year so democrats want it eliminated. Its called the stepped up basis. It basically allows taxpayers to inherit assets without paying any tax on the appreciation during the ownersowners lifetime joe biden has made getting rid of step up a centerpiece of his tax plan and maryland senator Chris Van Hollen is about to propose legislation killing step up, calling it a major loophole that wealthy households use to shield their investments from income taxes so heres how it works say an investor bought 2,000 worth of apple stock in 1999 say its worth about 200,000 today. If the investor would sell it today, they would pay a capital gain on that consider 198,000 difference so the total tax would be around 40,000. If, however, the investor holds on to the stock until he dies and passes it to his family, they would never pay any tax on that gain. The tax basis for the stock instantly becomes 200,000 so his heirs would only pay tax on any gain in that stock if it goes above 200,000 and they eventually sell. The result of all of that, well, ownership of companies, stock, and real estate can store in value for decades without ever being taxed. And if its given to charity, its never taxed at all. Tax experts say the stepup in basis costs the government between 30 and 60 billion a year and it also discourages the sale of stock and assets during peoples lifetime. So, guys, you can see from just a topline basis, its hard to figure out why this exists or why it should continue to exist, especially given that theres really no effective estate tax anymore. And so a lot of these assets are just getting passed either to charities or families without being taxed. Yeah, that one, carried interest, dont hear too much about anymore. That still exists as well, doesnt it exactly and carried interest is much smaller. This, again, were talking 30 billion to 60 billion the estate tax only bringing in around 15 billion so a lot of people saying, look, lets get rid of the estate tax and also get rid of this loophole that would actually raise revenue and besort of conciliatory to both sides but a lot of these loopholes that people talk about is blatant sort of, you know, abuses of the tax code, you know, they continue to exist, despite efforts to get rid of them for decades yeah. Well, it also shows how far apart the sides are, because the administration is looking for ways to mute the effect of Capital Gains taxes by saying, if its due to inflation, you might not owe it so obviously, not a lot of consensus on these questions, robert absolutely. Thank you very much thank you as we head to a quick break, getting a check on nguyen and other casino stocks. All climbing after macau gambling revenues for june came in better than expected. Wynn is the outperform up about 7. 5 squawk on the street is back after this when i see adversity, i find a way. When i hear never, i say now. [announcer] Southern New Hampshire university is education made to fit your goals with over 200 degree programs, flexible class schedules, and some of the lowest online tuition rates in the nation. cheering so when i face barriers, i can break through. [announcer] breakthrough at snhu. Edu. Welcome back to squawk on the street. Squawk alley, of course, still to come. But Morgan Brennan is doing a lot more than just that. Youve got the closing bell on your plate today, too. I do. And this guy next to me will join for at least one hour of that show, too well be all over todays record day on wall street with a full slate of guests ready to break down the market moves into the close. Were also going to talk about g20 and the easing of china trade tensions with former u. S. Ambassador to china, gary locke. Devils in the details we dont have a lot of those yet, so what should investors be expecting . Plus, blue heart bower ceo Cliff Robbins named genesee in wyoming as one of his top picks last month on the show. Well talk to him exclusively about todays deals news, which is certainly interesting given what weve seen in terms of softness in the freight data in recent weeks and recent months yeah, theyre short line. Do you know anything about them at all i do. Give me something quick about genesee in wyoming what do i need to know a lot of mergers and acquisitions, theyve acquired pieces of the class i railroads and businesses and the fact that theyre selling off now certainly could be seen by some as a potential market top. There you go all right. One to argue. Weve got squawk alley up next dont go away. Hi walter. Join us for a walk . Id love to, but my legs and feet are so tired and achy. Walter, you need revitive its the circulation booster it really got me moving. I use my revitive every day to relieve my aching legs and feet. Its so easy. Drug free. And its electrical muscle stimulation really improves the circulation in my legs. Im back walking this guy everywhere. Check it out online. Revitive. Fda cleared. Clinically tested. Only revitive relieves aches and pains, increases oxygen rich blood, and strengthens leg muscles. Weve gotta do this. Dont suffer any longer order revitive medic with a 60 day money back guarantee. With Free Shipping and free returns. Someone got revitive. Order now and well send you our most popular treatment boosting accessories. A 50 value absolutely free go to revitive. Com or call. Get moving today good morning it is 8 00 a. M. At spacex headquarters in hawthorne, california it is 11 00 a. M. Here on wall street and squawk alley is live good monday morning and welcome to squawk alley. Im Morgan Brennan with deirdre bosa and david faber live from post nine on the floor of the new york stock exchange. Carl and jon are off deirdre, welcome back to the east coast thanks for having me. The s p opening at an allday intraday high. The dow up triple digits again this morning although off the highs of the morning. Nasdaq looking for four