Transcripts For CNBC Closing Bell 20240714

Google, amazon, intel, and many others after the bell. Coming up in just a few moments, well talk about todays pullback much more with Hayman Capital Management founder kyle bass will be good to get his thoughts especially on china. Joining us for the hour, cnbc contributor stephanie link is back from nubene are you taking a chance from this pullback to do anything today . Its an earnings bonanza. Im still way behind in the Conference Calls that started last night but yeah, during earnings season, you always get exaggerated moves. So i actually am looking at the fundamentals and trying to identify where there is opportunity. Zille yix this morning was indicated down 6 last night and only opened up down three, but i still think that is an opportunity because they derisked the numbers bristolmyers opened flat, but actually that quarter was really good, bought a little bit of that so im lacking for opportunities slowly, because the macro, obviously, weve got a lot of questions still. So, does today mean that the market is interpreting earnings season overall as a big negative because we were at record highs just recently. No, yeah. I mean, i think that theres winners and losers all the time, but the moves are so exaggerated. The machines see the details, the numbers, and theyre not doing the fundamental analysis, but i think today is also a bit about the ecb and them maybe not being as dovish as what people wanted but if you really listen, theyre pretty darn dovish, so somethings coming down the pike. Listen in the first hour. Listen to that. Thats right. Lets dive in on the big stories were watching phil lebeau with tesla and the airlines, Julia Boorstin with facebook, seema mody with details on 3m, and bob pisani has all of the other key movers at the exchange, but phil, lets kick it off with tesla. Youre looking at a stock right now seeing its worst day this year. If it slides much further, it will be its worst day since september of last year all of this coming despite the fact that the company had betterthanexpected deliveries in the second quarter, but its the automotive Gross Margins thats whats weighing on shares of tesla in fact, yesterday thecompany said its auto Gross Margins in q2, 18. 9 most were expecting them to top at least 20 they were squeezed as they ramped up deliveries of the model 3. On the Conference Call yesterday, elon musk once again said he sees profitability in the future for tesla we believe tesla has is now at the point of being selffunding, and we expect the cash flow, the Free Cash Flow positive in future quarters with a possible temporary exceptions around the launch or ramp of a new product. Guys, tesla shares down more than 13 so far today. Phil, we also wanted to ask you about the airlines big news out of southwest, american, both out with earnings what were the big takeaways . Yeah. Well, thats why were down here in the dallasft. Worth area both airlines reporting earnings today and both of them beat on the bottom line, although they did take a hit in terms of revenue because they dont have the full complement of 737 maxes. Just a reminder american and united both have already said that they dont plan on flying the max. Its not in their schedule until after the beginning of november. Well, today southwest said, look, were not expecting it to come back until january. Heres doug parker, ceo of american airlines, talking about how theyre really trying to get the best guess here, but theyre really not sure when the max will fly again we remain in limbo, as everybody else does, as we wait to hear from the faa as to when theyve come to the conclusion that the aircraft is ready to go back in service again. And again, they will adjust that schedule if they do not get an indication that it will fly before november 3rd or if it wont be flying november 3rd, theyll push it back, like other airlines have. Shares of boeing once again under pressure remember, they said yesterday they may halt production of the 737 max if it cannot meet their projections in terms of being back in service by the Fourth Quarter. Phil, thanks very much. Busy day for you stephanie, boeing down 4 today, 8. 5 for the week as a whole youre a shareholder are you disappointed with sort of drip feed of bad news its very frustrating but remember, last thursday it was up 4 on the news of the charge, remember so i mean, netnet, youre down 4 why didnt they have it all at once . I dont thaink they know. The sense from the airlines is theyre expecting a worse outcome than boeing has guided to so theres a gap there surely you want to get the wobst case out there did you hear the ceo on squawk i knew boeing would be down when i heard that. 75 million of headwinds and they still beat the quarter, you know thats still impressive on southwests side but on boeing, look, i have said this consist qulaevenlt, this is not an easy fix, this is not an easy story in the near term. Its probably going to tread water and on headlines, and thats what its doing but once you get this thing in the air, it will resume higher, i think. And i do believe the cash flow story is just a delayed mechanism, not that its cut and youll never see it again. Turning now to facebook, also falling on the back of yesterdays Earnings Report. Julia boorstin with the latest julia . Well, weve counted at least ten analysts actually raising their price targets on facebooks betterthanexpected revenues yesterday but the stock is lower on concerns of whats ahead. Cfo david a winner warning that facebooks revenue will see more pronounced deceleration going into 2020 partially due to adtargetingrelated headwinds and uncertainty. While the fccs fine is accounted for, there are many unresolved issues. The fccs antitrust investigation, the dojs probe, plus, of course, scrutiny from capitol hill wilf and sara . Julia, thank you. Steph, is this one of the names where the results were good, the share price reaction to the down side overdone, and you want to be picking it up here . Well, its up 52 year to date, so its hard its only down 3 . So its not as compelling to me, but i mean, my goodness, those growth numbers, the ad Revenue Growth numbers Free Cash Flow growth was 92 better than consensus expected, 2. 4 billion in the quarter. Really good stuff. Caution around the second half. And expenses, for sure, but i think clearly numbers are going higher, in spite of that so this stock is actually very reasonable valued. I just think today is a little f. A. N. G. Fatigue, or a little deregulation fatigue, so people just took some money off the sidelines. This is the only one i own of the f. A. N. G. All sectors are low, though, today. Of course, f. A. N. G. Is a lot, but its not like its an isolated setting switching to dow component 3m, which was a winner today before becoming a loss, seema mody explains why. They beat on profits driven by cost cuts, plus sales for the quarter improved in divisions like health care, where it continues to put more money to work, recently acquiring a bandage maker. Still, concerns could and in in china. It was referenced on the Conference Call and that as when shares which were up 5 in early trade reversed course and are now down 1 on the day the company also said its going to slow down its rate of stock repurchases. Sara, back to you. All right, seema, thanks. Lets broaden out to the rest of the market bob pisani has more on what is behind todays pretty broadbased pullback. Durable goods better than expected that may have been a factor. Draghi may have disappointed people by not cutting rates. A lot of reasons why we could be down caterpillar recovering on disappointing guidance, yesterdays drop utx is high after good numbers on tuesday visa is at historic high and though down, had terrific numbers on tuesday if you look at some of the sectors, semis weak. Theres an earnings story. Xilinx, a little disappointment there, but many of these are at new highs. The semis etf just had another high metals and mining, theyve rallied the last two weeks and are selling off today as well. Cyclical groups look like theyre running out of steam here after a pretty nice rally in the last two weeks. Smo of the more defensive names, your Johnson Johnsons, your proctor and gambles, your merck, all are a bit higher today guys, back to you. Bob, thanks very much for that stephanie, in terms of the Broader Market, you mentioned some of the individual names are there any sectors that stand out to you, given the rotation thats been going on it is interesting because bob makes an interesting point in terms of the rotation today. Its actually been a reverse of what weve seen over the last couple weeks, so it will be very interesting to see if the cyclicals can kind of resume and i think a lot of that is going to depend on what we get next week with the fed and the boj, by the way, as well so i think that the macro is going to take over a little bit in terms of which sectors lead, but i think we have to wait for the fed. I mean, the numbers today werent as well received, bottom line, than they have been, and im wondering what the sort of thematic takeaways are from that is it weather . Is it softer Global Growth, maybe huawei issues . Well, i think every sector its kind of stockspecific. So, like paypal, the stock was up huge in the last year, a favorite of so many, myself included expectations were just too high. And yes, they did lower guidance, product transition issues, that sort of thing, but of course youre going to see a selloff on that xilinx, it was huawei, 3m my goodness, you dont want to be anywhere near china auto and thats a big part of their business, so they have problems, but on the flip side, others are doing pretty well. Bristolmyers, we looked at coke, right . How good was that . And visa so i think you have to pick your spots. Weve got markets down what, 0. 6 on the dow with 50 minutes left of trade. Were not far from the session lows as we stand coming up, a massive afternoon of earnings ahead with reports from alphabet, amazon, intel, starbucks and many more well break down what to expect from those results, coming up. Plus, weve got an exclusive interview with hayman capital founder kyle bass. Well get his take on everything from china trade to the feds upcoming decision next week. And as we head to break, a check on our data tracker for today. June durable goods orders climbing 2 , easily topping estimates. It follows two months of declines initial jobless claims fell by 10,000 last week, their third klein in the past four weeks two sets of positive data. Two sets of positive data. Well be right back. But i feel like you have the potential to do so much more. Can we build ai without bias . How do we bake security into everything we do . We need telps people understand each other. That understands my business. Weve got some work to do. And we need your help. We need your support. Lets expect more from technology. Lets put smart to work. When a plan stops being a plan and gets set into motion. Todays merrill can help you get there with the people, tools, and personalized advice to help turn your ambitions into action. What would you like the power to do . Lets cowboy up exhilarating speed. Woo precision control. Woo maximum reliability. Access denied. [ repeats ] access denied. If its not xfinity xfi, its not good enough. For wifi with super powers, get xfinity xfi. And go see, fast furious presents, hobbs shaw. August 2. Weve got 47 minutes left of trade. Heres where we stand in the markets. Lower across the board dow pulling back here about 171 points nasdaq down 1 the russell 2000 index lifts small caps lower as well mixed bags of Earnings Report and less than enthusiastic reaction to mario draghi promising more stimulus this morning. Mike santoli has todays market dashboards what have you got for us today, mike all right, here is what is on the sleet. First, should we fear the cheer . Its going to be our thursday sentiment check right here then, i think im going to need a ruling on this im sayi ining lol at vol could lol be pronounced like that, like an acronym . Ill say yes for these purposes. Applaud, its broad, that would be the market being relatively broad coming into today. And from cheap to steep, thats one part of this tape that seems like its going to get a little bit expensive. So, fear the cheer lets look at a couple different readings of Investor Sentiment first of all, professionals or Investment Advisory services this is the Investors Intelligence poll, it comes out every week and on top its just the s p 500. At bottom is the spread between bulls and bears. So, when this goes up, it means that a lot more bulls than bears, and it maybe is a little bit of a contrarian signal this is from jeff degraff. So, were pretty much in the 90th percentile. Its getting a little bit elevated but keep in mind, a lot of false positives. We were here above 90 we were here so, there is actually not a high hit rate in terms of getting very negative on the market when you get to this level, but on average, a lot of big declines are preceded by this so, its probably a little bit of a headwind but not something that stops a rally heres a different version, aaii really cautious, even though the markets at a high bullishness is in a down trend there, that from early last year, but not really responding. Bearishness is about the same as bullish, 30 above the typical level of bearishness, which says people are still a little defensive, a mixed picture, so you defer to whats been the story in the market, relatively positive. On the small chart, do we see a small pullback on average, you do get a little bit of a slowing down of a rally, a flattening out, a little bit of a pullback we actually have been more or less slowing down and taking a breather here with the s p 500, but its not really a sharp, very timely shortterm signal. Its just kind of part of the general context of whats happening in the markets. All right, mike, see you in just a bit stephanie, really quickly, the sentiment numbers. Its not euphoric. No, its not euphoric. What does it tell you and it youve record levels of outflows from individual investors, too so, look, i think theres definitely a defensive tone in the market, and thats what weve been talking about up until the last couple of weeks so lets i think that can unwind if people get in a little more confidence in where were going on the macro. Up next, we will look at which retailers could benefit from an antitrust attack on big tech, specifically amazon. A leading analyst gives us his call in our word on the street. Plus, for the Third Straight month, analysts have a buy rating on amazon it reports after the bell, along with alphabet and many more. Dont miss that coming up here on the closing bell. 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. Welcome back time for word on the street. Bank of america putting out a couple goals on gaming stocks, downgrading Electronic Arts to neutral and upgrading Activision Blizzard to buy. The group seeing growth concerns on the mobile and fifa games meanwhile, it says the Competitive Outlook for activision is improving and that its on the verge of an inflection point. Etig upgraiding etsy to buy, 79 price target there, citing increased Intrinsic Value based on the Online Retailers Free Shipping initiative and acquisition of Instrument Company reverb and positive trends among other reasons bernstein out with a note does an antitrust attack on big tech help retailers . Lets bring in the analyst behind that note in a word on the street cameo with Brandon Fletcher of bernstein. Brandon, do you actually think that antitrust scrutiny of a company like amazon will improve share Price Performance for retailers . Yeah, i think it takes a while for you to get the changes were looking for, but once a Large Company gets in the crosshairs of regulators, and frankly, just competitors deciding that there are no holds barred and they need to come after their competitor in any way, it gets very difficult. I spent the bulk of my career at walmart, and we used to have 10,000 lawsuits a year, and it makes it hard to operate when you face incredible scrutiny and i think that phase is coming for amazon soon. Do you think there are serious grounds to hit amazon in the retail space do you expect it to go ahead and to really punish them, make them sell off certain parts of their business yeah. So, i think that whats normally difficult about antitrust is we tend to think of it in terms of mergers because in the clayton act violation, which was designed to handle mergers, thats where most of the action is, but the very first antitrust act, the sherman act, talked about behaviors. And i think thats where amazon may face more scrutiny there are some, i think, reasonable arguments for illegal restraint on trade that you could make against amazon. There are some things that theyre doing with the way they deal with their vendors that you could argue were difficult restraints on trade. Their subtleties about how the oneday shipping program works, which will cause some vendors who used to be able to ship on their own to really have to go through fulfilled by amazon, which is extremely profitable for amazon and there were even practices which they very recently stopped, like forcing vendors to not have lower prices on other websites, which they only stopped because the senator was sniffing around for antitrust concerns so we think its inevitable that there will be a shoe that will drop again, its not a breakup call by any means, but pressure on amazon creates room for others to operate like who, brandon throw out some names of who benefits the most. Absolutely, yeah. So, walmarts powerful enough to probably hang in there on their own, but you need some help in order for a kroger and a target and a best buy to get some extra room let me give you a tactical example how those pricing rules become difficult we think of amazon as the price leader in every category, but they actually dont sell the most volume in every individual item in fact, there are plenty of items where best buy sells far more of those than amazon. So theoretically, you should end up with price points in a best buy marketplace that could be lower than amazon. But if amazon uses a rule like you cant price below my price on the website for a vendor, then youre essentially stifling competition. And if you can create something that puts a little bit of a break in the armor of amazon for the absolute lowest price on everything, which empirically, its not, you create room for a best buy, for target, for kroger, to create some other progress on their own. Quickly, what are the latest market share numbers on amazon and retail overall and Online Retail any real sign of a monopoly here yeah. So, monopoly definitions require a notion that looks at customer segmentation thats important. So we actually segment the market based on customer need. And when you segment the market, by the way, we think about it as price in assortment items, which is about 6 mnd billion in sales, which is a massive number but most of amazons sales in the u. S. Are inside of that category so, their concentration at 100 billion of sales is as large in that space as any other retailer in any other category. So its not that theyre at monopolistic levels, but theyre at enough control that some of these restraint on trade provisions may be possible and even if a suit isnt successful, discovery processes in antitrust can be useful to figure out details on how the company functions, and you might find bad behavior another way, even if the first challenge isnt successful brandon, thanks for joining us thank you guys. Still to come, weve got your last chance trade and steph is looking towards the insurance sector well reveal her call, coming up. After the break, hayman capital founder kyle bass joins us exclusive to talk about todays pullback, the latest china trade negotiations and china trade negotiations and more sfx record scratch music plays throughout [ watch me walk by Spencer Ludwig ] yo dj, can i put in a request . Dont have no sass about this im on my way im on my way cant take no class about this im on my way im on my like this this is a moment you plan for. To start your investment plan, find an advisor at massmutual. Com sfx [ mnemonic ] welcome back to the closing bell. 32 minutes left of trade here with the three things driving the action the ecb signaling a future rate cut as we await next weeks fed decision, earnings fallout from tesla and facebook weighing on the tech sector, and were awaiting results from alphabet, amazon, intel, and more off the close. We are down 136 points on the dow. Time for a cnbc news update. Sue hereras got it for us hi, sue. I do, indeed. Thank you, wilf. Heres whats happening at this hour, everyone joe biden and senator cory booker each appeared at the National Urban League Conference after days of sniping between the two campaigns. And then they talked about other problems if, in fact, i find out anything at all that is going on in terms of trying to alter the election, whether its helping me or not helping me, i will immediately go to the intelligence community, the fbi. This president said hed accept that information it is outrageous it is unamerican. And its close to treasonist. You need to understand that we cannot beat donald trump unless we have a large, vibrant turnout in the black community the next nominee for the Democratic Party will not win if they cannot inspire. And for only the second time since temperatures have been recorded, the mercury hit 100 degrees in britain today the high temps disrupted train service, prompted alerts, and caused people to flock to local pools and the beach. You are up to date thats the news update this hour guys, ill send it back to you. Sue, and we dont deal with the heat well. No ones got ac. I know. I think its the first 100 for july it has done it in august before, but nonetheless, massive heat wave and i was just reading on the bbc website, paris, 42 celsius today. Thats 108. Yeah, i was going to say, between 108 and 110. I mean, its ridiculously hot. Insanely hot. Well, we think its hot here often, but there we go it will only last a couple of days the rain will be back next week. Its more unusual in europe to have those temperatures. Northern europe, for sure. Thanks. Lets go to mike santoli all right, sara, were going to lol at vol. Im going to stay with that here volatility, that is. Take a look at the trend over two years in the volatility ind index. We are bouncing a little bit off recent lows over 12 in the volatility i was going to highlight this long stretch here last summer. As we similarly kind of had this stairstep pattern going higher, well, were kind of sliding down into that range again, and this tells you it can kind of last for a while. This was more or less the way it went until we hit this top here in september of last year. So its probably not going to match up perfectly not every feature of this market resembles that, but there has been a slow bleeding away of this slight anxiety buildup in the volatility index now, people have said that there was a really little uptick in speculation that there would be a pop higher in volatility going out toward august and september. That activity shows you that people perceive these levels of prices and options to be a little bit cheap and play for some kind of a latesummer storm. No real indication yet, but the setting is in place or becoming in place for Something Like that, guys mike, thanks very much. Good lol at vol. We approve of the lol we do. It works. Its definitely a word as well as an acronym. Hopes of a trade deal between the u. S. And china were revived when treasury secretary mnuchin confirmed that he and trade representative lighthizer will head to china monday for trade talks. Joining us now for an exclusive cnbc interview, longtime china bear kyle bass, chief Investment Officer at Hayman Capital Management good afternoon to you. Thanks for joining us. Good afternoon, wilfred how are you . Very well, thank you. Very well. And lets talk about the trade talks restarting how optimistic are you that a deal is reached lets say this side of the new year well, at first, you referred to me as a longtime china bear i like to call myself a china realist. But i would like to you know, when you look at what the chinese did in the last negotiation, it was about 150page agreement and the night before both sides were to sign the agreement, the chinese took 50 pages, the core of the agreement, and threw it away and so, they wont sign anything thats either measurable or enforceable. And trade rep lighthizer is pushing something that is both measurable and enforceable because every deal the chinese have signed with us since their ascension into the wto in 2001, china never lives up to their promises so at some point in time, one of our administrative officials has got to hold their feet to the fire, and this is kind of the battle of cultures, because the communist party doesnt want to submit themselves to anything thats measurable or enforceable. I dont think an agreement can be had but kyle, how much is the trade issues a swing factor in your bear case or your realist case, as you like to put it, on china . Would you be bearish either way . And would you be incrementally bearish if things broke down no. I think its important to focus on a couple of things with trade. So, first of all, trade is so its so nominal, its so minimal when you look at our relationship with china, its really ip theft. Its the stealing, the lying, the cheating, the thievery of all of the u. S. s, lets say what we produce best here in the u. S. Is our innovation and our intellectual property, and they seem to take it at will. And so, i think its important that trade look, if were talking about 500 billion worth of trade and potentially putting 25 tariffs on it, were talking about a little over 100 billion. The chinese economys 13 trillion the u. S. Economys 20 trillion. And we dedicate so much time to it, its really nothing. Whats important here is restructuring our relationship with china you heard fbi director ray say a couple of days ago that there are 1,000 intellectual property theft cases actively being pursued by the fbi, and all of them find their way back to china. So, we have to stop allowing china from stealing from us, and i think its important that these trade negotiations are but an agreement that we are forcing them to reset their entire relationship with us do you think its going to work i mean, clearly, i dont think its going to work i know mnuchin and his cadre are pro china and may be pro china even after he comes out of the treasury, and i think that lighthizers more of a realist and looking at the National Security of our country. How are you expressing this view right now, kyle because i believe you sold out of the chinese currency short ahead of the sort of trade tensions last year so, what exactly are you doing to bet against china yeah, i think its a good question, sara ive spent the better bart of a decade studying china, and the more and more and more i study all of the different aspects of our relationship and the manner in which the communist party operates, its become more of a personal passion of mine and i dont want to be conflicted with, lets say financial incentives at this point in time. So, we covered our chinese positions. We have positions in the rest of southeast asia, but nothing directly in china because i think its the epicenter of u. S. National security, and i think the greatest risk to our security is china over the next 10, 20 years, and we better pay a lot of attention to it now so, theres no trade expression here its just, sara, when you think about the fiduciary responsibility of Institutional Investors in the u. S. , how can you invest in a market where there is no rule of law . How can you buy a company that doesnt adhere to the same auditing standards as u. S. Companies . How can you as a fiduciary own a variable interest entity in alibaba when all you own is a small piece of a piece of paper that references something out of the Cayman Islands like, if you lose money there, you should be sued by whoever youre a fiduciary for, and youre going to lose that suit and so, i dont understand how fiduciaries can buy these things. Its interesting to hear your answer there about how youre not in the trade because of the conflict, because as you know, there was this propublica story out this week, which did name you, and it details rnc cochair tommy hicks jr. s relationship with Donald Trump Jr the report says hicks arranged a meeting between you and the Treasury Department to discuss your views on china. Says its not clear whether or not hicks held investments in any of your chinarelated funds at the time and that the relationship hadnt been probed by ethics exercise i know you talked to our Kayla Tausche about the piece, said it was a hit piece. I wanted to give you an opportunity to clarify what your role is with the administration, with the treasury, and whether there was any conflict there i think its absurd the treasury reaches out to people in the professional Community Every single day i lecture on the chinese Financial System at stanford and harvard and cal berkeley, and they reached out to me asking me about my china about the chinese Financial System this was a piece that a political reporter spent many months trying to do something with the rnc chairman, and they foiad all the meetings in treasury and found one its really its a joke you are, nonetheless, bearish still on other trades related to china, i think im right in saying are you increasingly bearish on hong kong given the protests of late yeah, i mean, look, when you look at i look at leverage. So, if you look at my history at what ive done, i found the overlevered portions of the u. S. Housing market, and thats how we began our firms history, and then we found the excessive leverage in ireland and iceland and greece and europe. Then we moved to japan, and then we looked into china and hong kong so, there isnt any particularly regional bias here theres a bias towards overlevered economies. And when you look at china or you look at hong kong, hong kongs the most levered developed economy in the world they have 900 of gdp in banking assets thats exactly what happened to iceland, ireland, and greece when they fell and you also have 300 privatesector credit to gdp for example, in the u. S. And japan, we only have 150 so, hong kong is the most levered, developed country in the world, and now theyre having this situation where theres an existential crisis. Like, imagine if you were running a business in hong kong. Would you be investing more money in capex would you be buying more homes would you like to move more of your family into or out of hong kong at this moment in time . You know, hong kongs going to have a real problem i love hong kong. Over the next few years, and i think youre going to see hong kong be the epicenter of the relationship between the u. S. And china and yet, i remember, you know, a few months ago you said you were betting against that hong kong dollar and the peg breaking and them not being able to sustain it, even though those crazy protests the peg seems relatively stable with regard to the u. S. Sure, pegs remain stable until they break think back to the tequila crisis of 95 or with mexico, or think of 97 when the thai baht broke. Its an interesting corollary because the british handed hong kong back to the chinese on july 1st in 1997 and july 2nd is when the thai baht broke. Its fears of communistic rule over former open economies that have caused the asian currency crisis of 97, and thats again percolating its way into, lets say asias Financial Center today, which is hong kong. I believe that asias Financial Center will move i think it will move to singapore. But guys, this doesnt happen in a day or two it doesnt happen in the news cycle that you guys would like it to happen in. I think its important to realize that these things take years. And this is just the beginning i guess the pushback, of course, would be that for chinas gdp and the metrics and the percentage of debt drops a l lot, but we need to move on and talk about the fed going back to zero rates as the u. S. Economy slows. Do you expect that to start next week and how effective will rate cuts be this time around . Yeah, i mean, i always we believe that the rate cuts are less and less effective once youve been at a zero rate bound, rate cuts have less efficacy than they once did before you ever got down to that level. So, its a great question and i think there will be less efficacy i think that as you heard in powells last press conference, a member of the press asked him, you know, if he believes in this ideology of, to the extent that there is going to be a slowdown, they have to be more aggressive sooner to get the intended effect, and powell tended to agree with that statement. And i think youre going to see, to the extent that we see softness in the u. S. Economy, which you know, when you look back to yield curves inverting, it typically takes, call it 9 to 14 months before you see the result and effect on the business of, lets say the economy. And so, i think youre going to see an early 2020, youre just going to see softness in the u. S. Economy and if you look at the pmis of europe and look at whats gone on in asia, and china just reported the slowest growth rate that its ever disclosed in the last 35 years, the worlds slowing down a little bit. Its not a financial crisis like 2008 we might have a shallow recession, but if we do, we will immediately go to zero rates so, what do you do, buying treasurys, selling the dollar, gold yeah, i mean, i honestly think what we all have to do is think about, you know, the best way to defend your investments in an environment like that is to buy longduration assets. I. E. , you want to own apartments, office buildings, you want to own long bonds, right . You know, one of my friends joked with me recently and said, you know, you buy bonds for Capital Appreciation these days and you buy stocks for yield and i think thats what youre seeing thats why youre seeing stocks go straight up and i think theyre going to go up more and more as treasury yields come close to zero. But thats interesting, kyle. So, youre bullish on u. S. Equities, it sounds like, but youre fairly bearish on the u. S. Economy how long, if both of those things play out, how long can it last, that equities outperform in a recessionary environment for the economy . Yeah, i mean, if i knew the answer to that, wilfred, you know, id already be on the beach. But i think that youre going to see just look at japan. In japan, theyve bought more than 100 of their gdp in their bonds. They own 75 of every listed etf. The bank of japan owns them. The bank of japans become a top ten holder of four of the Largest Companies in japan through their etf purchases. And guess what, they just keep going. And so, you even heard a question asked of powell, where they said, are you going to buy stocks and powell said, thats not in the cards right now. I. E. , its not off the table and you heard my friend, rick reiter, telling europe, if they want to stimulate, they need to buy stocks so, the playbook shows you that the fed and the ecb and the world Central Banks will go right back to zero the ecbs negative, right . We have record sorveg bonds the Record Number of sovereign bonds below zero yields right now, 13. 5 trillion. And its just going to keep going that way so, what were going what youre going to have to do is buy as much duration as you can and buy assets that have higher yields so, i think yieldbased instruments are going to do better and u. S. Multinational corporations are high dividend yields are going to do great so, do i think stocks could go down absolutely, i think they could go down. But over the long term, if thats the playbook from the Central Banks, then youd better buy anything thats nailed down. Sounds like youre sort of laying out a case for the noyielders, too, like gold, bitcoin. Are you a fan . You guys are good at this you know, look, gold, yeah i mean, is gold going to go up in that environment . Probably so. Bitcoin is such a fascinating concept for me ive looked at it over a long period of time weve looked tried to study im not a technical person, so i dont know the math behind it that well, but ive tried. And i think bitcoin is successful because the majority of the people that invest in bitcoin believe that scarcity equals value, and im not sure thats the case. But i do think that, you know, the blockchain is valuable and its going to displace a lot of businesses in the world. And i think its going to be useful over time but as bitcoin becomes more successful, if youre a sovereign nation and youve seen treasury secretary mnuchin comment on this recently and youve seen, i think powell comment on it in the past i think bitcoins success will be its undoing. I. E. , today i dont know what its market cap is of all of the bitcoin, 200 or 300 billion, but its just a play toy at the moment and there are speculator and people who have invested in it and made fortunes but i think as it becomes more successful, i think the sovereign nations of the world will have to tax it, outlaw it, do whatever they need to do to slow its growth or stop it because when you look at the u. S. , we use ofac at the treasury to impose sanctions on other countries. We use the swift system in belgium to impose economic sanctions. And in this day in age, i think economic wars are much more effective than kinetic wars. So were going to get into a place where bitcoin makes itself more problematic, but that doesnt mean that its hit a high im not calling a top by any means. But i think the better it does, the more trouble its going to have, and ill leave it at that. Kyle, so, youre out of the china short at the moment. I wanted to ask as we wrap things up, what is your highest conviction position at the moment i hope its not just like a dividend stock like bp or shell, and its something little more exciting for a Hedge Fund Manager like yourself. Yeah. So, i think that if you look at fannie and freddie and u. S. Housing reform, i think that you and i as taxpayers lent them 191 billion thats what they lost in the financial crisis and since then, theyve repaid the government 292 billion. So, theyve earned about a 12. 2 return, the government has, on its 10 coupon i. E. , they invested a senior preferred there. I think the junior preferreds of fannie and freddie are worth far and theyre trading below 50 of par. Thats our highest conviction position. There we go, 100 return for you if you go into that one. Kyle, thank you very much for joining us. Thank you. Nice to see you, kyle. Kyle bass there great discussion tomorrow, another great discussion coming up first on cnbc interview with National Economic Council Director larry kudlow on the trade talks with china and also the latest gdp report. Squawk on the street tomorrow. 10 00 a. M dont miss it. Still ahead, well get Earnings Reports from alphabet and amazon shares of alphabet down 10 over the past three months on that i think revenue miss last time what will they post this time . Well talk about it next welcome back just under ten minutes left to trade. Lastchance trade. Stephanie. So, i have chub i know you guys interviewed the ceo yesterday, which was a great interview, but this is hes one of the best ceos in the financial community, if not in the s p 500, in my opinion they have a great underwriting standard skill set that is their advantage, for sure, and great market share but the reason why i like it now is because they reported on tuesday, and it was very evident, they are getting pricing. We havent had a hard market in the insurance Property Casualty sector in over ten years so youre starting to see better pricing, 7 north America Commercial pricing then you also have layering on the ace acquisition synergies. They made this acquisition in january of 2016. They still have synergies there. The stock trades at 14 times forward estimates. A Free Cash Flow yield of 8. 8 i like it. Its actually also lagged its peers year to date, so i like this one. Part of this defensive pivot sectorwise or not . No, not really. Its really truly a good story and if you get pricing if its real and its sustainable, earnings are very, slow. Though travelers was a big knoimt earlier this week. I think that the underwriting standards at chubb are really superior. All right there you go were gearing up for earnings after the bell josh lipton with a preview of alphabet deirdre bosa following amazon. Josh, first to you what do we expect . So, we expect alphabet to report q2 eps of 11. 30 on revenue of 38. 2 billion analysts paying attention to the top line growth, saying you need 17 for the stock to move higher stock is up about 8 so far this year and that means it is badly lagging both the market and the tech sector on worries about slowing growth specifically in its breadandbutter search business, lack of disclosure, and Regulatory Risk. Wilf josh, thank you very much lets get to deirdre bosa for what to watch out for in amazons numbers d. Wilf, what we do know is that expenses went up this quarter as amazon rolled out that oneday shipping the question is, how much does they go off and will it accelerate Revenue Growth which has been slowing in recent quarters now, the street is also going to want to know whether that faster Delivery Initiative has been effective in getting consumers into the prime ecosystem and getting them to buy more also looking as usual at the highermargin services businesses, Amazon Web Services and advertising. Are they still growing at a healthy click . And can they continue to power profits . Lastly, of course, guys, we are interested in any talk on increased regulatory scrutiny. Thank you very much for that. We have got just 6 1 2 minutes left of todays session. And coming up next, well be covering all of the angles in the csilong countdown. Well be back. The dows down 115 points. Stand up if you are First Generation College student. Stand up if youre a mother. If you are actively deployed, a veteran, or youre in a military family, please stand. I will tell you this, Southern New Hampshire university can change the whole trajectory of your life. Why go with anybody else . We know their rates are good, we know that theyre always going to take care of us. It was an instant savings and i should have changed a long time ago. Were the tenneys and were usaa members for life. Call usaa to start saving on insurance today. You should be mad they gave this guy a promotion. And were usaa members for life. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Four minutes left of trading. Time now for the closing countdown. Stocks lower across the board. Dow down 152 lets trade the close. Kevin hanks from td ameritrade, is this an earnings story . And if so, what are you looking for, for some of the biggest movers after the bell . Hi, saraa thanks for having me on. No, i think its actually both the microeconomic effect is the earnings, but the macroeconomic effect will be tomorrows gdp number remember, its the last look, the last data point that the feds going to have before they go into a fed meeting, which should give us a fed rate cut on the 31st but between that, between the close of Business Today and the opening bell tomorrow, youve got all the earnings you can possibly handle, for sure. Kevin, if were talking about the big names after the bell, which of them, from what youre looking at, has the biggest implied move based on good or bad results . Right i mean, we have a lot of big names, and the options implied volatility give us an expected move right now, the biggest is actually twitter, which is tomorrow morning tonight after the bell, weve got amazon at 3. 6 , 71. Weve got google, 45. Thats 4 . The biggest is intel its only 2. 60, but thats a 5 expected move. The lowest, mcdonalds at 2. 60 or im sorry, 5. 70, a 2. 6 expected move kevin hincks, thanks for joining us lets go to Mike Santelli for the dashboard. Mike if you can applaud, its broad. That would be the market, the rally, that is, not today, but recently take a look at todays advancing and declining volume even at the lows of the day for the indexes, advancing and declining stocks, that is, even at the lows of the day was not terrible just about a 13, a little bit better than that looking on a longerterm basis, s p 500 cumulative breadth when you really focus on is this is a new high yesterday as the stock market hit a new high. Thats supportive. Go back to last year you actually had the breath figures kind of rolling over before the market did, so thats one thing to watch right now breadth it supportive even if the small caps are not always cooperating. Lets go to the nasdaq and bertha. Thanks. We have a broad pullback today across all sectors, but big disappointing earnings were really part of the catalyst here on the down side align technology with its worst numbers in terms of oneday decline in 12 years. Slow sales in china, big problem there. And then the other tech disappointments as well dragging things lower when you take a look at the other f. A. N. G. S, beyond facebook, you have alphabet and amazon on track today. A little bit of sderges there. Alphabet almost positive just a few minutes ago, and netflix for the first time is bucking the trend to the positive. And we also had on a day when you had a down tape, really good response to two ipos, la vongo and health catalyst, health tech ipos doing very well bob, over to you. And durable goods better than expected drug may have disappointed the markets by not announcing an immediate rate cut, earnings disappointments, whatever the reason, we opened down and we have stayed down look at the board here key takeaway, trade, geopolitical tensions. We heard that from dow we heard it from Rockwell Automation they lowered guidance on trade uncertainties impacting customers investment decisions. The slowdown in global auto cycle, thats an issue for ford and borgwarner look at the sectors, cyclicals, semis and metals and industrials, all weaker on the day. Defensive names, proctor and gamble, Johnson Johnson stronger it looks like the cyclical rally is running out of steam. Theres the Dow Jones Industrial average closing the day down 132 points, s p down 16. Good afternoon welcome to the closing bell. Im wilfred frost. Im sara eisen here with mike santoli, cnbcs senior markets commentate wror. The dow, s p, nasdaq and russell 2000 all declining today keep in mind, the s p and the nasdaq closing at record highs just yesterday 1 pullback, though, for the nasdaq s ps down 0. 5 . It was broad every sector, all 11 of them, closed lower energy and Information Technology were the worst hit. Had some weaker earnings stories, at least facebook ending lower, ford, that type of thing. Also not so much enthusiasm for ecb mario draghi, though he seemed to promise more stimulus is in the offing. Promised more stimulus, but i think people are focusing on the fact that later he admitted it wouldnt have that much effect this time around and of course, hes on his way out, so weve got to wait and hear from your good friend, ms. Madam lagarde to see what shes thinking. This is her last meeting. In terms of u. S. Markets today, broadly off by the close but all lower. The nasdaq the worst of the indices and tech wasnt a great performer, but it was energy and materials that led things lower as opposed to some of the cyclicals that weve been looking to lead the rally of late. Appendis held up relatively well like staples. Today is the busiest day of the earnings season. Lots more still to come. Our team is standing by to break it down. The octobox. Wonderful we will bring you all of those results as soon as we get them lets keep that up for a little bit longer look at those smiles. Brady bunch there all right, joining us talk that about the market, paul hickey, cofounder of Bespoke Investment group, kevin oleary with oshares etfs and youre still with us. As we await the biggies, mike. Yes. Amazon and alphabet what stood out amid the selling today . Honestly, it was a bit of a spillback of yesterday afternoons rally, and actually, yesterdays afternoon rally was a little bit odd it was kind of a little bit of a levitation, people getting perhaps a little bit overexcited as we got through the mueller hearing, we got the decent earnings i would say it doesnt really change much. Were still toying around with the 3,000 level of the s p 500 the rally is more or less intact you have a couple percent on the down side if you got a pullback before you would have to say, okay, now were in a new phase. Mike is the market now saying earnings season has been bad no, i think its saying earnings season is what it always is. Some days it looks like everybodys got it right and some days youre getting a sell on the news response but i do think that the earnings season has not really changed the broader picture for Global Growth its just that companies are perhaps a bit too conservative three months ago with guidance coming into the season. So paul, youve been looking at the sort of pros and cons of whether to buy stocks. I think youve reached the conclusion that there are more pros. Yes so, youre never 100 bullish or 100 bearish, kbrout add up the different ingredients and there are moe pros than couldnt. Whats at the top of your list breadth has been so strong. We had record breadth in q1, very strong in q2, and yesterday, breadth, the accumulative line hit a new hig for the market so investors are buying stocks, broadbased across sectors, so were seeing strength there. And earnings season hasnt been bad and we havent seen a lot of bonds of Companies Reporting so far. Hopefully thats still the case this afternoon. Dont speak so soon. Lets see how have earnings been for amazon, deirdre . Just getting them now and it looks like a miss on the bottom line but a small beat on the top line earnings per share coming in at 5. 22 versus 5. 57, which was expected revenue coming in at 63. 4 billion, representing growth of just under 20 , and that is higher than the 62. 48 billion expected now, this shouldnt come as a huge surprise in the after hours you see amazon down about 1 the street was expecting profits to come down a little bit here as they go into spending mode. Well continue to dig through these numbers and bring you more on Amazon Web Services, advertising, online sales, all of that. Dig through them and get back to you guys. All right deirdre, thank you very much mike, 20 Revenue Growth, a miss, though, on the bottom line, has shares down a little bit after hours. Pretty modest move at this point i think youd have to say, up like 4 this month, the stock is so doesnt change the overall picture without looking too far below the surface. 20 is better top line growth and i think thats going to be the anchor number here the earnings, we always talk about, its almost a residual for amazon its not like they target, you know, making the number, but here we are a little short. Yeah, i mean, amazon results always vary from estimates theyve missed revenues three of the last four quarters this is their first earnings miss in seven quarters, but theyre not playing, as mike said, to the quarterly analyst consensus. All about margins, right . Margins are a really big part of this story how much are they investing . How much are they spending on oneday delivery kinds of things and all of the other initiatives that they have so, i think thats probably the big question mark. I havent seen the margin number, but i would expect thats what came in below plan. All right, well hit it in just a minute, but alphabet earnings are also out. Josh lipton with those results josh sara, alphabet is reporting eps of 14. 21. The street was looking for 11. 30 also a beat on revenue, up 19 to 38. 94 billion. Analysts had it closer to 32. 8 billion. Looking quickly, Google Properties revenue 27. 3 billion, google ad revenues 32. 6 billion. Google other revenues, ameri 6. 2 billion. Other bets and revenue at 65 million. Looking at total tack in the quarter at 7. 24 billion tack is a percentage of google ad revenue, 22 . And paid clicks up 28 in the quarter year over year cost per click down 11 . Guys, back to you. Josh, thanks very much for that big jump, 6 due to that eps line beat. Steph, to your point, its all about margin its more important for google, the bottom line, compared to amazon. Absolutely. The name has been awful. Its lagged substantially pretty much to any other company and at a reasonable valuation relative to its growth. I didnt hear the number for the websi websites growth, but i think wereall looking for that number did you see that Google Properties is slightly better than expected, 27. 3 billion. So thats a little better than expected and its not a continued deceleration from last quarter, which is very important. Kevin, talk us through your take now that weve got a couple more of the f. A. N. G. Names in and weigh it out with facebook, of course, that came in yesterday. Well, certainly, the nay sayers on alphabet are going to be quieted this is a pretty good print. Im just reading it. Theres been a lot of concern about growth issues and margin issues this is a really good beat here. And i think its interesting on amazon, i only worry about the top line amazon spends so much money, and i will say this, i have a lot of positions in private companies that sell consumer goods and services in america, almost in every state now, and about 30 to 40 of our sales are now on amazon, and theres good pros and cons to that, but we really want that sameday delivery. So, if theres more capex going into that, im very happy with my position in amazon. Thats going to be a gamechanger for a lot of providers. Sameday is a big deal, because it lets you get an advertising spend and get a direct measure to how impactful it is in regional markets, when you can deliver the same day we have got another Earnings Report out, and its starbucks kate rogers has the numbers. Very strong q3 for starbucks here, beat on every metric well take you through eps 78 cents adjusted compared to 72 cents the street was expecting. Revenues 6. 82 billion versus estimates of 6. 6 billion. Thats up 8 year on year. The company also says thats an alltime high for revenues global comps up 6 kpaferd to 4 estimates. U. S. Delivering a 7 comp. Thats driven by 3 traffic growth and thats across all day parts, including the afternoon china comp up 6 they also say they grew store count by 16 in china. Starbucks rewards numbers, 17. 2 million, up 14 year on year theyve been streamlining barista tasks, working a lot of beverage innovation, those things do seem to be working the stock up 40 year to date. Its up over 6 right now. That Conference Call is at 5 00. Well take you through anything we hear after that back to you. Kate, thank you dont miss a first on cnbc interview with starbucks Ceo Kevin Johnson tomorrow, squawk on the street. Maybe well start with starbucks, mike, because those comps are pretty impressive, especially in china where there are worries about economic slowdown, competition with luckin i mean, for a company thats run up so far in the last 12 yeartodate, this is a big move. Yes well, its like the market was telling you that things had reaccelerated. And 7 for domestic comps is very, very impressive. So, obviously, it wasnt just that the market was saying, oh, this is a quality global brand, im just going to buy it for safety it was, it seems like they have a little bit of a revival of 2k3wr0e9d. So i guess its going to support it right here. Seems like 7 comp, most of it probably i. C. E kevin, i know you make your coffee at home in the morning because its cheaper, but a lot of americans ignoring your advice i own this name i just tell all my interns, if i catch them buying a starbucks, ill whack them. It costs 18 cents to make this thats why i own the stock i said, when you can afford to buy the stock, then you can buy the coffee. Well, maybe they did do that without you knowing, up a5. 9 for that stock due to good comps in china and the u. S another alert, intel jon fortts got it. Im going to give you the earnings number, also going to tell you about this transaction where intel is selling the smartphone modem business to apple for 1 billion first, earnings numbers. Intel beats on revenue, turning in 16. 5 billion versus 15. 67 billion expected also, earnings per share comes in at 1. 06 versus 89 cents expected outperformance really in client computing, 8. 8 billion versus a flat 8 expected Data Center Group outperformed, 5 billion internet of things also stronger now, this was an anticipated deal, apple buying intels modem business we have some details in the release. It says they have signed an agreement for apple to acquire the majority of intels smartphone modem business. Well find out exactly what that means. That includes approximately 2,200 intel employees that are going to join apple as well as intellectual property equipment and leases this has the transaction valued at 1 billion, expected to close in the Fourth Quarter of 2019, subject to Regulatory Approval of course, this is important, because for a long time, more than a year, we saw apple and qualcomm really at lagerheads over patent issues and licensing issues when it comes to smartphone modems. They did resolve that, signed a sixyear agreement but now apple with this business from intel has potential to grow its own smartphone modem business internally. This would follow a legacy of apple incorporating technology, not just hardware and software as its legacy has been, but way back in 2008 it bought pa semi, which was a dhip design outfit, allowed it to design lowpower chips for the ipod and eventually the iphone as well. Theyve integrated more with the aseries chips for the iphone, wseries for headphones. You can imagine they want to do something similar for smartphone modems in general as those are going not just into the iphone but also into ipad across all sorts of different mobile devices. That should help them on margins long term as well as intellectual property, guys. A really good context jon, thank you intel shares up almost 5 . The deal was rumored stephanie, youre an apple shareholder. Do you like it is this a strategic move yeah, im not surprised theyre not hostage to qualcomm, as we just heard but i think its really this is a really good report from intel, too i mean, it truly is. And its contrast so much from last quarter when they lowered guidance we knew pcs were going to be very strong for intel. Data center actually also was better than expected and the guidance is actually better than expected stock, i mean, this trades at 12 times earnings, only up a percentage year to date so we can see why. Its in line and it a modest positive. Youve been looking at intel as well. Analyst sentiment i think is the weakest in five years on buy ratings. But alphabet and intel, these are two important reports. Theyre both doing well, whereas in april, both stocks bombed in the end of april, and that sort of helped set the stage for overall weakness in the market in may so, the fact that theyre reacting positively and that theyre, you know, intel as stephanie said, beating data center sales, which was a big area of potential weakness are they losing a step, losing to competition this sets a really impressive in other words, these two had something to prove. And they came through on it. Another earnings alert. Tsmoebl out Julia Boorstin with the results for tmobile. Tmobile missing on revenues, coming in just a hair light of 11 billion versus estimates of 11. 13 billion but earnings per share beating estimates. The company reporting earnings per share of 1. 09 versus estimates of 97 cents. And the company also adding more subscribers than expected with 1. 8 million total net additions in the quarter thats up 11 year over year, and thats also about 500,000 more than wall street was projecting looking at tmobiles guidance, the company upping its guidance for its customer additions to between 3. 5 and 4 million, up from the prior guidance, also raising the guidance for adjusted earnings for the 2019, increasing that guidance as well tmobile shares down just about 0. 2 back over to you. Julia, thanks very much down 0. 2 . Bringing the conversation board back to some of the other bigger names. You said earlier you never want to see something thats 100 positive, 100 negative. Amazon, 100 buy calls is that a warning sign to you . Whats interesting about the stock price reaction for amazon, their numbers are off the charts every quarter. Were just in awe of what they do but the thing is, in the last six quarters, the stock has been selling five of the last six years, it has sold off in the following day once its opened so the stocks done pretty much nothing over the past 18 months. I mean, its up from where it is in january, but a big sideways range. And so, i mean, i think theres a little bit of, you know, are there many more converts left to amazon at this point so, its sort of got to grow into sentiment here people looking at this ceiling issue with big tech. Obviously the stock had a great run but stopped right below last years high, around 2,050, Something Like that a share. So i mean, this decline after the report is no big deal, but if it accelerated, i think youre going to start to look at that chart as being this kind of big, wide range with a ceiling on it, but we cant say that yet. As for the Earnings Report, deird deirdres got more details on amazons numbers. Thats right. Ive been digging through the report and the big question was could they accelerate Revenue Growth with that higher spending i dont think we really got that answer, but everything does look pretty steady, which is why i think youreonly see the stock down about 2 . Aws, this is always a Business Unit that were interested in because it powers amazons profit, coming in slightly below expectations, revenue there, 8. 38 billion versus 8. 48 billion expected that represents growth of 37 , which is actually lower than the growth, year over year growth of 40 or above that we have seen for at least the last five quarters of course, this is a unit that is seeing more competition from microsoft and googles own cloud offerings. That jedi government contract still needs to be decided. That will be important here. Looking at other product lines, Online Stores representing 16 growth that did come in a little bit higher than expected at 31. 1 billion. Physical stores, really no growth here, just 1 still a tiny part of the business thirdparty Seller Services and subscription services, this is important, especially thirdparty Seller Services, because this is what amazon always talks about in response to antitrust questions that came in, in line with expectations, nearly 12 billion, up 25 . And the ad business, ill just mention that as well, coming in within expectations, 3 billion, up 39 back to you. Deirdre, thanks very much steph, is this a sign that microsoft is starting to take some of the share or some of the very positive growth, at least, that all of the companies are experiencing, but theyre doing a little better in the short term and on cloud . Well, microsoft also saw a deceleration from 75 growth to 68 growth in azure. So, they also i moon, theyre growing faster, but they also saw a slight deceleration. I dont read anything negative at all in this amazon report, and this is one name that i would look to add to if it does fall, even though its up quite a bit year to date, where are you getting 20 growth on top line where they have the ability to flex the margins in terms of whatever they want to do, right they have the capability to pull back on spending and theyll see the operating leverage, and they do it from time to time. They also have the regulatory overhang, though. I think less so than the other f. A. N. G. S. You do . Why . Theyre their market share is far less than walmarts when they were at the peak, and i think theyre under the radar. I think maybe i dont know, the infrastructury secretarys saying that theyre destroying retail. Well, they are, certainly you have to come up with a novel theory of why they are a monopoly, but yes, but also, i mean, the Retail Companies underspent for years and years and years and didnt embrace technology and they didnt embrace change and they got caught. And amazon forced them so, yeah, there is a debate about regulation i just think that they are under the radar for the time being versus the other f. A. N. G. Names. Also not against the law to put other companies out of business. Right. Kevin, before we let you go, i want to go back to one of yesterdays Earnings Reports you bought tesla today i thought i did very unkevin oleary. Talk us through. But let me be clear, i did not buy it on any of my mandates or etfs i bought it personally for one specific reason i didnt know this, and a lot of people probably dont, but every Single College university in the world in the Technical Engineering Group puts together an electric car and the graduate students race these cars all over the world ive been hanging out in the pits with these engineers and ive learned something extraordinary. When you go to one of these races, like in lincoln, nebraska, six weeks ago. I was watching this. When the race is over, the winning team can come from anywhere on earth. Who do they want to talk to . They want to talk to the tesla hiring team there, the hr people that are hanging around in the pits every one of these engineers, the smokin hot kids that sit with their cars, the men and women that sleep with them for 24 hours a day its an unusual culture ive never seen before they all want to work at tesla why . Because the teams are six to eight people in size if they go to a legacy car company, they get drowned out in the back somewhere these smart men and women make a big difference as interns. I cant believe the access to talent they have thats why i bought the stock. That is a random reason forget the profitability. Yeah, right. And the p multiple difference to traditional autos, which weve heard your argument on i love that. Kevin, thank you. Were out of time well have to leave it there kevin, paul, stephanie, great to have you with us, as always. Were just Getting Started dont go anywhere. Up northwest next, an amazon shareholder reacts on the earnings miss, plus, reaction from alphabet, starbucks and other afterhours movers starbucks up 7 , starbucks up 5 and amazon trading lower by and amazon trading lower by 2. 5 the United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. More earnings coming your way. Weve got an alert now on expedia. Seema mody tracking that name. Seema . Hi, sara. Amid heightened competition, expedia reported a strong Earnings Report, earnings much higher than expected the estimate was 1. 67 revenue topped expectations, 3. 15 billion. And expedias gross bookings climbing higher by 9 year over year, 28. 3 billion. That was really driven by demand here in the u. S. And overseas. And on that note, it did see room nights up 12 that was better than anticipated. The big story for expedia and these Online Travel operators, sara, has really been the growth in its homesharing platforms. Vrbo, formerly homeaway, saw home bookings grow at a slower pace to the First Quarter when bookings grew by 5 year over year, although i would point out that revenue is stronger than last quarter shares overall are up 2 in extended trade and the Conference Call begins at 4 30 p. M. Eastern seema, thank you. Also, dont miss cnbcs exclusive interview with the expedia ceo. Thats also tomorrow on squawk on the street, 10 00 a. M. Eastern. Amazon shares lower an reporting disappointing earnings here to joining us is tripp, mark lehman, and cynthia littleton, Business Editor at variety magazine good afternoon to you all. Tripper, ill start with you coming into this, you are very focused on aws, slight miss, out but only slight. Is that why the stocks down i think so. I think its one of the key points everyone was looking at coming into the earnings today and you know, for us, 37 growth roughly is not a huge disappointment obviously, the comparisons to microsoft are something that everyones talking about they were a little bit down as well so, you know, for us Going Forward, we really Pay Attention to those higher margin businesses like aws and some of the other things that they continue to invest in, like their advertising business so, for us Going Forward, you know, topline growth of 20 , certainly we think drives the stock higher over the long term, but as value investors, wed welcome a dip tomorrow to get to buy more. Mark, what do you think this gutreaction selling is all about . I think weve talked about the fact that the top line wasnt that much of a blowout and we saw the aws slowdown. You do have the specter of legislation or oversight i think that people are worried about. But it was very much in line, and i think a continuation of trend. And i think, like you said before, the stock hasnt broken out of the highs and i think the quarter was just fine and youll see that continued growth through the rest of the year and amazon is still a stock thats going to go higher over time, and i just think this is a pause that refreshes cynthia, do you think the dojs a threat i think it is i think amazon is so big, its such a big target for all kinds of political agendas and ideological agendas. You know, we saw that with the online effort to devise a strike around amazons prime day. The Company Really does become such a punching bag for so many different constituencies its really got to be something that theyre weighing now. I mean, its one thing to be a political punching bag, but the question is whether for investors theres any risk of an outright case that would cause them to change their behavior or spin off a business or do something more drastic than say paying a fine. Well, i think we all know that Something Like that would take years and it would wind through the process quite a bit. And certainly, amazon has been less under the hot lights than, say, facebook or the big social communications platform. But amazons bigness, as we just saw in new york when they tried to establish new headquarters here, something that they thought would be welcomed with open arms, raised all kinds of issues from, again, a bunch of different political and civic constituencies, and i think that they are in their bigness, they are very vulnerable. Did you see that report that theyre looking at the lord Taylor Building . Yes, so theyre coming anyway, right . Theyre coming anyway, but also like a business that they helped start in a big way. Right thats a good point. I know that some of the Digital Media companies moved into the old the New York Times building, too, so, thats what happens. But you know when it comes to amazon, whats interesting is a lot of antitrusttype efforts in the past have involved bundling. So, putting some products within, giving it to customers at an uneconomic price its really hard to disaggregate prime, right a lot of stuff is thrown into prime. A lot of profits are harvested from aws and are also used to subsidize other areas. Its great for customers, but somebody could try to make a case that it disadvantages other competitors. Tripp, are you pleased to see them investing so much money in oneday delivery, or does that concern you in terms of the bottom line and when were likely to see significant actual margin improvement in Earnings Growth we think its a smart investment in the short run for them then over the long run, the payoff we think will be seen in the margins as we believe their prime business will grow it will attract more customers everybodys really focused on speed, quality and i think about you see them being cut by fedex as one of their delivery outlets, it puts more pressure on them in the short run to spend more capex to build out that Delivery Network for themselves and you know, with 20 top line growth, they need a pretty big delivery footprint, both for themselves and from third parties to keep the prime customer happy so, we think its a smart investment, both short and long term, and we think it will drive higher margins in the years to come. Trip miller, mark lehman, cynthia littleton, thank you all for joining us want to hit shares of google parent alphabet, higher, sharply higher after reporting earnings just moments ago for more on the numbers, theres the stock up 7. 75 , tom forte, john freeman and kevin landis from firsthand Capital Management gentlemen, good afternoon to all of you tom, your first take on what appeared to be better numbers, really psych lodge clael important for google, which has underperformed the rest of f. A. N. G. And the market. Yep so, on first blush, i think the headlines better than the numbers themselves, to the extent that revenue is better than expected, earnings per share was better than expected, but i think if you dig a little deeper and you look at paid click growth, you saw a 6 sequential improvement from last quarter but still have pretty significant deceleration on a yearoveryear basis so i think the headlines pretty good, but when you dig into the numbers on the advertising front, maybe not so good. John, in terms of what you were looking out for, part of it was youtube. Did you get what you were looking for there . Yeah. You know, i think we did i think that, obviously, what i would like to see is more breakout and more detail about, you know, youtube, more stats, but they keep that bundled and another thing ill be looking for in the details will be the Cloud Business that is just sort of emerged that, as know from amazon, thats a fantastic business that has tremendous operating leverage and everybodys going to be looking for an alternative to amazon, and there are not very many microsoft, azure, sales force to some degree, and then google is really what youve got, right . Yeah, kevin, you were also looking for how theyre changing y youtube and the ad growth. Bhadz y whatd you see its still an ad monster. And yes, you can find some metrics that dont look as good as maybe you were hoping but the bottom line is, this is up and to the right. Its a really powerful engine. Google is still really dominated by ad revenue, and it just sort of goes to show this greater debate about personal privacy. Its just impossible for them not to change this Business Model. I mean, its impossible for them to change the Business Model and get away from ad revenue. Stay with us, if you will we want to get back to our reporter josh lipton for some fresh comments from alphabets cfo. Josh. Er i did have the chance to catch up with cfo ruth porat we talked about the quarter and other issues, about the bottom line beat, 14. 21 versus the expectation of 11. 30. Talked about the operating performance, called out the strength in sites, that would include search and youtube, talked about the strong growth in the other segment, so thats cloud and play obviously well see on the call with more metrics on how the Cloud Business is performing we did talk as well about, listen, google like many other tech giants is clearly under this increasing regulatory scrutiny and i asked ruth porat how she feels about that scrutiny some analysts believe her company is a primary fartarget, just given their market share in search on that topic, ruth porat telling us they are already subject to oversight in a number of areas she semisized this is not new for the company, shoe taeld me, and that they have been engaged with regulators around the globe for quite some time. Switching gears, we did also talk about huawei. Thats interesting because its phones use that android operating system, but apparently, its now huawei has trademarked its own smartphone os, operating system and i asked ruth porat, how do you think about that if they make that move, how does that impact your company potentially to try to quantify that on that issue, ruth porat saying listen, we are focused right now on protecting the users. Those who are using huawei devices right now. It is still, she said, an open item and finally, we talked about m a. And listen, i think thats an interesting question if youre under more scrutiny from regulators, does that change how you think about m a does that mean youre less likely to do big, meaningful m a in the future just because youre under what appears to be a tighter microscope on that subject, on m a, ruth porat saying the acquisitions are additive and we are open to them where they make sense, there is a lot we are doing there organizely, though, as well finally, i did talk to her about peter thiel, of course, the billionaire investor and facebook board member. We know he recently ripped into google, reportedly said that google should be federally investigated for allegedly aiding the chinese military. Did not get an answer from her on that issue. Guys, back to you. Josh, thanks very much for that some great insight lets get reaction tom forte, whats your take on in particular the comments there that ruth porats not that threatened by Regulatory Oversight . Do you think thats something thats going to take some value out of the stock and whats your call overall, bullish or bearish yep, so, im bearish, and some great stuff there i do think that Regulatory Risk for amazon, apple, facebook, and google is the most significant risk for those companies if you look at the tenyear period where microsoft was dead money, essentially, the antitrust case and Regulatory Risk took a big bite out of microsoft. So, i think its something investors have to pay a lot of attention to, regardless, really, of what the cfo says guys, thank you all very much tom, john, and kevin thank you weve got an earnings alert on mgm resorts Contessa Brewer has those numbers. Contessa. Mgm popping on its release right now, sara. Mgm is meeting expectations with net revenues of 3. 2 billion the street was expecting earnings of 25 cents a share and mgm came in with 8 cents a share. Let me put some perspective on that number. There are some adjustments, some onetime charges these are costs associated with restructuring, canceling contracts, debtrelated expenses if you exclude those, the eps goes up to 23 cents. Analysts might consider that a small miss, but as you can see, its popping in extended trading, up now more than 8. 5 las vegas saw a 12 decline in gaming revenue the house had some bad luck with table games and there werent as many gamblers playing baca area. Weve heard that before. The gaming industry really focuses on property ebitda, that is earnings before interest, taxes, depreciation, amortization mgm beat expectations on that front in both lank and in macau, where its new mgm is ramping up and they are on track for an ebitda lift of 100 million by the end of the year because of the restructuring. Well jump on the call now and see what the ceo has to say about the numbers. Contessa, thank you up 7 . Mike, i was just wondering if amazon and alphabet have to disclose whether they are officially being investigated by the doj or the ftc because at this time yesterday. Yes. Facebook put out that headline and whether that would come in a release or in a Conference Call or what. If there were a formal investigation, presumably they wouldnt disclose it, but most likely in a filing so, the requirement would be that theyd have to include it in the quarterly filing in the 8k as opposed to the public press release. Which could be coming. Could be filed, yes. All of the f. A. N. G. Stocks in the red after hours following a couple Earnings Reports, google and well, googles higher, but whatever other ones we had there were all in the red. Still to come, well get reaction to intels earnings and its deal to sell its smartphone modem business to apple. Were back in a couple minutes prevagen. Healthier brain. Better life. Welcome back its been a wild after Hours Earnings session alphabet, apple, intel, starbucks all posting betterthanexpected revenue but amazon in the red. The other three nicely higher in after hours. Weve got another one for you, mattel. Courtney reagan with the results. Courtney hi there, sara. For the second quarter, mattel did post a loss, but it was a smaller than expected loss, coming in at 25 cents. The street had been looking for a loss of 40 cents revenue also stronger than expected at 860 million the street had expected 813 million. Gross margin also very strong, 39. 7 . Last year for the same quarter, gross margin was 30. 1 so, a really big jump there. Theyre not quite yet profitable, but the company talks about moving closer to profitability in its turnaround. And then if you look at the segments, barbie again strong. Worldwide growth sales up 9 hot wheels up 5 fisherprice, though, continuing to be sluggish those Worldwide Growth sales down 6 . And American Girl down 23 for worldwide gross sales, so thats still a struggle point the company is not giving updated guidance through its turnaround, so nothing there, but shares are higher after hours by almost 6 they had been higher by more than 7 at one point in reaction wilf, over to you. Cool, thanks very much. Time for a cnbc news update. Sue hereras got it for us i do, indeed, wilf. Thank you. Heres whats happening this hour military officials have arrested 16 marines following an investigation into human smuggling. The arrests at camp pendleton, california, were carried out during a battalion formation meeting this morning. Bill cosbys Insurance Company settling another defamation suit, this time filed by model janice dickinson. It is a big win for dickinson, who says cosby drugged and raped her in 1982. Hes where he belongs we need to work on the Justice System about statutes of limitation against traffickers, against rapists, and against this five, tevsevenyear, tenyr statute. And dramatic video shows a toddler who escaped his moms grasp, climbed on a Conveyor Belt and took a wild ride on a luggage conveyor at the las vegas airport. 2yearold lorenzo vega disappeared feet first through a rubber curtain, then crawled over bags trying to avoid being pulled through a large screening machine, but it did pull him in, and then he popped out on the other side only to tumble down into another room where security workers finally managed to pull him to safety. Hes a little guy, so you can only barely see him right there. There they got him. I cant watch i know. I hate that turn it off. I know. But you know what, he did break his hand he was fine. But luckily, it could have been much, much worse. He broke his hand, though. He did break his hand, yeah. Poor baby. I know. Poor little guy. Very accidentprone at this age. All right, sue, thanks you got it. Sue herera. Coming up, analyst reaction to intels earnings, whether you should be buying or selling the stock right now. Its trading sharply higher here its trading sharply higher here tehos. Afr ur what do advisors look for in an etf . Its trading sharply higher here tehos. Afr ur dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Dow component intel just out with strong earnings, also announcing apple will acquire the majority of its smartphone modem business ed snider from Charter Equity Research joins us now with some reaction, ed, with a pretty nice pop for intel up 6 . I guess it had been an underperformer what drove the better results . Well, primarily, the declines in some of the core business werent as bad as expected, but most importantly, their pc business continues to do fairly well rereleased a bunch of new products on their 10nanometer process and theyre starting to show up and its showing up in better revenue and margins, so that helped out quite a bit, too. Whats your take on the apple intel sale is it a good price for intel well, yeah, its smart. Yeah, its a very good price, given they werent going to be able to make much with that division if they werent in smartphones. So, they had this huge group of engineers that was constituentsing them quite a bit and dragging margins and if youre not in smartphones, you dont have the volume to pay for that getting apple to buy into this and letting apple use it for smartphones while intel uses that modem product for stuff thats core to them like laptops and routers is a smart move because it takes a lot of cost off their books but still gives them access to a 5g modem. Jon fortt also joins us, our recover who covers the stock, is going to talk to ceo bob swann tomorrow, jon, on squawk alley. Whats the key question around the earnings and this deal i think the question around earnings is the lowered expectations and then the raise, in the text around this earnings announcement, bob swann saying it was the strength in the data economy, both on the side for pcs and on the data center side that drove this outperform they raised their fullyear guide by 1 billion. Theyve been telling this data story for a long time, so what exactly did they see that caused the quarter to outperform that much and as far as the apple transaction goes, i think were maybe prone to underplay this a bit because there are rumblings this was happening, weve been talking about it for a couple days, but this is the most important investment, the most important m a deal of the tim cook era at apple. This is 2,200 employees along with intellectual property it is one of the most key components in apples most key product, and there are all kinds of possibilities on the integrations that apple can do on this Going Forward now that theyve got this in house. Apples always been this grand experiment in technology, particularly Consumer Technology when it comes to vertical integration, and this raises the stakes on that to a level we havent seen before with apple, guys yeah, so, i guess the question off intel, i mean, its up 11 this year it is one of the worst performing chip stocks does it get rerated on this news how do you value yeah, i think people are going to look at that. It depends on the Conference Call comments and the color we get out from the cfo and ceo on more details of the trends but youre in a down cycle starting the beginning of last year you saw this with ti a couple days ago where things were coming off the bottom of the cycle and they were protecting not predicting, but suggesting that theyre probably going to see a rebound. So a lot of folks trying to anticipate the bottom of the cycle, but it looks from these results and others weve seen, were reaching that. And so, i think you will get some reratings ed snider, jon fortt, thank you both. You bet. Looking forward to your interview tomorrow, jon. Lets get back to deirdre bosa for more headlines from amazon decrceos media call. The ceo says the cost to implement that oneday shipping initiative are slightly above the 800 million that he estimated last quarter he says that it has to do with adding and moving inventory. He says that productivity was a bit off in warehouses and transportation networks. He added that amazon has been down this road before, has dealt with numerous shocks to the system in the fulfillment world, and he says that amazon knows how to tune for those costs. He thinks haw happen over time, but for now, amazon will see increasing and ramping up cost pattern. He also adds, though, that amazon has seen very good pickup from customers theyre responding to this oneday shipping theyre liking it and theyre moving more volume back to you. Deirdre, thank you. Well look forward to any more headlines to come. That stocks down 4. 25 . Next, earnings mania dontinues, twitter and mcnalds on tomorrows docket. Well talk about those reports and debate starbucks, coming up. Markets pulled back from record highs today, at least the s p and nasdaq do you closed lower 128 points back to mike santoli for the final dashboard of the day. Calling this one steep to cheap. In the last 52 minutes we have heard earnings from about 22 of the nasdaq 100 thats three companies right there, amazon, alphabet and intel. Those three stocks alone, more than 20 of the nasdaq 100, the basis for the qqq Exchange Traded fund. This is the forward price earnings multiple on top of the qqq. You can see its reached kind of near its decade high, a little over 22, 22. 5 times earnings relative to the s p 500 which is somewhere around 17 times earnings this is the qqq valuation relative to the Broader Market you see the steady up trend. What i find interesting is back in 2011, 12, 13, you had the huge Growth Stocks trading at a significant discount to the longterm valuations they were basically at parity with the s p 500 that was the real buy. Obviously youre not stretching to extremes. If i took this back to the year 2000, you would be up here somewhere, so it obviously has been more aggressive but i do think it is worth noting that with yields where they are, these big Growth Stocks are definitely stretching the upside down valuation limits. I guess the absolute pe is not what looks stretched. Thats right. It is the relative to the s p 500 which does that also talks to some under valued te valued sectors out there. Thats right. This is the elite within the s p 500 and that is dragging the overall s p 500 valuation to where it is because you are right. I think more than half of all stocks might trade below the average valuation. 20 plus growth, then you start 20 p is not too bad. Never in history i dont think have companies of this scale with market caps of this size grown at 20 top line so for how big they are it is high. Exactly still ahead, year on wall street look ahead. Everything investors need to watch tomorrow when closing watch tomorrow when closing bell comes right back but youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. I want it that way. I cant believe it. That karl brought his karaoke machine . Aint nothing but a heartache. No, i cant believe how easy it was to save hundreds of dollars on my Car Insurance with geico. I never wanna hear you say. No, kevin. No, kevin believe it geico could save you fifteen percent or more on Car Insurance. 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. What a wild after hours earning session it has been. Just to bring you up to speed, alphabet, intel and starbucks beating estimates. The top line though was good, growing 20 . Dont miss a first on cnbc interview with ceo of intel bob swan tomorrow at 11 00 a. M we have expedia ceo also on earnings and a lot more. Also more fresh earnings coming out tomorrow, twitter and mcdonalds to name a few Julia Boorstin has twitter for us and kate rogers has mcdonalds julia, start with you. Well, the question is whether twitter can maintain its momentum after better than expected results in the First Quarter reassured investors the companys tweaks to format can jump start growth with a focus on eliminating fake news and trolls and making it easier to follow conversations analysts projecting 16 Revenue Growth and 10 earning growth in earnings per share back to you. Julia, thank you. Stockst flat over the last three months mcdonalds reporting tomorrow. Kate rogers with the preview kate. Analysts will be looking for updates on the companys velocity growth plan which includes the experience of the future, the restaurant updates mcdonalds made a few tech updates for drivethrough optimization in march, so details on how it is deployed will be key along with traffic and comp updates in u. S. As promotions provided a nice lift for the company in the last quarter. Back to you. Kate, thank you very much back to the earnings movers this evening, we talked about yesterday highs, bad day of trade today. Do you think it will be reversed with some of the positives it looks like the indication is it would be i think mostly it is because of alphabet it is up 95 bucks a share or Something Like that, a tremendous amount of market value, that kind of a move so i do think that it is going to give a little bit of a lift, maybe more than offset amazon if, in fact, amazon stays with the little slight down side. Everyone we have talked to this hour from analysts to investors have said on amazon they dont see a big problem. It will be the line until it stops working. It hasnt stopped working in a long time. It is because it is 100 buy. It is it is a unanimous consensus thing. At this point it hasnt stopped. I think what is interesting talking about mcdonalds, the same setup starbucks did, clicking to alltime highs almost every day everyone loves the concept and comps are supposed to be good. Those comps, both china and u. S. , extraordinary. Completely. And people thought they really were at almost the saturation point in terms of the u. S. , and clearly not the case, pricing and volume. I was going to throw in, we have sub quarter gdp number out tomorrow thats right. It is the last big reading before the fed meeting. Right Eric Rosenberg in boston said he wants to see all of the data before deciding. And the data has been generally okay we will see if we get 2 . We are out of time. Thanks for watching. That does it for closing bell. Fast money begins right now. Fast money starts right now. Live from the Nasdaq Market site overlooking new york citys times square live, im million your traders the desk are tim seymour, karen finerman, dan nathan, guy adami. A trifecta of tech titans wrapping up the busiest earnings day of the season. Alphabet, amazon, intel, all on the move in the after hours session. Those Conference Calls getting under way. Josh lipton just got off the phone, deidre bosa standing by gene munster is ready to break down the headlines coming out of the calls. Alphabet soaring after the company beat on both the t