Transcripts For CNBC Squawk On The Street 20240713

Achieve strong Sustainable Growth and safeguard against downside risks. The group offered no specific actions to combat the virus. How disappointing was that look, i think this is the same problem, central bankers are dealing with a biological problem that is then going to spill over to economics, probably means fiscal help what are we talking about here lets talk about restaurant closing, malls closing how about the people who work at the places, thinly capitalized companies that are supposed to pay these people Steve Liesman i worked with him this morning, excellent drop in there, par suited into their office one point the Federal Reserve was saying well stand back behind people whose insurance for instance isnt paid off for a hurricane. I think that its up to treasury and incumbent upon treasury to say were going to work with Small Business, if you have a problem, you can come to us, because thats where the real pain is going to be. We dont want the only retailer to be walmart when this thing is over no. No, we dont wed also like there to be more test kits available, which i think is finally starting to happen but thats been a real problem i think out there at least when you talk toment so some of the and we can get realistic totals. There seems to be a certainty that once the test kits get out there well see more cases and the question is the reaction going to be more concern or in some way is it going to give people a little more facts facts is the only thing that can confront fear. If you have a bigger, look, only the people in the hospital who get it and some die, thats kind of a skewed figure, how many kids 15, 12. Why havent the chinese told us like the 15yearolds that get it, 12yearolds get it . Why havent the chinese really worked closely with every nation because the chinese have this vast repository of information they aint telling us nothing. Chinese have done what seems to be a fairly good job of containing it at this point they track every Single Person they dont let you at work, they monitor you. Have your face mask on, dont talk to employees. They know based on cell phone data if youve been in contact with anybody has had the virus or could have had it, they prevent you from going to work we cant do that here i imagine they can experiment on people in a way that we would not. We have strict protocols about giving someone a disease i dont know what their protocols are. Theyre willing to handle false positives in the hospitals that we would never do. Davids right. If you can shut it down doing something involving that is really extreme if thats what it takes in the totalitarian country and not tracking people via cell phone and removing them from bourque if we think theyre exposed to somebody with the virus we identified previously westchester someone in an area for the people around here, its close to us and we think theres one person in china tracking hundreds of thousands the mortality rate in south korea is very clowe. David, youre not allowed to say that immediately people will say you are owned by the administration. 105 cases and six deaths. Are we going to argue the death rate in this country theyre all Underlying Health preexisting or elderly people in a nursing home in washington its the denominator. Dr. Fauci not silenced by the administration, written articles over and over talking about how this is a really, really, really bad flu. People say what does that mean they havent experienced bad flu. When i was younger, david, in spanish flu in the 50s that killed the equivalent of 100,000 people fauci is not giving you the high sign to go out to dinner hes just saying listen, there may be something between, theres something between sars and this, and youve got to respect the fact this may be 0. 5 or 0. 6,ment some of the horrib flus people say hes just saying its a cold hes not saying its a cold. Hes saying its a flu and a lot of people are going to die the question becomes what were trying to help people understand and deal with is what are the economic ramifications going to be, every day brings new cancellations and conferences and gatherings where people had plans to get together, a lot of activity would have taken place that no longer will. How shortlived will this be is a question trying to determine that at this point, as are obviously owners of businesses. Mark benihoff put out the most definitive list of things i think its going to be the prototype, no International Travel all cross border travel is prohibited wow. This is a Company Worldwide company. Vanguard did the same thing yesterday. Twitter told people encouraging all employees to work from home, some depending on the country you cannot work from home. Kind of set by example. Eye reflection of pullback expectations in terms of travel. Was yesterday just a fluke rally . Were supposed to ask you that its the most oversold its been every time its been this oversold with the exception of 2008 you had that rally. It tended to have staying power. Does the market know something we dont know about something that is a drug that you could take in the hospital that gets you out of the hospital . Once again, im going to explain, i lost my father, this is what happens. He breaks his hip, pretty healthy. We get him in the hospital say listen, hes got to get out of the hospital for 48 hours we couldnt because he wasnt able to stand up, so of course he gets pneumonia and dies hes a healthy person. He gets pneumonia but hes 92. You dont want to be in the hospital we can make it so they can get better at home, huge win thats not you say huge win im saying that theres a far more likely chance that people can live instead of getting really serious pneumonia this you cant get in a hospital. You might have it already. In terms of yesterdays price action, this argument that the stocks that got hit the hardest in the last half of february rebounded the least. They did because theres no cruise lines make sense to go down i remember dealing with chipotle, took 18 months delta is up big because Warren Buffett bought stock tomorrow do you think hell buy stock again . Come on, these are Companies Whose earnings will be slashed a lot of guys are saying like visa did, lower end. We dont know how long it will go. Everybody slashes lower end, listen, s p multiple is lower and this is why. You see the carnival Royal Caribbean norwegian cruise if you are buying, do you know something we dont know, the diamond princess that it wasnt that many illnesses, what do you know certainly seem to be a lot of illnesses off that ship, over 600, right thats a petrie dish. Youve said that before i was right you encouraged people not to buy the stocks i have and its been okay the only stock that i did was quietgen thats up a lot, the deal from thermofor a little over 10 billion. Interesting if you on air say this is not the worst thing thats ever happened or put it in some sort of context which is this is horrible people immediately blast you for not being serious about it yesterday all i did was put up a quote from dr. Fauci it was a quote, and what did people say on twitter . How could you misinterpret his quote . How could you do that to his quote . I made very clear that all i did was give his quote it doesnt matter. What was his quote it says that maybe its not going to be 1. 4, which is what china has. 1,099 people, 1. 4 deaths yesterday on squawk box, dr. Mccarthy, who was adamant about the test kit problem also said he thought the fatality rate would be far lower. Right potentially which are abhorrent compared to some of the other ones weve looked at we can be critical of the cdc but the chinese did cover up this thing for two months. We could have gotten a little bit of a heads up there. Were all still trying to figure it out. The one thing we do know, Public Service announcement every day, wash your hands a lot and dont shake hands. I do it dont shake hands we have to get rid of we have to have a policy. You cant shake hands. Why . In the ebola crisis they did not shake hand hands and they had surprisingly few deaths. That was a simple thing they did. Dont shake hands. You want a mask . I got some masks in my bag you gave me a few i have better masks really good ones i will take some, sure. You will . I may be traveling later this week going to tulane i may be, yes let me get you some supposed to go to new orleans. I wouldnt go being advised potentially these are the good ones whoa, those are good ones these are the good ones whered you get those they were third party came in a staples box. This is 3m. Immediately someones going to say they dont work, theres this, that, theres this, theres that you want mine, dont you they dont work. They dont work. They dont work, give me 100 of them they dont work, can i have yours . Tired of they dont work they have some ability now i got the honeywell one coming the honeywell is coming if something happens in my family, i can take care of my wife you have to know fit very well these dont fit very well but do more than the paper wait you wear it like this, right . If youre going on it on a plane and you dont wear, this david, i think youre kind of a joker. Really . We dont need another hero. They say we dont need to wear this, only if you have the virus or if youre sick. It does some. Especially if you are exhibiting symptoms and you need to get to the hospital then you need to wear the mask id rather have oh, it doesnt work at all. Okay you think everything gets, this is the better one. Thank you, jim. Doesnt fit perfectly, i know its really bad. Lets just destroy it. No its better than nothing n95 youll get to know that name we do the hand sanitizer. Unless you sing happy birthday twice that doesnt work. I washed my hands and immediately what happens i have to touch the thing to open the door so what is that . Were going to monitor mnuchin this morning in house ways and means better talk about Small Business well get an update back at hq on the outbreak hi, meg. One more health tip, dont touch your face. That is a main thing as were touching everything, if you can limit face touching thats huge. Two our update, case numbers across the United States, theyre continuing to rise with the expansion of testing now more than 100 cases in 15 states and six deaths all in Washington State seattle in king county the Government Purchasing a motel and setting up modular Housing Units on public lots to isolate patients as new york city has confirmed its first case one school in the city said it will be closed today after a suspected case in its community. Separately Governor Cuomo just now confirming a second case in the state, Westchester County a potential case here of Community Transmission in china, as new case numbers decline, major cities are putting new restrictions on travelers from other countries with active outbreaks, at least 13 people in china have been diagnosed with covid19 after traveling to places like iran and italy, which both are reporting more than 2,000 cases. In south korea, case numbers have climbed to more than 5,000. Worldwide, cases topped 91,000 with more than 3,100 deaths. Pharmaceutical companies met with the president yesterday to discuss time lines for vaccines and medicines. Biotech Company Moderna which already delivered the first batch of its vaccine to the nih said they were waiting for the fdas goahead to start the first Clinical Trial in people will be at least a year until a vaccine may be broadly available. Gilead and Regeneron Leonard Schleifer will join us on the exchange to tell us more. Schleifer told the president there is precedent or vaccines to make it worse you dont want to treat people and make 900,000 peopleworse absolutely he and his partner george instrumental in solving ebola and i know that the president apparently calls him lenny. Len was my first guest on mad money. The stock was 5 and went to 500. Remarkable guy i dont know him well enough to call him lenny may be president s first time but that 1 00 interview will be important. This is a man who has been in the trenches and can tell the truth and is working very hard on doing exactly what we want, which is solve, solve. A lot of news headed our way the next couple hours. Well monitor mnuchin and house ways and means on the tape this morning making comments about the g7, well get you that after the break. Check out our podcast, listen to the opening bell hours squawk on the street wherever you hear podcasts, were back in just a moment. A golf course is designed to be difficult. To challenge your thinking and test your execution. But great minds are driven to seek out the complex. They see what others dont, from an angle others wont take. They learn that embracing those challenges is what sets them apart. I am justin rose, and we are Morgan Stanley. Which of your devices are protected by daily security updates . Daily security updates. Daily . I dont know. The only thing. Im struggling with this. Some providers you have to manually download updates to each device. Comcast business securityedge updates every 10 minutes to help keep your connected devices protected against new ransomware, malware and phishing threats. Every 10 minutes feels pretty good. Get secure, reliable internet and voice for an amazing price. Call today. Comcast business. Beyond fast. Time for mad dash an opportunity to talk stocks something we havent done quite as often as individual companies. Tesla certainly a name we like to focus on. Whats going on . Jmp market to outperform. Well reasoned piece talks about what should be the right, what price to pay talking about 30 plus ebitda multiple near term virus disruptions could create what . A buying opportunity david, this is tesla got it. Everybody else is having supply chain issues and demand issu issues covid19 is good for the market yes its that one plus it was like this is your only chance to get in, because you see a momentary decline. This is what passes. This is the research, and what i have to say is that i know this is going to sound polyannish, i agree with the call. You do . I think its the only one all the auto companies, i look at ford, david, i think ford is not doing well gm not doing well and these guys dont have to do any advertising. This berlin plant if they put it up fast enough is probably the place that you visit, like i visited the lamborghini plant in italy. This is a company that is going to have earnings and then the remaining shorts if there are any are going to have to deal with the fact that its the only auto company that people they want the cars and i spent a lot of time talking to mike worth from chevron today, not from exxon, didnt do that well and talking about ev and esg and theres still bust is shun engines but people like electronic vehicles. They do europe, especially in europe. A small percentage of the overall market that is going to change chevron admits it. 30 times ebitda 30 years worth of ebitda, thats more on not just ev are you throwing cold water on this . Elon musk you may not like it but he just said he liked jack i saw that. Talk a little more about the twitter potential fight there between it later no faber report no faber report too much corona. As a reminder, watch us live on the go, its the cnbc app, download it today. 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When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. The swing in futures once again numbering in the hundreds of points, as we now have two cases in new york city, a couple of schools closing as a precaution mnuchin says the g7 agreed to d Everything Possible to nit gait harm opening bell in just about 7 1 2 minutes. Vo dont fall for negative, untrue attacks against Mike Bloomberg. Bloomberg has been praised by president obama. Obama hes been a leader throughout the country for the past twelve years. Mr. Michael bloomberg is here. Vo mike worked with president obama to combat gun violence and improve public education. As president , hell work to combat inequality by launching a new initiative to spur African American and latino homeownership and Small Business growth. And hell beat the divider in chief. Bloomberg im Mike Bloomberg and i approve this message. Dad, im scared. Its only human to care for those we love. And also help light their way. Its why last year chevron invested over 10 billion to bring affordable, reliable, ever cleaner energy to america. The opening bet is brought to you by nuveen, a leader in income, alternatives and responsible investing. Youre watching cnbcs squawk on the street live from the Financial Capital of the world, the opening bell in 3 30 on another busy tuesday as we get through the g7 call with no specific call to action. Mnuchin is in front of house ways and means right now saying a couple things. Trying to get out about a million virus test kits and that if there is a need to stimulate the economy, he says infrastructure will be a priority well see what else it brings us in the coming hours. I was hoping you would talk about small and mediumsized business, looking to be able to make it so companies that are week to week will not be, have to close and therefore laying off people remember theres two kinds of people who can stay at home, people who can stay at home because their bosses said work at home and people who have to stay at home because they have no job and we dont want those people to have to stay at home how do they feed their families . Thats what they should be talking about and by the way, jay powell cannot feed your family youre not going to do better on the Interest Rate cut. What you need is a pledge from the government that we will help tied you over until this thing passes. Right becautheres work restrictio because of Public Health right reuters with the story on chevron offering buyouts, you talk to them today yes, theyre talking about returning 80 billion over five years. Chevron is by far the best capitalized oil company, best dividend policy and best buyback policy. Hes also the leader in esg. Its difficult to have a lower carbon footfrint but hes being thoughtful about it. Employment in the oil patch is at risk would you argue yes or no . Everything is at risk everything is at risk. You could do a great job doesnt mean the stock will go up i said listen youre fantastic, fantastic at some point do you think there is a number, there is a value there that i just wonder about the incremental dollars given how much is in an esg strategy these that prevent it from investing in a company. I agree but we have to get out of the all oils are created equal etfs thats hurting him i think he didnt disagree the number of Companies Taking events, jim, and putting them online, targets investor day, adobe summit. The adobe summit is really big. Facebook is not going to south by southwest its really happening its adding up. Its adding up obviously it will have an impact on local economies as well, vegas, new york, whether its places that people congregate for these kinds of events. I dont think that people will be forgiving toward travel and leisure that says were not going to make the numbers. Forgiving toward visa, because visa is well capitalized no the an issue but the other guys, i dont know you have giant infrastructure, we are a Service Economy [ cheers and applause this is going to hurt us lets get to the opening bell, the s p 500 at the cnbc real Time Exchange and the big board Sysco Corporation celebrating its 50th anniversary as a Public Company and nasdaq cns pharma developing treatments for cancers of the brain and Central Nervous system [ bell ringing ] sysco provides to so many restaurants and restaurants are going to be hurt, everybody in the industry i know is preparing for what to do, when the customers stop coming, and who you keep on the payroll and who you cant. This is what people talk about yep these were highly paid jobs because the minimum wage is pretty good. You guys mentioned tesla at the telestrator. I did piper ups amd, deutsche ups u. P. S. Pretty bullish. Amd takes, piper takes it to 56 i know. These are the things people felt, when the market is done going down well make that call. I feel much more comfortable recommending a company more of a stay at home amd ive never hidden how much i like amd its a fantastic company but i didnt get the edge. What is the edge why do you have to do it today what are you thinking . The answer i got to do it today. No p research should not be like that you should have catalyst, some reason not just like hey, you know, doesnt work like that it shouldnt. Sometimes it does, momentum has its impact as you know i know but you know that thats you like rigor. I dont want to be built on sand right intel is having a price war . We havent mentioned the election yet super tuesday the s p is opening lower, you can see the components and it is largely red at this point. This is a big important day certainly for Michael Bloombergs chances. Yes banked it all on today. Really did. And biden resurgent the fact that unh is up today. Unh has been my tell there are people working at various betting sites, gambling sites about the election unh when its up, that signals that bidens going to win and when its down, that signals that sanders is going to win im going with you, unh at the close that stock has been absolutely unbelievably pressured about whats going on in the democratic party. Almost as if theres someone who knows the number its not really possible to know the nun. No. People havent voted yet. Unh is the bellwether. Who is going to win . Unh is the moderates how much has bloomberg spent on facebook ads. Will that go away come wednesday . Facebook preannounced to the upside i think hes been an important engine of ad spending. Hes everywhere for all sorts of media and well see obviously what happens today. Guys we had a deal we mentioned briefly thermofisher scientific is acquiring qiagen. This is a 23 premium over the Closing Price for the company yesterday. 39 euros a share, its all cash, when you throw in debt its about 11. 5 billion total at Current Exchange rates jim, thermo felt this is something they needed. We talked about this company a bit because theyre involved in testing and thermo is a giant in so many different areas of the laboratory so to speak they are saying that they believe it was something they needed to do right going back and forth with mark casper, a remarkable ceo nobody talks about too much about why this is necessary. Its accretive and significant value for customers and shareholders for a clinical customers benefit from qiagens strong presence. The Diagnostics Market where there is consolidation danneher is supposed to close on the ge deal so youre dealing with Life Science Companies almost unassailable in their franchises look at thermo thermoif you look at the stock price its incredibly strong and they have an aggressive requirement for some time in terms of consolidating part of their Industry Market has done a remarkable job quietly taking a company that wasnt always a good company into the forefront of all the stuff that we talk about, in terms of being able to beat these viruses and analyze things its a remarkably Great Company as is danneher previously there had been some concern on antitrust here, when this had come up as a possibility, but unclear to me, where their stance is. Parry harrys the allergen gg closer and closer to a close they got eu. They are waiting ftc, one of the largest deals of last year, the acquisition of allergen. Im told by people familiar it could be as soon as a week as soon as you get ftc approval, numbers will close the spokesman for the American Migraine foundation for a pill that they have for acute first pill for acute ever migraine is dynamite i wake up with a migraine, take that and in an hour and a half my head doesnt feel like david is beating it with a claw hammer you can see it tightening up, spreads are wider as youd expect in terms of gen malrisk and the risk arbitrage Community Given the spread of the virus and whether or not there are potential outs for these companies in terms of claiming material adverse change, if it hasnt been carved out as a reason being the epidemic. Interesting on the quaigen it was around, the huge deal, the 47 reported on publicly and a huge premium deal yesterday b when gilead announced it taubman even there are opportunities and takeover land for things made public not by me, unfortunately, but by others in the press and yet the stocks had not moved no. And it is amazing by the way that you have some really great remember, you have properties 33 billion in dividend theyve waited a couple of weeks, it would have been a lot worse for taubman. Yes the simon deal. That deal was structured to everybody kind of wins ilogical liked simon dom wood, what matters with the mall, look, obviously with corona, mall may not be the first place you want to go i went bowling this weekend. Not the first place on the apocalypse you got to pick up the ball other people have held that ball you have to have your own ball bruce had the ball but didnt have the holes drilled thermo said on the Conference Call said activity in china very slow due to the virus and the first half of 2020 will have less revenue than originally forecast apple reversed, apple is up all morning. It was. And theyre telling a good story. This market is really fraught. People at home, just find a level that youre comfortable, because this thing is going to be a wild ride it is is apple reflecting the core guide . I think apple is reflecting that people are just kind of, each day coming in and saying that the super cycle note that web bush put out for instance, were not talking about apple super cycle right now. We have super cycle the cold super cycle. Corvo is up or down on the revenue guidance again amazon is down even though its killing it on amazon fresh and prime. Theyre running out of stuff trucks never stop. Its interesting when you get to amazon for Something Like this and it doesnt come from amazon, it comes in a staples box but where is it from the other masks i bought the box was opened. You were the one that taught us that. It was up. It was. Guys, yesterday massa was in town, entertaining 200 investors for a meeting, talking about all the things hes learned, continues to learn talked to a few people who were in attendance there. Not that much that we havent heard from mr. Massa a bit of an apology tour is the way one person put it to me but pointed out hey, over time, my returns 16 . How are yours annually talked about 2000 he went from being the richest man in the world to having no money hes clearly a man who is willing to take risk, said he doesnt have too much debt, believes theres a lot of upside still left in alley alibaba, toh lizard story, cut off 30 of its tail, comes back, 50 it doesnt. He said hes a samurai, no excuses. Said he overpaid for wework, at least along the way the valuation was too high overall, sort of reminding people hes massa and this is what he does take it or leave it. He believes in the future of ai, he continues to believe in some of the big themes. Early early days said massa to this crowd there was a dinner that followed apparently as well does he still have that aura about him, that untouchable aura i dont think so. He has elliott on his case a bit on governance and things of that nature weve barely gone into some things elliott said. Think about elliott just twitter, softbank, at t, ebay, theyre all over the place on twitter theres pushback i think from the board of directors in terms of their desire to get rid of, to see mr. Dorsey replaced. And hp you mentioned hp based on the conversations ive had dont expect them to not put up a fight we think dorsey is the right guy. They have always been saying, look, we had half of dorsey, because of square, a half of dorsey is better than 100 of other executives talk about tremendous loyalty and a great quarter. I dont understand why theyre being picked on now. And the idea these guys are picking at arbitrary timeline. Hes had a team in there and during the period of time he has been leading the company its largely been positive is what they would say at the same time that argument for why you should have a parttime ceo seems to be one that has resonance is there anyone on the board take me in the board room, david. Decent board. Estani is real and will potentially fight. Jack is going to spend more time in the office how about that could be. Could be hes not exactly your pat on the back kind of guy no. Hes an intro vert is he on the Virgin Galactic list to go that would be interesting. You saw what the guys did to the secondary earlier . Of course thats what its about, david. Its about, well, i dont want to cast aspersion because im jimmy chill. We didnt get to target and kohls target beats revenue in line up 1. 8. Ecommerce up 20 they do see q1 and the rest of the year pretty much in line did take a 40 million loss on casper sleep it wasnt core. Thats each been a complete disaster, casper the unfriendly ghost. Why dont you take my wallet, please casper . Yes only time youll ever have slept on one of the beds is there. When we go fishing, gaffer kohls nice 5 div hike, comps flat, looking down 0. 1 they see 2020 eh, you know, 420 to 46 0. Street is at 458 i figured the stock would be up 1. 5 but its up four cents. Geez, remember its a store and in the end, id rather go to amazon and return it at the store which what you can do with kohls look, the store is a concept you dont need to go to the store. Stock up, you go to costco, everybody went to costco and just go home after work. I was at a restaurant, had a great, good meal glad to hear that kohls is moving, and there were a couple tables that people were eating. Someone came up to me. Yes, they did said their son liked me as long as they dont shake your hand. I gave her a hug. Thats not a good idea. I thought it was the last hug id ever get you want to limit social, you want social distancing you need to have your social distance its easy for you, david, youre an unfriendly guy i am not a particularly friendly person. Stay at home economy, the faber economy. The faber economy see . As long as i got my wine and tequila. Grub hub. Good books. The dog. I like the dog lets hope the dogs cant contract it. Thats all i know. The latest. A guy comes to davids house. And david puts on the glove, and gives him a little fist pump with this. Ha ha and then you know what happens, basically is that this is as close to humans that david ever goes youre looking at it this is it its like i hope theres not a pr proctology exam in my future why dont you do moon river. Remember the seinfeld episode . They look to return as muches a80 billion to shareholders. Half the company and jim did talk to Michael Wirth earlier this morning take a listen. Yes weve got the strongest Balance Sheet in the industry and were buying back shares so weve got the cash generating capacity to do both. When i talk to investors about share buybacks, they say we dont like them because we think companies only buy back when the price is high when youre doing well we are certainly in a down cycle now. We intend to see that through because weve got the best Financial Capacity in the industry you think younger investors would ever own an oil company or is it the new tobacco . No, its not the new tobacco, jim. Theres big differences. Demand for our product is growing. The u. S. Energy compaeconomy ans never been bigger, trade impact never better touches every aspect of life we welcome the Energy System of the future which will be a lower carbon system. Well be part of that. You had to buy one, it is yours but why do you have to buy one . I think mike is phenomenal by the way. He does among the least flaring in the permian flaring being maybe the worst thing for the environment. Cluster in australia. They have that program the largest, hes done more esg, we talked about planting trees. Hes gained trees, who is against the trees . Ive not found them yet. Youre stuck with his industry is not a good actor. He knows it. He needs i told him, you got to start reining in your industry, because their guys are flaring their heads off. Mike is a good guy and he does a lot of forward thinking and yields five and they have the best Balance Sheet even if they pay off, pay the the dividend and buyback i wonder whether these suffer from an essentially low multiple thats what i told him. Even as miserable as you are, i said look, i think its a low multiple situation and you know what he didnt disagree, if they cant break out of the etf and its just this motion, passive investing, passive investing youve got i mean the wave is divestment, college campuses, the endowment, divest. You go through it, divest. Im not disagreeing doesnt help. Only right now georgetown, harvard faculty, the california system but i think its coming its a steamroll quick Governor Cuomo says the man in westchester that School Closed because the mans child went to that school, and then said other schools may close voluntarily. Thats just out of the cuomo presser. Dow is down 210. Get to bob pi san see. Happy tuesday banks weighing on the s p 500 today. Take a look at the sectors, about even on the advanced decline line at the open, a little worse right now, i want to point out the banks down, energy a little weak materials marginally weak, semis marginally week. Industrials flattish after the real volatility. I want to point out how remarkable the momentum stocks microsoft say good example on the 19th, microsoft 187, all the way down here to look at the bottom there, 187 to 152, and all of a sudden were back to 170 again, so microsoft is essentially regained more than 40 of the losses it had in that enormous twoweek period if you look at some other things that are going on, its very sewerious, theres no bounce at all in travel stocks nothing is happening here and this did not move yesterday. In that huge rally yesterday none of the stocks had appreciable bounces at all we have big bounces in some large cap names, no bounces at all in stocks that are travel related. How about the Credit Card Companies, actually we had the same situation, the Credit Card Companies, visa 212, bounced maybe 12 off the lows here thats interesting theyre moving mastercard did the same thing. Mastercard was 344, february 19th you see the big dropdown here to 274 and bounce to 305 and another 12 move up. So what wha dodoes it mean big stocks move. Travel and leisure dont move, credit cards move. Trying to read what the market is telling us. Its telling us travel and leisure theyre anticipating no real bounce and expecting a serious downturn Credit Card Companies slightly different Consumer Spending will likely rebound at some point and the broader markets theres a belief in fiscal monetary stimulus is coming and speaking of fiscal monetary stimulus, everyone in the world lined up how much more coordinated do you want to get in terms of response the g7 this morning, we will use all appropriate policy tools i dont know why people werent satisfied with that, right at the top of the paragraph in the communique they clearly said theyll do everything powell said theyll act as appropriate. The bank of japan will take necessary steps. The ecb stands ready maybe not the details of what we wanted but its clear some action will be coming here finally just want to point out something, the u. S. Stock market has been under unprecedented stress in the last couple of weeks. We havent seen numbers like this, trading numbers like this for a long time. Were going to be talking with the head of the secs division of trading and markets, brett redferan 11 40 eastern time get an update how the u. S. Stock market is holding up, not talking about prices, how the Trading Systems are holding up we have not seen stress like this on our markets since the financial crisis in 2008 update on that 11 40 eastern time exclusively on cnbc lets get to the bond pits as well, check in with Rick Santelli at the check in with rk santelli in chicago. Good morning, carl. Really minor things start to change in a macro environment with lots of volatility you really need to Pay Attention here are some of the Little Things that changed. Other than a twoyear note yield, which is now looking at its ninth sessionoflower yield closes the rest broke their streak at 7, 8, they all closed a bit higher in yield yesterday and i only mean a bit. On 10s, lets look at that 8day run and see right there as it moved up a bit if you open up more macro to february you can see movement up on the right so lets keep this in perspective. But it did bounce a, b the yield curve now is starting to flatten a little bit. The twoyear note yield actually is only down 2 and were down more through the rest of the curve. The 30year that had been best performing notes over bonds had been widening, all that reversing a bit. Something to Pay Attention to. One week of boons, their yields have been volatile as well yesterday down to minus 66 now minus 60 and moving a bit higher in yield dollar yen has been on fire, so you can see on this february 1st chart going all the way back to october we havent been at these levels against the yen finally yeartodate of the dollar index, its having a very small up day now, lost 2. 5 cents a week the point is 96. 39 settlement for last year, 97. 50 now. You want to Pay Attention to the spread where its at and where it closed in 2019. Carl, jim, david, back to you. Rick, well see you in a while. Rick santelli. Treasury secretary testifying before house ways and means. He talked about coronavirus and ylan mui on the hill with the latest hi, ylan. Reporter hi, carl. It was supposed to be about the budget but he began by addressing the coronavirus, gave a little color there, said he spent five hours on saturday in the situation room discussing how they are trying to contain the virus. He referenced the g7 call this morning and said that containing the outbreak is a major priority for the administration do everything we can acting together to combat this. And i assure you its a major priority we look forward to the emergency funding from congress. If we look more issues, im sure there will be bipartisan support. On the testing, we are aware there had been no issues to those medical professionals. Now, he did not offer any new details so far about what potential fiscal measures they would be considering all he referenced there was that emergency aid package the congress could propose likely today. Im told the amount of that package is ranging between 7and 8 billion guys, that hearing is ongoing and well keep watching and listening to it. All right ylan, thank you for that ylan mui on the hill in front of house ways and means dow down 250 to start this Tuesday Morning. Were back after a short break all right. Jim, chevron. And livongo i want people to watch chevron, delve into the issues. Its not just i came back with new tobacco, its a real discussion hes a very thoughtful man trying to figure why the stock didnt go up. See you at 6 00 if not before dow down 326 on tuesday coming thoff e biggest dow gain in years on monday. Dont go away. Ion. You can actually see taste trends. Since when can we do that . Since we started working with bdo. announcer people who know, know bdo. Wewithout the planet cooler getting warmer. At emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Hey frank, our workers comp insurance is expiring, should we just renew it . Yeah, sure. Hey there, Small Business owner. Pie insurance here with some sweet advice to stop you from overpaying on workers comp. Try pie instead and save up to 30 . Thirty percent . Really . Get a quote in 3 minutes at easyaspie. Com. Wow, that is easy. So, need another reminder . No, no no, im good. Uh, yes please. Oh. Ho ho ho, yeah need workers comp insurance . Get a quote in 3 minutes at easyaspie. Com. Good Tuesday Morning welcome back to be squawk on the street. Im carl quintanilla, with david faber and sara eisen futures looked okay and g7 came out with the statement which had really no specific call for either monetary or fiscal policy with that, market did give up gains, currently down 271. Weve got breaking news for that lets get to Steve Liesman. Federal reserve cutting interest points by 50 basis points making surprise announcement of 50 basis point rate cut saying coronavirus poses evolving risk although fundamentals of the u. S. Economy remain strong. The statement saying in light of the risk and in support of maximum employment and price stability goals, the fed decided to cut Interest Rates. Feds say it is monitoring the situation. I think its been since january 08 a rate cut of this size. Federal reserve saying its cutting Interest Rate to 50 basis points, 1. 25 . This more or less meets market expectation of at least a 50 basis point rate cut, some probabilities in the structure there of futures of 75 rate cut. That was not the greater majority probability so 50 basis point rate cut obviously effective immediately. I can tell you guys that at 11 00 a. M. This morning, the Federal Reserve will hold a press conference headed by fed chairman jay powell and cnbc will carry that press Conference Live once again, 50 basis point rate cut following that g7 meeting, guys, which pledged there would be action. Here it is i was a little surprised markets were disappointed, g7 never takes action the action is done just like this, individual Central Banks, individual finance ministries. This is the first action well i guess wait to see right now if other shoes drop, ecb, bank of Jennifer Lopez as well as other fiscal authorities out there. Carl. I mean, we heard oohs and ahs and saw a 50point selloff turn into a 300 point gain. Clearly a huge Market Reaction i guess the expectation was they would do this but its surprising they did it now they didnt wait for the meeting. Im not surprised if you may attention to the way these things go, sara, and i know you do as well, this is the way things happen. The g7 doesnt cut rates the g7 have no rates to cut. Individual banks have rates to cut. What g7 announced was exactly what was expected, very much word for word what they did during the financial crisis. If you look at the history of these things, they did g7 meeting, financial crisis, rate cuts came afterward. 9 11 they did emergency meeting, rate cuts came afterwards. This was the process by which they go through. I think its interesting here that whatever happened, they were able to surprise the market i can tell you from my experience knowing Federal Reserve officials, surprise is what they want in this case. Well see if this surprise lasts. The idea they were still able to get a surprise, pardon me, after the g7 meeting was announced last night, i know some officials didnt want g7 to be known by the market. What they wanted was a surprise g7 meeting followed by surprise rate cuts. They didnt get that g7 meeting leaked. It came out, the market seemed disappointed it appears looking at market trading here able to affect some form of surprise to the market thats the way Federal Reserve officials believe rate cuts work best is to surprise the market. Really quick, steve no dissents . Unanimous decision here by the Federal Reserve. Also made some tinkering if youre interested you can read boult on excess reserves as well as discount rate discount rate they tinkered with that as well to try to help, again, grease the wheels and position the economy. I guess one of the questions that will be asked of jay powell, is this a permanent cut, a temporary cut . Certainly its an attempt to resolve or diffuse the situation in the markets, provide liquidity markets seem to be needing here well see how this plays in the market and in the Banking System i think thats going to be a clear thing for the Federal Reserve to watch. Steve liesman as the Market Reaction is pronounced jim cramer is here with us to talk about what this means real quick, fund mens of the u. S. Economy remain strong however, coronavirus poses evolving risks. Look, Federal Reserve also able to make people go out, that would be something that matters. This moves the stock market, so maybe people feel better a bit of a wealth effect this is a biological crisis. Its terrific jay is on board. He can do everything he can but in the end why go out. I guess they are trying to preempt more market pain they are doing it right now. Well see if it lasts. Two, if this really is a demand shock, consumers stay home, housing activity stops, we dont know where its going. That is a problem. Thats something the fed responds to with lower rates. We know Mortgage Rates are above where they were when tenyear was at 2. We know the problem is if you got something that allowed you to get out of the hospital, anything, you wont need this rate cut the more important thing we need people to be able to stay at work theres a lot of people that can work at home another group of people if they work at home, its deadly. I want to see what the claims are. Steve is still with us. What about the critics who are certain, i assume, would say this cuts the ability to really respond if the market tanks and we have a recession. Given the president s relentless badgering of the fed, they are nuclear ling under to his desires. Ill take the latter one. The fed is trying to put blinders on an and do their job as they need to do it. I think they wish the president wouldnt do what he is doing i think the act koscomes irrespective of the president s wishes its a legitimate view, i would offer the other side, david. The Research Done since the financial crisis suggests as you get closer to zero, when and if you have bullets to shoot you ought to do it earlier and more forcefully if there is going to be some downturn related to the coronavirus in the economy that has the potential to lasts, not just a temporary downturn, the fed ought to address it earlier and more forcefully. Thats what research said. David, i dont know how to counter the other side of the argument, which is perfectly legitimate that you ought to hold onto it at some point you make a judgment call thats whats happening now, whats happening in china, the supply shortage thats going to develop or already developing, the possibility that you have consumers not going out and spending and reducing their spending levels is one that the Federal Reserve thinks represents a serious threat to the u. S. Economy. Steve, theres a fed meeting coming up. A lot of the guests on cnbc expected this move to happen then what are we, two weeks away . I think thats the surprising element that it happened outside of a meeting what is he going to do at a meeting . If things get worse than expected, you might imagine adding another quarter point i have been showing probability charts that showed Something Like i want to call it 60 probability of 50 basis point rate cut by the way, its not for the meeting. Its for the end of the contract at the end of the month of march, so it can happen any time it doesnt really pinpoint when it happens some 30 to 40 possibility of 25point rate cut. I suppose what happened now, sara, the debate in the market has become one of 0 or 25 at the march meeting. Theres also been times throughout these last especially call them ten days of tumult in the market that the market has priced in a full percentage point rate cut as soon as july that whole 100 basis points or later on into the fall thats another part of the debate is how much more the Federal Reserve is going to do i think its also probably not crazy to Start Talking about whether or not additional quantitative easing is in place. Jpmorgan among them, rates could go to 0 as a result of this crisis i think the numbers to watch, and im kind of echoing jim cramer on this are not necessarily the economic numbers, though we will watch those, i think they are the infection numbers. Those are the ones that will determine also critically the infection number determine actions taken by businesses, schools, governments, as to how much a shutdown there is to the economy. Totally look at the stocks going up. Recession stocks people are saying, you know what, im making a determination the fed is worried, so i should be worry lets go by soft goods, consumer package goods, buy things people horde. They arent going to take caterpillar, its up a little bit because its in the dow. This isnt going to produce anything other than fear we need to see, yes, the infection numbers and biologicals. Thats what we need to worry about. Its not only the first emergency rate cut since the crisis, its the largest rate cut since the fall of 2008 Rick Santelli with us as well, your reaction. Ill tell you what, i was as shocked as anybody, of course. The reaction, well, lets look at the dollar index. It was up about an eighth of a cent, up 15, now down 19 if you look at a twoyear note yield, it was 88, now 81, down 9 basis points liu you look at 10year note yields down 113, down to 109, now right back to 113 where they were before the 50 basis point cut and 30year bonds the same place after dropping to 166. Equity markets the issue here is im not going to debate everybody out there listening and watching knows this was a mistake. I also think it was not because of pressure from the president if we had a different president , my guess is Jay Powell Company would have done the same thing i guess my question is more philosophical, why did they do it what is the trigger . I know everybody is thinking, whats wrong with the guy, its coronavirus. Read what they say coronavirus involving risk to economic activity. In light of the risk and in support of achieving objectives, they are easing because of coronavirus. They say the economy is underpinned strongly if everything is real, when the coronavirus passes they will take that 50 back. We know chances of that are minute i guess thats the way i look at it they gave the market what the market wants and much of it is probably from the phone call and pressure of other Central Banks, australia did it, eurozone what are they going to do, start scraping the glove compartment looking for pennies, there really isnt much left they can do here we go and if the stock market closes lower today, it will just be a demonstration of how they wasted those two eases. My opinion. Jim, i know youve got to leave. Have you got a last word i just think its great the Federal Reserve recognizes theres going to be weakness but maybe it makes me feel, the weakness must be more than i thought. Ive been trying to be bullish but i cant. This is like, wow, okay, 50 basis points i guess the claims are going to be bad i guess were going to have a real slowdown here i just wish we had some great doctors and great Drug Companies that can solve this. Take it back, add 50 i dont care im now nervous. Im more nervous than i was before. Dont you think they have to do 50 . Absolutely. Yes. Kevin worsh made the case, former fed governor, this is looking like a crisis, why wouldnt the fed get out in front, say were here. Were going to try to prop up the economy. We can take it back if things work out okay. They cant prop up the economy. Its not theirs. They at least have to try if they have the tools. Everybody has to try. We want the Defense Department to try everyone has to pitch in. I want everyone to try. I mean, if we got a drug that got it so were out of the hospital, i dont care about 50 basis, they can raise rates 75 bases. This is trying to get the country not to freeze up obviously the fed think its going to freeze up. See you soon. Mike santoli with more on the Market Reaction. Mike, what do you see . Sara, obviously the reflex is understandable the market, at least in terms of timing, got slightly more than what was priced in just to your last point about how the bond market set up, notwithstanding what the fed thinks it believes about the economic fundamental outlook here, the way it stood, federal fund rate on overpass loanight a one of the highest in the world. The highest essentially in the world. That was an upside down situation giving them cover to say were coming into line with new set of Capital Market indicators of what the outlook tends to be. In terms of stock Market Reaction, up 4. 5, 4. 6 yesterday. Incrementally its hard to see from right now after you got the 50 basis point cut whats the next thing is that would come in better than expected, not as good as expected that will give fresh energy to the market except for the fact we were deeply undersold and more of a technical thing. At some level the market after that kind of bounce, the old don draper rule comes into effect, which is happiness is just a point before you need more happiness. To that point, s p is up now purchase exactly. Back to flat. Banks are taking something out of it, down sharply. Even though yield curve steepened, banks are down with far lower rates. The absolute level at the short end is just going to be a weight on the bank stocks. Again, once you expended a lot of buying energy an agitated mash market vix above 30 trapped hedgingtype activity goes on. We see how this day ends yesterday a couple of dips, they were grabbed up right away and the market barreled higher at the close. Im not making a call this is all weve got. I dont think its necessarily one of those deals with people are kind of scratching their chain and saying, boy, what does the fed know we dont know its just saying weve got it, now we have to sit through the realization of the Economic Impact of all the precautions and Everything Else and whats going to get us beyond this, defeated the decline. Falling all major averages, dow down 125 its been a crazy few minutes of trade, a swing after emergency rate cut taking the rates down 50 basis points. Sara, i wonder yesterday we had blinder on we were talking about this he said confidence it will help instill confidence. When you have a Market Reaction, to mikes point, who knows how we end the day, i dont know, are you looking for a positive Market Reaction to at least have some reflection of confidence . I think the Federal Reserve would be looking for a positive Market Reaction to have some level of confidence. Youve got to give it time 11 00 a. M. Is the News Conference see what fed chair powell said, if he can instill confidence hes had a mixed record in terms of creating market volatility. I think theres wide recognition, guys, the fed cant do anything about a Public Health crisis. Which is why its so key to have him put it in context why are they doing it . Whats the question . What do you feel your ammunition should do and why should it inspire confidence the right guest at the right time, Current University of Chicago School of business deputy dean. Your reaction, randy, to what the fed just did. Like january 2008 last time they did the cut clearly they were concerned about the way the markets were moving and Financial Markets were moving. I think you guys were getting exactly the right issues i think they wanted to get out ahead of things rather than wait for the situation to become problematic, be out there early. The question, instill confidence in, yes, taking the reigns or, gosh, things must be a little worse than i expected. I think the press conference is going to be super important to see how jay powell characterizes this. I can remember, randy, the responses of this type, a 50 basis point cut in themidst of the financial crisis but after longterm capital, i think it was 50 also in the fall of 98, if i remember it that helped a lot. But that was a potential liquidity crisis this is not that exactly this is a very different kind of thing. The fed cant cure the virus so if you have a breakdown of the Global Supply chains, thats a supply issue the fed cant directly address during the financial crisis in 2008, 2009, there was a dollar liquidity shortage, everyone wanted dollar liquidity. The fed could do something directly about that and try to spread that around the world this can try to help offset tightening of conditions, some of the demand reduction, but it cant get at the fundamental of the problems of the virus. I think jay powell would say as much in his News Conference, just that what they are anticipating or what some folks are forecasting is that this will weaken the economy both in the u. S. And the globe, randy, which i think is an important point. The fed is the central banker. The fed has bullets to fight this, ec b b oj does not i wonder how much of it has to do with the fact the fed can move and ease conditions, that could help europe and japan, which could get hit a lot harder than we will. Thats exactly right. The fed has more room. The fed raised rates and then brought rates down and brought rates down further were not in negative territory like much of the rest of the developed world. The Balance Sheet is a percent of gdp, smaller in japan where its 100 . More cushion thats there. People run to the dollar when there are uncertainties so the dollar is the worlds reserve currency so its important that the fed show it is aware of the challenges, it is willing to do something about them the challenge is will that the fed cant act alone. So its going to have to be not only central bankers but finance ministers thinking about tax policy, thinking about some countries are proposing suspending payroll taxes temporarily, providing other tax incentives for more investment to do some sortoffsets none can address the virus issues but they can all soften the blow. As youre saying that, randy, mnuchin in front of house ways and means saying not considering china tariff rollback at this time but does sort of highlight what we will probably hear powell talk about. That is to say weve done what we can now its everybody elses turn, right . Has to be a little bit careful about that because says if its one and done, i dont think the market is going to like that. He has to be sympathetic to the challenge that are there and to the things the fed do but exactly as you said, he has to be very clear. The fed cannot deal with supply chain issues theres nothing the central bank can do about that. During the financial crisis they can provide liquidity when everybody wanted dollar liquidity. Theres a direct thing they could do to try to address the problem, the global problems this is much more indirect. Randy, Steve Liesman here bringing back not so fond memories of talking to you during the last crisis just real quickly, what do you expect to happen at the next meeting. Im doing that staring at probability charts i have to say i dont really believe them but it looks to me like they are pricing in a 41 or 42 chance of another 50 basis point rate cut and looks like a 58 chance of another 75 it may be these algorithms havent had a chance to adjust, but the market seems to still at this point be banking on additional rate cuts at the march meeting just a couple of weeks from now. A week before our meeting, we did do another cut at the meeting but a smaller cut. Right right. Its certainly possible that would happen but not unreasonable the markets will price part of that in because i think precisely because they are not seeing sustained boost in the market if the stock market went up 2 and stayed up 2 , its less likely the fed would cut not because the fed is targeting the stock market but taking the signal for financial conditions from that. Continue to fall, the fed is going to react. At the press conference coming up at 11 00, im sure some reporter is going to raise their hand and say, mr. Chairman, are these temporary . Do you attempt to take them back once the virus clears . Had you would you answer that question if you were the fed chairman in that case . What hell do is pivot and say what i do is look at Overall Economic activity. This is not just about the virus. This is about Overall Economic activity and go back to trying to sustain economic recovery and do whatever it takes to try to sustain the economic recovery. I assume thats how hell respond, and i think that would be the sensible response its not simply about the virus but a lot of consequences whether travel ban, confidence, a whole variety of things not just narrowly related to the virus. If youre keeping track, zigzagging all over the place. They rallied on the 50 basis point cut, went negative, come back positive. Dollar falling sharply 10year yields pretty volatile as we have seen prices now start to increase. Well keep track of all of it for you. Randy, if the market closes early today, what does that mean the market will be super choppy on the surge. Doing a lot more testing so definitely going to find more cases throughout the world thats going to continue to generate uncertainty both about the substance of whats going on with the virus and about the potential responses whether its closing down of different activities, keeping people at home so i think its just going to be an enormous amount of volatility Going Forward and legitimately its very hard to know. Equities, as you said, will be choppy. They did get the curve to steepen. How constructive is that well, steepen for the moment. Well see what happens in a few hours. I think even on that theres going to be a lot of volatility. So just to recap, randy, theres going to be a lot of people who come out and say why is the fed doing this . They are creating unnecessary panic. They cant respond to a Public Health concern they dont have a vaccine. What are they so afraid of what is the best defense for the move today so this is the paradox of central bank policy. If you move proactively and prevent something from happening down the line, people will say why did you do that . You may have caused panic and made it worse. But if you did nothing and something goes wrong, people say, you saw it coming and why didnt you do anything thats where jay powells words become so important, of how he describes what hes doing. I think it gets back to what steve was talking about before the Research Suggests and history suggests trying to be proactive when you see something coming is valuable rather than waiting until after it comes and trying to pick up the pieces but you also want to do it in a way that doesnt cause panic so i think if he just talks about the fundamentals of the economy are solid. Were facing particular shock in the u. S. And globally. We want to provide that support and sustained recovery thats what were trying to do hopefully people will believe that and reduce volatility my guess is theres so much uncertainty, its going to be really difficult for him to get that just right, but jay is pretty good on that. Randy, what a day to have you here thank you. Great to be with you as always particularly today we did see a flurry of trader activity when it hit bob pisani. Used to these 6 and 700 days. Doesnt even astonish anymore. I want to show you s p 500 what would happen, down 20 points on s p. All of a sudden on the fed announcement, were up 40, 45 points in s p and moved into negative territory you can see were back up 50 points consumer stocks are important to look at what will make a difference with the fed cut. Walmart, for example, had a nice little pop when that was initially announced. Then after a while it faded fairly quickly along with the re rest so a modest reaction to the upside if you look at bank stocks they didnt do very much. Jpmorgan barely moved on that. Thats important there rate cuts not necessarily good for bank stocks. Theres nasdaq you see moving up travel stocks elsewhere havent done anything at all they didnt rally yesterday at all. They havent rallied at all today. Thats also important. The market is essentially saying were going to have problems for a while at least in the travel and leisure area travel companies, visa had a nice move off the lows in the last two days, and it also moved up a little bit on this news but not much it didnt move that much it moved yesterday a lot but not today essentially. Finally just want to note all these coordinated efforts going on here. G7 saying they will use all appropriate tools and i think they did today youll see a flurry of Central Bank Activity as well as global stimulus, particularly in germany fairly soon here everybody down here says the fed doesnt want to be behind the curve. Thats the reason. Thats the obvious reason right now for the big moves on the upside right now the dow up 123 points. Back to you. Bob, thanks see you in a bit bob pisani joining us on this news if youre joining us fed, we have Wells Fargo Asset Management president and global cio kirk hardman your initial reaction . Im skeptical this is going to do very much. If its a Circuit Breaker, it should come friday afternoon not after a 5 rally we had yesterday. So that function is basically clearly not there given the contacts i think well look forward to the meeting. Explain why we need to do a big surprise insurance cut is not always an easy sale. Its uphill from hoere. We remain cautious even before the events of last week, before basically the selloff. We were defensively positioned, equity markets were 10 too expensive. If you look where were trading right now, in line with the previous growth baseline before anything has gone south. In terms of make ro, doesnt change that. Get the market up 10 or what exactly are we trying to do here i think i would answer that but they are trying to instill confidence ahead of what will be consumption and Global Growth because of the coronavirus. Riskreward the equity market needs to price in the Slower Growth and initial conditions matter. What we basically have is big positioning last week. I think events need to play out. As we saw today, what is the cut doing, adding to volatility. Volatility is a big negative the market came back, everything must be okay you look at the daily ranges, the vol is rising and vol is in everybodys Risk Management kit. Its going to mean things come back slowly instead of faster. Does the cut change your view of the stock market. This is a professional traders market its very difficult to carve the market whats interesting about the cut all the more underlines to me very difficult to predict the outcome. I think your outcome is going to be bifurcated. Shortterm rates, the twoyear 50 basis points, 10 year 1 . The big question for me, what is this going to do to earnings the best case right now is earnings are flat. The big question for me is what happens to the multiple. I can argue with lower rates the multiple should be okay but on the other hand theres clearly going to be more volatility and more pain which would make me think the pe multiple will come down so tough to call. A really good point on earnings goldman at 165, people hoping we hold 70. What do you think . I think of the shock basically as a temporaryshock. Most will happen in q2 i think its the trajectory thats going to matter so we were at 175 for this year. So if youre going to have 175 next year i would argue the equity markets come back so this is more about its a temporary disruption in our view so q2 is down but the equity market is going to focus on whether earnings are going to start growing in q3. You dont think that comes into view until the second half, right . You tell me exactly how the virus will evolve and exactly what the Economic Impacts are and ill tell you. The equity market has always had to operate under uncertain fundamentals the rules that today out of how the equity market behaved and circumstances are more useful than trying to figure that one out, but i think reasonable working consumption is that, you know, q2 is a hit, q3 should be up yes, i would say the equity does come back. Its more sort of later in q2 is the way i would play it. How do you expect ecb to follow up this act they all got together on the call and made the commitment now what saw the fed act. Who else is going next given where rates in europe are, the reaction is basically, i would say, likely to be much more nuanced if you think about the shock that is unfolding and ask yourself is this demand or is it supply, its not very easy to come up with a very clear and clean answer so if youre going to have a mushy answer, you need targeted Monetary Policy. You dont get that from Interest Rates. If the shock that were having is more a supply than a demand shock, as jim said earlier, lower Interest Rates, am i going to go out to eat, i mean, i think the worst thing you want to do is increase demand in the face of negative supply shock. Thats how we got the 19 youre saying inflationary risk on the back side potentially. You dont want to raise demand when you have shortages of things. Thats what we learned in the 1970s. I understand the confidence argument the equity market is 7 from its highs. It was 10 overvalued. Multiples were above 20 where weve only been four times in history. I would argue, you know, that multiples are not about lower rates. Their relationship between real rates and equity multiple, real rates is what the fed is setting is a positive correlation. Real rates going down means lower multiples, not higher multiples. The market is 9 off its highs and that was a pretty fast record time correction there was fear. That i agree with we needed a Circuit Breaker. The market came up with its own Circuit Breaker yesterday is the way i would put it. Its been said many times already that this cut is not going to get people to get on airplanes or stay at hotels or eat out or anything else do you see it in some way, though, boosting confidence for the overall economy . I think it says that the Federal Reserve is going to help but this is not a vaccine. I think it will be interesting to watch the next couple of weeks. I think the critical time for me will be when were finished with all the diagnosis and diagnostic kits are out there then thats probably the peak of the uncertainty and well see what happens look, this is fundamentally a medical crisis creating an economic issue, not like 2008 with the crisis. There are a correlation to the number of incidence of this virus is high. Anything the government or central bank can do is certainly appreciated. On that front treasury secretary still in front of the house saying they may recommend businesses well monitor that as well thank you, guys. Keeping a close eye on the Market Reaction all over the place. Positive now, groups like financials, energy, technology in the red lets go back to mike santoli for what he thinks mike. We have to widen the ban in the flat line just because its so jumpy right now i do think it reflects the wide range of interpretations possible for this fed action right here you can criticizes the fed and say this isnt going to target the problem. If we had an oil shock the fed might want to cut rates even if it cant find oil. Its a matter of off sets. Credit is rallying coming in dramatically the second day in a row. That takes stress off real people arguably those are the kinds of things fed can do to support financial conditions while we wait to see what the range of outcomes is. I think also the idea of half a percentage point cut at a time when weve not seen economic pain, if this does prove to be temporary, all of a sudden youve added fuel to an economy that didnt necessarily need it immediately. In retrospect that would be the determination. Then youre looking at like david mentioned in 1998 scenario where it was a relatively excrete moment in ti discreet moment in time under stress then had rates low for underlying condition then an economy thats going to heat up again. Thats just to describe the different ways this can go right or wrong the market has got to really contend with that right now. What do you think is the playbook here, mike . Were seeing groups like real estate, utilities and Consumer Staples on top here when it comes to the action. Go back to the low rate playbook. Its certainly low rates. It was fascinating yesterday those groups performed well i dont know if it means, for example, things like Big Technology remains people overcommitted to those areas and they dont necessarily need to add to them. Or were going to grab relative stability in terms of fundamentals, power and top line as opposed to bet on a quick rebound in the underlying economy that would get you back to things like retail and auto and things like that i do think its still a very noisy market the question coming into today without fed action was we had one of the biggest bounces off an extremely depressed condition for the market weve seen in history. Is that really an all clear or just a matter of a springloaded move thats going to have to, i guess, be reckoned with in terms of more choppiness down the road its honestly unclear because the easy part to be coming into the week was to say we really got a bounce here. After the bounce, clear to figure how the market will metabolize things like rate cut. Probably the press conference will help us out in terms of characterizing this move, how temporary or permanent it might be also if jay powell says, look, all thats gone on since our last decision has done nothing but create disinflationary pressures, farther from meeting our inflation target, that would be a signal 1 fed funds is what we should assume were at for a while. Sara and mike, steve raised this earlier, will they take back the 50 basis points when the virus goes away, and it will go away. This is going to pass. Then the question is are we left with the same rate environment or will they take it back. I dont see why jay powell wouldnt say, yeah, were going to respond to Market Conditions as we see them this is a move to get aggressive and early ahead of any potential slowdown right, mike . Im sure preserving flexibility is what any fed chairman wants to do when communicating with the world, so i do think that was very likely to be the kind of line i dont know if the market would hear it. Right now the way youve seen bond markets around the world react, its as if economies are hitting a sudden stop and were not going to really place our bets beyond that so maybe the market wont really take that to mean this is just temporary but i certainly would expect there to be some nod in that direction that, you know, were going to have to be agnostic about where it goes from here. We want to bring back Steve Liesman who is also standing by as we see dollar falling, steve, sort of a mixed reaction in the bond market. 10year yield is higher, stocks yoyoing all over the place, now higher, dow up almost 50 points. What do you want to hear from jay powell in about 20 minutes. First of all, i think this dollar reaction is a positive reaction that the fed is not troubled by. I think probably wouldnt mind this because of the impact on u. S. Earnings. The trouble becomes one of the reason why the g7 meets is because you avoid these beggar thy neighbor policies. Maybe stand by today for announcements by ecb again its typical when they do these g7 meetings theres a series of policy actions they will announce a rate cut as well i want to answer the question i asked earlier you guys were just talking about, does the fed chairman say its temporary. Im going to say hes going to avoid answering that question directly i dont think what he wants to do is provide stimulus to the economy, which is always sort of out into the future, and then take it back by saying its temporary. I think his answer to that question is going to be well see. I think his answer to the question of will you do more is, yes, were willing to do more if its found to be needed. Theres a lot of scepticism. I think david was voicing it earlier as to whether or not it will do good i think the idea for the fed is it certainly cant do harm and might do some good given the idea it might stabilize the market and the market has come to expect it and fed has obligation not to disappoint markets here to keep it from falling further. All right, steve. On that point, though, you mentioned the markets. What if the market ends down today . Is that not seen as a negative does that not reflect the fed is having as much power, ability to introduce confidence as might have been thought . Since youreasking a hypothetical, david, let me throw it back of you, how much of the 1300 point gain from yesterday does it hold onto today . Remember, yesterdays rally for whatever you argue technicals or whatever youre saying based on the expectation of this move. We had lagarde speak, powell speak on friday. We knew about the g7 meeting, a statement from the imf and world bank there was a strong signal from the Global Financial leaders that some form of stimulus was coming i think the fed maybe lost the possibility of surprise by leaking the idea of emergency g7 meeting. I think if you were sitting here yesterday and making a bet, i think you would make a pretty safe bet there would be some form of stimulus from the Federal Reserve. I would also say look at the bond market and currency market. In many ways thats more important whats happening on daytoday basis with equities those are the deepest, most liquid and often leaders in this market want to also bring in steven roche with us former head of Morgan Stanley asia and, of course, keeps a close eye on all things economic. Hes with us from Yale University your reaction . What does it mean for investors what he did marc rate cut outside of a normal meeting since october 2008. Well, sara, i think you need to look carefully at china and whats caused this flat line performance of the chinese economy. The transmission effect from virus containment goes through draconian quarantines, restrictions on travel and fear of assembly in Public Places we are not china but we are going to be experiencing similar types of actions to deal with what the experts are saying is likely to be an increased epidemic in the United States. These are actions that are insensitive to the level of Interest Rates, which are already extraordinarily low. So Central Banks are pulling out a playbook that was designed to deal with financial problems and not to deal with Public Health problems so i really think they are like a fish out of the water here they have no idea how to contain or even understand what may be about to happen in the Public Health area or the u. S. Economys response to that meaning what, steven, that it shouldnt have happened or raises higher risks as a result of the 50 basis point cut down the road i think, david, that this will cause certainly some concern, what does the fed know that the rest of us dont know but what are really the appropriate actions that the u. S. Government should be doing . We should be investing very heavily in building out our own Public Health infrastructure, rolling out massive testing on a scale weve never done before. We need to bring the scientists in, not the central bankers in to design these programs we do need to make certain theres ample support for liquidity for small and medium sized enterprise who might be hit by the quarantines, travel restrictions and fear of assembly in Public Places. Its just not clear to me that the financial is the appropriate playbook to deal with what could be a serious Public Health crisis. As youre speaking, steven, president tweets, the Federal Reserve is cutting but must further ease and most importantly come into line with other countries, competitors we are not playing on a level field. Not fair to usa. It is finally time for Federal Reserve lead more easing and cutting. Its never enough. At the same time the treasury secretary was asked about the fed cut in front of house ways and means a few moments ago and said it was a nonpolitical move. Here is what he said well, i very much support the feds decision i think they did the right thing getting ahead of this. Obviously theres limited data because this is something thats literally occurred over the last several weeks. But you know, i would say this is no different than any other severe situation this is going to have an impact in the shortterm on the economy. I would say its very different than the financial crisis because the good news theres an end in sight this will have an impact on the economy, but i have confidence in our Health Professionals they will develop both viral medical treatments and vaccines. This will have a time period but i think the fed, we had a coordinated cause with g7 finance ministers and Central Bank Governors even in the last week, i was literally last week at the g20 in saudi arabia. The difference in one week on peoples reaction of whats going on is enormous i applaud the fed on this move on a completely nonpolitical basis getting ahead of the issue and stimulating the economy. In the minute remaining lets get to eamon javers who tweeted earlier the National Economic council is holding a meeting. At the time eamon you reported they believed the economy was sound and skeptical of shortterm stimulus. This white house doesnt feel it needs to do anything to stimulate the economy. The president saying he wants others to take action, the fed the president doesnt believe the rate cut was enough. He wants more rate cuts and quantitative easing. He wants to move forward with payroll tax cut. Im toll at Economic Council meeting they are not going to be talking about stimulus ideas or policy options to be coming from the white house. This is about monitoring Economic Impact of the coronavirus here not necessarily coming up with shortterm stimulus from the white house specifically so you see the president s reaction here. He wants the fed to take the lead on this but aides here not planning any White House Initiative to stimulate the economy at this time, carl. Have any of the democrats, eamon, criticized the fed for being political and doing easing not only because the president is calling for it but during an Election Year . Do you expect that to play out we could see that on the campaign trail i havent seen that yet but until recently there have been a lot of democrats in the race, so i havent been following everything they have all said. I can tell you in terms of the white house, Senior Administration official told me this morning that the white house did not get a heads up about this rate cut in advance and that the president has not spoken to jay powell in the past 48 hours is what i was told. So they did not know this was coming necessarily, but the white house clearly feeling that this is not enough from the fed right now. Well see where we go through the afternoon with the president s reaction we will see him at the top of 11 00 on the east coast. An unrelated speech to counties here in washington im told a comment on the fed is not currently at the top of his teleprompter script. But you know the president , he always riffs a little bit at the top of the speeches so well watch there to see if he has any reaction at the top of the hour. We know what hell say because he says it in tweets all the time he wants 0 rates if not negative rates. He said he wants negative rates. He should talk to the europeans about that they are not happy they have negative rates it crushes savers, worried about social impact, terrible for Banking System, someone needs to make the case, larry kudlow, that negative rates are not a panacea purchase the difficulty for advisers is making a case to the president about things the president doesnt want to be hear can be career threatening in this white house. Weve seen that over and over again to senior aides to consistently told the presiden thats been dangerous. The challenge is how to convey that information in a way that the president will respond to it in a way those aides maybe want him to respond to it its very difficult and very political here at the white house. I think he believes if he were to put up a building at negative rates hed get paid to do it by the banks if you frame it like that he does think you get paid. Its a reflection of a really poor economy and has all sorts of negative consequences eamon, thank you you bet steven roche, Yale University, former asia chair. Do you see political implications and spillover effects as a result of this fed move, steven well, it will be interesting, sara, at 11 00 theyll have jay powell and donald trump probably on a split screen on your network, both talking and trying to spin these developments what strikes me in listening to the discussion youre having is that, you know, the u. S. Government, capital g, is flailing weve got monetary stimulus. Weve got the president tweeting thats not enough and we need payroll tax cuts we have the democrats and the republicans going at it. Theres not a lot of coherence in trying to articulate what this coronavirus means to the United States as a nation, what it likely would mean to the economy, and how it fits into a Global Economy that actually looks quite weak with japan back in recession, france and germany weak, and china flat lining. The old adage that greenspan offered years ago, that the u. S. Is hardly an oasis of prosperity, is appropriate in a weakening economy like this. What is our strategy people are assembling lists of the last emergency fed cut, lehman, the 2008 crash, subprime in 07, 9 11, techrelated bubble stuff in 01, russia in 98. How much guilt by association are people going to read into that well, with the exception of 9 11, david, you know, all these were financial events that certain certainly it was appropriate to use financial tools to address in my memory, weve never used Monetary Policy so address a Public Health matter so, again, go back to what is going on in china with quarantines, travel restrictions, inferior assembly. I dont think Interest Rates being cut today are going to address any of those issues if, in fact, they play out in any comparable way in america. Steven rush, good to have you here today thank you, sara lets get to the cme group and check in with Rick Santelli. Hi, rick hi, carl. I have a tank. Brad tank, newburger what a di. Im going to ask you, what did you think, do you agree with it, was this good timing on the feds part your thoughts. I think they should have waited until the meeting, create a little bit of a sense of alarm that maybe is unnecessary. We know they worked over the weekend, so i think they came to the conclusion to make this move probably on sunday whoa, whoa, whoa. Say that again i think they made this decision on sunday wait a minute so monetary, flexible, we dont have a stencil theres no preset plan or course to were getting sold a bill of goods here they clearly wanted to go in front of the meeting i think the tell on it was the emergency g7 meeting. The big bank with the only bullets left is going to be the first to shoot the president tweets out the fed needs to leave so hes going to lead us into the european mess, the japanese mess forget the president listen, he can have his opinion. I happen to disagree with it, but he can have it i dont think thats why jay powell did what he did i think he caved because the markets caved. Whos the held of Monetary Policy not president trump. Maybe not jay powell and company. Its the markets, fed fund futures, because of the big boys were they more stressed in the small Retail Investor prior to yesterdays bounce there are signs of it Global Forecast gdp and u. S. Gdp forecast came down big from a lot of the street shops towards the end of last week the thing that hasnt come down yet is earnings forecasts. Not much in terms of earnings forecast productions but theyre coming next. Now, weve had many exfed officials on one constant theme is, get in front of it, throw the kitchen sink at it early what happened with the markets supposedly being able to digest all this information isnt that what the markets job is, to digest this if earnings are meant to come down, if the economy is meant to slow, why would the fed want to inhibit that i cant disagree with you, rick i think a lot of the rally that occurred from early october to two weeks ago was based on nontrade deal, trade deal, and importantly the upturn in Global Industrial production, which this takes off the table clearly an ease is in the cards. The markets expected it. Probably better know better in two weeks. I have a retirement portfolio. I dont mind when these do these things because sometimes it helps equity at the end of the day, if the stock market turns down yesterday we were up over 5 if they wanted to do this, final thought, couldnt they have picked a more opportune, Pay Attention to the markettype time i think they were trying to surprise the market. Thats clearly the case. If you look at the markets reaction today, not much of a surprise we were up partially yesterday because of the carrots, the fed coming to the rescue we cut the carrot off the string, gave it to the rabbit, and this is what happens i think they can keep talking. It was working. It was working. Why bother guidance is a better tool than two bullets brad tank from newburger berman, thank you. Carl quintanilla, back to you. Thank you thank you very much Steve Liesman joins us as we count down to the fed presser in a few moments. Im sure youre aware Richard Fischer give us this comment i wont second guess the fomc but the feds action may be counterproductive unless coupled with other administrative initiatives. Deep respect for Richard Fischer, but i think the fed got its reaction yesterday i think thats what yesterday a rally was at least in part about. I want to share some commentary we have from another former fed official, worked at the new york fed for a bunch of years he says our best guess is that if incoming information remains adverse, the fed will deliver another couple of 25 basis point rate cuts in the coming meetings if the outlook starts to stabilize, theyll call a halt to its easing. That turn of the fed funds in the back id like to look at that first if you remember back in 2002, 2001, there was an emergency post9 11 rate cut that created a series of rate cuts that brought it way down. Then it came back. Again, in the 0809 era you had a series of big 50, 75 were puzzling out which kind of rate cut this is is it a oneoff kind of thing or one that brings the rate down to zero i think whats going to happen is the fed is going to bide for some time here and try to assess the economy and figure out where the next moves are going to be, carl so, steve, how would you explain what a rate cut does to the real economy because so many people out there are going to say, what does this do for coronavirus what does this do if im still scared to leave the house and go to big gatherings . I think you can make a series of effects it could have it could potentially stabilize the markets, and thats important in the big sense in other words, the fed i dont think cares about 100 or 500 or 1,000. The stock market in freefall creates liquidity issues, creates its own sort of economic maelstrom the that the fed would want to avoid. The market can go where it needs to go but the fed wants to get there in an orderly way. An impact on housing people have to be thinking about refinancing their homes. That will help somewhat in addition to autos, which is an Interest Ratesensitive sector of the economy overall the Interest Ratesensitive sectors should have some form of impact, some form of help from this not big i think a big thing if you put that chart up, back in 0809 the fed had 350 basis points of rates to cut it doesnt have that now so i think it wants to use what it can, try to stem what bleeding it can of the economy i dont think its going to erase the problems but it could help it at the margins the other question that im sure the fed chair will get, and i think will be tricky to answer, is why do you always get bullied around by the markets . You know, is the market the key to predicting what the fed is going to do . This kind of notion that the fed is here to the rescue every time the market has a sharp fall. I think thats a question that can be asked given the president s tweets and the market reacting, the fed reacting in the wake of the market selloff. What jay powell would say there he is right now. Lets listen to him. Lets go to him, steve. Heres the fed chair good morning, everyone. Earlier today, the federal open Market Committee announced a onehalf percentage reduction bringing that range to 1. 25 my colleagues and i took this action to help the u. S