Discovered new Software Issues and financials outperforming ahead of the stress test results. Joining for the hour to break this down is josh brown. I asked you what the key stock indicative of this market is and what people are watching you said gld that was surprising. I thought that was a private conversation, sarah nothing is private with me. I said gld because it trades like a stock and the dollar doesnt but what im really getting at i really feel the dollar is at a very critical level and i mentioned it was kind of sitting on support i think what the dollar does next from here could have big ramifications for everything from earnings estimates to emerging market stocks. It keeps weakening here. It hasnt broken down since trump has been president its been fairly strong. Some would say too strong. I know he would. For sure. You asked me what are people looking at and focused on, believe it or not its the dollar again gold is huge fiveyear breakout and breaking of the down trend is indicative of that. I think they are always talking about the dollar. I think the dollar is absolutely crucial not quite as crucial as you put it, sarah. But certainly we got everything. It is. It is everything. Ask the president. Its a barometer. It is. We have got so much to discuss with josh. Hes with us for the first full hour of the show its the big stories youre watching today philip has the latest on boeing and we are tracking the biggest moves and latest on the g20 summit and mike has his market dashboard. Phil, lets start with you. Lets talk about the boeing issue that was flagged late yesterday after faa flight pilots who are in a simulator flagged this to boeing and said we believe this needs to be corrected before this plane can be certified as safe to fly again and what we are talking about here is a Software Issue its not related to the mcast Flight Control system but boeing believes it is software problem, it is certainly looking at it right now seeing how they can address that issue Southwest Airlines continues to push back when it expects to fly the max. Remember, it was september 2nd and pushed it back and off the schedule through the end of september. You take a look at shares of boeing the thing we are waiting for, guys, is now when with will we see a recertification flight the first two weeks of july or pushed out a little while further . Phil, if this got pushed back, meaning putting pressure on millenberg . More pressure i dont think we are to the point people are saying dennis mullenbergs job is in jeopardy. Having said that this is dragging out much longer than people at boeing expected initially and even within the last month, you started to see the tenor of comments from Airline Executives change from, yeah, we expect by the end of august to now we are getting into the fall. Certainly before the end of the year we are moving closer in that direction. Phil, thank you despite boeings drop, the dow is on pace to avoid its longest losing streak since march. Just barely. Bob is here to look at the moves. Four down days and might avoid that hope on china trade talks propelling china stocks higher and banks have been more stable the last few days than the tenyear stable around 2 . Energy could overall weak but faye fading today as oil is flattish right now consumers big mover on the quarter Johnson Johnson and coke walgreens confirmed fullyear guidance and better than what people hoped for best first half in 22 years and up 17 and see if with hold that through tomorrow turning to trade. New headlines between a critical meeting between President Trump and xi in japan. Kayla is japan with the latest. Joo t. Reporter there is about a day between now and then there are some key conversations that President Trump will have between now and then with other leaders that are descending upon osaka for this g20 summit look at who the President Trump will meet with on tap for those discussions is trade, north korea and the president s strategy on iran kayla, thank you. We send it over to mike for todays first market dashboard mike let me first tell you what we are going to get to. Planet pizza a world josh brown i think might want to visit. Individual indecision. Retail sentiment summit suspense is where we are in right now a graphic showing you that and the fed fudge factor some data that go into the fed decision Planet Fitness got a new initiated buy rating at Raymond James and stock up it i wanted to plot it against dominos. This is a fiveyear chart. Here is dominos over five years and tremendous performer and Planet Fitness went public around four years ago. Its, obviously, kind of overtaken dominos. Not just the fun of saying you can have your peas and work it off. They are both franchise models and keep costs very low. 10 a month at Planet Fitness and 10 for a large pie at dominos essentially they put more volume through their system than you think is possible. Planet fitness has small stores and half of their people dont visit one of the gyms in given month and charge you ten bucks for the comfort of knowing youre a member of the gym mi momentum stocks are not cheap but they are working. What do you think of it, josh oi other than going to planet pizza . Someday i agree with mike. Dunkin is all franchises, another example of that. I think the big benefit for those stocks is that they have figured out that the u. S. Consumer strip everything away is extremely lazy and will not cancel things that arent costing them that much, so Planet Fitness, its not like equinox 1 150 a month and you dont go every day and eventually leads to you cancel could probably make it 15 youre like i cant cancel because im admitting im a loser and you keep it going. Domestic no dominos is an appear for other lazy people. Do you think overlap of people who use as consumers both companys products or shareholders that own both stocks i think they make it easy to stay on and paying them. Dominos to order from the app you can watch the car driving tour house its the ultimate laziness play so they have that in common incision to being efranchise models. Lets bring in lori at rbc Capital Market looks like we will break this losing streak but how are the risks stacked up so look i think we see puts and takes here we file like markets are rangebound the end of the year. I think youll zig and zag i think at the end of the day there is only so much you can do i think we need to get through the weekend and im not necessarily looking for any kind of big positive news but we need to get through the weekend without any bad news then everyone is going to away for the fourth and we come back to earnings season i think this will be a pretty tough earnings season. How do you feel clients place in the moment in the defensive names . I would say everyone is looking at the defensive names but then everyone is in a very bad mood about it. We are having a lot of conversations with people about utilities which have had a nice run. A lot of sticker shock on valuation. I personally think there is more room to do but a lot of clients just dont want to do it i would say we talk about staples earlier in the show. Thats where we are seeing a lot of client interest pick up over the past week or two these are names that feel a little bit more intuitively to a lot of managers and especially on the growth side they had a pretty good earnings reporting season last time, one of the best sectors i dont know opinion tabout what is your i think the consensus is 9 drop in earnings is that what you foresee for the Second Quarter for the market . No, no. Earnings is it the house view we have 2 on the year as a whole. So we think youre not going to have my model is tracking a little bit lower but we think a slight rebound in the fourth quarter. I think companies what we saw in the First Quarter the way i described t they threw everything but the kitchen sink at that reporting season so we saw a lot of companies talking about, okay, our tax rates are lower than it was a year ago ferocious buybacks and lots of cost cutting and companies not talking about what they were doing in cost cutting but how impactful it was i think youll see more that have i think we will muddle through but i think its tough. We talked about the dollar earlier. If it were to break low, would it lead you to alter any stock positions youve got no. Because we dont think we have an edge on how far that would go and how long it would last for i know people that do. Those people typically are investing in the way and its very far away and divorced what we are trying to do for our clients. However, i do think it would change the tenor of the discussions that we are having with clients and i do think there would be positives and negatives on both sides and i think the earnings picture would be impacted almost immediately by moving the dollar we have been through markets like that before 2014, 2015 is a good example all of a sudden you listen to Conference Calls and get a feel why people are buying and selling and the dollar keeps coming up in these transcripts the other thing a typically adviser will a sleeve dedicated to emerging stocks and merchant market stocks is a good example the way dollar impacts Equity Holdings might not change nothing for fundamentals but a huge impact in the multiple and people willing to pay. We have to keep apprised of but not saying here is our call on the dollar and what you do people can do that im not that smart. By the way, its still hurting and we are expecting that to be a head wind in nikes report after the bell today. Lori, you sound pretty cautious and pretty negative almost on the market are there specific cyclical sectors you would stay away from right now . We think the market will be there at the end of the year on the cyclical side we want to look at opportunities like trade war are ultimately longterm opportunities so we have been telling people to look at machine stocks we think the valuations are pretty cheap they have done a tremendous job with their margins its not an over owned part of the market and what i think is interesting and we dont see crowding in that space right now. I think can you look in certain parts of Consumer Discretionary as well and reasonable valuations in the brick and mortar retailers and think people should be hunting around in those kinds of places. Lohsy, thank you for joining us. Ahead, dow component nike out with earnings after the bell the big focus will be on china get you a preview of what to watch from that release. Specifics ahead. I sat down with Morgan Stanley ceo. If we see a rate cut, do you think that is good for Morgan Stanley stop line or bad given the issues his answer to that question and much more from the exclusive interview after the brk. Ea [ alarm beeping ] wake up theres a lot that needs to get done today. Small things. Big things. Too hard to do alone things. Day after day, you need to get it all done. And here to listen and help you through it all is bank of america. With the expertise and knowhow you need to reach that blissful state of doneness. So lets get after it. Everything is all right what would you like the power to do . ® all right welcome back i sat down exclusively with Morgan Stanley chairman and Ceo James Gorman and asked if the fed should cut rates he said favor a more assertive approach and the feds shouldnt use their fire power too early obviously its not good from a yield code perspective but its good if it estimates activity in the markets and encouraged confidence. So these things we dont run our base based upon is a rate cut in a quarter going to matter but gives and takes on it obviously. When we look at credit quality, do you feel the rate cut is needed . Are clients struggling to meet Interest Payments . I dont think so. No there is a lot of corporate debt the most exposed credit in the credit marketizing student lending. These kids have this debt hanging out with them going into their working lives. No i would say this is not a credit crisis we are not in a credit crisis. We are in a geo political confidence crisis. In terms of one big fear in the credit cycle people mention is leverage loans. Is that something people need to be concerned about and, if so, is it something the banks could get hit by i mean, the banks have been relatively conservative. Most of the big heavily regulated including us would be regularly conservative i cant speak to the street. The unsecured online lending space which has been explosive the last several years once we hit a down circle that is one area where i would poke and prod a little bit. Is it systemic in the way perhaps the Mortgage Link crisis was ten years ago . Not remotely. I mean, its just having lived through that, having slept in my office for weeks, not remotely this is a completely different environment. This is what you call a normal Economic Cycle and roughly every seven years you go into some sort of recession. Question is it shallow and short, is it deep or long . What happened in 08 will was deep and long. The economy is in solid shape. This is not remotely close. If we do see all of the big banks with the regulator approval return what is estimated 10 cash back yield, is that a sort of market for you guys to say to investors, look we are seller undervalued here and regulator ask a question good for asking for undervalued. Obviously, absolutely. This is crazy. Its been ten years since the crisis our own capital basis has gone from 30 billion precrisis to over 70 billion today and Balance Sheet is a third smaller. Liquidity i think three times precrisis. We are safer and better capitalized and trading we and other big banks for value. Listen in the short run markets get things very wrong often in the medium term sometimes if they misjudge macro longterm the markets is never wrong, youre the one who wrong. I think in a shortterm bunks why the bank stock you just focus on the business and we are well capitalized. Do you welcome the process youve been through . I think you had to submit 74,000 pages, is that right 72,000. Oh, a little shorter than that. Yes last year i think 57,000 and the year before was 45,000 to those who think dodd frank has been severely weak, it isnt true annual stress test making sure the big banks have sufficient capital is not a bad idea at all. Ive said that many, many times. I dont have a problem with that i dont know if you caught the debate last night, the world bank was only mentioned once and the culprit focus is much more towards Pharma Health care do you welcome that . Wall street shouldnt be. Lets be fair here we did the hard yards. We went through the crisis in our case we raised capital and took an investment 2 it and did a Ground Breaking deal in smith barney and we cut risks and we built out our bank and Wealth Management for business and we shouldnt northbound the debate we are not the problem im not suggesting who is a problem but is there but in a politically debate somebody will find somebody to be angry at the Banking Sector in the u. S. Is the best Banking Sector in the world right now. James gorman there. Our thanks to him for joining us sarah, if we add in some of the comments and talk on the street where he said that he does expect the trade war to last for a decade, given that, given his view on the fed as well, i think he is overwhelmingly positive about the outlook for the u. S. Economy and for banks as well. He said that they are undervalued and said their share price is crazy i also would take from that tone, he didnt say anything to me specifically on this, that they will get full approval to return what they want to c shareholders because he seemed very relaxed about that. He is not the first bank ceo we have heard voice frustration over the valuation and the share price. Both of them trading around book value this is much more specific. Up more than the other years. Why is that . He had a little bit of concern two years ago but this is specific and he explained the reasons why. Asset management margins under pressure, pressure in Wealth Management. The biggest by the way, he has done a good job. But the stock is only up 2 in two years and up 25 answer is staring you in the face a lot of the value at businesses that wall street traditionally has been able to charge for, they cant charge as much, investor preference is moving away from those things and they are looking for free trading, vanguard, i shares none of this helps one thing that he said is technically true but wont turn out to be during the crisis. The banks have much better Balance Sheets they fought that kicking and screaming and now love it. But risk can never be eliminated can only be transformed. The risk has been pushed on to a lot of the customers and in some cases willingly. When you look at where is the borrowing and lending revenue coming through if Morgan Stanleys management sheet is smaller . That will not look pretty in the next prolonged down turn hasnt mattered yet. We have 16day corrections in december but in a prolonged down trend you will have people with Wealth Management accounts, everywhere, they will say oh, my god, i now, all of a sudden, have to make sales in my portfolio for this money i borrowed Morgan Stanley will look for a risk like margin balance havent seen it yet but you will. Clearly you said a lot of these issues there a long time and trading around book value for sometime and it hasnt corrected. Josh, what if this afternoon all of the banks get approval and the cash back yield dividend plus buy back for the sector is over 10 it used to be a huge event and buyable event. The bears said they will tell how bad shape t