Transcripts For CNBC Squawk 20240704

Nasdaq higher, 20 points s p 500 up a little over 1 point. This comes after declines for the major indices in yesterdays session. Dow, s p and nasdaq each closed lower by 1 . The s p 500 closing below its 50day moving average for the First Time Since march 28th. Look at treasury yields. See where theyre standing right now. The tenyear note at 4. 182 and the twoyear at 4. 908 , just below 5 . The tenyear yesterday hit 4. 2684 core inflation remained at 6. 9 , unchanged from the prior month, slightly above forecast. Pay growth continued to pose headaches for policymakers as wages grew 7. 8 in the quarter that ended in june were watching shares of cava this morning sharply higher the mediterranean restaurant chain reporting earnings per share of 21 cents since going public swinging to profitability from a net loss in a year ago quarter. Revenue of 173 million Beat Estimates of 163 million. Same store sales rose 18. 2 . The cfo attributing some of the strong traffic to increased Brand Awareness after the ipo but said store traffic moderated in recent weeks and more diners are shifting from delivery orders to pickup cavas menu prices are up 8 from a year ago and the company says it has no plans to raise prices further the ceo will be on squawk on the street 10 00 a. M. On a first on cnbc interview. Hollywood financier tsg entertainment is suing disney for breach of contract the suit alleges that disney and its studio, 20th century fox, withheld profits and cut deals to boost its streaming platform and stock price that deprived tsg of cash to invest in individual films tsg cofinances the production of marketing costs of films like the latest avatar sequel the way of water. It receives a share of the gross receipts after the films release and after noticing a decline in profits, tsg requested an audit of three films and found in its words rampant selfdealing and accounting tricks within the books and had been underpaid by at least 40 million representatives from disney didnt immediately respond to cnbcs request for comment the other big story, intel now terminating its 5. 4 billion deal to buy israeli chipmaker tower semiconductor. Intel struck the agreement in february of last year. Failed to secure approval from chinese regulators, which was required to do under the contract with tower. Intel will pay a 353 million breakup fee to exit the deal but think about sort of how that is supposed to work. If you need chinese Regulatory Approval, for a chip company, in this environment, you think thats coming . No. Not really . Probably not, right wheels up. Private jet Membership Company which is all over the place, you saw it on the winning triple crown jockeys pants, a lot of marketing, expert marketing, but wheels up experience has reached a deal to receive a 500 million rescue financing package from a group of investors including delta airlines, which had an alliance with wheels up. The new financing provides a path for the company to avoid bankruptcy and in exchange consortium of investors will receive a 95 stake in the company and deltas cfo will join the board as chairman and wheels up went public, a spac, in 2021. And at one point, it traded sharply higher it now trades below 2 with a market cap below 40 million kenny d, who we have known for a very long time, unfortunately not the ceo of the company anymore. He was the one that had a lot of earlier relationships that developed what turned out to be wheels up. Having said that, the Business Model of wheels up was always too expensive in terms of the capital that they put into buying planes and the like really, really selling these things. But this is good news because the truth is i think a week or two ago, if you looked at where the stock was and what people were talking about, they were talking about, b, as in bankruptcy and this should stave that off. Meantime, news about x Company Formerly known as twitter, is that how we do this . That sign, formerly known as prince if you just say x, like, x what x what . Is it always going to be that way . No. It is, like, is it going to be like Google Alphabet . I still say google sometimes. Do you still tweet . No, you x. What is it called you x you x i think so. Xd it out. I heart you zeet. Really . You would know, joe. Last night, someone who has a segment where people send in stuff like a broadcaster, a segment where people send it is called a tweet or something or other and now what do you call it. Brett bear why dont you x elon . Tweet to him . Yes. And ask him. Formerly known as a tweet send him a message on his platform known as x now. Do you think he would ask he has 80 million followers. Meantime, the companys popular tweet deck service, cant be tweet deck anymore, has moved behind a pay wall. The company rebranded it x pro, when users attempt to access that service, theyre informed a subscription to that paid service, which is called blue. So, what do you think . I used to use tweet deck a lot. No. Stopped using it. Not because of the payment . No. This was two or three years ago. I left for two weeks, i made i put on my calendar, can tweet again on august 14th and i kind of slipped. But only once or twice. I saw photos. I saw a picture. I had to do that. Why because i met the british open champion, he was down there. And we were talking and i did you ever think you might just hold the photo until that august 14th date, which you are allowed to tweet is it that you cant tweet until a certain date or cant consume twitter . I cant flame mail someone who says ive been wearing a toupee right i cant respond did you come back i cant respond to someone with three followers, which i do a lot. Is it all bottled up inside i felt better i realized how it really doesnt matter what is going on. It is bad energy. They can say whatever they want about you, you know the truth about yourself and thats there you go, melissa. You dont i dont care what anybody says. This is not a tiktok. If it is racist or sexist, i will block you without any question otherwise, i dont care what you say about me. I just if it is antibaldite, thats from seinfeld. Do you remember that no. He went to, george, he said there are antibaldites, people who dont like bald people the rich are not so but im not bald. Youre the opposite of bald. Im the opposite of bald. Maybe thats why they keep thinking i have so much hair that they cant it is so good looking, it cant possibly be natural. Theyre jealous the rich not so rich anymore Global Wealth declined by 2. 4 thats the right direction for a lot of people. For the first part of for First Time Since 2008, due in part tole le volatile currenci thats from a Global Wealth report, said approximately 1. 7 million americans dropped out of the millionaire category all right lets meet at the bottom and nearly 20,000 more fell out of the ultra High Net Worth category, theyre no longer worth 100 million the report cited the drop in the value of stocks and bonds and it was partly offset by rising prices of houses and other assets thats not the way we want to do it we want everyone to meet up would be nice if everyone met at 100 million we can do that with mmt, right and print it coming up, retail earnings and fed minutes on todays agenda well talk strategy with tom lee next as we head to break check out the shares of h r block, the tax prep companys earnings and revenue Beat Estimates. Ke raised full year guidance and hid its Quarterly Dividend see the stock right now indicated up about 6 , youre watching squawk box on cnbc. 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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. News just out from coinbase, the company says National Futures association has approved it as a registered Futures Commission merchant. It says that now allows it to offer futures contracts and bitcoin and ethereum to eligible customers in the u. S shares of coinbase are moving higher on the back of this up by more than 5 a quick check on crypto prices, which have been fairly stable as late bitcoin at 29,136, basically flat, ether at 1,821. On the squawk planner, were going to hear from target and tjx after the opening bell and quarterly reports from cisco systems. On the data front, Housing Starts from july at 8 30 this afternoon, to minutes from the feds most recent policy meeting. Joining us to take a closer look at the markets today, today is wednesday, sometimes on a monday just to figure out what is going to happen for the week after you made that call, weekly call, which youre not going to do anymore, tom lee, cofounder of funds stat and cnbc contributor youre correctly bullish and more recently for august you thought that maybe we would take a breather i dont know if it is more than that maybe 10 pullback, maybe not. Thats playing out as well. Thats right. August is generally a tricky month historically especially when the markets are strong through july. It does seem like the weakness is a lot more pronounced, especially because yields are up and the dollar is strong and i think people may be fretting a bit about china too. So, i think later this month with starting with the fomc minutes and jackson hole, and then at the end of the month we get the inflation data, the pce, maybe thats when markets stay rt start to feel better but youre right, maybe it could be deeper. Your call was based on the trend in inflation, which continued in the week that you made the call. It was based on the Inflation Numbers that were coming that week, which were friendly. Yes. And you still but the economy, meantime, has been much stronger than most people thought and now it is going to be no landing or soft landing or people are thinking the narrative change but do you still feel that inflation is going to show a downward trend and pce,. 2 . Thats right. I think core inflation is which came in at. 16 last month, that is still reflecting elevated housing number. Shelters running at close to 8 . Thats going to start to cool. And there is a lot more downside in used car prices and then core services, which is the rest of that piece, it is actually been cooling because that was kind of pushed up by Vehicle Insurance and auto repair, which are going to start to fade. So i think inflation is on a glad path toward sub 3, sub 2 by the middle of next year. Sub 2 we could print something pretty low when shelter goes to zero, you could have core at zero. You could have some zero month over month or negative month over month for a bit. It is weird thats not a shocker. We back out energy. Yes thats right that helps. Energy is but then it filters through to other things, it seems to be reflected even though you back it out. Thats right. The diesel filters through as a surcharge. I think the fed will be alarmed a little bit by energy, but they will treat that differently than something sticky because energy can sometimes be idiosyncratic, rises and falls. Under 2 . So, the highs by the end of the year still in your playbook . All time highs in the s p 500 by the end of the year . Yes, i think as bad as august is, maybe if were down 5. 8 in august, there is 5 trillion of cash on the sidelines. I think people think the fed is going to hike. But if they do only one more, i think the market can absorb that and then, of course, growth has been strengthening and look at s p earnings x energy was up almost 3 in the quarter, first time in six quarters so i think you have an earnings recovery, fed may be slowing, Interest Rates could stabilize and then the cash gets put to work. Can we do all this with china falling out of bed i mean we have to watch that carefully. On the one hand, chinas weakness exports, Producer Price indices and cpi could be softer. You dont want the second largest economy to fall into a recession or depression or a recession. How does this inflation call of yours, and Economic Growth call, is it either influenced or impact your call on crypto it has i feel theyre all very interrelated for you, personally yes because crypto is dependent on Monetary Policy. Right so if if inflation is cooling, then we can start to bet on ford financial conditions easing and central bank easing sooner thats bullish for crypto. Right alternative assets. But what im trying to understand is which view did you back into . Do you understand where im going with this . I think crypto is the residual, is the residual allocation based on what the central bank could do. And bitcoin separately has a catalyst if an etf which were in the window where well start to see the potential for an s. E. C. Approval of a spot bitcoin etf. And you strictly are bitcoin these days i think it is still easiest to navigate through bitcoin and ethereum because of their regulatory status is a lot more clear and even to the coinbase announcement shows those are the two ways to get liquid exposure to crypto. And always like hearing your price targets, you are so fearless where are you on bitcoin by the end of next year, lets say . Well, if the spot bitcoin gets approved, i think the demand will be greater than the daily supply of bitcoin and so the clearing price, this is done by shawn farrell, our crypto digital strategist, is over 150,000, could be like 180,000. But thats only if the spot only if the etf gets approved yes, and the u. S. Space, a spot u. S. , because a spot bitcoin etf is approved outside the u. S. If it is not approved, then are we just lingering around 29,000 there is still upside counts because of whats happening next year, so youll have a drop in supply again but it wont be six figures. Bitcoins market cap is about half of nvidia yes i dont know what that innvidia could go up next wek it still might be early nvidia might be cheap here who knows when you watch it. We havent talked about are you a big enthusiast behind a. I. And that whole thesis for the group of tech stocks that have really gained yeah, i believe Companies Really will want to adopt a. I. And spend and thats actually going to increase tech spend for a bit. I think the social consequences are pretty severe, maybe understood i think things like judgment and gut, there is a thinking that data doesnt make good decisions, your gut does and we lose it with a. I im sure businesses will adopt it a. I. Scares me because were still at a point where were worried about dislocates and disruptions of all these people that need jobs but sooner orlater, when push comes to shove, and you need to cut costs, youre going to use a. I. There is just no stopping it it is inexorable, you wont be able to stop it. If your competitor is adopting it, yeah it will be scary. People who want to work three days a week will get their wish because they may be working zero days yes all right, tom. Thank you. Thank you coming up on the other side of this, were learning more about prosecutor strategy against Sam Bankmanfried. Were going to bring you details about that next. And at 6 30, were expecting Quarterly Results from target. Well bring you the numbers and instant reaction dont go anywhere. Youre watching cnbc and this is squawk box. 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. [soldier] take a look at this theyve left us a gift. [soldier] i think we misjudged them. I love horses. birds chirping [soldier] we should open the gate. Lets see what charlotte thinks. [narrator] at crowdstrike, we monitor trillions of cyber events to detect threats and prevent breaches before they happen to keep your business from becoming history. We stop cyberattacks. We stop breaches. We stop a lot of bad things from happening. Crowdstrike. Protection that powers you. Welcome back to squawk box this morning new Court Filings shedding some light on federal prosecutors case against Sam Bankmanfried they say his exgirlfriend blamed him for using ftxs customer deposits and recording from a Company Meeting that was made days before ftx imploded. At the time, ellison was running alameda research, but prosecutors plan to use the recording of that meeting to show that bankmanfried held decisionmaking power at the fund prosecutors will use a memo that ellison wrote entitled things sam is freaking out about. Prosecutors say it contains ellisons reflections on the alleged scheme between ftx and alameda. Ellison pleaded guilty to charges of wire fraud and she will be a key witness in bankmanfrieds case to me, by the way, one thing that is so fascinating about what is happening now is he was put in jail last week for speaking out publicly or for brought back here, right. For leaking information about Caroline Ellison that they said undermined Caroline Ellison. That was what they put it as witness tampering, intimidation kind of thing. And prosecutors are put out news about that they plan to do with Caroline Ellison in another way. It is a fascinating thing in terms of how this all is supposed to work or not it is very true, by the way, gag orders are real things in cases. You dont have i think i misspoke the other day, i said you have everybody has freedom of speech. If youre in prison, you dont have freedom of speech and ahead of a trial you dont either. So have interesting thing. Youre in prison, not having freedom of speech is the least of your problems. I know. But there has been arguments we got to go. Breaking news coming up. Coming up, results from target expected in the next few minutes. Well bring you the numbers and instant reaction straight ahead. Ready to take your business to the next level . Scale it with the commerce platform, made for entrepreneurs. Shopify is specially designed to help you grow your business. With easy, customizable themes that let you build your brand. Marketing tools that get your products out there. Yeah, way out there. Shipping solutions that actually save you time. And thats just the beginning. From start ups to scale ups. Online, in person and on the go. Shopify, your all in one commerce platform. Target earnings just crossing the tape. Courtney reagan is here with the numbers. So lets get through this, there is a lot here. Target Second Quarter earnings 1. 80 a share. The profit was not driven by sales. Revenue at 24. 77 billion below 25. 16 billion estimated. Also slashing full year Earnings Guidance this even after this quarters huge beat. It is expecting between 7 and 8, down from 7. 75 to 8. 75 also bringing down its sales expectations to midsingle digit declines, rather than low single digit declines to low single digit increase targets comparable sales down 5. 4 that is well below estimates for 3. 7 drop. Also the first decrease since 2016 the retailer says discretionary categories again weak while food, beverage, essentials, beauty, frequency categories were stronger. Digital sales down 10. 5 thats the Third Straight quarter of declines and the worst performance since target has been giving this number. Inventory fell 17 and lower markdowns did help to lift gross margins, operating margins also better than expected but at 4. 8 , thats about half of the level where it was two years ago at 9. 8 . On a call with media, Brian Cornell pointed to macro pressures for tampering sales. Also negative guest reaction to our pride collection he also continued to say negative reaction to our pride aso assortment and the business recovered steadily in july i asked cornell to clarify that the response by some consumers to the pride merchandise was material enough that it impacted sales, but then after target removed some of the merchandise or moved it in some stores, the trends changed, he said, quote, you describe it very accurately. We only took actions in the month of june. We wanted to make sure were focused on the safety of ur teams and the safety of our guests once we took those actions and addressed the situation, we certainly saw things normalize the last time the sales were negative was 6 years ago and that does correspond to the four quarters that followed the retailers santance allowing guests to use whatever bathroom they choose for their gender identity this time theyre calling it out, just not quantifying it, it is just, again, seemingly caught in the middle of the culture fw wars in a way that did seem to impact sales. The crime, the gangs we talked about we asked about the shrinkage. There is three words, basically, addressing that directly and they said it was as forecast so when they gave it us to last quarter, they said it was just on plan from where it was. But that it has doubled in general the loss from shrink since 2019 so, that is still on par from where it was but it hasnt changed. It is not a nonmaterial number right and target is the only retailer that in my in my history of covering retail in 12 years, that has ever quantified shrink when they gave us that number they gave it to us two times in november and last quarter. Look at the stock closed at a low, but, whoa closed at 52week high. The stock reaction is surprising to me, mainly because of the guidance, to take it down so far, especially after beating on profit, but there is a lot in this report. Down 20 in the past three months. Exactly in stark contrast to walmart, which is up 5 comparison chart is like mind boggling it is it really is we often put these two together and big market cap. Talking about billions of dollars. Billions of dollars to see that spread differ. Courtney, stick around. Lets bring in the retail analyst. What is your take initially on this the stock is up sharply. They took down the full year guidance. Im more concerned about the Topline Revenue numbers and digital numbers because those are numbers that typically we expect to see much higher. They dont seem to be in line even with walmart. It is a little bit puzzling what is happening i think that inflation is part of the story thats what the ceo had referenced the categories that seem to be most affected are electronics as well as some of hard goods, which is the electronics category, apparel and then other nonconsumable items as well in the home sector and home naturally is down overall. And any accessories that would benefit the category otherwise are going to be soft and that certainly seems to be what is playing out. Target is heavily weighted in the categories, more so than walmart. That seems to be problematic. And that accounts in part for the difference in performance in walmart and target but does that account fully . Is there a valid tradeoff in terms of valuation with target trading at 16 times forward and walmart trading higher than that is it worth the premium for walmart given the mix, given that it is not beleaguered by these pride boycotts. And the whole concept of, you know, kind of the depression in its numbers due to some of these culture war issues seems a little exaggerated to me we have seen the we have seen these things play out before with Companies Like nike and others theyre not really long they dont have a longterm impact. They dont really have a deep impact in general when we observed them in the past. So i feel like it is a little bit of pointing the finger at that, when in fact it is probably not that big of a material impact. The bigger question is more about target strategy. Walmart is, of course, more diversified globally they even have business in china, which is actually growing. So, there are things that are different about walmarts business, they also are more focused on technology. They are they have a much stronger ad business their ad business is, in fact, larger than Companies Like snapchat now so, there are things that are different. Target is trying to grow that part of their business, but it seems like there are there are big differences that they have not been able to capture since the end of the pandemic. Essentially lost all of the gains that they gained during the pandemic as far as the valuation of the company is, and i think that a lot of it has to do with product assortment and their inability to charge premiums, and for consumers to choose to purchase in other categories, and with other retailers. Were going to hear from walmart tomorrow well get more details but, you know, to your point, the point that i often make, walmart overindexes in grocery and food and consumables, 56 of the sales is there, a repeat business, they told us they have a higher income shopper that is starting to go there, does it speak to perhaps more of the consumer pressures that are being masked in other areas, meaning walmart seems to be an outperformer when times are tough, economically. Is it maybe more exaggerated than were giving credit when were seeing such a divergence between walmart and target it feels like it has to be more than just food yeah. It is it is puzzling. Because they all of the Economic Indicators about Consumer Spend or otherwise are pretty strong, right the shopper seems to be spending all of our aggregate retail data is that the shopper is still spending more, why is target not seemingly capturing more of that especially as the affluent consumer is doing well and my hunch is, in looking at the data that we see is that that affluent consumer is just spending right now in other categories, they tend to be spending more on services, traveling more, it is the summer, so vatheyre on vacatio. Theyre spending in europe thats not where target has any kind of leverage right now so that seems to be potentially a factor here. Does that mean that they could they should catch up later on in the fall or christmas time they may be sandbagging a little bit with respect to really decreasing those expectations. The comp store number being down as much as they were is really surprising. Thank you for your time appreciate it. Courtney, quickly, she sort of diminished the impact of the pride month boycotts what is your take . You had a funny reaction you pointed to nike as an example. We have the example of bud. Im going to call an audible. The control room can hang we many i have a chart and it is the target u. S. Comparable sales chart. If you can pull it up, youll see that in 2016, the Second Quarter of 2016, which began two weeks after target put out a blog post stating their stance on the socalled bathroom bill, saying anyone can use any bathroom that they choose and they made a very public stance about that there was loud boycotts, sales fell after that for the next four quarters. You can see it here. We have it marked. It is obviously very hard to always quantify and correlate why one bigger pressure or how much one big pressure is impacting sales. But it doesnt seem to be a complete coincidence that that happened there were other pressures happening then, economically and otherwise, with their strategy they made a lot of investments in stores after that too im not saying it was all of it. But for some reason, target has gotten caught in cultural cross hairs and there does seem to be an impact on sales when it happens. All right coming up, more big reports as retail earnings week rolls lhe wel ar from tjx and walmart tomorrow morning and get the best of squawk box in our daily podcast, follow squawk pod on your favorite podcast app and listen anytime well be right back. Only from natures bounty. upbeat music woah. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Welcome back u. S. Equity futures just marginally in the green. Literally right now, except for the nasdaq in a new bombshell court filing, in the court case against jpmorgan by the u. S. Virgin islands, related to Jeffrey Epstein, eamon javers joins us now with more. Still, eamon, more tell us. Yeah. This case, new details keep getting unsealed in this case and thats what happened yesterday. Were learning new details about just how late into the life of sex offender Jeffrey Epstein his relationship with jpmorgan continued. And also just how plugged in epstein was to the government of the u. S. Virgin islands. In a legal filing by the u. S. Virgin islands, a document reveals that epsteins assistant emailed jpmorgan in february of 2019, many years after the bank decided not to do business with epstein, and offered to introduce the bank to kathryn ruemmler, former white House Counsel to president barack obama. Emails showed jpmorgan received the introduction with enthusiasm, saying that she is a rock star and would make a great client epstein died in custody in august of that year. A spokesman for the Current Employer Goldman Sachs declined to comment yesterday the document also shows a similar 2007 introduction by epstein to nick ribis, long time donald trump casino executive, a call to a phone number associated to him was not answered in a filing by jpmorgan, on the other side of this case, a newly disclosed email shows that the legally embattled former govern john dejongh asked epstein for a loan of 215,000 he said i appreciate your willingness to help in his legal struggles. Cnbc has not been able to obtain a comment from dejongh and a separate document indicates an epstein employee was able to obtain a seal from the u. S. Customs department that would allow him to access secure areas at the airport in the u. S. Virgin islands and escort passengers through u. S. Customs and border protection, all of that indicating just how wired in to the local government and the federal government on the island epstein was at the height of his powers. Back over to you so, i have a bunch of questions. The first one is what do these emails really show en i dont mean to i would never defend Jeffrey Epstein, but jpmorgan in this instance, but it is unclear to me if somebody sends you an email, and it says, hey, i want to introduce you to this person, and youre more polite about it or more than polite about it, say, sure ill meet this person, shes a real person, not like shes some somebody you wouldnt have a meeting with, im just i understand i understand it shows there is a communication that is taking place, but, a, it looks like it is communication instigated by him, and, b, im not sure that i wouldnt accept the first of all, you cant not accept the communication, the email comes to you im not sure what some of these things say yeah. Well, look, i think what it says is that epstein had an influential web of relationships on wall street, in politics, and in business. Right up to the end. Right up to 2019 he was being taken very seriously by people in power as somebody who could make this kind of introduction, which, of course, had enormous amount of money potentially on the other end of it. This wasnt just a social get together this was an opportunity to do business, right . But was it . Was there money you say there is money on the other end of it. Thats the part im unclear about. Is there money hes referring ruemmler to jpmorgan as a potential client a kickback . Theyre doing their daily, you know, attempt to open up different theyre trying to get new clients. Extraordinarily well plugged in is he giving e ing him a kick is that what youre suggesting no, no. Ive not seen any evidence of that, no i dont understand they decided if i introduce somebody to jpmorgan, i dont get nobody is giving me any money i dont understand right look, again, what it shows is this is a person who had enormous level of connections, a web of connections and was willing to leverage those to do business with everybody in that network. He was taken seriously well after his arrest, well after jpmorgan decided to stop doing business 2005. When is the first what im saying all this happened long after we knew exactly what this guy was all about. A lot of those relationships, with all the blue chip people, were well after it is unbelievable dying in prison in 2019 yeah. But when was the first one that what was the guys name that like a sweetheart deal 2008 would have been his first arrest, right . Yeah, but then he had he had major meetings and relationships. And there were people who should not have been had meetings with him. But what im suggesting it is a longer conversation eamon javers, thank you. Regional bank shares falling yesterday, after a warning of a possible downgrade from fitch and support for higher Capital Requirements from a fed official details after the break. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com my cpa told me i wouldnt qualify for the erc tax refund, so i called Innovation Refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. Welcome back Regional Bank shares falling yesterday. Neel kashkari favors tougher regulation he said a proposal for higher Capital Requirements doesnt, he says, go far enough. The etf fell as neel spoke, saying that the fed has to keep raising Interest Rates it could cause more problems for smaller banks, comments coming hours after fitch warning it has to downgrade the Credit Rating of u. S. Banks. Kashkari didnt say whether he thought more rate hikes would be necessary. But said were a long way from cutting rates, which now is the expectation. Joining us to talk about the pressures on the banking sector, jason goldberg, barclays managing director and senior Equity Analyst good morning there was a Regional Bank freakout, i would call it, in the aftermath of what we saw with sub and then a lot of folks came on here talking about office, how the Office Business was going to kill Regional Banks and who did we have on this week, it is a multifamily that will kill the Regional Banks, and now kashkari going to kill the Regional Banks and fitch. Which is it . Or any of them we dont think any more of the Regional Banks fail this year theyre facing pressures now more recently were facing increase regulation in Capital Requirements and this week debt requirements for the talk. So clearly there is pressures. But we think the group can manage it. So, when you see fitch say this, what is the takeaway is there a takeaway . I think clearly fitch is acknowledging it is a challenging backdrop the debacle added some of the pressures. But i think it is all management, the context of the current earnings. You said this year, there wont be any failures this year. You have a fear there will be failures next year my chrirystal ball is only so powerful we focus on the banks, 100 billion assets and above with that lot, i think just given that earnings capacity it can handle a lot of pressures thrown at them. Of the banks, the Regional Banks you cover, which would you like and are there banks you would not touch in this environment . I think if you look at current valuations, group is trading at less than half of the s p 500, closer to threequarters there are headwinds we talked about, we think the market is more than discounting them if you think about the Regional Banks like pnc, u. S. Bank, we think the world can handle the current backdrop. Is there any you think are not worthy of your time or more resources . Yeah. If you look at some of the banks that may be outside exposure to commercial real estate, maybe more conscious of where thats where we think well see the most losses in the near term. You mentioned real estate broadly. Which do you think is more dangerous . Office, clearly just given the drop in property values, the work from home secular trend that is exacerbated by the pandemic and the backup in Interest Rates. Youre seeing pressure there. You dont think the multifamily, just the amount of money that went into multifamily, post pandemic, at the height in terms of prices and in terms of low in terms of where rates were. It is something to keep an eye on varies from market to market so markets have more housing pressures than others. Well leave it there. Thank you. Thank you appreciate it coming up, we will keep you posted on how target is trading this morning last check, the stock was up by 9 earnings beat revenue missed, the company slashing guidance for the full year. Squawk box will be right back. The first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com upbeat music awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Good morning major averages dropping by more than 1 yesterday. Different story today. But kind of flat small gains. Futures pointing to as investors look for perhaps a reversal of fortune. Target stock jumping after reporting results. Talking about the quarter and the impact that shrinkage is having on the company and other retailers. And a report from nomura says china may miss its 5 growth target this year the latest from beijing and what it means for the Global Economy is straight ahead. It is the second hour of squawk box, it begins right now. Good morning, welcome back to squawk box here on cnbc live at the Nasdaq Market site in times square. Im Andrew Ross Sorkin with melissa lee and joe kernen earnings galore, dow off six points, nasdaq up 11, s p 500, treasuries, tenyear and twoyear, the tenyear at 4. 182, the twoyear, 4. 910. And ill hand it over to melissa who will hand it over to dom. Yes hand over hand over dom chu will look at this mornings premarket movers. Hand over to hand over. I will take it, though, from both you and andrew, melissa so well get a check on the big retail earnings. Right off the bat, target, shares are up nearly 9 on over 200,000 shares of Trading Volume the big box retailer reporting mixed results, profits topping expectations, but revenues did miss the mark. Target slashed its full year profit and revenue outlook ceo Brian Cornell did note that sales and store traffic patterns improved in the month of july. But he still sees a more challenged consumer landscape due to inflationary pressures against the u. S. Consumer. Target shares, if youre wondering one of the reasons why were up 8 , we did hit a 52week low in yesterdays session, heading into this release. This print, the setup may not be great for target in terms of overall stock price. A bit of a bounce because of that on the mergers and acquisitions front, a busted deal shares of tour semiconductor, down 9 to 10 over a quarter million shares of volume shares of intel by the way, just about flat on the session right now. Just around 10,000 shares of volume there intel is going to abandon its roughly 5. 4 billion proposed takeover of tower. Both companies mutually agreed to nix that deal after failing to win Regulatory Approval from china. So, keep an eye on tower, semi and intel as well. And then well end on coinbase, which is up nearly 5 right now, just around 175,000 shares of volume the Cryptocurrency Exchange operator said it has gotten approval from the Natural Futures association, the nfa, to become a registered Futures Commission merchant. What that means is that coinbase now has the ability to offer futures contracts on their platform and the expectation is that the market could see futures trading tied to bitcoin and ether on coinbase sometime in the future. Coinbase shares up 5. 5 on that, melissa. Ill send things back over to you. Dom, thanks lets talk markets with seema shah great to have you with us. Thanks for having me on. You make the point that the consumers, households are actually pretty well off im wondering how you view targets results through that prism. Does that make you rethink at all or is this a target specific story in your view i think it is a fairly specific story to target what were seeing from this earnings season, not just on the consumer space, broadly across the sector, across the economy, the thing that youre hearing is that everyone is quite pleased with the way the performance has gone this quarter. But still, ceos are still concerned about what comes forward what is coming next. And are worried a lot of problems for consumers are starting to build up we are expecting that, yes, today, consumers are resilient and you can see that with the cushion we have been talking about for quite a while now. But the pricing pressures are starting to build. And so by the end of this year, into 2024, were expecting a lot of those headwinds to Start Building up and for consumers to almost lead the way into a much weaker economic scenario. So much weaker meaning what most of wall street has moved to soft landing is that too premature . I think it is a little bit premature. I do understand why when you look at the Economic Data today, but i think it is in a way fooling emintopeople into belon this could be a soft landing we are anticipating a recession early 2024 but were expecting it to be a mild one. On the household side, yes, savings will be exhausted by the end of this year those headwinds are building at the same time, corporates continue to look fairly short, maturity is further away and not something that corporates need to deal with Balance Sheets are healthy theyre offsetting each other a little bit that means this recession were anticipating is a 1. 5 drop annualized, which is extremely short, extremely shallow. So what does it all mean for the s p 500 . Are we starting to see the cracks now we saw 1 declines across the boards on the major indices yesterday and precipitated by the spike in rates we had in the tenyear yield and it does seem like whenever we have that spike in yields on the tenyear, we do see the commensurate drop on the equity side. Yeah. I dont think this move in yields is going to be sustained for too long the Economic Growth picture starts to push down bond yields. For the equity market, it is vulnerable we can see the valuations are very extended. There is vulnerability to some of a pullback. But were not expecting anything like a 10 to 15 drop we wont go back to last years october lows by any means. For investors, when thinking about the equity market, any drop we see could be very short, could be very shallow, so it is going to be very difficult to time that trough in a way, we think you should still be invested in equity markets, pick very wisely, be diversified and still think about fixed income, thinking about alternatives it is very, very uncertain backdrop at the moment the outlook is even more uncertain. This does means diversification key. What leads that decline on equitys . We have seen apple and microsoft challenge their average to the downside is it Big Cap Technology or elsewhere . So Big Cap Technology is a concern because valuations are extraordinarily frothy but they do have a very secular strong secular story maybe they do drop a bit of a pullback we think those will be quick to bounce back. Overall, i think it is just the Economic Data is going to start to really wear people down we think that, plus the idea that even though Economic Growth is slowing, the fed is still going to be keeping rates on hold at this very elevated level for a long period. That will be the key message coming out from the minutes today, from jackson hole, and from the meetings going forward. So those two things together probably take out a little bit of juice from the equity market and drive that pullback. All right, seema, great to speak with you, thank you. Thanks. Coming up, well talk target results and more after the break. Before we get to that break, take a look at the premarket winners and losers in the s p 500. Squawk box coming right back es deserves a great deal. Thats why comcast business is launching the mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 49. 99 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Some people think you can only have one favorite team. Well i beg to differ. Thats why i got xfinity. So, i can catch all my favorite teams outofmarket sunday afternoon games. And for the First Time Ever, no dish needed. In a word its fitzcredible. No. I got it, fitzsational. I should trademark that. Eligible xfinity rewards members can get up to 100 off nfl sunday ticket from youtube. Sign up for xfinity rewards now. Targets Second Quarter earnings coming in at 1. 80. Thats pretty good 41 cents above consensus revenue was not as good as the street was expecting, 24. 77 billion and the street was looking for 25. 16 billion the retailer then also slashed full year Earnings Guidance. To approximately i think where the street was, though, and socalled shrinkage as you see on the nightly news every night has been an issue for target you see crime, organized or not, people walking out with stuff and not even being challenged a lot. The retailer previously warned that it was on track to lose 500 million due to theft this year joining us now, michael baker, managing director and senior russia analyst at da davidson. It is what kind of bothers me, michael, is that we almost get inured to it and you say 500 million involved here and thats not material and it is like the cost of doing business, thats the world were living in right now. Is it material it is material. It is 500 more than they originally planned it was actually more than 500 million. I think part of it is youre right, thats what the team is trying to combat here is get the message out, hopefully people in washington are listening and helping and doing something about it because we have gotten too used to it and something needs to be done. Do you think the stock has seen its lows, nice move today, off of 52week low what other issues do does mr. Cornell have to deal with right now . It is hard to run a retailer i cant imagine ryine trying tot things that are hot every season that people want without having a bunch of stuff left over that you messed up how much you stocked the shelves with a difficult business just to do it normally and then all these other issues swirling around what do they have to do . A couple of years of problems i think the stock hit the low. One of the issues was i think everyone knew it would be weak because of some of the pride issues we didnt know how weak it was going to be. I think this is a little bit of news, get the numbers out and lets move on. They werent great, they werent terrible move on from the pride issue the next challenge is going to be the Holiday Season. So well see what they have to say about that today the one thing that really strikes me as a little odd is that from your reporting this morning, your teams reporting, it seems like the pride issue is behind us. That impact to june, july was better, but why the lower back half sales guidance, why down midsingle digit, which is no better than what they have been doing. So i think well have to flush that out in the call the next challenge is getting the Holiday Season right. That was the head scratcher, why still lower, unless were sandbagging. If you removed, lets say you had a magic wand, you take away the shrinkage issue and the pride issues, where does that leave target in terms of valuation and where should we be trading relative to walmart . It has the mix problem correct so, it has a mix problem, still probably underperform target in terms of same store sales. I think the valuation would be higher, trading at 15 times consensus estimates right now. Those are not likely to be a downgrade month because the eps guidance is roughly in line. Thats too cheap, thats below the historical average, trades above 17 times i think without the issues you would be back at 17, 18 times multiple the big story this year for target was supposed to be a massive rebound in the operating margins after last years issues with markdowns that got derailed in the spring because of the issue but if we can move past that, i think there is still a margin and recovery story here, maybe not back to where it was during covid, but precovid, the margins were between 5. 5 and 7. 5 , went to 3. 5 last year because of the ma,drkdown issue. Michael, whether a company gets involved in some of these things, and it is not all about the bottom line, companies can think that i want to be i want to act on certain cultural itches i think i can make a difference and believe in things courtney reminded me at least of the bathroom issue from a couple of years ago with target i didnt realize they had four quarters of sales that looked like they were affected by that that did not deter them from deciding to take the latest initiatives. I look at bud light, their ads now, theyre back to clydesdales and Armed Services and waving flags and things like that they look like theyre just totally going to move on from trying to make a statement in other areas. Do you expect target to pull back on this or to double down on things like this . It is a very difficult issue. You said it, youre right about that it does seem like they are pulling back a little bit because of the safety of their associates and shoppers. This is a big issue. It feels like they pulled back a little bit, right or wrong that feels like the strategy theyre going with. Companies dont necessarily do it because theyre expecting to be rewarded financially for it sometimes theyre willing to take some lumps and they just think that for the greater good, thats in the back of their mind, thats why theyre doing it not all a bottom line . What do you attribute it to . There are associates that they want to make feel welcome a lot of reasons they do these things and probably willing to take some lumps. I think the lump the target took this quarter is more than they expected a little lumpier. On the Conference Call this morning, will we hear about back to school . I would imagine much of back to school is done. We will be asked about they will be asked about back to school we have a chart that we publish all the time that shows in 23 of the last 29 years, trends broadly speaking for back to school have correctly predicted trends for the Holiday Season. Back to school is very important and will come up on the call tonight. What is your hunch on back to school im into the soft landing camp i think retail sales slowed. We saw that in yesterdays numbers. Yesterday that did beat, but we look at it year over year basis, we are seeing a little bit of a slowing trend, so we think back to school is slowing, but not bad. Not recessionary, you know, again, for us, the soft landing type scenario. Great, michael, thank you appreciate you having me. All right good to have you thanks okay. Still to come, a risk factor for the American Economy thats what treasury secretary yellen says about chinas economic slowdown. Well dig into the data. Tell you why one companys financial crisis could threaten the entire chinese economy and well talk about a little adventure she went on in china as well. First, a trip, a trip of sorts first, a fresh read on the mortgage demand. Diana olick has the numbers when we come right back dont go anywhere. Youre going to want to see this tiow me n for todays aflac trivia question. Amc leased its first theater in what year . The answer when cnbcs squawk box continues Expenses Health ie doesnt cover. So whos talking about the money aflac pays to help close that gap . Gaaaaaaaaaaaap aflac aflac gaaaaaaaaaaaap its about to go down, baby aflac aflac stop that goat get help with Expenses Health insurance doesnt cover at aflac. Com this thing, its making me get an ice bath again. What do you mean . These straps are mindblowing they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. And you are . Im an investor. In invesco qqq, a fund that gives me access to. Nasdaq 100 innovations like. Wearable training optimization tech. Uh, how long are you. Im done. Im okay. Now the answer to todays aflac trivia question. Amc leased its first theater in what year . The answer, 1920 welcome back to squawk box. Were watching shares of tesla the stock is down more than 2 premarket. The company is cutting prices on the model s and x in china by nearly 7 as it looks to reduce its existing inventory this follows a similar price cut for those models in the u. S. This week. The latest read on mortgage demand just out moments ago. Diana olick joins us with more diana . Melissa, Interest Rates just continue to climb. And mortgage demand continues to drop total Mortgage Application volume is now down 29 from a year ago, according to the Mortgage Bankers association thats because last week the average rate on the 30year fixed rose to 7. 16 from 7. 09 thats for conforming loans with 20 down it matches the high in october of last year, which was the highest in just over 20 years. Now, higher rates are colliding with higher home prices and crushing affordability Mortgage Applications to buy a home were essentially flat for the week, and were 26 lower than the same week one year ago with rates now approaching 20year highs, there are not a lot of folks who can benefit from a refinance those applications were down 2 , week to week, and were 35 lower than the same week one year ago. Both purchase and refi applications were at their lowest level since february. The only mortgage demand that is rising is from buyers of newly built homes. Thats because there are so few existing homes for sale, and builders are offering more incentives now like buying down the Interest Rates melissa . I would think that as Mortgage Rates go up, the cost of business incentives to the builders, more costly. Absolutely they do. Well see how much they can handle their sentiment level went down this week as we saw yesterday and they said a lot of that was due to higher Mortgage Rates and higher costs youre right diana, thank you. Diana olick. If it doesnt say my name, im not going to say it. Coming up, falling short in europe china will miss the 5 growth target as Downside Risks spread into the chinese Property Market the latest data out of beijing next. Plus, variant of interest, t dr. Scott gottlieb will join us later this hour. Youre watching squawk box and this is cnbc this is the only rotating i care about. Or activate anything to earn. Your cash back automatically adjusts for you. Can i get a cucumber water . Earn 5 cash back that automatically adjusts to your top eligible spend category, up to 500 spent each billing cycle with the citi custom cash℠ card. I love it. [voice vibrating] check out shares of Chinese Tech Company tencent reporting a surge in profit for the Second Quarter, but fell short of the streets expectations. They said cost cutting measures began to pay off with sales rising across the companys various businesses the stock is down 1 right now meantime, chinas largest retailer falling despite a beat on the top and bottom lines, reflecting concerns over a slowdown in the worlds second largest economy. New data out of china shows home prices fell in july adding to the mounting worries about the health of the real estate sector despite this, and the looming threat of default, embattled china property chountry garden will continue. Eunice yoon has more good to see you. Reporter im outside of one of Country Gardens Unfinished Projects in beijing. Workmen were on the property and sales staff were attempting to convince potential customers they didnt have to worry about any of the homes, they said that the company, despite the fact that it is facing default, would make good on its commitment to home buyers. Despite that, of course, there are a lot of indications that the Real Estate Industry is continuing to deteriorate. Just earlier today, data showed home prices in july falling nationally by the most this year thats 0. 2 from last month. It is also worse in smaller cities where Country Garden has been expanding Country Garden more and more is seen as symbolic of the broader issues that the Real Estate Industry here faces. Unlike troubled rival evergrand, which had excessive expansion as its problem, which, again, hit the financial industry two years ago as well as investors, s p compared the two developers this way saying ing in a report, evergrands problem was more related to hidden debt where as Country Gardens problems are tied to the deteriorating operating environment, particularly for lower tier cities in other words, Country Gardens problems are reflecting the falling home prices, the falling sales prices, and some of the bigger issues in the economy and that is that people just dont either dont have the money to buy apartments or are worried about the fall in prices and that theyre seeing that it makes much more sense for them to hold off on buying something today if prices continue to deteriorate into the future. Guys and always a something to talk to you about, eunice, in terms of china the latest now it is i cant believe how quickly things can change between boom and bust and expecting a post pandemic rebound now. I hear that that whole the idea that that is ever going to happen might be in question. And then at the same time, you see what happened with a weaker yen. 6 thats supposed to be china. Not japan. Gdp. Yeah, yeah, the gdp, yeah a lot of people are talking about how theyre feeling much more pessimistic about the future here. Especially with the Economic Data set that we saw yesterday and then as we were discussing yesterday, another big maybe not such a shocker, but something that people are really concerned about is the fact that the authorities here have suspended more data in the way of youth unemployment figures. The youth unemployment figures had indicated every single month that one in five young people are having trouble finding a job. And lo and behold now, the authorities are suspending that information, they say to revise the methodology, but a lot of skeptics say this just does not instill confidence. It just seems like president xi took an initiative to sort of temper his enthusiasm for the private sector and for that a booming economy solves all problems sort of to try to assert chinas dominance in a lot of other ways and that to try to bring the middle class up to the standard of living of the rest of the world. Is that on hold now given some of the moves that president xi made in recent years reporter i think it is really difficult to say. It is hard to figure out exactly what the leadership is thinking. And i think thats a big problem. Because this is the second largest economy in the world you think that there would be a lot more transparency in terms of what the leadership thinks. But it is hard to know right now when it comes to the property sector, people are wondering where is president xi . Where is the leadership . Why dont they do something to fix the problem . We can guess theyre worried about the debt issues, that theyre concerned they dont have a whole lot of money because the local governments just dont feel like they have the cash to be able to help out in any way but it is very difficult to say at this point because we havent really heard much from the leadership you got anything on janet yellen and the electric koolaid acid test. That was a famous book from long ago on psychedelics. But are you talking about the magic mushrooms that she did have i dont know you dont call them magic mushrooms here, but they are called which translates to see or touch hand blue this is a yellow mushroom that when you cut it, it turns your hands the mushroom turns blue and it has hallucinogenic properties if it is not cooked right. In the restaurant she was at, here in beijing, they are presumably cooked right. So you dont necessarily see Little People floating in the air or other things like that. Thats what people talk about in the area where those mushrooms are from in the southwest. People have long complained that you start to see, like, Little People, horses and stuff like that, if theyre not cooked right. But or you can even die there are cases where people die. But thats not the case if it is cooked in a good place, so what if it is only half cooked clearly it wasnt fully cooked for her. She was fully cooked. Do you hear stories about this, though, at this restaurant reporter what . You dont hear stories you dont ha hear stories about this restaurant in this instance or this is an unusual situation. Reporter what do you mean, that people that theyre half cooked there is a lot of stories about these mushrooms in the southwest where these mushrooms are from you can see videos of people with their spouses at the hospital, like, going like this, reaching out, there is stories recently about police who have been who have told reports of people who said that while they were driving after eating the mushrooms that they saw a child, you know, run across the street or things like that and it never happened so, there are a lot of stories about that it has hallucinogenic properties however, if theyre cooked right, so youre fine if theyre cooked right that restaurant, theyre getting so much demand that they were they have been posting all these pictures, showing that everybody who is at the restaurant is going in and theyre all pitching in to cut the mushrooms because the lines out the door are so long. And then the restaurant also said that Janet Yellens one of her aides stopped by to pick up the special menu that the restaurant made, which they called you noticed, the god of money menu now which has what the what she and her staff ate at the restaurant. You keep saying whether it is cooked right there is a lot of these tech guys out in silicon valley, they say cooked right, they mean cooked to get the cooked right means reporter no. All right, eunice. Reporter i meant, cooked cooked to not release the reporter yes, not cooked not baked, cooked. Yes. But it gives a whole new meaning, like pizza with pepperoni and shrooms, god knows what would happen, right yeah chinas answer to bad news, skip it or give people those mushrooms maybe. Beijing will stop publishing figures for youth unemployment weeks after it hit a record high in june. New this morning, in a report, it is increasingly popular the second largest economy will miss its 5 growth target, that comes after the Chinese Central Bank delivered a surprise Interest Rate cut this week to try to bolster sluggish growth. Joining us now is anna ashton. Good morning to you. Whats your takeaway on this shift, if you will, when you dont like the numbers, you change them or maybe you just stop publishing them well, some analysis ive heard is that it could actually be much higher than the reported rate, the last reported rate which was above 21 . And so that could be part of the reason to try to sort of sweep the numbers under the rug because the explanation from the Chinese Government was that there were inaccuracies and that would qualify as an inaccuracy one of the figures i heard cited is as high as 40 . So there is that there is also the fact that the Central Government really hasnt offered any thoughts on how to fix this so far. Theyre acceptable or satisfactory to the youth who are actually affected by this. There has been an attitude of roll up your sleeves and take the blue collar jobs because this is fundamentally about a mismatch between the jobs that are available and the education status of this huge group of college graduates, but the blue collar jobs dont pay the same and dont make up for the expense of college. How bad is it how bad to you think the reality is and i ask it in the most selfish way, which is to say i think that the west is trying to figure out exactly what is going on in china because if they get a cold, were going to get a cold and we were with tom lee who is very bullish in the environment, partially because he thinks some of the problems in china may be deflationary. Some of the problems this china may be deflationary. But, you know, if china is experiencing deflation, that doesnt change the fact that consumers arent really spending, theyre not spending in china, and theyre not spending abroad either so chinas exports are down by a significant amount globally. Especially down when you look at the u. S. Numbers really striking that the latest numbers showed that exports for the first half of 2023 from china to the United States were down 25 as opposed to Global Exports to the United States being down 7 so it is not just about inflation, it does seem to indicate there may be something going on that is, you know, a manifestation of the calls now for numerous years for companies to derisk and diversify their supply chains. And we know about the issues in the Property Development sector, particularly with Country Garden, but now we also know that a leading trust firm missed several payments in the last few weeks or so thats in the shadow banking sector, estimated to be 3 trillion do we have a handle . If we extend chinas problems beyond property and we start thinking about the shadow Banking System there, how does that impact the economy overall . It is a big problem because, first of all, the real estate sector is Something Like a quarter of chinas economy so, it has a hugely outsized role in how the economy does overall. And when major when major companies, like Country Garden, for example, the largest private sector Real Estate Development company, are looking like they might default, that has huge ripple effects for the lenders and the lower tier cities that are particularly exposed and then that, you know, affects every other aspect of the chinese economy and makes it that much harder to get growth going again. How do you think this changes the political dynamic between the u. S. And china are you of the view that somehow given the weakness in terms of their economy that they therefore are more willing to placate the u. S. Or do you think that actually it is the opposite that in a bad economic environment, you need to show strength and so you actually will make things tougher i will equivocate and say it is a little bit of both. The showing strength part, it certainly doesnt hurt the Chinese Communist party or xi jinping to be able to point a finger at the United States and policies like export controls and the latest Outbound Investment restrictions that the white house announced. And blame economic problems on the United States, quote, unquote, containment policies. On the other hand, though, it actually does look like the economic malaise that china is experiencing may be contributing to its apparently increasing willingness to come to the table and engage in diplomatic exchanges with the United States and it is not like these diplomatic exchanges are producing major deliverables, were not seeing a dynamic where everyone is back to finding ways to cooperate it is still very much talked about in terms of competition. But thats a positive. Anna, thank you i like the map next to you what year is that from actually i have no idea my husband gave it to me ill find out. Thank you coming up, a new strain of covid called aris is making the rounds the World Health Organization calling it a variant of interest and monitoring it for mutations that could make it more severe dr. Scott gottlieb will join us as we discuss this when we head toward the cooler weather in the United States. Check out shares of tjx moving higher earnings coming in at 85 cents a share. Squawk box will be right back. Welcome back to squawk box. Futures right now are mixed. The s p unchanged basically. And the dow and the nasdaq just barely in positive territory pullback day yesterday in august so far it has been not quite as positive for the averages as we had seen earlier in the summer coming up, right after this, dr. Scott gottlieb on the latest covid variant making its way around the u. S. And making its way around china the symptoms, the spread, World Health Organization is warning, all peopleryg g tintoet back to work and the office after labor day and everything else. A reminder, get the best of squawk box in our daily podcast, follow squawk pod on your favorite podcast app and listen anytime didnt wanna do t. He was proud of the price he was charging. My dad instilled in me, always put the people before the money. Be proud of offering a good product at a fair price. I think hed be extremely proud of me, yeah. New strain of covid making its way around the country and the world. The Health Organization called it a variant of interest, theyre monitoring it for mutations that could make it more severe. Joining us now, cnbc contributor, dr. Scott gottlieb. Whats going on, doctor . We keep hearing, we had a bunch of guests cancel recently because they got covid what is happening here well, look, there is definitely a summer wave happening right now. This eris variant has a new mutation in it other countries have experienced waves of infections with this same variant and it hasnt caused increase hospitalizations or morbidity. We have seen an uptick in hospitalizations among those 70 and over, those who have immunocompromised or older individuals but nothing significant. You look at the hospitalization rate now in the u. S. , it is below where it was last time last year when we had significant omicron surge late in the summer. While this is kerconcerning thee are people vulnerable to this infection and continue to be vulnerable there is nothing to suggest this particular strain that is circulating in the United States right now is more pathogenic than the prior variants. People vaccinated who had the infection before should have some residual immunity against this the thing were looking at is the waste water data from biobot you can find it online the hospitalization data isnt reliable and neither is the data on testing not getting reported by a lot of states and most people testing and testing at home. Were looking at the waste water data the parts of the country where the infections are going up the most now are the midwest and parts of the south thats where were seeing the surges of infection. Is that a function of people just spending a lot of time indoors because of air conditioning partly that i think it is partly a function of declining immunity from people who either had the infection from last winter or vaccinated last winter and the part of the country id be most worried about right now is the south where we see an uptick in e. R. Visits for covid, around 2 of e. R. Visits in the south are for covid. Thats the part of the country were seeing the biggest uptick right now. So heres the big question. For those that have comorbidities or are older or what have you, should they be taking the vaccine thats available today as a booster i know im going to go get my flu shot i imagine late september, early october, i assume thats when the new booster will come out. Should i be getting that booster, not getting that booster . Theres a lot of information and misinformation on that Health Insurance your take i would encourage people, especially if they have comorbidities to get the vaccine. It will be available by late september. Supply is available right now. Its up to the cdc and fda to make a decision. Which booster are we talking about . I was just talking to my parents about this the old booster, old omicron booster may be difficult to get right now. I would encourage people, if they can, to wait for the new booster to come out. I think if you go and get the old booster right now, its going to be hard to get revaccinated for the fall and september. There probably are people with special medical circumstances who need more protection by vaccination. I think for most americans, if these vaccines do become available, thats probably time enough to get the vaccine. In the interim, people at risk should take time to protect themselves there are surging infections in certain parts of the country we dont have the free testing anymore. We dont have the free test kits that we used to get in the mail. Is the surge much greater than we know . What about when we go into the colder months, if we dont have the free tests are we more likely to spread this . If you look at the waste water data, the new variant is very prevalent thats always backward looking so its probably more than that. So this is quite prevalent around the country, particularly in parts of the midwest right now. In terms of the testing, its going to be more difficult to get access to the testing this winter this variant is probably going to come and go next fall this particular strain isnt that worrisome this is going to run its course probably by the end of september into october this particular variant i think will have moved around the country. Should that just mean we should all anticipate were getting it this fall, say its gonna happen and well be out for what is it, five days . Whats the recommendation . Look, for a lot of people who are up to date on vaccinations and have had prior infections, it is a mild illness those who have comorbidities are at significant rusk. Eventually this will become an endemic virus this will continue to evolve and continue to reinfect us. Certainly we dont get infected by flu every year. It would be unfortunate if this is an infection that we get multiple times over the course of the year. Were going to continue to get reinfected which it from time to time and paxlovid, is that the only real firewall, especially for older people its the only drug thats widely available right now merck has a drukg on the market. The monoclonal antibodies arent available anymore. Pfizer as well as other companies have Second Generation antivirals in development right now paxlovid is indicated. Thanks. I feel like were all sitting ducks. We are he said again and again for people at risk those are the people we have to worry about. I dont think id go wild for healthy, young people. You dont like a cold. I dont luike anything my parents are holder. Theres no monoclonals and these other kind of thunings whats the approach . It would have to be a pretty bad variant for me to go back to boosters, get on that train again. You get the flu shot . I get the flu shot. Couple of times one time. And tsg is suing disney alleging they withheld profits and cut deals to boost its streaming platform that deprived them of film in exchange it received a share of gross receipts after a films release. An audit said it found accounting tricks within the books. They denied to cnbcs request for comment. When we come back, Scott Sperling says he sees a high probability of a recession for the next six to nine months. And were going to have retail coming up. How can you sleep on such a firm setting . Gab, mine is almost the same as yours. Almost is just another word for not as good as mine. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Good morning futures point to some gains at the opening bell were coming off the dows worst day in more than a month when the 10year note hit its highest level since last fall. And results from target, tjx and others well bring you complete rundown. And cancel the outrage, apple may not be moving the end call button on the iphone anyone who done want to overextend their thumbs need to listen up final hour of squawk box begins right now good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with Andrew Ross Sorkin, melissa lee is here becky is off today i think maybe shell be back next week. Youre not in tomorrow, though friday. I think kelly evans is. Youre back on friday . Im here. U. S. Equity futures here this morning were actually some of the best levels weve seen, up 19 points on the dow and the s p and nasdaq up fractionally treasury yields, we are watching the long end seems to be a more interesting 4. 189 on the 10year. Big morning on retail earnings dom chu chountsjoins us with tht results. Well start with Big Box Store target, which is up right now off of its premarket highs but still up nearly 8 right now, over 1. 1 million shares of Trading Volume at this point target reported mixed results. Profits topped expectations, revenues missed the mark target slashed its fullyear profit and revenue outlook the ceo did note sales and store traffic improved in july but still cease inflationary pressures. Target shares as a setup hit a 52week low going into that print. So again, target shares may have been set up for success given the low mark we saw yesterday. Shares of Tjx Companies just around 40,000 shares of volume after the Parent Company reported betterthanexpected ruts, like earnings, revenues and sales growth at established locations and tfrmgts j. X raised fullyear profits. They were helped by foot traffic at all of its retail stores. And this is the second Biggest Ecommerce Company behind alibaba. It beat profit and recommend news its the second biggest shopping day by ali baba in china so negativity in china all over the place, jd. Com down 4. 5 . Yup, china angst. Our next guest sees a high probability on private equity over the next six to nine months, saying its an outperformer, especially during times of economic turmoil. Joining us is Scott Sperling yesterday i was saying the fed, did they really stick a landing . Did that really happen it would be the First Time Ever thats what i mean. And the way it wouldnt work is if the excesses that we all talk about over the past ten years, all the easy money, whether were not finished dealing with that, whether this isnt this is the first series of rate increases. You and i were both around for 8 10years, right my First Mortgage, our younger partners laugh because it illustrates my age but my First Mortgage was 17 so in the world of rates, this is not horrible. This is a still below longterm 40year averages for rates so i think that theres a reasonable possibility that no matter what, rates are going to stay within this range would that cause a recession . Or do they have to go higher will they have to go higher . I dont think its the rates themselves i think its a whole confluence of things. We had an enormous influx of money into the hands of consumers through various forms of fiscal stimulus i think rob kaplan has pointed out there has been a lot more in peoples pockets than maybe had been expected. And that helps account for some of the Consumer Spending were seeing record Credit Card Debt at rates if you cant pay it currently of over 20 we have a situation where some of the drivers of growth that weve had over the course of the last few decades and the drivers the antiinflationary drivers are all dissipating. So globalization helped bring down the cost of everything. Were now deglobalizing. May be very good reasons for that but there is a price to be paid the impact of china slowdown is pretty significant for corporate growth because for Many Companies that is one of the key parts of their Growth Strategy so i would expect that theres going to be a number of factors that may lead to a recessionary period, soft, hard, i think its painful regardless to the average person, it tends to be a painful period and the inflation that youre describing and i do see a lot of reasons and we talked about it in light of industrial policy. We need to bring chip manufacturing back but its going to be more expensive. We need to go to Renewable Energy but its going to be more expensive. It all leads to it means its more expensive will it be higher on the 10your . I am not that smart i dont know i think we should expect were expecting cuts next year thats what the markets expecting. The market is trading pretty close 20 times, which is higher than normal. I know theres this issue of the concentrated performance of a handful of companies so others are not benefiting quite as much, which again is problematic from a but do you think this leads to instruct structurally higher inflation . I think inflation for the intermediate term will be more in the 3plus percent range and could be bouncing around between 3 and 5 , depending on shocks to the system which we have seen that can impact particularly. The way to deal with some of the wage i think well be looking at wage increases in the 3 to 5 range for a long time is through automation and activity. And there are technologies out there that woe dont yet know exactly how that fully plays out. Clearly regenerative a. I. Is one of those things but lots of other technologies so why do we need private equity you rationalize operations and cut the facts . There are a lot of strategies you try to fund a good company in a really attractive area that may have the ability to perform better bus youre firing a lot of people sometimes its hiring a lot of people. We buy a lot of companies where we add chief revenue officers, we add a lot of peep who can expand the Revenue Generating aspects of those companies we tend not to buy Manufacturing Companies so but youre doing gods work um, as a godfearing person, i would not put it that way but but you can see i can see how you can view it that way youre a benefit to society and over time thats how we introed the segment, your asset class outperforms most others and at 20 times earnings, this might be that people who can afford to should look into again, particularly if theres problematic cycles, we tend to do even better but the model of private equity think does work through most environments heres a piece it have that makes it more complicated. Theres no true mark to marking. So part of whats happening here is you can outperform in a bad market and the second piece is that basically its a levered return. Yes so theres always been this argument if i levered the s p, how would i do relative to mr. Private equity in. So there are people who have levered the s p and tack margin loans and it hasnt always worked out that welfare reform and the ability to add value operationally, to work through periods where that the second piece of it, though, is when you look by the way, im not a pe hater. Weve had this conversation for years. When you look at the way we mark and others marking, i think were pretty aggressive about marking appropriately relative to the comparable universe that exists and for us weve seen that in terks of amount of appreciation rel we dont get paid until ro israel and different examples where we actually have to sell something. So it doesnt do us any good to mark and eventually not have a realization pretty close to there. So i think the data will hold up reasonably well under that particular type of analysis. I mean, we do gods work. If you dont believe youre doing gods work, you need to get into a different business. Go exactly if were here on the look, were in a really interesting period where the uncertainties are higher than ive everine them, the markets would have completely collapsed. Hes doing gods work and so are we hes in a special tax bracket. No, thats thanks for coming in the chosen people how did i know this would come up . Because u in taking the carrot interest is what it is. Arent you well compensated enough to take a little grief . I i um. I am grandfather to a lot of Young Children who give me grief all the tight. Guatemala can go up and as we head to break, take a look at stock restaurant chain cacv and squawk on the street if youre watching the 10 00 hour. Stay tuned to cnbc he snores like an angry rhino. Youve never heard an angry rhino. Baby i hear one every night. Every night. Okay. Ill work on that. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Okay, folks, get your iphone out. If you have your phone out, a new ios, you know the end button because you cant just slam the phone anymore. I know you probably have a land line and you just slam the phone when its over, when you want to hang up on people. So the new ios was going to put the end button in a kind of hardtoreach place. But the new situation. There was a whole kerfuffle about it the button will be where you used to know it, lower down. You can use one hand, hit the button with your thumb and all is food in the world thank goodness. You dont have a land line . Dont give me that in your house you dont have a land line . No land line. Welcome to what year is it 2023 we have a new place where we go you got a land line we got one because people if they rent it from us you might have a reason for that then. Yeah. You have a land line yeah, i dont use it much i need to get my spam calls. What if you have no electricity. Even better, i can use my cell phone run out of battery. Thats a problem but we have chargers we have what do you call it, extra batteries that charge. Theyre always fully charged . Not fully charged but we have enough stuff do you have a land line, too . I do. Who calls you on that no one. You can get the greatest medicare deals unbelievable, great medicare deals. Lets talk about oil prices down this week, Still Holding at 80 bucks a barrel. U. S. Gas prices are up 30 cents a gallon for more on energy, rita, great to have you with us. What you do i this the directory of crude will be the saudis announced extending their cuts and we have seen prices up about 20 since then i would definitely view it as a success. What he has been saying throughout is that they wanted to bring some stability to the market to continue weve also been through a huge period of destocking because of high Interest Rates. And i think we are now it does look like we are pretty much through that cycle. So i think theres a little bit of profit taking right now its also the summer lull so people are off on holiday, which is to be expected but i do expect prices to grind higher around 90 after this profit taking is over how do you you view china i was talking to another Energy Analyst last week and she said the numbers out of china in terms of buying crude haves andh has slowed to less than 9 theres a risk if if they didnt do the monetary easing that maybe growth would have been 4 for the year rather than 5 but oil demand extremely strong, i think the fundamental problem is that the leash year activity and problem and theres even more the problem is people werent spending money on the Property Market because the macro data has been extreme lip weak and but we havent seen that effect crude wing or just generally transportation thank so much, am well be right back. Welcome back new this hour, a new look into how ev owners feels about public charging station phil lebeau joins us with that story. Phil reporter andrew, they dont like it. The latest survey explains why they surveyed more than 15,000 ev owners and the level of dissatisfaction or the if the main complaints last year, too coastly, the large who were surveyed of 15,000 said whe not do whatever the reason they are frustrated and for good reason those are most of the bruck charging stations that people are come plans about you may you a ap and it ranked at number one monday nn and even other public. That are now going to when you go by a ses ba frm it may be crowded but it it all of has to stocks had even with the government insiders out there. Speaking of get people confident when theyre chargin on road you we rm theyre out on a new campaign to convince people when you rent an electric vehicle at hertz, you can get where you into the it bottom line is this on has to frms. Okay phil lebeau, i dont have an electric car yet so i havent had this experience. What about you, fill until. Ive had one and ive tried out some of the public chargers. I dont blame people and look, the number of times my friends who do have electric vehicles, they say the same thung. Most people. In. When you use your google to see when youre going to get there, i plan on getting there by then. I dont like diversions. If ive got to a place where theres a sunoco, i wont even wait and its just not going to work to. We have data coming up next and Housing Starts for july right after this well be back. 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 z flip5. Only on verizon. A lot of times id get in trouble in school and just get kicked out the classroom. My mom put me in football for a discipline thing, i didnt really, like, know anything about the sport. I didnt like it at first either. I remember it was the banquet night. Coaches said most improved player goes to najee harris. i was just like and i looked up, like,what . that award changed the trajectory of how i looked at life. You know, football, people see it as a sport. But i see it as tools for life. Welcome back to squawk box. Rick santelli here live on the floor. Well, i wish it was the floor. Cmhq, floors is closed and were expecting Housing Starts for the month of july, theyre hitting the wires, expect being 1,450 on starts. A little bit improved but pretty much right on the mark 1,254 includes so do consider, though, that just a couple of months ago in may we had 1,559,000. So you can see the starts have deteriorated a bit but we also have 1,300,000 earlier in the year so theres been some volatility if you look at the percentage numbers with subtle revisions, were down about 4 on starts. And excuse me, were up about 4 on starts and were up about 0. 1 of permits, which is chase by unchanged we learned today the average 30your,ed high side you have to go all the way back until it is fixed mortgage raw and pr, hovering at 421, settled around 420 yesterday but maybe the most Important News at all is we traded as high as 426 to an ininterest expectative yesterday thats highly significant for a technical perspective and this was had squawk box, well, melissa lee, its back to you. Rick san teley, thanks it to you. Diana, let get to the first, your take. These are write along expectations but there was a big devision down in the june number there from from and id like to break out thingle many and starts month to month. Thats debt sp when rat prm f and they blamed it on higher Mortgage Rates and higher cost but they seem to there there is more demand coming down the pike because there is eso little supply on the existing side, it goes to builders when we go to multifamily, i with i think we need to Pay Attention to now, rents pulling back and year over year. Thats actually not terrible but when ba, mostly on the high are end, tonight want to see that much commonwealth are it looks look if eveningnd theyre still putting holes in the ground, even though were seeing the higher rates this week its already been rising and it even higher than that now and has held there for several weeks now, which it hasnt really done that much in the past, melissa. Diana, thanks lets get to Steve Liesman were looking forward to the fomc minutes were expecting a marriage of the folks that theres more to be done and this feeds right into that narrative. Let me just pick up what diana was saying temperature housing sort of finds a way here its rahaling this the housing number are down but if you look at the long trajectory of Housing Starts, we have been at difficult times, below a million. Were in the even close to that now. Were down from where we were this time last year but i dont know if its the issue of builders paying down mortgages or just the sheer need that we have in this country for housing that whatever price there is relative to how bad it could be and with these Mortgage Rates, its remarkable to me that housing has found a way to remain rel seft had of and very quickly on the minutes, melissa, were wondering is whether or not the strong gdp data is out there. The big retail sales number we have has pushed gdp Sales Forecast i have a tweet if you want to read against the large rates in atlanta fed. Its a question of how the Federal Reserve addresses this at all thanks to all sticking with the our pb in which he looks into why u. S. Inflation coming on. When one does an analysis, the result is the same and it was likely the predictable consequence of a reful of labor markets provided some additional and now a professor at harvards cool of ken p Kennedy School of government heres how i would have done the intro, professor or jason. I havent talked to you in a while. You are so deep in the weeds with all this reading your notes or even oneds and so much has chang so many data point and nuances overall you i just want to ask you can we tame inflation if theres no recession and would the fed stop if they dont cause a recession . Is that that. Of course itm getting a little bit more hopeful that its possible, even though unlikely i still am of the view that the last mile will be the hardest. That when you get a string of unusually good, the trend is to lean against the wind, not to, pend it. Is it possible a huge critic necessarily of all the easy money and that theres a day of reckoning coming thats going to be ugly of whatever you want to call it, fiscal and monetary larges is it too simple o to i guess im asking you the same question again. Im wondering whether the fed has to fapg either you stay high or go back to what i consider normalized rates, 6 or 7 . I this we had about a year and a half there when we had easier money than we needed to the fed cleaned that up really quickly. I think theres most likely another hike or two in our put thats it and then cuts . I think itting if to it doesnt take a lot more this many it. And have inflation under control. If you dont have both of those, i dont think theyre cutting rates so i think this is going to be high for a while the last mile, the ooeven s been Renewable Energy is probably going to cost more to make that transition the population is aging. Labors going to stay tight. Theres a lot of things that arent going to just happen easily and thats is that why were going to be higher for longer . Yeah. The other thing is we back to a place where fiscal policy is fighting Monetary Policy the deficit had come down a lot last year. Its actually risen over the last year. Thats Pretty Amazing because you have the stock market rising, the Unemployment Rate low and we have a quite surprisingly large deficit for an eit puts mr questions on the feds. Some of the other things that people have talked about, i dont know, inflation is high because of used car sales, thats not going to last but on the flew if ill goes whack to 100, doesnt that make things difficult as we pilt are,000 if and part of the inflation now is the good luck of falling oil pruces if ever count on good or bad left to continue and i expect that in energy. By the way, the other sets frm and you may see that in the p. And youre growing its really hard for that to happen on a sustained basis with that inflation being about 2, 2 1 2 over covid so theres a lot of things here proo have evening. Are you forecasting recessions in the next 18 months i think eight rot of the you fluchl and if the fed stays where it is and doesnt raise anymore would we get a recession . I think most of the monetary tightening i mean, look, most things like the dollar, the stock market, mart rates, corporate proing current level of tightness in juneipero serra of 2022. Its over a year ago we were just talking about Housing Starts and permits, we might are so i think many unless there theyre behind us in is it harder to see a recession with as much additional stimulus still in the pipeline from the chips act, from the infrastructure, itsing if to be a number of years into the future the ira has a lot of subsidies that are going to happen over the next couple years. Im sort of channelling Robert Caplan who says theres a lot of money stale be that is going to keep the and, look, if we dont land, the fed is going to keep raising rates, cause a recession. Thats what i mean. Its too much archgood thing right now. We probably wouldnt have a recession if they state police here theyre going to be compelled to keep hiking before they get to a fiscal slow down in 2025, a lot of the tax cut expire i live in new jersey. So youre right. That was my guess or other tax cuts, why not let it spire, have an extra bit the ro rather than fighting the fed, which is the mode its in right now. What happened nm peoples republic of cambridge, in fact, is where you are, arent you yeah, were socialists all of us did the salt hit you when they got rid of that you know, it did a little bit but e now we have people who want to clear their space without the salt bag thats do you have an agent, jason . You need one i got a good name for you. Thanks, geoff. You know, all in all, i think the results they werent good but they also werent terrible how much do you think they should take away of whats happening at target relative to everybody else in terms of the mixed results, do you put this on sort of the woke social issues weve been talking about . Do you put it on Something Else . Do you put it on the economy what is it i think for target this quarter it was a mix of both they said on the call today, com sales deteriorated for the second half of may and that deteriorated into june but then when they pulled the merchandise in june, they did say that sales and trend and traffic improved in july so i think that was one positive but in regards to the broader Consumer Spending and retail environment, you know, i think its a mixed bag clearly target is more exposed in those discretionary categories and celebrated gay pride or other lgbtq issues but didnt seem to get the backlash. I think the merchandise at target was very specific and it caused a stir in the media it caused a stir in social media as well. You know, people are just much more polarized these days, so for corporations, companies, i think they have to be very careful about how they market and merchandise their products, and for target, it kind of alienated both sides of its customers, and target does serve a very Diverse Customer base, so they have to be very careful and try to be as neutral as possible, which it really clearly did not do with the pride merchandise. Yeah, interesting on the call, they said the reaction to the pride assortment was a signal for us to pause, adapt, and learn, so it really seems like target is going to reexamine how it handles these sorts of celebrations going forward. But aside from this, lets say this issue is past target. Lets say the shrink issue, the worst of it is over. What sort of multiple should we be paying for target, given the unfavorable mix that it has going into this economic environment . And it did cite, also, the repayment of Student Loans as a headwind for it going forward. Yeah, great question. If this pride wasnt an issue, and the shruink wasnt an issue, i think target should be trading on much higher multiples it could be trading at 18, 19, 20 times, which would still be a discount compared to its peers like walmart, trading around 25, 26 times costco is trading north of 30 times. Historically, costco has traded at a lower multiple. Its a little more concentrated. Its only located in the u. S it doesnt have some of the other channels and banners that other retailers have like, for example, walmart has Sams Club Walmart has International Business walmart has a much larger alternative profit stream like advertising, things like that. Target shares usually are at a lower multiple but i think it could be higher than where it is now. Okay. Were going to leave it there. Thank you. Appreciate it. Thank you coming up, were going to talk markets, get you ready for the trading day ahead. Futures have turned south. Areyre all red across the bod. Stay tuned, youre watching squawk box on cnbc grow thickr 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. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. I need it cool at night. You trying to ice me out of the bed . Baby, only on game nights. You know you are retired right . Am i . Ya save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Welcome back to squawk box. A little more than half an hour to the opening bell on wall street joining us now, head of equity strategy at Wells Fargo Securities chris, great to have you with us great to be back. Your target was 4,420 in terms of the soft landing. Where are you now . In terms of soft landing, 4,420. Our base case coming into this year was 4,200 so we expected 10 upside and when we slice through the 42 and the 44, we said, somethings different here this feels a lot like 992000, and 992000, you had uber caps running. You had a fed tightening cycle, and you had a lot of similarities and you had a new technology you had a lot of similarities to today. What we said is, the big impediment back then was the fed. What the fed did was 25 basis points here, 25 basis points there, but at the end, they accelerated the pace, went to 50 that broke the economy that broke earnings. That broke the new economy stocks here, we were thinking, okay, follow the fed, because if the fed doesnt break the economy, theyre not going to break that major trend, and that doesnt appear to be true. So, now, what were watching is ig credit spreads, claims, and those still are those are still well behaved and until we see them move higher, that major trend has not broken so, are you thinking theres upside to your target at this point . Potentially what we did is we said, we cant we dont have a great insight into 24 numbers the market is telling us numbers are going to be up maybe 20 next year. Were doing the work now, were looking at it, and were saying, valuation is really high this is not about valuation. This is not about a level. This is about an event and the feds not going to do it and ive never seen a recession with ig credit 120 basis points or less. Until we see that, things the path of least resistance is still to the upside. There can still be ceilings to the markets, and i feel like were seeing that. We saw that yesterday when we saw the tenyear yield hit the highest since 08, closing at the highest since last fall or so, an is that going to be a headwind if we are higher for longer, is this going to be sort of the cap or a cap its the tenyear yield plus ig credit spreads. Last year in october, it was about 6 now, were looking about 50 basis points lower maybe what were saying is, hey, we need to entice buyers with a higher yield that yield isnt high enough, and until we do that, those folks are on the sidelines, and we are seeing stocks are no longer teflon. The fundamentals are still positive, but the reaction to earnings for a lot of a. I. Stocks has taken things down a peg, and with higher rates, were starting to see downside, but i dont think this is a correction unless you see the cycle high for the tenyear is about 4. 25 , youre going to have to see a material move higher for that correction but 3, 4, 5 pullback seems about right. If you set up ten at the beginning of the year at 4,200 now, 44 ,400 now, id rest on my laurels if i were you. Id waffle id love off that for least another year we might go up, might go up and down, im cautiously optimistic day, optimistically cautious the other day. Thats what you ought to do. But you cant. When do we hit alltime highs on the s p . We turn the calendar. What happens the calendar actually improves, or it may improve. We may see more ipos we saw one or two ipos that were very well received during the summertime the Growth Market is still on fire the other thing that happens is that is the conference season, so you have different conferences, banking conferences, tech conferences, health care conferences. Theyre all going to look into 24. I think theyre probably going to be pretty optimistic. Now you can start to stir up some of that animal spirit, some of that optimism we probably need to see a little bit more downside before we go up 5,000 next year we havent got that far, but its not out of the question youre asking him to point out next years price target in august of the Previous Year . Its not that far its really not. 10 . Yeah. I mean, the way you get to 5,000 is the fed starts cutting rates because the things are too restrictive, not because the economys fallen, and all of a sudden, the back end i told him not to say anything, and then i asked him to Say Something very specific thank you, chris harvey i thought we had a big invisible eightfoot rabbit coming in. Harvey but we dont final check on the markets were down a little. Make sure you join us tomorrow squawk on the street is coming up next. Good wednesday morning, welcome to squawk on the street, im Carl Quintanilla with jim cramer at post nine of the new york stock exchange. David faber has the morning off. Pretty soggy premarket target, tjx, moving the retail earnings ball along, and the tenyear still elevated at 4. 22 . Cisco tonight. Our road map begins with target. Up sharply as an earnings beat offsets this sales miss and the lowered guidance Regional Banks looking to rebound after the comments on Capital Requirements and concerns about the china slowdown weighing on that countrys stocks, includin