We stand with the markets. Stocks have bit a bit under pressure but the yield now off the session lows were off the session lows on equities as well the yields are 1. 48 s p 500 is down just fractionally small caps are getting hit the worst there. You see the russell is down by just about a percentage point. Power lunch starts right now and despite growing recession risks, jpmorgan is taking on the bears. The firm saying today that the worst could be over and calling for the market to advance as the year ends. Start with the september surge but goldman, bank of america, and nomura across the market lets get over to bob pisani with more. Bulls versus bears, an old sory, but the bears are getting more vocal in the last couple days a sudden spate of bearish notes. First, Goldman Sachs said the trade war escalation is making them judge down their gdp growth forecast for the third quarter, fourth quarter, and First Quarter of 2020. Probably the most Important Note out there right now. Bank of america elsewhere noted corporate buybacks decelerated last week. Nomura noted hedge funds seem to be less keen on taking risks recently jpmorgan, as you heard, the lone bull in the last couple days its nearing time to add back risk and earnings are not contracting significantly true, and earnings contract notably only in recessions which they think is unlikely. They remind everyone if earnings are not falling, just flattish, which is what we have, every per isnt of the market falls, it becomes a percent cheaper. The volume this month has been much heavier on down days like friday than on up days like we saw yesterday. This suggests to me that trader are indeed more cautious buying dips but thats not a big surprise giving what we now call tweet risks and the fact the s p 500 is only 5 from its historic highs. Were not in terrible shape. The risk a little bit to the down side. Back to you. Thank you very much one recession sign all of wall street is watching is the dreaded inverted yield curve, and its getting worse the tenyear yield falling to its lowest level against the twoyear yield since 2010. Lets bring in jim and joe gentlemen, good to see you art, ill start off with you when the yield curve initially inverted, we said, you know, its happening for a split second, so it doesnt count. At what point do you start thinking, you know, its still around maybe it does signal something i think you ask that question very well on twitter today serious question, how long does this last before we start to take it seriously. Its the twos and tens were taking seriously, not the threemonth and tenyear which has been inverted for three months three months is exactly what people who have watching this for long time will tell you. Its certainly going to tell us things are slowing down. But not just because its lasted that long. Because it causes the slow down. Banks cant borrow short and lend long. Business slows down. So theres a causal relationship to the inverted yield curve over a period of time that will slow down economic activity, but i think what we have to look at is when was the last time we had an inverted yield curve where the interger was 5 5 they have been inverted where we have been 5. 4 versus 5. 2 we have a single digit interger we havent had an inverted yield curve when that was the case were trying to apply all the metrics we have used for past inverted yield curves to today which is a starkly different environment. Im not saying its not a warning sign im just saying its a warning sign in an environment that is different than any other inverted yield curve we have had. Jim, how do you factor in this potential risk factor signal, which you factor in consumer confidence, which is still high were in a global world and our rates are still relatively attractive compared to someone else, theyre still positive and i agree with art that that makes some noise i do feel concerns because art is speaking about a slowing company. Most especially whats happening with small caps. Hard to explain why in an environment where Interest Rates are going down, which mostly benefits small companies, theyre doing so poorly. Theyre not exposed to the trade battle as much, yet theyre 15 off their top. Thats a bad sign. Do you think theyre sniffing the recession . Thats my concern im seeing that. Im seeing the Global Markets clearly, they recovered after us and never really got to the heat we did, and theyre leading the way down so right now, the s p 500 and most importantly the Growth Companies in the s p 500 are , typically when you get an inversion, its still a year later that the market after the inversion. So again, that doesnt mean that the markets are going to go down im not necessarily sure it means that we are in a recession. I just dont like seeing the small caps doing so poorly its a bad sign. A great point that chronic underperform blsh im curious, at a time where people would say okay, this recession indicator, lets call it, makes me want to get defensive, but all the defensive parts of the market are the most expensive and crowded, what should people do well, interestingly enough, the dividend payers are at a bigger discount in valuation to the nondividend payers that may have been in 40 years. So some research from goldman that did the analysis. A lot of the dividend payers are actually valuation wise as counterintuitive as it would sound with low Interest Rates, you would think everyone would be crowding the dividend companies, but theyre not so its a very interesting scenario where people are actually defending themselves by owning apple and a lot of the names that you would not expect to be doing that well because theres a rush for anything thats growing so again, people have not yet moved from the yield curve and saying im going to start getting paid by my equities because theyre concerned about the stock market again, what i would suggest is make sure that your overall allocation is in line, that you can put up with some volatility, because its hard to imagine we had a 15 run on the s p still, even with this so far this year. So its been a good market just make sure that youre prepared for what could be a very messy next few months art, before we get into what you buy in this environment, i want to ask, you pointed out all the differences between this yield curve inversion and past ones so that stat where the markets do fine for the next 18 to 22 months, you want to throw that out the window as well i dont well, you know, its interesting in effect you were able to get a survey and get 2,000 responses today means everyone has an opinion about what the yield curve inversion means, and in an instantaneous information environment that were in, that either diminishes the point in time in which this becomes bad news or eliminates it completely that its bad news we all know this is happening. Joe brought up a good point. Growth versus value. Whats happening how could that be . I read goldmans report today, too. The multiples are lower, but theyre still way too high for a staples company. Look what happened to smuckers today. You say im going to go to the dividend safety of consumer staples, have a company like that blow up if you look at the places that are super cheap, financials, Energy Everybody is there, absolutely right theres absolutely no way you can talk somebody in a flat yield environment into financials even if theyre getting less regulation of the rollback and the same thing with energy, even though the commodity has gone up more than the equities, everyone has too much ptsd again those two spaces and cant touch it. The russell 2,000 looks interesting versus the s p 500 if youre concerned about the trade war, if youre concerning about a Global Economic slowdown, this is largely domestically focused index gentlemen, thank you. And to the bauntd markets now. The culprit in all of this action today Rick Santelli tracking the action at the cme. Rick its not the culprit. Its the aftermath the culprits are Central Banks every maturity but two years looks to potentially close at a new cycle low. And in the case of 30year bonds, alltime low. Lets go through it. Heres the twoyear note at current midaugust lowyield close is 1. 47 going back, as the chart goes to october 2017 you can see the little tang on the righthand side, that represents the low of the cycle. Look at five years going back to november 2016, 1. 41 was its own cycle low. Right now were at 1. 38. July 2016, for tens, 1. 53 currently were well below that, and finally, 30year bond, theres a 20year chart, 1. 97 is the current yield close. Were going to beat that no matter who you slice it, for whom the bells toll, we can definitely argue about all of the issues of trade, but at the end of the day, 16 trillion of negative rates, if theres a recession to come, i would think that that would be the antagonist melissa lee, back to you Rick Santelli, quick question for you. We were just discussing the inverted yield curve David Rosenberg tweeted out a fascinating stat this has happened three months and its a 100 correct predictor of a recession when that happens whats your take and whats your preferred inverted yield curve well, at this point, none of that okay David Rosenberg is one of the best there is, and he understands markets. But one thing i understand, i have been watching markets for 40 years and there is a unique circumstance here. Negative Interest Rates is the gorilla in the kitchen, and Central Banks are all too happy to point fingers in every direction as to whats causing a potential slowdown or recession. In my opinion, i guarantee theres going to be a recession some time in the next ten years. I dont think youre going to be enlightened by three months or two years to tens. Thank you, rick we have a news alert on alphabet lets go to deirdre bosa for the details. Melissa, there department of justice is bringing a criminal dierment against anthony levandowski. Hes the exgoogle engineer at the center of the past waymo uber selfdriving lawsuit. In a statement, uber said we cooperated with the government throughout their investigation, and well continue to do so. Comment from waymos spokesperson, of course, alphabet is the parent company, says we have always believes competition should be fueled by innovation and appreciate the work of the u. S. Attorneys office and the fbi on this case. At a press conference in san jose today, the special fbi agent in charge of this investigation says that they have been investigating this case since may of 2017, and to remind you, melissa, the waymo uber case was a huge deal in Silicon Valley and an important piece in the development of selfdriving vehicles. They settle ed in 2018 with ube paying 225 million of its own shares to waymo, but it cost uber time and money in its selfdriving car ambitions well continue to get more on this and bring it to you melissa, back to you thank you deirdre bosa and coming up, energy is the only sector, speaking of energy, in the negative for the year now a whole lot of oil could be coming on the market what will that do to oil prices and Energy Stocks . Well talk about it. First, papa johns shares are piping hot today as the Company Names a new ceo. Are they finally moving past the ugliness with the former ceo that story will deliver in 30 minutes or less. Papa johns naming a new ceo today. The stock moving higher but still down nearly 40 over the past three years is the Company Finally getting past the controversy surrounding its previous ceo and founder kate joins us with the story thats right. Rob lynch who is the former president of arbys is taking over as president of papa johns lynch led arbys through its own turnaround and is behind the famous we have the meats campaign i got a chance to speak to lynch. He said priority number one is to do a lot of listening and engage with ski stakeholders and franchisees as well as the Management Team to understand where they think the biggest opportunities and challenges are for this brand he also added that hes not spoken with John Schnatter but his focus will be on moving forward with the brand in this new royal. The company has been struggling for nearly two years after controversy surrounding schnatter, who is still its largest shareholder, and he stepped down as ceo in december of 2017. Jeff smith and star board invested 200 million in the company in february and appointed smith as chairman of the board. They also signed a new endorsement deal with Shaquille Oneal i heard from John Schnatter who said ron lynch has proven to be an effective Market Leader and while i still have many reservations about the actions of the board of director and their ability to fix this decision, the decision to terminate steve richie is a step in the right direction steve and john worked together for years. John had made those comment about the nfl leadership some thought were critical he talked about them during the kneeling controversy he stepped down the month after that steve took over in this role for about a year and a half. A lot of controversy several lawsuits now a settlement starboard is invested. Now rob lynch is the new ceo is it surprising or not surprising the new ceo has not talked to the largest shareholder yet . Im sure they will talk he said my focus is on the future of the business john has been selling. Thats important to note he owns about skaep of the company now. He had owned as much as a third. It will be interesting to see if he sells or buys now moving forward. Kate, thank you and do not miss papa johns board member and nba legend Shaquille Oneal right here on power lunch, thats tomorrow shaq in studio wow i mean, our necks are going to be im telling you aching like this trying to look at him. Papa johns isnt the only fast food stock heating up. Chipotle, starbucks, mcdonald, all on fire, outperforming the s p 500 and at or near their 52week highs. Can that trend continue. Joining us is matt defrisco from guggenheim securities. First of all, why the broadbased o outperformance low unemployment. So obviously the fast food consumer is seeing a bump in pay from minimum wage increases, and hes also out away from the refrigerator, so displacement from home is always good for fast food brands okay. Its clearly better for some than others. Want to ask you about dominos since we were just discussing papa johns. Why does that stock jump out to you . Well, papa johns, i think, is very similar to chipotle where theres a change of management so theres a hope right now. Dominos has always had that Management Team in place a very good deep bench they have had a change over of ceo two years ago, but the baton was passed very well, and theyre well ahead of their competitors whether its pizza hut or papa johns theyre within the direct pizza category, well ahead of them on the delivery side and they invested ahead of the curve on technology their samestore sales, the growth has been stable combination of samestore sales and Opening Stores matt, your top picks right now are mcdonalds, dominos, and chipotle, correct . Not chipotle. Why not chipotle, the valuation concerns me. Right now, you see next years earning estimates. I believe the street sitting at around 17. 50. That implies an insane multiple. The buy side, whos buying at these levels, is anticipating significant amount of up side in the earnings number. So for the consensus to rise i just struggle to see it going up much further than sort of where its sitting now at 17. 50 at a 25 earnings number, you would have to at least put on a 35 multiple on a p. E. Basis on this stock what art said in the last segment you did, thats a very expensive multiple at this late innings of the rally that were in matt, how important in the multiple is china growth and the potential of china growth to say a mcdonalds and starbucks and im wondering if there is anything that is concerning to you about what the Chinese Government could do to prevent or make it very difficult for mcdonalds to open those 400 stores in china by the end of 2019 or the 2100 additional stars for starbucks by 2022 . I think mcdonalds knows who their competitors are. They know the landscape, and obviously, the difference in numbers there, you see it. Mcdonalds i think is being a little more pragmatic about the growth expectations. Starbucks, on the other hand, seems to be leaning very aggressively into china. Theres obviously a very good local competitor, and theres more than just the local guys there. So besides luckin, there will be other competitors there. Cocacola with the purchase of costa coffee, that will not go away so the competition exists there. I think mcdonalds, though, probably has a little bit of a better history of identifying their competition on a global basis. Outside of competition, though, matt, which we knew two years ago theres a china trade war now, and im wondering if you think there could be anything that the Chinese Government does to make it difficult for these companies to open more stores yes, i think they could make a Company Ownership model. Starbucks is owning their stars. Mcdonalds is not owning their Chinese Stores theyre looking more and more toward the franchise model i think the difference there is unique, and i think it would probably hamper somebody who is a u. S. Company operator in there rather than maybe a partnership with a local franchise or a licensed agreement matt, thanks very much. Appreciate it. Matt talking those food stocks today. Thanks. Energy the worst performing s p 500 sector so far this year, down more than 10 in august so far. Is there any reason to be bullish on this group, and as recession fears grow and bond yields fall, investors are turning to gold. Should you go for the gold power lunch will be right back welcome back to power lunch. Im mike santoli at the New York Stock Exchange investors rushing into gold as stocks wipe out earlier gains. The safe haven climbing to fresh sixyear highs with