Transcripts For CNBC Squawk Box 20240713

Minor deal that would be open. As far as no more tariffs would be open as far as two more rounds of duties in return, they said they would be open to things. Speaking on the background in terms of noncore recession saying they still would not budge. That was an official speaking to one news source. Lets take a look at what would happen in asia the nikkei came under pressure hang seng down about. 8 and shanghai am coup about. 4 markets go up or down based on what rumor or headline at any given point on these trade talks scheduled to begin tomorrow in the United States. In europe, the bachl dax is up y about 1 looking at the treasury market, yields are higher. The 30year, a little higher than where we were yesterday the twoyear sitting at 1. 44 . Eunice yoon joins us now. Did we sleep last night. We look horrible without these thanks for pointing that out. Mine is too bright. We are going to toss to eunice ill tell you what way was thinking about on my way in. Did you hear about how many fans there . There are twice as many fans there as in the u. S. And they are serious fans too. But the numbers weve got 310 million. There is like 500 million really big fans i dont feel bad but i feel compassion for adam silver i dont know what he gets paid but what do you do right now that cats out of the bag you try to slay low that is for south park. That doesnt hurt them like the nba. Probably not. Apple getting grief for taking the taiwan ease flag off their phone they sell in china they really want it it will be hard. Nationalism is rising both here and in china. Ill give you mine. Im going to take andrews hes not here anyway i can use the light on my phone. Thats an idea. Well try anything we are pros here its like waynes world. Am i tossing to eunice you are so Many Companies over the years, like it or not become very defend enter for china . A lot of companies will have to make a choice. Reporter a lot of people are wondering if what we are seeing is a turning point the vast majority of companies in this case, the nba did issue a policy but really walked that back and said that they would have to face the consequences of upholding a society. Theyll have to walk that very fine line silver is in china today. He arrives in shanghai hes here for an exhibition game between the lakers and Brooklyn Nets there was supposed to be a press briefing today the fan event was canceled he is supposed to show up at that preseason game press briefing tomorrow we dont know what hes going to say more about why the government has been so harsh and angry. The state media has been comparing the riots in hong kong to 9 11 saying because it is a similar situation, you wouldnt allow people to criticize 9 11 in the same way we are seeing the nba chief or the Houston Rockets gm criticizing the hong kong, quote, riots hell be talking with partiers to smooth things over it is still very unclear what they dont want to have is any discussion here about what deviates hell have to work his magic here i almost feel like we are importing censorship from the regime certain things on twitter and google certain things dont show up the regime into the censorship it is weird. The sick thing or the cynical thing is that the all mighty yuan or dollar is behind it. They seem willing to compromise on free speech or whatever you want to call it. They are willing to knuckle under free business with china i dont think anyone looks very good in this whole thing when you talk to Business People i feel like when i talk to Business People here, a lot of them are fully aware of this trade off but dont necessarily feel it is the companys role to be taking a line when it comes to politics. Usually Companies Just want to get their business done. What i thought was interesting too go ahead. What we have is the equivalent of the dont ask, dont tell rules are changing companies are being forced to make decisions im sorry, eunice, what were yo going to say another one is apple. We are watching that here. Apple supports an app in hong kong that the protesters have been using to track the movements of police. They were saying that apple needs to be able to distinguish right from wrong they asked a receitoricle questn will apple have to make that same decision . Apple talked about increasing chip suppliers were up because they talked about increasing the amount of these new iphone 11s by 10 . A lot of that demand was coming from china china is a huge market. Tim cook made it clear that he still wants this market. Chinese people still love the iphone, the ipads and different gadgets. Other home grown brands are making head way like huawei. Let me ask you. We talk about the reaction in china. We are talking about the governments reaction. Do fans not love the nba as much is there a way to distinguish between what the party wants thats really difficult. What we see on line is often scrubbed very quickly lowest estimate ive seen is 500 million, highest is 800 million. That tells you how many welpeoe really love the nba. People who are under tremendous amount of pressure the chinese officials again said they were pulling their relationship they were doing it vivo and tense it is pretty much every single nba partner had pulled out the whole thing is mind bogling. The world really isnt that big of a place one guy in houston, gm of a team on twitter can do this literally, the entire world is talking about this it is really weird and scarey. I wonder about hong kong and the future of hong kong. Always a weird dynamic a portal to all that business in china that sort of existed in a really weird place i dont know which expression to sus. Does it ever go back to the way it was can it it might ive been talking to some high level people who regularly meet with government officials. They say the thinking there is just to wait things out. They cant necessarily be seen coming in and cracking down but that it is going to be a waiting game waiting and watching for protesters and protests to die down it will be difficult to unscramble the egg but just because theres been so much anger on both sides about what is happening it doesnt necessarily help that beijing has been building up this level of nationalism around or against hong kong here and also in hong kong, people are angry and we see videos all the time of people getting angry at Chinese People just going about their day. Those make it more difficult to see how this is going to resolve itself a lot of them put hum ty dumb ty back together again, cant put tooth paste back in a tube there goes eunice. Shes gone if you were still there before i dont know thanks, eunice we are going to continue this discussion to some extent with texas senator ted cruz, he tweeted in response. Cruz said, in his words, as a life long Houston Rockets fan, i was proud to see morrys response cruz joins us this morning on the squawk line from taiwan ahead of an expected trip to taiwan there was a backtrack of the backtrack. Now i think there is a backtrack of the backtrack to the backtrack. You cant envy the nba or the commissioner in this where do you think we are right now, senator good morning. It is good to be with you. You are right, weve seen the nba falling all over itself to backtrack. Everybody understands why. There is big money in china. The nba and nba teams make a whole lot of money that being said, this goes to show how china tries to use economic coercion and blackmail to get companies to engage in censorship what he said was perfectly reasonably the protesters there are standing up for democracy and human rights they are walking the streets of hong kong carrying quotes from americas Founding Fathers they are asking for the same rights everyone wants. To see what the nba did. As soon as he tweeted this, the nba suspended the coverage in china. Knocked them off tv, boycotted them we saw a whole series of just abject apologies i should say, the nba should be better than that when American Companies and a Sports League like the nba which is truly a global brand is willing to press itself in pursuit of additional dollars in china. That is unfortunate and a dangerous precedent. The wokest of our Sports League here too. Whether you like being woke or not or appreciate it it is sad that being woke doesnt really go that deep, does it when dollar signs come into the picture you can leave woke behind and come back to the real world. This is a very cynical story, senator, right joe, it is a striking contrast weve seen when states in the United States have passed laws for religious liberty. Leagues have been willing to declare boycotts and announced them loudly in boycott to lgbtq issues thats okay. It doesnt cost you anything here, when the Chinese Communists in hong kong are oppressing or surpresident ing free speech. Where the stakes matter and there is a choice between standing for free speech and human rights, the nba has demonstrated where its priorities lie i think the nba should have stood with the rockets and said, you cant boycott one team any time an American Business does business with china, there are risks entailed if our companies are an arm of chinese censorship, that exports their oppressive policies to the United States and globally right kind of a bad move if anyone is saying that President Trump is on the wrong track in terms of some issues. You dont have to agree with all of iz pings. 0 hell be on. He may be the last person in the country that doesnt say, wow there is a problem to some extent with this relationship. Senator, can i ask you a question this morning, futures are up by about 200 points based on a report based on a news report that shina may be willing to do a deal suggesting he would be willing to buy an additional u. S. Dollars. Does that sound like the type of deal youd support im hopeful well get a good deal trade with china is important. When it comes to the president s trade agenda, where i agree most is with china. For a long time, their trade policies have not been fair or on a legal way for the president to try to lean in and get fairer terms. I have urged the president is to focus on china and try to open up that market but dont engage in a battle with our other partners it would be good to see a trade deal with china. We can do that without linking back to this nba issue we dont have to do that to be able to engage in trade. Senator, while we have you here, some other stuff going on. What would you need to see in terms of this ukraine situation for you to say, okay, im going to vote with romney if he happened to go that way . Do you see any possibility of President Trump losing 20 snapchats . Look, im not going to engage in hypotheticals i can tell you that the behavior of House Democrats is that they have been looking to undue this election since november of 2016. The view of House Democrats is that they want to impeach the president. I think there is a very good possibility the House Democrats will vote to impeach it is not based on actual conduct or fact. They are there before any investigation. The snapchat, i voted with all 101 senators to investigate and find out what happened we should look at the facts. Thats not what the House Democrats are doing. They are trying to undo an election because they are unhappy with how the American People voted in 2016 can you tell us why we are talking to you in taiwan how much can you tell us i know you werent free to talk about it before. Sure. I am in the midst of an end oino pacific tour i left hawaii and went to japan. Met with Prime Minister abe and had a good discussion. Great for texas farmers and ranchers opening up more agriculture agricultural trade spent quite a bit of time talking with Prime Minister abe about security threats the dominant threat is china china is getting more and more aggressive military. They are vesting billions in modernizing and massive amounts of money essentially trying to get impof errished governments to take attractive deals or be in a situation where china can control the infrastructure that purpose of this tour weve envisioned as a friends and allies tour meaning friends and allies of america throughout the pacific and discussing ways to stand up and coming from increasing the president would say some of that 500 trillion, we are basically funding the build out of chinas military. A point well taken right i think that is exactly right. It is one of the most Significant National security improvements weve seen in the last 2. 5 years with this president is taking china seriously. Another example is huawei. A Telecommunications Company owned by the Chinese Government. They have been going throughout the world offering free equipment to build a 5g. You take their equipment, now the Chinese Government has unlimited spying capacity. That is a very, very bad deal for america and our allies the Trump Administration and a number of congress have worked together to focus on our National Security threat they were taken to huawei and put in a position and thankfully, theyve stepped back that is a consequence of taking that threat more seriously are you headed to dinner . I am heading to dinner with theify wan hes foreithe taiwang minister tomorrow is their national day they call it the 1010 day. Ill continue to tour throughout the indo pacific thank you take care futures are on the move talking rebound from yesterdays sell off potential an analysis. Looking at the days biggest winners and losers in the dow. Announcer todays big number 500 million. Thats the amount of people in china who saw lstatea one nba game on tv last year orlando isnt just the theme park capital of the world, it also has the highest growth in manufacturing jobs in the us. Its a competition for the talent. Employees need more than just a paycheck. You definitely want to take advantage of all the benefits you can get. 2 3 of employees said that the workplace is an important source for personal savings and protection solutions. The workplace should be a source of financial security. Keeping your people happy is what keeps your people. Thats Financial Wellness. Put your employees on a path to Financial Wellness with prudential. Few turz on tutures on the morning. Joining us this morning. Our guests, how are we supposed to sfefeel about the performanci the last year or so. We are flat . Well, you had the huge move in 17 to early 18, since the advent of the china mess, that has stirred the water. Is it Spring Loaded you are looking at a potential air pocket here. Ive got two dates circled on my calendar october 10 and 18th. Important dates. What is the november 17th date thats the apex summit in chile. How big is the air pocket we felt it was maybe 5 to 10 . We are half way through that some folks think we are going to retest where we were we are experiencing this air pocket right now how would that play how long would that last in terms of being supportive . Will earnings take over . Absolutely. There has been a deceleration because of the china overhang. If we have a path to a positive resolution that will have an impact on 2020 we are at 2. 4 gdp the street is at 1. 8 the delta is that i think we have we have a bigger view of china. If china happens, do you mean if there is a substantial deal or a minideal where they buy more ag. We agree and there arent additional tariffs step one, lets do no more harm wed love to see this at minimum a skinny deal. Maybe we get structural reforms. That would be the best possible case what are you telling clients . China has been the big overhang with all the inquiry going on, i think china has been more emboldened you thought that. But what if Elizabeth Warren or the alternative to trump if it was biden on his comments on china, theyd love him. Why would they want to wait for that maybe the devil you know it is a little ways out if trump gets reelected, they are no worse for waiting if not, theyll feel their happened is stronger they are thinking, what have we got to lose at this point. Id say if we get any positive progress, just agreeing not to raise tariffs. If we can just get to that point where we stop raising tariffs completely and just zin to discuss, i think that would be positive how are earnings going to play out as expected . It will be a little better. Depending on which source you go with, youve either had a modest increase right now, we are looking at a 4 earnings. It will probably be better it has been better the estimates come down and you usually have a bit of an outperformance when we return, the gm auto worker strike enters day 24. What it means for both sides and whether it could send michigan into a recession sometimes, the pressures of todays world can make it tough to take care of yourself. But natures bounty has innovative ways to help you maintain balance and help keep you active and wellrested. Because hey, tomorrows coming up fast. Natures bounty. Because youre better off healthy. Announcer welcome back you are watching squawk box. Live from the Nasdaq Marketsite in times square. We have been getting some reports suggesting china would be open to a deal, perhaps a skinny deal. If you want to call it that. More on deals which are due if they were willing to buy additional exports to the tune of about 10 billion these are reports based on officials with the dow indicated up s p 500 up and the nasdaq up by 81 a developing story, in california nearly 800,000 homes and businesses expected to lose power starting today because of heightened wild fire risks impacting more than half of californias 58 counties including much of the San Francisco bay area the question is, can you continue to have power supplied without the possibility of fire. Do you understand how it is here, the lines get heavier when it gets hot and drop lower the times did a huge story, a lot of those towers have existed longer than their life span. With err talking 100 years or longer high winds heavily treed areas. Coming up, the World Economic form the latest on juul and how the companys value has changed. Stay tuned you are watching squawk box. Ah, you could say that. So how are things with you guys . Great. Thank you. Thank you, sir. Lunch next week . Terrific. Say hi to the team. Will do. Call my office, i will. Sounds good. Alrighty. Servicenow. Works for you. Welcome back. Briefly, u. S. Equity futures are up 222 points. Nasdaq up 85 and s p up 26 when we return, gm shares down since the strike. Well talk to experts on the ground there about what both sides want ant if that could tip michigan into recession. Well be right back. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. 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. To take care of yourself. But natures bounty has innovative ways to help you maintain balance and help keep you active and wellrested. Because hey, tomorrows coming up fast. Natures bounty. Because youre better off healthy. Welcome back. The United Auto Workers strike against General Motors now in its 26 day estimated to be costing the company an extra 50 to 100,000 a day. What is this costing the union our estimate is about 450 million a week so about a billion and a half. The union is paying strike pay to its workers thats about 11. 5 to 12 million. They have a strike fund a little more than 800 million they could last about six weeks. I thought they were reaching a deal i dont think that is likely. Their fund is very strong. What do you think the most likely scenario bob . Would gm ever agree to bring back a car thats produced in mexico and china and produce it in the United States you know, theyve done that in the past. Every Union Negotiation there is usually a liing of all the product guarantees that the union has won and oftentimes there is stuff saying this is work originally intended for mexico sometimes its a switch. The work for mexico has come to the United States and work intended for the United States then swaps out and goes to mexico but, yeah, you know, thats part and parcel of, you know, conveying job security to the work force is that theres product and investment in their plants. Gm seems to be digging its heels in because they dont want to wind up in a situation like they were in just over a decade ago and it looked like the company could go bankrupt, however, we have seen the president wade into these talks already with some of the earlier plant closures that gm had proposed to undertake. What do you expect to see from the Trump White House . The president has been remarkably quiet through this set of negotiations, more than i thought he would be. The plants four plants that were unallocated back in november, gm has intended to close at least three of those. Theres been talk during these negotiations about keeping one on, the detroit hamtramic plant. Gm had over 1 Million Units of unutilized capacity in the United States. Those actions took out about half of that under utilized capacity and brought them more in line of profitable operation. So what does that mean . That means i think somethings going to close or at least the union has a letter that theyve negotiated with gm that says you cant close plants during the term of an agreement. So gm came up with a new way to close plants by using the word unallocated. These plants could live on in this agreement as exempt from that plant closure policy or they could agree in this round to close them. Its generally four to eight years to close a plant in the past so this would be very rapid if they made the announcements in november and there were and there was resolution of those announcements by this fall. You know, the union has a point. Gm is very healthy, has done very well, is very profitable. Thats true. What do you see on the horizon at this point just in terms of whether theres a slowdown coming to the United States, whether theyd be able to withstand a recession that would potentially hit our shores. General motors is much stronger now than it was when we went into the recession in 20082009. Theyve learned from the mistakes and they want to not repeat them. Both sides are looking at the same set of economic data. Theyre looking at slowing auto sales, a whole lot of risk from trade policies and fuel economy regulations that arent yet set. New investments that the companies are all making in automation and electrification that bring risk to the business along with the underlying risk of whats the economy and does General Motors have the vehicles that people want to buy. They look at that same set of data and the company says, well, we need some flexibility and contingency because things could get bad and we dont want to get stuck in a situation we were in before the union looks at that and says, this is looking very uncertain. Weve relied on Profit Sharing to be part of our compensation profits may be hit we want to lock down into base wage increases and have job security, income security for all of our workers, including the temporary workers through the next down turn. What about the argument that gm workers make more than just about anybody in the business . Gm workers are the same as they are at ford and fca and very close to what they are at toyota and honda gms average hourly labor cost is the highest in the United States, partially because they paid out almost 11,000 in Profit Sharing last year and theyre also carrying the costs of more workers theres more people in the numerator, the cost side of things, than there are in the denominator, hours side of thing. Its all labor costs divided by the number of hours work. I want to thank you for your time today nice to see you. Nice to see you as well, thank you. Coming up, futures jumping sharply ahead of the open. Live update from beijing on the trade negotiations moving the markets. In this case, higher today plus, fallout from the vaping illness epidemic on the market leader, juul and ecigarettes. Squawk box will beig bk. Rhtac were carvana, the company who invented car vending machines and buying a car 100 online. Now weve created a brand new way for you to sell your car. Whether its a year old or a few years old, we want to buy your car. So go to carvana and enter your license plate, answer a few questions, and our technowizardry calculates your cars value and gives you a real offer in seconds. When youre ready, well come to you, pay you on the spot, and pick up your car. Thats it. So ditch the old way of selling your car, and say hello to the new way at carvana. I cowe can do theyour screening at her house. Hi. This is the man thats going to check your eyes grandma. Cognizant ai solutions are helping Healthcare Companies advance diagnostics and prevent blindness in patients with diabetes. Everything looks good. You have beautiful eyes. Futures pointing to a higher opening. China trade talks and your investments straight ahead hong kong backlash now Chinese State media is accusing the nba of endorsing violent protests the latest out of asias Financial Hub is coming up. Could the markets see a correction if Elizabeth Warren wins or looks likely to be the democratic nominee why theyre saying dont wait until the 2020 election to see a selloff as the second hour of squawk box begins right now. Live from the beating heart of business, new york. This is squawk box. Nice shot there. Good morning welcome back to squawk box here on cnbc im joe kernen along with becky quick. Andrew is off today. U. S. Equities futures up 211 points now, 215 on the dow s p indicated up 26. Nasdaq indicated sharply higher, up about 84. All based on china. Thats right. Breaking news this morning that is creating all of this activity a report that china is still open to a partial trade deal with the United States despite the inclusion of some top chinese ai startups on a trade black list a couple of different reports out there suggesting theyd be open to a light dual eunice yoon joins us from beijing. She has more on that front eunice, good morning. Reporter good morning, becky. That report says that china, as you had said, is open to a partial trade deal, but by that they mean that the u. S. Would have to lift all the tariffs or at least not impose anymore tariffs. Beijing buys more stuff but doesnt have to compromise on any of the major sticking points so, in other words, not a whole lot has changed in that position in fact, generally the expectations for a break through on a trade deal this week are very low here. The vice premiere is heading to washington and what people are talking about here is that he goes there without a special title of special envoy so that means that the leash on him is tighter than it has been previously so and then on top of that, theres the overall backdrop in the environment between the two is quite negative. Beijing today blasted the u. S. s decision yesterday to impose visas visa restrictions on chinese officials who the state department believes has been engaging in or complicit in the detention and or abuse of the Muslim Population in chinas far west so the Foreign Ministry today had said that they believe that this was a serious violation of basic norms of International Relations and also went on to say that the u. S. Should immediately correct its mistakes separate to that, reuters is now quoting sources as saying that china is considering some visa restrictions of their own on american visitors who they believe have antichina links. So in this reuters report theyre quoting sources as saying that that means people who are associated with the intelligence community, their family members potentially as well as anybody who has donnie work with human rights so we have that then, and then as we were talking about an hour ago, the standoff then between china and the authorities as well as the nba continues to escalate today adam silver, the nba commissioner, arrives in china he wont have a usual welcome that nba commissioners have had in the past by china in fact, hes facing a full tirade of state media. In fact, the Chinese State media has been comparing the hong kong riots, which was, in quotes, riots, which was the topic of the tweet of the general manager of the Houston Rockets to the 9 11 and also the state media said that adam silver, if he thinks that endorsing the indiscriminate violence of the radical hong kong protestors are resorting to is supporting freedom of expression, then he should think again so a tough situation for him right now. The nba theres an nba fan event tonight. Thats been canceled theres also supposed to be a briefing today, which was postponed. Theres supposed to be an exhibition game tomorrow between the l. A. Lakers and the Brooklyn Nets so far that game is still on, but we dont know whether or not its unclear whether or not its going to continue to go ahead, though adam silver is expected to be speaking at a press briefing tomorrow associated with that game. Thats amazing because silvers comments over here, we think of them in a different light, that it was like way too appeasing to china over there theyre playing it the other way. So were talking about a skinny deal now, is that what were calling it is that thats what phil orlando calls it. Skinny margarita, i dont like skinny burritos skinny bundle . I like the marketing on it. It sounds a lot better than just a partial trade deal skinny deal. Unsatisfying. Nobody wants a skinny a skinny deal, but thats all is that the best we can hope for . Is china taking all of these other issues off the table what happens the issues we care most about, oh, yeah, were not talking about those but well buy more soy beans 10 billion. Maybe a skinny deal is better than no deal, an armistice, a truce. Kick the can down the road, well come back later, right that sounds much worse than a skinny deal, yeah. Eunice, thank you we will check in with you a little later. In the meantime, the markets watching all of these global trade developments with high level negotiations between the u. S. And china set to begin tomorrow right here in the United States. Joining us right now is eric knudson. Charles campbell whos trading desk specialist at mkm partner and mike santoli, cnbcs senior markets commentator. Mike, does the market want this skinny deal so theres no morrah chetting up of things . I think thats right. I think the market wants kind of a cessation of hostility, no reescalation interestingly, you saw the markets sensitivity to the headlines about the visa restrictions and therefore it seemed to have people say, theres no makings of any agreement here you took, you know, about 250 points off the dow in an hour after we had had an interday recovery its almost like today, guess what, it feels good because were not bashing our head against the wall again i read these reports and i thought, okay, this doesnt sound any more promising to me. I dont think its the only thing going on i know its the only thing we can identify on a timely manner that the headlines are moving to markets for the most part. You know, for four years the stock market has gotten up to this particular level of valuation, between 16 and 17 times forward earnings, pretty much it kind of gets and sits there and goes sideways and waits for the next reason to go in a different direction, and right now we have variable Interest Rates powells speech was well received in the sense hes going to be accommodative. In the absence of obvious attraction in the economy, it will give you a convincing sense that were just coming out of this soft patch. This is where we are. Eric, what do you do at a time like this when theres so many potential pitfalls . So we are unlike earlier in this year when we were very risk on, weve been trimming that back through the year weve actually gone to a lower risk posture weve gone underWeight Global equities, under Weight Global Government Bonds really reducing risk, not because we think the economy is going off the cliff. We actually think the risk of recession in the u. S. Before the end of 2020 is still quite low. Its just that we dont see a catalyst for up side from here earnings are quite earnings expectations are quite modest, negative in the short term 10 growth next year we dont have clarity on where that comes from. Meanwhile, full valuations were into the going to say rich, but full valuations. There are all of these risks stalking the globe what we expect is lots of volatility, not a lot of up side, more risk to the down side we want to take beta down. We want to be cautious. Which means what . If youre under weight in global stocks and Government Bonds, youre over weight in cash over weight cash the first time in this expansion were over weight cash credit relative to Government Bonds, corporate bonds, and were biased towards the u. S. Relative to the rest of the world. We think were entering a period of twotier growth where the u. S. Is experiencing a soft landing, growth stabilizing around 2 , supportive Overall Economic conditions. The consumer is fine you are seeing the growth slowdown continue in europe and japan which are much more sensitive to global trade. We want to be biased towards the u. S. U. S. Equities, neutral over small cap and over weight u. S. Credit where we think being paid carry from good quality contractual income relative to very low global Government Bond yields is very attractive. Charles, how about you . Whats your take on markets now . Market participants are rational in the sense that they are sensitive to whats going on in the china trade front between u. S. And china, the two countries account for a sensitive market on the trade front. Against that backdrop, weve had manufacturing slow down in china, india, the eurozone, United States, spillover effects that we see in pmis to Service Economies in each of those countries. Central banks have responded by turning dovishly the question is will u. S. Fed be behind the curve some say they are, some say theyre catching up. In march they indicated they would revisit the Balance Sheet normalization. Powell indicated that in his speech yesterday inflations not a problem. 17 trillion of negative yielding debt its clear that those countries with negative yielding debt from sweden to japan dont have outsized gdps. The new one greece. Go ahead. Greece . Amazing, isnt it greece. Minus. 0 200 billion economy with greece a couple of years ago we thought greece implodes, it will be cataclysmic. Now youre paying greece to hold your money. Isnt it amazing . Youre a better banker. In the united kingdom, 3 trillion economy thats not a larger issue. Because economies globally are slowing, that could be a pushing point into recession. Thats scary stuff. Are you suggesting miemd are you suggesting theres somewhere im suggesting they take a more defensive position than they might otherwise take. The economy is obviously in record expansion length duration were expecting q3 earnings down about 4 the bar has been lowered most likely people will exceed but its going to be the guide the guide will depend to a large degree on what happens on the trade front. Heres where i talk myself back in circles about this economies are weak but youve also got all of this negative yield out there, which makes me think that stock prices could get pushed higher and should deserve a higher do you think Companies Make a cap x decision in the United States, either here or abroad, based on where the fed funds are at 187 no. Or 125 no. Doesnt matter. What it does do is it impacts investor and business confidence, which is negatively impacted by the uncertainty caused by the trading problem. Are we talking ourselves into a recession . No, i dont think were talking ourselves into it. This is the conversation that happens in the latter phase of any cycle. The idea that were going to come to this moment after this long an expansion and say, you know what, everything is fine. Were reaccelerating to 4 in the next five years, thats unlikely unless you have some kind of intervening correct, whether the market corrects down or Something Like that i think a lot of the leading indicators are kind of getting ragged in a way that makes you have to at least raise your probabilities that were potentially risking that so, again, i just think its an uncomfortable spot to take risk and thats why it feels comfortable not to take risk and to hide in zero yielding debt. I mean, when you say stock markets have to go up because the alternative is zero yielding debt, why is the alternative zero yellielding debt its because people are choosing that. I dont know if its people, companies, who well, a lot of that what was 17 trillion has come down a little bit of negative yielding debt is owned by Central Banks and institutions that have to own those securities. It was issued with a could you upon. Indeed. They can yield down. There are some reasons that as an investor you may want to own it the u. S. 10year treasury is the highest yielding market bond greece you have i have not. I would let them keep. You could stay. Italy that would be minus 10 . Theyve been there for two years. Just to live there if you want to keep money in the bank, let me live in on the emolfi coast, keep it charles, mike it doesnt work that way. It should. Those tourist areas, they ought to be able to they mess it up somehow. Anyway, coming up, a pro gamer winning a nobel prize no, pro gamer chemistry today the tournament winnings after showing his support for hong ko kong that story is next then our series on the most valuable venturebacked private companies continues. Todays focus, really . Juul which finds itself under pressure from regulators and Public Health officials in a crucial time for that company. Stay tuned, youre watching squawk box on cnbc. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. And who doesnt love going home. He wore a gas mask and goggles which are associated with protesters there he appeared to shout out a slogan associated with the protesters the two commentators conducting the interview were fired just to show you the perils of how these companies walk these lines when we were talking about people visiting china and whos now on a list of people they look at, we said a few things. Can we go over there with impunity, do you think i dont think im going to try no. Too far. When we return, juuls valuation has been hit too far a privately held vaping company, its rivals and the futures check out the stock futures this morning which are sharply higher on a percentage basis, not a lot. 200 points on the dow, 25 on the s p. 78 on the nasdaq well come right back. Time now for todays aflac trivia question. On this day the sewing machine e sw wn bc in what year . Thanerhecnssquawk box continues aflac coach saban we have Health Insurance. Did Health Insurance pay for everything . No, we still have bills. Aflac gives you money directly to help with those. Aflac and your deductibles, knee brace, whatever you choose. Aflac sounds like a winner. Umhum. Umhum. We try. Get help with expenses Health Insurance doesnt cover. Get to know us at. Duck aflac dot com whether your beauty routine is 3or 57,. Make natures bounty hair skin and nails step one. Its the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. Natures bounty, because youre better off healthy. Now the answer to todays aflac trivia question. On this day, the sewing machine was pat tebented in what year the answer, 1855 quick check again on the futures. Strong all morning long. Up about 200 points on the latest overtures from china, which may or may not be significant or different from anything still want a deal even after the black listing. We go back and forth every day not huge moves. They want a deal, they just dont want any of the other issues on the table. Skinny deal. They want to be able to not get tariffs put on, additional tariffs, and they want in return they say theyll buy agricultural. Big fat deal. No. Fat buyer reto. Big, fat greek wedding. Yeah, i forgot about that. Juuls valuation reached 38 billion last year after an investment by tobacco giant ultria its facing increasing pressure from regulators. Frank holland joins us he has more on the story hey, frank. Reporter youre right. 38 billion, thats juuls latest valuation ultrias investment for 35 stake in the private market at 250 as the regulatory scrutiny increases, its not clear if that sky high valuation can hold up hedge fund arsana is the latest to write down its investment valuing juul closer to 24 billion. The value on the Second Market can be as much as 24 lower. Pricing shares at 225, 230. Juul launched in july of 2017 as a spinoff of pax labs. It has roughly 72 of the ecigarette Market Selling directly to consumers and through 100,000 retail outlets a bloomberg report citing a person briefed on the numbers said juul expects revenue of nearly 3. 5 billion in 2019, however, 80 of those sales come from flavored vaping products. State bans and Health Concerns could hit the revenue numbers. Unlike its un corn peers, it does have marquis names. Including fidelity tiger global and preoxis ventures, also investors back overto you. Did you practice that one pronouncer there several times better you than me. Thanks, frank. Owen bennett, Senior Vice President covering Global Cannabis and tobacco stocks. Its been moving fast, owen, on juul recently. I see three or four potential flashpoints. This latest nicotine study was concerning to me it was in mice obviously is that on your radar screen for juul i do think thats a bit of a scare story. If you look at the story in detail, there are a number of flaws there. I mean, the ament of vapor they give the mice, its the equivalent of taking 6,000 mi i millidwramill milligrams a week. You take the nicotine out and saw no increase in cancer . Is that a new link between nicotine as a possible carcinogen possibly. I wouldnt like to comment on the Health Care End of it since im not that in depth of it. The amount of carcinogens win vapor versus cigarettes, 95 reduced. Thats great. The deaths so far, it hasnt been with its sort of been bootleg versions of the Delivery System and oil involved. Its not just normal jewel vaping, right . That shouldnt be something that knocks 50 off the market cap of a or a valuation of the company. Well, i think right now, i mean, if you look at that 24 billion that was just referenced, if you do the math on that, which i looked at quickly, implies that juul lose around 30 of their volumes. That does not seem unreasonable if you assume the fda implement the removal of flavors now, they dont remove juul altogether which is a risk still, then youve got to assume a number of those users to switch over to tobacco, not going to quit altogether 30 loss in volumes. It seems to me its almost light. Isnt it 80 of their sales right now come from those flavored versions . Yes are those 80 of people using those or are they going to quit and use the category i assume theyll switch and use tobacco flavor. What is it, Phillip Morris yeah, the heat not burn iqos. Markets in the developed world where iqos heated tobacco has gone up. Established for reduce risk markets. You also need to consider nicotine strength levels in the u. S. , our is around 1. 1 milligrams so heated tobacco may not work in this market like it does in sharon. Every company tries to look at the potential disrupters. Did they pay a high price for something too early on my personal view, the signs were there in terms of usage when they looked at this deal. I mean,you look at some of the altria comments before they bought juul, they raised these themselves they know they have 50 of cigarette share in the market. They felt pressure and they panicked, therefore they needed exposure to that vapor segment because their own offering wasnt very strong. Juuls valuation right now, as low as its going to get . Well, theres still a possibility with the fda compliance policy which is due before the end of october. They remove all of jewel products and if they dont and its all flavors, the valuation of 24 billion does not seem unreasonable what we need to remember as well, very much tied to the u. S. The International Opportunity is very, very small the technologys not good where you have 2 nicotine restrictions the markets, they dont have the distribution regulators will be much quicker to take action and theres a huge round price point where theres markets, et cetera. Either Phillip Morris or altria look attractive to you . Altria, i think theyre getting no value whatsoever for juul we looked when you talk to the juul value worth around 41 pound. I dont think theres much more down side from here. On Phillip Morris, the rationale for the deal, we actually wondered whether the reason theyre doing this is they have visibility on heated tobacco slowing down and thats what they did if there is a risk around that, then id be cautious on Phillip Morris at current levels. Owen, thanks. Thank you. Still to come this morning, the state of the Real Estate Market in the meantime, lets get a check on the equity markets right now. Looks like dow futures indicated up about 225 points on the idea that there is the potential chance for at least a skinny deal in the trade talks with china that begin tomorrow. S p futures up by 27 the nasdaq up by 82. Squawk box will be right back. Someone i can trust. impact, click who is with me for the longterm. Who understands im dealing with lives, not only livelihoods. That in order to help people, i need more than products, i need Quality Support and insights. Can i find someone who partners with me to achieve peoples longterm success . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Still to come, check on the Real Estate Market and where Mortgage Rates could be headed thats coming up next. Then what an Elizabeth Warren nomination means or could mean for the markets will we see a major correction before the 2020 election new this morning, a report that china is close to a trade deal dpieste a tech black list much more on this developing story. Squawk box coming right back welcome back to squawk box, everyone the futures are trading around levels weve seen all morning. Up by over 200 points. The dow futures up by 215 points s p up by 25 and the nasdaq up by 79. This comes after the dow was down by over 300 points yesterday. A lot of concern over what was going to happen with the trade talks between the United States and china tomorrow a couple of headlines suggesting that china at least is looking to still potentially do a deal, just not a fat deal. A skinny deal that would include no additional tariffs coming on but they would buy Agricultural Products from the United States to the tune of an additional 10 billion. Well see what happens when the trade talks begin tomorrow. In the meantime, Mortgage Application data out earlier in the hour the decline in Mortgage Rates has resulted in a twomonth high in refinancing demand. Joining us now to talk about all of this is timday gafadzi and diane ramirez, the ceo of halstead good to see you. Thank you. Diane, tell us what the Housing Market looks like on a national basis. Okay. My focus is more new york but i do have a feeling for the national the luxury market is becoming to have more inventory than weve had in the past, but specifically in new york weve been seeing a hesitant market and prices are correcting but with Interest Rates and purchasing power were were going to see things better were definitely in a buyers market in new york city. Were in a buyers market yes. How does that match up with luxury having more inventory and prices coming down well, when you have more inventory and prices coming down, thats clearly a buyers market great time to be a buyer in new york city. In the rest of the country i hear its a sellers market everywhere else. When you talk about first time in, more affordable apartments, that across the nation seems to be a strong sellers market still. Not a lot of inventory but across the nation what im seeing is the luxury market is where the inventory is being built and that is starting to luxury market meaning north of 1 million, north of 5 million . What are we talking . Luxury its hard to put a price on it because its where you are. Luxury in some states could be half a million but its still luxury usually you think of it in terms of millions. Here in new york certainly 3 million and above. Tendai, what do you think in terms of Mortgage Rates . How big of an impact is that having on the state of the economy overall . Mortgage rates are boosting housing rates in the market. I mentioned things are a little bit weaker it would be weaker if we had higher rates if you were looking where people thought rates would be at the start of this year versus where they are now, theyve been supported for activity in the market as prices have made affordability more challenging, Mortgage Rates work on the other end to make it more affordable for people who can buy. What happens . Whats the price affordability if the ten year is below what . When do you see additional people either buying houses or refinancing . I think any time it moves lower some people get incentivized to buy and some people get incentivized to get a rephi. I would say with the Mortgage Rates below 4 , that would be a ten year around say 1. 6, 1. 7. Any time we fall below that thats when you can see activity start to pick up again yeah. I think that makes it look attractive for a lot more people there are always people in the market but lower rates help. I feel like weve had low rates for so long and people have been refinancing. Is there a point youre reaching saturation and everybody is already refinanced actually, no. When you are in the Financial Press of the financial markets, you think, hey, theres a 50 basis points gap, everybody is going to rush and refi today because this is the day to do it not everybody has their eye on whats my rate today and whats the not everybodys a market savant it trickles down they hear their neighbor refinance and they think about it. Theres always a reserve of people who are able to refinance. Do you think theres a national Real Estate Market anymore or are we seeing this huge divergence between luxury sales versus middle income sales and what you see in red states versus blue states with all of the tax changes . Feels to me like its more of a diversified market in terms of where weve ever been historically i think its a little bit diversifi diversified, but its still your home thats what people remember. Its not purely an investment. I think you see that across the nation, that people do want some permanence in their life its their home. So i think that youre not going to see any difference. Diane, tindayi, thank you. Could markets see a significant correction if Elizabeth Warren were to win the democratic nomination . Well discuss what could be in store if that happens. Check out the futures. Up 220 on the dow. Comingig bk. Rhtac one broker. Youre welcome. Dr remember, carl, we havent been investing with you for a while. Hmmm . Because schwab makes planning for things like this easier. Yeah, with schwab we get automated investing and integrated planning help. For a low Monthly Subscription price. Why would schwab do that . They help you plan for the things that matter. Subscription pricing. Schwab introducing subscription pricing with oneonone guidance. Schwab intelligent portfolios premium, a modern approach to wealth management. I certainly intend to be actively campaigning i think were going to change the nature of the campaign a bit, make sure that i have the strength to do what i have to do. That was senator Bernie Sanders on changing his campaign after his recent heart attack. A shift in support from sanders may be benefitting senator Elizabeth Warren the latest numbers from the political betting exchange have warren as the strong frontrunner and that has some wall Street Investors on edge. To discuss a potential warren nomination and the impact on Market Sentiment and investments, id like to bring in ed mills, strategist at Raymond James. So i guess the question is, ed, and thoroughly, i dont know whats going to happen with Vice President biden obviously, but theres a lot of people now, that was the predicted that was betting, but on the real clear politics average i think senator warren has now got a higher percentage than any other candidate. Its a very good possibility she could be the nominee would that be enough to affect the market either positively i dont want to assume its going to be negative would that be enough to affect the market in any way if she became the nominee, not the eventual president yeah, joe, i think it is. I think what i hear from investors is they want to know exactly how to position their portfolio and they dont know right now. I think what happened when trump became president is that absolutely everything was in play and for a lot of investors they knew that not everything was going to happen but they used a lot of the maybe it happens as an excuse to own certain equities my concern with Elizabeth Warren and her candidacy is maybe the exact opposite, is that the uncertainty that she could bring to certain sectors, be it health care, financials, energy is going to cause investors to think that absolutely everythings in play once again but the outcome would be negative this time for those sectors, even if it doesnt come to fruition, it might be shoot first, ask questions later and that is where we could get the Market Reaction out of her candidacy. Kneel mahotred is joining us, stanfo Stanford Graduate School of business is with us. Im trying to stay as objective as possible in terms of the various policy proposals from either the republicans or the democrats. Ive seen it and its usually posited by academics ive seen it in an overall sense that senator warren would reemphasize labor rather than capital in terms of treating it better in a tax system or various ways that wouldnt necessarily, according to the academics, wouldnt necessarily be taken negatively by the markets. Where are you on this . Could it be a positive if labor were reemphasized has it lost some support in the last 30 years, for example sure. I mean, i think in the the polling shows in the broad public there is strong support to shift some resources from capital to labor if you look at the Business Roundtable discussion recently, there is an argument that long term its sort of better for capitalism to reorient the balance between labor and capital. So i think i agree with ed that its very uncertain on how a warren presidency would specifically affect different sectors of the economy, but i think the view that its going to be 100 bad for everybody is wrong. Many policy changes theres winners and losers and not everything is purely winwin so, kneneil, the other thing hear, a lot of times its from Business People that walk this fine line, they cant support republicans for social issues. They dont necessarily support the economic proposals of the democrats. They just say, well, its very unlikely any of that could ever get passed the green new deal, for example, or free everything thats never going to happen so but thats a weird way to support a candidate, that i really dont believe their proposals are ever going to be enacted so i can support them because of their social stances. Yeah, i agree with that i think it also sometimes forgets although some stuff is passed via legislation like the obamacare or the 2017 tax act, a lot of things that president s have the ability to do is via regulatory action, which sometimes gets approved by the court, sometimes shot down i think in a warren presidency having very major changes to the economy passed by legislation, going through the house and the senate is somewhat unlikely. Theres a lot of things a potential president warren could do on the regulatory front, especially, for example, attacking issues of private equity and how things are handled in that industry, reserve requirements and liquidity for banks. Things that could have a direct effect on investors. Ed, at Raymond James which sectors would be affected negatively in your view . Just a guess at this point, but i think we all know at least three of them. There are some positive sectors, i think, that youve identified, too, with a warren nomination or presidency. Go ahead. Its never as bad as you fear nor as good as you hope. So, you know, we are always looking for kind of the silver liningment so lining some of the things that are positive a lot of people thought that when donald trump was winning on Election Night the market was going to get crushed with his presidency its been a very different story. As it relates to a potential Elizabeth Warren presidency, you look at certain things like does her wealth tax, if it passes, unlock a new round of fiscal stimulus if were heading into a recession early on in a potential administration of hers, do we finally get that infrastructure bill . We have a lot of industrials bottoming out right now. Do you see a bid for those names . Do you get an increased bid for utilities . Theyre already regulated. Their yield eer, especially if r doing tax regulations could be more attractive. Same thing with housing. Same thing with some of the ree yields its not bad, its more the feel of what could happen in health care, energy and financials that will have people looking for some of those safe havens. Those are the three that you finally got to the health care, banks perhaps, financials and then energy could you concede that point, neil, that you might i dont know what you i dont know if you own any stocks, whether you delve into that. Would you say everything is going to be fine but sell all of your Health Care Stocks and all of your Energy Stocks and financials if she looked like the eventual president , neil i think within industries it could be very complicated. So i think some traditional sectors of Nonrenewable Energy could be badly affected by regulatory change. There could be support for renewable sectors. Another industry i would mention is tech. President warren would be appointing people at the doj other areas that could bring antitrust enforcement against different sectors of the technology industry, which could be quite damaging. So i think even i think its hard to say broadly that an entire sector would be bad or good i think one way to think about it is does something require legislation or just regulatory action how might that affect different subportions of these sectors you know, neil, weve had you know how things get revisionist. Weve had an economist he wasnt an economist. He was a financial journalist from an institution i wont get into, but he actually said that there are false profits that have been exposed. He referred to Milton Freedman as one of the false prophets that have been exposed in the new woke financial literature. I guess. Do you buy into that is adam smith now you know, i always go back to 1776 and say do we need to learn this every 20 years, that the invisible hand really does allocate capital in a more effective way than central planners . Are you tending that way, that Central Planning that theres a place for that and that the free market is not the most efficient way . Well, i mean, i dont think those two extremes are the only outcomes you have. I think the freedman ideology of shareholder supremacy i think definitely dominated the world from the 70s through the 90s jackwelch is a great poe opponent of the idea of shareholder value. You have seen a lot of people, not just in the populus movements of warren but also at the Business Roundtable saying that different stakeholder groups should be accounted for you have huge sectors growing like Impact Investing which is a broader stakeholder conception of what ceos and managers should be doing so i do see the pendulum swinging a little bit. I think the open question is is this all just cheap talk by the business industry or do they believe that for longterm sustainability that promoting other stakeholders besides shareholders, i dont think that means capitalism is gone, i think the question is do we have a shortterm oriented capitalism or longterm oriented capitalism what do you think, ed i think thats been the big debate in the market overall what she would say is the market has been too short termism. There are a lot of policies if they get impacted or ultimately put into law or through regulation, longer term they might have a good benefit. When you are on wall street and you are trying to keep assets, you are trying to appease your investors, you know, that volatility is going to cause a lot of fear and that fear is going to be what drives Asset Allocation over the next year and into the early days of any potential administration and so she will have a Market Reaction if this gets done. I think what weve seen in our politics is that its a much more populus politics out there in that kind of the old ways of doing things here in washington, d. C. , have been entirely up ended in the last couple of years. You go through the tea party movement, trump getting elected, kind of this 2018 election so i think the market and dc are trying to figure themselves out and there is a recognition that the old ways of ways in which dc did things are completely out the window and you have to expect the unexpected coming out of dc now. Having said that, we thought the same situation when President Trump came in and talked so much about what he was going to do with the pharmacy industry you havent seen drug prices change that drastically. Some of the administrations efforts, theyve even rolled back what do you think would happen if Elizabeth Warren won the presidency but the senate stayed with the republicans yeah, i think thats going to be a huge hurdle if she were to win the presidency and she doesnt have the senate. One of the things that allowed trump to get more of his regulatory agenda put into place was that they lowered the threshold for nominations getting cleared through the senate to a simple majority. But if she doesnt have a simple majority in the senate and she is putting up candidates that Mitch Mcconnell does not want to see in those regulatory agencies, we could have a you know, probably some of the longest confirmation battles and a real question if she could get her team in place. And mcconnell would absolutely love that fight to prevent her from doing those changes he would think its his duty and so that would be a huge hurdle. Although we have seen both President Trump and president obama before him use executive order to a much higher percentage than weve ever seen in the past whampt can they do with executive order yeah, i mean, i think its an open question. I think one of the things that trump has done on executive orders is hes really starting to use the National Security authority of the president , which congress usually cant check, that it needs an override through a veto to check that authority. And the courts dont want to step in and say in this case this is National Security, in this case its not the president is the commander in chief so hes done all of his trade policies through executive order and executive action i would expect that if president Elizabeth Warren to do the same. I think the bigger question is, say, on fracking, if she doesnt executive order day one on fracking, it probably only impacts federal lands. If that drives up oil and gas prices, it might actually be more profitable to frac on private or state land. So these are the debates were going to be having over the next year, year and a half. Neil, another philosophical question so people work a long time, they pay income taxes, they accrue wealth is it okay to then say, i just want some of that even though youve paid taxes on it . In the past there would have been Property Rights and there is a way that we viewed something that youve earned over your lifetime is it con physician fiscatory t want that . Will that hold up in terms of constitutional challenges . Well, i mean, the polling data suggests that thats very popular so that a lot of people is it right i can tell you some other stuff thats popular that isnt necessarily a great a great idea if you ask if you ask 80 of the public should we tax 20 higher than you, is that great when you get 55 that say, yes, tax those bastards it has come out of u. C. Berkley saying because passive income is treated so much more favorably, the tax rates of the top 400 americans is lower than the tax rate of the bottom 50 right i think when you look at it in that way, i think there is an american ethos that we should reward people for their earned income when you look at the favorable tax treatment for the taxable assets there is a pendulum swinging. Did you see the analysis if we went back to 1980 and did the wealth tax, that a lot of the people that have done really well, companies that have done really well we know jeff bezos is worth so much money he has amazon stock and its been such a game changer in a lot of positive ways for consumers and everyone else. That may not have happened with the wealth tax. So i so i think thats hard to predict. I think the question is is that would people behave differently if they had a net worth of 10 billion versus like 500 million. Well never know, will we kneel neil, me and you we never will. I hear the music. Maybe ed ed probably knows. Hes at that 500 level. Its popular and we have the wealth tax its a real estate tax. Eneve got to go. Wh we come back well have more on china and the futures. Thanks to you, we will. Aw, stop. This is why voya helps reach todays goals. All while helping you to and through retirement. Um, you guys are just going for a week, right . Yeah thats right. Can you help with these . Oh. Um, were more of the plan, invest and protect kind of help. Sorry, little paws, so. But have fun send a postcard voya. Helping you to and through retirement. Um houston, weve had a problem its human nature to hate problems. But why is that . Problems inspire us to rewrite the rule books. The history books and future books. Thats why so many people work with ibm on everything from city traffic to ocean plastic. From flight delays to food safety. Problems even got us to the moon and back on one tank of gas. And who knows where theyll take us next. Breaking market news futures jumping on trade headlines. Our special guest this hour, steven roach whats working a new report says Venture Capitalists are putting more than 100 billion into startups this year. Well take to graykroft partner Ellie Wheeler about her big bets. An 8 billion judgment against Johnson Johnson. The final hour of squawk box begins right now. Good morning welcome back to squawk box on cnbc were live from the Nasdaq Market site in times square. Im becky quick with joe kernen. Andrew is out this morning the futures are higher dow futures up 226 points. Nasdaq indicated up by 84. S p up by 28 reversal from yesterday when the markets were down. Dow was down by over 300 points. Also been watching treasury yields this morning and they have been a little bit lower or a little bit higher than where we were yesterday. 30year at 2. 06. Ten year is at 1. 558 . 2 year at 1. 49 the markets reversal coming after thoughts that we may be closer to a potential deal with china, although it seems to change every ten minutes or so more on trade in just a minute first, just crossing American Airlines is pushing back its expected return to service date for the boeing 737 max from december 3rd to january 16th and i think american has got a big fleet. I think southwest has the biggest but american and united have the 737 max planes that have been there. This has been a gradual push back that weve seen from all of these airlines as they said late summer, they thought the fall, now were talking about next year before they are expected to return to the 737 max. Probably not a hung sge surpriso anybody watching the eu regulator was saying it wasnt sure the company had backed up its points for why it should be reinstated and still had some safety concerns thats the big issue, not just whether the faa signs off but whether regulators around the world give a little more push back well talk to a boeing analyst in the next half hour and we will continue to keep an eye on the stocks you a report this morning says china is open to a partial trade deal with the United States. Kayla tausche joins us with the latest this is the reason weve even the futures up this morning. As with all of it, if you look at the details not clear that theres so much optimism. Reporter yeah, becky theres been be a flurry of reporting all morning about what may transpire in the coming days and what may be in the package that leo he will present even as many op ed pieces from officials who have worked on u. S. china negotiations say the recent measures make a deal less likely china is preparing to offer to increase its soy bean purchases by 1 3 more. That would raise it to 30 million tons from 20 million tons chinese pork and soy bean purchases have been building in recent weeks but that report significantly moved the commodity futures. I have not independently confirmed the reports but i have been told by sources that discussions among deputies are tense, you probably could have guessed that, but both sides want to deescalate. It has been a peculiar way for u. S. And china to deescalate the situation. You have new visa restrictions that both sides announced yesterday. China is threatening more retaliation for the u. S. Banning business with eight tech giants and you have chinas high profile dispute with the nba talks get underway tomorrow morning. They extend through friday but both sides, guys, have today to really sit and think about what has been discussed so far among deputies and what theyre prepared to accept or discuss for the rest of the week becky . The other big question is what happens to those tariffs . I think october 15th is the date that pushed off date. So well see what happens this week with those. Then on the 15th well see if the new tariffs go in. You have the october 15th date, becky. That is a significant date the u. S. Delayed that as a measure of goodwill knowing that these talks would land right before this and to try to introduce another negotiating chip here, but you also have the tariffs that went in place september 1st on a large variety of u. S. Consumer goods and another tranche of that hitting september 16th a lot of principles want to roll back that september tranche and want to avoid the december tranche at all costs its not just the escalation on october 15th. For more on whats at stake in the next round of u. S. china trade talks, lets welcome steven roach hes senior fellow with yales Jackson Institute and a senior lecturer with the school of management ambassador Robert Hollyman hes now a partner at crowell and mooring law firm and, ambassador, lets start with you. Trying to read the tea leaves through every one of these reports we get whats your feeling about how likely a deal is well, having been in that room before with the chinese, the deputies are working out trying to see if they can get the parameters of a deal that position something that could potentially be a truce the impact on both the economies is obviously hard and tough at this point there is no way that we will get a major deal with china this week, but theyre trying to see if they can set that up so they can keep a momentum back in place and moving forward and so my guess is that we may see the outlines of a truce but we are a long way from dealing with the fundamental problems, which is are the ones that the u. S. Identified when they started this a year or more ago. Ambassador, thats very interesting that you think the best Case Scenario is that we get to a datante, so to speak. What does that mean if the president decides to go ahead with tariffs next week what happens next . Do you think that has to be pulled off the table in order for that truce to be met no, i dont think it has to be pulled off the table. We already have 550 billion of imports from china that are subject to tariffs up to 25 there will be some going up to 30 . You know, that in and of itself is not so significant in light of the tariffs that the u. S. Is already paying its meaningful, but in the broader scope its not significant. Whats the toughest issue here is at the heart of the u. S. Concern is we want u. S. Technology firms, particularly u. S. Technology, to have better access to the Chinese Market at fair terms that allow us to compete. At the same time weve been pulling back on access by chinese firms into the u. S. Market so weve actually set ourselves up the underlying problem was difficult, but we have compounded that and that is at the heart of what the u. S. Has to get at this at the end of the day and thats why i say it remains elusive and it will be tough to get there now that weve started down this road, we have to get there. Steven, you know the chinese mindset very well. What do you think that theyre expecting heading into this . What do you think the best potential outcome is well, becky, what is a deal is a truce a deal or is a deal really going after the issues of intellectual Property Rights, forced property transfer, and the like the administration has insisted thats where the rubber meets the road and a truce that just welcomes china to buy a few more soybeans that kicks the can down the road on these tough issues, thats not a deal, thats face saving and hoping that, you know, a brighter day will come at some point. I think the chinese are unwilling to come up with a better deal with all the additional pressures that have been launched in recent weeks over blacklisted companies, visas, capital controls, delisting. The u. S. Has escalated a lot and i dont think chinas going to swallow that nearly as easily as this report overnight seems to suggest. Meaning you dont even think a truce is on the table . Look, theyd like a truce and who knows what is going to happen tomorrow, but a truce should not be equated with a deal a deal is resolving tough issues and a truce may buy us time but the prospects for resolving these tough issues as the ambassador just eluded toare close to zero this week. If anything, the aggressive actions that the United States has taken in recent days i think underscores that point. Ambassador, in speaking with some Technology Ceos they say that no matter what happens, whether theres a deal reached, whether theres a truce reached, whether nothing comes about with any of this, that the die has already been ast, that they ar looking for other places for their supply chains, that they are not interested in putting any additional infrastructure into china, that they are looking very quickly to try and find any other way to find other places for that supply chain what does that mean for china after all of this . Well, a lot of companies are looking for alternative places for their supply chain, but fundamentally thats actually a shortterm question for whats underlying the trade dispute whats underlying the trade dispute is that u. S. Technology firms want to do business in china for chinese customers and to expand their race thats what weve been largely denied and so thats the issue its not as much about the supply chain, although thats important in the short term, but its can we compete in that market can we be part of that growth long term . And that is where i completely agree with stephen, that the chances of getting that are a long way off and a truce is not a trade deal but a truce could help us get back on a path to better discussions. Stephen, should the nba or other Companies Looking to do business with the Chinese Consumers tow the Chinese Party line look, becky, you know, this whole nba issue is really absurd i mean, darryl morey says he stands with the people of hong kong who are the people hes standing with is he standing with a legitimate protest which i totally support over extradition or is he supporting, you know, destructive anarchy thats aimed at tearing down hong kong . That absolutely nothing we know about. That sounds like the Chinese Communist party line what theyve been saying about it. Youre baiting me its not a Chinese Communist party line. Thats what they said. Classic thats expected but classic i love it. I was talking about you earlier today. At this point i actually heard you, joe, when i was driving up here and almost went off the road. You know i love you. Thank you for that. You know i love you here you come right on and you do i think you did that for me youre not really serious, are you . No. No i wish i was there but i cant be in two places at once come on, i mean, this is right now were talking about a destructive anarchy. Is that what standing for the people of hong kong means, joe tell me. Is it okay to say that you support democracy and freedom . Its fine that you support democracy and freedom, but in what form, becky, do you do that theres a legitimate gripe over this horribly miss managed extradition bill the protests started out at that its gotten totally out of hand. Its aimed at tearing down anything and everything that supports hong kongs future. I dont support that darryl morey has no idea what hes talking about. Ambassador, your thoughts hong kong has for a long time been a key partner of the u. S. Weve seen it as a place of opportunity. There are tough economic consequences now happening in hong kong and i think this issue is something that really needs to be resolved in a way that recognizes that there were certain obligations that china made with the u. K. When hong kong had this period of semiautonomy and we need to find a way to respect that, but that should not be brought into the u. S. Trade discussions that are happening this week and i dont think they will be. Steve, were you like when the wall was coming down, the berlin wall, were you like, this is awful that is a great regime here this is very sad this shouldnt be happening. These guys are radical what are they doing here, tearing down that beautiful wall was that where you were with that joe, youve got to be careful when you push this wall thing. I mean, you know, we have another wall thats more important today. Im kidding but 50 kbreeyears from now, ste, do you hope that china has loosened some of the things we think about as far as the communist party in the way human rights are treated and fair and open discourse and things like that do you hope that theres some loosening of that . Or is it impossible with just the structure of china no, joe, look, its a great point. I think that china is firmly committed to shifting its model from a but you cant just youve got to to more of a consumer mind set. The consumer mind set is aspirational there has to be freedom of expression amongst people. Gentlemen, thank you. Good to see you both. Thank you. We have to go. Nobel prize in chemistry john goodnau he introduced lithium could he bought oxide to the inner workings of batteries and invented the batteries for cell phones, ipads and iphones and Everything Else. Hes 96 and hes still inventing stuff. Coming up, a new report says Venture Capitalists are expected to put 100 billion into startups my battery, i may call this guy because its weakening really quickly. Or the question of time congratulate him on the battery. Well talk to elli wheeler, thats next. Driving specific sectors of outperformance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. You should be mad that this is your daily commute. You should be mad at people who forget theyre in public. And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. Welcome back to squawk box. Equity futures sharply higher. Dow up by 210 points this isnt making up for the losses we saw yesterday when the dow was down by over 300 points. This morning the nasdaq is indicated up by 80 points. S p up by 26 2019s ipos struggling but is the Venture Capital Community Concerned . Joining us with whats working for tech investments, Ellie Wheeler with greycroft thanks for joining us. Thanks for having me. What weve seen in the private markets in terms of on the way up for valuation and on the way back down, have you seen this before . Is there anything that makes this totally unique or youve seen this movie before i think weve seen it before. You get a complete dislocation from fundamentals and the Public Market says, no, that Still Matters and eventually it works its way back down but it takes time its not immediate. Should we be surprised that the unwashed public know more than all the wellhealed vc investors . I dont know that its that theres been so much cheap capital. The fed central bankers around the world. Yeah, exactly its looking for a place to go and late stage Venture Capital is where its gone to be fair, the opportunities are large, right these are Global Opportunities in various sectors that are being disrupted by technology and theyre really big opportunities. It isnt crazy to be investing in them. Were excited about a lot of things that are going on, but youve got, you know, in 2010 before a company went public on average theyd raise 63 million. Today on average theyve raised 250 million. That is a gigantic increase. Thats the problem. The u fora is in the vc stage, not in the Public Market and the companies are more mature. Theyre more mature, raised a lot more and typically taking a little bit longer to go public too. Youll see some of them do very well as a result right now were talking about a number of them that havent but there are ones who have. Ones that havent have losses and profits down the road that say maybe we never make a profit. Thats right. Unit economics its a continuum that we see growth at all costs with a lot of cheap capital when the capital gets less cheap and less available, you have to swing back to Unit Economics you can go too far in one direction. Weve been a little bit far on the growth at all costs. Is the Digital Technology angle, component, is it mandatory to get Silicon Valley excited . Can you just do dog food or does it have to be you know, can you just do an exercise bike or does it have to be, you know, ai is telling you how to yeah, well, theres buzz words. Certain buzz words the joke is you get 3x more by using more. Like adding dotcom. Crypto. That didnt work so well. No, it didnt, but there are some things that have changed, right . Techenabled businesses are everywhere the most Public Companies call themselves something related to Technology Even if traditionally they havent been. Even if its true or not . Well, thats for them to decide, but its so as i said, really it is everywhere so theres a reason for optimism in terms of technology and the impact that its having. But doesnt mean that all companies should be, you know, valued forever. Has it changed how the vc community is looking at deals that theyre doing today i said mostly at the earliest stage. It takes a long time for that to trickle to us. Now its going to hit the late stage the late stage market first. Obviously if theyre investing with the hopes of going public in 12 months, the Public Markets are telling them the multiples have changed, they adjust. Its a lagging, slow process its going to take a few months. If the markets continue the way they are in terms of how theyre valuing some of these, that will eventually change. What do you like right now . What do you see thats coming along that doesnt necessarily have a buzz word like ai or crypto or one of those things in it is there something new that we havent heard about yet, the next buzz word the buzz words going out of style. Im spending a lot of time in Digital Health i think its particularly interesting. Consumers still arent paying for health care in this country, but theres an awful lot of taking best practices and thinking about the consumer and everything that you do, kind of make sure that that Consumer Journey is great its convenience, value, also just everything that the company is doing and orienting around is to make that endtoend experience is wonderful. It hasnt been the case in health care given who pays youre seeing a lot of new approaches rethinking that the patient actually is the consumer here. Lets think about how we make this experience better which hopefully leads to Better Outcomes and better value. Ive heard that those types of Health Care Apps are getting commoditized people looking at information saying, okay, this is great. Were going to put it into this watch, these places, but were not sure we can ever make money off of that. Thats true in every sector there are things that dont necessarily have staying power is this a stand alone company . Is this a feature . Will this be better off in somebody elses application, somebody elses distribution or can this have legs will this stand alone and is ultimately a sustaining company . All right, ellie. Youre at this point full speed ahead . Its not the end of the world . Its not the end of the world. Weve seen this fall apart before. Whats the next big thing can you tell me . Where should i put some vc money. What do i need revenue growth, Technology Component and an eventual profit is it going to be social media i hate social media. I think you would be a little bit hard to get funded in social media right now. What do i do . Bitcoin . I dont know about bitcoin. You really dont know about it of course weve thought about t. Personally we are spending more time on the infrastructure, less on the actual currency. If you call it a currency. Thats a discussion in and of itself but youre seeing a lot of mobility youre seeing a lot in autonomous vehicles. Youre seeing venture dollars go into aerospace while it used to be, you know, kind of strictly a focus on software or thats how some people used to characterize it as i said, kind of technology is increasingly empowering most industries and as a result youre seeing investment broaden across multiple sectors. All right thank you. Appreciate it. Thank you. When we come back, weve got this mornings stocks to watch stay tedun you are watching squawk box on cnbc its been reported that theres a cyberattack on business every 39 seconds. Ouch. I dont even want to think about it. Comcast business has a solution. We go beyond fast with a cloudbased Security System that automatically updates, so you always have the latest protection. Phishing. Malware. Risky sites. It can help block all of that. Its one less thing for us to worry about. Comcast business securityedge automatically protects all the devices on your network. Call 18005016000 today. Man how can i deliver superior longterm results . It begins with a distinctive approach to managing money. That for over 85 years has focused on keeping confidence up when markets are down. An approach where Portfolio Managers work well independently. And even better together. Who dont just invest, but are personally invested. Can i find a proven approach designed to deliver results . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Coming up, not just tariffs. Were talking about the biggest issues doing business in china using the nba as a test case stay tuned, youre watching quk xn bc welcome back to squawk box, everyone the futures up pretty sharply and have been all morning long there have been a number of reports suggesting that china would potentially be open to some sort of deal with the United States. A skinny deal. One that means that no additional tariffs come off. Potentially the roll back of other tariffs. In exchange theyd be willing to pay, these reports suggest, another 10 billion for agricultural exports from the United States. Right now dow futures up 203 points s p up 25, nasdaq up by 75 apple trading near 52week highs this morning this morning canaccord is raising from 260 from 250. Mike is here what caused you to make a move this morning, mike thanks for having me. Our team, we do these monthly surveys of smartphone sales at different stores, mainly north america based. Just based on the survey work and the feedback, its certainly off to a stronger start than expected when were analyzing the apple numbers, we see easier comparables from iphone. We think with easier comparables, improving trends, little better demand given the Camera Technology seem to be resonating with consumer this led to us increasing our iphone estimates which has led to us increasing our price target today and keeping our buy rating on at that pointle. I dont know why we said 52week high you dont have to think that hard to realize that any new highs here are all time. Whats your new target our new target is 260 we have a one year price target. What is that in market cap . Oh, gosh, in market cap it would be, you know, about a 1. 2 billion. You mean trillion yeah, its hard to even say that, right . Yeah, it is. Why say trillion when you can say billion . As some famous person said dr. Evil, wasnt it . Yes all the angst about china would hold some people back, mi mike why isnt it holding you back . Looking at apple in the overall business areas doing well we see Services Continue to grow at higher margins. What pushed us to take up our price targets is really twofold. One, easier comparables on the iphone when iphone revenue gets to better trend from shrinking double digits year over year getting close to break even, even growth potential. That usually does well for apple stocks we see the trends go through we do price targets. Its based on calendar 21 estimates. You heard my question my question, why isnt it talking about china. Why are you not worried somethings not going to hit the fan . How do you know somethings not going to hit the fan we dont. We try to balance our risk with investors. We think the near term were above consensus for september quarter. Its that simple . Youre not even factoring in if it happens, you couldnt have controlled it anyway is that its just some people have gotten less they might be a little bit more defensive based on being in the middle of this, you know, black listing, nba, Everything Else that could affect apple, could it not absolutely it could as we point out, in the area it could. We look at whats going on in china. Certainly theres risk there, but huawei is doing better in china. In the near term nationalism but the iphone, loyal consumers and even in china the 11 seems to be off to a better part near term remains strong and its something to keep an eye on mike, thanks. Thank you. In other news in other headlines this morning, protests are continuing in hong kong and Chinese State media is accusing the nba of endorsing hong kong violence chinese organizers canceled a fan event on the eve of tomorrows exhibition game in shanghai between the nets and the lakers this is after, of course, darryl morey tweeted over the weekend backing the hong kong protesters backing them is a strong word. Lending some support the nbas business in china said to be worth 4 billion meantime, reports say that espn is directing its employees for the First Time Ever to steer clear of politics. Thats got to be a first, really whats been happening for the last five years. And just focus on basketball during its coverage according to an internal memo from a senior espn executive amazing. Joining us to talk about the challenges of doing business in china is cnbc contributor Michelle Carusocabrera and greg portel at a. T. Concerny. Michelle, greg, thank you for joining us what did you think when you first saw this are you a basketball fan nba fan . I dont watch a lot of basketball. When you see opera, theres no sports theres no no. Right. Okay. Not your cup of tea no. When i saw this all go down it really struck me how bad the chinese are at propaganda. Theyre very bad propagandists they should be great. They should be great because thats in theory what they do. To have misunderstood the American Public to have elevated somebody who was not a household name they could have suppressed this in china as they do. They could have blacked it out to have said were going to cancel games, were not going to show it on tv is to have created a situation which now means that if the American Public didnt know what was anybody left who didnt know what china was about and what was happening in hong kong, now Everybody Knows probably speaks to the feeling get backed into a corner to a certain extent. In terms of hong kong on the economy, cracking down on u. S. Companies, anything headed into the trade talks. I think you speak to another point that i would make about them, it clearly demonstrates how insecure they feel, that they have to come down so hard on this suggests that they are concerned about their existence. Now i am not saying that the fall of the chinese regime is coming. No. A lot of people have predicted that. Theyre a little touchy. They are extremely touchy and you have to ask why. Do they fear for their existence . Do they fear about the economy i bet they do. It is weakening regardless of the trade war. Greg, what do you make of all of these discussions were having well, the challenge facing Multinational Companies is despite all the complexity, despite all the noise, china is one of the last remaining sources of pure consumer consumption growth so ceos around the world need to engage the market and that creates the complexity that you start to see and, i mean, if you were the nba right now, you were adam silver, how would you approach this well, the challenge that Companies Face is that theyre starting to get increased pleasure to have a voice on human rights, to have a voice on political issues, social issues. As long as its not china. Well, thats where the nba has kind of walked themselves into a discussion that probably isnt very helpful for them in the long term, but if youre going to have a brand, you need to stand for something and thats clearly what adam silver is trying to do now. Every company has walked into it, right . Every company that has said were not going to do business in a certain state in the United States because they have passed a certain law, now you have to turn to them and say, okay, are you going to do business in a country that has concentration camps, right theyre not going to the white house if they have the championship have you read steve kerr or popovich do you see what they say about our own domestic situation and thats the conundrum. Theyre afraid to look ascant at a communist party it weeks of hypocrisy and right dictated by money i think its an awful precedent for pr. Well, it goes back to if youre going to do business in china, which every company now has to do, you have to have and develop a pretty proactive multilayer strategy which involves how do you serve the Chinese Consumer, how do you manage your supply chain and how do you manage the overlay of political and social issues. You know, in the u. S. Many of these companies have had experience with it in europe theyve had experience with it. China is a new adventure and it shows the importance of needing to have that comprehensive strategy and manage it on an ongoing basis. I dont know what kind of strategy can you have when youve got to choose sides. Your consumer forces you to pick a side. Thats the demand of consumers now, particularly in america and now the Chinese Consumer appears to have demands based on the supposed outcry that were seeing there which side do you choose because theyre very different sides, right it goes back to one of the evaluations that we always ask clients is how strong is your brand . What do you want it to stand for . Because if you are going to have a brand that has a voice, that voice is going to be challenged. Now where you start to run into problems is when the consumers in one market and their preferences differ from the preferences of consumers in another market which side of the fence do you fall on . Its you know, multilayered complexity when you talk about issues such as the ones were talking about in hong kong and china. If you will, greg, it shouldnt be controlled by where your financial interests are youre either woke or not. Well, what drives the financial interests in both markets may be different you know what im saying. South park hit a sensitive spot yesterday because they said, we, too, believe more in money over dem kra i is. I mean, thats what thats what this comes down to. Are brands going to be forced to take a side . Are Companies Going to have to pick one side or the other one of the elements you see Companies Respond with is localization of many of those brands so the brands can have different voices in different markets. Something like the nba, however, is a global brand, a global powerhouse brand and that puts them in the cross hairs. All right greg portel, thanks. Michelle, thanks for being here. Good to see you. The offer is great, by the way. Any time you want to go. You prefer that, right . To basketball, yes, sorry corgi and bess was great see macbeth. Yes, it is in english beautiful. Understand it. There are subtitles. On the back of the seats. No way yes its great. Macbeth is great you love shakespeare go see macbeth. A Digital Technology component to opera i knew it. Thats fantastic thank you. When we come back, another airline is pushing back the expected return to service date for the boeing 737 max well talk to an industry analyst what this means for the Airline Stocks when we come back welcome back, everybody. Big news this morning that weve just heard in the last 45 minutes. American airlines is pushing back its expected return to service date for the boeing 737 max from december 3rd to january 16th you can see American Airlines shares up by 1. 5 . Boeing shares up by half a percent. Joining us now to talk more about it is Sheila Kahyaoglu sheila, probably not a huge surprise given some of the headlines weve heard recently about the eu regulators and others whether or not theyll follow with whatever the faa decides to do on this. Sure, yes this is one of americans push back a month and a half is one of six delays this year from the u. S. Carriers among others so its no surprise. I mean, when we think about the max we should have had 1,000 in the fleet by year end and theres 25,000 aircraft globally taking 4 of the gross fleet out of the mix for carrying capacity. What do you think in terms of whether that january 16th date is a realistic one at this point or is this one in a number of additional roll backs . You know, i dont think i know we know boeing is making progress they had 700737 max flights with the new software and theyve had the max software log 393,000 hours in sim so thats equivalent to 45 years theyre making progress, thats clear. Whether the faa and europeans and the chinese approve it and the timing of that, you know, i dont think anyone has any particular insights into that. What i will say is that you start looking at all the things that are happening with the trade talks, if there is an impasse, if things dont go well with the chinese trade talks, would you expect chinese regulators to use this as another tool in the battle back and forth over the trade talks sure. Chinese trade doesnt help wto is not helping i think what you want to see is a global approval of the aircraft because you dont want to have a staggered recovery where the u. S. Approves it and it takes six months and it creates uncertainty for an aircraft so i think you want to have global approval for the aircraft or as close to it as possible and all the Macro Economic factors in trade is not helping that. Boeing shares are at 375 what do you think about that valuation right now given all the uncertainty, all the unknowns sure. We still have a buy on it. We have 430 price target. We think the stock can still generate 30 plus a Free Cash Flow per year from 2020 to 2022 even though we just recently cut our wide body Production Forecast thats how the advances are going to come in as they deliver on the max we still have a very positive sales. Sheila, thanks. Good seeing you. Good. Thank you. Shares of Johnson Johnson are lower this morning after the health giant was hit with an 8 billion verdict. Meg tirrell joins us with more hey, meg. Hey, joe. Johnson johnson is no stranger to the courtroom with investors bracing over talc powder and opioids. A philadelphia jury said j j must pay 8 billion in punitive damages for risperdal. He already won 680,000 in a compensatory award j j said in a statement the award is grossly disproportionate and a clear violation of due process and it will move to set aside the verdict. The Company Faces more than 13,000 cases due to risperdal. Thats in addition to the cases concerning the talc powder and opioid businesses. J j just settled out of the first opioid trial for 20 million after losing a case in oklahoma and being ordered to pay 572 million the talc awards have been much larger j j was ordered to pay 4. 7 billion last year. J j stock down 1. 7 showing the 8 billion verdict is unlikely to stand back over to you. Meg, very quickly on this i know you read deeper into all of the headlines and what i was reading on some of this, it sounded like evidence that Johnson Johnson was on the list of Warnings Issued for this, was it or was it not was this a known side effect, something that they warned about or not the drug is approved for use in adolescents with autism to treat irritability that was the setting where the plaintiff used the drug. I look eed at the drugs label,t mentions it, but it isnt high up in the label and the trial focused around whether j j warned enough this could be a risk. Whether or not they incentivized doctors to increase sales . That i dont know about i would have to look further into that. Meg, thank you. Thank you. Coming up, well followed strategist jeff saut, his call on the markets when squawk box comes back [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. I can shine. Imma do what im made to do. Built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. Lets get a check on the markets, ahead of the opening bell dow futures still up by 192 points above fair value. Nasdaq up by 68. The s p up by 22 lets talk more about what wall streets watching today. Joining us for that is jeff saut, founder of saut strategy, Portfolio Manager and chief investment strategiest at capital wealth planning. Youve been optimistic on a longterm bull market. Headlines out of china, brexit and with the fed, what do you do when youre seeing volatility like this . How do you react well, if you recall for the last few weeks of september, i repeatedly on the show said that our model called the august 5th selling climax low was telegraphing the first part of october would be difficult we raised a little cash. We think the market bottomed last week. We said in mondays letter it would be more of a process than the v shaped bottom you saw at the august 5th selling climax low. The reason is pretty simple. There is not as much energy, internal energy built up in the market right here as there was back at the first week of august so we think the market is still okay we think a lot of the noise out there is just that noise, the fundamentals look still pretty good to us and we think youre in the process of making a bottom here. You do have big events and i realize normally youre not looking at the headlines and which way they whipsaw we could see additional tariffs on october 15th. What would Something Like that mean what does it mean if we have a hard crash out of the brexit at the end of the month i dont think the brexit is going to be that big a deal for the u. S. Markets i think steven roach and the ambassador pretty much nailed the china talks. What i heard this morning, out of my contacts in d. C. , where i used to work, is there is going to be no big agreement coming out of the talks i actually heard that the chinese might even leave a day early. So maybe you get a truce, maybe you get some kind of partial agreement, but there will be no major trade agreement. The people looking for a major trade agreement are going to be disappointed and i think it will be interesting to see how the market acts when that becomes evident. You think it is more important what happens with earnings i think it is much more important what happens with earnings i know a bunch of the negative in nay bobs said earnings will be down and thats probably true. It is not important what happens in this quarter. What is important is what is going to happen next year and we think earnings will look pretty good next year. You think companies will be able to issue any guidance like that or companies . Guidance has been pretty squishy right here but i do think next year youre going to see somewhere around 177, 178 on the s p 500 with a 19 multiple on that, which is what we think is the fair market multiple here. Auto youre talking 3200 on the s p. I dont usually ask you about specific stocks. Ill ask you about the bernstein downgrade of fedex this morning. I do this because the transports are important, i do this because fedex is important in terms of shipping and what were looking at with the holiday season, bernstein is downgrading fedex because their bull Case Scenario isnt playing out. Part of that is because the tnt integration theyre worried about. Big part of it is because theyre having to spin pretty aggressively and getting killed on the ground shipping and after the amazon fallout i think the transports in general are an interesting place to watch when were looking around the corner for any signs of potential recession. It has been said, if you catch the transports right, you can mack can mackke a lot more money. Let me qualify this, im not a fedex analyst. But i would not want to be selling Federal Express going into the christmas, thanksgiving christmas selling season. Because it is an important shipping time . Because why . Because it is important shipping time. Well have good christmas sales. I think sales will be up substantially over last year fuel costs are under control fedex is always tended to hedge some of the fuel costs anyway. I just i wouldnt be selling fedex here, going into christmas. Thats interesting. It is probably a broader call on the consumer and strength we have seen there. Are you not concerned about the ism numbers we got last week, for manufacturing and for service. I know those are confidence indicators, but are you not concerned about what it might potentially signal i am not that concerned with it right now i think one month does not a trend make hard data i have been seeing is actually quite positive. A lot of the soft data, the surveys, i dont pay a whole lot attention to. Would you raise cash if you thought Elizabeth Warren would be the next president . I dont think she has a chance of becoming the next president. Why not i think if you look at a program, she wants to put forth, she will bankrupt the country. There is the the numbers do not pencil. Spend money to make money if we if there is no earth left, youll wish you spent money on the new green deal. Everybody is in an environmentalist, just at a different level. I happen to think the environment is not as bad as a lot of younger people think. All right i just wanted you think trump will be reelected then . Or you dont think shell be the nominee . I think hes go to be the nominee. Im not sure hell be reelected but i do not think Elizabeth Warren is electable. Okay. Would you raise cash if joe biden got elected . No. You wouldnt . You would be fine with it . Yeah. Okay. All right. It is specifically Elizabeth Warren all right. Jeff, good to see you thanks for joining us. A pleasure, becky. Well talk to you oon. Big new Orleans Saints fan or something . Thats the symbol for his company. Are you sure . Jeff, are you still there im here. I think the saints are great. Fleurdelis. Im rooting for the rays, the rays won two in a row. Bye, jeff bye, everybody else. Join us tomorrow right now time for squawk on the street. I get knocked down i get up again aint never going to keep me down i get knocked down i get up again good wednesday morning welcome to squawk on the street. Im Carl Quintanilla with melissa lee, mike santoli at the new york stock exchange. Cramer and faber have the morning off. Features rally on optimism over u. S. China trade talks this time the ft saying china is ready to boost their purchases of u. S. Ag chair powell speaks at 11 00 a. M. Eastern time. Europe up, and benchmark yield back to 155. Road map, china surge. Stocks set for a rally at the open amid the optimism