Transcripts For CNBC Squawk On The Street 20240714

Weekend for labor day. Road map, it starts with some optimism on the trade war front. Same thing we were saying yesterday. Stocks rising amid cooling rhetoric but here come tariffs. A new set, theyre going to be hitting chinese imports and will kick in this weekend. Keeping an eye corporate earnings, plenty this morning. Campbell soup, ulta, dow, workday. Shares rallying, this on news that 16 models will be exempt from the china import tax. All three major indices in the red for the month. And the nasdaq is the biggest decliner still down more than 2 , this might despite what has been a last rally the last few days well see how we end the month. It has been a round trip, actually, from last thursday to yesterday on the s p 500 you recouped all that was lost on that friday, a surprise escalation in trade war fears. Todays open at the s p level that were seeing right now, it would take you back three weeks. Basically august 8th, most of the losses of august, it is kind of partly, i think, just tactical people really did in the equity market get very negative, positioned very cautiously, sentiment took a dive, lots of flows out of stocks. Lots of downside protection. You had this real seizing up of concern based on what the bond market was doing now thats eased slightly and maybe a sense that, you know, the trade news can stay sidelined for a little while and were just recouping i think it makes it a tough return to work for a professional investor who went away thinking youll have a chance to buy an oversold market at the low end of the range after the labor day holiday. You come in, like, well, were right back to the top of the range, not as oversold as i was hoping it was and we still have the same issues were dealing with. The bond market is not reacting as enthusiastically or optimistically as the stock market 150 on the ten year, great, but wow. Right, exactly. You have this inversion issue to deal with. The technical analysts are saying that we are seeing quite a nice recovery. This morning matt mele notes the support levels held in two key groups that everyone was watching the transports and the russell 2000 both of them had underperformed for all of august. Both of them are seen as a bearish sign on the economy and the forward view and we have seen the june lows hold and thats potentially a good sign. And recovery in the past couple of days has been relatively broad in terms of volume you had money rushed back in because the outperformance of bonds so extreme and people were positioned really for further downside in stocks right now, it is kind of a tactical, okay, we overshot just a little bit in the shortterm, the big question obviously is do yields give you clearance for further optimism in stocks the volatility index is looking like it is going to decline toward 17. The last time the s p was at this level, we were down, you know, 16 so clearly a little bit of a reserve out there, people saying were not sure if this bad weather has passed yet. Sara, we were sitting here on closing bell just a week or so ago, talking about a brief inversion in the 210 yield curve. Now it is more constant. It happened a bunch of times. There was concern then that doesnt seem to be widely shared now in terms of it being a key recessionary indicator. I dont think anybody disputes it has preceded seven of the last recessions. They dont. We detailed how many people have come on and talked about unique factors in this current environment. The u. S. Is the high yielder. The foreign governments and Foreign Investors and foreign Everybody Needs yield and we have positive yield. And when you have so Much Negative yield, the money rushes into the u. S thats one of the main explanations and actually if you start looking at the end of the month data, Foreign Investors did pile into u. S. Stocks and u. S. Bonds at the fastest pace in about a year. 64 billion worth of u. S. Stocks and bonds in june. Largest amount since august 2018 we saw that in the price action, but now were getting the confirmation in the flows. Which is a good thing. The other thing i would point out, mike, our economy is still in pretty decent shape even the latest news on the economy, yeah, big pending home sales miss, but consumers strong, Consumer Confidence high so it is really hard to get on board with that inversion recession call if youre looking at some of the even the forward looking data like jobless claims it is true. Personal spending was a little upside surprise today. In the same theme, of course, you have the counterpoint to that, which is, yeah, after the initial inversion, it always sort of starts to look good. Yields have come down. We have gotten a little bit of a second wind. So i dont think youre going to get liberated from this debate of are we sliding toward zero growth even if were not sliding toward zero growth. It doesnt tell you when. So it is hard. With the tariffs set to go into effect on sunday, President Trump is weighing in on gms president in china this morning. Tweeting, General Motors, which was once a giant of detroit, is now one of the smallest auto manufacturers there, they moved major plants to china before i came into office this was done despite the saving help given them by the usa now they start moving back to america again. Lets bring in phil lebeau in chicago. Automakers yet again, target of a president ial tweet, though. This is getting an eye roll, not only at gm headquarters, but in the Auto Industry and in detroit. This tweet is primarily intended for a broader audience not for gm, not for the business community. Everybody realizes there is very little in that tweet that is accurate or correct. General motors is still the largest automaker in the United States it is still one of the largest, i think it is the largest of the automakers in terms of employment in southeastern michigan and they didnt move their plants from the u. S. To china. They started establishing plants in china, going way back to the days of rick wagner. He set the blueprint for the Auto Industry in terms of you build in that country to sell in that country almost everything that they sell in china is built in china thats why those plants are there. They didnt take plants from here in the u. S. And say, well, you know what, lets move it over to china and well bring it some of the models back here to the u. S. Thats not what happened so i will say this, guys while this gets an eye roll, in the Auto Industry, and everybody will say this is not correct, i have heard from other people, just regular people who will say to me, well, you know, the Auto Industry, they moved their plants to china, i say thats not correct, they come back and say, really . Thats what i thought. Thats not just because of President Trump. Thats just a general idea that is out there. Phil, it is important to point out, as you always do, china is the largest auto market in the world and probably will be for forever right right. Even this year, they had 13 straight months, guys, of sales dropping year over year. 13 straight months and still going to sell 23, 24 million vehicles think about that that dwarves what we do here in the United States which might be 17 million if it is a strong second half of the year. We were just talking about performance for august as we wrap up the month, phil. Autos as an Industry Group down 7 for the month auto parts down 7 is that a reflection of all of the new tariffs and trade friction or are people reading into that as some sort of forward looking indicator, cyclically for the economy autos have been out of favor for a long time. Investors look at this industry and say where is the growth . Youre investing heavily in autonomous and electric vehicles were not sure that things get a whole lot better from here look, the United States is the most lucrative auto market in the world, General Motors made a couple of billion dollars in the Second Quarter, in the United States, theyre doing fantastic here how much better is it going to get . If youre an investor, you look at the United States auto market and say, not sure it gets a whole lot better for these guys from here. They have to make all these investments in the future. Thats why auto stocks in general are not doing anything and in terms of the trade impact, thats the part suppliers. They feel an impact because of tier two, tier three components in china who ship over parts to larger components that go into vehicles those are being impacted. Phil lebeau, phil, thank you. You bet never a dull moment joining us on the overall market take, Brian Jacobson and steve fultz. So what do you do . Do you buy into the optimism on the u. S. China and the markets we have seen i cant believe any selfrespecting deal maker would fold now for a multiyear truce or deal. You got chinas economy leaking over to the consumer side, weakening. You got europe in trouble in the continent. You want brexit to go more towards the uk way most importantly you got the fed meetings coming up and you really want rate cuts. Why would you settle now so there seems to be a little misplaced optimism there as far as i can tell. Youre saying why as President Trump would you settle yeah, lets face it, hes running this trade negotiation it is being done at lower levels by function aries, thepolicy overall is being set in the white house. I dont think there is any great rush and as the month progressions, we might get lower prices in the fourth quarter, particularly if the fed drags its heels on rate cuts. Brian, the bond market is kind of dictating the terms of this debate. We were talking about it, we had this recent pretty steady flatness of the yield curve and credit markets have been okay. It is not like the entire bond market is declaring a recession is on the way. Where does all that bring you . For our team, still favoring adding some of the credit risk, but in a very judicious way. We have seen that treasury yields have fallen they dont seem to be able to get back up. But yet if you look at credit spreads, those havent blown out. And in the past, if you look at what are those conditions that say that a recession is more imminent, it is usually about the inverted yield curve and the spreads widening thats not to say there wont be a recession, but it is an imperfect indicator as to when will it be a slow slide over the next two years or how long it is not a very good indicator about when it will happen. Given that what our take is, that we will likely see continued economic showdown, but not enough to really see a dramatic increase in default as a result, the fixed income portion of our portfolios, we like adding that credit risk at the same time, were not that afraid of adding the Duration Risk were stuck in a somewhat slow sluggish growth environment with very low slow inflation. And that means that yields are likely to stay range bound how are you going to get a return for your clients if youre putting them in to credit right now . Well, believe it or not, there are plenty of opportunities for credit if you look at the lower quality investment grade, higher quality, high yield. If you look at emerging market debt, cocoa bonds in europe, pan european high yields so it does involve really moving out along the risk spectrum a little bit more. We manage multiasset portfolios. Were creating a multiasset income type strategy, were also adding global dividend yield stocks interesting dimension too, i dont think investors should be so fixated on clipping coupons and collecting dividends they can consider what is the total distribution potential of their portfolio. It is not just about the income, but can you create your own income by having more tapping into Something Like Capital Gains that you accumulated. To that point, barry, do you think that we are at a point where investors should be more aggressive buying dividend yielding stocks that are yielding so much more than treasuries more than the 30 year treasury for the First Time Since the last recession where are you on that . Positive since last summer on the bond proxy defensives, the staples, the reits, the utilities. When you look at the mild recession of the early 90s and early 2000s, very mild, the real yield, the real yield fell about 100 basis points we started june 20th at a 50day moving average and three month curve yielding the real yield then was 25 basis points so there is no reason we cant go to a minus 75 basis points on the tips and thats how you make some money on credit as well. I heard the earlier discussion you would be looking at a tenyear yield of somewhere around 75 basis points thats with a mild slowdown that doesnt hit the consumer side as much as the corporate side of the economy. Leave it there, barry banister, Brian Jacobson, thank you for joining us. Coming up, Market Reaction to earnings from the likes of campbell soup, dell and ulta sara and i will talk about contouring and why its decline is actually contributing to an incredible decline in shares of ulta youll want to look forward to that plus, another look at futures as we get ready for an open 15 minutes from now 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. Should always be working harder. Thats why, your cash automatically goes into a Money Market Fund when you open a new account. And fidelitys rate is higher than etrades, Td Ameritrades, even 10 times more than schwabs. Plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. Just another reminder of the value youll only find at fidelity. Open an account today. Number of earnings movers to get to this morning, campbells soup rising after beating on the bottom line and top line dell up sharply, better than expected results there helped by strong sales across the computer product line check out shares of ulta plummeting almost 25 after posting a quarterly net lowering full year guidance which the company says reflects head winds in the u. S. Cosmetics market davids done a lot of work here. And i think the key question is contouring, has it peaked . Yesyou brought that up to me i was reading the Conference Call not really that many people to call this morning. Ive taken a reading, listen, they had total sales up 12 . Gross margin expanding 40 basis points all of which is really not bad it is pretty good in terms of continuing the growth story there. But the problem as sara just alluded to is 50 of the business and their highest margin category is cosmetics they say they continue to drive meaningful market share growth and makeup across both mass and prestige but cosmetics overall in the u. S. Market is challenged after several years of very strong performance, it is decelerating. Right now, it has gone negative. And when they talk about why, they say the main issue driving the softer cycle in cosmetics is newness and innovation that have been the focus of the most brands and have not driven incremental growth and over the last year, few years, they have seen a strong growth in cosmetics driven by new rituals in application techniques like contouring and brow styling and that innovation resulted in new makeup rue seen teoutines and nt doesnt seem to be happening anymore. Why . Im a huge fan of the contour. You might notice i do it every day. But seriously, this has been a trend across the Cosmetics Market we have seen it out of Companies Like estee lauder and others who have done well because the growth is in skin care and other beauty products. But as you said, ulta exposed to the Color Cosmetics category, which i guess mary dillon, the ceo, is blaming on the producers, saying theyre just not innovating enough and not coming up with enough styles my window on this is the endless loops of youtube makeup tutorials that my daughters will watch. Though i do wonder if thats maybe reached a little bit of a saturation point in terms of certain modes. And just having a very finished look i dont know what i do know, though, this stock was valued as a perpetual growth retail momentum story not stock momentum, but fundamental momentum and how many stores can they put out there and had great comps and performed very well for a long period of time people saying, look, course correction here, they do not have necessarily a strong and organic growth path as we thought, it is falling away. Again, 50 of the business and the largest margin contributor is makeup, both mass and prestige, which i think we maybe we need to clarify for people what that is. The behaviors youre talking about, you keep i keep contouring Kim Kardashian keeps contouring so im not a believer in the death of contouring. They said kkw beauty by kim is coming to ulta beauty. Kim kardashian, theyre hoping will get things going again. Maybe the average woman says i cant compete with kim kardashi kardashian, sara eisen and this. Kylie is a billionaire. Kylie jenner. That helped ulta in the past. Preopen down 1 . I need to figure out what contouring actually is. You have it on you. As we count you down to the opening bell, another look at the futures. Going for another strong day on wall street. Dow futures up 160 thats on top of the already pretty strong gains we have for the week well be right back. A look at how we open. Six minutes from now, another higher open would be our third day at least remember, one week ago, very different story, opening bell coming up. See thats funny, i thought you traded options. Im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . 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 final trading day of the week, of the month, of the summer bob pisani at post nine to join us, run things down. We were talking during the br e break, you forget, your returns have been amazing we had a complete reversal this week this is unusual this week. The s p is up 1. 4 the equal weighted, all 500 equal weighted, up 2. 6 . Thats 460 stocks up this week, only 40 down thats weird this is a broad rally. Everything is essentially up 1. 5 to 3 . Why . Why is this happening . Less trade tension some rebalance and the answer is maybe a little of both. Look at the cyclicals selling off. This is much better than it was a week ago all down double digits theyre still down for the month, even though we had a good rally this week. What i want to point out, we were talking about, the treasury rally this month has been titanic. The 10 to 20 year up 6. 5 . That tlt, i dont remember ever seeing a longterm bond up almost 11 in the month. That is extraordinary and that weighs in a blilittle bit maybe there is rebalancing going on. The issue is where are you on the Global Growth slowdown do you believe it is going to have a big slowdown or a little slowdown if you believe a big slowdown, the bears say it will accelerate, maybe recession. What i care about, what is the earnings outlook earnings, if youre really bearish, could be flat to down 20 . In a typical recession, typical down market, you get earnings down 20 2008, down 23 but the bulls will argue, well, wait a minute, thats unlikely outcome. The geopolitical risk will subside, well get a truce or a deal and earnings could be up 5 to 10 what do you do with this you could drive a truck through the earnings estimates you got a big ask that is wide on the earnings side. What it doesnt tell you is exactly what is priced into the market for earnings. We know what the estimates are, we can look at it and say it looks aggressive to say we get double digits starting, by the way, in the first quarter. Thats only a few months away. You can say that, if you look at the stocks within the market that look like they have been beaten up, nobody believes the earnings, thats the push pull to me. Stocks to bond dynamic, fascinating. It shows maybe the bond market got everybody thinking too much about recession. I think the problem we had and what the market is reflecting if they dont have a lot of confidence in the earnings projections, you got that kind of dispersion, opinions on the 2020 earnings number, the market will be all over the place and reflecting that uncertainty. Thanks, bob hear the applause, hear the bell look at our real time back at headquarters more green on that board big board, boston beer company, celebrating the growth of the truly hard seltzer nasdaq, chinabased Blue Hat Interactive Entertainment Technology all about hard seltzer. Combines the bubbly water and the young people getting into Healthy Drinks this is where the growth is in the alcohol business. Not about contouring. About hard seltzer. Well see well see about contouring after Kim Kardashians line launches ulta, talk about how the stocks are getting rerated off bernings, best buy closing down 10 . Ulta, it was a lower sales forecast, there was a lot in there about weakness in the u. S. Cosmetics market one question going into ulta is where the valuation was on the stock. This has been a hypergrowth story, one of the favorites. I remember simian segal getting a lot of grief he was a little early on that. But clearly thats coming to fruition. The market was getting a little wobbly on the outlook for ulta traded at 360 in midjuly. So it was already kind of on the downswing a little bit to the low 300s and this is one of those quarters where you say, fine, if youre a growth investor, you want to lower your sights for what it can do, organic sales growth, mostly top line. It was a category killer in some respects i think it was a hot category and a good operator. If youre losing the tailwind and the category, thats going to have people retreat. We do have some winners this morning. We mentioned dell and campbell both out with earnings let me hit dell. Havent talked about it that much, have we, since it became a truly Public Company roughly 36. 5 million market value. Cash flow, in the quarter, a record 3. 4 billion adjusted Free Cash Flow driven by what strong profitability and working capital discipline thats what theyre saying also, deferred revenue up 17 to 25. 3 billion. And recurring revenue makes up 20 to 25 of the revenue each quarter as im sure many of our viewers know investors typically are willing to pay a bit of a higher multiple for recurring revenue given you can count on it overall, a very positive quarter from dell this morning again, i was focused on the fight as often is the case when shareholders are objecting to the Exchange Offer and everything else. It is now public for a while. It is arguably probably still kind of undercovered, underowned there is a complexity factor here in terms of how it became public in the various stakes involved and things like that. It seems like off the price, sort of having this move, i was saying when they reported, not the same exact business, but hpe this week had a really bad run, cheap stock, and you got a relief bounce. They compete with each other. Campbells is a company you follow closely for a long time how is the quarter light at the end of the tunnel a nine cent beat on the bottom line sales also looked pretty decent. 2 net sales, 2 organic sales the snacks division, remember, they own Pepperidge Farm, goldfish is doing well and also they own snyders, thats been a higher growth category. Paid a big price for it under the last administration. They have been spinning off businesses, trying to clean up the Balance Sheet. Thats why the earnings are a little messy but if you look at the underlying sales trends, theyre improving. Here is the biggest point for investors, soup sales are stabilizing. Oh. That was a problem, condensed soup, you know theyre investing behind this brand. Wont be a Straight Line all the commentary on the call, still going on, up der the new ceo and the outgoing cfo, which they announced theyre getting a new cfo from chobani today is about the stabilization and the investment that theyre going to bring to the soup category one weak spot is v8, but theyre encouraged by the plantbased trends going on in the market. Theyll try to pump money into that brand as well overall, actually, relatively healthy set of results that as we can see the market is applauding up almost 7 and stock performing fairly well significant position, got a couple of board seats, agitated for change, involved in the new ceo taking over there. When you talk soup stabilizing, though, i tend to i go to craft heinz and think about their product portfolio. No stabilization there i think earlier we showed it, it has been such a poor performer this august. Right always sort of campbells down with it in terms of the underperformers. Theyre making a stand here. Theyre turning it around. So clearly kraft is the one that is lagging behind. They lost their cfo recently as well yeah. And not much look, Consumer Staples so strong lately because they pay high dividends, were actually seeing some signs of organic growth there, the healthy consumer is working, the turn around plant, the new ceos making the mark on their companies. I think one of the questions for investors as we look to september, are Consumer Staples going to continue to be the hot place to be. Right because they really have been just lifted on this tide, the sense of quality stocks. They have been really strong performers it would be logical if you got more certainty about the Economic Growth outlook that they might give some of that outperformance back. So, yeah, that is something didnt happen yesterday, really. Staples were flat, knocked down, as the rest of the market went up workday, reported last night, and really only because it is a 40 billion Market Cap Company that has been an amazing performer, a play on a lot of the enterprise software, cloudbased software, dynamics people are excited about up about. 6 right now up as much as 1 it is 16 off its high it is in this very expensive stock, great fundamental trends, everyone has embraced. But it has backed off from its highs. Maybe stabilizing. Had some guidance, so far seems like subscription trends up 34 year over year is enough to hold the stock in place now 14 times revenues or Something Like that. Number of people have come back to sales force this quarter and said how strong it was, though it did get wrapped up in the decline late last week, i believe. And stock has not done much this year 3 , sales force, which typically we have come to see as a strong performer over years past. It has been essentially software really the strongest part of tech this year, in terms of making new highs and leaving the group and sales force has been sideways in that trend, gone on its own die nynamics. Worthwhile, worth noting that it is making another little attempt up toward the highs. If you look at the best performing stocks for the month of you know best performing stock for the month of august. No. Target, up 25 for 26 for the month. Yes, they had an outstanding quarter, but it is consumer stocks, not just target. Number two is Dollar General up almost 20 for the month of august. Extended its gains yesterday after stronger than expected earnings. So it is really the retail performers that are actually benefitting from this healthy consumer citigroup had out a note last night, if the u. S. Consumer is in great shape, why are the retailers going in Different Directions the conclusion was the consumers is in better shape than the retailers. Theyre all dealing with their own sort of issues and secular problems but if youre nailing it right now, that is what was rewarded during the month it is also just striking to see, i mean, i mentioned the rerating on ulta today. The reactions to earnings have been so sharp, either up or down i dont know if thats a setup, the market was at a record high or we have low Interest Rates or what. Hits a raw nerve. Any worse than expected numbers, you get caught up in the macro story. Something bigger going on in the market, august reporting season, it gets a little jumpy with air pockets and stuff. I was going to point out the position of the overall market, the s p 2937, the recent high august 8th is 2938 this market just kind of goes up to a certain level, everyone has been watching, hangs out there for a little while it did yesterday morning as well the high more for the month, was 2950 thats where if you went above that, you say, okay, fine, august might have been this completed pullback youre in the zone of trying to figure out if were just bouncing and not really making another run at the highs treasury yields up with the ten year at 150. As we end august and head into the fall, and september, any trends we should be looking at in the past for guidance in terms of what we can expect. If you believe the historical tendencies, september is the weakest month of the year on average. Whether it is up or down has been a coin flip in the last 90 years basically. 54 of the time it has been down on average 1 . One of the deals where usually i dont prove them, meaning theyre irrelevant, but theyre not the first, second or third reason the market does what it does my take on it is that the seasonal trends are climate, not weather. Tells you the broad tendencies, it doesnt tell you how to dress tomorrow. For all the talk about the strong dollar, strong dollar, strong dollar, the dollar is flat for the month of august it is up a little bit. But clearly it has been up, you know, over a threemonth time period over a 12month time period head wind probably to earnings nothing like the moves we have seen in the bond market or even in the equity market for the month of august. I would also point out, you know there is still a lot of overseas concerns and overnight we saw, what, 20 more arrests in hong kong. Thats something that wall street keeps an eye on argentina defaulting it just goes from bad to worse there in terms of its currency and bond market. Not necessarily on the front burner for u. S. Investors. But i think it is part of the part bhof what we have to watch many people keeping a close eye. I get stories sent to me about hong kong and whether or not china is having a military buildup on the other side of the border and what they will do, youre absolutely right. Unclear exactly what the Market Reaction would be, but one would think it would not be a positive one should the chinese become more forceful in asserting their wealth in terms of with that hovering out there, i think it is one of those interesting little shortterm tests for the market ahead of a threeday weekend. Are people going to have the nerve to step up and say, fine, stocks look reasonable, well be willing to buy them up 100 points on the dow, going into a threeday weekend when you have still a lot of perceived headline risk, whether it is real headline risk or not. The other thing to watch is europe and the decline of the economy is there as a result of getting caught up in the trade tensions economy like germany, so much more exposed to exports in the chinese slowdown, you know, contracting, is a potential real head wind for u. S. Earnings. On that front, i wanted to point out an interesting oped from tom donahue, the most influential u. S. Business lobby and this country, who he always walks a fine line with intervening and politics, they dont support tariffs, but they do support the president trying to negotiate a better trade deal for u. S. Companies he calls on the president , though, to withdraw the additional tariffs scheduled to go into effect, a desperate last mi minute call there. He gives the president credit for the tax reform and the deregulatory relief saying that causes a lot of spending from businesses and warns that if we continue on this tariff route, we could be heading into recession. Capital investment is a huge driver of the economy. Trump has fought pack at him in the past. Well see if we get any response to that at all a bit more on whats moving this morning, other than ulta, which is certainly a feature today kate rogers. Down almost 26 . Thats right. The nasdaq opening higher by just under half a percent this morning, looking to end the week on a positive note, breaking a string of four consecutive weekly losses ahead of the new tariffs, kicking in on sunday. For the month, though, the nasdaq composite still down by over 3. 5 . Tesla is a big mover this morning on news that 16 of its models will be exempt from chinas auto purchase tax. The Company Raised prices on some of its vehicles in the country. You mentioned ulta, huge mover here, i love that contouring conversation you just had. Down by 25 , the Comp Store Sales lower than expected. The company also lowering the profit forecasts sales of the Color Cosmetics did slow down. Dell up more than 10 . The company reporting beats on the top and bottom line. Thanks to stronger sales on its computer product lines so it is also saying it successfully is handling some of the tariffs imposed on some of it products and another one well keep an eye on, apple, that contributed to a lot of the gains we have seen at the nasdaq this week. It is up this morning and will be one to watch heading into the weekend as the new tariffs are slated to kick in. Back over to you kate, thank you chicago pmi due out in a few months it has been a wild week with respect to Interest Rates. One week of ten year, you know, were down two on the week, but were actually up two on the day. So after the initial breaks, most of the big drops in yield happened earlier in the month. We have stabilized we havent bounced high off of the lows that we have established. And, of course, they are cycle lows and with regard to ten year and 30 year, theyre very long 30 year all time. If you look at a chart of tens, just this week we touched a level that we havent seen since july overseas, the two year in europe, known as the shots, traded minus 92 basis points as you see. Finally, if we look at what is going on in foreign exchange, i like to talk about the dollar index, sitting on 27. 5 month highs, if you look at the euro versus the dollar, you can see the breadth of the drop. Now, of course, were expecting a big number right now and that is our august read on chicago pmi, expecting a number under 50, surprise, 50. 4, now, considering our last look was 44. 4, the weakest since christmas of 2015, this is a nice jump. It only takes us back as far as our 54. 2 read that was in may. It really isnt about how far back you have to go. This is a very important jump in the series, back in expansion mode and will continue to monitor there is issues related to trade affecting the industrial aspects of this country and many others and, of course, that continues to weigh on lots of various parts of the Global Economy sara, back to you. Rick, thank you. This follows manufacturing these survey numbers were worrisome last time around they were the most worrisome really set of data we had. A lot of the Manufacturing Industrial survey based numbers. It is a survey we are going to get the official ism tuesday. Right. Thats been very widely watched. And there has been this subtle trend of better than expected Economic Data here and around the world. Better than expected, in the great. Well see if that sort of changes perceptions a little bit of where we are in terms of growth coming along with better personal spending numbers this morning and 2 ratification of the Second Quarter gdp. And coming with more tariffs, which are set to kick in. Right, exactly. The question is, is this relevant to the outlook. Right. Negative rates continuing to get more negative in terms of germany. Who is buying this stuff, sara people who made a ton of money buying bonds and watching the price go up. Thats a lot of it and people who literally have to. Insurance companies on some level have to. Pension funds there are mandates that they must own something. If you believe the current by the way, a way to make a positive return out of it. You can swap out of dollars and into and youre getting paid a little bit on the currency swap if youre u. S. Based investor my understanding is if you buy if you lever that up, there you go, you might get a bonus this year. The people that think europe is heading into a deflationary recessionary longterm trap. Worth even less. Exactly. All right, there you go good explanations now on negative rates mike santoli making some new calls there. New dynamic. As you can see, were opening higher across the board, dow up 102. S p up another. 4 , adding to the gains of the week. Looking at potentially 3 or more gains for the overall market another positive day on wall street well continue to track the movers for you here on squawk on the street. Stay with us all right. There is a look at cisco it has not been a good august for the company. Worst performer on the dow of course, we know the best performer overall has been rget sara told us earlier squawk on the street will be right back from managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. The u. S. Markets arent alone when this comes to a rough august its been an ugly month for stocks around the globe. Thats right. Lower rates would typically be good for emerging markets, but a combination of a weaker chinese yuan and escalation in the u. S. china trade dispute and slowing growth has triggered 13. 8 billion in outflows from emerging markets in the month of august marking the worst performing month since the u. S. Election in november of 2016 it serves as a reminder of the highrisk nature of investing in developing nation. It comes as hedge funds have been increasing exposure to emerging markets in 2019 with long and short positions Goldman Sachs Analysis Shows the etf is one of the top holdings of hedge funds as of june 30th. Summing up where we are seeing the weakness, its broader asia, exchina and latin america primarily due to argentinas debt restructuring plans today creds and m cutting the nn by three notches to triple cminus or selective default argentinas stock market, guys, down 43 this month. The broader outlook for emerging markets as we enter the final three months of the year really dependent on what happens with trade and the currency market. Strategists say if the chinese yuan weakens further that will make goods in south korea, india, among other asian nations that compete with china less attractive invesco is saying over time investors will become more selective of specific emerging markets versus finding a basket of stocks that track emerging markets. That will probably be a strategy they use over time back to you. Thank you its a really good point the chinese currency down almost 4 for the month of august thats like the worst month its ever had you dont see moves like that in this managed currency. Whether its china fighting back on the trade war or weakening on the new tariffs, it is up for debate the Administration Made itself clear its a currency manipulator. I think a big question Going Forward. Will that continue we have seen signs of stabilization in the last few days. Coming up, keeping the rally going, we will have more on that upward momentum at least so far we have seen for stocks. With pressure rising, and racing. This is also mias pulse. That her doctor keeps in check, so she can find balance. This is mias pulse, and now its more stable than ever. This is what medicare from Blue Cross Blue Shield does for mia. And with over 80 years of healthcare expertise, imagine what we can do for you. This is the benefit of blue. Testify de good friday morning Everyone Welcome back to squawk on the street. Im sara eisen here with david faber and Mike Santelli live from post 9 at the New York Stock Exchange Carl Quintanilla has the morning off. Taking a look at the markets, just adding to what has already been a strong week for stocks, s p 500 up a third of a percent. Dows up 97. Gains across the major rinaveras now of 3 , limiting august losses to 1. 5 down for the s p. Not as bad as it looked before we came into today. We have Economic Data across the table. Lets get to Rick Santelli for that yes, a final read on august for university of Michigan Sentiment comes in definitely not as strong. 89. 8 our midmonth read was 92. 1. That now disappears. Sequentially, that follows 98. 4. So this is a large drop at 89. 8. As a matter of fact, i will have to go into the way back machine. That is the weakest level since, oh boy, looks like about october of 2016. October of 2016. So not a pretty number with regard to michigan lets go through the inflation aspect, shall we oneyear inflation outlook constant from last monday and mid month read at 2. 7. Five to tenyear constant with the midmonth read at 2. 6. Sara, back to you. Thank you a little light there on Consumer Sentiment. Our roadmap this morning starts with wall streets trad booth. Cooling rhetoric as we close out a wild august. What should investors expect ahead. Plus, shares of ulta beauty plunging we will go through the quarter next. And the tariffs, a new round set to pikick in sunday we will take you live to to americas busiest port and one ceo who calls the threat to his business, quote, a nightmare. Sundays tariff deadline looms. Our next guest has a firsthand view from corporate and institutional clients navigating this market volatility he the u. S. Ceo of bmp welcome. Thank you for having me pleasure to be here. In honor of your appearance here, the president has just tweeted and maybe in mind a little bit about the currency market saying the euro is dropping against the dollar like crazy and if the fed and the fed does nothing our dollar is the strongest in history. Sounds good, doesnt it . Except to those manufacturers that make products for sale outside of the u. S so here are the numbers. The euro down 3. 4 so far this year it is down 0. 8 for the month of august and its down about 5. 3 over the last 12 months. Its significant the euro has been weak against the u. S. Dollar. Whats your Vantage Point as the u. S. Ceo of a french bank . First and foremost, this economy is very strong gdp, employment, Consumer Spending still, and thats a big factor in terms of driving investors to invest here the second factor which is really a consequence of Central Bank Policies across the world and in europe and u. S. Is the status of rates. You have still negative Interest Rates in europe and you have fairly healthy positive net margin Interest Rate here. You know, sitting, bridging europe and u. S. , we have seen inflows of money coming in which support the dollar further, but its more like a mechanical impact on what about this view from the president that the fed should do something about it target the strong dollar because it is hurting our manufacturing . Is that would you agree with that, with a window into the economy . I am spending most of my days and i love it with u. S. Ceos, with my clients, right and what i can tell you is they have strong confidence in the daytoday economy i can see them moving. I can see them pushing the business forward where there is uncertainty is when you speak with the medium term and long term you see a still significant trend in terms of share buyback, which explains a willingness, a better, a safer sentiment to return value to shareholders for investing longterm. What i sense here is uncertainty not coming so much from the doll oth er or euro today its not so much driven inside domestically, but more like by global, gee l geopol political, and social tensions. Has that increased in the last six months in terms ceos here in the u. S. And their uncertainty, so to speak i think it has. As you mentioned, trade has been a big factor just let me share a live example here i was with a u. S. Ceo last week. He is leading a big u. S. Manufacturing company here he is exporting to china and it was explained to me over the last 12 months he has seen tariffs going up and down, from 15 to 40 done to 25 impact on the p l, managing uncertainty. Meantime, he is importing steel, aluminum, same concept thats what ceos are trying to manage we are spending i can tell you a lot of time at bnp being a lead in terms of advising, in terms of promoting hedging strategies across rates, currency, and commodities. You have a business in the Capital Markets advising u. S. Companies and advising european countries. I am curious, is there any demand for u. S. Companies to before owe in euros overseas given the negative rates is that an opportunity or not something that really works . In many ways, its an opportunity first and foremost in terms of investor diversification. More important when one is in vl tile times its an opportunity in terms of locking in lower rates Going Forward. As the lead bank in the euro bund over there, we have been really leading a lot of transactions there for large u. S. Companies, but with international scope. One of the questions as the markets now essentially price in a lot more fed easing, or at least a couple more easing moves, is whether that would have an affect on these dynamics you are talking about. In other words, the cost of money is not a main challenge for companies or consumers even. Would lowering rates that much more do much of anything and do you still expect it . I think there is a real discussion between lower rates and better, you know, i would say economic dynamic here. Listen, the only thing i can really see here is the fed has more ammunition today to maneuver versus most of the rest of the world when you live in a negative rate environment, its true for the u ozone, part of asia, this is more complicated to play with. As it relates to europe, i believe there is a potential next step, not only Monetary Policy but reflecting on fiscal stimulus. What do you think the ecb is going to do next they have been signaling, and im looking forward to this, that by midseptember when they come up with the updated policy that they are willing to provide more stimulus. Then i think the world is waiting to see how a strategy develops. What does it mean for the European Banks i mean, one of the Cautionary Tales in this country is we dont want to go to negative ralts, we dont want to go to zero it destroys the Banking System thats happening in europe and japan. Your point is extremely well taken, sara, here. You know, if you look at European Bank versus u. S. Banks, i think they have recovered from their respective crisis in 2011. I think they are better capitalized, better liquid, well managed on both sides. The main difference is one is growth valuation is a factor of growth for any sectors. The second one is what you just mentioned. I think being in negative Interest Rates zone, they have to, you know, billions of deposits with Central Banks, that costs money there is another factor i would like to highlight here this is a Capital Market the main difference between the two regions, you have a vibrant Capital Market here. And u. S. Banks have this ability to recycle at a faster rate, better return, better profitability. 80 of the funding in the u. S. Is coming from Capital Markets in europe, the same, 80 coming from the bank. And thats maybe, back to ecb, there will probably be on the agenda one day as they manage to build and establish joint currency and common currency, maybe building a capital bank could be a good step forward as well. What are your expectation for the last four months of this year in terms of volume, in terms of activity here in the u. S. Where you operate we still see economies forecasting another, you know, 2. 3 gdp growth here overall, you know, the fed continuing to be on the top of it and potentially providing stimulus might probably help the business Going Forward main question to me, uncertainty around geopolitics, politics, and social. Thank you for joining us. Good to see you. Thank you for having me. The ceo of bnp pair ba. When we come back, shares of ulta getting crushed this morning. Down more than the last time we spoke about it why . Well tell you it has to do with contouring a new round of china tariffs, they are set to kick in sunday jane is live at the port of l. A. With a look at whats ahead. Jane. Hi, david yeah, retailers are trying to beat the tariffs coming up i am going to tell you where that ship came in from, where this ship came in from, and across the channel where that ship came in from when squawk on the street returns well, the market is up dows up a 137 the president is fixated yet again on the Federal Reserve and criticizing it this morning. Just in, if the fed would cut we would have one of the biggest stock market increases in a long time badly run and Weak Companies are smartly blaming these small tariffs instead of themselves for bad management who can really blame them for doing that excuses. Well, mike, the fed did cut. That was close to where the market peaked. We have gone down since. Clearly, the market expects more cuts probably going to get them unclear if thats going to be a true offset to what the people are concerned about the economy. What about this idea he says companies are blaming tariffs . I mean like making excuses making excuses for tariffs. That has been a theme this earnings season, especially among retailers and the outlooks of blaming tariffs the truth is the companies will have to pay it or pass it along. Yesterday we were talking about Dollar General, dollar tree and they were talking about how to mitigate the expensive tariffs. They were talking about how, okay, we are going to do this, this, and this to try to preserve the market gives credit usually when they believe that story. Yeah, preserve prices where they are speaking of tariffs,of course, a new round is going to kick in on sunday. That brings us to our jane wells. She is live from the countrys busiest port its the front line of the china trade war. Jane. Reporter hey, excuses or no, companies are preparing for these tariffs. This is the gateway to asia. Okay i am going to show you whats going on here. That ship is in from china, but this ship over here is in from korea and the one across the channel is in from vietnam so you start to see how the supply chain has changed we are seeing another problem here that we saw last year with the first set of tariffs retailers are so busy trying to front load ahead of the new tariffs that we have got all these containers starting to stack up around the port and we could have another clogging and traffic situation gumming up the mix. We had it a year ago when it happened right now the vacancy rate at warehouses in Southern California is below 2 we could run out of room think, for example, like black friday, those tv sets, those doorbusters tvs. Steve ferreira says over an 11day period this month 260,000 tvs came in here to try to beat the tariffs. Even though the president delayed those it was on tvs to december, the ships were already at sea starting sunday, 98 of the goods coming in from china will be tariffed. That is 164 billion worth of stuff. We are talking clothing, diapers, contact lens. I am not kidding you on the list live whales from china im just quoting here. Live asses i assume they mean donkeys exports are down and the biggest growth here, guys, is an empty containers the number of containers coming in full and leaving empty is up 20 from a year ago. Back to you. Well, clearly right they are taking less and we are taking less. We keep using those numbers, jane, in terms of 300 billion overall, but the numbers from china keep coming down, too, dont they reporter imports are up. Now, not just from china, though we are still buying, but overall imports are up a as these supply chains are reconfigured. And whats fascinating is while u. S. Exports to china are down double digits, they are up double digits to malaysia, korea, singapore, japan. I mean, its pretty fascinating. Vietnam. The way things continue to un r ungulate and change as the situation remains in flux. All right jane, thank you very much. With those tariffs scheduled to take effect on sunday, jane wells. Our next guest imports 90 of his products from china, calls the tariff threat to his business a, quote, nightmare and the new tariffs on his products set to take hold in december joining us is jay foreman, ceo of basic fund. Maker of toys like light bright, lincoln logs and more. Jay, 90 of what you sell is made in china . Yeah, thats correct. There is really no production based in the u. S. Anymore. Most of the toy factories that were here left in the 80s during the Reagan Administration so over the last 30 years we have developed an incredibly efficient supply chain thin chia thats where almost everybody in the United States and in the world makes toys. How quickly can you get it out . Well, i mean, i dont think we can get it out quickly at all. You guys do stories all the time if you see how factories operate in india, i am not really sure the American Consumer is ready to start making toys in the kind much conditions you might see in factories in india there is no labor here in the United States to manufacture toys so it seems like the administration is really creating a problem that has no solution except raising prices on everybody and taking profits away from companies and the employees of those companies yeah. I if you are not diverting factories, you are preparing to pass it on to the consumer well, we are not necessarily necessarily have the ability to pass it on. A lot of our Retail Partners tell us that we are not allowed to pass it on. They wont accept price increases. If that happens, what that means is that small and medium size and Large Businesses all over the country are going to have to eat that tariff. And not be able to pass it off what does that do . That means we have less money to invest and expand, less money to give promotions and raises and christmas bonus to our employees. And we have less tax dollars to pass back to the American Government so the tariffs, as was mentioned earlier, arent paid by china. They are paid by american businesses eventually the prices will be get passed on to the consumer sometime later next year right now a lot of businesses will be suffering. Its not just business owners. Its everybody within the company that suffers when a companys profits go down and their Balance Sheet is out of balance. The president just tweeted, and im paraphrasing here, that you are going to blame tariffs for really what is, and i say you as in a small to mediumsized business, your lack of execution there it is. Bad management when really its your own fault jay, what do you say to that well, again i say what is the president expect us to do . He wants us to bring manufacturing of this nature, things like flipflops, underwear, socks, toys back to the United States at the same time he is closing up the border he is telling people that come from countries where low Skilled Labor would be making all that product dont come we have maximum employment in this country so what does he expect he is kind of talking out of both sides of his mouth. Its sort of like, you know, the neighbors where there is an apple tree in between their property and they are fighting over the apples that fall on the ground and the solution is lets cut down the apple tree so we dont have the problem anymore its really ridiculous and he is claiming we are efficient businesses and i would say to you, say this to you his big gripe, as much as anything, because he cant gripe about labor and employment here because he dont have it, his kbri group is intellectual property apple makes all the phones in china and the biggest store in the world is in china. If they are worried about ip and countries like microsoft and apple who are worried about ip, why are they doing so much business in china . Its really a false argument that he is making and there is to solution to the problem that he has created. So when you forecast for lets call it the next half of next year, certainly up to december 15th, what are your expectations in terms of overall demand for the products that you are selling here well, the natural rule is, when prices go up, demand goes down a person will buy more toys at 10 or 20 than they will at 20 or 30. Individual volume will go down certainly as prices go up, the consumer will become more concerned and tighten up of course, the knockon effect of the companies and the employees who work for all those companies, if you know your company is being attacked and its Profit Margins are being taken away and passed along to large agribusinesss, you know it will be a lean christmas maybe you wont buy those toys or cars. This is not a couple thousand of companies. This is millions of employees affected by those tariffs. Its outrageous. We are in south florida right now. We are watching a hurricane come in, and this tariff situation is like looking at those Spaghetti Models every day you are wondering where the storm is go to go, where the hurricane is going to hit. How do we plan thats what were going through. Jay, whats the Price Sensitivity of your products if you modelled out what kind of price increases you might have to impose and whether in fact that really will materially impact demand . Well, the price impact will be directly reflected by the tariffs. If its 15 to 30 tariffs, prices will certainly go up 15 to 30 because its a direct tax almost like a vat tax you find in europe and in asia on the products so the price of products will go up if the price of products go up 15 or 30 , you know, paychecks arent going up. The president s bragging about paychecks are finally going up thats great all the money that people are making from getting a little bit more money that their pay pact is going to go to higher prices on the shelves so there is a direct correlation on the increase of pricing, and as prices go up tsunamis wiconsl spend less i think prices will go up on all the goods imported from china, not just toys. Phones, tableware, sneakers, blue jeans, you name it. And they will go up 15 to 30 in the second half of next year no doubt about it its got to go somewhere. Is there any hope for you moving your supply chain, getting out of china i know the toyota industry is china, as you said earlier cant you just think about getting out of there well, you know, we can, but think about it this way. You know, mr. Trump is the great deal maker eventually the assumption is he will make a deal we move our supply chain to places like vietnam and india and all of a sudden he makes a deal and we have our supply chain on the move and all of a sudden india is the enemy and vietnam is the target. So again, without a rationalization in this trade policy, there is really no way to plan. So i can move my production, but think about vietnam. Vietnam is a tenth the size of china. If you moved 5 of the production out of china into vietnam, vietnam would be maxed out in a year. And they would not want to necessarily be making flipflops and teddy bears. They want to be making telephones and cars and consumer electronic products. We would be squeezed again wed have to move to india the president has talked on the edges about india and trade with india. As soon as that happens and we start to move, he is going to put a target on somebody elses back and where do we go from there . Jay foreman, thank you for joining us thank you thanks for covering the story. When we come back, two earnings movers going in opposite directions. And as we head to a break, take a listen to what some Industry Leaders mean those looming tariffs will mean. Whats happening globally is a confidence effect on business, Business Confidence not just in the u. S. And china, but across the supply chain. We plan on passing costs on to the u. S. Consumer we are taking a waitandsee approach we think thats the prudent approach because we are seeing changes happen via tweet. We will be raising prices on products to accommodate the tariff. The biggest impact is on we have been thinking about this for a while. We diversified our supply base it used to be exclusively out of china. We have spread our sourcing out of china if it hit in september as its scheduled to, its going to have a shortterm Financial Impact on us. We can effectively pass on those costs, ultimately those costs will be borne by the consumer over time. Most of the people believe that the china situation, which is very difficult, is going to take longer than people think to resolve fully. It may get better. There may be debates about whats going on and you ar ihet every day, the reality is it may take a long time every day, the reality is it may some earnings movers to hit for you this morning check out campbells soup, up the. 3 , beating analysts expectations help by strong organic revenue. Up more than 40 for the year, trading at levels not seen since february 2018. The relatively new ceo is taking shape, and especially those sales trends are what drove the quarter and what drove the better expectations. 4 organic sales in snacks thanks to Pepperidge Farm cookies and goldfish and also sniders lands, and also the meals and beverages segments stabilizing, especially soup sales, starting to come back class talking on the call saying there is a lot of innovation we have to do within soup it hasnt been the driver, but we have been working with retailers to relaunch the Convenience Store sales and that has helped some of the soup sales. Preg owe, they own pacific foods. Its not broth thats really doing well its some of those meal type soups, in case you were wondering. 43 this career this year. I remember shareholders were like sell it sell it at a 10 premium, 15 premium. They are thankful they waited around. True. It has remained a heavily shorted stock. Its substantial for an alt line company. There is some debt, but not an unknown smoking gun type of story. This is not a runaway growth story, but there are signs of hope in these numbers. Also campbell has done well spinning off and getting rid of some of its businesses, really streamlining its whole business, which was the Strategic Plan announced last year. The carrots and all that stuff. They got rid of the Fresh Produce and found buyers. 67 degree years ago, right. To put it in context, climbed 40 something to 47. On the op sid end of the spectrum, ulta beauty plunging the cosmetics retailer slashing expectations industry wide headwinds, saying its clear that the cosmetics in the overall u. S. Market is challenged the stock losing most of its gain at this point for the year. It was, mike, a highvalued stock, one of those momentum best in show Comp Store Sales when it comes to retail. That could have to do with the exaggerated effect on the stock. It was a disappointi quarter she talked about the Color Cosmetics are an innovating or producing style trends ala contour. We made a joke about contour, but that came up in the call. Recently the makeup category has turned negative. This represents roughly 50 of the overall business and is one of the highest margin categories its significant for them. Apparently new innovations and trends the behaviors are changing thats where i lose track of the story. You have to go on youtube you have to watch the demo videos from the makeup influencers. What happened the trend is sort of stabilized . Well, people are very into skin care. Masks i think are really hot right now. This is totally anecdotal. My 14yearold wears masks all the time. Yes thats a highmargin product forres forrest dr for estee lauder. Up more than 50 year to date however, if there is a little bit of concern about the overall category, its getting skimmed off the top of that. You heard it here first masks are the new contour. Okay. Ill pay closer attention to whats going on in my household. You should. Its a good policy. Now lets send it over for a cnbc news update good morning so here is whats happening at this hour. Dorian is now a category 2 hurricane. It is expected to strengthen over the weekend as it heads towards the east coast of florida. Its expected to make landfall monday night the National Weather service says the storm currently has maximum sustained winds of 105 miles per hour. A new york city teenager has been arrested after telling undercover agents his deskbliiro conduct a violent attack in the name of isis he is expected to face a judge later today to face terrelated charges. Hong kong Police Arrested prodemocracy activists in a mounting crackdown on people involved in the summers protest. They have been taken into custody. Officials denied permission for major march planned for tomorrow organizers said they were calling off the march. Ford recalling 550,000 trucks and suvs in north america. This is because seat backs may not platforoperly restrain peopn a crash. And that is our cnbc news update at this hour. David, back to you. Okay. I will take it thank you. When we come back, stocks are still up this morning. They are on pace for what would be the second negative month of the year what should you be doing and expecting for september . We will fill y ine wn oun xthe squawk on the street comes back best. Ing out whats selling to managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. The last trading day of august the market is continuing to climb pack from midmonth lows still august is on pace to close as the second negative month of 2019 joining us is head of fixed income gregory staples and Asset Management chief investment strategist nancy tangler greg, to get a Vantage Point from the macro picture here on the fixed income side, bonds have been front and center we are concerned about how low yields are, the structure of the yield curve, all the rest of it. What is it telling us in terms of the Economic Outlook . Have bonds overdone it, or does it make sense . I think for the short term they have overdone 50 basis points in august alone. From the tenyear treasury. Thats right. And i think you can justify it in some sort of a longterm secular decline. This is just another leg down. But i think given in august, a little bit too much too soon. Does that mean this yield curve signal we are fixating on is not relevant, is mature, distorted or should we worry the inversion of the yield graph, i think a little bit overhyped. When my 84yearold motherinlaw says we are going into a recession a little bit too much. We dont ignore it we think perhaps this time its a little bit different, spillover from whats going on in the ecb in their quantitative easing the longterm liquidity premium this the new york fed talks about, maybe its an acceptance of longer term Interest Rates are lower and people want to get in front of that. If your motherinlaw looks at her portfolio and has bonds, she has done pretty well. Positioned more defensively i think in fixed fincome and equities think about reits, utilities, those throw off a decent dividend. You dont worry about the high valuations on some of those groups everything is high valued yes, absolutely positively but when you pull out an individual asset class and say things are a little inflated here, show me an asset class thats not. Nancy, you look for things that arent so highly valued you look at the stock market right now, obviously some parts of this market have gotten beaten up more than others in this august downturn and now the recovery what have you been finding by way of value at this point hi, mike. We have been adding modestly and actually been more oriented towards trimming back some of our larger holdings. I think this is an interesting time to continue to add to software because ceos are still spending on the cloud and software applications. We have been picking away at broadcom and usually, you know, when im talking about a stock, it takes us a year to build a full position. We started about a year ago. We are still adding to that. I am taking a fresh look at federal express. That stock has been pummeled we own it. I think its overdone at this point and i thinkthere is an opportunity to view this stock like we did American Express during the costco transition as a company that is moving away from amazon and trying to increase margins by working with some of amazons competitors. So as you look at these companies, as you model out what they are going to earn next year, is your premise that the economy remains in okay shape or do you think, on the other side of it, fedex, in terms of its valuation, has already priced in Recession Risk i think you could argue it has. And certainly its been punished by the trade rhetoric and by the Chinese Government but, yeah, we have said that we think that the yield curve inversion is overdone, that the real important thing is to watch the 30year into a negative sloping environment. I am going to be watching the pmis, the nonmanufacturing ism pmi and manufacturing next week i think thats super important to ceo confidence in spending. And then i actually thought the consumer numbers today were maybe a shot in the across the bow to the administration. This may not be playing as well in middle america, this trade war, as the president had thought. The Consumer Sentiment declined, absolutely university of michigan. Do you need to move down the risk curve to find yield i think you have to do can he swe a lot more focus . I think you have to move out the risk. Thats what i meant i used the wrong word. From single a to triple b to high yield i think this the time to pull in risk a little bit. Why because i do worry if we get an economic slowdown you are talking about lower quality bank loans, week high yield names might suffer we havent had the kind of selloff in 2018, but we are vulnerable in 2019. Cant ignore with oil today and the month of august, nancy today its down 2. 6 worst daily performance since august 14th. For the month down 6 . If you look at the stocks they did even worse its the only group thats actually lower for the year and with the worst performer in the month of august. Is there opportunity there i mean, that has been a difficult place to be for three years. We were in in 2016 when oil was 24, 26 a barrel that was good for nine months. We didnt get entirely out about three months ago we started taking our exposure down on the concerns that Global Growth was slowing and that oil at the margin may be more cyclical than its been over my investing career due to alternative fuel sources so were in the big integrateds and actually in one of them, chevron. We got out of exxonmobil we have one of each of our strategies, we have one riskoriented oil stock. We are now market weighted and not overweight and i may be dead wrong on this because normally my instinct would be to buy more, but i have been watching this for decades this one feels a little bit squirrely to me, this cycle. The market is definitely acting like there is something bigger happening than just a cyclical downturn. Thank you very much. So despite todays rally, Global Growth concerns still very much in focus with President Trump tweeting about chinese manufacturing earlier. Our Steve Liesman joins us on the ripple effects of the global slowdown, steve. Thanks. As the fed worries about global economic, we find out how connected the world is the day that the fed is looking at the weakness overseas having important effects over here and happening already, look at these key gauges of manufacturing in china and the u. S. They fall together the uspmi from 60 to 52, along with chinas manufacturing it has dropped from below 52 into contraction territory around 49. Joined at the hip that chart looks like also it affects whats happening in germany as well overall, chinese imports are down year over year. That started in december overall exports from germany went negative suggesting a strong german chinese trade in economic connections anything that is weak in china hurts germany. Germanys weakness part of europes weakness. It washes up on u. S. Shores and shows up in export data. Yesterday Second Quarter gdp data shows u. S. Exports almost always add to growth they subtracted 0. 7 of a point we saw the two biggest exports subtracters from growth in a quarter since the Great Recession in the last four quarters the good news, the u. S. Has held up well thanks to the consumer we got some of that spending number this morning. U. S. Steel growing at 2 but the links are there. If other economies worsen, sara, in a globalized world, the u. S. Is not going to be immune. Yeah, the other question, steve, this is why we have seen Central Banks bring to action in every in so many Different Countries around the world and i wonder if they can stave off a global recession and if they have the ammunition and efficacy to do anything about this issue. I think we will find out. I mean, next month when we get back from the holiday, we will be talking about Central Banks. We have the ecb, japan, and the fed meeting next month and thats september so we might get some easing from all three here certainly the europeans are talking about it its priced into the United States and we will see if that takes some of the edge off it. Its a little scary, sara, to look at that u. S. china pmi chart and see how closely they move together. And we dont really know which way the flow goes. Is the u. S. Down because chinas down is china down because the u. S. Is down . And how much all of this relates to tariffs and the effects of tariffs, possibly weakening germany because the idea that china is down which weakens the u. S. Thats the way the world works. Yeah, which weakens south korea, which weakens japan. There you go. We may want to deglobalize, but that is not true yet. Steve, thanks. Pleasure. As we head to break, shares of tesla having a good day after chinas automotive regulatory body declared it will exempt tesla from the tax more squawk on the street when we come back dows losing some of its ste re up 87 points yep, Td Ameritrades got that. Free access to every platform. Yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. No hidden fees. No platform fees. No trade minimums. And yes, its all at one low price. Td ameritrade. Could there be danger lurking beneath in rebound rally . The chart suggests trouble ahead. Mon outore tradingnation. Cnbc. Com more squawk on the street is coming up. Lets get to the cme group in chicago Rick Santelli. Thanks, david like to welcome my last guest in front of this holiday weekend, peter, academy securities. Youre the right guy on the right day. Financial times story made my heart palpi tate in the month of august, the globe added 3. 1 trillion in negative securities bringing the grand total to a little bit more than 17 trillion what do you think about that i think it caused a rush and capitulation into bonds here in the states weve seen Foreign Investors, you see that through some of the fund flows the etfs have attracted money. Its really almost this last gasp capitulation that we are the only play to get yield and people flocked here in august. And i think with the lack of liquidity, its a bit overdone right now. Now, and you know what, reading that and reading all of the stories about how, as you just pointed out, Foreign Investors coming in for stocks, coming in for treasury securities, you know, we have to weave that inverted curve into this im not saying we cant have a recession, not by a long shot, but you need the monitor the data the yield curve really does have some issues. Your thought right i think there is a reflection that people are concerned about future growth. But i think theres been so much demand coming in for these bond products, particularly longdated products. Everyones really decided they want to own longdated bonds as a hedge against equities going down or as the only way to get yield, its put so much pressure on a pretty thinly traded market in august, some of the inversion is just technical factors and as it normalizes in september, as corporates come back to the issuance side, i think well see a little bit of steepening, and mnuchin is talking about the hundredyear bond and may switch a little bit of his issuance. This treasury should be issue longdated debt. All of which should put pressure on and resteepen the curve because all of the yield curves are bad for the economy. All of these tbills that are being issued really is just exaggerating the issues of the yield curve. Lets move to another topic real quick. A trillion bbbs. 1 trillion bbb minus is any of this paper going to be big problems, problematic in a downturn in your opinion, peter . I dont think its going to be problematic at all. We talked to a lot of the corporations i think theyre well aware of where they stand with the rating agencies, what they need to do theres a lot of levers they need to pull to maintain those ratings. And the big thing everyones got to remember, in the past few years with yields so tight, no one needs to be single a, so people have gravitated towards bbb, but they do not want to go toward high yield. And the other big trend that doesnt get talked about enough, snur Insurance Companies are much more sophisticated i think they have already pared back on the bonds that they dont like if it got downgraded. I dont think youll see wholesale selling pressure the problem to look for in credit will be a little bit somewhere down the curve, some of the highyield names are having a little bit of trouble maybe emerging markets is due to crack. And maybe were supposed to be looking elsewhere. Whats a safe asset thats overdone that could pull back. That tends to be where the problems occur, not where everyones looking thanks, peter, for your opinions have a Great Holiday weekend mike santoli, back to you. Now lets send it over to june forjo fortt with a look at whats coming up on squawk alley. Well, you, for one, youre coming up on squawk alley. Looking forward to talking to you. It is the end of august and it has been a championshoppy month we have some big ipos, big launches for some tech names, including microsoft and apple. Does that mean for the rest of the year in tech . Well dive in, coming up on squawk alley. Well, ill be well into starting my long weekend when sarahs got the closing bell thanks a lot. What are you going to be covering there what youre going to be missing is the final hour of the final day of trading for the month of august. Also, the president s active on twitter right now about the Federal Reserve. This time last week, friday, he was hereby ordering companies to get out of china so anything could happen there plus, Amc Entertainment Ceo Adam Aron joins us to talk about why its partnership with netflix fell through well talk about the Summer Box Office and more. But more importantly, were going to tally up the damage from august. Though its looking a lot better ill be there with you. Thank you you will not on your vacation at 3 00 p. M. Not yet but have a great weekend, guys there might be an m a deal breaking this afternoon. Then where are you going to be here. Well have a lot more, though. Speaking of being here, well have a lot more on todays rally. This is, as sarah said, the last trading day of august. Squawk alley is up next. Good morning its 8 00 a. M. At Amazon Headquarters in seattle. 11 00 a. M. Here on wall street squawk alley is live good friday morning. Welcome to squawk alley. Im jon fortt with leslie picker an