Transcripts For CNBC Squawk On The Street 20240714

The week as a whole for the three indices. Road map starts with 30 minutes after the jobs number, good news is bad news again. Over 200,000 added in the month of june. That has stock records in the rear view mirror as data may ease pressure on the fed to cut rates. Futures in retreat, moving sharply lower to start the morning. While the u. S. Is on holiday, europe took out the elegant gun on big tech. Both parties in the uk back to target big tech and france moving forward on attacks on the likes of facebook and google the employment rate ticked up to 3. 7 as more people entered the workforce. Wage growth slowed a little bit in june, but remained at 3. 1 year over year for a second straight month perhaps more importantly, though, we did see average Hourly Earnings 0. 2 versus the 0. 3 expected. Mike, your take on this as to whether it really alters the chance of a 25 basis point cut in july. Not very much it injects a little bit more uncertainty than probably traders were hoping for today. But i do think the bottom line reaction initially was just to take away a probability of lets say 25 probability coming into today that we get a half a percentage cut in july thats been reduced. To what 10 so it does seem as if the market Still Believes were on course for this 25 basis point cut in july but there is still going to be a camp in there. We know there is a camp in the fed that says they dont see a reason for a rate cut now. I think you need you would have needed to see upward revisions from prior months, maybe a hotter wage number to really change the story. The fed is basically not taking the opportunity to push back against the market expectation and only a couple of weeks to do that if they wish to but i do think the Market Reaction really in terms of equities is just slightly dialing back wednesdays rally and not even all of it i do think right now it is a pretty modest response but the bond market did have a little bit of a move you took out that idea were getting a half a percentage point cut at all in july you had the ten year treasury yield tick up, saw the dollar index strength a little bit on this gold sold off, fell back below 1400 because, again, maybe Stronger Economic data here going back to that idea of potentially uncertainty around a rate cut wages still growing. The other two things that caught my eye on this, the Labor Force Participation rate edging up and the Unemployment Rate edging up. Perhaps going back to some of the comments we have seen earlier in the year that maybe perhaps maybe there is say little more slack in the jobs market than we expected. I think there is definitely the cover for the fed to justify a small cut if it wants it, not a big cut. Well wait and see what happens. The other thing i wanted to point out, the dollar is up 0. 4 , snapshot versus the german factory orders this morning, which is really weak, down 2. 2 month on month, expected to expand, down 8. 6 year over year todays data in the u. S. , in europe, good snapshot of who the trade war is affecting doesnt matter if the trade war is between the u. S. And china. Germany would over 50 of gdp being exports and imports is suffering. Easing is likely over there. In a back doorway, also why some are arguing that the fed really still should ease if you look at global bond yields, almost nothing is above 2 in the entire world, except for the very short end of the Treasury Curve and the very long end of the treasury. The idea that the fed is kind of propping up a very short term rate in a way that seems out of step with what the world is looking like i think this is a good number in terms of what the equity market was assuming, well get a fed ease, but it is not because the u. S. Economy desperately needs the boost right now. Crazy question here, how much does a cut need to happen if the rest of the world is easing and u. S. Rates are tied to what is going on globally . I just think it is for people uncomfortable with the shape of the yield curve, thats the only reason you do it. It is not because you need to jump start housing and auto sales necessarily. Those are already getting refreshed by the lower ten year yield. It is more about why are three month yields hanging up at this level and then it goes down from there . Another record all time low on the ten year in germany 0. 403 all three major indices coming off record highs, hitting all at once on wednesday. Lets discuss that and the jobs number this morning. Alan rosken, and john silva. Good morning to you both john, ill start with you, for your Immediate Reaction to that jobs number. Well, in the note i mentioned earlier today to you folks i certainly agree with mikes assessment taking the 50 basis points off, 25 probably because the fed is focused on inflation the reaction of the dollar and the two year and ten year all reflect that the market is taking off those expectations of the fed, easing policy going forward. And particularly picking up on germany, yeah, what the chinese slowdown independent of the trade issue, you can see whether Germany Economy continues to weaken but good housing numbers should be coming forward. Autos should be good Consumer Discretionary should be pretty solid Labor Force Participation rate and more jobs, thats a good combination for those sectors. But, john, multiple rate cuts now less likely this year . I think so. I think what youll also see is that third rate cut this year is probably off the table as well so july, yeah, i still think theyll do it in july. Were going to see what the september numbers look like. But two rate cuts are reasonable is certainly julys a done deal. But three, i think, is off the table. And, again, thats pretty consistent with mikes assessment that 50 basis points in july is off adam, what is your assessment and what does it mean for equity markets . Good news is good news. It is good news is not bad news. In so much as the i think the market has to think of this as a mini cycle of fed easing rather than a maxi cycle where we suddenly drive rates down to zero what we have seen in the past in 1995 and 1998 is when you have mini cycles, fed easing, and rejuvenates the economy and tends to be supportive for equities i think well be in that space for a while unless proven otherwise, unless the economy looks weaker than we have seen. Theyre very closely watching the global picture, trade dynamics, how much of that factors in, especially when you see weak numbers out of places like germany. The fed mentioned global factors. Consistently and in the Global Economy is not looked good and hasnt looked good anywhere, really. All the Major Economies are slowing materially that being said, it tended to concentrate heavily in the Manufacturing Sector and to some extent on the investment good side of things when you see here in the u. S. As well is that the Capital Investment side, business commitment investment is going to be soft, consistent with the Global Economy so the key is really going to be does the consumer hold up. So far the consumer is holding up but thats the one well be watching alan, you mentioned the episodes in 95 and 98, mini easing cycles, not very long after the easing inthose two periods, people started to become concerned that Financial Markets got overexcited and disengaged from the underlying economy. Right or wrong that was the narrative in 96 and 1999. Are we headed for Something Like that youre starting to see people say look the bull case is a meltup scenario when we have rates cut if we do in july. I think we have to think about that with are some away away from that you have having the fed effectively easing now with equities at all time highs, thats an extraordinary phenomena. You would have to say why is the fed easing so it does work in the direction of financial excesses. I think they have to be careful on that one. But i dont think were there yet. John what happens if the fed doesnt cut rates this year . Some folks believe that may not happen yeah i think the market will be really upset in terms of valuations i think people will be asking why arent they cutting . What is going on here . It doesnt appear that the overall economy is picking up. And, morgan, i would pick up on one of your earlier segments today on cnbc, a lot of discussion about Earnings Growth slowing down and that, again, is a tough combination if youve got the overall economy slowing down a little, but Earnings Growth slowing down a lot fed doesnt cut. Market valuations will be really under pressure. Youre expecting a rate cut or two in the year ahead but do you expect the dollar to firm up as it is doing today because it is not cutting as much as others might be . You got it. The dollar is a relative price between imports and exports and capital flows and to the extent that we see weaker german data, and more likely a longterm ecb easing, negative rates, thats positive to the dollar, but ill go back again to say the Dollar Strength means that our import prices will be lower and that will pressure the fed to look at were not getting our 2 inflation, inflation is not up to target, we need to ease again in part because Dollar Strength means lower import prices. Back to one of your earlier points you think good news means good news in the equity markets, would you admit that hasnt been the case for the first half of the year, that if we hadnt got that fed pivot that markets wouldnt be as strong as they have been. They needed the fed, particularly at the start of the year, we needed the fed to pivot. You could say that the easing that has got baked in was needed to keep the equity market as point as they have been very, very supportive for the equity market as long as that holds together, the equity market will hold together as well. Thank you very much for joining us thank you coming up, a perfect guest for this jobs friday Rick Santelli talks to judy shelton, choice to serve on the Federal Reserve board. Hear what she has to say about Interest Rates, Economic Growth and so much more and taking another look at the futures this morning, were just about 20 minutes away from the opening bell everything is lower. Dow is indicated to open down 94 points more squawk on the street live from post nine at the nyse when we return. What do you look for when you trade . I want free access to research. Yep, td ameritrades got that. Free access to every platform. Yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. No hidden fees. No platform fees. No trade minimums. And yes, its all at one low price. Td ameritrade. Is it to carry cargo. He or to carry on a legacy . . Its show of strength. Or its sign of intelligence . In crossing harsh terrain. Or breaking new ground . This is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedesbenz summer event, going on now. Lease the gla 250 suv for just 329 a month at the mercedesbenz summer event. Mercedesbenz. The best or nothing. Welcome back big tech under fire across the Atlantic Frances lower house of parliament approved a 3 tax on internet giants like google, amazon and facebook. This in an effort to prevent them from avoiding taxes by setting up headquarters in low tax eu countries Boris Johnson, the leading candidate to replace theresa may as uk Prime Minister, is urging his countrys government to impose a tax on tech giants. Heres what he had to say about that yesterday i also think it is tedeeply unfair that high street businesses are paying tax through the nose and Business Rates and everything elsewhere as the internet giants, the faangs, facebook, amazon, netflix and google, faang, are paying virtually nothing and we have got to find a way of taxing the internet giants on their income because at the moment, it is simply uneven. Simply unfair. Boris johnson watching cnbc, using the fang term. The error of this, which is interesting, apple has been hit, even when an apple phone is sold on amazon to someone in the uk or france there is some tax claimed as a sales tax at the point of sale. The area that i think there is going to be continued focus on is the likes of facebook and google who are gaining revenue by users in those countries from adverts they sold. This will be ongoing moves to try and close. The headline, if it is apple or amazon, is slightly more misleading i think tech giants, online tech giants who get commercial revenue, is different from a point of sales tax. It is almost as if the initial bull case on faang is now the cautionary case on faang, Business Models are global, they simply benefit from more digital eyeballs forever, and they almost cant help but make massive high margin bottom line profits it seems like there is is a Movement Toward a almost an alternative minimum Corporate Tax, right for the Economic Activity that you represent, not the technical earnings that you book in a particular locale. We see this big debate brewing in quite a number of developed countries around Digital Sales taxes. I think in general it speaks to the fact that this is a movement more globally now, really it almost doesnt matter what your politics are, case in point, here in the u. S. , against the Big Tech Companies and increased scrutiny no better example is uk looking at this Amazon Investment in delivery now which is is somewhat unusual. Thats the cma, looking into delivers what is the minority investment by amazon. That one is a surprise i think if that went through, it would be a very bad if the block went through, would be a very bad sign for whether the uk is welcoming competition and investment it does seem like an odd one just a pause in investigation and that does happen quite often and doesnt see through to being a blocked investment the fact it is a minority investment does raise a lot of questions as to whether it will go through or not. Back to the france version and your point about whether the bull case is now the previous bear case, this is a proposed 3 tax on revenues they would deem were generated there if that becomes the norm, would sort of be a win once it comes through. It is not a 40 tax or a fine that cripples the business model. Incrementally is not a problem. Not punitive. It also is shaken out as something domestically that politicians would be seeing to have a win on it kind of fair, something in the middle on the point of european politics, Jeremy Corbyn also the leader of the labor party, just as a sign of the cross Party Alliance in europe on this, writing a birthday card to jeff bezos saying that theyre not paying enough tax in the uk and you should give workers a pay raise. Again, similar theme to what we have here, from the left leaning leaders. But it is something that does have cross body appeal, quite manifesting in some term sales tax, pay raise, some kind of fine, these guys are in the cross hairs, probably increasingly so in europe and the u. S. Because theyre not European Companies exactly theyre literally kind of the foreign entities, yeah those stocks, amazon down a little bit in premarket, nothing too significant, in line with the market declines which has got the dow down around 100 points. The countdown to the opening bell, which is in ten minutes, take another look at futures lower this morning afterthat stronger than expected june jobs report s p is poised to open down 13 points dow down 90 and the nasdaq down 53 this after coming off of new record closing highs on wednesday. We got more squawk on the street from the nyse straight ahead. vo the hamsters, run hopelessly in their cage. Content on their endless quest, to nowhere. But perhaps this year, a more exhilarating endeavor awaits. Defy the laws of human nature,at the summer of audi sales event. Get exceptional offers now. Welcome back to squawk on the street. We have got about eight minutes until the closing bell the pictures were showing you now here at the stock exchange, opening bell, excuse me youll be doing the closing bell also. Yes but opening the session today, we have the United States Coast Guard Auxiliary in celebration of their 80th anniversary and founding to honor the occasion director thea narkowitz will ring the opening bell. You see that getting ready right here signing her name in the book all right and as we prepare for this open, lets bring in ken yny pulkarey. Good morning i think back on times like this in the market where ned davis looking at this market for 50 years, says dont fight the fed, dont fight the tape those two things pretty much tell you should be oriented in a bullish direction. Does that make sense to you given what else were seeing in the macro scene . It makes sense because hes right. You cant ever fight the fed if youre having that conversation about this pending rate cut coming at the end of july, i would suspect you might see the market back off a little bit today, just because you had such a strong number, so maybe there is a question about are they going do it, is it going to be 50, 25, what did the market expect versus what they think theyre going to get now and so therefore you may see some churn. The other Economic Data is not as weak as everyone is making it out to be. The economy feels like it is chugging along just fine so therefore i do think that there are better days ahead. But in the shortterm, there is a fair amount of noise, a lot of it around the report today, a lot of it around certainly trade which will be ongoing. But, look, if we get a trade deal in the next 25 days before the fed meeting, you could see in my opinion the whole fed cut rate thing come off the table because strong economic jobs number, you get a trade deal that really looks like it is going to work. The fed may take a second and say, lets sit back for a minute and see how this plays out i dont think it is over yet it is not over. That would mean we have 3 1 2 weeks of suspense, right we went into the july fourth holiday thinking we got this figured out, a rate cut and maub maybe a trade deal on hold, but later. What if the trade deal happens in the next 25 days . This morning, news overnight that china goes, if you dont get rid of all of the tariffs, these trade deals the talks will go backwards again. Once again, kind of creating some angst, some noise, stamping their feet a little bit. Maybe it feels like were not going to get one by the end of july, so therefore the fed will go forward and cut i think 25 basis points. I think 50 is off the table. I think 25, though, if they do it at all, thats what it will be and the market will appreciate that ma maybe they wanted 50 but theyll appreciate 25. Lots of talk around whats been happening to estimates, coming way down and what is the future going to look like thats going to start to play into this as well. We got plenty to focus on thank you very much. Youre welcome. Opening bell is just a few minuteaw s ay welcome back to squawk on the street live from the Financial Capital of the world the opening bell is set to ring in just one and a half minutes futures are pointing lower as we await the open coming off the back of a strong week, off the back of all time closing highs for the s p. Were up about 2 for the week as a whole mike, expecting, what, 100 points pullback on the dow, which in perspective of a strong jobs number is nothing to be too concerned about. Unemployment rate ticks up to 3. 7, but for the good reason, more people looking for work, wages on target. It seems as if the market just wants to take a little bit of the possibility of a more aggressive rate cut out of the market, for july 31st. It seems as if we also have to figure out if this big breakout to a new high is, you know, going to be ratified here. Looks very good on the charts. We finally got above this 2900 level by a couple percent and thats all for also worth pointing out, on wednesday, we did see all of the sectors higher we saw the russell take part, which is hasnt done week to date as a whole. Ahead of the open, the equity market, we did see the ten year treasury note off the back of the job number rise back above 2 there goes the bell. As we said earlier, ringing the bell here at the big board is the u. S. Coast guard auxiliary, celebrating the 80th anniversary. At the nasdaq, reach across america, nonprofit, wreaths on veteran graves each december lets check out how the markets are opening. Dow down about 0. 4 the nasdaq lags, down 0. 6 in terms of how the sectors shake out, one higher, financials, as we said, we saw yields tick higher of course off the back of that jobs number which is stronger than expected. Utilities, outperforming of late, is at the bottom down 0. 8 the dow down over 100. Were still higher during the holiday shortened week for all of the major averages as you mentioned, financials the big outperformer today dare i say the only one of the s p sectors in the green right now also i would keep an eye on semistocks, those are lower after we got that warning from samsung. We got intel at the bottom of the dow. Down 1. 2 . Point out on the samsung numbers, they were better than expected earnings down 50 year over year semimargins big factor for that discrepancy and the guidance wasnt particularly strong intel at the bottom of the dow the brokers, some of the weaker financial stocks have been the Online Brokers like schwab and etrade theyre pretty direct read on shortterm Interest Rates, they get a lot of money off of client balances and they are leading the way right here in terms of all those stocks that are down, i was pointing out earlier, almost a quarter of the s p 500 is about 20 from its 52 week high so this idea that everything has been up and were at new highs for the index, the index certainly has done very, very well there is a lot of kind of either you can say the wreckage or dry powder under the surface where a lot of the cyclical and financial stocks have underperformed and that could be the source of rotation going ahead if we do think the u. S. Economy is perhaps less weak than thought. Yeah. Of course, you know, having this conversation in the midst of what is going to be a flaring rate debate whether the fed cuts later this month on the heals of the stronger than expected jobs report, one thing i would point out in the numbers we saw in the june nonfarm payroll numbers this morning is the fact you saw something of a resurgence in terms of hiring reconstruction and manufacturing. Trade focussed industries within the economy. See if that continues to hold. And we mentioned the chip stocks already, nvidia and qualcomm to the bottom right at the bottom, though, free port and newmont goldcorp, both down over 2 . Relating to, of course, the jobs number and the move we saw in the dollar to the upside. They have been strong, very recently just leverage plays on the gold price is how they trade on a reflex basis the big tech stocks, not really backing off very facebook down almost 1 some effect there, this idea that they have had a very good run and, you know, maybe this is this idea of getting some pushback on the regulatory side. Wouldnt make too much of it as a new trend. Also you got a mixed picture for crude. Brent slightly higher. Wti, u. S. Oil futures are lower. Both are lower on the week, despite the fact we had the opec meeting earlier in vienna where they agreed to extend production cuts also the fact that youre back at five year lows in terms of output for the opec cartel gold coming off today, 1394. Volumes so far the trade here on the big board, 40 million or so were expecting a light day trade, which is historically what is to be expected. It is it is an odd one just an interruption of the week it is a full trading day on jobs friday, the initial reaction in the morning is kind of what youre going to get, but interestingly, here is the backdrop, though people seem a little bit under invested and surprised by the new highs and the s p. If you had to make a guess as to whether if we get a decent dip, gets picked up, i would say probably so. I know that the strategists at city group say there are indicators that suggest that if we do get any kind of pullback from here, it probably is one to be bought, simply because you dont have the Recession Risk flashing right now. I feel like thats been the theme for this entire bull market, which hit a new record length of time this week too it has largely been a theme we have been very quick to go toward worry when you have a little bit of a pullback or some scary headlines, i would say january of 2018, everyone was thrilled and happy and the headlines confirmed the strength that was the momentum. Even september of last year, complacency, but, youre right, it is quick with a few Percentage Points of dip if we get one of those that it does go toward people just very much anticipating the end of this cycle multiple times before it happens. So your point about the faang stocks suffering in todays market, overseas regulation question, netflix is the worst performer of those thats the one that is left out of the regulation debate i dont know whether it is that specifically or just more broadly that tech stocks are not having the best sessions interesting, mike to see maybe a reflection on Stranger Things season three. I havent seen it yet it is on the list for viewing this weekend. You know what else is making the rounds, that study last week of how long people take to figure out what to watch and that 20 of people dont watch anything i think the algorithms are terrible it is very binary. I watch a war movie, everything im recommended for the next movie is world war ii documentaries, which i often watch, but still you would think they could get it a little bit you know what netflix would say. You have to watch more to give them more data to know what you like. We have been a member for three or four years now. I do think that the recommendations on that could be better, relative to the data they have compared to a traditional broadcaster. The broader sector up 0. 4 some gains quite significant Morgan Stanley up, bank of america up over a percent. These stocks still do continue to trade very much correlated with the yields. They havent significantly broken out days where they jump a little bit, but havent significantly broken out to be the new darling of the market. Just been very stubborn, operate in this relatively tight range, all looking relatively cheap. Probably have to be a more comprehensive rotation into value for them to perform much better though we anyhow the dividend and buyback story a big part of it pretty negative, 1 to 4 to the negative side in terms of up down stocks. I wonder how much the u. S. chin ka trade talk s, you v this one, if the two sides are to reach a deal, all imposed tariffs must be removed, according to the ministry of commerce spokesman chinas attitude is clear and consistent i just wonder, it begs the question, are the chinese once again maybe reading the u. S. Position on this wrong and what does that mean for these talks and how sustainable they are. We should mention, Deutsche Bank is up 3. 2 , thats the euro price, euro 20, down close to 6, dipped below 6, as much as three weeks ago. Had a strong run up over the last month, up nearly 17 or 18 . Might have more detail on that to come later in the show. The headline today being their Investment Bank chief has stepped down and, of course, this comes ahead of a important weekend for them, the board is meting this weekend and expected to finalize their broader restructuring plans and the market certainly welcoming the sentiment that those restructuring plans are coming over the course of the last month. Stock up significantly from an incredibly low base. Dollar index up half a percent today. It is a pretty significant move, back up, you know, above 97, pretty solidly thats been one of the tailwinds very recently was the dollar backing off. Not out of its range, still below the highs. The other interesting thing in the move today, it is about a half a percent move against all of its major pairs of late, a lot, we have seen more individual moves based on ecb headlines and the euro or risk on, risk off sentiment. It is rare that we have seen unanimous half a percent move across the board that focuses on people expecting slightly less easing from the fed because of a stronger number today. Either way, were up down about 0. I cant find my markets down 0. 6 at the moment on the s p 500. We are ten minutes into trading. Seema mody has a look at whats moving. Latest jobs report puts the feds next move into question. The expectation was that the fed would cut rates in the july meeting. This just this week a series of weak data points private payrolls disappoint, ism Manufacturing Survey was weak. Factory orders dropping, which fueled expectations that the fed would act in july. The average jobs growth over the past three months is now 171,000, which is lower than the average of 192,000 and below the 2018 average bottom line, the june jobs report may have beat estimates, but the u. S. Is still on average creating fewer jobs than last year heres the Market Reaction as you were alluding to s p 500, the dow, the nasdaq all lower after hitting three record highs for the s p this week. This move into perspective we are seeing a pronounced move in the u. S. Dollar on track for about a 1 gain for the week and gold is selling off, down nearly 2 , still hovering around six year highs and the ten year yield above 2 in response, the gold related mining stocks are are all trading down by around 1 to 2 . 3 for kinross gold. The proxies are moving to the downside real estate down about 1. 5 now that the ten year yield is back above 2 the attention now turns to fed chair Jerome Powells testimony to Congress Next week for further clarity on the feds next move. Back to you. Seema mody, thank you. To the bond pits now Rick Santelli, treasury yields are moving higher. Rick yes a lot of things are moving higher i think we could let the markets speak for itself regarding all the issues of the day after that strong report. A two year note yield up 9 on the day. Up 10 basis points on the week 5s up 10 on the day, up 6 on the week 10s up 9 on the day, up 3 on the week 30 year bond, up 7 on the day, 1 on the week. I find that a very big reversal. As for the dollar index, right now, it is up well over a penny on the week. To the charts. Let as intraday of two year note yields, you see how much it flows. Looking at 2s and 5s and 10s your next chart, they all look pretty much the same they leapfrog. If you look at bund yields, yes, they rallied all the way up to minus 35 but nonetheless, it shows you that the ecb isnt doing anything to push rates higher. We are all in this together with respect to how policy and how data points and various economies affect the sovereign debt market in identical patterns just starting and ending points where they are and basis points is a bit different look at the Euro Currency and the dollar certainly dropped off a cliff, which, of course, means the dollar index flew. How much this will impact fed is a hard one to answer just listen to the way it is talked about what we have taken a 50 off the table. Who said a 50 was ever really on the table . Im not sure the logic there i know people talk about it at water coolers, but maybe thats the issue today and im going to have judy shelton on thats what i would like to talk about. Do the markets get what they want all the time and is that the best thing tune in. Well see her answer mike, back to you. Rick, thank you very much for more on todays movers, it Bertha Coombs at the nasdaq youre coming off an all time high on the nasdaq and this morning we have seen just about a few stocks starting to move into the green but the majority this morning are to the downside as were seeing some profit taking here this morning chips are among the worst performers they continued to be under pressure samsung put in a quarter that looks like a little bit better than expected. Not as bad as feared, but nonetheless continues to weigh on the memory chipmakers as it doesnt really see that much more demand. What is interesting is that the faang names, they were the big contributors coming into the year but they arent so much now notwithstanding the complaints about them in the uk from Boris Johnson. Look at whats been contributing to this move to new highs here at the nasdaq, it is really been the Software Players thats where we have seen the strength, a lot of the cloud players, we have seen that in the ipos as well as in the stocks that have been around as well as in the granddaddy of them, microsoft, the biggest contributor, not just to the nasdaq, but to the s p gains and the gains in the dow as well microsoft already off to the best year since 2017 when it gained 37 for the entire year to go back and find a better year than that for the full year, back to 2009. Back over to you i have started watching Stranger Things, but to wills point, it is wild to see how much those kids have grown from the second season. Thats one of the stranger and tougher things to watch. But the other thing is that for me netflix i dont think they know what it is i like, i like Stranger Things but i also like the crown. I think theyre confused what my genre is. There is another season of that coming i believe soon as well i cannot wait got to tweak the ailgorithms little more. Thank you. Time for a closer look at oil prices dom chu is back at hq. Stranger things in the oil market now prices poised lower, seem a little strength lately in the trade for a mixed note to close out the week prices ticking ever so slightly in the green 57. 37 thats well off the session lows futures up 1. 5 . 64. 12 from a full trading week perspective, still one of the bigger down moves for both benchmarks oil trader continues to deal with weaker Economic Data. This morning, read on Industrial Orders in germany fell by more than expected. That follows up on weaker data for factory good orders. Thats putting downward pressure on prices, but remains to be seen how strong any support for prices could be given this weeks extension of production cuts by opec and its partner countries and more geopolitical tensions given that seizure of an Iranian Oil Tanker by british marines in that area between the Atlantic Ocean and the Mediterranean Sea for alleged European Union sanctions violations in taking oil to syria. So as we watch all these things coming up, the oil market slightly ticking higher at this point. Back to you. Dom, well track it for sure. Thank you very much. Wanted to make note of the volatility index, the vix. For relatively low levels it had remained very elevated in the 16 range, ahead of the g20 meeting, we did get a little bit of a truce on the trade front. Declined into the holiday and now today, about 13. 6. Little unusual going into a weekend and going into, you know, another kind of week of july trading when you have earnings coming up next week shows this little bit of reserve of caution in there because we maybe have gotten a bit of muddle on the fed outlook for the next three weeks. One to watch as we go to the close later today. We will there be. Yes, we will. Coming up, casino stocks are on a roll and outperforming s p 500 so far this year. Is it likely to continue stay tuned for the second half playbook squawk on the street will be right back when you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort. While premium foams relieve pressure, keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Live healthier, live happier by resting deeper. Get 15 off, and 2 free pillows. Go to leesa. Com today. Welcome back lets have a look at this weeks top gainers on the s p 500 symantec leading the charge, up 15 . The company in talks with Chipmaker Broadcom followed by jefferies financial, which is up rks wnart of 10 maetdo 120 points on the dow. We will be back in a couple minutes. Welcome back with 2019s first half of trading in the books cnbc is looking at the second half Contessa Brewer is looking at her beat, casinos. Reporter in the Casino Industry all eyes on u. S. Relations with china the first thing to watch is whether the United States and china make a deal on trade its impact on the economies of both nations translates into how much appetite there is for gaming if a deal goes bust it could negatively affect the ne negotiations or negatively impact the number of chinese visitors coming to the United States to gamble the most affected winn, sands and mgm. The second thing is mergers and acquisitions casino m a grabbing headlines. Is nguy finding a partner and getting big ser a Global Gaming trend. The third thing is how lady luck lures in local lawmakers watch for more states to expand casino gambling and to adopt Sports Betting regulations they are hoping to hit the jackpot when it comes to tax revenues from gaming what is so amazing to me about this, guys, when you look at the casino stocks and the fact that they have outperformed the s p so far for the start of the year, how resilient the macau revenues have been those have been up 6 versus the year prior and thats just by what has been arguably a slowdown throughout the asia region. Even so, people seem to be going to macau and spending money there. Clearly, the stocks, tdo trae on traderelated headlines with china. The macro data in china, particularly what the government is doing in terms of capital controls, is a more relevant factor for them. Macro data in general in china is linked, of course, to the trade war, but also leading the government to ease a little bit on the monetary side and that feeds into easier move of capital. So its offset quite n significantly. I wonder whether you have the high rollers and big spenders that otherwise would have come to vegas, are spending more money in mack kow. Yeah, instead of gold or bitcoin, you get money out with poker chips and things like that. You could do all three. Exactly. Winn is down a little bit today. Up 7 for the week the third or fourth best performer on the s p this week 6 on the s p. Coming up, judddy shelter. Rick santelli will have that interview in the 11 00 hour. We are back in a couple of minutes. Good morning welcome back to squawk on the street. Im Morgan Brennan with wilfred frost and mike santoli carl, sara, and david are all off this morning the markets on this final day of the trading week, all the major averages are lower the dow down149 points, s p down 20, nasdaq down 23. Treasury yields ticking up, dollar stronger. All of this of course on that stronger than expected june jobs report we got earlier in the morning. Our roadmap starts with that blowout jobs number. Stocks under pressure off the back of a recordsetting week. Taxing big tech what europe is doing to take on the likes of facebook, amazon and google. And we will hear from beto orourke, his tax policies in focus there. First, the major indexes are falling in reaction to a strong jobs report for the month of june joining us to discuss is Wells Fargo Asset Management senior Portfolio Manager marty patel and urian timer. Good morning to you both one of the questions seems to be thrust into the spotlight on the heels of this nonfarm payrolls report is whether the fed is actually going to cut later this month. Well, i certainly think they should because there are plenty of signs of Financial Stress Interest Rates are too high. You see that in many Interest Rates sector one job report shouldnt put them off their track which is for lower short rates. Whats your take on this on the heels of this report this morning . Does it change your view it does not i mean, it was a good number it was a goldilocks number there is other information that suggests that the u. S. Has joined the rest of the world in kind of a synchronized Global Economic slowdown and that a couple of insurance cuts here over the summer into the fall makes sense. Probably not a 50 in july, i mean, you know, as mike said earlier. That really didnt make a lot of sense in my mind anyway. But i think the fed is still poised to scutt. Whether they actually cut or not, with dont know my guess is that they will and in a slowing growth environment the payroll number notwithstanding i think that kind of insurance cut with inflation running so much below its target makes sense here and they can always take those cuts back next year if the economy reaccelerates. I know u. S. Equities are lower this morning but in general the moves to record highs that we saw earlier in the week, what happens if the market doesnt occur i think it would be a big mistake on the part of the fed just as they made a big mistake in december. I think its very appropriate. I would be shocked if they didnt cut rates i think thats why the market is doing better this year because of the feds sea change in january when they reversed course to say we need to step back and look at Economic Conditions for the level rates that were not justified. This late in the cycle does a small cut or a small couple of cuts tend to actually work and then allow the fed tostand back or would this be the start of a change in direction that would persist for a number of years . Well, i dont think we are at a cycle. Urinto you. That is the great question because if the economy is going into a recession, which year over year expect at all, you could argue even if the fed cuts too late and we are going into a bear market. But if we are not going into a recession and our evidence suggests that there is only a 3 chance that the economy is currently in a recession kind of as an nowcast, and if the fed cuts rates against that scenario, it could really extend the cycle. Actually, i looked at this if you go back to the 50s and look at the cycles where the fed starts cutting and the economy is still expanding at that point with a low odds of a recession, five out of the six times the market is up by an average of 20 a year later so it does matter. And if the economy reaccelerates, as it did in 2016 when, at that point, you know, the s p was at the 100th percentile of its yearlong range while the ten year treasury was at zero percentile, it was treasury yields that caught up and we went back to a tightening track a year later, which is what it did i do think it matters quite a bit here you mentioned earlier that you found Interest Rates sensitive to sectors of the economy under stress. What do you mean just some of the kind of spotty housing numbers . And what might a rate cut help on that front when you already have ten year yields light i credit spreads are tight what are you seeing . Well, i think that we are seeing some slowdown which reflected their tightening, an appropriate tightening last year, not only housing but also the inverted deal curve and other signs of corporate slowdown so i think if the fed continues with being passive, the proper course, and cuts rates, i think that will give more confidence to business. I really think that the cycles we have had had been caused by the fed. If the fed steps back to a passive mode, there is no reason to have secular growth for a number of years in the future. There is nothing inevitable about a recession unless the fed overtightens. What are you seeing in terms of client portfolios and the level of risk exposure, cash exposure at the moment clients always get a little nervous when they see signs of a slowdown and that fear that we are about to have another big correction as if 2008 is going to happen tomorrow is still there. But i think the continued good news i think a steady policy by the fed would do a lot to clear away that negative sentiment. You mentioned at the top of the discussion that the u. S. Is joining the rest of the world. Is the u. S. Still the most attractive market to invest in, or are there other opportunities in other places . I think emerging markets are starting to look interesting here they are trading at a discount of about four, five points to the u. S. , although a lot of that has to do with sector weightings but i think that is, you know, an area that has lagged the u. S. For many, many years, since twech t2011 the u. S. Has been the star performer. If you went outside the u. S. You would have given up performance and added risk to your portfolio in verms terms of volatility. That will mean revert. Whether it happens right now or not, it probably will require a fed easing cycle for that to happen because that allows ems at that point to start to look more attractive to and to cut policy but i think that is sort of the next big question mark as to when will the leadership transition until then the leadership we have had so far, which have been these odd bedfellows of secular growers and the bond proxies, i think actually will continue to work for the cyclicals to work i think we need a recession first and then this early cyclafem on nonand we are a long ways from there. Thanks for joining us today the dow is down 142 points. Europe taking on big tech. Frances lower house of parliament approved a 3 tax on google, amazon and facebook in an effort to prevent them from avoiding taxes by setting up headquarters in low tax e. U. Countries. Calling out faang names, Boris Johnson the leading stit to replace theresa may as Prime Minister this is the labor leader Jeremy Corbyn wrote a letter to amazon Ceo Jeff Bezos wishing the company many happy tax returns on its 525th anniversary sayin this year pay your fair share of taxes, and respect workers rights guys, we were talking earlier. If the france model goes through and were talking a 3 tax, its probably similar to the way that gdp and various other taxes on google from the e. U. Ends up being a win for the stocks in the long term relative to the worstcase scenario fears. Will they continue to be seen as big pools of money that politicians can target you know, one of the proposals of senator warren, i believe, in her kind of tax policy slate is to essentially force companies to use the same earnings that they report to investors as their tax return earnings. There is none of this one for investors and one for tax purposes whether that ever happens or not, i think its part of the same impulse that corporate is talking about right here. I think its amazing. It almost goes across party lines, whether you are looking in europe, the u. K. , other parts of north america that the consensus is that Big Tech Companies need to have further scrutiny, maybe warranting some sort of regulatory or increased Regulatory Oversight the devil will be in the details in how different politicians imagine that playing out is different. Also, just really amazing to think that amazon is now 25 years old. It has been like one of the most one of the biggest disrupters in so Many Industries for so many years now. The point on the french proposals is exactly how they are going to enforce it. Its hard to define what revenues for a facebook precisely came from france you get the sentiment behind it and the 3 number is not perhaps the end of the world though those stocks down today, facebook down 2 when we return another democrat, another tax policy we will hear from president ial candidate beto orourke and what he thinks should be the top tax rate later amazon celebrating its 25th anniversary we will look at jeff bezos and his path to becoming the worlds richest man. A look at the Top Performing stocks in the s p 500 today. Back in a couple of minutes. Democratic president ial candidate beto orourke sitting down with our own john harwood, hitting topics including trumps tax policies and what orourkes tax plan would be. It was a topic that came up in last weeks debate when he declined to answer whether he thought a 70 top marginal rate was too high or too low. Its too high i think in my 60 seconds of trying to get an answer in and trying to root my answer in the fundamental inequality of this economy and the inability of far too many of our fellow americans to be included in this economy, which is, you know, central to anything else that we are going to address, including the tax rate, i didnt answer the direct question so if youre asking me, no, i dont think we should have a 70 tax rate i think that is too high. What sounds right to you . I think you at a minimum roll back the worst elements of the trump tax cuts the marginal, the top marginal tax rate back up to 39 . If you were to do that and, in addition, make some other structural changes to our tax code, the Corporate Tax rate, which was brought down from 35 to 21, bring it back up to 28. Great place to start and as you probably know, you generate hundreds of billions of dollars over the next ten years if you tax capital at the same rate that you tax ordinary wage income like the waiters who are working here then i think you also get to some greater structural correction to a very unequal economy and you generate the revenue necessary. You mean Capital Gains and dividends . Absolutely. And i want to make sure that i get this point across, that, yes, you generate the revenue that you need to pay for the investments in education, in health care, in the affordability of college, but you also reduce the con sensation of wealth and power and privilege that really defines this age in america in a way that we havent seen since the last gilded age of more than 100 years ago. And so both are necessary to ensure that this democracy, this country will work for everyone. If you increase a wealth tax at the intergenerational transfer of wealth within families you mean like estate tax and the stepup basis that absolutely. You tax at the real value of that given asset and john harwood joins us now with more. John, i guess its something of a custom now you go on a clarification tour after a big debate a lot of the candidates want to do that to elucidate their vision what do we see here from orourke in terms of his general economic thrust . Whats the message aside from perhaps undoing the trump tax cuts well, the takeaway for me, mike, was that he is positioning himself as one of the more moderate Democratic Candidates closer to obama on taxes than, say, Elizabeth Warren. You guys were talking before the break. Elizabeth warren wants to do a whole lot of things to corporations she wants to change the rules of corporate governorens. She wants people to pay taxes on the basis of what they report to shareholders she has a 7 minimum profits tax for very Large Companies to avoid an amazon type situation where you dont have tax liability. Beto orourke is not going there. So that is positioning himself as a somewhat more business friendly candidate i think his hope may be if joe biden continues to have trouble, joe biden had a very rough debate very recently, then some of that moderate vote has got to go somewhere, and beto orourke hopes its him john, is this always his position or is this a sort of lastditch attempt by him, having seen his position in the polls slip what to try to put himself as an outlier . The headline grabbing top income tax rate of 28 is a fractional increase its very far from some of the other candidates. Exactly what he is doing, remember he ran in texas last year, which is a very conservative state, against ted cruz he ran as a protrade democrat thats one of the other things we talked about. He was for trade Promotion Authority for president obama, but now says he would be against tpp. Thats kind of standard for democrats in a democratic primary. No i think he is trying to figure out what his lane is in this race after being a sensation in 2018, he has fallen back so far this year, and i think identifying himself, which is sort of consistent with his texas roots and the fact that he is a Small Business owner, as a more moderate candidate maybe thats a way for him to compete. He is not going to compete with Bernie Sanders he is not going to compete with Elizabeth Warren or aoc, for that matter, on the left edge of the democratic spectrum. John, i love watching these sitdowns that you do and it makes me hungry when i see you sitting in the different restaurants. Im hungry when i sit down. Well but that was a speakeasy first, john. I dont think we have ever seen you take a big heartdy bite of food like that midinterview. I have taken a lot of interviews those enchiladas, which is a stap location in el paso, absolutely delightful. Red sauce and green sauce on there. I have been there its very good quickly, john, in this discussion around taxes with beto orourke, did he have anything to say about the Tech Companies . We have been having this discussion including the last block of the show not just here but also in europe whether the Tech Companies are coming under more scrutiny and could be seeing their tax bills revised upward does he have thoughts on that . We didnt talk in detail about Tech Companies, but the concentration of Corporate Power is a theme that he echoed and all Democratic Candidates have echoed so there is a question about how direct candidates are going to be weve seen Elizabeth Warren, who again is the most sharply defined on economic populism say i want to break up those specific companies other candidates are a little bit less direct than that, and beto did not volunteer anything as direct as that. But i think the Tech Companies, democratic president ial candidate wins in 2020, they are certainly going so see more oversight, more regulation, and higher tax bills than they would get under president trump. Okay. John, thanks very much. You bet. When we come back here on squawk on the street amazons 25year run. We will look at the stocks historic climb and where jeff bezos ranks among the tech elite. Ir hi sure will be the answer squawk on the street when we come back. Welcome back to squawk on the street. It is now time for our etf spotlight. Dom is looking at it prices for oil well off their worst levels of the day. It may be on pace both of those benchmarks for the worst week out of the last five and that has put those Energy Stocks into focus after record highs in the dow and s p yesterday. Meanwhile, the worst performing sector like you said during this holiday shortened week is energy, down by just over 1 three quarters of the stocks are lower during that span lower prices have made oil and Gas Exploration companies nong the worst sector performers. Those companies in the business of extracting energy from the ground ticker xop down 3 this week oil services oih is down over 1. 5 this week as well that means, of course, Broader Energy stockbased funds like the Vanguard Energy Index Fund Ticker vde down in line with the overall sector over 1 crude oil prices will continue to be a key to that trade. West texas intermediate and brent crude prices still below the 50 and 200day prices. As we talk about the dynamic, this particular oil move here today could signal some more weakness ahead possibly, but oil stocks a big focus back to you. Dom, wti turned positive just during your hit there. So and present has been solidly higher all day long as well. Amazon celebrating the 25th anniversary today with its founder jeff bezos now worth an estimated 158 billion a closer look at the figures. Thats right. Jeff bezos founding amazon. Com july 5th, 1994 thats exactly 25 years ago today. Since then the company has broken many records and turned bezos into the richest person in the world. Forbes says he and his family 159 billion. It just changed. He didnt make that money evenly across the 25 years. But for some sense of scale consider what it means if you broke it down into some smaller increments he has made an average of 6. 4 billion per year every year over these past 25 thats 530 million a month, 122 million a week, and maybe most illuminating he made an average of 17 million a day every day for the past 25 years. The vast majority of his wealth has been made over just this past five years. In that span alone he has earned about 130 billion, or 70 million a day just since 2014 back to you. Eric, you know what is so amazing about this when you break the numbers down like this, and its all relative, the fact that he sells, what, about 1 billion worth of amazon stock a year to fund his other company blue origin, it almost seems like a drop in the bucket. Exactly thats why you could do it if someone had 160,000 and they told 1,000 every year to fund their hobby, its the same exact numbers. We just have a lot nor zeros at the end of that. Eric, thank you very much some extraordinary numbers there, mike. The thing that is a good snapshot for me is we throw this in with all of the new Tech Growth Companies its 25 years old and it has adapted because its got aspects of netflix in it and aspects of google with the Cloud Business but the core business is old. It is old its actually a bit like microsoft in its 90s heyday, was roughly at the same age. Now, amazon went public earlier. But exactly right. Its very well established its a massive, you know, piece of the economy, right . I mean, just in terms of how its intertwined with it the thing about all those numbers about his wealth thats, that i take away, that the averages obscure the fact that at one point his wealth went down from 90 . In 2000 to 2001, the stock went down 90 and people didnt know if it was going to actually have a second act. The other point id also say for the 25yearold part of this, the online delivery shopping products, thats not really profitable, which is the other extraordinary take away. Find another company that has grown so successfully over 25 years with the core business being loss making give or take. Or running a the a loss. Thats kpraet extraordinary uber couldnt do that unless it develops Something Like Amazon Web Services which is a cash cow to pour profits in the other businesses. It makes the argument for the strength of a company, of an investment long term that continues to keep putting money back into whatever is going to be next for that Company Versus more shortterm quarter to quarter numbers that investors sometimes focus on with stocks i was going to Say Something else but i forgot. Anybody out of Silicon Valley wants to play by amazon rules, they dont generally let them. The other point which was not erics point, how much money he made per year or per month, per week, is unrealized. This is capital gain 99 of it is as you said, he fell 90 before. So dont count your chickens. Well, when we return samsung expecting a huge drop with u. S. And china trade tensions weighing on that stock we have the latest a check on the markets you do see the dow down 172. S p down 0. 75 more squawk on the street when we return. 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. Good morning everyone. Im sue herera here is your cnbc update at this hour Southern Californians are bracing for more aftershocks following yesterdays 6. 4 earthquake video cap dhurd tured by resides shows cell phones cases shaking on their hooks it was the regions largest quake in 20 years. Executive and philanthropist chris cline was killed in a Helicopter Crash yesterday the chopper was on its way from florida to the bahamas six others were also killed in the accident. Hundreds of people use the july 4th holiday to protest the treechlt of immigrants at the southern borderer which marching in the streets austin, texas. It comes days after democratic members of congress expressed outrage after visiting detention centers. And a flight from new york to london was forced to make an Emergency Landing in boston after a fire broke out on board. Crew members of the Virgin Atlantic flight put out the flames and all 217 passengers on board were safely evacuated. You are up to date morgan, back downtown to you. I am glad they were safely evacuated. Thats scary. Absolutely. Not a good way to start your flight. Seriously. The dow is down 180 now. Meantime, samsung says its quarterly profit will fall 50 from a year earlier with u. S. china trade tensions continuing to that weight on demand deidre joins us with more. A onetime gain helped results this quarter over profits. They were down, as you said, more than 50 . What were seeing is a supply surplus and slowing demand from memory chips remember this is samsungs biggest business now, the china u. S. Trade war certainly not helping. Analysts say the trade war and the u. S. Export ban on huawei has hurt demand for memory chips globally if restrictions stay in place, that could pressure chip prices even further now, samsungs smartphone business also facing challenges with sluggish sales of the galaxy s10. Samsung could actually benefit from huaweis pain they could sell more smartphones if huawei sells less remember that huawei is the number two smartphone maker. Samsung is number one. Samsung is also making components for rivals in this space and ramping up its 5g Network Equipment business guys, it is not just samsung being affected by trade tensions aside from china and the u. S. , tensions between japan and south korea could be another headwind for them and other south korean chipmakers samsung lg and skhynix fe guys, this is really about the Global Supply chain picture. That 0. 76 decline is important. Its outperforming some of the other regional players yes, in the shortterm there might be macro headwinds they are seeing and a potentially longterm beneficiary if the u. S. china trade war persists thats right. Huaweis pain could actually be the their gain, right . But it stands to gain if huawei continues to have problems remember that the company saw smartphone shipments down some 40 in one month on the back of this export ban and the problems that they are facing so certainly samsung could pick up some of the slack there who knows . Maybe apple could regain a foothold back to you. Thanks. Stocks ending this mornings losses after wednesdays record close with losses this morning after wednesdays record close the jobs for june dampening expectations is the fed expectation the key thing for markets . In the shortterm, yes. We think they have been priced too much, 100 basis points over the next year. But really the story is about inflation, which is as todays numbers tell you earnings are not up very much thats very good news on the Participation Rate thats what the fed is addressing as we speak whats the story on inflation. What is injury expectation then for rate cuts in the year ahead . To get 50 to 75 over the course of the year i think the Central Banks across the world will are highly supportive thats not the entire story. Much more important part of the story is where is valuation . Thats been the major support for the last several years, especially this year and in all this news flow we should not lose sight of that. I want to go back to the point you just made. What is the story with inflation . The story with inflation is a difficult one. At such low Unemployment Rates you would have expected that wages would be rising faster, and i guess people are coming around to the view that, or economists are, just looking at the headline Unemployment Rate is not telling me the complete story, that there is room for the Participation Rate to improve, that workers are coming out of the, you know, distressed workers and disappointed workers are coming back joining the work force. Old Older Workers like me are hanging around and staying longer. Pmacro economics. What was your take this morning . Was the jobs numbers Strong Enough to dae lay rate cuts . Not by itself, but, you know, we have got a whole month of extra data to come out before the meeting on the 31st. I think ittesets up an interestg few weeks. If we get a run of numbers on the upside the markets probability of a rate cut will drop further the market has taken the idea of a 50 basis points season and is saying that getting a 25 is less than 100 . Just a few days ago markets were convinced of the action. Lets say we get strong return sales, strong cpi over the next few weeks. Its not impossible to think that by the time of the meeting the markets say mr. Powell its a 50 50, you choose. That wouldnt surprise me at all. Its a big move from where we have been and i think justified. To my mind the labor market is Strong Enough that the economy doesnt need to be supported by the points at this point. You mentioned valuation is a reason to believe that the market can stay supported. I assume you mean valuation of equities relative to where bond yields are most of all but globally maybe in absolute terms. Overweight risk assets like equities and globally countries like japan, emerging markets have underperformed severely thats one side of the position. We underweight industrials to be a little defensive we overweight treasuries to be defensive. Overweight Communication Services overweight Consumer Discretionary. Staying invested and keeping sight of the targets. International equities did underperform significantly last year so there was some valuation catchup if you snapshot year to date performance of the major oopgs averages around the world they are looking at 15 to 20 gain. Is that sort of relative valuation discount less attractive than perhaps it was compared to december, perhaps. But compared to where it should have been, where it should be, i dont think so there is a lot of room here. I mean, equities were generousl priced versus fixed income last year we tumbled in december we recovered from there. Yes, i mean, rates being so low, its part of the story no question. But foreign markets are trading at a substantial discount to where they mormnormally trade vu the u. S. For a holiday shortened trading week in the u. S. It feels long because we started the week on the heels of those g20 headlines and the fact that this u. S. china trade truce, or i should say a reigniting of talks was taking place, and yet today we get headlines that chinas reiterating that the u. S. Needs to scrap all tariffs as part of any deal. Also that beijing wont follow through on big agriculture purchases until it gets clarity on the trump administrations huawei reprieve. It doesnt sound very hopeful. To me it sounds like maybe, based on some of these comments from chinese officials, they are miscalculating or misreading the u. S. Stance on this again. What does it mean for these talks . Well, this has been a constant theme the last few months of each side misreading the other. China would love to see a deal where the tariffs are removed immediately. You might as well ask for that, but that doesnt mean youd settle for only that then a stage reduction later my guess is that would probably be enough for the chinese even though right now they sound more bellicose. The talks are restarting, you know, very shortly at an early stage. So im not surprised we are hearing sort of aggressive noise frz both sides staking out their positions and maybe for the domestic audience sounding griet aggressive i think it comes down to the anytime nittygritty, both sides want a deal very badly. Its hurting farming its hurting manufacturing its hurting political leaders on both sides of this dispute. I think they need the optics and the economic reality of getting a deal so, yeah, a lot of noise at the moment not a huge surprise. But i think that the incentive for both sides to thrash out a deal over the summer is actually pretty big if they really were happy with the current situation, it wouldnt have been all smiles at the g20, they wouldnt have agreed to restart the talks, trump wouldnt have agreed to not impose tariffs on chinese goods. I think we are past peak trade war now and my guess is the news fundamentally, never mind the shouting and talking from the sidelines, i think the news is likely to be quite good. Thank you for joining us. As we close out the first half of the year cnbc is taking a look at the market in the second half and heres my look ahead of what that means for financials Interest Rates, credit quality and whether the ipo bonanza can continue are the key things to watch in the second half of the year first up, yields banks typically like high rates and a steeply rising yield curve. That lets them borrow money at lower rates and lend out at higher rates they have gotten neither of those things at the moment that means even if a fed rate cut comes, it might not be so bad as it will steepen the curve even though it will lower rates. And it should boost the economy, which will help the banks. Second, credit quality quality has remained robust. There are also fears about the huge rise in leverage loans and direct lending but this isnt so much an issue specifically for the banks as fed reserve chair Jerome Powell stated, the fed feels banks are in a good place and they are more concerned about the nonbanks that have made those sorts of loans third, the ipo bonanza q2 was strong for ipos m a also picked up towards the end of the quarter can that continue and help the likes of Goldman Sachs and Morgan Stanley of course, guys, we are not far now from q2 earnings we said this the last two quarters could that put people off thinking, gosh, these late cycle plays, the Interest Rates are falling and see them have higher returns, say credit quality is fine and decent earnings, that hasnt been enough the last two quarters we will have to see if it works this quarter around. Also we will get comments from the management maybe it will be enough. Maybe it wont trade something not expected to be great though. Right you mentioned that the market i mean, you look at how the markets trade. There is a sensitivity to the idea that the end of the cycle could be approaching its been overanticipated but not evident in the banks actual numbers. Financials have turned lower today. Still the Top Performing sector in the s p relative to everything else. Which is a great sign of the sort of lackof enthusiasm even on day where the rates picture improved for them. Its hard to catch a bid last week after the c core results and cash back yields of 10 or something. Shallow conviction. As we go to a break, take a look at shares of bmw moving lower. Chief executive krueger announcing he is stepping down the weakest earnings in a decade bmw will hold a meeting on ceo succession july 18th more squawk on the street when we return in a couple minutes. Dow down 217 after a record run this year, a market watcher says a painful pullback could come in the second half. Find out nmore on trading nation. Welcome back lets get to the cme group in chicago. Rick santelli has the exchange. Thank you you know, what a uturn. We go to the whiteboard. A big data uturn. 224,000. Labor force Participation Rate ticking up we like that that caused a negative consequence. Be careful what you call negative because it moved the employment up to 3. 7 we want as many people working that are able to work. Thats a good thing. The other thing not discussed much, average Hourly Earnings last month released from 0. 2 to 0. 3. That wasnt upbraided in terms of last mant year over year average earnings is stuck at 3. 1. By, d boy, we are right back to the 206 area, 207. That really lingered as a consolidation area before we had europe really their rates and mario an draughty, the catalyst to that the day before our fed meeting. The real issue continues to be so many are saying that the market expects something and we will have chaos if we dont fet it just think about todays uturn. Rates have uturned from lower to higher. Dollars uturned and it is now up well over a penny on the week. What hasnt uturned, i guess it has, actually, was has u turned as well is the equity markets. Not in a positive way. They have turned lower suspect that the point its about communication alan greenspan, former fed chairman, tried to initiate a new form of communication and have an evolution over many, many years at this point in time you figure august, september, october of last year too many tightenings built in we dont know if they would have occurred now we have to have it we have this too loose mentality and maybe the markets are having a bit of a hissy fit remember a hissy fit when the dow jones is at 26,767, thats okay we didnt pick a bad spot. The data even though its weakened isnt horrible. But the communication issue is a big deal also a big deal, gold versus fee at i tell you why i will have dr. Judd judy shelter on today in the end of the day, would you rather have something with gold kind of moved into the currency arena . Do you want to go to the copy machine . A real key here because at the end of the day as good as gold is, you put in a vault, you have negativary you put it at home, somebody might rob you, etfs, do you really have gold . Futures, theyre great but theyre really volatile. So at the end of the day, maybe gold bonds, like a convertible gold bond, where you can actually pick, if china devalues their currency and you have a chinese bond, youll take the gold versus the deflated yuan im going to talk to dr. Judy shelton in about an hour and this is going to be one of the big topics so i hope you tune in. Mike, back to you. All right, rick we certainly will. Thank you very much. As we go to a break, lets take a look at the markets. As rick was saying, a little bit of an unwind of this monthlong trade weve had, backing off the dow, down three quarters of a percent, s p down a little more than that,the nasdaq down 8 10 and treasury yields are a good deal higher on that jobs news. More squawk on the street when we return. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort. While premium foams relieve pressure, keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Live healthier, live happier by resting deeper. Get 15 off, and 2 free pillows. Go to leesa. Com today. Welcome back to squawk on the street, getting a quick check on markets here with the dow down 188 points right now, 26777. Thats your level right there. Really trading near lows of the session, so far, for all the major u. S. Equity averages, youve got the nasdaq down about 9 10 of a percent, small caps down, transports down, and also the s p down 22 points or about 8 10 of a percent. Were also getting some headlines out of president trump, as well talking about the fed again, also drug prices and more. Were going to bring you those once we have them. Meantime, schools out for summer and that used to mean one thing, getting a summer job. But at our kate rogers found out, teens arent working in the summer the way they used to. So shes breaking us down for that on this summer jobs friday, from asbury park with more kate reporter hey, morgan thats right the Labor Force Participation rate for teens working summer jobs at the businesses like the ones you see behind me here in asbury park has been stagnant over the past few decades. Take a look at this chart. The number of 16 to 19yearolds who are working or looking for work in the summer, its been at about 40 in the past few years. About ten years ago, that was nearly 50 20 years ago, nearly 60 so what are all of these teens up to if theyre not working summer jobs . Well, take a look at this chart. The answer here could be school. This chart shows you more teens are enrolling in summer classes in 19 al, 10 of teens were taking School Classes in july. Last year the number was at 45 . And employers like Anthony Bannon here in asbury park say that theyve seen this shift in teen working dynamics firsthand. And actually, hes shifted his recruiting tactics in order to keep up. Take a listen. We found over the last couple of years, as 15, 16, 17yearolds arent working as much, weve had to open it up to 15 and 14yearolds working with schools. So weve had to expand that age range a little bit reporter bannon says he employs some 38 teens across his two boardwalk businesses here in asbury park. He works really hard to retain them, to keep them coming back summer after summer. He gives them opportunity to work their way up, take on some more leadership roles here but weve heard from him and other employers that teen availability and scheduling is not what it used to be more kids are taking classes, volunteering, playing sports that old summer job where you just work all summer long, thats just not what it used to be, guys back over to you okay, kate, thank you very much when we return, well take a closer look at europe taking on big tech and what that means for potential relation here in the u. S. Squawk alley up next dont go away. [ 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 good morning it is 11 00 a. M. At the Federal Reserves headquarters in d. C. It is 11 00 a. M. Here on wall street and squawk alley is live so id like to know where you got the notion say, id like to know where you got the notion to rock the boat dont rock the boat, baby rock the boat dont tip the boat over rock the boat dont rock the boat, baby isnt this music make you want to just jam on a summer friday i dont recognize that. And weve still got another show to do after this its not really late friday yet zp shes keeping the energy up i know, i welcome it. Todays job number rocking the boat a bit were live from post nine at the New York Stock Exchange on the floor here stocks lower this morning and actually taking another leg lower just a short while ago were going to start with the fed, the Monetary Policy report just being released moments ago ahead of chair powells congressional testimony next week, which will be another big moment for the market. Yl ylan mui has more on this report from washington. Ylan reporter morgan, the fed reiterated that it will act as appropriate to sustain the u. S. Economic expansion amid global uncertainty and muted inflation pressures