Transcripts For CNBC Squawk On The Street 20240714

Germany down 1 . German Business Sentiment hits an eightyear low. And then watch our own 30 year falls below 210 overnight and everyone is going to be watching todays close. Lets get straight to the market, futures lower ahead of this mornings open, following a sharp selloff in the second consecutive monday Global Economic worries, falling yields continue to weigh on investor sentiment, driving toward safe haven. Gold now, the highest price in more than six years. The president tweeting a few moments ago through massive devaluation of their currency and pumping vast sums of money into their system, the tens of billions of dollars the u. S. Is receiving is a gift from china prices not up, no inflation, farmers getting more than china would be spending, fake news wont report what we will report that that core cpi 22 is the 17th month of plus 2 . There is a level of inflation in our country, but there is also, i think that when you see it, some of it is tariff but if youre a central banker, you recognize that there is a way of deflation coming when you have these rates going the way they are that is enough deflation the president seems to im not saying i want to be part of the fake news, so to speak it is entirely possible you can have hes depositing something that is hard to disagree with, thats whats happening, and fake news, lets say were fake news, were not fake news, but these are facts, there is not as much inflation, there is some inflation, but were better i think what i would emphasize is everybody wants our market everybody. Thats because were strong. The strong dollar will not necessarily be a great thing for us larry used to talk about, by the way, the chief Economic Advisory talk about king dollar. Steady dollar. Steady dollar i think what is needed is some sort of belief by someone other than the president that we can avoid or will not be in recession because this talk is endless, carl. I went home last night and i said im dealing with there are companies doing incredibly well you can say, jim, thats a video game okay, so then we have dr. Pepper, theyre doing incredible keurig is the most discretionary. Do you need to spend 199 on the new duo . There is a difference between a global recession and u. S. Recession. Todays fund manager survey is highest Recession Risk in eight years, but u. S. Equities are the most preferred region for the next 12 months there is a believer that because the rates are going down, it has to be recession, and yet i look at it like this. I say, what kind of moron who has any money if theyre in germany, if theyre in spain, in italy, in japan, in china, they can somehow get the money out, who wouldnt buy we all think the dollar is going up we all think our rates are going down who wouldnt buy our bonds are you arguing that a global recession, if in fact were headed there, is going to result in a meltup for u. S. Equities . Just people trying to get to the nearest bomb shelter, essentially . Somehow theyre not no way to say that lower rates will help equities. They help gold and thats because itdoesnt cost any you have low rates like this, gold is a natural and anytime rates have come down like this, people are supposed to buy gold. I think everyone is very confused theyre stuck. If they listen to the companies, with the exception of a couple of international companies, the numbers have been really good. You have to believe that somehow were going to be importing that decline. You look at the german economy, thats very sensitive to china china never let us sell much there. A lot of it was ag it is not like they sat there and bought all of our oil equipment. They just dont do it. So im stuck again i see ill give you a great example. Larry culp, the ceo of general electric, he buys 3 million worth of stock now hes bought 10 million. Hes got another guy on the board who 500,000, and what do i hear instead . You got to remember the summer of 2007, when everybody was worried that we thought that housing was too high yeah. It can turn on a dime housingi inwas hot until it was cold it is possible that we could be in recession because everyone thinks that it is so bad that we should be in recession i wish that i heard a company that felt that things were rolling over i see Something Like International Paper yields five. I think, wow, maybe paper is rolling over chemicals have rolled over basic blocks that didnt even roll over in 1987. But i wish i heard the banks say that things were bad you say, the banks didnt say anything bad in 2007 everyone keeps analogizing 2007. The consumer was totally in hoch in 2007. People say student loan. Take student loan off the table. The Balance Sheets are very good i search for real reasons why we could go in recession, but when i hear when i say that, what people say is doesnt he realize that you dont have any real signals. Thats not the case. We would be looking for things like a sudden spike in jobless claims. Yes, i would be like, hey, look out there are people laying people off. Look, i was looking at a reit. It is a it is pei theyre very bullish big new mall opening in center city, philadelphia throughout the questions were how many scores are closing . The big achilles heel is brick and mortar retail. Thats doing quite badly if you look at the reits catering to brick and mortar, those are bad. Is it jcpenney, is it lowes saying theyre going to lay off a lot of people. I dont want to be cavalier, but those people have jobs now jcpenney all at once, no that would be terrible. There has been work done on containers, riding the rails now, people arguing that retailers are happy to let inventory levels come down, theyre not counting on a strong consumer to get us through back to school or through the holidays. Thats what pvh has been saying, the most accurate indicator, thats managed rico but then i say, listen, theyre levered to macys what is macys doing at 7. 7 yield. Isnt that a sign of something i was seeing jeff gannett, he thinks business is good and he paid down a lot of debt. So then someone would say to me, go back and forth in your head, dont you realize macys is doing badly. I say, yeah, but it is doing well but dont you realize it is terrible i say, it is not terrible. There is no winning in this. People keep saying, wait until walmart rolls over wait until target rolls over walmart is accelerating. Target is having a great quarter. I want to it is lets i debated this this morning. I debated coming on the show and saying, you know what, carl, everything i think is good is really bad thats like 1984, war is peace and peace is war right that would be glib we dont want to be glib here. We want to be were stuck with it is empirical things arent as bad as the bonds are indicated empiric empirical. We have news in the media space, cbs and viacom in the final stages of negotiating this deal that would reunite sumner red stones media empire kc viacom at nearly 12 billion with an enterprise value of more than 20 billion cbs would Exchange Shares for each viacom class b. Would be nice to have this settled. My trust owns viacom. We have been might haffed, all stock has done is go down a couple of points it has been intertwined on this merger we dont have the old cheerleader at the helm of cbs need i say more . Thats true viacom buyback doing a great job. Obscured by this it is incredible how good his over the top is doing, they have the first advertising bump in a long time. This is a space that is just i wonder, broadly, what the environment is doing, you think, to sentiment on m a, International Getting regulatory approval, uncertainty over pricing, right it is bad i pick up the New York Times, they have a lead story, the business section, basically says that everybody in the valley is i read that, like, holy cow this is the New York Times but one thing is clear, if i were one of those companies, i would be afraid to buy somebody. If i was a faang company, i would be afraid because of concentration. Those are natural buyers, great Balance Sheets alphabet, they would be a natural buyer. I think theyre feeling i better not buy it. It is time to make it so that were not on the radar screen. So theyre the ones that i think are most vulnerable to not being able to take advantage. Thats called being defensive. Well talk later this morning about verizon finally selling tumbler. I have an oath, a tshirt, and a bunch of oath stuff on my kitchen table. I never took it away from you have Little Things that charge your batteries that i got from a previous ceo of oath i think they got rid of oath tumbler. Wow. We dont talk about that that was one of the worst buys ever after acquiring it as part of its purchase of yahoo two years ago, the buyers acquired automatic, word press. Com, reports verizon is selling it for a nominal amount the sum has not been disclosed tumbler once fetched a price of more than a billion dollars from yahoo in 2013 when we spoke to yahoo s chief of the time, marissa mayer, who defended that price tag, the day the deal was announced a lot of different analyses, looking at things like dcf, discount ebitda, other transacts and a lot of different methodolometho methodologies and all supported this valuation. That was the key line in that interview we did with her, comparing it to other recent purchases and arguing it was in li line. It was ill advised. Tim armstrong put them all together i remember a great meeting i had with tim, he was talking about the tumbler and yahoo and nothing. He didnt even last a few days the new ceo was named at verizon the day i saw tim and he didnt want this. So hes gone spent a lot of money on this. Yes, they people arguing ma the most misguided purchases for the price. A lot of hope that verizon would challenge facebook, would challenge google, they challenge anybody. The new ceo just didnt care for it and tumblr was bought by the guys from word press theyre smart guys im surprised that verizon didnt say, look, well pay you this to take tumblr, but faang and anything that touches online now you got other old line telecom trying to compete with netflix, which just got its third point investor stake boosted by 25 got to give loeb kudos for campbells, campbells was good. Campbells is starting to get more relevant. And so that was good i dont think hes going to pressure reed. Reed is doing a good job just that they spent an awful lot of money on content. Wow. This is a weird moment i just i want to hate the market i got to find stocks within that i hate other than 3m arent you are you finding it harder to find stories you love no. Not as they come down. Not as they come down. I think there is a lot of companies in the drug sector that that i want to come down more ive been looking for novartis to come down in the food sector, kraft heinz, i come back to this here maybe it is top of mind, keurig dr. Pepper when a great story they are. Theyre value names, defensive names. Yes defensive names. For were not an industrial power. We dont really have im not waiting for the industrials to come down. Honeywell is doing well. United technology is doing okay. If boeing could make boeing is a weak link in the system it is not like china if china plays with boeing, it would be, like, wow, we love these guys thats why the max is important here the max is so important to gdp. Came around at the wrong time. Yes that was thats the achilles heel of the u. S. Economy now. Certainly affecting gdp were going to get cramers mad dash and count down to the opening bell, another important session today. The shakeup at yum and u. P. S. , high profile executive shuffling over there take another look at the premarket as well keep our eye on the tenyear, the 30year, the spreads, moresquawk on th street from post nine in a minute here i go again on my own goin down the only road ive ever known like a drifter i was born to walk alone . Barb you left me hangin on the high harmony there. If you ride, you get it. Geico motorcycle. 15 minutes could save you 15 or more. 12 minutes to the opening bell cramers mad dash, watching apple today. Great piece out of web bush, talking about how apple is probably going to absorb this next round, the 10 . It is going to cost 50 to 55 cents. Thats not a minor amount. Thats a big amount. But they say theyre moving production, going to try to move to india, vietnam, and going to solve the problem. This is a flashpoint for Peter Navarro. Peter navarro, my contend, the most powerful person in the white house when it comes to trade, why dont these guys make everything here . Logistically thats very hard. I defend tim cook for what hes trying to do which is do both make a lot of stuff here, make a lot of stuff there but this piece just says, listen, cook is listening to president. And i wish the president s people would read this piece i think they would say, cook is not a bad actor. Hes doing what is necessary in order to mitigate too much exposure to china. At the same time, a very powerful piece from Credit Suisse saying china iphone shipments bounced back in july this is the existential crisis i have arent they supposed to be plummeting isnt this supposed to be the patriotic phone that is winning out . Huawei, no i think anyone who is trying to say that am should be going down should read this piece too. Yeah. Nikkeis had a piece out this morning, 33 Chinese Companies have told exchanges were going to start moving production out of the country 70 shoes, vietnam they dont have the correct infrastructure theyre resourceful people they had tremendous tensions with china they did have a war with china after we left vietnam. But i do also say that theyre just not ready and nobody is trying to help them they have to be ingenious themselves there is a rush to vietnam that is incredible going on, which, again, is why i thought it was interesting, india, india. China, how much has cook wanted to crack india we all want to crack india. Tough market in different ways. Only way to crack it is yum well talk about yum. Well talk about yum in a minute Apple Holding 200 here the opening bell, one more look at futures on this tuesday dont go away. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. Healthier brain. Better life. Futures coming off the lows of the session here. Bunch of movers ahead to get to before the opening bell, including yum and u. P. S. Watching hong kong, of course. The pboc and yuan fix this morning. Got you covered. Dont go anywhere. Youre watching this squawk on the street. Opening bell in four minutes we havent really sort of recapped what happened in argentina yesterday. But the second worst klideclineo any stock market. There are a lot of companies that have been excusing argentina, they have been south america, x, argentina, south america, x, venezuela. At some point south america, lets call it uruguay. There are really some cavalier companies who dont realize how terrible that continent is and, by the way, brazil is probably the best once really, people are envious of argentinas economy. They have more Natural Resources than almost any country in the world. Their government has completely failed their people. In a different way from venezuela. A failed it is it is probably the failed richest city on earth i think Morgan Stanley today says the peso could fall another 20 . I think thats true it reminds me of the turkish meltdown in the 90s, where i was looking at turkish stocks. I said, boy, these things never go down. They were like a ten for one reverse. The turkish lira plummeted so much people have to be careful, stay away from the markets. We have people come on the air and say, you know what, emerging markets are great. I think you should take a look, you like the emerging markets, you should buy msc, the old Morgan Stanley index henry fernandezs company, the company that keeps the indices, that msci is the way to play if you want if you really want to be in an emerging markets, why not be in a company that is a the picks and shovels and that is msci, it is an 18 billion company, i think it is worth for mfar more record highs every day. You look at s p 500 from 2000 to 3,000. Henry fernandez, so understanding, he rang the bell, like, well, who is that guy . Who is that guy . That guy is one of the smartest people ive ever met by the way, one of the most charitable. It is difficult to play individual countries singapore, for example, cut their outlook to flat to one for the year. We were looking for much more there is an example of what i say, wow, i thought they were doing well and theyre doing badly. I keep waiting for that to happen here. Everybody says it is going to happen it has not happened yet. More trade reliant than the u. S. Economy our economy one of the things that look i thought the president was going to slap tariffs on germany, they wont take our cars. Without a high tariff. We always have been pathetic as an exporter. Our currency is so strong. Yeah. A big head wind to fight you mentioned gold, jim. Six year high, 1529. Buy barrack just buy them. Theyre inexpensive. Niko eagle is doing well that symbol, dont think aem, theyre not done going higher. They get good companies. A lot of chart work being done on gold and silver too. Opening bell here in the s p 500, cnbc real time exchange, at the big board, as jim said, it is keurig, dr. Pepper celebra celebrating the first Year Anniversary at the nasdaq. I think that keurig dr. Pepper is very inexpensive thats bob gan bob was the manager at pinnacle foods. Has done a remarkable job. One in every five houses, now they have this duo on sale today for amazon, it is the first coffee pot keurig. For those of us who miss the coffee pot, he has answered you. Hes revitalized a lot of old brands including some of the theyre doing well, carbonated soda they do have people forget, canada dry is doing canada dry, i thought great white north, canada dry, what a job that this man has done a lot of people felt there was no more upside to keurig one in every five homes. Thats a lot and i dont want to put words in his mouth, but one in every four. You talked to him last night on mad. We have sound cued up from jims conversation last night. Take a listen. I thought we did and we dont. Are they doing, though, a case volume growth or pricing growth as well as coke and pepsi . Yes i think theyre doing better in some places theyre gaining share. They lost fiji thats a re good move. Thats a very theyre in this bai, core, thats a drink people like i think the main thing is that everyone thought that keurig was a keurig itself, the coffee pot, was a dead brand. Millennials, listen up, he will very shortly have biodegradable single cup that has been the single pot has been the bane of the millennials existence. They love it they think it is bad for the environment. Hes hurt. We mentioned yum and u. P. S. Earlier, jim yum new ceo, effective january, when creed steps down. And u. P. S. , new cfo, richard parrot has come on every quarter for the past few years. They bring in a very smart gentleman from pepsico i will tell you, i spoke yesterday with david gibbs and greg creed, outgoing ceo, hell stay as chairman at the end of the year greg has done a fantastic job. He feels it is time. This is one of those things where it is a couple of 60yearolds talking about their boats, and their gardens and im not ready, but he is i think that this fellow is an old hand. I think this will be a smooth transition the only problem he has was that creed had the best quarter of that whole industry. How do you top that quarter . They got a huge amount of momentum i think that gibbs is going to do a terrific job. I am surprised that u. P. S. Is bringing all these outsiders thats been a very cloistered company. But thats not the case anymore. If you notice, theyre doing look at their stock. Look at what abbvie has done with their stock versus fedex. I happen to think the fedex is run by fred smith is driven. U. P. S. Has the mojo. Mojo per share ge will lead this morning on the heels of that stock purchase by larry culp. Larry believes in a piece yesterday by wolf, thats a brokerage firm, which did lay out a positive story, disagreement with tusas regular email that you get i like steve tusa very much. Hes wearing me down hes wearing me down with his negativity and i want to call larry culp and say what are you wasting 10 million for, you idiot dont you see then i realize larry culp is the man who has done a lot of great things and hes very smart. This is a great existential conen druco conundrum. Larry is smart hes good. And i dont know i dont think hes i never see to be this misdirected but maybe hes a hopeless optimist. Not a small purchase. 10 million. We remember purchases by immelt prior to his departure. I said the word you dont like to hear. Twilio. I guess hell sell that. I dont want to i dont want to be i dont want to get too personal hes a nice man. Got it. I was going to move on to this cloud that Advance Auto Parts is putting around all the retail. That was not that was a suboptimal situation i was somewhat surprised we got good numbers from autozone and terrific turn around i am not going to give up on that space i have a 13yearold car and i got a call that it has an air bag problem. The cars, i mention it not because but 13yearold car, thats an aap car. A lot of companies are they have been benefiting from what i regard as being the aging fleet. Which is pretty incredible can you believe apple is up this much. Apple is one of the leading are they doing badly . Im not so sure about that. Clearly some uncertainties the watch is growing 50 . Im going to go back to the old i got a bright line i feel like i got to go back to it because of how bad apple is doing. Theyre only up 50 . By the way, this was invented by tim cook thats why you know it is no good. Jobs didnt do it what am i doing why do i rely on it so much . Why do i talk into it . Why do i get my the answer is i must be too optimistic. Speaking of optimism, we got initiation over at sun trust of some of the home builders. A lot of them will be in the green this morning. Well, thats another industry that benefits tremendously from lower rates, provided that the housing is starter housing and thats horton. Here is something interesting. Horton added 1 from the 52week high i live in a world where horten is doing amazing, Single Family homes, starter homes, thats supposed to be a very good sign for the economy. So how do we rationalize this, and what we have we cant fall back on just saying that as low rates get as low rates get lower, it is bad for everyone it is great for the home owning industry well see a surge of buys. We hope so. 5 and 12. Nfib today, Small Business survey, asks people in the survey, if rates dropped 100 basis points, would that change your capex plans, the percent who said yes, 12 a lot of companies dont want to expand because they cant find help. If things are as bad as people some people say, there will be a lot of help coming Marvin Ellison said hell lay off thousands at lowes. Jcpenney is in trouble there are people that are going to come from that industry, too many people, there is too many lawyers, there is too many bankers. And i dont know where those people are necessarily going get jobs that is an achilles heel but it hasnt seemed to hurt the bankers so far it is our hampton price is down a little bit for houses. Yes. But the houses are still very expensive. It is not like theyre collapsing in price like they did. They collapsed in price 2007 to 2009 prices were cut by a third some places by a half. That hasnt happened yet clearly not we think there will be something that occurs maybe somebody goes bust, but horton is the economy Domestic Company that makes the most homes thats the economy lennar is the economy. Ive been trying to get lennar to come on it is almost at the 52 week high why do the companies not matter in the equation . I dont know i think theyre very important toll has come back toll is up for the year. These companies are doing very well 10 of our economy is housing. And frankly it punches above its own weight one thing that is i mentioned wells. It has become like the old national lampoon, which is, you know, is franco still dead where is the ceo of wells fargo . Where is the ceo how many this is like intel when they finally got swann. Does nobody want that . Ill take it i will run wells dont think that last year already going to be fed chair. Nobody is running wells now why cant i run wells as well i dont know, carl wells is a big yield is 4. 4 doesnt have they got to pick a ceo soon it has been a drawnout succession process. Maybe somebody from another industry, like greg creed. Here is bamle on the 210 inversion, if it happens looking at ten inversions back to the 1950s s p topped out within about three months, six times. And 11 to 22 months the other four if it does invert, does your view change . That is my biggest worry, but i keep thinking that jay powell can read the tea leaves too. What happens if jay powell, who already ran to get it uninverted, what happens if he keeps cutting . What is why doesnt the fed should go back and start selling its bond i once posited to rubin, why didnt we do a giant tender for all the bonds by he said it cant happen, cant do it. I sit here and look and say, why doesnt every i know that european governments are constrained by eu laws but germany could do a very big bond to ignite their economy, but they wont do it because they remember 21 to 23, theyre gripped by the republic. What is keeping us from doing longstanding fears of inflation, hyperinflation. Thats important to point out. Is the case building for a 50 basis point cut or an intermeeting cut thats october of 2008 when you find out there is something very wrong, longterm capital. Please, jay, if there is something wrong and you know about it, lets take some action i havent you have to have your ear to the ground now a lot of people the new york fed, i believe, knew how bad lateterm capital was, didnt know how bad the exposure was. If there is someone large who is short treasuries, will you please stand up, please stand up that kind of thing because otherwise, i think we can do okay here if powell slowly cuts, doesnt panic, no reason why he should panic president has been given the pass for 48 hours, right do you ever stay youve dialed something by mistake, do you ever continue to watch it, unless it is the movie shaw shank redemption. Watching by mistake ive not watched a lot of sometimes i put on erin burnett because i miss her but i find what i want the comcast system, put on cramer, it doesnt put on donnie i love donnie. I love donnie. I think there is a lot of tv watching remember when your mom would tell you cant watch tv, you had to do your homework. I say that these days do you . Yes i used to tell my kids, no using google i didnt know what google was at the time i heard you werent allowed to use it. We had a nice turn around at the open lets get to bob pisani. It started off usual Consumer Staples, utilities, defensive sectors stronger and more cyclical names like industrials weaker but we turned around, caterpillar gone positive. Look at the major, im putting up the major cyclical sectors here energy weak, retail still weak, semis down at the open they flipped positive. Banks down at the open theyre positive Consumer Staples were positive at the open again. This is very defensive every day as we take a look. The real action, frankly, has been overseas in asia. Another town day for the markets on the hang seng here. Were down the hang seng, hong kong market, were down 9 this month so were at the lowest level since january. It is starting to affect some of the smaller developing markets, malaysia, thailand, philippines, down 4 or 5 for the month overall. Awful lot of political turmoil in around just important for everyone to be aware of it not just in hong kong, of course, hong kong air, but in italy, as well as in the uk, with the Brexit Issues argentina as well. This all adds up a lot of this is due to popular fights going on from populist politicians, hong kong, different issue, of course but it all puts into a very potent stew, makes it very difficult to assign numbers for earnings thats what the stock market is. I think importantly evercore had an important point, global gdp growth, estimated to be about 3 but china is the incremental ad for the world. They add china adds 1 percentage point to Global Growth it is about onethird, one percentage point of that 3. 2 is china. If the china numbers come down, Global Growth numbers come down. The point is china is really sort of one of the main engines of Global Economic growth. If that starts to come down, we have a problem we have seen some individual stocks trading in hong kong that have just had frankly horrible months this is macau gaming hong kong, big Property Developers in hong kong, down 12, the hang seng bank, big bank, they trade they deal mostly exclusively in hong kong. Finally just quickly, cafe pacific, their own employees may be involved in demonstrations, thats near a ten year low back to you. Thank you very much we are getting some news this morning regarding potential u. S. China trade talks. Lets get to eamon javers. Duelling statements on tariffs and the trade war. This just in from the u. S. Trade representatives office, a new statement from that office on china, theyre saying the United States trade representative today is announcing the next steps in the process of imposing an additional tariff of 10 on approximately 300 billion of chinese imports. Im reading it here with you live but theyre referring back to the may 17th announcement where they published a list of products imported from china that would be potentially subject to additional 10 tariff theyre confirming this new tariff will go into effect on september 1 as announced by the president. On august 1. Certain products being removed from the tariff list, the ustr says barks says, and will not face additional tariffs of 10 . Also going on to say further as part of the Public Comment period it was determined that the tariff should be delayed to december 15th for certain articles products in this group include, for example, cell phones, laptop computers, video game consoelz, certain toys, computer monitors and certain items of footwear and clothing ustr going on to say they intend to conduct an exclusion process for products subject to this additional tariff. Today on the website, theyre going to publish Additional Details and lists of the tariff lines affected by the announcement the news in this ustr announcement were just getting now is that theyre delaying until december 15th the tariff of 10 for certain articles until that december 15th date. That is an important one to bear in mind. The Chinese Foreign ministry also issuing a statement of its own, based on a phone call, that theyre reporting that happened between lee hu and also ambassador lighthizer and trade minister mnuchin saying the chinese side made solid representations on the issue of tariffs on chinese exports to the United States on september 1. Not clear what those solid representations are that the chinese side has been making to the u. S. Side. Well press for mo detare detain that they agreed to call again in the next two weeks the chinese statement referring to additional talks before that september 1st deadline for the new tariffs to go into place we had been expecting that the chinese side and the u. S. Side would meet in washington after september 1st. At some point in Early September, the u. S. Side is planning for that to happen. We dont have any finalization as far as Senior Administration officials know from the chinese side that there is a meeting in Early September, but theyre assuming that that meeting is going on now the chinese are putting out a statement saying there will be additional calls between now and september 1, the u. S. Side saying that on september 1 those tariffs will go into effect, some will be delayed until december 15th and expectation of a meeting after that back over to you. Market responding to all of that, dow up with quick 300 points. I asked for apple to be excluded my wish was their command. Can we guess here that in return for talks we delayed in tariffs, take some tension out of the room . Yeah. This is the bears said this would not happen the bears repeated over and over again these talks were blown up. It is obvious if youre delaying these talks to december for some of these products that is a huge, huge win for the talks themselves it is lighthizer, not just mnuchin, that is very important. And this is the ill say it, you know what this is . I think this is the president saying i dont want the stock market down anymore. And i this is dramatic. Were going to forget about the inverted yield curve a little. Were going to say that maybe this is going to bring back some commerce if youre short apple, and shorting it when i said i wish they excluded it, what do you do they excluded it what do you do say now i hate it for another reason i think the watch is bad i got a call ill wait. You actually do have a call right now on your apple watch. It is someone i should have taken. But, look, this is exactly what the bears Worst Nightmare is, they can say, there is an inverted yield curve and come back and say what do i do . The dow is up 400. You just wait. What good is that to wait . What good is it with apple up 9 and well see how long the inversion watch lasts as the ten year is now back above 168 the president reads not only watches a lot of fox news, sometimes gets to watch other things, he also watches the dow. He didnt like what is happening. That i know there are a lot of people who think thats ridiculous it is not true he watches and i think that this is a response to the fact that maybe hes concerned that the world might be slowing and he doesnt necessarily want that to happen. Remember, he also likes to b remember, he also likes to be liked. Those of us who have worked with him know that he thinks that is important thais a sin . I dont know i was so look, tim cook has done everything the administration wants, and i was shocked when they didnt exclude him but now they have. Some are going to argue the u. S. Blink here. Is that unfair we dont know what the chinese are doing. We dont know what they have given. We dont get the whole side. I care i want to hear what Peter Navarro has to say since peter is really doing this look at the vix collapse wow. Youve got to go to uber and lyft to get something bad. Theres still pockets. Thats fine remember, they are selling great stuff at 8 that cost them 10 look at this market. I want to be so negative, carl, but i would be so wrong. It also come in sides with caterpillar threemonth rolling sales for july. They are horrible. Not as bad as you would have thought. My travel here is the update this is bizarro world. We like them ugly. We put venus demilo, all were saying people are so negative they want arenas on venus, wings. Youre not calling all clear, just a phone call. No. Absolutely its a phone call. What matters is what is exempt they have said over and over again that apple would not be exempt apple is often the key to this market i think that they blinked for apple. I dont know if they blinked for china. This is very fortuitous for china because they have got the problems in hong kong we havent talked enough about. Did somebody blink how about if everybody blinked. It serum seems that way your point about apple 208 takes you back to the beginning of the month. Were going to watch the rally happen in a hurry. Dow up 330, squawk on the street continues after at short break. Dont go away. Got a rally in progress. Dow up almost 400 as u. S. Trade reply moments ago said they will delay some tariffs until december 15th for products like cell phones, laptop computers, toys, even items of footwear and clothing. They went for apple, some of themakers, xbox. Im not sure where xbox is made. Ill tell you this, i think the administration would say, hey, listen, fed, this is less inflationary less inflation, why dont you take advantage of it the other side is people say what did the chinese give the United States. All this is a delay. Its the gift to tim cook who i think has presented a case that is quite good to the president thats why that stock is deservedly up 11 because its got a lot more time. The people who were betting against this market on the yield curve, they are going to be in hiding today and thats why its so hard to just say i hate the market the first 20 minutes here was an existential crisis for me. I wanted to hate the market and hate business but i couldnt i went up there and said, listen, i wish they would give apple a break. No, he didnt watch that, because it was in the works before that. This is a major change and a gift to these companies but its still going to happen. But powell should make his end of the bargain of thats what the administration is thinking the inflation you were worried about, the tariffs, thats off give us cuts give us cuts from the point of view of the stock market, this is an amazing rally in perhaps the midst of the most gloomy moments. It was getting dark. It was getting dark. The spread came win 3 1 2 basis points of inverting. I think this is a very important move i do not think the chinese really gave the United States anything has not been able to pull out of china as fast as they look, that is a great bellwether. Apple, a flash point some of the president s people saying as i said, what is tim cook doing the answer is tim cook just got a reprieve if july sales are as good, whats a bear. Here we go when you see a bar code thats zebra, novocure, a friend of mine got a few more users because of a drug they have for brain cancer. Well see you at 6 00 apple up more than 5 and were up 400 dont go away. Complicated, you know . Feels too well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade good Tuesday Morning welcome back to squawk on the street. Im cart quintanilla its been an eventful hour of trade. Watching the spread, ust comes out delaying tariffs until december and with that the dow up a quick 400. A lot of optimism to go along with the move in the market. Our roadmap stars with stocks rallying with that move from the white house. Well discuss that next. Financials in focus bank stocks rallying with the tape yield is climbing higher. The attack on agriculture we talked to the ceo of Scotts Miraclegro on how trade tensions are affecting that business all right so eamon javers brought us this moments ago, concurring headlines out of china a little more context now. Here is the key statement that came out a few minutes ago. This is the announcement that moved the narcotics in the last hachl hour certain products are removed from the increase in tariffs the president is talking about they are saying thats done on health, safety, National Security and other factors those products, which they are not listing here will not face additional tariffs of 10 . At some point were going to need more detail on which products and which Companies Impacted by the decision not to impose tariffs of 10 . They are also saying further as part of their ongoing Public Comment and hearing process it was determined, passive voice, that the tariff should be delayed to december 15th for certain articles products in this group include, for example, cell phones, laptop, video games, certain toys, computer monitors and certain items of footwear and clothing again, not a whole lot of detail owner those broad categories were going to have to wait and see what ustr says in terms of which companies are impacted it looks like a significant walkback from the United States side, pushing some back to december 15th. Some of those categories are going to be eliminated from the 10 tariff all together. That put together is what has the market rallying today along with the statement from the Chinese Ministry of commerce in which they are saying they did have an additional phone call with Robert Lighthizer and Steven Mnuchin on the u. S. Side and continue to have calls over two weeks. Whats clear the meeting were expecting in Early September, expecting the chinese side to physically come here ive asked a couple of sources whether that meeting is replaced by phone calls or that meeting we can expect to happen in Early September as well. Well let you know as soon as we have the detailston that, carl. Theres also been there rum blinks on capitol hill about whether congress was ready to take some action if there wasnt moves coming from the executive branch. Sure. What are you feeling about this unification of will happening within government right now, eamon well, the politics of this are really sensitive remember how they designed the tariffs. They deliberately went enthusiastic Companies Buy got hit by tariffs first and the stuff people buy would be in the last tranche this is the last tromplg thats why its politically sensitive leading up to the Christmas Shopping season, you would see prices on a range of goods, including things listed here, shoes, software, laptops, cell phones, all the stuff people might buy for christmas, that could come into play just at the end of this year and just going into the 2020 election season a lot of politicians were nervous about that and now were seeing the administration here taking some efforts to delay that and push back what the president had announced. Eamon, thank you very much for breaking that news for us. Joining us to discuss the Market Impact jpmorgan Asset Management Global Market strategist jack manly and Global Advisers cofounder gentlemen, good to see you here today. Lets set the scene on delaying 10 tariffs on 300 million worth of goods at least some of those, though we have yet to learn exactly what gets broken out, why such exuberance or optimism. Business as usual with trade negotiations we have seen that ratcheting up and dialing back down is standard operating when it comes to these negotiations. We got a little bit of news. I dont think its long lived. I would not be surprised if we see more escalation in the next couple months or weeks. You wouldnt be basing your investing decisions right now on this bit of news coming out from the trade representative. Not a whole lot my base case still as we move into the election season is that we do start to see more Permanent Progress being made but i think that todays news is just one of many instances of things dialing up and dialing back down again. Tom, set the scene. Well, its a difficult time for investors, right, because tweets move markets more than wars and i think its very confusing, and i think at the moment its easy to build a bear case. Look at recession, bond yields but the markets have panicked, look at aii sentiments extreme readings, vix term structure inverted, a 3 decline these are massive buy signals in the past so unless something is completely different this time, as difficult as it sounds, its a huge buying opportunity right now. So your second half monster rally thesis is in tact. Yes. And bolstered by todays action some will argue this is a suckers rally, todays rally. All rallies start with Short Covering it shows you how tilted sentiment is we have just a mild shift in the trade tensions and we get a huge rally in markets it tells you what kind of move to expect if trade tensions ease im not saying its happening in the next week. Look, the u. S. Economy, huge economy, u. S. Consumers are 40 of Global Wealth it all depends how the u. S. Consumer does and i think they are fine. Weve seen a lot of fear the last few days, driving the moves on the market. Are investors just looking for any Silver Lining they can find to beoptimistic . I think they are both looking for any cracks in the armor to get scared about and any silver line to get excited about. We are 10 years into the bull market, 10 years into the expansion, both record highs for the economy, the stock market, theres a lot of anxiety out there right now. How do you think the fact that were sitting on the edge of an inverted yield curve plays into that. I dont think the yield curve means too much maybe im oversimplifying here were living at the tail end of a tenyear period, unprecedented unorthodox Monetary Policy not only here but the entire developed world. If nothing about todays bond market is the same as it was 10 years ago, why can we think of the yield curve in the same way. For those who hedged in recent weeks with gold, silver, treasuries, do you think they should take that hedge completely off half off i think the hedges that are out this are valid whether its gold or bitcoin because we have 40 of bonds trading at negative rates. Clearly the world is not thinking about interest anymore, they are thinking about capital gain you know, i think all of our clients think this bull market is late cycle on its last legs it kind of reminds me of my dad. When he was 50 he told me he was old. Hes 87, still golfs every day, drives, and still says hes old. Hes going to be old for a long time, i guess. I think this bull market is mid cycle. I think everybody who thinks a tenyear bull market is the end are the same people who mich faded this market in 1992. Im pretty sure you should clip this and send it to your dad and make sure he knows you have compared him to the longest bull market ever when youre thinking about the Global Market and investing opportunities, where are you finding value right now, jack . Shortterm International Landscape challenged as long as tariff uncertainty remains perhaps pockets of opportunities in the european consumer or parts of Southeast Asia have gotten really beaten up. I think longterm like what i think korea is probably undervalued at the moment. I think there could be some potential there. I think china is a little tricky but valuations are cheap right now. If youre a longerterm investor, i think that story continues to make sense. Shortterm i am focused a little more domestically until trade tensions settle. Does this give powell even more clearance for further cuts, more aggressive cuts you know, i think thats one of the things investors have to keep in mind Central Banks are still the most important entities out there and the fed is the most powerful central bank in the world. I dont think the fed is out of bullets, ammunition or out of credibility so yes its a huge deal if the fed decides Market Conditions are tightening and they are, they could do an even bigger move and conventional tools. I think its a mistake to fight the fed. The Consumer Price index came in at. 3 , exactly where it was expected does that change at all your calculus i mean, i think were probably in a weaker inflation nutraceutic environment because of what the tenyear is telling us i think people will mix falling inflation with cyclical downturn the yield curve steepening, leading for 10 months. Tells us inventory correction, cyclical slowdown is continuing and we should see stronger growth next year. All right thank you very much. Thomas, jack, great to see you both. Thank you. When we come back, banks obviously rebounding with the Broader Market after yesterdays selloff. Ceo of kbw will join us in a few moments to talk about where banks go from here a lot more on the market rally which came in the last 30 minutes or so as ustr delayed tariffs to december. Were back in a minute were pretty different. Somos muy diferentes. Muy diferentes. vo everyone in your family is different. Thats why verizon now offers more plans to mix and match so everyone gets what they need without paying for things they dont. New plans start at just 35. The network more people rely on gives you more. We believe in education built for all people. , [woman] snhu was the best experience of my life. [man] without snhu, i wouldnt be the leader i am today. [woman] i graduated high school 19 years ago. I still finished. [man] in the military, you feel that sense of accomplishment. Thats what snhu is. You will march from this arena and say to the world. I did it. [woman] you did it. I love you. [graduate] i love you too. To the wait did frowe just winners. Prouders everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you preorder a new samsung note. Click, call or visit a store today. Bank stocks are rallying along with Broader Market having a rough moment as you know with falling yields dragging the sector lower wi will federer frost joins us. The move weve seen in yields this month has been a worst Case Scenario for banks, lower and flatter. Weve had a rate cut, 30year collapse from 250 to 210, and see the part of the curve invert all in a matter of week ahead of this latest turnaround this morning. A reminder bangs like high rates because it gives them room to arbitrage between lenders and savers and a steeper cut here the banks net exposure to net interest income, though wells fargo is, in fact, the best performer this month despite having a high exposure and none of the banks escape the selling even if they have a low exposure also worth reminding relatively low direct exposure to china, if it is indeed the trade war that has sparked the move in yields and also a reminder of how cheap the bank stocks are currently trading on 8. 7 times or 53 of the s p 500 average. That compares to historical average of 10. 9 times. Well watch that closely. Joining us president and ceo of stiefel company. Wish i could be down there. Give usa take on the headlines in the last 30 minutes. What does this all mean for the banks specific first of all, what i think has happened is an incredible amount of bad news has already been baked into Securities Prices i think you see it nowhere more than the bank stocks and financials ive been watching your show, been watching the market since really the middle part of last year and especially this year. Bank stocks have been underperforming because they are basically the centerpiece of all the worries. But the reality is the performance of the banks has been better. If we dont get the worst Case Scenario, i think theres a lot of fuel here for outperformance in a rally. Worse Case Scenario meaning what meaning we have baked in 2 25 point basis cuts our view is there still will be continued growth in the economy and we dont hit a recession around the corner. If that doesnt happen, there are a lot of positives to where these stocks are right now and where the industry is right now. Imean, i was looking at the forward pe ratio is the lowest its been in 15 years. As of this morning on the open and close last night, 16 of the 24 banks in the index had a dividend yield that was 200 the u. S. Treasury tenyear also, banks are still buying back a lot of stock. Remember, they buy back stock in dollars not number of shares, so their dollars have been going longer so they are going to have better earnings per Share Performance because of the prices at which they have been able to buy their own shares the Balance Sheets are the strongest they have been in 80 years. Ill even throw in two, two weeks ago 100 Bank Managements at a conference in new york city pretty much to a man and to a woman, the ceos told us that the current outlook is pretty good they are not seeing all the trouble thats been worrying the big headlines. So youre painting a really rosie picture there. If you look at the warning signs, there are lower rates, a late economic cycle. You just said if the recession doesnt happen at this point theres global macro at play here and there are a lot of investors who think these earnings estimates are too high. Is there still an upside scenario for the banks even if all of those warning signs are true yes, there is, i believe. Look, my firm kbw has been cutting Bank Earnings estimates for the last year. So we used to think earnings per share growth would be 11 . Thats when we thought rates may be going higher. Now were looking for 4 i think its a question of earnings per share growth, not is the Banking Industry going to hit turmoil like it was in the last crisis. The industry is in too good a shape and in different shape than where it was, so i think what were talking about is a matter of earnings per share growth, meanwhile relative to historical averages, bank stocks are 25 to 30 cheaper than where they would be typically on an actual basis and on a relative basis. I heard earlier it was mentioned 53 of the s p 500 by one measure, thats a historic low, yet the industry is very close to record profitability. Theres not on the horizon weve seen yet. Ft had a piece this week about the number of layoffs at investment banks hitting 30,000. A lot of that is european of whats the likelihood from offensive stance u. S. Banks start cutting workforce in some significant numbers . I think the drive for better efficiency is incredible right now. Technology and digital attributes and banking are really changing the Banking Industry like they are changing most industries. Theres always pressure to cut expenses, especially if we think its a 4 earnings per share Growth Market banks are going to do everything they can to squeeze out growth they are always focused on efficiency my instincts are youre going to see head count in the industry continue to go lower youre also going to see very big shifts in market share you mentioned the european banks. The european banks with negative Interest Rates are in a much more difficult environment than the american banks, and they have been losing share to the american banks i think its likely to continue until they can steady their profitability outlook. All right, tom. Good insight especially given the freshness of the news today. Well see you soon thanks. Thank you. Lets go to josh lipton in San Francisco with a look at tech names moving on this optimistic trade news. Hi, josh. So contessa, the Trump Administration saying it will tla tariffs initially set to go in effect on september 1st until december 15th for certain articles including electronics check out apple rallying off that headline. The iphone maker seen as vulnerable to those potential tariffs because though it designs all its products in cupertino, austin, many assembled in china, physically putting together iphones and ipods. If such tariffs went into effect apple might have to absorb or try to pass price increases to consumers, that would potentially dent at the manned remember analyst tim cook had other levers he could pull here like moving Assembly Work out of china, into vietnam or india apple suppliers rallying, check out corning, skyworks, all moving into the green. Before a break lets check the markets, Dow Jones Industrial up almost 2 on the day. S p 500 moving higher by 1. 75 nasdaq above 2 on the day all sectors on the nasdaq except for utilities moving hhe more squawk on the street when we return. Stocks surging after United States say they will delay china tariffs on some products until december 15th. Those items include cell phones and clothing among others. Lets discuss how this affects etf market with founder emqq emerging market internet etf which has significant exposure in both china. I wanted to ask you whats your exposure in hong kong, too first of all, your reaction to the news that the trade representatives will now look at these products that 10 tariffs were supposed to go into at the beginning of the month now delayed in large part until december what does that do to the stocks in your etf . Well, any delay in the tariffs i think is a good thing. Tariffs are mathematically, a great consensus to this, tariffs are not a good thing they are a tax, essentially, on the people that consume the end product. So any delay to the tariff regime is a good idea. Id like to think its a negotiating tactic in terms of effect on emqq and the ecommerce companies, you know, were not really involved with the trade war the trade war is about agriculture products its about manufactured goods. The real story in china and emerging markets is the growth of the consumer and consumer with a smartphone in this pocket, doing everything online. Thats a secular sort of one directional thing. You have among your top 10 holdings 10 cent alibaba, jd. Com give me a sense of how their future success relies on better trade relations with the United States well, at the heart of the trade conflict is the idea that china doesnt consume enough and that manufacturers and exports too much china knows this the government has been working to rebalance economy towards consumption. To the extent that rebalancing increases consumption, i think all of those Companies Benefit this is really the story its all about the consumers emerging markets, the thing thats emerging is the people. They want more an better food, appliances china, india, wherever it is, thats the story thats really at the heart of our trade conflict what needs to happen is chinas consumers need to consume more. I think those stocks are well positioned to help them do that. How much of your etf is focused on hong kong well, 60 is china. Chinese stocks in hong kong, trade in the u. S. , and also in shanghai, but the companies we own are largely in the u. S. , ten cent tradesed in hong kong whats happening affects china and the world, but i dont think the stocks that trade in hong kong necessarily behave on the New York Stock Exchange. Do you think there are implications for the way that china handles or does not handle these ongoing protests for the companies that are in your etf i think it certainly handles oit influences the sentiment theres riots in the streets of hong kong. The situation with the hand over of hong kong back to china has always been an area with some stress involved. Right now some of that stress is boiling up its certainly important to the sentiment. I dont know that it resolves itself affects fundamentals but certainly will affect sentiment and well have to see what happens with it. Finally, where does the calculus lie now from chinas point of view. You said they have taken gloves off, they are using yuan more aggressively now what are they thinking today when they see what appears to be sensitivity on our part, the u. S. s part regarding equity prices look, tariffs ar bad idea i cant stress this enough this is a point i learned very clearly in college mathematically we had a trade scuffle with china 10 years ago regarding tires. The mathematics of it have been studied. They are a bad thing universally i think believed by most economists. Id like to think our governments threat of these tariffs is just a negotiating tactic and that eventually and hopefully soon there will be some resolution that doesnt involve tariffs. Im not saying theres not room to position our trade deals better, but tariffs are not a good idea, and im hopeful that whatever news is out thats favorable is something that will continue. Kevin, we appreciate your insights, appreciate that. Kevin carter with emqq. Dow up almost 500 points. Weve got a 2 gain here on the s p. Lets get to sue herera and get a news update this hour. Quite a morning, sue. Indeed, carl. Thank you very much. Here is whats happening hong kong airport has canceled all remaining departing flights for the second straight day after protesters took over the terminals. Officials say they do not expect arriving flights to be affected, although disease of arriving flights have already been canceled in her Weekly News Conference hong kongs chief executive carrie lam reiterated her support for police. The police have their practice to follow the police have very rigid and stringent guidelines in the use of appropriate force that requires the lowest level of force in dealing with those situations construction workers put up metal fences around Pariss Notre Dame cathedral in preparation of a led decontamination operation. The blaze melted hundreds of tons of lead in the cathedral fire and roof. Nearly 200 firefighters battling a fire on an island in athens the blaze is burning through a nature reserve in a thick pine forest where access by land is very difficult so its a very busy news day, very busy day on wall street thats the news update this hour carl, ill send it back downtown to you. Sue, well see you in a little while when we come back, ceo of Scotts Miraclegro will be back to discuss how trade tensions affected his company dow up 0. 04. Squawk on the street back in a minute hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Well, weve got a real rally after yesterdays selloff. Some positive trade news bob pisani joins us now. All it takes is the trade representative saying, hey, were going to delay tariffs on some products and we dont know which one yet. Whats progress on trade talks worth, about 500 points. You and i were commenting on this when we were going on the air. Down 50, 60 points, dow, retailer, industrials, trade related stuff all down half a percent. Im coming on the air, youre tossing to me and imd like, gee, caterpillar is up. Talking to me, caterpillar is up three minutes im talking, dow goes up 200 points while im talking no not because im talking. 350 points thats a pretty remarkable breathtaking rally here is the good news. Everybody blinked. It was a good idea for everybody to blink theres a lot of crazy stuff going on in the world. We were talking about this last week what would be the price of a second truce the barrier to doing that is very, very low its a very reasonable idea to declare a second truce who is the constituency demanding more tariffs on september 1st other than Peter Navarro, thats about it so the right decision was made here the problem is were still one tweet away from going backwards again. Theres nothing thats really, truly been resolved. In fact, the president tweeted 20 minutes august, as usual china said they would be buying big from our Great American farmers so far they have not done what they said. Maybe this will be different but kind of throwing a little bit of cold water on the optimism over this trade deal. Maybe it will be different maybe this gives time and reset. What about the other things that were driving so much fear in the marketplace. The hong kong protests and turmoil and commercial shutdown of the airport the inverted yield curve why is that all on the back burner now its not. Thats one of the reasons i think that a decision was made theres a lot of strange stuff going on in the world. Hong kong, weve got italy, got brexit, got argentina. You put this all together and cooler heads would say, wait a minute, what is the value of suddenly imposing more tariffs on a very difficult situation globally i put up a thing this morning that i thought was very important. Were talking about 3 gdp growth this year, 3. 2 china is the biggest driver of that china is about 1 3 of that gdp growth if that starts moving down notably, global gdp growth estimates are going to come down rather quickly this is a lot to be dealing with right now. Thats why i think this was the right decision cooler heads prevailed lets keep negotiating i dont think anybody lost any phase. I dont think it was a backward move for Trump Administration or Chinese Government i think it makes eminent sense everything just reversed it was breathtaking standing there looking at it while i was on the air. Yesterday you brought us earnings for say Specialty Retail for the quarter youre going to see revisions on the back of this maybe if that continues thats whats got me concerned the guys who do bottoms up analysis for stocks that really influence the markets were starting to change Third Quarter and Fourth Quarter numbers on the industrials, some of the cyclicals, on retailers, finally starting to put models into the impact of this i was seeing the numbers go possibly into negative territory for the year now, remember, my position has been were flattish. Flattish is tolerable for the markets. If things get revived downward in key sectors, the market is having a problem with that not going to put 17 1 2 multiple when Global Economy is shrinking and more tariffs in the world. Thats a problem for the markets. We continue to watch the dow hovering around 500 points bob, thank you for that. Meantime we did get some Small Business optimism numbers today. For that well turn to kate rodgers. Morning, kate. The monthly index on optimism increasing by 1. 4 points to 104. 7. The uncertainty we saw in june around trade and tariffs seems to have somewhat subdued this month. It is important to note, this latest survey was taken before trade tensions escalated in august and china labeled as a currency manipulator well have to see if that weighs things down next month take a look at this, optimism over the last year, 4 points below the alltime high we hit last summer of 108. 8 this month seven of ten components increased the largest increases centered around the economy more Small Businesses expected higher sales and expected that the economy would improve. The biggest drop this month was an inventory satisfaction followed by expected Credit Conditions Skilled Labor is also still a major issue. 26 say their single most important problem, that is a record high for this survey followed by taxes, government red tape and regulations the group says businesses are likely to increase wages to attract talent in the ever tightening labor market. We had our own Small Business survey, that showed a drop in overall confidence it, too, was taken prior to trade escalations in regard to chinas currency after the president had announced those september 1st tariffs, which now may be delayed, how all this shakes out in the months to come will definitely be interesting, guys. Back over to you. A key number to watch as we go to break, wamp mcdonalds did get a buy rating over mkm partners. Obviously lowering 220s. Forecasting sustainable sales Growth Stocks up more than 20 for the year dow up 485 as this rally remains in tact. Were back in mitea nu i mean, if you havent thought about switching to geico, frankly, youre missing out. Uh. The mobile app makes it easy to manage your policy, even way out here. Your marshmallows. Get digital id cards, emergency roadside service, even file a. Whoa. Whoa. Whoa. Whoa. Whoa. Whoa oops, that cheeky little thing got away from me. My bad. Geico. Its easy to manage your policy whenever, wherever. Can i trouble you for another marshmallow . Will this rally hold were up 450 lets get to rick santelli. On a wild day id like to welcome peter. Peter, lets get right into it we see headlines regarding china. Immediately stocks rally the curve initially continued to flatten because short maturities led rates higher the real point is nonfundamental, noneconomic news, its more communications from leadership, government, agencies, Central Banks, trade negotiators. Thats what moves markets. That says something about how you need to invest. No reason to look at the fundamentals, no reason to Pay Attention to Economic Data where earnings just listen to what governments have to say to us. I do have to say im glad that we took a step back from putting tariffs on most consumer goods three plus months ahead of the Holiday Shopping season. Yeah, you know, theres a bigger issue here. Anybody who has had a car that needs a tune up understands it doesnt run well but that doesnt mean the engine is blown. I walk away thinking if the u. S. Has bounces off this from tweets or headlines or communications, basically the united pinnings must be good its the tweaking of the economy that needs some care. Also confidence just imagine youre the ceo or cfo of Major Industrial manufacturing company. In the shortterm, how can you guide your business in terms of hiring and spending decisions. So a lot of it is confidence if you can certainly regenerate confidence versus from clarity in policy, that goes a long way. You know what else will go a long way, peter, maybe im just naive. Im sorry. Nonfundamental noneconomic issues move markets the way they do, doesnt the Federal Reserve need to at one of these press conferences tell us the truth about why we should pay a whole lot less attention to the inverted yield curve well, i dont think they have their hands fully around the message the yield curve is sending. I think its in their eyes well have to see how this plays out i think theres no question that the yield curve is sending a clear message and that growth is slowing. But how the fed is going to respond to that, how they want to try to resteepen the yield curve i think remains to be seen there only, as we know and spoke about, only so many rates they can cut. At some point the law of diminishing returns kicks in we reach a point where lower rates dont reallymatter in terms of generating faster growth. Long end is distorted by many larger global influences, would it be a stretch to say the u. S. Inverted curve may be a better sign for global weakness and much less so for domestic weakness outside of trade considering were a consumption economy . I have to agree with that we have a cleaner, so to speak, yield curve certainly compared to europe and japan. Now, when i look up and i see what the dollar is doing up over a third of a cent, i cant help but think you said the fed might not have a handle on it but still use the same models. They dont have a handle on the Foreign Exchange side either if countries like argentina, venezuela, who have a real funding demand for dollars and their economies are deteriorating, stock markets deteriorating and costs remain high, they still need to pay off those liabilities. Thats an issue that seems very difficult for the reach of fed policy. Yes why the rise in the dollar against a lot of these currencies obviously become very dangerous and the fed, i do think they do Pay Attention to that even though they say its not their purview but realize Global Implications of what they are trying to do in their models, not exclusively in what they tell us but what they do is tell us a weaker dollar is a form of easing they think by cutting rates we get a weaker dollar thats a form of easing financial conditions. I understand. Peter, thank you very much for your thoughts today. Always appreciate it contessa, back to you. All right thank you for that, rick lets head over to jon fortt with a look whats coming up on squawk. Hi, jon. Hi, contessa. Theres indications facebook changing the way it does business in light of pressure. So what does that mean for digital ad market, m and achlt well get into that on squawk alley. Or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. I went straight to ctca. After my mastectomy, i felt like part of my identity was being taken away. My team made me feel whole again. Cancer Treatment Centers of america. Appointments available now. Scotts miracle grow, shares hit an all year high last year sales in their cannabis business almost doubled after favorable changes to some laws shares up again today after the u. S. Said it would delay some of its planned tariffs on china joining us this morning is miraclegros chairman and ceo whats changed is it just cannabis or is there Something Else going on . You know, its one of those years where everything is going right. I think the consumer is willing to reach into their wallet we got a lot of new products thats going well. The retailers are, i think, in the fight for the consumer against amazon and lawn and garden is a part of that for them, that they think is special and different than online. So retailers are in, were in, consumers are in weathers not been great, but not been terrible either so this is on just a consumer level. Nothing regarding mass production, mass gardening at scale . Is it mostly homes yeah, our conventional brands, miraclegro and scotts and ortho, those are Consumer Brands for use in home how closely are you watching whats happening with mortgages and home sales and new construction a lot a lot. Listen, we feel really positive about the growing group of millennials that are coming in and i think same with depot and lowes looking and saying theres a lot oaf pentup demand for homes and thats got to be good for us down the road for people who are theyre having kids and they want yards and dogs and all of that theres been a lot read about farmers we saw what happened with corn yesterday just for one example. Its been a tough growing season thats not been you know, its not been a great season, but sales are really good. So its one of those things why is that because homeowners will plant a vegetable garden regardless of how wet a spring is . I think our marketing is up i think were taking a different approach to sort of digital marketing. I think the retailers are promoting us really heavily right now. And i think the consumers, they want a yard and garden and so theyre buying in spite of the fact that theres been big batches of rain. Lets talk pot a little bit okay. You had a pretty lively Earnings Call with some of the analysts in fact, it got attention because you used a profanity in your Earnings Call i tend to do that talk to us a little bit about the expectations, how its changing, and what lights the fire, so to speak, under the growth for your pot business well, you know, if politicians could stay out of the business and not screw it up, that would be pretty helpful. Both at the federal level and the state level. But wait you Want Congress to get involved and take action so you dont really want them to stay out of your business. California you assume, california goes recreational, how could that be bad . They have really cut them out of people who are allowed to legally grow its pretty bad. But what i say, the business is doing fantastic. You look at a state like michigan, michigan is up like 70 in a quarter, like 40 for the year and thats without anything sort of happening legally that gets in the way of the business florida is up about the same numbers, like over 50 for the year so businesses is where the politicians sort of stay away. Do we want the politicians to, at the federal level, especially help on banking . You know, this is a business thats like twice the size if you look at all, black market, legal, its twice the size of kraft beer and these guys have no access to the credit markets. The tax rate, because of 280e, which basically says that if you are in a federally illegal business, you cannot deduct your business expenses, their tax rate is like 80 so going legal is really tough right now. And the majority of americans, republicans, democrats, old, young, support legalization. The president said he supported legalization and the states like what its doing for their revenue, although in many cases, its not bringing in the kind of revenue they had thought if you look at california, washington state, i think they brought in 1 billion in tax when you look at the appetite on capitol hill to tackle the federal legalization of marijuana, how important is that for businesses like hawthorne that you dont grow pot, but you provide the lighting and the nutrients for the farmer who s do i think if the politicians could do anything, it would be appreciated. Banking especially and tax, but cory gardner has a bill in the senate its called the states all it says is something as simple as this. If its legal in the state, its legal from a banking point of view and a tax point of view i think getting the votes to deschedule would be hard but i think the states act goes a long way to saying, let the states decide what they want to do in their own states and dont try to tackle descheduling right now. Have you been active in trying to push certain states over the edge, like jersey or new york where its come close its been pretty frustrating, i have to say. Both new jersey and new york are mondo states as a conservative, i have a point of view that this is not about making drugs more available, its about getting them out of schools. And a lot of what we saw up in albany at the end of thesatio session, which we were pretty active in, which is a group of senators, democrats that took republican seats, that are scared about this next election cycle. And there was a lot of liberal stuff happening up in albany but i think schools this is getting it out of schools. Its a lot easier for our kids to buy pot in school than it is for adults maybe not in new york city, but go to long island and that would be the case. So, if you could tax it, control it, get it out of schools, keep it with adults, i think how you do that, how you get the cops to go onboard with traffic stops, testing to say, how do you stop people from drug driving, these are all the issues that the industry has to deal with. Come back and talk more about that haas a huge story and it continues. Thanks you bet thank you, guys. As we go to break here this morning, obviously, watching to see if this rally can hold dows up 416 a. N. sn e mooucve, as well well talk about that when squawk alley starts in a few minutes. Good Tuesday Morning welcome to squawk alley miami Carl Quintanilla with Morgan Brennan and jon fortt at post 9 of the New York Stock Exchange stocks have been surging today as the white house announces a delay on tariffs of certain products into december, sending stocks like apple higher and the dow up 400 points. Although earlier the session high was about 520 lets get to josh