Transcripts For CNBC Squawk On The Street 20240713

Coronavirus induced volatility plus quarterback buoyed by a string of super tuesday victories for the former Vice President. Is the contender for the democratic valuation former investor jeff ubben, never seen anything like this and says why it makes Value Investing impossible the fed announced a 0. 5 rate cut. Stocks looking to recoup most of yesterdays losses which includes a drop in the dow of 785 points jim, once that tenyear broke 1 , wow. Could you not take your eyes off of this price action look, i think that i was struck by the rate cuts. I didnt like jay powell you cant say listen, the fundamentalless as are sound bue need a gigantic rate cut that means the fundamentals arent sound i didnt know we were that bad off. People either way we are bad off or powell knows something and to see that you get a Biden Victory and maybe things bounce back a little is encouraging and mostly because its just about the tenyear the tenyear drops to 9. 8, then everything you see on your screen thats green will go red. We are in a dangerous Trading Market wait until its down, dont buy it up because you might be lets say have to buy more its a discouraging moment i find because i dont feel that anyone really has a handle on corona well speak to larry kulp, trying to get a hold of it like anybody else everybodys trying to understand it and it still lacks a great deal of understanding given we dont have any facts. Mr. Culp will join us an hour, hour and a half from now theyre having an investor call ongoing at ge. Well bring you updates from that as well jim, no shortage of questioning of the fed i think yesterday Somebody Just saying really, why . Why . And only coming back oftentimes to is it really just to help the stock market and if so, is that the relationship that should be foremost im just asking the question i can hear liesman or sarah saying no, financial conditions. I dont want to debate it its a biological crisis i said it have the beginning, it is not a financial crisis. We have a sound Financial System we can create one having the fed tell us things are worse, they have to take action or we can recognize look, dont touch your mouth or face. These things are so etherial but the fed came out and said well wait until next week but he understand this is a fluid situation which is code for we dont know, that would be better than doing these actions which basically says we do know and its really bad. There is no demonstration but the fed had no business doing this they dont know more than larry culp does. What are you doing taking dramatic action when you could really just say listen, its a Public Health issue and we want to throw everything we can at making sure that your company, if it closes, you get compensated, so you can hold over this period some reuters had a piece about the fed tapping into private data, trying to understand whats happening on the ground through Companies Like first data and others, so i dont know maybe powell seemed to, and his answers were so short and so couched and qualitative versus quantitative it was really disciplined i figured he knows that adp is going to turn really bad we have 183,000 job increases. Certainly didnt know that i thought it was fatuous i know davids right we have people who talk about the fed all the time but the other thing people talk about is i dont know, im none an epidemiologist. You dont need to be an epidemiologist to know which way the wind blows im tired of hearing people talking im not a virologist listen to dr. Fauci. He is. Hes the foremost and saying two things, one, a year and a half from now and two no reason to be optimistic in terms of a vaccine. Why is he saying that . We had yesterday a gentleman with meg and kelly and i listened closely and hoping august they could actually start to be in trials but it will still be a year from now i speak with them and hoping what they would do is the chinese would actually accelerate their process because we are so safety oriented in this country china has not distinguished itself as being completely safe. Organized knowing what youre going to do and where youll go, theyre much more it desocializing, making sure if youre sick you stay at home that was part of faucis point. They have arrested the caseload because theyve taken social distancing to its furthest extreme. Were not going to do that he says were not going to that they basically said is look, why is this novel . Because we have no natural defenses against it. Theres no people who are immunized naturally against this now, i have to think that we dont have that many deaths yet, yet, but then all we hear about is wait, well be iran iran seems to have decided let it rage and see what happens talking about china for a moment, where the cases continue to drop, new cases drop dramatically, in part because of measures theyve taken right do we have a good sense yet as to the true impact on the chinese economy and what thats going to mean around the world believe it or not, larry culp has the best handle on it. He may very well. The journal writes the story as so many others are focused on it as well in terms of trying to understand what the impact has been not just in Hubei Province but throughout the country, given the lack of consumption and a lot of people not getting paid, even if they are showing up to work, because small and medium sized businesses are under pressure i thought secretary mnuchin would come out with a bold plan to say listen, this will tide you over youre talking here yes, here that would require them to admit it thats the thing. Plenty of story this is morning how the president s balking at major stimulus, will leave it to congress if they want to do a payroll tax cut. Not rolling back china tariffs why is that, jim well, i think that it is an Election Year and also i think the president wants to come out and say im worried. Does he want to do what the fed did . The fed made me feel listen, i used some props yesterday. Let me make it clear yes, i do have the 3m mask yes, i have gloves why . Because im being told in everything i read that you should do that dont touch your face. But these are things, i mean lets face it. What were trying to do is lower the odds for getting it ourselves. Yes if thats what were talking about, im spending more time lowering the odds than i am trying to figure out whether the raw scores are any good. People are trying to lower the odds than they are going to a conference to try to close a deal, and so there is this sensation of commerce where the president and the trek rear secretary should be well aware of if you say everythings fine i tried to talk to a number of Investment Bankers every day whether they have anything going on or not, theyre not getting on planes. And activity is not occurring that otherwise would right as a result of that even right now in this country, and just looking at notes yesterday from a couple of conversations i had, caution is the word meetings are being canceled all over if you you are longterm, on a fixed income, 401 k or i. R. A. That has a lot of fixed income in it, pension fund trying to meet your 7. 7 bogey, 2 on the tenyear didnt help you but below 1 is truly shocking but its even beyond that. I had an opportunity this morning to sit down with jeff ubb, founder and long time chief Investment Officer at value act, now hes actually the Portfolio Manager of their socalled spring fund, thats the name of it, an esg focused fund. Ub ubben has been around as a activist he made a connection between the fall in the tenyear yield and value in investing take a listen. We have gone to the longest duration asset in priced as if its always going to be this way, and its been going on for five or ten years so its kind of the death of Value Investing to a certain extent because the world becomes kind of valuation a agnostic what is Intrinsic Value if terminal value is discounted back at 1 , right . Right once you lose that, though, you kind of as a Value Investor with a bunch of baggage you kind of lose your bearings. He admits hes lost his bearings as to many other Value Investors ive spoken to recently say similarly i spoke with one of the more thoughtful people in the oil business, mike wirth yesterday, the ceo of chevron and he said listen we have the greatest Growth Profile we have the best Balance Sheet weve got the most solid dividend we have the most solid buyback. What happened, boom, they actually their Balance Sheet was better the next year he said hes got one of the best profiles for all growth companies. David, no one will touch that stuff. No. I want to share this later because ubben was here because spack yesterday, vetro iq, steve gurski ran that. Small fellow from the auto business he knows gm better than anyone Hydrogen Cell fuel stations and the trucks that will go through them, we did a long interview which well make available later and share some of it. Thats why ubben was here. We talked about bp as well, jim, youll want to listen to that. Valuable company. Buying the thing at three times eebitda but ubben talks about the new world and what the Companies Need to potentially think about doing. My travel trust owns it, we go every morning stocks we think are idiots should wear postits. And bp is on there, its been backished was that a new verb dont make that a verb. A new verb . Its new world. Thats the ceo of viacom is that a value stock . Never stops it is a value stock and keeps getting less and lessable ha less valuable. Isnt that part of what we are talking about . Its down 45 for this year this year is only two months and a few days old you search for when youre really stupid, you dont listen to jeff ubben. Jeff ubben is telling you, you want to go to the morgue viacom ive been to the morgue when i cover homicide i dont like it. Five times ebitda and now selling it at four morgue. Better than back hsh ish coronavirus on the travel front Corporate News meg tirrell for the latest for the first time, the daily number of new deaths reported outside of china surpassed those reported in the country, suggesting as the New York Times put it that the front line of the epidemic may be shifting experts are cautious though about declaring china out of the woods and are closely watching what happens as restrictions return and people are back to work south korea reporting more than 5,600 cases and iran almost 3,000. In italy, with more than 2,500 cases weighing plans to close schools for two weeks. India reporting its first cases yesterday, a traveler from italy and six of his family members. Today the count of infections climbing to 28 in the u. S. , more states reporting their first cases along with a report from New Hampshire that a patient with the disease broke selfisolation and attended a party this as Health Officials still trying to get a handle on the key characteristics about this virus, including the fatality rate the World Health Organization saying globally about 3. 4 of covid19 cases have died compared with far fewer than 1 of people with the seasonal flu. The difference they note is people havent built up immunity to the new virs and susceptible to infection and for some severe disease. Guys 3. 4 has gotten some peoples attention in negative ways, higher than what wed anticipated originally how accurate is that thats above where the spanish influenza was in 1918 i believe. Yes, its considered an early estimate that is really just where we stand right now, and what a lot of people are saying is especially as we are starting to see new countries reporting cases, what are getting picked up are the more severe cases so the death count is going to be sort of artificially high, until we start detecting all of the mild cases as well, guys inside china, wed heard more of a fatality rate of about 2 and really what experts will tell you, its important to break this down by age, people who get, are older have a higher death rate younger people not so much meg, in every pandemic of any major proportion, including the 1958 incredible flu season, theres always tremendous number of people who die overseas in the Public Health system, its just so poor overseas and so many countries its very bad in italy, even though i thought northern italy had dealt with that pretty good can we start gishing between the re distinguishing between the rust of rest ef the world aof td the United States. I really think that the w. H. O. Particularly done a terrible job, is scaring the heck out of people when theyre not distinguishing between asia and not distinguishing between countries. Of course its going to be different wherever you are, how old you are and underlying conditions you have. Smokers, people with chronic respiratory conditions, those are the people who are facing worse outcomes potentially from this 80 of people will have a mild case, if thedata from china stands up around the rest of the world. Big piece of that puzzle is enlarging the denominator. We will have Clinical Labs meeting in d. C. Today for their convention, airline ceos meeting with the Vice President and a lot more thanks, meg. Well get cramers mad daush and larry culp, ge chairman and ceo, stocks on the rise this morning. Premarket a lot more to get to this hour. Squawk on the street continues straight ahead through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Welcome back kind of feels like weve already had an entire week, given the moves in the markets, but its only hump day or otherwise known as wednesday lets get to a mad dash. We start trading about ten minutes from now United Health care going to be a feature. Yes joe biden i would assume this is bidens poll numbers. This is how relevant biden is to the conversation it trades one for one. It will be up 10 . They did have a meeting with citi and saying our coronavirus exposure is limited. Medicare, the Medicare Advantage continues to show solid growth Medicare Advantage program is a very good program but david, this thing would have been down 10 had it not been for texas, and minnesota, whatever youd like keep close to this this is the stock if you want to monitor who is going to get the democratic nomination, this one is the big money play on who gets it. Because bernie gets it, they dont exist if he were to get his Health Care Plan passed. Biden favors universal Health Insurance and bernie favors no Health Insurance right you can say thats better or look at the Italian Health care system today how are they doing i thought their system is good because they have a lot of good doctors but you know what . Theyve been blown up by corona. This is not the only name responding positively to biden no, centeen and the mckess mckessons, carrion and vultures of bernie are considered the way of doing business. I want to say one thing im solicitous of everyone who comes to the exchange and i want to thank them but im not going to shake anyones hand during this crisis because you want to get it, shake hands. Its time for our psa, we do every day. Dont shake peoples hands its a little odd in the social interaction to say no. Used to be. Theres a way to show you have no weapons i have no defense. Give them the peace sign. I like that or thumbs up. Or dr. Spock maybe . Or this live well and prosper im not a meanie as my 8yearold would say not a meanie anything but a handshake stick around, ges Ceo Larry Culp in the next hour on squawk on the street. I sfx [phone ringing] you still have service . Call the Insurance Company its them, calling us. Its going to be a week before they can get through on these rds shhh, sorry, i didnt catch that. I said ask how soon they can be here right now . Whats now . He says theyre surveying our property now theyre probably at the wrong house i dont see any hovering his name is hovering . Look up . By automating claims with Machine Learning and analytics, cognizant is helping Insurance Companies advance how they serve even hard to reach customers. Cool when i switched to geico. This is how it made me feel. It was like that feeling when you go to highfive a coworker, and you do a perfect highfive. Everyone is really excited for you because it was such a great highfive. And then. The boss comes in. And she wants one too. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. A busy day as we weigh the coronavirus headlines and political implications of last nights super tuesday races. The imf is on the tape well talk to later on this morning, china productions restored to 60 hopes to move to 90 in the coming weeks of course, imf and world bank have canceled their Spring Meeting in d. C they will make it a virtual meeting. Larry culp i think will come up with a similar figure i get this figure over and over again from people that china is better or worse, making them come back, 60 which is up from 30 but we still get those images satellite images of pollution in china, relatively pollution free which says not everybody, the numbers could be overstated of who is coming back to work. What a terrible thing a way to analyze it, how much bad air they have. The bad ware is one other thing, it is so in play when it comes to the death rate because its respiratory illness. S having spent time in beijing. Heavy smoker, terrible pollution, doesnt help. Men are dying much more, about 56 men versus women and its 51 smoke in china, men versus women obviously smoking matters. We have to start distinguishing in order to make it so furor doesnt reign, because again in the 1958, you had 2 Million People died of the flu 33,000 died here we just need to, we need more data we need more data. First of all, nobodys getting tested in this country or just starting. Crazy what a breakdown we had. People already had it and gotten rid of it good point. A difference between fear and planning right reuters has a piece about jpmorgan today, theyll ask thousands of their employees in the u. S. To spend a day working from home over the coming weeks to test the contingency plans, should they have to require it do i need a teller . A teller no one of the things bank of america has done is figured out how many transactions can be done online. Will this be the death nail of people who turn out to be a little bit unnecessary wouldnt that be something, in a world where zoom video which reports tonight basically makes it so you can do a lot of business at home right do we have to have right, what behavior also chan behaviors will change as a result of this stay at home is cheaper jpmorgan may have to fundamentally reevaluate im not trying to scare people but theres a lot of excess people if you work at home theyre building a giant new headquarters are adding to their old one on park avenue really . I dont think theyre expecting to have people not come in to work. Theyre doing well. Spending billions of dollars on a beautiful uilding my state at home index is soaring which moderna the football stock dr. Fauci liked mod rn gen a yesterday today moderna is another stock that takes the temperature of things so does the tenyear put together the things that take the temperature, and right now the tenyear is boring the heck out of us and if that means boring the heck out of us here goes the tenyear rate started to go down. Doing wonders for mortgage refis, up 26 week on week overall applications up 15 thats good for wells fargo and chafrlie sharvcharf. What are you supposed to do in this environment with the tenyear at that level really you go to cash now . No. Eventually, you are now because the fed wanted wealth effect. Is anybody able to get a return jeff ubbns point how do you value an investor when value has no meaning any longer. You discount things at a 1 rate i totally agree buy cocacola. The president may want negative rates that would be horrible well, hes so wrong about that its painful. That says our country is weak, and that we shouldnt have any money coming here. Our country is strong and im surprised our president opts for a strategy which says our country is weak. Thats not the way he usually acts he needs to be i think schooled on this. He should not be saying make america weak again why is he doing that why is he saying he wants to weaken our country is that his game plan to make it great . The banks obviously are not beneficiaries of this rate environment, yesterday the yield curve steepened early on wells fargo down about 25 so far, stocks lost a quarter of the value this year, bank of america down 21 the loser in this low rate environment. You want zero rates . Do you take the chance and buy the bank here . No. No . Because you have a guy coming on named jeff ubben, those are value plays. Value means sell look at this my travel trust has goldman seven times earnings i hope it goes out because it has a credit card business [ cheers and applause there you go, a lot of students here today you could work from home and still use your credit card the savior for goldman will be the apple part. The savior for mastercard is a better run company than goldman. Its time to buy mastercard. [ bell ringing ] david, i come back to cocacola, great Balance Sheet, nice yield and i think people are going to be drinking coke in an atmosphere where they may not trust the water even there is the opening bell the s p 500 at the bottom of your screen gfl on the big board, canadian Waste Management company celebrating its ipo today. Interesting choice. Nasdaq national simamedia, Advertising Network celebrating its 15th anniversary were so oversold i dont want to tell people to bail out but i think everythings being taken up by the s p. Good time to sell travel and leisure. Today oh yeah if youre canceling the conventions, chicago, 78,000 hotel rooms. The housewares show you want to buy that . No look, theres some things that are going up that make plenty of sense, Drug Companies, but then theres airlines i know Warren Buffett is buying an airline he doesnt care if they have a shortfall. Obviously he was saying last week just as good a time to buy as any if i said that, people would say where did jim go, the coronavirus or was he removed . You guys did unh at the te telestrato telestrator. Campbells beats on surging sales of nonperishable foods my wife bought the chicken noodle soup. And i went back to the old staple the chaunky used to be my meal for dinner. Ravioli. Heman . No. We used to buy swanson, thought that was a uxury you got buy a lot of food to prepare for a long period of time too much, way too much really . Were going to be able to go by the day i think we got a days worth. Thats silly. It is we got a pantry that looks like costco. Giant hydraulic lifts helping you move food around and the tp are you okay on that those i think i could have lets not go into it way too no, ive got to tell you, its not a bad idea again, its not a bad idea to stock up who is saying that the doctors. I mean again you dont have to be a doctor to say what a doctor says do i want to stock up on campbells chicken noodle . Im listening to my doctor you got to stock up on chicken no, i am brave i dont care im going to weather the virus no thats the iranian way how is that doing . How is the iranian way handling . Iran is a very interesting why, because they chose not to care . The impact the virus will have on the social fabric there, on perhaps the government. Its not to be ignored either. I dont think well go up as much as we went down yesterday, by the way, just so people know. If you want to lighten up, change some things, do it into the strength we did lose 785 yesterday so were trying to reverse all of those losses tom lee had a good note overnight, looked at the number of instances in which you had six Straight Days of less than 10 of the s p below the tenday moving average on day seven all four of the instances you rallied. So the point was if we dont rally today the market is in his words extremely not normal wow look, the s p oscillator that i use other than thefinancial crisis, im looking at 20 years worth of data, of the financial crisis wed bounce today im sorry, looking at 20year says that we should bounce today other than the financial crisis. Which was also an extremely not normal market. Right thats what we should do, but i dont like the tenyear. The tenyear is starting to go down in yield and the tenyear is just, the s p futures common stock trades off of that you dont really need to see much so if the tenyear continues to go down in yield, then well reverse this move. Theres really, were an algodriven algorithms are selling stock when the tenyear goes down in yield oversold blah blah, blah, blah, thats what will happen. Did you ever think the tenyear with a 0. 9 in front of it no, theres a sign theres a cre cessation of business and total fear flight to safety people dont trust any financial instrument by the way, jpmorgan says 50 chance of zero rates this year, its not their base case they still see 130 by the middle of the year and 160 by the end of the year. We would take that, right . Yes, we would, but id rather know that gileads palliative, whether the drugs work i dont care about any of this nobody trusts anything, because everything is fluid. We dont have enough data right now why is that . Because we just dont know anything its too early . Yes no natural defenses too early to measure, i think. China is still unclear in some ways right questioning it. I mean south korea certainly more so in terms of at least trying to understand, but we dont. Look, i do think if you go back to the higher yielding stocks, i know its really boring, okay, and im using cocacola as a rubric, but this is when you buy cocacola, and there is no doubt about it that james quincy is doing a good job. They had very good organic growth, the yield is fine. Its a buffett stock no one ever got, no one ever made a mistake buying it its not going been a performer of late but james quincy is doing a good job so there. Cocacola what about dividend paying stocks what is exxonmobils dividend . David, youre doing oil and gas and in the esg world i am, 6. 8 . Well, yes but so what . So 6. 8 times the tenyear yield. Theres chevron, has much better coverage. Right and chevrons got better growth, got better Balance Sheet and yields five. You could buy it but then youre a pa ryia. You have to hope robin hood stays town would you buy chipotle on wells going to 1,000 for may 68 . Did you read this one. I love chipotle why recommend a food stock you might get a better chance to buy lower. Remember, you have to go and be with other people when you buy they have great takeout, great delivery they make money. By the way, what else, nomura ups home depot mat tell has a 16 price target i met with management. Hasbro has fallen down on the job switching to little theat c theatrics. Chipotle talked about how much money they make on delivery to homes so that call may not be so bad. That is the stock up the most in the s p so why would you go after that an investor willing to look past what is some economic dislocation, why not buy things that are historically cheap right now . Why not . Why not yes because they could get historically cheaper thats why all right historically cheaper. Id rather buy hersheys on that note we talked a lot about the Oil Companies, of course, which youre caught up on them. I want to share thoughts from jeff ubben again because we talked about this a lot. He runs an esg fund and ubben is buying bp. Major oil and gas company. Hes right. Listen to what he said and i want to get your reaction afterwards i was buying bp yesterday or two days ago at 30 bucks a share, three times ebitda, and im like this is ridiculous. Its really hard to get off oil and the company has done a great job in the last three years financially. The Balance Sheets fine they can be part of the solution they can move that to Carbon Capture and hydrogen and other things with their capital spend to become a company of the future, but im sitting there saying, you know, who what fundamental usually i could buy a stock below Intrinsic Value and add Intrinsic Value, thats my business who am i going to sell bp to, really wow look hes so right why did we buy bp for the travel trust . We figured wed buy it at 7 yield and then we buy it at 8 yield, someone is going to come in and want that yield and they havent yet. Bp upped its dividend. Bp has the best plan for how to be less carbon oriented. Theyre a remarkable company, sold enough assets that their Balance Sheet is good and yet i was wrong. It was wrong i think you have to say im not early, its wrong. I believe all the things we create interest and it didnt, which is one of the reasons i was so tough on mike wirth yesterday, the ceo of chevron, because i was looking at bp, they went to 7. 7 and theyre pretty good company. Chevron not go to 7. 7 . Jeffs right what an honest guy thank heavens he didnt say i own bp and they got a great yield. No its good to have a little hes always in forwardthinking thautful intfo ing thoughtful you like that, not afraid to say confident, onneshonest they sold microsoft way too early, took that position 2013, microsoft sold it in 17 trump is having an important meeting, hes meeting with, what, kim from north korea, who is he meeting with is he meeting with, oh Kim Kardashian, sorry. I thought it was are you being serious well, i guess well find out in good time. You mention ubben. David ackman with news on our website how hes taking steps to protect the portfolio from downside, seeing substantial negative impact from the attempts to mitigate the effects of the virus, jim. I see fitch is on the tape talking about restaurants and how they can expect more restaurants to be in distress. Yes look, i think that anyone who has been with a number of restauranteures given what i do for a living and i got to tell you something, we are without a doubt in a challenged industry are you seeing a reduction in any no. Youre not. People are still going out really good bookings and i attribute that to the fact that people are still confident to go out and havent been scared to, but i think if you talk to cisco, theyre not seeing any. Lets be serious, trump meets with Kim Kardashian to discuss criminal justice not her first visit you dont want him consumed by the coronavirus shes been a great spokesman by the way the president has been very good on recommending that you hire people who come out of prison and weve done that, and its loyal people who were in prison for things that arent criminal now. So i didnt mean to be too hard on the president , i just thought it was, you know theres a lot going on Kim Kardashian i dont follow kim, up like most of america. 24 million followers. Many more than i do get with the program. Not my thing. How do you feel faang versus fang oil fang versus facebook, netflix, alphabet. You know, jim, one thing theyve got attention today at t accelerated buyback wasnt that something sort of flies in the face of this theory if corporates are under real stress theyre think being cash flow, inventories, working capital, do buybacks take a hit yes, i think they do, but chevron said jim, youre wrong, when you have the cash flow, you do them. I think at t was a statement buyback theres the tugofwar between the good people at elliott and good people at moffit nathanson. Moffitt in a thanathanson is th sanders of at t theyre not positive on the future of the company. Theres a great debate out there in terms of the success. Do you think they can c conserve it . They generate Free Cash Flow. They target a certain amount return to shareholders there is still a belief out there i think and part from the likes of Moffitt Nathanson and other investors that at t will come under some pressure it has a great yield. What its going to see there in terms of the lack of success, directv the continued subscription defections. They launched their at t now product, remember replacing the directv product. Yes very recently david, when you mentioned at t is something people to buy and ive been recommending it to people, the first thing they say is come on, that yield cant be, dividend is not to be trusted. Why would you buy 4 billion of common stock if youre worried about your dividend . I think there was concern sometimes about it, but last few quarters i dont think thats the case the wireless business is still fairly strong and the question becomes if we have a real recession, people get laid off, are they somehow not able to pay their wireless bills, does that result in reduction . I think thats the long thinthinlast thing to stop. Market pmis and a few minutes ism are important. We talk to Rick Santelli in chicago. Good morning, rick reporter good morning. Well not only do we have a nonmanufacturing ism, we also have the markets version and that would be coming up shortly. Very quickly lets look at whats going on with the markets. Twoday charts seem appropriate. Twoday of twoyear, obviously were extending, were only one basis point away from the historic trade yesterday down minus, down at 62 basis points, which obviously is the lowest level going back to 16. If you look at what happened to twoday and tens, their low yield which is historic alltime was 90 basis points. Were six away so you can see theres curve implications going on finally, yetodate of tenyear note yields id like to draw your attention to something important. The first trades of the year were the high yields of the year i know the coronavirus is accelerating the moves here with flight to safety, but weve been somewhat rate doomed ever since the first trade. Here we go market, Service Sector number pmi, 49. 4, exactly as expected, exactly as in the rear view mirror and happens to be of course the lowest level ever for this series, and this is the final read of course, and the reason i say its the lowest read for the series is unlike the next number were going to get that may have a longer history in terms of nonmanufacturing sm this series goes back to march 2017 and the 49. 4 is the lowest reading in that time frame lets get back to the charts quickly. So we are talking about the yeartodate of the tenyear, first trade of the year was the high yield, weve drifted lower. Look at the dollar index basically the first trade of the year was the lowest and continues to accelerate. We come back town getting closer and closer to testing it the point of the matter is that many of the variables that were exaggerated recently whether it was due to the fed action or not, they seem to be just adding to what was longterm trends that have been with us not only for 2020 but beyond, and at 10 40 eastern lets discuss all these topics with jeanclaude trichet, former ecb president. Carl, jim, david, back to you. Rick, thank you see you in 15 minutes. Bob pi san see, dow is up 505. Ybanks are lagging, gold is down health care a big leadership group, semis doing well. Utilities bouncing on the yield still staying down getting a bounce industrial about in line here. Again you see banks doing nothing right now. If you look at some of the big banks that are out there, no bounce at all today and no bounce in the yields either, so there you go this is zero, doing absolutely nothing. Jpmorgan is a drag on the Dow Jones Industrial right now we talked about this yesterday, but bears repeating again the triple whammy as i like to call it with the banks, rock bottom rates, low enloan grove possibilities and these are possibilities of higher default rates. Triple whammy hurting banks. The banks are getting really cheap again like cheap on back three, four years ago here, so nine times forward on bank of america, this was 13 six weeks ago. Citi 7. 6, it was ten six weeks ago. Fifth, third, 8, 8. 5, these were around ten six weeks ago so nobodys doing any big calls buying the banks because the pe ratios are down but theyre back in the really cheap areas weve seen several Years Ago Health care stocks all huge today and obviously unitedhealth here, 12 points there, a big part of the overall move here that were seeing in the, 32 points up, the big reason why the dow is up so much, anthem, hca, all this on bidens victory. If you look at the futures here, i want to show you this, what happened last night overnight. As we got trickles reports here, here is the futures at 7 00, when the first results started coming in about super tuesday. You could see the market moving up throughout the day as we got headlines on clear biden victories in a number of key states and the upset win in texas. Its hard interpreting the impact of elections on the stock market this is very difficult, a lot of people having a hard time with it Raymond James had a point out as good as any, remember that whole thing about sanders, the surge of sanders would be good for the markets because he would lose against President Trump and that was the initial idea so the markets kind of ignored a lot of this the coronavirus created a higher chance of sanders winning, and of course that created a lot of uncertainty and may have contributed to some of the market turmoil in the last week. This is hard to push out and figure out in a clear way. Biden says super tuesday wins lowered sanders chances overall. Now you have a possibility of the market being okay with biden going here this is hard to figure out here but this is Raymond James interpretation i think it makes some sense. Were just off of the highs for the day. The dow is up 512 points jim, we didnt get a chance to talk retail to the degree that can reflect whats going on urban was a miss goldman adds target to the conviction buy list. Its interesting, you have a tugofwar there a price target cut there by bimo now i would say that target had, i read the target comp. Score i thought brian corn ell was optimistic kohls i thought looked like there was a decent quarter, raised the dividend. The stock gets pancaked. Nordstrom stock gets pancaked. People dont want the standalone second tier retailers. Tier ret. They have decided you know how the Oil Companies nordstrom, Eric Nordstrom taking over as sole ceo. They had a joint ceo structure that Conference Call was disjointed and i saw no reason to buy the stock the kohls Conference Call was over and over we screwed up, we screwed up were going to get better. Thejudgment has been made by the market they are irrelevant. Target is not irrelevant i think that matters i think Brian Cornell is going to recover did not have a good quarter. The one if you really want to be in it go back to costco. There is no doubt were about no doubt that the future, if you want to hear a Conference Call, someone would say what is so good last time he said, seed cucumbers. Cucumbers. He has he is so good. I want people to listen to his call it is calming. He is smart. Its a great retailer. And its where you go to stock up costco is where you go for sure. Still to come, ges larry culp will join us with his strategy to turn around the company in this volatile market environment. You have the dow up 480. Ten year trying to hang on to one. Vix actually down two points back in a minute there has never been a better time to have a favorite food. With new grubhub plus you get unlimited free delivery and cashback rewards for ordering noodles, and noodles. And noodles. And noodles. Grubhub plus. Free delivery, cash back, and noodles. Yes im stuck in the middle with you, no one likes to feel stuck, boxed in, or held back. Especially by Something Like your cloud. Its a problem. But the ibm cloud is different. Its the most open and secure public cloud for business. It can manage all your apps and data from anywhere. So it can help take on anything, from rebooking flights, on the fly to restocking shelves on demand. Without getting in your way. Time for cramer and stock trading. Maybe there is a victory with j. Powell with the Home Builders for instance Toll Brothers up today and webb bush said its best idea. Horton, ivy is by far the best in this group i think and ivy says listen if you believe in this buy horton. Lets go over again the short rates have not really influenced Mortgage Rates im getting 3. 18 went yesterday to try to adjust it what are you, kidding me looking at the bonds yeah so lets not get all excited but there are people ivy is really good and willing to say maybe you want to buy horton stock has done quite well this year but i also point out that the ceo of Toll Brothers said he wasnt sure about the spring selling season because of, yes coronavirus. Yeah on the material side supply issues . People want to stay home. Ah. Just open houses. Forget it. Yes with the 30 year . David, 30 year versus getting sick you know you get sick, youre most likely going to get better isnt that sagelike . Thank you. Just trying to make a little sense. 3 versus 1. 4 . I dont know go see a house how about tonight okay. I got dollar tree which a lot of people feel i think agree with it could be the bottom in this very tough period. What can i tell you . A work at home situation zendesk. 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Im Carl Quintanilla with sara eisen and david faber live at post 9 of the New York Stock Exchange markets trying to get back what we lost on tuesday in the wake of that emergency rate cut from the fed. Up about 400 points here two big buckets of news. Of course super tuesday the big story along with coronavirus headlines, more news about cancellations, corporate guidance from ge, and campbells and now ism services lets get to rick. Yes, this of course is a very important read february reit, 57. 3. This is a really nice number much better than expected and 57. 3 will take us to the way back machine we have to go back to, hum pretty good. We have to go back to february of 2019 exactly one year one year might not sound like much but do keep in mind on the ism services this particular number, nonmanufacturing, this number series started in 1997. The market one we had earlier that was the lowest ever has only been in existence since march of 2017. We have much more history. Traders are much more comfortable with this number and it did have a nice bounce. Having said that, i see 61 basis points last on twoyear note yields, which means we took out yesterdays 62 basis point load for the cycle and that is significant should it close here, it would be the lowest close since july of 2016 we want to monitor it. 90 was the number for tens on intraday low yesterday six basis points higher gives you some idea of the curve implications going on. Sara, back to you. Rick, thank you lets get to our senior economics reporter Steve Liesman with more reaction steve, it is sort of surreal to see the really good data points coming across when the market is in correction mode and the fed is doing emergency rate cuts let me give you more details. And quickly button up the idea you just had there, sara, which is the idea that the number was very strong. The new orders index at 63 there was a strong number on employment almost all of it was strong. It did say, however, most respondents are concerned about the coronavirus and its supply chain impact we do some of the responses here that come with it from the respondents. The coronavirus has increased lead time for critical items, in the construction business, First Quarter numbers slightly behind. Mostly positive comments right now, which is good and the reason is this if youre going to go into something and have a shock you want to be in the best shape possible, the economy in the best shape possible to with stand it and i think the adp number this morning up 183,000 on the private sector job growth estimate and then this strong number for services. It is a good way if youre going to have to go through Something Like this especially hopefully if its temporary youre going with a strong number our flash cnbc fed survey finding wall street thinking unbalanced the fed on balance the fed rate cuts are positive but wont be enough to address the total economic fallout from the coronavirus a strong 60 majority approving of the fed rate cut 25 disapproving only 32 think it will be somewhat effective but 43 say slightly effective and 23 saying not effective at all. Still, there is another 50 basis points of rate cuts expected from the fed for this year and 35 of respondents think the fed could go to zero in the next 12 months some of the commentary we got, the chief economist at stifel says buckle up yester years low rate environment may seem high stakes compared to the reduced Interest Rate environment on the horizon. Then even after the rate cut the probability of recession in 12 months has surged to 41 the most weve ever seen in the nine years weve been asking this question commentary accompanying the survey was mixed in the assessment of the fed. Joel naroff says they botched both the timing of the move and the messaging. From oxford economics, she writes while not a virus panacea it does provide some support to the economy. Finally, forecasters estimate the coronavirus will shave 0. 6 off growth this year what i find curious though is they think its just a 0. 1 percentage point rebound next year yeah, not exactly a v there. What are the expectations in the market and from economists now about what the fed is going to do next including in that meeting in what, less than two weeks . The last i saw i believe there is a 25 basis point rate cut being built in for the march meeting and if you look at the trajectory both in the market along with this survey, by the end of this cutting cycle they will have done a full percentage point, down a 0. 6, sara. I dont know how long youve been around. I know ive been around long enough to think i dont think id ever have seen this not only just once but then twice getting down to the lower levels in the Single Digits of the fed funds that would be something thanks a pleasure for more on the markets qmas ed campbell is here and, david, youve been one that is worried about the economy even before the coronavirus scare. Do you think these rate cuts will help ease some of the pain . Well, i think its a double edged sword. What was interesting yesterday with that aggressive rate cut was the near 4 decline in bank stocks so, you know, the temptation is to say, well, this is going to help Risk Appetite this will help the Home Builders you saw the great numbers on mortgage applications. But it is definitely not good news for the banks any more than the ultra low rates have been good for the banks in europe i refuse to believe you can have a healthy economy if you dont have a healthy banking system. The lower rates will help some parts of the economy but my big concern at these low levels is it will hurt other parts of the economy and comes out as a wash. Whafrjts what do you guys think i think the rate cuts are necessary but insufficient theyre not going to fix Global Supply chains. Theyre not going to get scared consumers to venture out into sporting events. I do think theyll help Market Sentiment on the margin and keep credit flowing to the degree that we have broader fall out from the virus and it causes demand destruction, i think it will help support the recovery once we kind of get past the worst in terms of net new cases. I think it is something that has to be done but is not going to fix our problems as for the rally today, up 400 points on the dow. I mean, clearly. The talk is biden and the boost of the moderate candidate into frontrunner status. Do you see this as any sort of lasting help we have a cross current we have the push and pull of the negative impact of the virus and the positive impact of the policy response were seeing not just in the u. S. But around the world. As you mentioned biden had a lad russlike reemergens on super tuesday and this decreases the possibility that a democratic nominee is going to be a socialist and all of the negative policies associated with that. I think that is definitely helping today. What would you buy on that . I wouldnt buy solely on that, no i do think the whole situation is generating a buying opportunity but i dont think weve seen the maximum drawdowns as of yet. We could see another 7 down turn. From here just associated with the rising probability of the Global Pandemic pushing the Global Economy into recession i think we cant discount that so i think there is more down side here. Where are you, david, on the equity market . I think you want to focus on the best leading indicator that there is which is the long bond yield. The treasury market is telling you if were not going into an outright recession we are certainly going into a Significant Growth turndown and in a period of course alongside that where the uncertainty around the earnings outlook is as wide as its been at any time during the 11year Recovery Period and when you are buying equities youre buying the earnings outlook. I think we are in a bog right now. I think recession risks are on the rise that is negative i think the heightened period of uncertainty is not going to go away any time soon thats a negative for the pe multiple so i think that, you know, well be stuck with a lot volatility and the overall market will still be vulnerable more to the down side and your best bets are going to be in areas of the market where the dividend is safe and youre in areas of the market that are noncyclical. David, how far away is recession from your base case right now . I think it could start as early as next quarter. I know theres a lot of excitement over adp but i dont know why youd be focused on those, and todays ism we have the university of Michigan Consumer Sentiment Index on friday and it was just fine february numbers, considering the stock market didnt peak until the middle of the month, these are all yesterdays numbers. I think Going Forward well be seeing significant weakness in the economy starting next month i think and until we get some semblance of stability on the coronavirus situation, i think that the risk that youll have the Consumer Sector follow last years manufacturing recession and hunkering down Savings Rates go up. I think the general outlook for the next few quarters will be very weak. So you guys are both kind of a gloomy pair here what is an investor to do if you expect another what, 5 to 7 you said down on the market . Where do you hide out . Where do you allocate . So, i mean, bonds and gold have been very effective as a crisis hedge here. I think you want to be nibbling in stocks. Youre not going to call the bottom exactly so putting money to work on weakness does make sense. I think if we do experience a recession it is more likely to be a technical recession than a true recession so the economy could come roaring back here when the threat of the virus passes and given all the stimulus weve put in place. Where are you nibbling, certain sectors . Really broad market exposure. I would say s p 500. All right well, were bouncing today up 454 on the dow ed and david, thank you both thank you thank you spoke earlier this morning to a longtime activist and Value Investor, founder of value act, the Large Hedge Fund that with its many billions of dollars of course taking large positions in Many Companies and forced some change here. He was here to discuss a new investment that is now going to be a company that is going to be making trucks and Hydrogen Cell fuel stops and has a very interesting Business Model well discuss it in the next hour i did take the opportunity of course to ask him his thoughts on the new rate environment if you want to call it that and what has been a long term trend of course of lower rates and what that does for somebody who ostensibly is a Value Investor we have gone to the longest duration asset and priced it as if it is always going to be this way. Its been going on for five or ten years. It is kind of the death of Value Investing to a certain extent because the world becomes kind of valuation agnostic. And once you kind of lose your connection to Intrinsic Value and what is Intrinsic Value if terminal value is discounted back at 1 right right once you lose that you kind of as a Value Investor with a bunch of baggage you kind of lose your bearings very interesting point of course particularly in a market, sara, in which you could point to certain securities and say they are quite cheap, bob pisani making the points earlier about the banks where multiple points have come out of the stocks in a matter of weeks or energy or any number of other areas and yet his question is if i buy something at what seems to be a very cheap multiple to ebitda is anybody going to be there to buy it from me at a higher multiple . Value investing over the last ten years has been a very difficult endeavor at least in terms of trying to keep up with the overall move in the s p 500. I think of the banks as well. Theyre still in citigroup, right . They are. Theyre in a number of finance institutions he no longer runs the main portfolio. His focus has been on esg which is the reason for discussion this morning again back to this company but it was interesting i think as a thought from him in terms of something we might not connect necessarily to the bond yield of 0. 99. Everyone says as soon as the fixed income as soon as yields go back up maybe value will have its moment to shine. How many times have we heard that many. The same thing we hear at the beginning of every year this is the year yields will move higher only to find bond markets have skyrocketed once again crazy breaking news in the race for president. Reporter were just getting news that Mike Bloomberg is suspending his campaign for the democratic nomination for president. Certainly something that was expected to happen after a disappointing super tuesday by the former new york city mayor where he only won American Samoa and picked up a few delegates in texas. His whole strategy had centered on super tuesday, which we saw a shocking sweep of states from massachusetts through the midwest and across to texas go to joe biden the former Vice President that brought his campaign back from the brink the current nbc news delegate count sees biden at 453 delegates leading senator Bernie Sanders by 80. Elizabeth warren has 39 coming in third in her home state and nbc news reports that warren is speaking with her Campaign Today to reassess its path forward Michael Bloomberg picked up a single victory in American Samoa and also a few delegates in texas. Biden spoke in los angeles last night as the results were coming in it is safe to say he was triumphant just a few days ago the press and the pundits declared the campaign dead and then came South Carolina and they had something to say about it and were told, well, when it got to super tuesday it would be over well, it may be over for the other guy maybe for bloomberg but not so fast for sanders. Maine is currently too close to call and sanders leads in california, the most delegate rich state, which is still too early to call with just half the votes counted. Mike bloomberg is close to the threshold that would award him a chunk of californias delegates but with his new decision to suspend the campaign it is unclear where those delegates would go the Bloomberg Campaign plea of yously sought to turn its attention to michigan and florida and where he had polled more favorably the Campaign Manager Kevin Sheekey said last night bloomberg would either be the nominee or the most important person to that nominee and after super tuesday its looking like the latter guys it also looks like he is picking his person in a statement saying that he is endorsing biden and that he will, quote, work to make him the next president of the United States which is interesting, that he is not waiting to see ultimately who the democratic nominee for president is at this point no, and it will be interesting, sara, to see how quickly the funds transfer from the Bloomberg Bank account straight to the Biden Campaign with all of the bloomberg ads up until this point seeking to paint the former Vice President as someone who is not fit for office and trying to paint bloomberg himself as the one that was closer to former president barack obama clearly the messaging will have to change pretty rapidly as he seeks to reassess his support and to change the messaging there to divert that funding all of that support, that half billion dollars he has spent so far he said he could spend up to a billion dollars or even more to defeat President Trump, so well see exactly when that money hits the coffers for biden. Elizabeth warren was the talk of this desk when she was the leader in many polls obviously before the primaries began do we expect a similar move by the Warren Campaign . We do, david. I think it is safe to say a third place finish in your home state is not what you need to engender confidence among an electorate that you have electability in this race. Certainly an announcement from warren would not be surprising at this point given that performance and when i talked to strategists about where warrens downfall was they really point to early november after sustaining various attacks throughout the fall about how she would pay for all of the plans she put forward, it was in early november that she put some of the pay fors out and people felt like she was being a little disingenuous about where the money was coming from and exactly how much these would cost that was really where the polls started cratering for her and where some of the support for these other candidates picked up that home state calculus was clearly part of klobuchars decision to get out of the race and well see if sanders changes his take on a plurality of delegates going into the convention after taking a stand on it so far thank you. Watching bloombergs exit for now from the president ial contest. In the meantime, stocks not far from session highs up 617. Were back to 3065 on the s p. It comes as the dow is already having a rollercoaster ride in just the past two days on monday as you remember, the dow soared nearly 1300 points but then yesterdays selloff saw it plummet 785 joining us this morning is former Goldman Sachs Asset Management chair, jim, good morning. Good to have you back. Good morning. How are you distilling the various dynamics in the market right now whether super tuesday politics, fed stance, the overall corporate response to the virus . I guess my honest answer is im glad im not in it anymore as a professional daily thing. I have no idea what i would be trying to say in an attempt to sound vaguely coherent and of use to anybody it is even by the standards of a business which is very difficult and tricky this is particularly complex. I think it comes at a time where the World Economy was challenged anymore. And markets particularly in the u. S. Not exactly cheap so youre trying to make the better, seemingly never ending fed larges versus additional by any challenge of my professional lifetime, an extremely unpredictable one Going Forward. Its tough a lot of people knew you, jim, for your china calls and optimism over the years on the chinese economy. Yes we just got pmis, manufacturing numbers that are record lows for china and hong kong how fast do you think itll take those economies to bounce back so not with standing what i just said, and partly because of the world i was involved in, peculiarly the biotic review i led for cameron i have been immersed by examining daily numbers for the province in china the last few weeks and actually it looks to me not with standing the major mistakes they probably made at the turn of the calendar year, it looks to me like the chinese have got it under control. Certainly outside of hubei and according to every bit of intelligence ive got theyre letting the economy restart, so i think the real value of those numbers you highlighted are that they probably symbolize the absolute bottom of this staggering february collapse of the chinese economy. At least i hope thats the case, because if not, the worlds got a lot of problems, because essentially it implies that chinas dropped by half its size in one month, which we see anecdotes of all over the world. But i think the markets were at least right to vaguely explore that might be very temporary obviously it now depends on the go on im sorry. I was just going to say even if we reached the bottom there in terms of the numbers, which were dismal, as you noted, i think one question were trying to figure out is how fast can activity rebound there can they just get back to 6 growth rates or is this going to look different than a v well, as i tried to remind somebody yesterday and again i emphasize, im not in this world in the same intensity that i used to be but if you take your mind back to 2008 to 2010, by relatively early 2010 the chinese were actually tightening policy because theyd over stimulated so much in 2008. The economy was probably growing for a brief period by Something Like 13 , 14 . So the idea that once china starts turning up it cant really get back to six, i think, is probably the last thing that i would worry about right now. The bigger question is, whether by opening up peoples movements again they can still show the numbers theyve been showing in keeping this thing under control the past fort night and what it means more broadly for the dynamic between the governments and people but i wouldnt be worrying about the likelihood of them getting back to 6 if the chinese feel confident enough and are prepared to use fiscal policy especially enough, i think they certainly for a period could do that weve asked lots of questions about the medium to long term, about how much growth is borrowed, questions about debts and so on, but i think the really important thing is whether they can pull off this trick of letting things start going again without causing a fresh acceleration in the incidence of this really troubling infection. We are seeing stimulus packages get developed in hong kong obviously china, south korea, the uk is working on emergency loans for businesses and yet here the president according to a lot of reports balking at major stimulus how much pressure should be on the white house and not Just Congress well, i personally have to say, what you didnt touch on was yesterdays fed rate cut i am surprised that the fed did that i think whatever the messaging and the sort of general statement of were here to help everybody, i think tactically it was surprisingly quick what happens if the u. S. Follows the path of other countries and the rate of incidence continues to rise for another couple of weeks . Whatever the long term consequence. You know, the fed has already deployed a couple of bullets im in that camp that agrees with many others that this is a supply shock its not obvious to me if you have to deliberately close your economy down in some form what cutting Interest Rates will actually do. So i think exploring the ideas of providing some kind of loan support or loan extension and carefully thought out fiscal initiatives are likely to be much more warranted than fooling around with Monetary Policy in my view. I mean, the flip side is the easing helps cushion the effect on asset prices and liquidity and on financial conditions and without it those all would have been tighter i, you know, im somebody that helped preside over the creation of one of the First Financial conditions indices over 20 odd years ago so im saying what i said fully aware of the importance of financial conditions, but, you know, the u. S. Cant get itself into a position where it cant avoid any tightening of financial conditions ever. Because thats just sort of unrealistic. And, more importantly, when you look at the broader issues that are so relevant for the world in the 2020s about the equality of growth and the actual and perceptions of it, the idea that we constantly do surpass it markets which does mean in some places the beneficiaries of capitalism continue to be those that happen to own a lot of financial assets, has its own set of issues, too, that arent going to go away simply because of this. So certainly i would be hoping in the uk and in europe the more active response to this is probably going to be more fiscal than monetary. In addition to the important thing you did raise in making sure that the liquidity is there to make sure markets function. Jim, thanks for the time and the guidance well talk to you soon thanks for having me on good luck, guys. Lets get to washington, d. C. With the news alert. Reporter hi, sara. The treasury secretary stopped and spoke with reporters before heading into a hearing here on capitol hill he said that he was on the phone with the imf this morning to talk about the response to the outbreak and the impact on the economy. He does not believe there will be a longterm impact from the coronavirus but obviously that there could be some short term damage he said he does support the feds rate cut for most americans who are healthy, even if they get this virus, they will be fine and were taking an all of government approach. I think the feds action yesterday was very precautionary and the right thing to do. So were taking a whole of government approach. Reporter now, because the treasury secretary is here testifying, he is not at the white house for that meeting with the airline ceos on the response to the outbreak, though he did say that he believes that americans should feel safe in flying and that he is not changing any of his plans. Id be very comfortable getting on a commercial plane today if i were personally traveling so i havent curtailed any travel other than for being in washington, d. C. Focused on the Task Force Reporter mnuchin also highlighted the white houses move to expand testing and expand the availability of testing kits guys, i am assuming hell get a lot of tough questions about that during this hearing back over to you again, stubbornly resistant would you say, in the idea of rolling back tariffs on china imports . Yeah, we did not ask him about that directly this morning, but yesterday when he was asked about that he said there were no plans to do that that was not on the table. Is there a lot of criticism from members of congress on the delay in testing kits . Why peope u. S. Are not being tested when there is thought to be a rising number of cases . Reporter yeah, absolutely. The thing that were hearing from the hill and from members is that this is very much a Public Health emergency and thats where their focus is. So the administrations response, the lack of testing kits, what they say is a lack of communication is why youre seeing more white house officials coming to the hill on a regular basis. Vice president pence is going to come to capitol hill this afternoon again after being here yesterday to talk to members what theyre telling me is theyre not really worried about the stock market slides or the volatility in the stock markets. They are focused on this right now is a a Public Health crisis. They are still putting the final touches on the emergency aid bill we expect to be released sometime today and trying to get that out of the door by the end of this week even as mcconnell works on contingencies for capitol hill itself thank you. David . Ges Investor Outlook day was today. They had a call not long ago that wrapped up the company saying at this moment they expect coronavirus to only impact First Quarter numbers reiterating full year 2020 guidance to 50, 60 cents a share. Company Ceo Larry Culp joins us right now. Nice to have you here. Lets start off on the subject we cant get away from which is the virus. You have fairly decent insight into china on both sides actually what are you hearing and seeing there . What are your expectations obviously knowing clarity is very hard to come by right very much the case thanks for having me on this morning. We wrapped up about an hour ago and as you would imagine this was a topic of some interest i think what we tried to share with everyone on the call is that our focus with respect to coronavirus, first and foremost, is the health and safety of our team we have 18,000 people in china many of them in our Health Care Business obviously this has become a more global phenomena we are fully focused on everything from personal hygiene to smart travel restrictions that we are taking care of our team it is particularly important to us in china where our Health Care Team are really very much on the front line, helping Health Care Providers operate our ct scanners for example which are really part of the first line of defense there. I would say with respect to operations were trying to stay very close to customers, be it health care, aviation, and otherwise as we bring our facilities back online other than those handful of facilities we have in Hubei Province, our facilities are up and operating. Not all of them are yet at a hundred percent of capacity. That ramp continues and literally is a day by day effort as folks come back to work in addition to what were doing with our facilities, were clearly working with our suppliers as they go through a similar process. So it is particularly tactical it is fluid. I think were making progress relative to the getting back to business in china. What we said on our call, david, is we see some Free Cash Flow pressure here in the First Quarter probably in the three to 500 million range two to 3 million worth of operating pressure but we didnt take a view with respect to the rest of the year what we dont know clearly outweighs what we do know but well take it. We think the footprint ge enjoys and the agility should help us weather the storm however it plays out. Speaking of progress of course investors believe youve made a lot of it since you took over we havent spoken on television since we talked in the fall of 2018 right at the time i asked you about power. It was very much an uncertain area similar in some ways to what were seeing now. Do you feel like fast forwarding a year almost that this is the inflection year for your power business well, ironically 17 months in the job this week. Not that im counting but at times it feels like its been much longer. That said, i thought our two power ceos did a really good job on the call today walking through what they did in 2019, how theyve entered 2020 with an eye toward being smarter about what we sign up for in terms of new business, how were executing both in our factories and in the field, whether were installing a new piece of equipment or servicing it, and what that really will allow us to do over time with respect to driving better margins and better cash performance in those businesses now, this will be another year where were not putting out positive cash flow in that business but the trend very much i think is moving in the right direction. I think we have dealt with some of the legacy issues well while really laying in good operating improvements, which i think investors will see increasingly in the years to come a great, challenging job in 17 months, you have a gigantic Aviation Business that is the jewel not just of your company but i think of the world and yet you have a max overhang that is going to make it so it is very difficult for you to forget what is going to happen are you confident were going to see some sort of 737 in the air by the end of this year . 737 max . Well, im going to tuck in behind my customer and good friend dave calhoun on this topic, right boeing i think has been chrystal clear that the regulators are going to shape the timing of the return to service. All of us are working to support boeing and the faa as best we can in that regard i dont think i have a different view than dave expressed relative to a mid year return to service. I think some of the uncertainty for us has been addressed, though we shared on the call this morning that we, through our cfm joint venture with saffron, have reached an agreement with boeing with respect to payment for the engines on the parked aircraft that were built last year as well as the engines that will be delivered to boeing as they ramp you have 19 parked yourself well, the you own some planes we do within our gcash unit. Im really referring to the planes built in 2019 that gives us an opportunity to catch up and be paid during the course of this year for the engines we delivered thatll be a good thing at a time of some volatility to assure folks with respect to our cash position. Lets talk about demand for a second even during the period of this turmoil, many planes are not filled are you worried about the economic consequences in terms of the customers well, we certainly see that happening particularly in the asia pacific region. On the call, we didnt change our outlook for the quarter or the year but acknowledged that three to 500 million of Free Cash Flow pressure coming largely from aviation in no small part because of what we are seeing in reduced flying hours in that part of the world. Well see how the rest of the year plays out but that is certainly something were keeping a careful eye on over all at the company you have been taking costs out trying to focus to a certain extent on margin in many of these businesses, not just power but many others. The well known analyst this week actually upgraded the stock and raised the price target. I did want you to respond to something. He says your Gross Margins remain sector low by about 1700 basis points versus the pure average, a metric that is hard to move the needle on regardless and that you would have to be in the top 20 of total s p 500 companies on gross margin Free Cash Flow conversion to hit the numbers that many people have out there for you. How do you respond to that well, i think there is a lot of news that came out on monday. I havent had time to comb through that obviously we were hit early monday with the sad news of jack welchs passing. And obviously our thoughts and condolences go out to suzy and the family in that regard. But i think with respect to our path Going Forward, david, i think we feel very good about the opportunit invest in technology you see a refreshed aviation portfolio. Certainly both in power and renewables, new products coming online, were investing aggressively in the Digital Space at health care that coupled with better cost controls in our businesses, be it in our factories, be it in our design laboratories as well as in our Field Service organizations. Corporate expenses, too youve taken massive cuts, havent you . We have you put that all together and we think we have an opportunity to expand margins relative to our peer set, deliver better than average cash relative to our peer set, as we look forward so were hyperfocused on delivering better performance both for our customers and our investors. Thatll play out where are you on that journey 17 months in its early. Its still early. David, a lot of what i see day to day when im with the businesses really isnt yet evident in the financials that we highlighted today and that we put out in late january. We talk about the upgrades to the team carolina, our new cfo started this week. A number of new leaders in our Renewables Segment are really just getting their bearings. We talk about implementation of lien, what i grew up learning from toyota has tremendous application in all aspects of ge but, again, very early at best i would argue it is probably the second inning of a multiyear transformation that is under way at the company. I can get very excited about that because not only do i see the potential but i see the team broadly, not the people who report to me or the top 20 or 30 but deep throughout the organization around the world really seeing the opportunities for us to build and growth great company. Okay. So, larry, lets look at power i dont like your power business i think its out of you do gas turbine. Thats fine for now. Nuclear, well you have a couple orders your renewable also. Onshore wind youre good but the world is going offshore which you dont have a prototype. I say to myself if i were larry culp id try to get that business together and get rid of it i know you got a lot of people that work there and dont want to hear that but, larry, that is a business whose time has come and gone well, as you point out, jim, lots of different moving pieces within both power and renewables i think if you look at our power business its largely a gas Business Today eh. It is just in terms of size. Im saying the aps and dominions. Our utilization, jim, with respect to the use of our installed base in gas was up 2. 5 last year, right . Service, service, service but that is utilization of those turbines and utilization as part of the Energy Transition there is no better way to transition from other sources than to gas today. Right . Renewables cant pick up all of that capacity. Theres no more fuel better positioned than gas to run along side renewables be it solar or wind so we think that if you look at that data that we see in our installed base today, we look at the shape of the Energy Transition broadly these businesses have a role to play our wind business, our offshore wind business, you say it is a prototype. Right that is out performing our expectations in rotterdam as we speak. That is a multi year effort. But were well positioned in onshore and offshore weve got a couple businesses we need to fix. I thought the ceo of that business did a phenomenal job this morning laying out he is playing a number of different hands. He was more, in 2016, was pretty bullish didnt hit the numbers well, i wasnt here in 2016 okay. But partnering with jerome in 2020 i feel good that he and the team, all of us are going to get after it im obviously playing devils advocate because you can be number one in every business, larry. That is the toughest one to be number one in in your portfolio. Finally, the portfolio overall. You made it clear you are in the second inning is what you said but there are those who still look at ge, Health Care Business from which youve made significant investments. Obviously the engine business. And power. And say they dont belong together eventually he is going to separate them and do even more with this portfolio. What is your response . Well, i would say, david, that as we continue to make progress on reducing the leverage at the Company Overall and we made a lot of progress last year, were on the verge here of closing trying to get to like two and a half times two and a half times on the industrial side and well get a 20 billion check here soon when we close the biopharma transaction. That puts us in a very good position in that regard. That deleveraging coupled with the operating improvements that weve been talking about i think position us with all of our businesses to create tremendous value at ge. In what form, what shape that might take, well have a lot more options down the road with a strong Balance Sheet and better operating performance than we might enjoy today. Well see how that plays out i will try not to use the word never very often but were going to create value and optionality for us as we continue to tend to these issues and seize the opportunities inherent in our markets. All right we look forward to staying in touch with you along the way im willing to say congratulations. You are yes i am. 17 months and i say, yes congratulations. Dont shake hands no. Sorry. Larry culp, thank you we certainly appreciate you taking some time my pleasure thank you. Chairman and ceo of ge. Sara, back to you. Thank you as we head to break look at the top stocks on the dow right now which is up more than 450 points United Health by far biggest winner thats been one of the politically sensitive stocks on the biden win from super tuesday. Up 9. 5 . More on the sandertangs ki the number two spot. More squawk on the street when we come right back we see harnessing natural gas unleashing the promise of clean energy. At emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Danafarber Cancer Institute discovered the pdl1 pathway. Pdl1. They changed how the world fights cancer. 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Their tools make trading quicker and simpler so you can take on the markets with confidence. Dont get mad get e trade and start Trading Commission free today. With fear creeping into this market is it time for investors to get defensive find out on tradingnation. Cnbc. Com more squawk on the street coming up. I cant believe it. That chad really was raised by wolves . Which one is your mother . Thats her right there. Oh, gosh. No, i cant believe how easy it was to save hundreds of dollars on my Car Insurance with geico. Its really great. Well, im just so glad to have met your beautiful family. And we better be sitting down now. Believe it geico could save you fifteen percent or more on Car Insurance. Stocks are up about 1. 5 right now. Lets check in on the latest on coronavirus back at hq meg . Hi, sara. New york Governor Cuomo holding a News Conference this morning announcing an additional four cases of covid 19 connected to the 50yearold attorney in Westchester County his wife, daughter, son, and neighbor who drove him to the hospital have all tested positive as well thats as worldwide concerns are mounting about a shortage of personal protective equipment endangering health care workers. The World Health Organization making a call for manufacturers and governments to increase production by 40 to meet rising global demand. Exacerbated they say by panic buying, hoarding, and misuse and today more Drug Companies are jumping in the race for medicines developing potential treatments derived from blood plasma of those who recovered. And new drugs are being developed as well. Guys thank you very thank you verg tirrell. Lets get to Rick Santellis special edition of the santelli exchange. Thank you very much i would like to welcome jeanclaude. Let me ask you one question. I dont like negative rates. Japan has them, you have them, the u. S. Doesnt have them my question to you is the u. S. Central bank efficiently using the amount of ezs it has left if it has no intention to go below the zero bound, in your opinion . With regards to the negative, rates, of course, Everybody Knows if we had negative rates in europe, its because we had not on the crisis which came out of the Lehman Brothers bankruptcy but also our special sub rate risk crisis so we had a very, very peculiar development. And that is why we were and still are in negative rates. Would i not suggest for the United States to embark on that and i would suggest to utilize other means which have their own drawbacks, even if theyre fully justified in the case of europe, it seems to me mr. True shea, do you think its unreasonable for any central bank to hold levels that the rest of the yield curve seems to be sliding past just to hold the Pressure Point to keep from going close to the zero bounds there may be curved disportions but is that a big or small price to pay for avoiding the zero bound . Again, it seems to me, of course, the Central Banks have to do what is appropriate in the circumstances. At the present level frankly speaking, i am not sure we have the equivalent of what we had with Lehman Brothers bankruptcy and absolute drama of immediate and grave threat of depression, not recession, but depression. So it was very special, and in those circumstances, again, the present one i mean, i am not sure that we should go in the u. S. Zerozero it would call, of course, for having some view on what should be or could be done right now. I am not sure it would be very good to utilize right now all of the cartridges the central bank has. And from that standpoint im not encouraged at all by the successive call from the president , from the chief of the executive for a decrease of rates and be unhappy with the decrease of rates when they arrive it does not facilitate the task of the fed and i guess the fed could say more or less like the eathole general, youre not facilitating my life. And youre not facilitating my own authority. The feds credibility and independence is absolutely fundamental in this present circumstances. Excellent one final thought, we will stretch it out here, the dollar. I see many of my sources think g7 does not like the strong dollar and part of their message of not addressing more liquidity was really a notion if the u. S. Coordinated lower, the dollar would weaken, easing some of the pressures for some of the emerging markets and high demand for dollars to satisfy liabilities. Do you think the stronger dow, even at weaker levels, will be an ongoing problem for emerging markets and much of the globe . Well, first of all, im not sure that the dollar is that strong at the moment and speaking second, let me say that you mentioned the g7 i am struck by the fact we have a global crisis, coronavirus is a global thing it is impacting, of course, enormously emerging economies, including asian emerging economy, started there so im a little bit annoyed that we dont hear the g20 at all we dont hear the coralation not even between the g7 miss but all i would say systemic economies in the world, including the emerging economies to tackle the coronavirus, you need a global strategy, not on the strategy restricted to the advanced economy and concentrating on central bank and on markets its a global issue. Jeanclaude trichet, we have to leave it there. I thank you for your time. A lot going on in the market today. Thank you. Sarah, back to you i will send it to phil lebeau in washington with the ceos meeting at the white house. The ceos just arrive. The meeting starts in a few minutes. This meeting is about the ability of the airlines to trace contents of passengers as they try to contain the avenatti outbreak we also had a chance to talk with the ceo end zone abos, a, to travel now and b, so many are told not to go on the road heres what they had to say. Coming from someone like me, no one will listen but, yes, we have to get those facts out to other people. As people again change their travel plans and it obviously has an impact on demand. Were prepared for that. Thats fine. Well live through that. Its not true economic demand. Thats again related to a shortterm situation we will deal with shortterm situations doug parker and oscar munoz a few minutes ago. They are now signed the white house. That meeting with the Coronavirus Task force starts in about five minutes back to you. Phil, thank you the head of the International Monetary fund, Chris Lena Gore gavia saying Global Growth from coronavirus will take a hit. Listen. We are faced with a generalized weakening demand and that goes towards confidence and proper channels including threaten tourism, commodity prices, financial conditions they call for an additional policy response to support demand and ensure an adequate supply of credit. She went on to say that growth in 2020 will be less than growth in 2019 that was about 2. 9 . We have a first on cnbc interview with her in the next hour on squawk alley, so we can ask her to elaborate on what she sees happening with growth, not just the supply chain but demand side as well. They also have a pretty good feel for whats going on in china. Im eager to get an update on the situation on the ground. Some of the headlines on the tape regarding chinas production pretty encouraging, you can hope did they cancel the meeting . Its coming up in early april and its an International Gathering of financial ministers and central ministers and, yes, theyre canceling it. Starbucks, annual meeting, virtual. Targets investor day, virtual. There are a few im curious about. I wont mention them publicly. A big one in may we will see as well. With International Folks . A lot of international arrivals, yeah you would imagine one particularly in l. A. You guys probably know. Yeah, yeah. What do you have coming up, speaking of whats coming up, on closing bell the ceo of campbell soup, the stock is on a tear, last i checked it was up 8 mark clouse will join us with his strategy this is a turnaround story and it is starting to see real results. They actually upped irthis guidance today they saw sales growth for a change not much, 1 or so but its also been an interesting coronavirus play because people stock up on canned soup. They did stock up 7 1 2 . Interesting move for campbell. Very different from kraft, which we pointed out many times, beyond karinia and benefits, they have taken substantive moves to improve the best. They also have snacks, snyders pretzels and kettle chips and that thats helped insulate them from some of the problems at kraft. They also had a turnaround in place that resonated with investors and new ceo that has done that as well, mark clouse, who has come out and spoken unlike what we have gotten from pet craft. Let get a sector sort with don at hg. Lets look at whats happening now. Were in halle move to close out the week it is being led by an interesting slate of Sectors Health care, yes, very big focus on the heels of super tuesdays primary results. Its followed up by really not the big defense sectors but utilities, Consumer Staples are the second, third and fourth best sectors helping to power the leadership positions to the s p. They are currently, by the way, the only two sectors positive in 2020 so far. So they will be a key foghous as Interest Rate hovers at or near record lows. Just only comments of the imf directing manager, that slowing growth may be powering some of those particular moves keep an eye on those folks i will send it back downtown to you folks at the New York Stock Exchange. Dom, thank you very much. Good morning, its 11 00 a. M. At the federal reserve,11