Transcripts For CNBC Squawk On The Street 20240714

President. Road map begins with stocks moving lower ahead of the open, investors digesting trade war fears, latest jobs numbers, the uncertainty about the feds next moves. Trump tariff threats, the president promising to tax the hell out of china until a trade deal is reached. Oil prices recovering after the worst trading day in four years. Both exxon and chevron moving higher after reporting Quarterly Results this morning. Along with inline results for july, payroll gains were revised downward for both may and june the Unemployment Rate held steady at 3. 7 for a second straight month wage growth 3. 2 from a year ago, but manufacturing weak, year to date average 8k, works 22k last year and santelli pointed out, manufacturing work hours, the lowest since 2011. We know where this is all coming from. Were continuing to get a tale of two economies. Overall a healthy job report, came in line, better participation, better wage growth, a lot to be encouraged about, but there are pockets of weakness, private sector is one of them that people are pointing to, private sector added 148,000 jobs in july the expectation is 165,000 jobs. Also, the revisions for the last two months were down a total of 41,000 the question is what does it mean for the markets and what does it mean for the trajectory of the fed i think the read so far this morning, if you look at fed funds futures, bond market, some of the Research Commentary is that not a whole lot the tariffs are much more impactful of what the fed is going to do next in september. Which the market pretty much has confidence now will be another cut. Indeed. The odds for september went from about 60 to 100 today. And even up from 85 late last night. So were definitely watching the cross currents between trade and the fed. Were getting a bit of a bounce here in the futures, well talk about that in a moment but the president , of course, going 10 on the 300 billion, beginning september 1 and last night in cincinnati, quote, were going to tax the hell out of china i think certainly you also have to consider at this point what the chinese response is going to be. You could argue it is not necessarily a surprise that trump went to this could almost tell from some of the most recent tweets and frustration with the lack of chinese engagement in terms of following through on some ofth things he said, she said, did you like that, that the two leaders had had they exchanged potential promises and had not followed through on, but i guess the question becomes what is the chinese response and do we start to really get that ratcheting up that has been the concern for so long in terms of another level of tension that we have yet to see that we talked about as a possibility, many times, when we dealt with these tension points. They dont have nearly as much to tariff as we do. We Start Talking about, are they going to do things that are other things, will they somehow try to penalize some of the u. S. Companies that operate there in some way. Apple or starbucks unlikely, perhaps, but you have to start to consider that as a larger possibility if in fact the chinese dont have any other tools to respond to the latest provocation. Or walk away from talks and the tariffs go on. There is rare earths, letting the yuan cross 7, regulatory scrutiny well go through the list, the old list we have done this before. The fact is they have really not used gone there, which has been a good thing and potentially why the Market Reaction over time has largely been one of a muted response and or positive or focusing on the fundamentals. Were getting squirrely action in futures in the last five minutes people are looking everywhere for headlines, as to why we suddenly jumped 70 points and now settling back, were in august, and people are looking for heightened volatility and lower volume and some funds sort of shutter up for the last part of the summer. But were in this game, where bad news is good news. The fed will cut rates, what the market wants. Is trump linking the two . Is he feeling like if i keep going on tariffs, i get my rate cuts i want. It is interesting, within two days, we got a fed cut where the fed chairman jay powell said one of the things were watching and targeting is increased trade tensions and the impact of the economy, which is a signal that were going to move if it gets worse and thats exactly what has happened and, of course, the trade talks wrap up and the president goes forward with tariffs he says hes doing it to put pressure on china and shes not moving fast enough but this is already impacting the data we got the trade deficit numbers. China is no longer our top trading partner for the first half of 2019 our exports to china dropped 18 , our imports from china dropped 12 . Thats what happens in a trade war. As we know, as carl has seen firsthand in terms of changing supply chains, it is not as though imports overall are changing, and it is not as though we are really basing that manufacturing that is no longer going on in china to provide goods for the u. S. Here in the u. S. It is just going to other countries such as vietnam. I did think the background to yesterdays events that has been described, i think, by bloomberg and a couple of others in terms of lighthizer and mnuchin opposing the president s decision and navarro being the one sharing it on is interesting. We know where navarro comes from hes not scared of tariffs. Hes not. People describing this balance on the right side of the screen to kaylas report a moment ago in which she said the president is open to delaying or halting the 10 if china were to take action between now and then i dont see how thats new from what he said yesterday but well take that for what it is worth for the moment. This is what the president said last night in cincinnati about china. Take a listen. We have been losing hundreds of billions of dollars a year to china and it has to stop president xi is a good man, a friend of mine, he understands it and until such time as there is a deal, we will be taxing the hell out of china. Thats all there is. Meantime, some spokespeople from the China Foreign Ministry Says the u. S. Will suffer all the consequences as they sort of start to telegraph the degree to which they may counter punch a good report this morning about boeing, could they be the center of the action. Bamil, looking at apple and eps hits 50 cents, 75 cents depending whether or not they pass along the cost of a 10 tariff on phones. It is, what, conceivably could amount to 30 billion over the course of a year or if those imports dont continue to drop i dont know, we could use the money, certainly, to help the deficit. The question is who is paying for it the president i think you and i know who is paying for it. The u. S. Consumer is not paying for it, which is false. I know. Why not just engage on the actual facts of the argument, which many in the Business Community fully agree with when you talk to so many people do believe that we need to try and level the Playing Field with china it is funny, the president rarely if ever talks about intellectual property theft, talks about their cyberespionage, about so many things i hear about in the Business Community as much more important than just the numbers themselves but they dont go there, they go to the idea that, well, yeah, youre not really paying it. Theyre ripping us off. 42 of apparel, 69 of footwear in the u. S. Is still made in china. Thats from the American Apparel and Footwear Association the numbers are still high and the u. S. Consumer should feel it lets bring in keith lerner at sun trust and terry hanes, founder of pan jay policy. Also the data out this morning keith, are we reading into the jobs report, reading into the tariff increase right now . What is the market moving on i think it is definitely the tariff side. Important that the job numbers this morning were healthy. If you had a big miss, that would have been a bigger concern, especially with the loss of momentum it is all about trade right now. The other thing is, we had a great start to the year. This is the best start first seven months of the year since 1997 we were thinking going into august that it was going to be a choppy market, seasonal trends are weaker now we have the whole period of august where there will be uncertainty on the tariffs and dont have the next fed meeting until midseptember. That said, we think that equities over the next 12 months is the place to be terry, what is the escalation going to look like do you expect the rates to go higher, do you expect china to retaliate, do you expect the 10 to go into effect at all before september 1st . What i expect is a after an expression of seriousness by the president yesterday, some sort of threat and proportional response by the chinese, we have seen a lot of this before, and the United States is going to look to see if china will actually start to make some movement on the things that the United States cares about. The president put a lot of this out there yesterday, the president talked about initial moves on agriculture, which hadnt been resolved following through on promises to stop manufacturing fentanyl and fundamentally what the United States remains frustrated by, im not here as a cheerleader for the government, but remains frustrated by is the chinese lack of willingness to come to an enforceable agreement in my view, the linchpin has been and kins to be enforceability the chinese will agree to have an enforceable deal, i think theyll find the United States wanting to put a deal in place fairly quickly without that, though, what well have and i think what is likely is that the current trade war continues into 2020. Ramped up a little bit more as a result of the president s actions and the chinese response terry, we can barely put together an ag purchase. What is it going to take to get as far as youre talking that depends entirely on the president xi and the meetings of the split bpolitburo over the n couple of weeks. Another of the frustrations of the United States government has been that you can see this in the chinese official press and the Financial Press is the desire the belief that they can wait out the current United States position and that their economy is sufficiently good to be able to do that i think what the president is trying to do here is frankly push them to get down to the table, get serious and get a deal done. I think we see that in terms of timeline i think we see that in the next two to three weeks whether theyre willing to do that as was pointed out a few minutes ago, i think if the chinese makes some goodwill gestures to do the things they already said they were going to do, i think youll find the president interested in wanting to not only continue negotiations, which he said yesterday, but also maybe to hold the tariffs off a little bit in order to facilitate the next meetings in september. Keith, on levels, people have been watching 2950 as a marker that would determine whether or not we had a false breakout like last september at least thats the word from technicians. Are you worried about where we are right now . No. I think that the downside is probably limited to 5 to 7 as far as sentiment, hot shortterm, the fund flows this year have been hugely negative thats not consistent with the top. We have this ten year treasury at 1. 85 we now have 50 of s p 500 names with dividend yields above the treasury that should provide some support for the market as well and we have to get used to this ongoing carousel of concerns that we have been dealing with the last few years and if people have sell based on the tariff news, you have to remember, we made a new high on the market last week and we do expect some digestion, back and forth, but later in the year we expect to make new highs very quickly, keith, the declines are sharper overseas. It is a sea of red, more than 2 declines across the major averages hong kong down 2 overnight. Is this continued playbook of the u. S. And u. S. Equities are the best place to be we still think the u. S. Is the best place to be some of what youre seeing overseas, a catchup yesterday, as we have seen today, the u. S. Economy is still solid, wage employment is still solid, wage growth moving up, consumer 70 of the economy one thing missed, the savings now for the consumer is at 8 . Thats about triple what it was heading into the 20002008 recession. Yes, we think the u. S. , the earn trends are better. Keith, terry, thank you both. Have a great weekend. Thank you when we return, the president s tariff threat and its impact on oil prices, wti bouncing back today after its worst day yesterday in four years. Also the latest on exxon and chevron earnings, both stocks moving up. Taking another look at futures, we have been kind of all over the place in last few moments. Better than expected or in line jobs report. Still focusing on higher tariffs. Dow futures down 26. More squawk on the street when we comba e ck you wouldnt hire a twostar mechanic. You wouldnt even ride with someone under 4 stars. Casey . Yeah. So why do you stick with a bank that treats you like this . Yeah, check the. Uh. Check uh. 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But getting a little bounce off oil, up 3 nowhere near the decline we saw yesterday. Worst day for crude in four years yesterday on that settlement, unbelievable day in crude. When we come back, volatile premarket moves, well see how we open. Take a look at the dow futures this morning, which are once again in the red if we trade lower today on the dow, the s p, the nasdaq, the longest losing streak since march 4th through the 8th when we had a rough period as well. Back in a minute tell him were flexible. Dont worry. My dutch is ok. Just ok . in dutch tell him we need this merger. in dutch its happening. just ok is not ok. Especially when it comes to your network. At t is americas best Wireless Network according to americas biggest test. Now with 5g evolution. The first step to 5g. More for your thing. Thats our thing. These are avas shoulders. They square off, hold firm, bear it all. This is her physical therapist, who lends his strength, to hers. These are avas shoulders, now stronger than ever. This is what medicare from Bluecross Blueshield does for ava. And with plans that fit every budget, imagine what we can do for you. This is the benefit of blue. Just about nine minutes to the opening bell, a cnbc contributor, kp, good to see you, happy friday. Thank you and to you a lot of people, the traders this morning are saying, look, we have seen this pattern in the for the past year and a half where you get worries about tariffs, you got to buy this dip. What are you doing i think you i think thats right. He created lots of drama yesterday, thats his style, we have seen it, i dont necessarily think the market should have been surprised i think maybe the way he did it is what the surprise was and it caused the markets to have that reaction in fact, i think it is a huge opportunity, you look at some of the names that have gotten beaten up. Theyre reporting, energy is doing better it got really clocked yesterday. Oil got clocked. But it just it just creates an opportunity so you back the truck up the ten yearyield is at 180 clearly we had a trade truce post through 20, trade talks just this week i think it did come as a big surprise listen, i think it came as a surprise that he did it. Hes been talking about the threat of additional tariffs, china doesnt come to the table, we dont make this deal, hes prepared to increase, prepared to put new ones on the idea of additional tariffs wasnt the surprise, i dont think. I think it was the surprise was the way he did it. Especially after what the fed did on wednesday i think hes trying to force the feds hand he came out and said he was disappointed on wednesday when he didnt get 50 basis points. Now he says, okay, if youre worried about trade and worried about the economy, im just going to create more drama and create more angst in the economy and then well see what we get youre picking up energy stocks, what else . Healthcare is is the other big notable laggard for the year is that a place you would be looking . I think you have to be careful with healthcare, just for a little bit longer. Look, healthcare is on the back a bulls eye on its back if you saw the debate on the last this week, every single candidate on healthcare, healthcare, healthcare, joe biden wants to throw the executives in jail and everybody wants to tear it apart i think you have to just be a little bit cautious at the moment with healthcare let it play out a little bit longer there is values, in names have gotten beaten up if youre in it for the longterm, i think there is certainly opportunity there. But i would i would play it a little bit more cautious right now. More broadly, what do you think about this notion of the jobs number this morning, if youre a cautious corporate manage and cut capex, we know what Business Investment is doing, do you turn to hiring next were seeing little tiny anecdotes of layoffs, lows, uber, citigroup, nissan in the past week or so, could employment could what happen to capex soon be happening to employment well, listen, i think look where employment is at the moment unemployment is did it go down to 3. 6 . I think there say lot going on there in terms of where were seeing youve seen it in the Financial Services industry as well. There is going to be more layoffs. But a lot is going to depend on how the u. S. Economy, how the Global Economy reacts to this ongoing trade drama and isnt going to cause more angst in the firms. So im not so sure that youre going to see hiring yet much stronger than it is. I think that the path of least resistance will be starting to cut back a little bit, especially if the trade drama drags out and it really starts to hit home. I then see i then think you could start to see layoffs increase, actually all right, finally, i ask keith lerner about the significance of 2950, which technicians point to as a level the bills need to support, are you there . Yes thats the 50 day moving average. Thats the level i think overnight we came 2928 is the 50day moving average. The market found some temporary support. I really think the level is the 50 day, 2928, we tested it overnight and bounced back i think right in here it is going to churn for a little bit longer not necessarily going to take off and surge today, but should churn and build a little bit between 2928, 2928. 50 is where youll see your base good to see you we still got to get to etsy and pinterest and square and earnings and analyst calls, opening bell in four and a half opening bell in four and a half minutes. Oh, wow. You two are going to have such a great trip. Yeah, have fun thanks to you, we will. Aw, stop. This is why voya helps reach todays goals. All while helping you to and through retirement. Um, you guys are just going for a week, right . Yeah thats right. Can you help with these . Oh. Um, were more of the plan, invest and protect kind of help. Sorry, little paws, so. But have fun send a postcard voya. Helping you to and through retirement. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Youre watching cnbc squawk on the street. The opening bell is in 90 seconds on this friday and what a week it has been from the Earnings Reports to crazy fed story, now trades have been a part of it and were not done with earnings season. It is the two factors moving the market this entire year, whipsaw the market in two days this week. Were looking at declines going into a friday of more than 2 across all the major averages. The dow, the nasdaq and the s p 500. Plus sharp declines now and it is not just in stocks. I think we have to mention what is happening in the bond market, were seeing yields we havent seen level since the 2016 election wiping out the entire higher yield on the better trump economy on the tax cuts and everything else. David, we love to watch german bunds, germanys entire curve is now negative. It is the largest economy in the world to have all negative yield. It really is shocking when you step back, we have become accustomed to it. We have seen it before, though i dont think the entire curve, thats a first yeah. It continues to be something people do end up sort of shaking their heads at how is that really going to actually generate growth draghi, the fear is that we start buying bank stocks, right . Thats the black rock, it is not just that, were see iing prices at multiyear high the bell and the s p 500 at the cnbc real time exchange, the big board sparked networks, americans second largest dating company with dating apps. Kura, sushi service chain, with 22 locations in five states. Those revolving it reminds me of japan today, kicking south korea off this list of trusted entities as some argue trade wars can go viral. Yes that was a headline, sort of a risk off headline. Youre going to have competing narratives now in the market of slowing global growth. I just mentioned copper at the lows of the year and Central Banks to the rescue. And whether that can actually do anything can central bank easing fix weakness from trade wars, can it fix capex . Can it fix slower hiring and manufacturing . The central bankers are organizing thats what they do and that they can, they can lower capital costs and make it easier to borrow and thats where we are, the question is how much of it are we going to get, is it going to be effective and drive markets to new highs. It is not as though capital has been deer to begin with. It hasnt been if you want to make a decision to build a plant or expand and do it through borrowing, it is not as though you have been prevented from doing so in the past perhaps it comes down to some level you could make a different decision, but as the ceo and certainly among the ones that i speak to who are holding some of those decisions in advance, it is not about that, it is about what is the return on the Capital Investment going to be and how can i come about determining it when there is so many different variables now i cant get the answer to. Where should is be . Going whacamole here around the world. That is the debate at the fed. Why we saw two descents on the fed. Eric rosengren put out a statement as to why he descented and ill read that to you. With the Unemployment Rate near 50 year lows and inflation likely to rise and stability concerns elevated, he says given prices, i do not see a clear and compelling case for additional monetary accommodation at this time i think a lot of people on wall street, we heard from Luke Cooperman on the Halftime Report earlier this week agree with him. Richard fisher agrees with him the question is, what costs will that have if any and has it already been priced out. We saw sharply stronger dollar it has been a strong dollar week as a result even after the fed cuts rates. Well start watching currencies more closely. Watch square today, beats by four cents, revenue ahead, they guide below and they announced the sale of a food ordering platform to door dash in a deal worth about 410 million in cash and stock. Analyst call on square too that i might have seen or missed . Not sure that was one of the big Earnings Reports that we were watching partly because of dorsey, twitter, having the best year ever on 50 , best gainer for july and now i think 60 some odd above t above the ipo price. They did report metrics above what were expectations and user base grew in a more significant fashion than people anticipated, straight up since then. The i think evercore is that what youre talking about, downgrading square, no longer a deal after the earnings, they reduced their 2019 to 2023 eps, cut the price target from 101 to 64 21 Downside Risk on that call. Do you want to come back to one of my favorites of course here in terms of coverage, which is sprint, tmobile, dish, not over yet, is it . Yesterday, the attorney general of the state of texas added their name to the ongoing efforts of what had been 13 states in the district of columbia, now 14 states, including by the way, the first republican ag to join the effort to stop this deal, even though the doj signed off on it Deutsche Telekom the owner of tmobile there is the look at texas ag. Some are look at, at t, texasbased company, hes the hes the president of the Republican Ags association to which at t has been a significant giver. Okay perhaps that is true but at the very least this would seem to continue to have an impact on the timing of the deal and certainly still poses a real risk that the states and some fashion will prevail if and when they make their case in court. That has been pushed now to december from what had been october 7th. But that might have to be well into next year. So the market is reacting to some extent as you see did speak, i did speak to marcellus, the executive chairman of sprint, about how they were going to and hoped to deal with these states that remain key rhin recalcitrant. It is a situation that we have rarely if ever have seen where the main antitrust authority says yes, and yet the states continue to focus on trying to stop the deal from a competitive base, and certainly texas addition has gotten some notice. Well find out how powerful the statements can be. Right well, where they end up in terms of the doj, they brought some statements along with them when they made their deal still waiting on the Public Utility Commission of california which im now told may wait to see how its state ag, one of the states suing, will deal with things as well so it is going to be some time, they may have to actually extend the merger agreement yet again, expires january 2nd next year. Research note, very bullish out of pivotal, saying the selloff had been overdone and there is no immediate catalyst, but they do say that Opportunity Knocks theyre upgrading to buy the valuation has just gotten out of whack and the analysts say it reminds them about major selloff following the whole foods amazon announcement of the deal and that proved to be a buying opportunity and kroger has a lot of opportunities of revenue and income streams theyre working on and the bar has gotten pretty low in terms of expectations, the stock has been pretty beat up between competition from a walmart or a resurgent target to amazon, whole foods and a low margin business where food, you know, is a tough one always has been cl kellogg is the fourth biggest gainer on the week driven by pricing, we saw so much against the food space. Also not one of the better performers the new kamz s came in better strong reports from food, household products and beverages. Keep your eye on amazon, were back to levels that we last saw around june 10th. Down about a percent, 1836 as the pentagon delays awarding this 10 billion cloud contract that amazon was expected to win until the new defense secretary expert can review it and all those rivals complained, the president mentioned this yesterday. And amazon under a sort of sharper microscope there also watch etsy, this was an Earnings Report, and a bit of a disappointment for a stock that had been really strong the results are still strong if you look they did miss expectations at least on the top line after what the Company Called a soft start to the year. Only posting 37 Revenue Growth and 43 profit growth. Everyone looks at the gross merchandise sales, they were up 21 . And they did raise their outlook for sales. But maybe some opportunity to take some profit off the table with the stock up 40 so far this year. Important to keep Something Like that in perspective since Josh Silverman took over what was a company that was underperforming as ceo nothing but up for the most part over the last couple of years, certainly at least from what had been this stock was i like etsy. You use it . I used it before. When decorating a nursery, they have great artists who make stickers for the walls that look like wallpaper all sorts of other sort of unique interesting thats the whole thing. It is not pottery barn youre getting something that is made for you by artists, very professional artive ivisartists. They sped up shipping. All sorts of measures to compete with the likes of amazon and whoever else, ebay, that theyre competing with. It is worth mentioning cloudera, up again, or up yesterday, after carl icahn filed a 13 day in the company. He owns i think what is the number, average cost 5. 75. Stock is up. He said he might actually try to seek some board seats at the compa company. And there it is. 12. 12. 6 . Lets look at a few different stats here on the company. It has been underperformer for quite some time. This is a great performance over the last day, but it has had its share of difficulties as an interim ceo. Certainly if you wanted to pursue board seats there, one would expect he might be successful in doing so well see. Hybrid cloud is what were talking about here in terms of those companies that dont feel they can just use aws. Big move for mr. Icahn his son used to do the technology investment. Hes no longer at the firm carls greatest investments, both of which nonactivist, netflix and apple. If you held them, by the way, the returns would be astronomical where engineered by his son, but but they have moved on so not quite sure, usually carl is not on top of exactly what the companies do, but hes great at perceiving value. By the way, speaking of great money managers, berkshire, well see what the rails are like in apple and some other names by the way, kudlow is on the tape saying hasnt heard anything about possible delay to china tariffs. The hong kong issue is not part of the trade discussion. The indices swirling around a little bit on some of the headlines. Keep your eye on poiinterest as well revenue was above. Nice boost in maus we got a 16 move in pins here at the opening very strong caps off what was a strong earnings period. High numbers on average revenue per year user. Internationally coming off a strong base, more than 100 for pinterest, 40 for the u. S and speaking of strong earnings, wanted to mention Restaurant Brands fast food is having a good Second Quarter and good consumer economy. Restaurant brands, interviewed the ceo yesterday on the impossible addition to burger king they posted strong 8 sales growth, comps at tim hortens was up popeyes also sales rose, comp sales rose 3 . Just capping off what has been a pretty strong environment, consumers spending more, eating out. 7 mcdonalds was 6 . Good employment, low gas prices, wage growth good at the bottom end and then you add on top of that technology, digital, third party, door dash, uber kind of delivery services, it is a great mix for the industry it is the question is have the stocks already factored it in thats the chart of Restaurant Brands it is gaining almost 4 . They have been rewarded. Yum brands yesterday but they have also been up 30 , 40 , so far this year. Market had sort of sniffed out this recovery in restaurants and the company affirmed it. Did you mention campbell since it is up your alley . Thats not yeah, it is names that are not that exciting 2. 2 billion divestiture 2. 2 billion is the total price. Longterm lie secensing agreemes well swanson, real stock, and other select markets stocks that millennials havent been buying and the reason they need to spin it off. Campbells has they get rid of it, theyre streamlining their portfolio, a snacks company, a canned soup company and theyre going to have to turn it around under the new ceo. This was part of the transition, right . And the outline that they put out there. I dont think i think dan lobe wanted something more sell the company but instead theyll sell off parts of the company and see if they can turn the core business around thats been the story. I guess theyre finding buyers they did in this case, yeah kraft heinz, not easy finding a buyer for some of those brands. Indeed. Well below 2940 to courtney reagan, see whats moving. Good morning. What a week that we have had we had the first rate cut in 11 years, three quarters of the way through earnings, jobs report today, a fourth round of tariffs coming september 1st surprise, that is how the market felt we had late day u. S. Selloff, it rippled around the world, germany, france, the hang seng, nikkei, look at the drops here, more than 2 in some cases, 2. 5 for germany right now. Look at the opening action, you mentioned we are lower under pressure here right now. Still going through that shock of yesterday with that tariff news dow industrial down by half a percent. Nasdaq seeing the bigger losses at this point by. 8. Lets look at the s p futures you end up seeing movement here with this initial drop, which was likely on that slight uptick in the Wage Inflation in that jobs report. We kind of made up the ground, we had this brief turn around when Kayla Tausche reported that President Trump is leaving the door open for discussions with china that could delay or change that tariff plan but then the markets realized, wait a minute, i think we knew this, thats what we thought, this is nothing new and we moved again. Lets look at some of the trade sensitive sectors. Heavyweight industrials, boeing and caterpillar, those are weaker as you might expect along with the semis and large cap chinese names. Tech and consumer discretionary, those are groups that have led the gains so far this year then those two groups could bear the brunt of the tariff pain they say this could hurt the growth story, you can see this here, the divergence, we may be reversing that so far when we have seen this the value and the growth split here. Take a look at best buy, one of thursdays biggest losers on the tariff news. Rh as well, selling off, even after the company said tariffs wouldnt have that big of an impact maybe out with the bath water. Back over to you. Courtney reagan, thank you. Bond pits, Rick Santelli in chicago. No shortage of action there. It has been a very interesting week indeed. I like what carl was discussing earlier, my phone was blowing up look at the intraday of 30 year bunds, briefly if you blinked, you missed it. Down three quarters of a base point below the zero line. Below the water line yes, negative. Now granted it is back up a bit. But a longterm bund chart should make any fixed income aficionado perspire a bit. Maybe those who should perspire most are the central bankers because it is going to be really hard to extricate themselves from this. Now, if we look at our yield curve, there is a one week of two years. Down a basis point on the day, down a bakers dozen, down 13 on the week one week of 10s, down three on the day. Down 21 basis points on the week now lets look at king dollar. A lot of people used to refer to it as king dollar, dont seem to be enamored with king dollar there is one week and it is up a fifth of a cent, still, after all the volatility and issues regarding the fed and tariffs. Finally, year to date chart, what is notable here is were still basically what had been a high earlier in the week, we traded at levels we havent seen since may of 2017. Back to you. For more movers, we turn to Bertha Coombs at the nasdaq. Good morning, bertha. Good morning, carl. The trade tariff tweets yesterday really hit the nasdaq and tech hard. We are now on pace for a decline of more than 3 for the nasdaq composite. Slightly less for small caps this week, relative basis, thats because biotech is the only sector that is fractionally positive this morning, tech really taking it hard with netapp preannouncing lower revenues, saying the revenues will be down 5 to 10 , as opposed to up single digits. Thats tending the storage players. Sea gate, though it had fairly good earnings, its outlook week as well. Chips getting hit, chips on pace for their worst week since march of 2018. Though we do have some chip members that are performing well korvo did report fairly good stable numbers, one of the apple suppliers, it is getting beaten down with the rest we have some earnings gainers, red fin, the real estate company, continuing to post a loss that was in line, but outlook a little better than expected and it is one of the gainers today. Back over to you guys. Bertha, thank you. Still to come, Goldman Sachs chief economist jan hatzius on the jobs report and how the new tariff threats against china could affect the fed and the economy. Stay with us dow is down 142. Woman my reputation was trashed online. I felt completely helpless. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. The biggest losers this week pfizer weakest performer, down 11 . Goldman, cisco, nike, caterpillar, down 5 two winners on the week. Merck and Procter Gamble squawk on the street will be squawk on the street will be right backfirst month payment. Experience amazing. The mucma fest of summer. Country musics biggest stars perform their hottest hits. And the first time ever. Lil nas x, Billy Ray Cyrus and keith urban perform the hit old town road. Cma fest sunday 87c on abc. And after the show check out a special encore performance of brett youngs song, catch. Available only on xfinity. Just say brett young into your x1 voice remote. China vowing to retaliate if the president launches this fresh round of tariffs the latest from beijing. Reporter here in china people are using a popular chinese saying to explain President Trumps decision that President Trump changes his mind faster than flipping pages on a book. Chinese officials havent been as generous. The commerce menstery called it a serious violation of the consensus of the g20 and a Foreign Ministry said that beijing would be forced to take countermeasures. Its that last monpoint thats concerning u. S. Businesses in china. The u. S. China Business council says members are worried about increased regulatory scrutiny, delays in licenses and approvals and discrimination in Government Procurement tenders. Chinese manufacturers are worried, too we spoekt to factories that sell to the u. S they said a 10 tariff would be a blow one manufacturer who sells Christmas Gifts said he would likely have to stop selling to the u. S. All together. The global times said that the new tariffs would only lower the prospects of a trade deal and beijing will hunker down instead for a prolonged trade war. I spoke with a source who is familiar with china sides thinking they said to the chinese, the trade truce is off eunice in beijing when we come back, tariffs, jobs, and the economy. Goldmans jan hatzius on what this could mean for the fed and rates. Rates. Dows down 150 lets go its earnings season. The biggest in the world. We are breaking down the numbers like nobody else its about performance. And opportunity. Its earnings season on cnbc. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen and david faber at the new york stock exchange. Trade, the fed, and earnings have collided to make for a heck of a week. The worst week of the year for the s p. Now some michigan data lets get to santelli. A lot more than mishs data. Factory orders up 0. 6. What a negative revision from minus 0. 7. But sequentially 0. 6 is a lot better extransportation up 0. 1 durable goods, the final june read, 1. 9. Usurps the 2 mid month read extransportation up 1 . The allimportant capital goods orders nondefense exaircraft proxy for Capital Spending, which we are appropriately preoccupied with, up 1. 5 Rearview Mirror up 1. 9 solid. All right. Michigan, our july final read, 98. 4 and of course how does that stack up well, 98. 4 is exactly what the midmonth preliminary read was, and it stacks up pretty well the month before, of course, the final read for june was 98. 2 some improvement Current Conditions moved down from 111 and change to 110. 7 Inflation Expectations 2. 6 on the oneyear unchanged. Five to tenyear, down 0. 10 from 2. 6 to 2. 5 that maybe gives you some context into the feds decision this week and how it didnt make a lot of sense sara, back to you. Rick, thank you. Our run oadmap starts with President Trumps tariff threats and geopolitical headwinds for stocks the s p and nasdaq on pace for the worst week of the year. It is jobs friday u. S. Labor force set at the highest level ever we will talk to goldmans jan hatzius about the results. And oil is rebounding after the worst day in four years. Exxon and chevron delivering Quarterly Results. We will dig through the numbers next. The u. S. Economy added 164,000 jobs in july Steve Liesman with more beneath the headlines. It was an in line job reports. A few hints of weakness that i think bear watching here nonfarm payroll up 164. 165 was the estimate but those may june revisions down 41,000 is what the concern is right there average hourly wages pretty good, up 0. 3 . Unplimt rate unchanged Labor Force Participation ticking up to 63 . Thats good. But along with the down revisions weakness in manufacturing hours worked manufacturing hours have been m negative or flat for 11 of the past 12 months you see that right there they registered the biggest decline this month since 2015. This is the industry most sensitive to trade tensions and Global Economic weakness we want to watch that. Some of the other details. Education health services, 66,000 it looks like local education workers came back a month early. So you had a big pop in july there. That was probably responsible. Information doing good manufacturing this month doing well, but the yearly average that is declined from the prior year the government getting a pop thats where that education shows up and temp help doesnt tell me that there is a whole lot of extra hiring going on there. That number should be strong its a good leading indicator. On the plus side, Participation Rate up the past two months as more americans have come into the labor force. The fed likely sees confirmation from the report to ease wednesday, ease a little bit but the effect of the jobs report overwhelmed by the threat of more tlifs op china that is to dial back in the chance of that third rate cut this year by december, sara. So where do you stand, steve, on how the Economic Outlook has changed if at all this week . The new 10 tariffs on u. S. Consumer goods and whether the fed is going to be actually able to do anything to fight that and alleviate the pain with another rate cut i think the sequential answer is yes and no. I think its hard to see anything but somewhat weaker Economic Growth as a result of tariffs. Every single estimate i have seen shows that it takes something off of gdp growth in the tenths from onetenth to twotenths up to fivetenths maybe half a point of growth i think it does not offset trade. Its hard for me to see. I think the chairman has a point when he talks about the confidence channel hey, somebody is doing something about this ultimately, decreasing the cost of capital i dont think offsets these taxes that were putting on the American Economy. Steve, finally, really quick, i was struck by your point on squawk box this morning about whether employment is next in line after capex from worried cautious managers. Can you expand on that. I was taking off what a guest said he goes, look, at some point you bring capex down to as low as it can go, and what is left on the next thing you bring sg a down, obviously in terms of how ceos express their confidence, they express it by building new plant and equipment and hiring new folks well, we have seen this decline in the growth rate of Capital Spending and well see if that gets down to a place where, hey, i cant cut here anymore now i am going it reduce my hiring that would be an effect. We will see how much this whole tariff thing plays out in terms of confidence or whether or not we get some kind of bounceback from the lows we have been. All right steve, thanks. Big week all around. Steve liesman. Joining us is dianne swaung, david rosenberg. Good morning, guys good to see you. Good morning. Dianne, your thoughts on the number i am struck by the revisions, the number of multiple job holders. There is some Interesting Data on temp help whats your take well, the overall jobs numbers we are seeing a slowdown we expected to see i am worried like steve is, we will see more of a pullback in hiring somethings got to give. Either we see confidence in the business sector come back and hiring pick up again, or we are going to see the slowdown in hiring which will effect Consumer Spending and the tariffs are not good news out there. There was a Silver Lining to this number on a Participation Rate almost all of the increase in Participation Rate came from black teens and those with less than a high school degree. And thats really important because it means we are pulling in people who were formally not reengaged if this economy. Thats something chairman powell has been very focused on in running the economy, sustaining the expansion, bringing in the slack that people didnt believe was there. And i think that is something thats a positive in this report, is the number of people that are finally throwing their hat in the ring, people who havent thrown their hat in the ring in past teens took it on the chin in the wake of the crisis because they had to compete with older workers. The Minority Community coming back, that is welcome news. David, there is also wage growth that came in better than expected, 3. 2 from last year. How do you square what was, you know, overall Pretty Healthy jobs report with your recession forecast and some of the other mixed signals we are getting from the economy, the worse ones right look, what matters most is total personal income or wage income so average Hourly Earnings were up 0. 3, but the work week was down 0. 3 so, actually, nominal workbased income in the report today was a flat and probably negative in real terms thats a question mark in front of the consumer for the Third Quarter after a strong Second Quarter. In answer to your question, and i think that steve really answered a lot of them, was what you try do in is look at the forwardlooking indicators or the components that will give you a window as to what the future is going to look like the stagnation in temp Agency Employment in the past five, six months, well, thats a worry sign you are taking a look, for example, at the downward revisions, this is becoming a pattern. Four reports in a row the revisions to the downside. That is what economists say is, the economy is losing momentum i think that the defining feature of this report today was the negative 0. 7 reading in manufacturing hours worked because, you know, Eric Rosengren is focused on the Unemployment Rate. It almost guarantees he is going to make a policy mistake if he was running the fed because the Unemployment Rate is lagging and yet what is in the leading indicator and the only employment component in the conference boards indicator is the manufacturing work week. It went down significantly in the latest month on top of the fact that overtime hours are also very weak i think when you look beneath the veneer of this number and what its telling you about the future, it actually was about as down beat as it could possibly get. David, you have been critical of the fed you said its one of the few things with the president with which you agree. After the cut this week, have they done enough no, not at all. Look, its clearly a divided fed. Its a very divergence of opinions on the fed, and you can see that i mean, two dissents doesnt happen all the time. There is a lot of other people that were openly saying, you know, why bother cutting rates at al . The people that dont want to cut rates are obviously looking at the last employment report that we got for june you are looking at the q1 gdp and the forehandle on the consumer and the 0. 4 in retail sales. I have answers for all those questions. I think there were a lot of temporary factors behind those bullish reports. So my view on the economy is a lot different than a lot of folks on the fed i still think this is going to be a very aggressive easing cycle. I know right ni thats what we end up getting the most important determinates of this view out of todays number is im looking at the sixmonth trend in aggregate hours worked for the production nonsupervisory workers. This is critical because in the past six months its turned flat thats exactly what happened two to three months ahead of all of the past three recessions. So were getting, no doubt, i think, in my opinion, a recessionary impulse from todays number i think that the fed look, this is the biggest flipflop fed i have seen in my 35 years in this business and i think that they will flipflop again towards more aggressive cuts once the economy starts to weaken off more sustainably in the latter part of the year. And you didnt even mention the new tariffs that were announced yesterday. 10 on the remaining chinese goods. Dianne, is david too gloomy . Too aggressive in his easing forecast if you could work in the new calculus with the new tariffs that we are going to get. I have been one thats been saying the fed is going to ease for a while. I agree with that. And i think the majority of the fed is actually there, they are worried about their symmetric mandate. There is dissonance. And i think they were sort of betting a little bit too much on the momentum i think jay powell in one of the things i think he did explain in his press conference, he said, listen, we wouldnt be where we are at if we hadnt done the pivot that we did. They are getting the economy they thought theyd get with two rate hikes and they are having to ease now and a promise of easing and the expectation of easing are part of the strength in the Second Quarter. I think what is important. I think they are looking at it the right way. The headwinds, what they thought were risks, are becoming a reality. Additional tariffs are one of these realities. We dont know what is going to happen with brexit and additional hikes in tariffs between now and the end of the year tariffs seem to be more of an actual they are not a negotiating tactic they are a goal. Once we accept that, then we know where were at. Tariffs have been increasing our estimate is tariffs will be as high as they have been since the latter part of the 1980s, early 1990s by the end of the year. I wish we had more time dianne and david dianne, by the way, did call for the fed to cut in 2019 back in december of last year. Got to give her props for that thank you, carl. Have a good weekend. Thanks, carl. Take care. When we come back Retail Stocks getting rocked on President Trumps latest tariff threats. Former walmart ceo bill simon joins us on what it means for the sector and the consumer. Later, Goldman Sachs chief economist jan hatzius will be here to break down the jobs mbs,hearf reat dow is down 219. Squawk on the street will be squawk on the street will be right back i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Retail stocks under pressure again after President Trumps tariff threat. Courtney reagan joins us with more. You have to do a lot of homework to figure this out. The president says that china pays for the tariffs the truth is the company pays them, then consumers pay them. Its coming soon on clothing, shoes, toys, electronics, and a lot of other things. Tim boyle said lets not tank the economy with a misguided conception that trade wars are fun. Tariffs will be a disaster for the American Economy employers and consumers, his company and others he says will be forced to raise prices. 11 thursday tariffs hitting 7 of its total cost of goods sold last quarter,et too premature to speculate about what will happen here they are. Steve madden, name on many analysts list, as particularly heart hit on shoes nearly all of the u. S. Goods are sold in china. Department stores no longer spared macys has a pricing category by category when looking at evaluating what to do. They are going to hold prices on products that are more elastic and raise them on others plus, it could also possibly split those higher costs with some of the vendors, which is something retailers like gap, inc. Cant do because they make most of what they sell there is no one else to negotiate with unless its the factory directly. Are there stand outs that you can think of that have shifted production away from china that are insulated . There are so tapestry, which is a Parent Company of a coach and kate spade, they have been working for years on moving production out of china even yesterday those names were hit. I want to watch the pricing action today to see if some cooler heads prevail when we start to Pay Attention and wonder, wait a minute, is this name going to get hit . Thank you. Yes. Staying with retail, joined by former walmart ceo bill simon. How big is this going to be for the Retail Sector . I dont think its as big as it would seem, at least not as big as the market is reacting to certain retailers and certain products with high china exposure could be a big deal in the short run. As courtney said, retailers have been working for a while since this whole thing started to mitigate their, code word, mitigate the cost, which means build new supply lines once they build those, i think those costs, you know, that the tariffs become irrelevant to us, but very relevant to china because 100 of the product that leaves china is gone from their economy. They have to grow 6 to 8 a year for economic and political reasons. I dont think its that big of a deal if it lasts a long, long time, it could be. I mean, i thought the whole thing was that it was difficult to move production quickly when you have manufacturing in china. And according to an industry group, 40 of the apparel in this country is still made there. Sure, it is difficult to move, and it takes a long time we are now going on about year two of this. If there is no deal done and if its, you know, if its true that china is delaying until the election, we are talking about two plus years thats enough time to start moving factories and if you build a factory somewhere and you put in the ground, thats a 20 to 30year decision i think china will slowly recognize some of this stuff i still remain optimistic. I think a deal gets down because both sides really do need a deal. I think the concern to some, bill, is that it spins out of control in terms of a chinese response you, as you said, have been optimistic for some time the voice of reason, if you want to call it that, in terms of the real impact. What, though, would concern you . What would be something, if it was a headline or a trump tweet or a response from the chinese, that you would start to get really concerned escalation. Escalation beyond tariffs and into things like t bills and other economic sanctions and freedom of navigation. I think those are all possibilities as to, you know, two big guys start pushing each other around. Bill, there has been a bunch of stories this week obviously, all anecdotal about a fragile consumer people borrowing to stay in the middle class consumers taking out personal loans to pay for Credit Card Debt are you seeing any fissures at all, any cracks in what we normally call a very confident consumer no. I think the consumer is very resilient. I read those articles. I understand there is probably cases where thats happening it doesnt seem to be happening on a largescale basis right now the consumer is strong and staying strong as long as the external impacts of news and tariffs and stock market declines dont push the consumer in the wrong direction, i think they will stay strong, which is hi think frankly one of the reasons that the fed lowered rates to keep that confidence moving curious on this idea of moving supply chains, which is in progress. A there are certain products that the chinese are particularly good at making or certainly very efficient at making at a very low price. I mean, once you move a supply chain, you are not going to move it back, right you are making a longterm decision, i would expect, to move it, and do you still have to worry about the quality of your goods not being what they have been previously when they were made in china i think there is a transition effect certainly it will take a while to get the building up and running. China really is not good at particularly anything other than labor. Lower labor costs. Capital is agnostic to g geography. So 1 billion or 1 million costs you the same no matter where you put it access to Natural Resources is important. Most of the cotton that the apparel in china is made from is not grown in china its grown in the u. S. And in india and other parts of the world. And so there is no real secret sauce in the chinese, you know, apparel business except the lower labor costs. And tariff the tariffs impacting that cost combined with the transportation costs, if oil starts to bump back up in price, i think that all those things could impact it but the point youre making is one i was making earlier once that factory gets moved and established, and it does take a couple of years, it is a longterm capital decision and you are now not working on, you know, a total cost basis you are working off a marginal cost basis right now china has that marginal cost advantage because the factories are built and established and running there. If they let this go too long, somebody else will take that initiative away from them. Bill, one last point on that. On the apparel front, that makes sense. But a lot of our reporting on like hightech assembly has shown its not just about labor costs. They have a large army of people who are good at technical things, not sewing necessarily would you argue what you are saying is true across the board . No. I try youre right their work force is nmore technically trained because the factory and assembly and the product needs are based in china, but that doesnt mean that that couldnt move to another market they dont have a monopoly on smart people they have a monopoly on the factory and the training that went to get th the transition can and occur given the right economic circumstances. I do believe they recognize this i dont believe that china can wait a long, long time to resolve this because once, i said once those factories move and the people are trained in the markets to be able to do that, to work in thats gone to china for 30 years. Really quickly, just because walmart is down 4 r, you used lead walmart u. S how much of walmart u. S. Is made in china not that much surprisingly, twothirds of what is sold in walmart u. S. Is either made or grown in the u. S. Dont forget they are a very large grocer the remainder, which is about 110 or 115 billion, 15 comes from china so youre talking, you know, 20 billion or so sold in china. If there is a tariff on 10 of 20 billion, thats just on the cost of goods, i think maybe for walmart its a 30 basis point impact some they can absorb some of it theyll pass on its not that big of a deal i dont believe. One last thing, bill. This week lowes announced plans to lay off thousands of workers in the maintenance and Assembly Department outsource to third parties is that the beginning of something new . I think its not new. Outsourcing and thirdparty operations has been going on for a while. I think lowe los is trying to figure out how to reinvent themselves they have been doing a good job generally speaking losing out in a twohorse race to home depot who has found the right formula and a new ceo is trying to figure out how to get an advantage and this is something he is trying. Bill simon, thank you you bet. A have good weekend. When we come back oil coming back after the worst drop in more than four years chevron and exxon lower after their results. We will dig through those numbers. The dows down 181 time now for our etf spotlight. Today looking at energy this morning. Ticker xle recovering slightly in early trading on strong earnings in the sector now taking a turn lower. Kind of spilling in the last few moments. Exxon and chevron out with Quarterly Results. Exxons revenue above wall street estimates chevron reported over 25 rise in profit. The initial reaction was to buy. But both stocks have now pulled back, trading down over 1 more broadly, wti crude is regaining some ground after its worst daily performance in four years. This as the sector remains in bear market. Down over 20 from its 5 we2k highs. President trump calling an end to a shortlived trade truce with china saying 10 tariffs on the remaining 300 bill of u. S. Imports from china will begin september 1st. Here is the president yesterday. When my people came home they said we are talking. We have another meeting in early september. I said thats fine but in the meantime, until such time as there is a deal, we will be taxing them. Joining us now at post 9 pulitzer prizewinning columnist jim stewart. Back in the mix in terms of tensions rising once again whats your take on the latest tariffs . Well, i think weve just stepped back a little bit from the immediate news to me there are two big differences between the u. S. And china and it gives china an advantage. Number one is we are a democracy. They are not secondly, their idea of short term is 100 years. They have an extremely long time horizon. We have an election coming up next year, and i feel trump, for two reasons, economics and, secondly, to demonstrate his negotiating style, which is one of his main claims to prowess, he has to produce a deal here. He has to come up with something that he can call a victory or he is going to be handing the democrats a huge selling point in the election where the economy is one of his, you know, strongest calling cards. So i remain optimistic that some deal will happen here. Its not going to be a great deal for the u. S. Because, a, the chinese dont respond to coercion, and secondly, because of their longterm horizon, they can afford to wait it out. On the other hand, their economy is getting hit pretty hard they have had inflation problems they are worried about capital flight might have to defend their currency at seven. A lot of people look at the market and economic reaction and say the u. S. Has the leverage. Thats why i feel there is motivation on both sides to come up with some kind of a deal. I think we underestimate the pain that the Chinese Government is going to be willing to tolerate here in the interest of a longterm advantage. And we do not live in a country like that. Thats why its hard for us to project what the chinese leadership is thinking because, as i said, we have elections every four years four years is like a nanosecond in terms of chinese history. So youre saying he needs to have something politically by next election, but they would be unwilling to think on that so what no, i think they are willing to give something. I mean, look, they are smart, too. They know that they have some leverage here and they have some opportunities. Looking back at basic negotiating strategy, which the white house seems to ignore. Nevertheless, its been that both sides have to fall wawalk feeling like they gained something. There are things we can do for the chinese, and vice versa. If you think we will simultaneously solve the huawei problem, get them to roll back their insistence on sharing of technology on chinese ownership ventures there and buying all this u. S. Agriculture products in one fell swoop, thats not going to happen. And have an enforcement mechanism to make sure is it happens, which seems to be a key Sticking Point at this point. Right the chinese are, i think, most defensive about it looks like the u. S. Injecting itself into their sovereignty and telling them what kind of judicial proceedings, what kind of enforcement mechanism, and what kind of laws they need to have to make to satisfy us thats a tough one to sell again i have said this before, but history shows that the only trade wars that someone wins are when one side has a huge economic advantage over the other. Like, yes, we can win a trade war with guatemala no doubt about it. But china . You know, we have some advantages in terms of the import expo import export imbalance, but no one is going to end up winning the question is can you come up with something that both sides call a victory. Changing subjects while we have you you were part of a reporting team for a bizarre story the other day in the times about jeffery epstein, loosely called a financier if you want to call him that he is in jail for a lot of different reasons. What are you finding in terms of the continued reporting you are doing on epstein and his relationship with some well known people in the Financial Community that conceivably could continue to reverberate . I dont think there is any question about it. First of all, he not just a brilliant circle of nobel prizewinning scientists around him. By like the equivalent of major investors, some of whom are going to his house, having dinner with him, hailing him as some kind of financial genius. While i have said he is nowhere near a billionaire, he is astoundingly wealthy his lawyers estimate his net worth at 500 million. The question is where did this money come from . He zriebd hviebd him sofs descr as a tax expert. There is no evidence. In all the years i have been covering hedge funds or people who make investments, never crossed my path in any way but i have heard that he did help people with their tax planning and their estates and things like that do you think its possible that down the road, given these sizable holdings he seems to have offshore and the comingling of funds that some of you have reported on, that there will be some investigation as to whether this was legal well, there has to be some investigation. If im assistant u. S. Attorney sitting in the Southern District of manhattan right now, i would be all over this lets concede maybe he is a tax expert there are many tax experts sitting, you know, within a stones throw of us on wooelt, and how many of them have 500 million what tax strategy could conceivably have generated for him that kind of income . It simply does not make any sense. When you show me a giant pile of money like that, a shifty character who we have demonstrated is a serial illusionist, as we said in our story, and im an investigator, i would be all over this thing and as a journalist right we look forward to it, for the reporting from you and the team and others as well it is disturbing but an interesting story. Thank you. Jim stewart. We are back to 29018 lets get to sue herera for a news update. Good morning. Heres whats happening at this hour a strong earthquake struck often the coast of indonesias java island buildings were swaying as far away as the capital. The u. S. Geological survey reported the magnitude 6. 9 quake was centered off the islands southwest coast. Secretary of state mike pompeo lashing out at china for what he called predatory trade practices that he says harm Economic Development he told an audience in bump stock that asian nations will thrive once chinas trade policy is fair and transparent. Decades china has taken advantage of trade, taken advantage of trade versus the United States of america and versus countries in asia and Southeast Asia its time for that to stop and President Trump has said we are going to fix this. The socalled caliente fire burning through parts of Southern California near the Mexican Border that scorched hundreds of acres of open space before destroying a palette yard where it was eventually contained thats the news update this hour sara, back downtown to you. Sue, thank you. And when we return, Goldman Sachs chief economist jan hatzius is here to talk about the potential impact of these new tariffs against china. Todays jobs numbers and the r e decline we are looking at foths p on the week. More squawk on the street when we come back right hey, mike. Check out this timespace wormhole i created. Hows it work . Let me see your togo, and ill show you. Burt you have my lunch. Introducing togos new hot chicken trio. The new brewpub chicken with grilled chicken, bacon, and fresh avocado. The hot buffalo chicken with franks redhot wings sauce. And the tangy barbecue. The new hot chicken trio at togos. How far would you go for a togo . Well, between rate cut news, a tariff threat from the president , todays jobs numbers, it has been a volatile market week we are looking at a decline of 3. 5 on the s p for the week Goldman Sachs saying a new round of tariffs would increase the chance of a quarter point fed rate cut in september to 70 from 55 previously. With us now in a cnbc exclusive, the author of that report, Goldman Sachs chief economist jan hatzius. What a week, jan. And the jobs report is the least important of it. What does that mean we will get more fed cuts . I think its pretty likely. We think 80 probability in september, 70 of 25, and i think you cant rule out a 50 basis point cut. Although i think thats quite a bit less likely. There is a lot we dont know yet. The threats out there the final, you know, announcement has not yet occurred, but if they do actually go ahead with the 10 , then i would expect some more effects, at least on the sentiment indicators, and i think that solidifies the idea that the fed is probably going to do more. Are you saying that this increase in tariffs is different because its aimed at the consumer part of our economy than previous rounds of tariffs we have seen in terms of Economic Impact . I think it is somewhat different from that perspective. I think as far as Business Confidence is concerned, it might actually be a bit more similar. But for the consumer, this is a more tangible increase in tariffs because it will be a bigger effect. We are estimating about a 0. 2 impact encore inflation from this round, and that is going to hitconsumers pocketbooks. You are normally pretty circumspect in your notes. Yesterday you said this tranche could be politically unpopular because of the price effect . Yeah. I mean, i think its more relevant to a much larger number of americans because so far most of the tariffs, with a few exceptions like washing machines, have really, most of it has hit the business sector but this is going to be pretty visible i think in the store so, yeah, people will notice. Kudlow is on the take this morning saying the effect will be minuscule is that correct . Well, i think its a little bigger than minuscule. You could argue whether 0. 2 impact encore inflation is large or small i dont think its minuscule i think its going to be noticeable, especially in individual categories. As you average it out over the price indices, thats going to reduce the overall number. But i do think its going to be noticeable. So i was interested to hear you project the rate cuts for the year because you, i think along with a lot of other economists, felt after the fed meeting it wasnt so clear what the fed was targeting or where the fed was anchored in terms of the next move. Yeah, we previously had the 60 probability of a cut in september. So we did have it as the baseline but this makes the probability higher, i think. So i think that there are, of course, some questions around what the fed is targeting. There are a couple of different rationales for cutting rates that showed up in the statement. One is inflation is below target the other one is the global uncertainties. And depending on which of those you put more weight on, you are going to have, you know, somewhat different views on the timing bue more easing is the most likely after everything that we have seen this week. You dont necessarily agree with it . I think the move towards easing was, i think, probably quicker than was necessary there were a couple of dissents. Boston fed president rosengren put out a statement this morning, you know, i think making a pretty strong case that this is not, you know, a necessary move at this point even though, of course, things could change Going Forward i think that made a lot of sense to me. Have you figured out an effective way to measure the impact of tariffs in terms of in your models . I mean, given how long you have been trying to, i would assume everybody is grappling with the impact. Its hard to tell, i think, because a lot of Different Things happened in 2018. When the trade war first really started, the second half of 2018, obviously the economy slowed a lot, and tariffs started to increase, but there was also the rolling off of fiscal stimulus. You know, there was the cumulative effect of previous fed hikes. There were some there was a fairly sizable tightening in financial conditions the short answer is, no. I think we generally see larger effects on sentiment than we do necessarily on the hard Economic Indicators i think thats an interesting divergence at the moment, that the sentiment indicators in the business sector have weakened quite a bit. The hard Economic Indicators, including the payroll numbers, still look decent. If you add it up, a 3 handle on gdp First Quarter 2 Second Quarter. Whats Third Quarter going to look like . Whats Fourth Quarter going to look like . What kind of year are we looking at we are 2 in the second half, maybe a little bit below that in q3 but 2 somewhat slower than in the first half but still a little bit above the longerterm trend. We would still expect the Unemployment Rate to move sideways to lower from here, even though recently we have obviously been sort of flat at 3. 7 . Finally, watching 185 there, how much of a push on either housing or other capex can we expect from these lower rates . I think housing probably more than capex we are expecting a positive impulse from lower Mortgage Rates for housing. So far weve only seen a little bit, but we do think that it will be coming through capex, i think its going to be driven really more by Business Confidence, profitability, and other factors. That doesnt seem to be as Interest Rate sensitive. Jan hatzius, thank you very much. Thank you. Lets get a market flash with rahel solomon. Hi. Shares of mobile energy right now jumping after a strong Earnings Report last night after the bell also raised its fullyear forecast it is highs of the day at this point, but still up 6 thats shares of noble energy. Almost up 7 after a strong Earnings Report after the bell yesterday. Carl, back to you. All right thanks for that. Take a look at pins and square moving in opposite directions today pin tret had an increase square getting hurt on weak guidance and the sale of its food ordering platform caviar to doordash we will talk to ceo in the next hour the dow do 2wn64 driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. No matter what you trade, at fidelity i got shotgun. I got shotgun. No, no, no dont start. I got shotgun. You ready . Yeah im ready. On my three. Okay. One [ screaming ] woo [ screaming ] staples are sizzling this summer, but the charts could be sending a distress signal. Ndut more on tradingnation. Cnbc. Com more squawk on the street is coming up. Dont miss your golden opportunity to experience thrilling performance. Now at the lexus golden opportunity sales event. Get 0. 9 apr for 60 months on all 2019 models. Experience amazing at your lexus dealer. Same week the fed eats for the first time in 11 years we have tariffs that arent terrific, but todays report had some issues that i would like to raise. I would say the report was basically average. But there were some very key points first point, if you look at employmenttopopulation, affectionately referred to as epop, it was 60. 7. It was just onetenth better at our last look at 60. 6. But if you look at the chart, even though we have had lots of 60. 7s, you have to go all the way back to june of 2008 to find a higher one this is a good thing we also saw Labor Force Participation increase a bit, but that might be squishy and pretty much flattening out from current levels average weekly hours, this was really detrimental to the report and if you go to the charts, you have to go back to january of 2011 to find a number lower than the 34. 3 and just like the epop, weve had lots of 34. 3s, but you have to go to january 2011 to find that 34. 2. Now, lets really get to it. Beans, bonds, and the buck commodities, ive always found commodities such a good sentinel sector to Pay Attention to and the tariffs are adding to problems already in the pipeline for agriculture, as you can see on this threeday chart of soybeans if we look at whats going on with respect to jobs and beans, or excuse me, jobs and beonds, jobs are kind of average, but it certainly seems the bond market is doling out a lot more than just an average slowing or potentially a flattening of jobs if you look at what is going on there, we are down 22 basis points for the week as you see on this chart. But maybe the biggest story is that in europe, pretty much for a minute or so, their entire yield curve all the way out to 30 years was negative. The 30year boom did come back a little bit, but the point is that we all wring our hands look at our domestic economy, look at the fact that weve gone from 3. 25 down to 180s so quickly how could that happen . Well, of course, were slowing a bit, but a lot of it is overseas and things we cant really control at this point in time. Finally, in terms of how this tariff issue will turn out, we had walmarts spokesman on today and he says, it really isnt a big deal im not saying it isnt a big deal he knows better than i but at the end of the day, the impacts will just get worse over time and the markets dont like that uncertainty david, back to you have a great weekend you too, rick Rick Santelli. Time to send it over to jon fortt with a look at whats coming up on squawk alley. The overall market looks rough this morning, but you know what looks good . Survey monkey, it is up some 10, eh, 11 . Well have the ceo, zander luery talking about eain arngsnd this economy is drawing so much attention in Silicon Valley these days thats coming up on squasquawk alle alle alleytraders have coaches . Who says they dont . 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So now the dow and nasdaq are on track to have their worst week of the year. Well tally up the damage and see if that couldntntinues. And well get reaction from tom donohue about what he thinks this is going to cost American Business and american consumers. He always walks a pretty good line between the politics supporting the administration and their efforts, but also, talking about the impact did trump go after him a while back went after his policy chief, when they criticized the announcement is that myron brilliant, the one he said, not so brilliant. Correct and myron put out a statement yesterday saying, this is very negative for the economy and for the consumer well see how tom frames all of it were also going to zoom in on the Retail Sector. Stocks have been getting crushed on the tariff announcement well discuss the fallout with the Footwear Association of america, because you want to know how much your sneaker prices are actually going to go up well, your husband certainly wants to know that yes, sneaker collector. Maybe hell cut down well see you guys this afternoon. See you later. When we come back, well talk to quitn. Ash chief tony xu on their acisiodow down 300 s p on pace for the worst week s p on pace for the worst week of the year. To do alone things. Day after day, you need to get it all done. And here to listen and help you through it all is bank of america. With the expertise and kno youd to reach that blissful state of doneness. So lets get after it. Everything is all right what would you like the power to do . ® all right good morning. It its 8 00 a. M. At door dash headquarters in san francisco, its 11 00 a. M. On wall street and squawk alley is live 33