Transcripts For CNBC Squawk On The Street 20240714

With tim cook. And one company is shrugging off concerns about an economic slowdown in china. Well tell you which one it is. A moment of truth for lyft as insiders get their first chance to sell shares at the open stocks are set to build on fridays rally, were heading into this mornings trading session, the dow is within 394 points of recouping all the losses from that wednesday selloff of 800 points is the economy at risk of recession . Take a listen to what the president and some of his top aides said yesterday i dont think were having a recession. Were doing tremendously well. Our consumers are rich i gave a tremendous tax cut. And theyre loaded up with money. And theyre buying i saw the walmart numbers, through the roof. I dont see a recession we had some blockbuster retail sales consumer numbers towards the back end of last week. We had the strongest economy in the world money is coming here for a stock market also coming here to chase yield and our bond market. Vice president today talks to the detroit economic club. Jim, well hear more from this administration about the economy. Right i think they got a break this morning. Came in after putting everyone out there. You got the inverted yield curve. There is a lot of intelligencia that comes on. And scares you on the inverted yield curve. Seven out of seven, and i think with what the president s people are saying, look, this time is different, dangerous words, we know that. But i do believe that when you listen to what navarro was saying, navarro versus the world, navarro is saying, look, the money is still coming here, and it makes sense and thats the inverted yield curve larry relying on what he always did, on aggregate numbers. The president is krill drillidr on walmart where does that leave the rest of retail. Thats what i worked on all weekend. Were doing programming about the American Consumer. 92 of all retail is still brick and mortar and brick and mortar is living hell we have to focus on that thats the weakness. Not as though we havent been focused on, we sat here for many years discussing the decline of retail, especially mallbased retail, which is worsening. Macys was the biggest wakeup call in ages 9 yield pointed out many times, one thing conceivably they can still support that you do wonder, you get to 9 dividend if it is worth maintaining at that level or cut, even if you dont have to, though it might send a bad sign. I was working on signet, they have more than 2,500 stores and look at that, 12 yield. Im saying, lets balance what the president says, walmart is the biggest member, i like amazon, target this week, costco is great, home depot tomorrow, balance those against what is in the mall and every mall owner, all the reits, through experienctial many malls have vacancies, a vacant mall is a place you dont want to go. This is only one going one way. Amazons dominance and that of the other major retailers that have adopted and are competing aggressively online. A la walmart, target, nordstrom, even though by the way in a journal piece this morning, did all the right things still couldnt make it work. Rent the runway these people, the millennial is very hard to figure. They would rather rent the runway still im focused on the directive of looking at the American Consumer, spent a lot of time on that. American consumer is going away from the traditional and i just think it is an achilles heel as you point out, 90 still brick and mortar 8 online going up, up, up. Unless youre online or off price, online or off price keep that in your head. The point made by the president and his advisers, the consumer does remain strong. Consumer is still robust and that does matter consumer has to stay robust because if youre international, it is slowing for you. For the most part. You saw the michigan numbers friday Spending Intentions on appliances, on new vehicles, got to go back three or four years to see them this low. There is undercurrents that are worrisome, just that these new there is baby boomers who are near the end of the line and then there is the millennials and they just theyre in a sharing economy lyft, which is quite a good company, lockup empires today, lyft is synonymous with the current they wont buy cars the year 2000, were making as many cars as them. Nobody but were such a bigger country in the same way that you go back 50 years for housing, and were doing the same amount of stars housing and cars used to be an important part of the consumer economy. Those are diminished. Im looking for things that could go wrong the possibility that unemployment, last time it was like this was 1969, what happened during that period. Did get a recession. I dont want to play against the current narrative because ive been bullish about the consumer. But im focused on what could go wrong, just because when youre i find when youre up 300 points in the dow youre an idiot if you focus on what is going to go right. The bond is reversing. You dont think the lows are in on bond yields for the year or gold topped out for the year. I like gold. Youve been saying that a lot lately. Youre against the theme that things are better than people think. Im worried about europe. So is the bundesbank today. Theyre going to tip into recession. Dont they need to do something to reinforce the banks. They never did a geithner. Remember wells what you point out is, it is a key that is always worth mentioning, we did go and recapitalize our banks by actually being honest with the stress test, for first ones particularly and forcing the banks, even when they said, no, no, no, to take t. A. R. P. Money and recapitalize. In contrast, the europeans never fully recognized the holes in the Balance Sheet. And still suffering as a result of that. I think that if i were the europeans, i would be very worried about the bank system. I look at the bank stocks, and thats what you need to worry about. But if youre saying youre worried about it, it could get worse that will impact over here 2011 didnt go particularly well for equity markets it didnt im just trying to say, before you decide that there is an all clear, lets remember, that a week ago we thought we were on deaths door i dont like this. Sometimes my daughter will do something, my 28yearold will start out, shes mad at me, the worst day ever, by the end of the day, shes, you know, nice to me. This is the greatest day ever. You cant do that. Thats called bipolar, okay. You dont want to be bipolar you can take one of the antiseizure drugs but theyre from the 1950s. Ill take a sports here for new york teams like 69 even with a recession on the end of it. See how pertinent he is. Recreating it as we speak, this season has been great. For, yeah, baseball is but there we had three we had three we had the jets, the mets and the knicks yes yeah. Yes look, i dont want to necessarily devolve to sports. Sorry. Thats okay didnt mean to take us there. Im focused entirely on a concept that you cannot get as rosy as you were negative, it is a suckers game be temperate the president , the president liked walmart. President focused on macys, wouldnt that be something, macys had a bad callout walmart is bigger, obviously. Walmart is a better reflection of the u. S. Consumer. Walmart is good watch. Watch. I think walmart, the greatness of walmart is that it devastates all other retails. Retail for ages. Some of these mall vacancies are shopping youre seeing theyre trying to fill the vacancies with popup stores tanger, terrible vacancies, you walk the streets of manhattan, also shocking. Ever see anybody with shopping bags anywhere no, they order online. The shopping bag ask the doorman in manhattan, how people are shopping. All they do is take packages. Logistics. Target has amazing Delivery System same day or next day, youre king youre king. King for that day. Macys does not have a great signet, by the way, which is this jeweler im focused on, they have like 5 online you know thats not enough look at apple, will you . What the hell. Funny you mention that, president talked about having dinner with tim cook friday, last night night, discussed tariffs and apples rival samsung. Take a listen to this. Tim was talking to me about tariffs. And you know, one of the things he made a good case is that samsung is the number one competitor and samsung is not paying tariffs because theyre based in south Korea Samsung is not paying tariffs because theyre based in a different location mostly south korea, but theyre based in south korea, and i thought he made a good argument. So im thinking about it. Said he made a good case on tariffs. It is funny he doesnt watch mad money clearly. Sorry. Insulting i say it almost every night, this is a win for samsung. Said it on this show too many times. It meant absolutely nothing tim cook says it and suddenly it resonates. Im not being facetious. I said this over and over again, a tariff on apple is a win for samsung. And my reporting indicates thats irrelevant. Irreleva irrelevant they wanted to punish apple for making things. How are we doing huawei today . A day after the president signaled that that wouldnt happen, we got it. Yeah. And i struggle to think about what the real policy is. It is always good, the talks are always good. Then there are no talks. How about the fact that i read a piece this weekend that is so contrary to what the int intelligencia says, how about the face loss by xi and hong kong big protest in hong kong where is the power where is the power of xi i thought he was like 100 years . Im not sure you want to see that by the way in the form of troops on the ground there, that would be a bad day. Protests this weekend were peaceful, no tear gas. Im saying that there is this whole question of where is xis status with the country . Do they like the fact that the economy is slowing as much as it is it is slowing. The chinese economy is slowing. It is taking down other economies . Like ours. Germany italy. Ours is slowing too. Ours is slowing there is no doubt. No one is saying ours isnt slowing. Im saying at least we have a strong consumer, but i want that consumer to stay strong. How long does the consumer stay strong if every day everybody talks about recession . How about larry . He should have gone recession. Do you think a fed cut of 50 basis points will reassure them . I think that, yeah, i do. I do look, jackson hole, i got to tell you, jay powell is in a hole hes got to pull it out jackson. Well talk more about jackson hole, the event of the week, well get cramers mad dash, countdown to the opening bell. Got to get to 26,279 to wipe out the wednesday selloff back in a minute vo the hamsters, run hopelessly in their cage. Content on their endless quest, to nowhere. But perhaps this year, a more exhilarating endeavor awaits. Defy the laws of human nature,at the summer of audi sales event. Get exceptional offers now. So, every day, we put our latest technology and unrivaled network to work. The United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes hey 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. All right, lets get to mad dash, getting ready to start the trading week, about 14 minutes or so from now estee lauder future day. This is an amazing quarter. Why is it so important there was a considerly short position buildup why . One of the big fulcrums is china. Hong kong, by the way. Hong kong, get this, hong kong airport sales. That is always very, very important. And they basically said, listen, were in great shape a lot of shorts will be scrambling here. This was a beat and raise that is probably one of the most beautiful prestige brands selling very well. What is the secret im not kidding, he does reverse mentor a couple of days a month where basically his younger people tutor the older people get a great sense of what the selfie generation wants. And look at this breakdown. Listen, you talked for a long time, we have focused on the success of this company in china. Mr. Freda, a genius. He spends do you know he goes to china, he goes oftenly, oftenly, often, he sits down with teenagers and people in their 20s, influencers in china, which there are many, find out what they like and prestige brands really resonate there United States is good too. And we have to wonder whether the United States is good enough after what happened with macys, they sell a lot in the Department Store level this took a lot of people by surprise for a belief that he would have to guide more tepidly given what is happening in hong kong and he did i know theyre nitpickers who try to go against him. Such a big is there a larger takeaway for the state of the Chinese Consumer or really very specific to this particular brand and this particular i know youre not going to like this. The larger takeaway is instagram. Instagram. People dont want to walk outside their house because of selfies and instagram. And i think it is really rather remarkable how powerful instagram is and people dont recognize that. It is all about yourself you coined that, be your selfie best. He schooled me. Thats a better term than tutored. One more look here at the futures, of course were set up for a higher open on wall street, which will open about 11 minutes from now. A lot more squawk on the street straight ahead [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. But youre not mad, because you have e trade which isnt complicated. Their tools make trading quicker and simpler. So you can take on the markets with confidence. Dont get mad. Get e trade and start trading today. After two mondays in a row, were looking for 1 in the other direction and then some as we try to get back last weeks losses opening bell in eight minutes. Do you have concerns about mild memory loss related to aging . Prevagen is the number one pharmacistrecommended memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just about five and a half minutes. Busy morning as we await chair powell and jackson hole on friday you got more reports now that the germans are considering fiscal stimulus and we wonder whether or not their long memories on inflation is sta starting to fade. Black zero, thats the plan a bit of an emergency plan to be able to stimulate. Youre right, carl, in the constitution that theyre not allowed to do anything but things are i dont say things are dire. But theyre in a recession thats the way i look at it. Europe is in recession the thing im most worried about is you canuk we get a hard brexit. That will also push europe further into economic distress or whatever you want to call it. We have to talk about what is the plan for uk. I think it is what is the plan for europe thats going to be very jarring. You know, all these things are man made theyre all man made and it is we had a guest earlier talking on squawk about how you cant create jobs with lower Interest Rates. Now, i think that ultimately if youre in italy, there really isnt that much of a Banking System im not being facetious, like a barter economy so youre right. Look, what do they really need to do . We all know what they need to do, get rid of the euro. They dont have any intention of doing that you need to have the euro go away, the euro is the mark, the deutschemark theyre crushing everybody so, what, youre talking multiple brexits involving lots of countrys . No, they wont do it. They wont do it we keep trying to figure out how do they get back on track . Permanent, no growth thats not good for the world. It is just not and you mean they come out of negative Interest Rates. Getting yourself out of that is not easy either. Stories on the tape this morning, interviewing companies who say, yeah, we know borrowing costs are negative were still not interested, not interested in incurring the debt. I spoke to my wife this weekend about buying a house in denmark, there is zero Interest Rates. What do you do i know, we like houses. Listen cant own stocks. You should have another home why not denmark . I would like to vacation there more regularly. Theyre too expensive it is not just the Interest Rate, the home itself is too expensive. Thats the euro speaking i dont know you cant you cant even with the dollar . There is big friction when you want to buy a house over there. There is friction. You dont not like you really know 16 people at the close of the house we bought in italy 16 people. Here, have some euros, have some euros. And the carrying cost once you own it how many olive trees have you planted . 200 that was we already had 200, you cant expour export it really high class problems. What do you do . You sell it to yourself . How do i deal with the olives it is a high quality problem we rent the place for 40 weeks, thats how you do it im pointing out, you think with my with zero mortgages, we americans would be over there buying the heck out of it, right . Right copenhagen, remember that one . The future and the fact that people seem to think assets deflate. Thats my point i know. Thats my point you buy that farmhouse in copenhagen in denmark, i think you lose value i just dont think that remember, we have greater affordability in our country houses are not losing value anymore because it is hard to build them we have a lot of issues in terms of the they changed a lot of the you can build them, no longer that advantageous im pointing out, up 300, you got to be thinking about all the things that people think about if we give up the 300. Youll hear all these guys come on and say, i told you so. A lot of i told you sos. Where is dalio Morgan Stanley this morning, michael wilson, 2700, the fed china trade put expired. 50 basis points will spook investors, will spook consumers. The lockup period for lyfts ipo tend ends today, earlier t expected stock is down 28 from the march ipo price. I think were talking about 250 million shares or so, right . Well, there you go. Coming right at you. Coming at you. The quarter was good. Ubers quarter was particularly bad. A feature for some of the larger ones, we discussed it with derrick khosrowshahi about what he was going to do about the lockup expiration at uber. Hes, like, what can i do . Something i cant control. You wonder whether givend pn th performance or lack of performance, will that mitigate selling or not there should have been buying, but because of this, there hasnt been. So i think lyft, if david were sitting there and he asked me that is the key to the market, i would have to say lyft really . In what way . It has to stabilize cant go down four or five that would be a real tell for a lot of other things. Look at beyond meat. Remember the fabled beyond meat. It broke that print. It broke the print thats an interesting sign yeah. Lets get the opening bell here cnbc real time exchange, big boards, wall street rides for research run by a former cnbc producer, Allison Tepper singer, congratulating them. At the nasdaq Parent Company of the River View Community bank, river view bank corp well see what holds im watching cisco also cisco had the socalled disappointing guidance, good quarter. When we interviewed chuck robins, we almost forgot that it was a good quarter and focused on a series of comments made on the Conference Call if that stock works its way back, were in forgiveness mode. Earlier we had a guest talking about, you know, josh, josh about the possibility that alphabet, 15 years, happy birthday, might look at nutanix. That is against vm ware. I dont know if you noticed vm ware, on a pivotal, pivotal possible acquisition, pivotal. Right. That was viewed as sub optimal. Your point about cisco, jim, has a ways to go to get back to last wednesday. Oh, yeah. But i think that where we are in this market is lets say you reported a bad quarter, you wait a few weeks and then go by. There is there is a lot of heres one to atch, same thing pay pal guided down, just like cisco. Pay pal hit 105, 106, it is going to work its way back there is a lot of belief that these particular Payment Processing and networking stocks are down and for no reason. I want to focus on one that is i thought was the single best tech quarter, nvidia, nvidia was a surprise this week. Go over the Conference Call. Youre blown away. Gaming is back data Center Getting stronger there is a autonomous driver, theyre with volvo they didnt talk about volvo, with uber. Uber needs autonomous driving in order to be able to make it so that they have economy to scale. Right now they dont right now drivers are too expensive. What are you looking at . Saying hello to how are you doing good to see you. What are you doing what were doing a tv show these are old friends of ours old friends this is a tv show. Speaking of old friends, ge is an old friend in many ways, given we work there, work for the company for many years youve been following this pretty closely the company did thats ge, did come out with a more detailed response i guess this morning. Q a, written q a between cfo, i think, and investor note they put out, addressing really longterm care and baker hughes. Right . Longterm care, you go back and forth with ge, here is the issue with longterm care. There is no level of reserves. Nothing is good enough the reason why nothing is good enough isbecause it is about their finite they paid off, that the insurance is paid off, and then people live much longer and the cost of in Home Healthcare is was not thought about. So, yes, they can believe their current reserves are well supported. I think they are. They can, but it is is it fair to call it fraudulent if you disagree with where theyre coming in . I thought that was market manipulation i think you can say, listen, theyre under reserve, aig was under reserve. You can argue that Warren Buffett is under reserve anything that is longterm care is per se under reserve because people start living even longer, you know, it is sad, but ill tell you, the big bet for longterm care is you have to believe that the actual table is reversed and people start dying younger and you have to start believing i had healthcare, staffing company, on for healthcare, you have to start believing there is a sur fed of nurses both things have to go ges way. If you look at what the regulators want, theyre doing it why is that fraudulent if you do what the regulators want, why is that fraudulent what was the hedge fund theyre working for . I dont know. What is that . Does that make is so if you say i havent tried to find out i probably should. Here is the sunlight. Im working for hedge fund, trying to destroy ge, i think the sunlight should include the hedge fund and i also think if i were the head of the s. E. C. , i might miake a call, put a little jingle in there. No that said, when hedge funds own a lot of stuff and analysts come out all the time and build them up and we dont ever say a word about it. Thats a good point thats a very good point i found it was this notion you can do what the regulators want and somehow it is fraudulent, if you do what the regulators want seems wrong. Yeah. It just seems wrong. Larry culp is not the baker hughes accounting, thats harder i dont think, again, lorenzo is an open guy, the ceo of baker hughes, i never heard anyone say that anything negative about the accounting or that doesnt mean there isnt a possibility. But i just brought up the longterm care because you just cant tell how much it is. So what you do is you do what the regulators want and a little in excess and thats what larry culp has been doing, the ceo. Couple of stocks, guys, im watching one is this aaramark, up on newt mantle ridge, the activist you can call it a fund, but it isnt, because what mr. Hulal, we know him from the Csx Hunter Harrison move which went well for them, what he does is he creates special purpose vehicles with these five year lockups where the general partner doesnt get anything, it is like a you dont get a management fee, and then you get percent of the upside if it works at the end of the investment when you exit it. By the way, it is worth mentioning, i havent really, this structure is now one that is used frequently by many of these activist investors they arent really raising big funds any longer theyre going with these special purpose vehicles, which are certainly from the perspective of a limited partner preferable. You can make a choice. I want to go in on that with you. Instead of a fund, where youre stuck with whatever theyre choosing aramark, 9. 7 economic position, he also has cash settled derivatives that take it to an economic exposure of about 20 and the stock is up sharply, you can see, why i guess people think hes going to push management, perhaps separate, they have a uniform business, a food business. They dont do as well as their competitor interestingly, i had heard from a number of sources that mr. Hulals ambitions were far larger than the 24 stake he had been approaching large Institutional Investors about a much larger equity check and also approaching banks about potential Debt Financing to try to actually engineer a go private for this company, which, by the way, had been taken not doing it again. 7 billion in debt. A lot of debt. So he didnt seem to succeed on that. Hulal answers the cell phone and says absolutely nothing, will never talk to me does, but hes very polite and saying ill never speak to you, please hang up this is a Philadelphia Company that did not have a great last quarter but it had a lot of good previous quarters. An outsorcer we know that there are a lot of companies that really dont know how to run their comps you outsource it to them it is a pretty Good Business they also do stadiums. Thats another good thing. Provider of food in a lot of stadiums as well they have underperformed the competitors, but to your point, they have gone public, private, 7 billion in debt, unclear how that cancels out for lbo right now, a very large stake and well see what happens with it the market is reacting positively, i guess. The stocks are going up after that bad quarter no one can figure out. I think a lot of people didnt think it was vulnerable given the fact it has so much debt that turned out to be no defense. Hes stuck in it. I dont know got big in it, that bigger ambitions and now stuck. Also wanted to mention, this came out late on friday, from the journal, stock didnt have a lot of time to trade on it news of talks that took place way earlier this year, back in february, apollo did approach, im told, was a soft approach of tegna. They didnt get a price at that point. And subsequently my understanding is that apollo talked to them a couple of times, but more on the actual focus being to sell them some of the stations, apollo has been the large leverage buyout private equity firm has been focused on sort of putting together this rollup of local television stations around the country. Couple of pending deals. But my understanding is they have been talking more, in fact, i know they have been talking more recently about selling stations to tegna. So dont read a lot into that one. The stock was up sharply in the o after hours on friday after the journal had that report. Also standard general, filed 13g Late Wednesday with a very large stake and then had the story come out late friday that is an area that has been a black hole while you were away, viacom did a merger yes, they announced a deal, yes. He joined us. I did call in. You did call in briefly we had a discussion about it there was some distress that the synergy numbers announced were lower than the street had anticipated. Thats what i often times it is what you like to call underpromise, over deliver. And that may be the case here because i did hear higher numbers associated with the potential deal, than they came out with that seemed to be somewhat of a disappointment overall, the sector not doing particularly well. Particularly since disneys quarter, which we all know is less than stellar. Certainly for disney. Good numbers. And then this is one of those that reminds me, one of the most discouraging things ive been involved with in the last couple of years dupont i think dowdupont separate would have been worth more viacom cbs, clearly separate, at least in the beginning interesting. Theyre getting together. And the question obviously will be can they deliver on the synergy targets, raise them at some point and what deal is next . This deal will close quickly, failed to point that out you have the same Controlling Shareholder on both sides. Not a change of control, therefore it is going to take less time for the regulatory review this thing could be closed before the end of the year. That group is cheap dont know what happens. There is no big rollup no. No more rollup. No. It is over. Yeah. You got to come back, always remember, Rupert Murdoch decided to sell, he wasnt large enough. Yeah. That was a pretty good move by him. It was. He had the softest voice there. Couple of what . The succession, by the way, which is really good. Season two apparently a lot better than season one so every dow component is green except for mcdonalds. Up 290 to bob pisani. Up 300, essentially been up 300 since the open here. All of the cyclicals outperforming, defensive not take a look here you got there is your dow industrials. This has been one heck of a rally here, folks. From the bottom on thursday, we have moved close to in fact, a little more than 800 points here, thats a pretty big move overall. We have seen you see the pop here today sectors moving today include semiconductors, banks, retail, Consumer Discretionary, utilities have been lagging overall. The important thing is we have been moving lockstep with the ten year yield and there is the ten year yield right there, bottoming on thursday 1. 47 and here you see us moving up, essentially locks up this is the ten year yield versus the dow industrials. Essentially were moving in lockstep, along with it. So the big question is what happens with the ten years this happens unfortunately, sometimes things get stuck moving directly in tandem with each other i think the important thing here is the market rally were seeing today. The bond selloff, is it going to happen . Is it going to be eventually continue at this point here . Are buying yields bottoming, the most important question overall. We cant answer that right now the last couple of days, that has been happening the recession fears have eased a little bit the president s people have been out over the weekend trying to calm concerns about recessions out there. We have a huawei reprieve on top of that. Some vague discussions over in europe about more stimulus, not just from the ecb, but maybe even germany doing some stimulus, none of this has come to fruition yet, but vague talk about that over the week, helping things out the big question is are the bond yields that have bottomed, if any are, a lot of people argue this defensive sector move over cyclicals is way overdone. We have seen this throughout the year sectors in the third quarter, reits have been outperforming, staples outperforming, utilities outperforming, and, of course, the cyclicals Like Technology and industrials have been underperforming. If yields are really at a bottom, bulls can make an argument that should start reversing. We dont know. They dont veigh cle this has been going out through 2019 technology has a small edge. Im talking about year to date now. Tech is up 25 here, again, defensive, reits, staples and utility, two, three and four industrials are further down there. Everything else is further down there. So lets just say with the exception of tech, this is still on the year a very much defensive rally overall that we have been seeing finally, want to note, lyft trading down a little bit, you heard all day, the lockup is expiring this is five months, not six months, they moved it up a little bit here. Lyft has turned to the upside. There it is on the upside. I think the important thing to point out is 72, five months ago, 52, it is still underperforming. Both its ipo peers as well as the overall market if you look in the last since the quarter to date, ipo, the ipo etf, thats the benchmark, the green line here, and lyft, the white line, thats uber as well both of them underperforming two bigger ipos this year still underperforming overall peers for the quarter. Right now holding up, dow up 285 points carl, back to you. Thank you bob pisani google meantime went public 15 years ago today. The ipo was priced at 85 as you might recall, giving a market cap of 25 billion since then the stock now known as alphabet surged more than 2600 . Look at that chart, 15 years ago. That was remember that day . I remember. Came on the network, i said the stock is going to triple and no sooner did i say that, the general counsel called said how dare you say that. They did that dutch auction, which was odd. What i remember is the dont be evil i think we even have that. Dont be evil. Dont be evil which was right there at the top of the ask one this is an important aspect of our culture broadly shared within the company interesting to read that now in light of the recent change from the business round table. Have that too changing their statement of what basically what a companys mission is supposed to be, signed by 180 ceos deal ethically with your suppliers, invest in your employees, think of your communities, people are arguing whether this means anything or not. I think that i had a man by the name of scott barshe, who youre familiar with. Yes. Hes the foremost m a he said something that was really amazing. He said the reports are now willing to consider other stake holders including what you described. And he said delaware courts had pretty much gone milton free for a long time. And now that theyre willing to consider it, thats a major change youre no longer against the dictum that youre hurting the shareholders and barshe is cutting edge it happened, he said it, nobody seemed to care that was really unusual. But the report delaware courtsu cant be for the shareholders, you have to be for the stake holders. Thats the benioff way of looking at things. Larry fink. Key guy in those courts is very much of that view yes. You also had, i believe hes retiring yes, he is. But this is going to be a key issue in the upcoming president ial campaign, one would imagine, as well defining what capital should be in the view of two different it will be interesting, does Elizabeth Warren believe that the workers own the means of production never said that, did you im aware of that. Russian prune juice. To the bond pits and Rick Santelli at the cme. Good morning. Good morning, carl. What a difference a few days makes. Bob was saying it is hard to tell if Interest Rates have bottomed dont think it is hard to tell they have bottomed the question is how long will this bottom be sustained and there is some things we can look at to give us the answer first of all, the curves resteepen and remember this double asterisk at the wall street journal and many seem to have forgotten the curve never closed inverted. It was an intraday inversion so articles are talking about inverted curve really isnt now, can it get again . Yes. But right now it is trading just under 10 base points two day of 2s. Theyre up a bit look at formation left side to right side, it is up four basis points to the long end of the market, 30year bonds, it is much different, yes, theyre up six basis points, just like 10s are. The reason i picked 30s, this is one area where you can really handicap if this bottom is going to hold for a while. Lets harken back to june of 2016 unlike ten year note yields, which double bottomed in july of 2012 and 2016, we only have one bottom in july of 16 in 30s, a close of 210 last week we went through it like a hot knife through butter, but, boy, if we come right back to test it, and if we close above it, there is your answer on whether this bottom holds for a while. Finally, the dollar index, since july 19, you can see the last day of july, fed day, when it made its high back to may of 2017 were very close to that and finally, really kind of ironic, nobody is showing this chart anymore, the on shore dollar versus the chinese yuan it is hovering here. There is a lot of forces at work on this trade deal and a lot of them show up on that chart, carl, jim and david, back to you. All right, rick, see you in a little while as well Rick Santelli. Holding the majority of the premarket gains, dow up 276. Were back to 2921 as we keep an eye on the 50day at 2944. Back in a moment pretty good breadth here one dow component in the red, mcdonalds octrin25on to 8. Stk adg with jim after a break. Customers to care for lives to get home to they use stamps. Com print discounted postage for any letter any package any time right from your computer all the Amazing Services of the post office only cheaper get our special tv offer a 4week trial plus postage and a digital scale go to stamps. Com tv and never go to the post office again time for cramer and stop trading. What if they gave a lock up expiration and no one came im watching lyft. I wonder whether john zimmer, who is quite the guy, has talked to a lot of the holders and said this was a good quarter. Stay put we saw that in facebook when it went down. Watch this stock that is a stock where a lot of people fell. Here comes a flood if there is no flood, then i think people say you know what maybe we are fine into wework. Wework something the market i dont think is ready for. I am told rbc is taking their market to 62 we will talk to them later this morning. Remember all these have problems because they all are paying drivers more than they make per but i do think that if lyft holds in there, that will be a sign, a clarion call that maybe there arent as many insider sellers than we think for the stokes that have broken. I like that. Tonight i am focused on the American Consumer and what the American Consumer is doing in the new ways, particularly when it comes to where the millennials put their dollars. I have been researching millennials. They are not all that crazy because they owe 7 trillion in debt by the way, six years, 100,000. Sorry. Thanks. Thanks for that pick me up to close out the hour we will see you tonight. Mad money 6 00 p. M obviously, the dow is up 253 nco ts rng. Moin dot go anywhere. Or to carry on a legacy . Its show of strength. Or its sign of intelligence . In crossing harsh terrain. Or breaking new ground . This is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedesbenz summer event, going on now. Lease the gla 250 suv for just 329 a month with credit toward your first months payment at the mercedesbenz summer event. Mercedesbenz. The best or nothing. Good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen who is back. David faber of the New York Stock Exchange take a look at the markets the dow up plus 300. We turn our attention to potential policy responses in the United States and europe not far from erasing last weeks pain. Stocks rallying, despite fears of a looming recession. Shrugging off concerns about an economic slowdown in china. A group in retail that continues to grow. Sounds like the Great America ball park where i came from stocks are rallying this morning on the heels of what has been a wild week for the markets. Bond yields rebound from their august lows. The white house looking to calm investors fears over the weekend, commenting on those looming fears of recession. I dont think we are having a recession. We are doing tremendously well our consumers are rich i gave a tremendous tax cut and they are loaded up with money. They are buying. I saw the walmart numbers, they were through the roof. I dont see a recession we had some blockbuster retail sales consumer numbers towards the back end of last week. We have the strongest economy in the world money is coming here for a stock market its also coming here to chase yield in our bond market so its mixed messages. Clearly, the white house wants to reinforce that the fundamentals are good. Kellyanne conway just on the wire doing so. You can look at some other forwardleaning indicators, guys, like the inversion of the bond curve and, by the way, we saw that inversion since may not the key to your tenyear, but the threemonth. And you can look at the decline in commodity prices, now more than 15 off the highs you can look at manufacturing numbers, consumer confidence, or the president s right, you can look at walmart numbers, which are strong its not a clear picture for investors about where we are exactly heading in terms of the economy. I think thats the confusion and why you get these huge up days and huge down days. Nor a clear picture from mr. Powell as he heads out to jackson hole later this week. He speaks on friday. So the expectation is that he will, he has the markets back now. He will say that he is prepared to do more progressive ease fg the Economic Outlook warrants the market is playing the fed like they are starting an easing cycle. Thats really the theme whether you believe in this market do you think the stimulus can help whether its coming from the german economy, which is the chatter today. A third of Central Banks have started easing in the last six months thats pretty tremendous can it work and can it reduce the markets . Well find out. Friday is so far away. Jack hole is a fun week you have a lot of speeches ahead of time where people lay the groundwork for central bank efficacy thank you both for joining us. So first, j. J. , you got a handle on the Retail Investor what are they doing amid all of these wacky market moves yeah, so for the last couple of weeks, sara, theyve lightened their exposure to e equities overall and gone a bit forwards fixed income and shorter term fixed income. Last weak it gave them an opportunity to buy stocks in general. I think many of them are kind of hanging tight a little bit and just kind of letting this all play out we know every day were tweet driven or rumor driven or whatever it may be we do have some retail earnings to give us some guidance in general, i think its been a little bit of a strange time you talk about jackson hole later this week. It seems so long ago, a year ago we went in there talking about 3 tenyear rates, was the target going to be 4. 5 or 5 the next few years. How are you thinking about the action in the bond market, matt, versus what we are seeing in stocks . The rebound today clearly hechti helping sentiment. We have got all the negative rates in europe. You have the manufacturing slowdown you talked about before the way we reconcile it is that this cycle has been a series of cycles within the cycle. What we are seeing now in the Manufacturing Sector is a cycle there. We saw that in oil in 2015 in some way that prolongs the whole cycle. We dont necessarily think thats a forwardleaning indicator for the whole cycle to roll over. You think its just manufacturing . At the moment trade, manufacturing. That sector. Its significant, but is it enough to bring down the whole economy when the consumer, as you noted, is doing quite well. How does the manufacturing recession or an outright recession sustain the broader growth cycle is that your argument . Yeah, it keeps the excesses from building. So we have these little washouts we had that in 2015. Lets back up. We are certainly late in the cycle. So lets be clear about that and that means we are nor vulnerable to downturns. Everyone of course is on edge. This is what late cycle looks like you have slowing growth and the ability for any sector to bring down the broader economy so people are trigger happy. We saw that last week. Then people are comfortable with the fact, that, okay, the broader cycle. What about earnings expectations where do they sit for the rest of the year . They are okay, not great. Again like we saw in 2015, we are having the manufacturing cycle put pressure on the earnings picture and so we have muted Earnings Growth for a couple of quarters. Hopefully, assuming everything is on track, we will have some gradual acceleration in late cycle you dont get the big lift like we saw from the tax cuts. J. J. , you said your clients were taking an opportunity to buy stocks what kind of action did you see and which stocks one of the thingswe have seen, sara, is they have been a bit of sellers of apple over the last few months. Apple came down. Seeing some opportunity there. Our clients continue to like on the selloff, uber has been particularly for millennial clients a stock that many believe in people may say they dont have earnings, et cetera, and i totally understand that. I think one of the things is using their parents, who said investment things you believe in and use in the longer term, i think that is definitely sit being that generation in terms of something they are using. One thing i will say about the market overall in terms of recession or whatever it may be going forward, one of the things that these tariff overhang has done is keep us range bound on the s p between 2,700 on the downside, 3,000 on the upside because its the fear of missing out as we get to the low end of the cycle for he many people and the oh my god i cant buy in case it set nuls a bad way to the upper end. I think we will see that until we have something on the tariff front thats more definite. You think the china trade put is intact, j. J. . You think its around 2,700 . I do, carl. The one thing actually about earnings that concerns me is not so much the earnings themselves, but the fact that if you listen to the earnings calls, nobody is talking about investing in infrastructure i think the damage that may be done is a couple years down the line because we are not hearing an infrastructure talk at all because as a ceo you are okay buying back stock is the best use of your crash right now. I dont blame ceos from not investing in plants or whatever it may be because they dont know wherever this is going to end. Once they know the rules of the game, they can win the game. Right now they dont know what the rules of the game are. You have a strategy, what, overweight u. S. Stocks but you dont like small caps . Yeah. In late cycle this is the kind of profile we get slower growth. The pace of gains are slower you want to stay in high quality assets and you will have a lot of volatility. So really we are really following the late cycle playbook to a tee. What does that mean how many years it depends on the slope of growth people have been talking about late cycle for the last five years. I think starting a year ago actually when you were seeing the market go choppy and generally flat for the past year, to me thats true late cycle and the bond market is confirming that. J. J. , matt, thank you both. Thanks. When we come back a lot more on todays rally how much is going to hold . How to protect your portfolio amid the vallolatility we were t talking about. The Top Performing stocks on the dow. Apple leading the way today along with walgreens boots and dow, inc back in a minute , a veteran, a veteran, or youre in a military family, please stand. I will tell you this, Southern New Hampshire university can change the whole trajectory of your life. Welcome back to squawk on the street. The major averages having their best twoday rally since early june volatility has sent investors ruining into munis. The bond market we dont talk about enough a combination of lower rate and stock market volatility continues to push investors into municipaldebt. Mutual funds sign posts of 1. 6 billion last week the average deal six times oversubscribed bringing the total amount raised this year to over 58 billion, on pace to break the 2009 record. It pushed the average tenyear yield to 1. 5 . But lower yields havent stopped investors from eying some of the new deals that have come to market in the last two weeks we reported on the pennsylvania ticonderoga, turnpike that deal price last week pays 1. 7 hospital common spirit offering a yield of 2 . L. A. Public works financing just 1. 3 and San Francisco bar at 1 . Peter hayes, head of blackrocks Municipal Bonds group, which oversees 150 billion, anticipates a this favorable supply and demand dynamic in the muni market is likely to persist especially as High Net Worth investors and higher tax states lake new york look for ways it generate that taxfree income. Strategists are quick to point out that the number of firsttime defaults has declined over the past three years making muni debt with good credit quality seem like a safer bet than it has in the bast. 2 billion in new deals coming to market this week, including the department of transportation in texas sara, back to you. Yeah. You brought it up. The inability to deduct state and local income tax is one reason why there is more demand in states like california, new york for muni paper. You also think its a great time to issue if you are a municipality rate now. Try to do infrastructure, whatever it may be, you are getting incredibly low rates. Typically, history shows that lower yields coincide with more issuances. So far this year we have seen a decline in new deals coming to market could change this the next three months if the fed cuts it gives some states an opportunity to refinance some of the debt that they are already sitting on. Thank you joining us with more strategies around fixed income, Capital Management chief fixed income strategist, and custom income solutions, would you be recommending investors go to munis for a safe spot . Absolutely. The longer end of the curve from seven out to 15year maturities one of the few pockets left for investors, particultaking advan the incremental tax investment because of a segmented markets, there is not a lot of corporations or not International Issuers who can take advantage of that so the narrower market, the sort of less tradition rather more traditional trading within those markets i think helps leave it in a position of value in the long run. What about the rest of the fixed income space do you think overvalued . Bond yields bottomed yields have come plummeting down, particularly over the course of the last three weeks or so. There are a few things behind this one is a genuine expectation that Economic Conditions might deteriorate early next year. Two is lower yields in many foreign markets. Three is some concerns related to market. We have treasury issuance coming up towards the end of the third and fourth quarters that may strain Balance Sheets. And force the Federal Reserve to act even more aggressively, thereby supporting bond market valuations. Is the issuance going to have an impact on rates are we finally at that day it doesnt seem to be and certainly not thus far debt to gdp ratios in the u. S. Are set to accelerate a bit during the back half of this year, but it doesnt hold that much dern. The bigger issue when it comes to debt issuance is how the debt issuance is strange dealer Balance Sheets in a world where dealers are becoming capital constrained by regulations that werent here in the last economic cycle. What is the risk to market plumbing what actually happens . Right so the Dealer Community ends up in an awkward place where there are basically capital constrained, cant buy as many treasuries as they are forced to do by the heavier issuance and the Federal Reserve has to respond in one of a couple ways. One could be a much more aggressive rate cut than is currently priced in. Another option could be the launch of many quantitative easings or shortterm bond buying sprees to help alleviate the concerns that would make the president happy, wouldnt it perhaps it would. You know, its one outgrowth of Balance Sheet rather i thshod say deficit expansion to the degree that has happened. What are you telling clients about the inversion of the yooeyiel curve . Its a recession indicator, could come, what, in the next year or so is that what you guys are saying, or is there something more granular we should know about whats happening right now . The inversion of the yield curve is a great signal that a recession is coming. Its a horrific signal about when a recession is coming if you take a dart and throw i at a calendar and throw it at any given, a round number is a 10 , 12 chance of recession in thattier in a good year thats based on new information, might go down to 5 , up to 40 i think we are towards the higher end of that spectrum. Reflecting what the yield curve is telling us. So, i mean, whats i mean, for investors who are looking to narrow down that widespread of time that history has given us between inversion and recession, what clues do we have, if any . Is it four weeks is it 22 months . Right and we dont have the perfect answer to that recessions by their nature are impossible to predict with any confidence we have a few clues. The fiscal impulse, incremental spaendi spending from the federal government becomes sort of a tailwind to the economy, it becomes roughly neutral to the economy in the beginning of 2020 capex plans from the cfo and Ceo Community are slowing down a little bit those are the fundamental risk factors that are more sort of timing evidence than it is just the inversion ever the yield curve. They are hinting somewhere in the early to mid portion of 2020 but then when the white hotr advisor navarro comes out, its just a reflection of a fact that everybody wants our debt we have the highest yields compared to all of europe, which is going completely negative it shows the strong fundamentals in the u. S can you make that argument well, comparatively, i suppose. If you are a treasurer of a European Bank or a Japanese Bank or insurance company, when you go out and buy United States dollar debt you need to hedge the currency risk. After accounting for that hedge, u. S. Dollar debt out past roughly five years provides a lower yield than domestic debt in euro or yen terms. Good to talk to you good to see you, sara. Yields up a bit today 160 right now. As are yields across the board. When we come back we will talk about the surge in skin air. Estee lauder up more than 40 for the year take a look at the s p all sectors in the green as we ba in mo16 cka ment estee lauder jumping after a strong beat on earnings, up more than 8 . The skin care and Makeup Products company mentioned escalating u. S. Caroli china tre tensions as a source of tension. That stock up 50 this year, heavily outpacing its Consumer Staples counterparts consumer staps ales are defensi. Like a p and g they are showing strong growth and a lot is coming out of asia i mean, the u. S. Was actually the weaker spot in that earnings report, but doubledigit revenue increases in places like makeup made for a pretty strong report. Certainly doing wonders for cramers long standing instagram thesis, which he will not back away from. You leave the house, youve got to look your best, right hong kong seeing no slowdown despite what had been significant protests and unrest there. Thats what we got from the Consumer Staples companies if there is a slow down its in heavy machinery, in the Manufacturing Sector much like Better Seeing here the consumer in china is holding up pretty well, at least when it comes to smaller items like makeup and hair care sg 2 running like crazy there. These are not cheap estee lauder has some very expensive no, but they are not c caterpillar tractors. No, clearly. Yeah, not bought on credit. Its not cheap, youre right. I have never bought lipstick. Sticking with retail for our etf spotlight, the xrt down 8 for the month. Trading slightly higher today ahead of a busy week for retail earnings macys, nordstrom, t. J. Maxx on deck stacey, good to have you back. Good morning. Good to see you. How much does last weeks retail sales number give you confidence that consumer is going to hang in there what weve learned that is that the consumer is hang in there. As we talked about for the past couple of years, there are the have notes target, walmart, cosmetics with estee lauder and the selfie generation, and the Department Stores and specialty retailsers that have a lot of selfinflicted pain here clearly there are increased signs of potential issues ahead. For now the numbers look good. I saw some numbers on this is pretty geographically specific, new york tourism as we hear concern about the drop of chinese visitors to the United States, how much do the signets and tiffanys rely on foreign customers . That is a very important part of the business. Tiffany last quarter said that the chinese visitors dropped 25 . Thats an incredible number for them they used to say the Flagship Store in new york, tourism was up to 40 of that business its so important. As you see the chinese, a, have less spending power because of their currency, b, you are staying home and repatriating luxury spend and of course, third, the American Brands questionable if there will be some retaliation some of these north american Luxury Brands are under significant pressure here. Tiffanys one example and certainly you have tpr and cpri and tapestry that are also suffering from declines in the wholesale space. Tapestry is down 38 so far this year, and then you have restaurants like chipotle up 88 , starbucks up 49 . They are a strong bifurcation going on in the market around consumer names do you buy the ones beat up because they look cheap or stick with the iners heres what happened. Over the last couple of years we have seen brands, whether under armour, kohls, macys, clean up the channel and say we are going to clean up margins. They did that. But they did not drive their sales through volume or traffic. They drove it through price points that is over that is behind us. And these companies have failed to pick up where they left off and increase volume. So we dont have any samestore sales growth in so many of these names. When you talk about capri, tapestry, coach athey have make a acquisitions and said we can turn around these brands so far this is not working i would stay waway from those stocks so you have to kind of question the direction here. What do you make of macys . You mentioned it, obviously, and the stock took a significant hit after earnings a 9. 4 dividend yield you have to imagine some people are tempted to try to wade that the shares giving that the dividend hangs in there. Thats a good point you look at so many Retail Stocks kohls is yielding 6 . Its tempting to jump in there but of course that yield suggests there is more risk to come and i think there is more risk to come here. Certainly macys, you look at their margin structure continues to come down they continue to be forced to offer more freebies here so the operating margins continue to come down in that sector there is no end in sight estee lauder, you look at atlaa cosmetics, they are stealing traffic from that sector out of the Department Stores. I would continue to avoid them its like catching a falling knife here. Depot, tjx, market, who needs to maknock it out of the park target, there is High Expectations they talked about their private label grocery brand which is so important. They are driving traffic through private labels the expectation there is that their comps will continue to be driven through traffic i have confidence that they will because of what they are doing in private label but certainly they need to do well here. Walmart certainly set the bar. Of course, tjx that have been driving comps through traffic as well High Expectations there. But again thats where the traffic is going, so i would continue to own those stocks i would mention target up 14 times is incredibly cheap versus walmart here. Good stuff. Talk to you soon. Dows up over 220. Lets go to sue herera for a cnbc update. Good morning everyone heres whats happening at this hour at least 66 people were wounded in a series of explosions in eastern afghanistan. This as the country marked Independence Day ten blasts occurred in the capital of jalalabad the plosions came as they mourn 63 People Killed in a bombing at a wedding in cab akabul over the weekend. The iranian tanker seized last weekend has departed. It slowly moved towards International Waters separating morocco and the southern tip of the iberian peninsula. Denmarks Prime Minister says greenland is not for sale and the idea of selling it to the u. S. Is absurd the comments came after President Trump confirmed to reporters on sunday that he had recently discussed the possibility of buying it. And a basketball jersey believed to have an worn by former president obama has been sold at auction for 130,000 the jersey is from a high school in honolulu where the former president played basketball. It came from a seattle resident who said he rescued it from the trash. No details yet on who the buyer is. You are up to date thats the news update this hour david, back downtown to you. Michael jordans number. There you go. When we come back, markets are extending fridays rally of course, there is still that question is the economy still at risk of a recession . We will tell you how to protect your portfolio when squawk on the street returns. Announcer only fidelity offers four zero Expense Ratio index funds directly to investors. And we have zero account fees for brokerage accounts. At fidelity those zeros really add up. Maybe ill win saved by zero stocks rallying. Investors em bracing for the fed chairs jackson hole speech late they are week amid calls from the white house to cut rates further. David rosenberg, chief strategist and economist who says powell will be the pinata whether the recession comes. And quincy crosby. Thanks for your time today quincy, i tweeted a comment you made last week about the germans and deficit spending are these headlines significant in your view well, yeah. The market is sensitive to the headlines. The question is this has been brewing for some time, the chatter about them moving away from a balanced budget to deficit spending think about it they are talking about if germany goes into a recession. You clearly need to do this before that. Whether or not the 55 billion will be enough nonetheless, it has helped the markets today. It help push up yields its help given a more positive risk tone to the market. David, how much of this threeday bounce is about policy hope i actually think a lot of is just technical in nature this is the wednesday was the sixth time this year that the dow plunged at least 400 points. And so what happens is that you get dramatically oversold and then you gifill the gaps, whichi technical jargon for a rebound for these oversold lows. Some blens of fiscal talk germany, larry kudlow trying to calm peoples nerves saying there is no recession. But this rally is 100 purely technical in nature. Does it give you any comfort, david, the fact that stimulus is coming from all places now whether its potentially the German Government, the Federal Reserve embarking on more aggressive easing and other major Central Banks around the world joining in on the party . Can that ease the pain here of the dire recession forecast that you have i would say the answer to that question is no. The German Government actually hasnt done anything yet they havent pledged anything yet. This is purely speculation if you are going to be changing your view based on speculative chatter coming out of a german newspaper, you know, i think that would be a huge mistake i think that weve already got the proof of the pudding, is in the eating, which is that you are republ100 right, sara, cen banks were moving more aggressive long before the feder fed cut Interest Rates at the last meeting. Recession rates have gone up globally, not down thats pushing on a string i think people could be hoping there will be lots of stimulus but in a Global Economy we are choking on so much, and there is so much geopolitical and trade uncertainty Holding Back Investment spending that i dont think Interest Rates are going to do a heck of a lot. Quincy, whats your playbook right now . Whats your Economic Forecast and how do you factor that into which sectors of the market you are buying the playbook is that, you know, the economy is slowing, but is it stalling there is a big difference. And how much does the fed alleviate some of that pain with Interest Rate cuts in september and into the rest of the year . So what weve been doing is hedging the portfolio for more downturn, more volatility. That would be your standard treasuries, gold, geolittle political risk, and also reits reits have done better than utilities. You could see it they are more attractively valued the pi point is, if the yields keep coming down, even utilities will push up. The core of the portfolio is a mix of cyclical and also defensive names, but ones that give you a strong cash flow and dividends. On the other side of that is the more risk. Emerging markets, and this is a big if, if the u. S. Dollar comes down, emerging markets, the algos give it an instantaneous bid. And small cap, which is volatile and risky at this point. The question is does the fed give us enough lae way where even small caps get a bit. In terms of sect ergs, we like the Consumer Discretionary names. The consumer is doing well ijs war moving higher. This could change obviously if the job market weakens with the work week weakening even more. Its already started and we also like the defense names. That is defense as in lockheed martin, General Dynamics they are doing well. The pentagon is giving them a lot of money they have contracts around the world. They have contracts within the u. S. And the defense names are also defensive by the way so in the industrial sector we would be there technology, you are not cloud is not going away. Enterprise is not going away internet is not going away so the more they sell off, the more attractive they become. Thats a comprehensive response, quincy you covered the gamut there. Thats that you wanted. Yeah. David, tenyear coming off of onefive, 30year coming off 198. Do you think those are the lows for a while . No. I think its perfectly normal for bond yields to bounce off the overbought levels much as the stock market has climbed off its oversold levels. This is purely technical. I believe that recession risks are high and rising and in a recession you typically get bond yields going down. The recession, it looks like, hasnt even started yet. As i said, those risks are rising all you really have to know is that even if we go one rung above a recession, call it stall speed, we will build up tee flakesary output gaps across the world. As low as the yields are, negative in some jurisdictions, they are probably going to go lower. Certainly in the u. S. Treasury market i fundamentally believe that the tenyear note is going to close this cycle converging where u. K. Tenyear gilts are now. We are not a fundamental low on yields just yet. Because we have heard this a lot, including today from a prior guest, those that say manufacturing is a small part of our economy. And yes, manufacturing may be in recession or completely rolling over, but the u. S. Consumer is in good strong shape and, therefore, u. S. Economy is going to be fine what do you say to that . Well, look, i think everybody pays attention to the july retail Sales Numbers which, lets face it, i would even say that that was a really strong number no question about it but what else do we know about july is that income fundamentals in the sector deteriorated we know from the pay report that the really big number was the real average workik weekly earn were 1. 3 the work week is contracting even though yet payrolls have gone down. The fundamentals for the consumer and we saw that on fridays university of Michigan Sentiment index, the fundamentals are deteriorating if you look at income expectations in that survey that came out on friday rolled over in a very significant way. Id say this yes, 100 true that manufacturing is a small share of the economy guess ma you go back to 12 years ago when i was at meryl, what were people saying to me every single day . Housing is only 5 of the economy, dont worry about it. When you shock one part of gdp with lag it affects other parts of gdp this is not just the u. S there is a critical component of gdp called capital spending. Business capex which so far this year globally is running negative 5 at an annual rate. And that is going to have a knock on effect with a lag and other things, consumer spending. I would not extrapolate the good news on the consumer down the road even a as it pertains to the u. S. Spending right now. My forecast is that will be the last leg to drop over the course of the next 12 months. Both you have came to play today. David and quincy, thanks for that good stuff see you soon. Thank you. As we go to break, checking shares of lyft, that lockup period from the ipo ending today a month earlier than expected. That news sent the stock lower after earnings and a quick programming note thursday and friday we will hear from some of the most powerful economic minds in the world live from the jackson hole summit squawk on the street will be wup50fter this. Dos 2 from using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Could be the makeorbreak moment for the markets this week find out more on adgniocn. Ctrinatn. Bcom more squawk on the street coming up. At Southern New Hampshire university, 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. All day here on cnbc we are focusing on the great American Consumer we turn our attention to one part of the economy thats blossoming diana owe lek is live in washington i dont think its housing, diana . No, its fitness. A record 71 Million Consumers use some kind of health club last year. They are not just doing it in bic about big box gyms the biggest is names like barrys bootcamp, orange, solid core, club pilates there is not enough room on our wall for this. Since last year, Health Club Industry profit up 8 to over 32 billion according to the International Health racket and sports club association. But in 2017, boutique made up 40 of the market. Up 121 in just four years now, compare this to 18 growth for big gyms and boutique customers pay twice as much a month. Streaming home fitness is growing fast names like peloton, gaia, beach body, tracey anderson, the mirror in a survey, largely millennial reader ship. 21 of respondents spending on digital thats twice the share in 2016 peloton, which comcast, cnbcs Parent Company, does have a stake in, is the giant with plans to go public its in a quiet period right now. The latest stats are from february when peloton told cnbcs make it that investors put about 994 million into peloton and the company is valued at 4. 15 billion it was on track to hit 700 million in revenue with 400,000 bikes sold that does not include the new treadmills Planet Fitness is one of the few publicly traded companies. Its stock is way up year to date with strong sales and it has doubled its locations to 2,000 in all 50 states analysts are warning of a slowdown if we go into a recession. Now, most fitness is backed by big private capital, tpg just brought crunch and stephen ross equinox. Relate is doing cobranded hotels and residences hoping to capitalize on the fitness boom see, sara, i got real estate into it. How about that are you working out while you are talking to us . No. I already worked out this morning. Im just hanging im on the bike, you know. Here is my question, diana. With all of these competitors out there, is it becoming cheaper for us to belong to gyms and take classes i mean, it still feels like so much money as you just reported is spent on this. Yeah, no. The short answer is no you have class pass. You have discount deals. If you are going to go boutique, you are going it pay more. And big box gyms like Planet Fitness are cheaper, but you get a lot more they are doing things like streaming home, like crunch has its own streaming home fitness brand. If you are a basement rat like i am, you have options at home people are double up the editorinchief of a sweat life told me not only are. Yeah, short afternoonswer is. You have class pass, you have discount deals, but if you go boutique, you will pay more. They are also doing things like streaming home, like crunch has its own streaming home fitness brand. So if you are a basement rat like i am, you have so many options, but you are paying for those as well. And a lot of people are doubling up im told not only are millennials working out in boutique fitness companies, but also streaming at home so paying twice. Diana olick, thank you. And that doesnt even throw in how many people are spending clothes, supplements, everything anyway, our series focusing on the great American Consumer continues all day today. Later on the closing bell i go o well talk to ron johnson about how he sees consumer spending. Le wha also what he is doing around electronics. And also interesting to hear from jon fortt and consumers are spending on rides to get to that gym and lyft has a lockup expiration today. Even though it is just 15 build billion in market cap, uber has been moving in lock step so does hitave broader implications well look into it our 18 year old was in an accident. Usaa took care of her car rental, and getting her car towed. All i had to take care of was making sure that my daughter was ok. If i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. Were the gomez family. Were the rivera family. Were the kirby family, and we are usaa members for life. Get your Auto Insurance quote today. You spend days researching bed sheets. And weeks picking a dog bed. So why would you settle for just any bank . Just do what you do with everything else. Ask the internet ask your friends. Ask your co workers. Were pretty sure theyll send you over to us. Because were not just a bank. Were an ally. Ally, this is pamela how can i help you . Welcome back Rick Santelli live on the floor of the cme group ira harris, lets get right into it yield curve inversion lasted about five minutes it is steepening a bit, but we are seeing buying coming off the high yield levels. Your thoughts. Makes perfect sense started to get a bunch on friday, got a bigger bump after the 3 00 close here. But because of the fed treasury came out with that announcement ultra long bonds. So two things that we have to go over lets start out with the ultra long bond. I cant see how it wouldnt be a good idea to issue long maturi y maturities well, but if you do it, you better go big or go home because the market is in terms of size . Size. You cant just do a little bit this is the United States market, u. S. Treasury make york and it has to be able to sustain itself when they brought out the seven year notes, they didnt have a quite large enough pile took a while you need a lot of supply to keep lick quid market. Right goes back to 1792, we need a success to be able to sustain the credit market, you need a robust credit market and the other big driver of course has been germany, talking about stimulus and maybe not a balanced budget or budget surpl surplus. You have questions in that regard first of all, really need to see a name i know we have some people of substance, but today they talked about a slowing but no name attached to it because people are trying to push germany and that is not a like the rest of europe they are helping to support people . They are trying to push them off being fiscal conservatives and create a fiscal stimulus program. And president macron goes to bed every night and prays for a recession in germany and i dont mean like a mild one. Because that will get germany to actually embark upon fiscal stimulus and nobody would love that to happen more than salvini in italy because then the gloves can come off and he can do whatever he wants. So all eyes are on germany and they are pushing hard. Problem is that they have brexit to contend with at the same time which will slow this down. One thing i have 00 noticed is after the whole diesel issues, Global Dynamics of course have suffered in germany autos are king with regard to the export side of their economy. Just the notion of more electric, that alone will play with their future when you add the rest of it and were out of time, but it is a big deal absolutely. And they will have to get advanced battery work. All right karl kibt knCarl Quintanilla, b. And when we come back, a lot more on the rally. Faang oig uniformly in the green. Squawk alley starts in a few minutes. It is 8 00 a. M. At google headquarters 11 00 a. M. On wall street. Squawk alley is live. Good monday morning. Back in black may not be appropriate for the month today, but we are in a good position on the markets. Do