Well talk about that when power lunch begins right now welcome to power lunch. Im melissa lee. A wild day for the market. The dow now up, look at that, almost 400 points. 1. 5 wiping out yesterdays losses on track for its best day since may. The nasdaq is now up just about 2 as tech leads the charge higher. And check out shares of apple. Having the biggest impact on the dow, it is up about 4 its best day also since may. Kelly. Thanks. We begin with a phone call that turned the markets around. Kaley tausche has all the details of what took place the details we have about the call are coming from china actually commerce minister and hard liner jong chun, and leo ho were among principals from beijing along with Robert Lighthizer and Steven Mnuchin representing the u. S. Chinese tv said the u. S. Asked for the call, but declined to provide a readout or comment whether inperson negotiations in september were discussed. President trump on twitter implying there was a discussion of agricultural products, more of which hes wanted china to buy. Beijing said it would consider those purchased but not commit to them, but trump tweeting that maybe this will be different unclear exactly what this is what resulted from the call, though, is a delay in some of the tariffs that would hit consumers hardest, with President Trump this afternoon acknowledging he doesnt want to be the grinch. Were doing this for Christmas Season just in case some of the tariffs would have an impact on u. S. But so far, they have virtually none of course, there will still be a large set of tariffs that would go into place on september 1st at 10 , but melissa, things like toys, smartphones, and some apparel and shoes, those would be delayed until december 15th i guess get your Christmas Shopping done early. Thank you. Kayla tausche. Lets get to bob pisani at the New York Stock Exchange on more of what is moving the big relief rally. Talking about grinches if there was one grinch, it would be the bond market, which seems to have barely responded to the response sentiment on equities woor up a little bit and moving in relation the market hit the highs around 10 30, and thats when bond yields were hitting their highs for the day. Not as perfect as it has been recently i want to point out what kayla said, the toy makers are loving the comment on the tariffs you have apple moving and caterpill caterpillar, but mattel is up, hasbro is up hasbro issued a statement about their appreciation we appreciate the administration listening to our concerns. We believe this will help mitigate the impact on u. S. Consumers this holiday season. Were also seeing very heavy volume in cyclical etfs that are tied to trade. So technology, the xlk, financial, xli the industrial, xlf is financial. Xli is industrial. Consumer discretionary, much heavier than normal volume same with the asian etfs hong kong etf, tremendous volume today. Rallying today taiw taiwan, singapore, and the emerging market etf, or heavy volume than normal back to you. Bob pisani at the New York Stock Exchange a major escalation in the situation in hong kong as protesters and police clash at the airport earlier today. And we just had President Trump tweeting moments ago at the Chinese Government is moving troops to the border as the tensions intensify for more on the hong kong protests and what it could mean for trade negotiations with china, lets bring in fred kemp, president and ceo of the Atlantic Council fred, welcome back it seems that whenever we visit, bad things are happening, but well take that as it may be lets talk about the situation over in hong kong. I saw stories last night that hong kong or chinese Mainland Police were massing near the border in shenzhen, going through exercises. How much of this latest news do you feel is a real portending of a crackdown . Well, theres a lot thats chilling right now over the weekend, we had some of the most violent scenes we had we had the shutting down of the flights to the airport you also have new language in the Chinese Governmentcontrolled media, calling the protesters terrorists and thats totally new language. The real question is, is this a bluff on president xi jinpings part to put pressure on the protesters to stand down a little bit can hong kong restore order itself giving the protester as little bit of what they want. Its looking more and more unlikely that thats the case. Beijing is saying, and i read regularly an editor of global times, and he says it is hoped he speaks for the government when he sense out these tweeds its hoped hong kong can restore order by itself. That is the best end if the development of the situation suggests there is no hope, beijings intervention will be inevitable its a hard choice, but once it becomes the decision, it will be a firm one he very often is speaking for the government i think we have to take for granted in this case he is when the president says this is fundamentally an issue between china and hong kong, which is a part of china, do you think that that position is will be enduring, if things escalate, will he be able to use that kind of language . Well, let me talk about how the two things are linked, trade and hong kong. The move to december 15th is not an accidental move for the deadline for the tariffs for President Trump. October 1st is the 70th anniversary of the peoples republic this is a really important time. President xi cannot be shown to be weak either to the United States on trade or the protesters in hong kong heading up to this anniversary he needs a clean hong kong before the anniversary so you really have to imagine things are going to happen this month, Early September at the very latest in hong kong. Either order being restored in a normal way or the nightmare scenario, which is a violent crackdown in hong kong, which inevitably will worsen relations with the u. S. At the same time the trade disputes continue. I think thats what everybody is really most worried about. At the same time, fred, hong kong is an important conduit for investment for china, particularly, including xis important belt and road initiative, so its not necessarily, i understand wanting to crack down and clean up the situation by that important anniversary, but theres a delicate balance also to be struck in that you dont want to headache it seem like hong kong is no longer a Financial Center because you risk that investment not coming in to china where its needed. Yeah, i couldnt agree with you more on that i think the last thing president xi jinping wants to do is use force and military force with beijings fingerprints on it to bring this under control if he has no other choice, then maybe thats what hell end up doing. There are also mixed feelings in china about hong kong. So the better hong kong does, you know, on the one hand its really great for china and great for hong kong, but there are also rival cities within china that wouldnt mind seeing hong kong being brought down a notch or two in terms of an attractive place for global investment. All right, fred, thank you very much, as always good to see you. Good to see you thank you. If you didnt look at the dow today, and saw the hong kong protests, argentinas selloff amid Political Uncertainty and u. S. Bond yields nearing record lows, you might not think the markets would be up nearly 2 today. So why is even the slightest positive headline on china outweighing, it would seem, Everything Else . David is managing director and Portfolio Manager with ankora. Noah black steen is Portfolio Manager with Dynamic Funds you say were living in policy hell does that mean you really cant invest fresh capital right now not advisable . No, i think you can i just think you really need to sort of go through the noise of whats going on. You cant time the next tweet. You cant time the next overnight pegging of the chinese yuan if you really focus on companies you know or you have a good outlook for the next three to five years look, back in 20122013, we were talking about the pigs, portugal, italy, ireland, greece, spain. Talking about spanish banks. This Company Calls facebook goes public, trades between 20 and 30 a share in the 1314 timeframe and then goes over 200 if youre an investor today, the best thing to do is go more mike row and focus in on individual companies, not bigger secular trends because trying to trade these macrothemes, whatever the overnight pegging is or tweet is is impossible. Do you agree with that, david . It makes sense to me that amid all this uncertainty, the best thing you can do is stick with your plan and do what you were doing. Always a long term formula that works, tyler, and thats a more concentrated, High Conviction portfolio, i think, will Proof Positive in the long term with a long term focus on companies with superior cash flow, who are very shareholder driven, good allocators of capital, and this year, just to remind you, we had a conversation last december, and the message was when the market was on its back, this year would be to bet the over, above average year its still going to be that year in 2019. The only concern i have in the near term is i have listened to so many earnings calls, Second Quarter numbers were good, but the guidance was below expectations on a 1 to 10 scale, about a 3 or 4. Thats why i think were not out of the woods even after a nice pop today. All right, were going to take a pause, gentlemen, because we have breaking news on cbs and viacom, officially announcing a merger deal. Lets go to alex sherman who has been monitoring this so yeah, this has been three years in the waiting, but its finally official after several starts and stops cbs and viuconn officially agreeing to merge. It puts to rest a saga that has gone back and forth, of course, les moonves leaving as ceo of cbs last year, and then cbs refreshing its board, really talking to viacoms board all year long. Exploring various different options, trying to figure out is this the best path forward it puts these two companies that were one for many years up until 2006 back together under the de facto control of sherry headstone, who controls national amusements, the holding company. Sher Shari Redstone is the ceo of viacom and redstone. It shows so many mergers in the past two, three, four years now, and cbs and viacom are two companies, each less than 20 billion market cap, that need to get bigger to compete with the netflix and amazons and the other Legacy Companies that have already gotten bigger. This is a step forward, and it probably wont be the last acquisition from this company that is going to be called viac viacomcbs, all one word. Lets get back to our guests and talk more with david and noah noah,if you had a sector that you would lean toward in the current market, what would it be look, i think that there are numerous secular Growth Trends that are continuing, whether its in health care, and youre looking at combination therapy, whether thats in Cancer Treatment or new medical devices. Whether its 5g is finally coming and its going to have profound impact, especially on industrial applications. Or youre looking at the continued Digital Transformation of enterprises these are secular themes, regardless if the economy slows down in the back half. I assume the stocks will pull back as well, but were not rolling backwards to ordering software off floppy discs anymore. So where you have the secular trends that remain intact, those are areas to focus on. The area i would avoid completely is the bond market where your best Case Scenario is a small loss your worst Case Scenario is a total loss i think focusing on individual companies, focusing on the trees and not the forest, is really critical at this juncture. All right, and finally, to you, david, what areas or individual names do you have your eye on right now . Sure, quickly line to the value side high free cash flow, faster than average dividend growth. So to complement the conversation, health care, amagain is a stock that i own in the mutual fund i comanage. On technology, broadcom is offering a yield 100 points above the basis high free cash flow. Those are a couple examples i would look at with a theme of lean value, lean cash flow, dividend growth. Noah, one followup to what you just said about being exposed to fixed income now. You think, we could be talking about a total loss of capital . Well, so if things lets say youre in europe and buy a bond youre guaranteed a small loss if you hold to maturity. If youre holding it for a few years and Interest Rates go up, youre guaranteed a big loss if things get completely worse, i think european banks are trading at their 1987 lows if they get worse, youre at complete loss for default. I dont know why people keep calling it the riskfree aslt, but apparently, riskfree means a small loss with a potential for a big loss i dont see how to win i think you can do better trying to find individual companies but if you buy negative yielding bonds, its an amazing time were living in, for sure. Net of inflation and taxes, thats the riskier investment if you think about a five or tenyear horizon agreed thank you very much noah, david. Appreciate it. Lets get more details on the viacom cbs merger. Bringing in david ferber on the news line. Hey, melissa. How are you doing . Good. Whats the latest here i think whats interesting of course here is the third time proved the charm, but its been an awfully long road to get here, as you well know, and having followed every step of the way, i can certainly tell you that as well this is a combination that many thought would have taken place at this point years ago. But was stymied for a variety of reasons. The first time around, after Shari Redstone had taken back in a sense not control of the company but taken over her fathers affairs and control of the company through that way, a number of years back and gotten rid of philippe domonas the ceo, there was an expectation it would move very quickly to a deal with cbs. They were unable to agree at that point on social issues but as much on economics fast forward, try again. As we well know, and as i detailed time in, day in and day out, of course, the problems they had in trying to get a deal through leslie moonves, wanted full control in terms of his ability to appoint the number two, in addition to being, of course, ceo of the combined company, and then mr. Moonves maying the unprecedented decision to sue his Controlling Shareholder and the ultimate litigation and his ouster, of course, with the charges of sexual misconduct. Fast forward yet another year, and frankly, this time last year, there was an expectation of early this year, they would start the talked, melissa, and they finally got there many of us expected they would announce a deal as soon as april or march of this year, but cbs board really took its time, going over every single thing they possibly could, demanding certain things in terms of the competition of some companys board, and focusing on the social issues prior to getting to the economics which they were able to deal with in a relatively quick fashion in the last few days. Here we are, but the knegz is how much has the landscape changed since they contemplated putting the companies together they had been partners for roughly five years until mr. Redstone decided to split them apart the stocks are barely moving on this. Perhaps,ilitieser to your point this deal had long been anticipated. The call, i understand, is at 4 30 p. M. This afternoon in your mind, what are some of the outstanding questions still for this new Management Team yeah, i think obviously theyre giving all of the reporting that has taken place prior to the final announcement or the announcement today, as you point out, the facts have adjusted to a certain extent were expecting an inflation of the ratio that came in more or less in the realm of what many anticipated. The key questions are now, do they still have enough scale can they compete in the world you talk about every day, melissa, when you discuss netflix and discuss, of course, disney, which is now the owner of fox and seems to be launching its direct to consumer services. Cbs has started all access viacom has an adod, a video on demand purchase that is trying to grow quickly. But are these enough to compete in what we know are these rapidly changing times that remains a key question, as do the simple things for example, the cbs contract. Yes, its not up until 2022, but the fact is that often times they can begin to renegotiate those a year or two years in advance. Who is cbs going to be meeting on the Playing Field to compete for those rights and will they be any better capitalized competitor even with viacom in the fold so there are plenty of questi s questions, although i will say viacom was able to answer a key one that existed eed a year ago did manage to do that. The economics of which remain fine we dont always get the exact nature or terms of those deals, but at least they got the deal done in terms of the agreements they had outstanding david, thanks so much for phoning in david faber on the cnbc news line the ceo will be on squawk box tomorrow so you wont want to miss that. A relief rally for retail best buy, dollar tree and kohls, but is trade progress enough to solve all of retails problems, and a big interview coming up. This is a different big interview. Lots of big interviews on cnbc tomorrow on squawk wilbur ross joining squawk at 8 00 a. M. Eastern time power lunch will be right back Retail Stocks valley as the u. S. Waits on tariffs that weighing on the group. Even with some tariff