Transcripts For CNBC Worldwide 20240704

What italy did to the Banking Sector that would make Elizabeth Warren smile it is tuesday, august 8th, 2023 you are watching Worldwide Exchange here on cnbc good morning welcome to Worldwide Exchange. Im frank holland. We kickoff the hour with the u. S. Stock futures with the higher session for wall street and the dows best day since june the futures are in the red across the board right now, the dow would open up 80 points lower. It is early. Also seeing the nasdaq hardest hit down. 30 . We are looking at the bond market ahead of the busy week for fixed income with 100 billion in longterm issuance over the next four days. Yields here with the 10year treasury at 4. 01 this is down from where it closed just about a week ago we are seeing a steady decline after the fitch downgrade where yields spiked up 2year treasury at 4. 764 the yield on the short end is something we continue to watch with the bond issuance we will talk to our guest later on in the show the Energy Market and wti at 81. 15 similar for brent crude down 1 . Natural gas with a lot of movement yesterday and today is flat time to check on the corporate stories with silvana henao. Silvana. Another batch of data from china. Falling deeper than expected in july for exports and imports that is all over fears of the lack of growth in the economy. The sharpest drop since 2020 imports fell 12 for the biggest drop since january moodys is placing a Credit Rating review on six major u. S. Banks. Saying they are on the edge of a possible downgrade like u. S. Bank and bank of new york mellon they are cutting the rates from several lenders warning the credit will likely be tested by funding risk among the names, m t and pinnacle and bach financial. The data regulator is gathering information on snapchat to see if it is doing enough to remove underage users. If they are in violation of the rules, it could face a fine up to 4 of the annual global revenue which would with each wall 1 184 million frank. Now looking at futures. Pointing to a lower open with key inflation data this week acknoan the final stretch of the latest information this week. It has led to 53. 5 billion losses in july and 175 billion losses this year this is adding to the names like coinbase and nvidia. Those are the least profitable short sales of the month lets talk about this with the partner at the wall Street Alliance group. Great to be with you, frank we will show you 53. 5 billion in july. Short covering is a factor in the market it is one factor do you see short coverings continuing to the upside or down si side that is one of the phenomena happens when people have a fear of missing out on the market we do think in the short term the market is poised for correction september is the weakest month of the year in the stock market. The s p has had the best first seven months of the year since 1997 a correction is in the cards. We have a big week for bond issuance starting today. The 3, 10 and 30year auctions the 3year yield 4. 4 a lot of competition for the equity markets how do you see the bond issuance impacting the markets . We have clients that are making use of the cash and taking advantage of the bond yields if you take a longer term point of view, we think there is plenty of opportunities in the equity markets right now which will outperform the bonds in the long term. We are looking at sectors which have not participated in the rally so far. Which ones . The one stock we like is home depot. It did really well during the pandemic because we were trapped in our homes and wanted to make upgrades since then, the demanded has subsided people have to upgrade their existing homes which will benefit home depot. That is specialty retail. Any other areas you see opportunity . These high quality momentum names which have run up a lot. We will look at those as a pullback as well apple and meta the street was disappointed with iphone sales declining we are saw the Service Business do well and the growth margins are almost double of the Product Division we are constructive on apple as well. 8 growth on the Services Business of the decline business 20 declines on the devices. You are seeing shares down 6. 5 in last two days since the Company Reported earnings. Are you worried this might be a story where valuations are just too high and yields are rising and showing cracks in the rally . We would be looking to add positions as the stock declines further. We think apple yes. Meta as well . Yes. What about the other high valuation names . Nvidia maybe palantir . We have it in our portfolio we like that as well that has run up a bit. We will wait more on that. Meta you spoke about meta they had a phenomenal year the year has not only been great about cutting costs, but transitioned away from a. I. To boost ad revenue we think that is phenomenal for the company. You are seeing opportunities in the mega cap tech names which powered the rally. Are you seeing pullback with the buying opportunity you dont think the bond issuance is an issue for the stocks or market in general . We think it is shortterm opportunities. The fed waged a war against the 40year inflation and it is clear the fed has won this war inflation has come down from 9 to 3 . The economy is still doing fine. I would ask what is the catalyst for the pullback. You think there is not a rate hike we have cpi coming up. Is that the catalyst for the pull we withthink a lot is due to fatigue. The cpi and ppi shows inflation cooling off, that in the long term will be good, because that means the fed is done. If it doesnt that could be one. A lot going on. Glad to have you here. Thank you very much. A lot more to come on Worldwide Exchange, including the one word investors have to know today. First, europe opening deep in the red why bank shares are painting a rough picture this morning a live report from london coming up. Later, getting set for the u. P. S. On the heels of the tentative agreement avoiding what could have been a devastating strike for the u. S. Economy. And the a. I. Is not a problem at all look at that chart we have a very busy hour when Worldwide Exchange returns stay with us let Innovation Refunds help with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy. I run a wax museum. Let Innovation Refunds help you get started on your erc tax refund. Stop waiting. Go to innovationrefunds. Com you really got the brows. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Welcome back to Worldwide Exchange. Futures in the u. S. Pointing to a lower open, but europe is leading the way to the downside. Arabile gumede is in the london newsroom with more arabile, good morning. Good morning, frank it has been a day of big movers. We got news out of europe, particularly from italy. That government has decided to put in a 40 windfall tax on the excess profits made out of the banks which would hurt a lot of the indices. We have seen a pullback in the stocks across europe that has now continued across the board. Around. 30 down was the stoxx 600. That market is retreat territory. 40 weaker for the ftse 100 which is taking in news from glencore earnings. They are still on the hunt for acquisitions although you find the ebitda has fallen 30 last year that figure is not actually coming through a quick look at sectors here it will be the banks which have, as i said, pointed toward that windfall tax and that is hitting them substantially. 30 weaker. And the banks taking on the china story. We have the cpi print from the u. S. As well as numbers from china tomorrow a quick look at the stocks gainers and losers this is packed with the banks as you can see. 8. 5 down after the earnings came out today b banco down. 80 . Negativity coming through today and all of that from the banks, frank. Arabile, thank you very much. Arabile gumede live in the london newsroom. Moving to earnings as u. P. S. Is gearing up to report Second Quarter numbers. Any comments from management on the cost of the new Labor Agreement with the Teamsters Union reached before the deadline last month. Jo joining me is david bernstein. Good morning good morning, frank. Estimates are for eps to decline 24 year over year what do you expect and what is your rating and price target for u. P. S. We are expecting a weaker print for q2 here. The price target is 224 range. We took it up last week. Expecting the company when they provide not only the outlook for the full year, but more earnings on detail which is what the labor contract will cost means it will be lower than the bearish intterprinterpretation you will look at 2023 and moving past peak inflation and you should see multiyear period. This is a company that trades on margins for the u. S. He ecommerce business u. P. S. Is vocal about cutting costs and sweat assets what do you expect when it comes to margin, but when it comes to volume you continue to see the Consumer Spend and a shift from Services Back to goods. So, im not sure we will see that yet in this quarter for u. P. S. I think volumes are under pressure with the weaker economy and also because of the boo bookings shippers saw that deadline without a deal and they may have started to push volume away from u. P. S. This may start to creep back i think that the overall volume will be challenging for the macro. On the margin side, we are in the mid 10s. We think that more importantly the story will be about the setup from 2023 to 2024. The company is giving us a new target the early part of next year to put it in context, 10 margin is good for the ground industry for u. P. S. As they searchi for the double digit contracts. And this is important to note that the teamsters have not ratified the new deal yet. How do you see this impacting eps for the next few quarters . It has been clear this was going to be a loud deal and late deal and winwinwin for labor and company and shareholders you will not hear anything from the prepackaged script. They really do need to respect the process and let labor go through to get the deal ratified they dont want anything to destabilize that i dont think we will get that much insight into what the contract will cost what this ratified, i think the company will give us more insight to what the labor rate would be, in the end of august or beginning of september. We will not get that much detail right away as far as the cost of the labor deal we had to work earlier on this deal where the inflation being in the low 3 range. It is a little more expensive on the upside maybe 2 million or 3 million more in the first year of the contract with hefty firstyear wage increases across the board. Everybody will get a bump in the first year parttime wages will get a bump. The ben pefit fact means this contract will moderate and the company can be set up. There will would be a hit on eps. We are expecting to get more clarity when the deal is done. And p ffedex is more leveraged n china. We continue to see consumers hesitant to spend. How does china impact u. P. S. Whichina is a big part of the global trade that manufacturing may move to other origins in asia. As you see the trades shift, you will see fedex and u. P. S. Moving as well. David vernon, i appreciate your insight. Thank you coming up on Worldwide Exchange, management here looking at surging inflation for taking a bite out of shareholder appetites. That full story and we will explain the mystery chart when we return. Stay with us new natures bounty hair growth. Clinically shown to help grow thicker, fuller hair with just one capsule a day of advanced hair complex. Conquer hair thinning. And fall in love with your hair all over again. Only from natures bounty. Well come back to Worldwide Exchange. We start with shares soaring with revenue posting 183 million compared to 175 to 178 million. It was a 6 decline from last year the Education Company laying out a strategy for artificial intelligence, including the new gene generative a. I. Tool taking a look at shares of beyond meat. Cutting forecast after the miss on q2 sales due to slowing demand for plantbased Meat Products inflation and ambiguity of the benefits of plant based meat weigh on the trend shares of beyond meat down 16 and an paramount global stock as the company recovers from the advertising headwinds and losses from competition management reiterating it will see improvement in the ad market in the second half of the year and expect return to positive Free Cash Flow in 2024 paramount announcing it sold simon and schuester. Shares of paramount global up 3. 5 . Time for the check on more of the headlines with Jessica Leyton in new york jessica, good morning. Good morning, frank we begin as the south and east coast are reeling from severe storms that killed two people. A 28yearold died after struck by lightning in alabama and the 15yearold was hit by a tree in South Carolina close to 1 Million People lost power and hundreds of thousands are in the dark right now after severe thunderstorms hit from georgia to new york. Many states dealing with heavy rain and flooding. And texas firefighters are investigating this explosion that happened at a Sherwin Williams paint factory outside dallas the blast sent a fireball rising through the air. One employee was hurt and treated at the scene the hazmat team is monitoring the air quality. The Mega Millions continued the losing streak during fridays draw. That means the prize has ballooned to 1. 5 billion. This could be the largest sum ever and Third Largest sum in all u. S. Lotto history of the you history. You still have time to play. The drawing is 11 00 p. M. Tonight. Frank, i have a couple people in the pool here. I was looking at the odds of winning. I think ill put a few bucks in, jessica. Ill cash app you. We can split it. Not bad. Thats sitting pretty for both of us. If they dont see us here tomorrow, they know what happened jessica, thank you. Straight ahead here on Worldwide Exchange, new hiring for gen z. We have the top trending stories coming up. If you havent already, follow our podcast on your favorite podcast appapps more Worldwide Exchange after this break fan 1 there ya go thats what im talkin about josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. It is 5 30 a. M. In the new york city area more ahead on Worldwide Exchange. Here is whats on deck futures under pressure as investors brace for high yielding Government Debt we are watching apple coming off the worst twoday loss since november we ask if it is buy the dip opportunity. And italy and moodys are casting a cloud over the sector. It is tuesday, august 8th, 2023. You are watching Worldwide Exchange here on cnbc good morning welcome back to Worldwide Exchange. Im frank holland. We pick up the half hour check on u. S. Stock futures. As you can see, they are in the red across the board dow close to the lows of the morning looking to open up 150 points lower this hour we see downside moves for the s p and nasdaq we are checking the bond market ahead of the busy week for fixed income with 100 billion in longterm issuance over the next four days. Yields here with the 10year treasury at 4. 01 we have seen that decline since fitch downgraded the u. S. Credit rating we continue to watch with t watch the major u. S. Banks moodys call u. S. Bancorp and bank of new york mellon down 2 . And cutting the ratings of the credit strength which is tested by funding risk and weaker profitability. Among the names hit with the downgrade is m t and pinnacle. We will continue to watch those throughout the show. We are checking on the biggest names on the space with this news you see the action with the big banks. Citigroup down almost 1 bank of america is hardest hit down 1. 5 . Time for the check on the top corporate stories with silvana henao. Silvana. Frank, shares of ring central sinking ahead of the open after the company said founder and ceo is stepping down this month to transition to executive chairman ring says it is naming board member as the new ceo who is a former cfo for hewlettpackard ring with earnings in line with the estimates from wall street regulators in china plan to restrict business use of facial Recognition Technology in favor the non biometric measures. This could take effect in september. Airports and hotels and stadiums and exhibition halls and other Business Establishments shall not using facial recognition platforms. And creating a data base of 1,600 structures for meta abandoning Blue Sky Research in favor of a. I. Projects to generate revenue. Interesting shares of meta down. 50 silvana, thank you now turning attention to a mega cap name apple. It has been a few rough days since friday, the stock is down 6. 4 and coacoming off the worst loss since november. Apple now trading just north of 2. 8 trillion. Since reporting on thursday, the stock lost the equivalent the market value of disney or u. P. S. Or wells fargo joining me is the analyst at d. A. Davidson. Tom, it is great to you have here good morning. Good morning. Thank you for having me on. The obvious question, tom, what do you make of the twoday slide as you rated that price target after that report i have a neutral rating and leave lowered to 185 after the compan reported after the quarter i look for a larger pullback the good news is there are two natural issues coming ahead. The launch of the iphone 15 expected in midseptember and vision pro launch expected in early calendar 2024. I think there are stocks that could help the stock rebound. Tom, you say nearterm catalyst the stock is trading at 178. You dont see more upside for the company . Correct going back to the downgrade, what wite found was shares had a huge run near the 52week highs. They were trading at premium multiples which they still are on the pe basis. We thought that the structural challenges with apple making augmented reality and ar headsets the mainstream. The comeback needs to happen looking at the chart, you see a steep decline. I want to get into the report. Significant declines in the apple hardware business. Ipads are down 20 services are up 8 which side of this is giving us more insight about the future of apple Going Forward . 8 increase in services revenue. You pointed out every major category of hardware was down and services is up im bullish long term with the opportunity that they could charge consumers 200 a month to get the latest hardware and including the iphone and services with apple music. Apple the could charge 2,000 for the iphone and consumers would know with the monthly bill apple has more services in the future which bodes well for the company and stock. Is launching a new iphone a tailwind for the services or vice versa apple 15 had innoinnovation what is left to bring in consumers who are generally stretched . We expect apple gets more Android Users to switch over to the dehe videvices. Increasing the install base. You point out there havent been a lot of innovations to shoot a movie camera or sos or other things which are minor features which benefitted apple they are trying to get more consumers on the d5g network that is where they come in with vision pro and the extent they get revenue there and maybe out perform against expectations well see. And whine p an was a bright spot in the report in general, we are seeing disappointing data coming from china. We hear consumers are not willing to spend as the company tries to gain market share there and ships more business to india. China was a brought spot. India was also a bright spot strong results in emerging markets, including india i think longterm india, that could be a catalyst for the stock. Nearterm basis, the investors got ahead of themselves. I think what success could look like in india with china being 10 of sales and the major component in the supply chain. I dont think china is enough of a catalyst on the next 12to18 months to buy shares for china. Tom forte, thank you. Thank you. Coming up on Worldwide Exchange, italy cracks down on profits from some of the biggest banks and those stocks are sinking. A live report from europe coming up. And before we head to break, top trending stories survey from intelligence finding 40 of Business Leaders think grads are unprepared for the workplace. 94 say they avoid hiring recent College Grads and etiquette classes could help transition to postcollege jobs. Bubbly may lose fizz s p warning the taste of champagne could change as soaring temperatures spark fears over the future production in the champagne region remember, champagne can only come from champagne, france. And social media platform hosting a talent show give me the mic. You can register to audition to a 30second video. Anothereonr as p tto go on tikt. Much more still ahead right after this welcome back to Worldwide Exchange. Time for the morning call sheet. We start with Jpmorgan Chase downgrading fresh pet. It is a valuation call with the stock up more than 111 the past 12 months. Surpassing gains by rivals it has no issues with the management treatmeam or Company Shares of fresh pet up. 25 . Goldman has a buy of 33 price target piper of 67 of the shares of the company are down in the premarket and downgrading home depot and lowes the near term expects the retailers to experience a slowdown related to the weak Housing Market shares of both companies down more than 1 home depot down 2 time for the global briefing rough batch of data from china exports and imports falling deeper than expected in july fueling concerns of growth and deflation in the worlds second largest economy. Exports fell by 14. 5 year over year the sharpest drop since february of 2020. Profit, along would cost of equity of bank shares as well down. And softbank falling 3 billion marking the Third Straight quarter of losses softbank is trimming the stake in alibaba after it saw a nearly 4 billion unrealized valuation loss on that stock. And italy issuing windfall tax which is equal to 19 of the bank profits per year according to citi. The Italian Government expects to collect 3. 3 billion from the measure. Shares in europe are falling on that news. We have more from joumanna good morning, frank we saw the weaker Economic Data from china which set the tone for european markets which opened in the red. The main piece was the announcement from the Italian Government which caught people by surprise. You see it ftse mib is lower down by 2. 2 today the others were lower based on the links to china lets start with the italian sector this is one of the worst days we have seen. Unicredit is down 5 these banks had a very solid run year to date unicredit was up 70 before the pullback today the reaction in the market tells you this was very surprising and really impact the outlook for the distribution and returns investors were getting buying into the banking stocks. A surprise for the european markets which sets the tone, frank. The headline is about the italian banking space, but do we expect an impact in the broader european banking space the picture is similarly negative perhaps not as much as negative price action for the italian banks. You see it here across the french banks which are down 2 to 3 . Deutsche bank, one we follow in germany, down 3 it is worth mentions that spain, for example, has their own version of the windfall tax which was introduced and applied. That is in the price, you could say. A lot of analysts are pointing to the fact that the Banking Sector is the most owned and most loved sectors of europe year to date what we are seeing is a bit of position trimming because of the bad news. Joumanna, thank you very much Joumanna Bercetche live in our london newsroom. Coming up here on Worldwide Exchange, the one word that every investor needs to know today and jeff kleintopp is here to layout the best day since june. If you havent already, follow our podcast on apple or ofotify or other podcast apps the much more Worldwide Exchange coming up after this welcome back to Worldwide Exchange. A live look at new york city and london as they are late in the morning and hong kong and washington, d. C. Again, this is just the start of the day in washington, d. C time for the wex wrap up mo moodys with a Credit Rating review on six banks. Cutting the ratings of smalltomid sized lenders taking a look at shares all in the red right now. Shares of tech soaring after better than expected Quarterly Results and a new strategy for a. I. , including the generative a. I. Tool. Global stock getting a boost with the Second Quarter beat after they recover from advertising headwinds and c compe competition. Para p paramount sold simon schuster. And wondering if it has done enough on snapchat to get rid of underage users. Shares of beyond meat with the miss of q2 sales for the slowing demand apple is testing more powerful chip in the highend macbook pro. It could help apple recover ref enou revenue for the business. And here is what is on deck reporting from under armour and rivian a pair of officials are speaking today. Patrick harker and tom barkin before the opening bell. Futures are pointing to a negative start dow is down 160 points in the premarket lets bring in jeff kleintopp at Charles Schwab thanks for having me on, frank. We have seen a lot of disruption fitch downgrade and vix moving higher we see mixed results with the different indices. What do you expect today today, we have a number of currents data from china which is disappointing on imports and exports which is setting the tone for global markets. The Cardboard Box recession continues. Anything in a box for shipping is in a recession right now. That is weighing on the global economy. We see pmi weaken for services it is starting to soften up. Maybe the recession is coming out of the box and spreading into services. We will learn more today from the companies reporting. You are leaning into the fact that u. P. S. Is reporting before the bell you mentioned a slowdown in shipping is u. P. S. A potential market mover with the insight into the state of the consumer and what they are buying online to the extent the guidance is telling us what is going on right now for what is going in and moving around in Cardboard Boxes. We see the boxes fall 10 . That only happens in global recessions that will be a good indication if we are seeing better demand for u. P. S. Services and the good indication if the weakest part of the economy is showing weakness the threeyear begins today the yield at 4. 4 . How do you see that impacting the equity markets today that is the key we have been emphasizing with style we have focused on pricetocash flow and shorter duration stocks those stocks with the higher proportion of the cash flows we priced to cash flow to measure and stocks have been outperforming since 2020 they stumbled during the banking turmoil. They are back on top in june and july companies are able to fund their own borrowing out of their cash flow they are doing better than businesses which have to borrow at the threeyear rate they showing signs of resilience i want to circle back we were talking about the earnings with the Cardboard Box recession which led us to u. P. S. Other earnings this week what is your wex word of the day. My word of the day is layoff. The potential for more layoff announcements which is putting earnings seesason on friday there may be more coming, frank, because comments from Business Leaders on earnings calls talks about shortages which dominated last year. We heard it from cvs and inbev and qualcomm and trowe price. We can finally be seeing a turn in the Global Labor Market does that give stocks the boost . Company announced layoffs and stocks shot up because they were cutting costs. This will be focused on cost cutting. We will get the Consumer Sentiment numbers on friday here in the u. S will that begin to feed in the pace of Consumer Spending . We have to see. I want to bounce the headlines off you. First, Banking Sector risk moodys downgrade. Europe cracking down on profits for banks. This is something that banks, particularly in europe, had to focus on it is not just italy uk banks have been looking at the windfall tax there are baltic countries that are putting in windfall taxes. This is a cloud that may hangover the nations for a while. Issues with the commercial real estate, not so much in europe, but here in the u. S. With vacancy rates in major cities likes like atlanta and dallas and san francisco. I have to ask about china demand in china. Another batch of weak Economic Data a lot of u. S. Companies are heavily levered to china how big of a risk is that to the u. S. Market . The weakness in china . It is the second largest economy in the world and big Consumer Market for u. S. Products i know one of the things i have been watching is air pollution in china with the epa tests. It is starting to pick back up again. That tells me there is more air pollution. That is a sign of economic momentum in china. It is starting to pick back up if that continues, it could be brighter news for china. Jeff, the futures right now with the dow close to the lows of the morning s p and nasdaq moving lower throughout the morning what do you expect today another down day or a rebound . I think we could consolidate a bit today. We have the important earnings after the bell we are still focused here on what we hear from the fed speakers that is important this week given we are not sure if the fed is finished or not. A lot to watch. Jeff kleintop, thank you futures are in the red dow opening 150 points lower at this hour and s p and nasdaq futures are. 50 lower thats where we will leave it. Squawk box is coming up next thanks for watching. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Good morning stock futures pointing to declines after the rally yesterday. We get you ready for todays earnings and economic today. And the Italian Government announces a surprise 40 excess tax on profits. And shares of beyond meat lower and showing no signs of rec recovery it is tuesday, august 8th, 2023 and squawk box begins right now. Good morning welcome to squawk box right here on cnbc here at the Nasdaq Market site in times inqsquare it is just me and melissa lee. Becky and joe are off. If we opened up, we opened up 150 points lower nasdaq down 50 points. The treasury yeields with the 10year treasury at 4. 00 flat you never see that the 2year treasury at 4. 730. Italian bank stocks hammered after the government approved a surprise 40 windfall tax on lenders profits in 2