Has been a tumultuous quarter. Plus, a rough quarter for ipo shares of ab inbev and Bernie Sanders corporate tax, the 2020 president ial hopeful out with a new plan calling for a tax on companies that pay their ceos way more than their workers it has been a roller coaster ride for stocks in the Third Quarter as we enter the final trading session of q3. Dow and nasdaq aiming for a Third Straight quarterly gain. Mike, awe kn mike, as we know, we went into the month thinking big, bad and scary. I think thats actually the story for the quarter too, the market held itself together and preserved these levels it was at, just about at old highs. Without really a ton turning for the better the way you can look at it is the cost of two and maybe a third fed rate cut was not that steep in the way of suffering through really bad growth or any real stress in the Financial System just yet. So but it does feel tenuous, feels as if the market is sort of maximized what it had to work with to get to this point. I think because old leadership has shown signs of fatigue. What we have seen in the past month is this notable rotation as we have seen yields come up in the past one month, we have seen the performance of the banks improve. We have the financials, the best performing sector of the month regional banks doing better because of the super yield curve. We have technology showing some signs of just fading at this point. Netflix basically almost out of faang, if you ask anybody who follows that, right . Exactly. Well see if that follows more google in the journal this morning, looking at internet protocols. Well talk about that later on today. All of them are at least 5, 6, to 15 below their highs. Yes. The big faang names it shows you that, i think there is two ways to spin that one is the market has essentially been able to preserve its levels without necessarily what used to be the best players exactly. And so thats probably in that positive but the yield story will dictate that rotation, and whether in fact the overall market can make headway. Really we have been tracking, you know, rising Government Bond yields means stocks have headway to move and value to perform and banks can do okay and thats been the pattern. There is a little show me attitude to the bank breakout we have seen recently but it is notable in terms of some of the performance of the faang stocks, facebook, just last week, down 7 and so you got to wonder finally these faang stocks are discounting or more of a valuation discount because of the regulatory head winds such as the ones youve talked about. Youre starting to hear more about ripple effects from the kind of reckoning that the startup world has come about arguably amazon has been a little bit weak because people are a little bit scrutinizing aws. Their customer base, very leveraged to start up activity and all that whether it is true or not, it feels like the sentiment is turning that direction. Lets bring in samantha azarello to talk about the markets. Happy monday good to see you. In addition to all we discussed, we had ipos, a new wrinkle, financial plumbing got interesting late in the quarter. What is what do you think was the defining dynamic of the quarter and what do you think it will be for q4 i think was the issues that popped up with repo. We didnt think the financial plumbing issues are really indicative of anything systemic. It is just liquidity problems. We dont think it is solvency issues but it scared people it points to the fact that in the broader bond market we see liquidity issues Going Forward and only starting to talk about that now. Really . What does the fed need to do what does new york fed need to do the new york fed will get back into their open Market Operations, look at the asset and liability pieces of their balance sheet, but really comes down to the fact that more collateral on the market is probably necessary, especially as funding needs come to call and i think you put that along with the idea of slowing Economic Growth and startup issues and all these Different Things and this all feels kind of frag. Is it a risk off environment . I would argue it is a risk off environment. Were slightly underweight equities for the first time in a long time. Were saying skim off of growth and reallocate to value. That in itself feels risk off. What about the idea as we were saying, we at least so far made it it the end of september. It seems as if sentiment isd po the Fourth Quarter thats the bull spin. I like the bull spin. Im curious how you would answer that. I think longer run we have to make the case for equities i think if you look at flows year to date, all the money has been going into bonds or cash equivalence, were aware of that there has been massive net outflows out of stocks, speaking to the fact that maybe, you know, given flows alone you have more upside potential for equities. In terms of setting up into the last quarter of the year, did you feel it reminiscent of one year ago when we had a rough earnings season, we had china trade tensions and we saw a precipitous decline in the markets . Is it possible we get a 15 decline in the markets this quarter . Absolutely i really do think so especially if the trade tensions deteriorate. News over the weekend, which was alarming, you know, at best about stopping capital flows so if anything, i think there is more downside risk, but i would say it feels very episodic in nature, right . It feels like volatile swings are temporary and everything subdues. I think staying the course is probably key. John stoltfus joins us this morning as well. We have been talking about whether or not there is reason to be cautious in the coming quarter because of some of the new dynamics that revealed themselves in the last few weeks. Fair or not . Absolutely fair the question, anything that would impede the ability of the markets to function on a globalized basis would be a very serious thing. Related to the trade war itself, as it exists with tariffs, that negotiation continues, but especially the news on friday, the possibility that the administration would limit capital flows, that was very worrisome. I want you to know, i was racing to get here. Well give you a chance im nervous about the market. Navarro pushed back, treasury spokesperson over the weekend, said no current plans. Thank goodness. That was very helpful. Do we believe the president authorized a review . Let me put it this way, i think it is very possible given what we have seen thus far since 2016 anything is possible but would say this, i do think there is an election next year and i do think the American People are very concerned that there would be any shakeup of Economic Activity in for the consumer. Doesnt that backdrop though not matter until the markets are way off the record highs being so close to record highs, doesnt that give the president some leeway to do what he wants . I tell you, ive got to say, melissa, i think it is that is a question we really have to see. I think the president is with all the impeachment potential that is out there, i think there is so many things that have so many chickens that have come home to roost at this time efficacy calls for a trade deal, okay both china and the u. S. Need a trade deal right now every day china does not do a trade deal, more companies diversify supply chain away from china. Thats not a good story for long planning when china wants to see 2025 be made in china as a goal, and for the u. S. I think for the administration i think the administration really plans to make every effort it can to get reelected and so i think we come out of this and the markets have been so resilient, the Third Quarter may have been just edging slightly higher, basically, flat the positive bias in return for the s p before dividends and the most recent quarter. But generally speaking, if you look at a stream that shows you all your returns globally, most markets are green and some substantially so which would indicate to us that the markets are expecting some kind of a trade deal, some move that is significant towards normalcy. Samantha, the big question is related to that is what specifically seems right now to be priced in and captured by the market in terms of trade expectations youve seen some day to day sensitivity to the stray headline it is hard to think if you got a deal next week, the market would stop. You get a relief valley i will say to melissas point, i dont think the average American Consumer cares about the trade war and i think thats being shown up in the retail sales data in the consumption data we know ceos and business planners and leaders care, but im not convinced this is trickle down to the consumer yet. And the other question i guess is do you get another rate cut from the fed without trade stress in other words, can you have both either good or neutral news on trade and still get the fed to be more helpful i think it is possible. I think the fed is trying to show us theyre live they dont know what theyre going to do, so there is no way we can know what theyre going to do. Theyre waiting and seeing how the data unfolds john, last word. I think the consumer does care, it is just the consumer hasnt been hit yet. A lot of deals were done in the first 18 months of the trade deal chinese suppliers did everything they could to reduce their prices, reduce the cost of the companies they were supplying things with. Now this is chapter two. The next round might be critical. The breadth and depth of the tariff war has is extended and expanded substantially so it is time for action and positive action from both countries. John, thanks. Thanks for starting us off on a monday. Ab inbevs asia unit going public in hong kong. We have the details straight ahead. Mitch mcconnell on the trade picture and the push to pass the usmca. Hell be up shortly on squawk on the street. Look at futures, were looking at a higher open with the s p looking at 3, dow, 25, much more squawk on the street live from post nine at the nyse when we come right back. Driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Hong kong bracing for more protests with Chinas National Day hours away sherry kang is on the ground in hong kong with the latest. Sherry good morning, melissa yes, as china is gearing up for its national day holiday, certainly a special occasion for beijing authorities to celebrate, but here in hong kong, at least for pro democracy protesters, it is an occasion that theyre going to, quote, mourn, calling all the other protesters to wear black and participate in the march and we saw a little bit of a preview this weekend, certainly escalation yet again in the past weekend with protesters, you know, basically confronting with Hong Kong Police, with some of that actually setting the entrance of some mtr stations on fire, hurling patrol bombs and Police Officers responding with tear gas as well as pepper sprays as well that with that usual scene, will this further escalation in their action that is highly anticipated tomorrow to mark that occasion, is that going to sit well with beijing authorities as well as those here in hong kong is really the main question. And the meantime, Hong Kong Police sending a text message to hong kong public, warning against such disruptions and also coming out with their statement condemning all protest activities saying all acts are one step closer to, quote, terrorism, and calling on the public not to participate in tomorrows event of course, tomorrow were going to see some scaled down ceremony here in hong kong, but a lot of elements have been scaled down as i said. Fireworks, for example, have been canceled. Back to you. Sherry, thank you for that. Speaking of hong kong, ab inbevs asia unit going public there. Frank holland is back with details on that. Good morning, frank. Shares of bud asia rising 4 after opening slightly above the listing price of 27 hong kong dollars per share. This ipo raising more than 5 billion. This gives bud asia an enterprise value of 45 billion and based on 2020 estimates the price to earnings is 33 times. A lot higher than Parent Company ab inbev, compared to other leading chinese brewers you see more comparable numbers there, also comparable numbers when it comes to revenue growth. But asia third in that market by a very thin margin people with knowledge of this ipo says it was motivated by a desire to reduce debt as well as growth in mergers and acquisitions in asia thats something that ceo jane kraft touched on. Many other markets in southeast asia, were not number one or two, so if you look at vietnam, thailand, philippines, cambodia, there is many markets we could imagine we can create a lot of value together with regional players in the future. People close to the ipo say m a is a longer term goal. The focus is on china, which consumes twice as much beer as the u. S. , about 13 billion gallons a year compared to 6. 2 gallons a year here in the u. S and Debt Reduction the company has 102 billion in debt much from acquiring sab miller in 2016 and the company said its goal is to reduce that net debt as quickly as it can, especially next year. Todays ipo is hong kongs largest ipo of the year and the second largest after u. S. Ride hailing company uber back over to you. Wow frank, everyone is paying attention to where companies decide to list these days. Thank you. Frank holland. Speaking of ipos, talking about what an interesting quarter it has been goldman has a nice chart out today, looking at the percentage of new issues that have uneven Voting Rights at 17. Pretty much the highest in the last decade. Yeah, thats actually kind of a point against those companies, you can look at the performance split from those, they wont get likely put into any indexes thats one of the big overhangs on some of these you had this complete clash between private market valuation math and priorities and what the Public Market wants to swallow thats one piece of it. It is funny that also coincides with the Record Number of dollars raised by unprofitable ipos in a single year i dont know if thats cause and effect or related in some way, but worth noting because thats the trend we have seen this year that we have these founder led companies, retain control, largely unprofitable companies, and they have managed to stay in the private market for so long because of so much money slashing around, a product of zero percent Interest Rates around the world. And lower compound annual growth rates in Public Markets over the past decade, all the money floating to private. Thats where the action was. Fred wilson with an oped today about basically it is a no brainer now. That chart we showed of the big three, there it is buy and sell stocks every day, they feel like they missed out on something, they can get into it immediately the lesson has been learned. If youre not making money, prepare for scrutiny without a doubt and he also goes on to say, talking about this, if it looks and acts like software, the market likes it. If you pretend to be a softwarebased business and dont have the margins, dont have the Network Economics of a software business, the market sees through it. And i think thats been the split between uber has an app, but it does not have software economics. Or peloton. Good example. Which is also indicated open lower again today. Here is the thing about pelot peloton, though, and smile direct, it is not just oh, the Public Market doesnt like the valuation, it is in the moment, the bankers thought they had demand behind them at the ipo price and didnt there is something in that transaction, that reading of the market that has been off lately. A name that priced at the high end, at the last minute we saw what happened still to come, an important interview, Senate Majority leader Mitch Mcconnell with us, well get his take on trade, and the chances of Congress Passing the u. S. Mca well talk about the house inquiry, take another look at the premarket as we kick off as we said a busy week full of central bank speak, data, jobs number and the start of earnings were back in a moment ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. 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Welcome, good to see you what do you make of this week and how were setting up given earnings, Economic Data, lots ahead of us. Yeah, earnings are going to be important and what is interesting is were the weekend talk shows were consumed with the impeachment deal and it doesnt really seem to have a major Market Impact i think the only way we have seen it as an impact is when these hearings get partisan and acrimonious. It makes the traders feel the chances of getting infrastructure, the chances of getting anything else done are almost nil but the key that is all en