The answer, unfortunately, is the very culprit caught in a u. S. China tugofwar right now. Details on what can boost chinas productivity and whether they could gain access to it september 1st is when drug Price Reductions are set to take effect and one of our guests says it will make the entire largecap pharma space vulnerable and it will hit five names first. We have those details ahead. If thats not enough, dom chu has a look at the market you and i have been up very early and we are still upright right now and kelly, if you look at the board behind me, youll see things havent change a lot from when we were on in squawk box this morning, but we have seen an acceleration in the Technology Trade well get whats driving that sentiment in a couple of minutes here and the dow industrials are just about flat on the session and thats pretty much unchanged. The s p 500 is up 18 points and onehalf of 1 and 18 points at the highs of the day we were up roughly 22 points there and down 11 at the lows of the session so tilting more toward the higher end of that range so far today. The nasdaq composite is the outperformer, up about. 75 the composite index is up 96 points to the upside and 13,741 and like i said, ill tell you, one of the reasons why thats outperforming so far today its a big week for retail earnings and a big couple of weeks if you want to look at it this way and a bulk of names will report this week including home depot, target, walmart, Tjx Companies and estee lauder that will give you an interesting spectrum over just about every part of the retail spending landscape home depot, target, walmart up about a 1 decline and tjx and estee lauder missed so far today and keep an eye on the catalysts for retail it will be a big week for them one of the reasons for the outperformance is because the single worstperforming stock in the s p 500 by a wide margin, viewers and listeners on sirius xm channel know its nvidia and the shares is are up this year earlier this morning we were up much weaker and were at session highs up 6 and it reports earnings, and this morning we have analysts saying at Morgan Stanley that this is their top pick going into that earningsdriven catalyst they think that the pullback that we saw which, by the way, was only 15 before the 5 gain makes it an attractive entry point. Kelly, this is interesting the momentum is on nvidias side and it trades at 47 times forward earnings and theres a big debate over whether that catalyst will be the one to buy. Its probably bad that my reaction is thats not that high as josh pointed out to me on the Halftime Report last week, its been overvalued for a while and people want to buy it. Undoing about a third of that decline in just todays move, dom, thank you very much the u. S. Dollar could be on the verge of a breakout. Its up 4 in the past month and trading above its 200day movin average and among the reason, chinas weakening currency it comes after fresh concerns over chinas property sector and banks. We do get a bunch of chinese data tomorrow, retail sales, Industrial Production and property figures here to discuss is tim seymour, the cio of Asset Management and cnbc contributor ill get right to the heart of the concerns in the premarket here before things stabilize what is going on with chinas proper sector shadow banks well, theres enormous bad debts out there and lot of help that the government will need to provide and the speculation and the reverberation of the speculation to chinas Broader InvestorMarket Capital flight its significant and other times when weve seen the Property Markets and either bad debts or the inability to really project where cash flows are coming for the folks who have stuff to repay. Its weighed heavily on the currency and as you pointed out, the yuan is off about 2 even in the last two weeks or so when the dollar has rallied significantly, and a lot of that i think has to do with the yuan, but the Property Market has been hanging over in thespecter of the Property Market collapse has been hanging over china for almost a decade. So im not going to tell you that we should be sanguine about these risks. I will say that china is going to and is certainly cognizant of the risk and the broader risk of the economy. I had the same reaction when it came back in the headlines. Is it 2018 didnt we kind of i guess the answer is it didnt go anywhere and this is what zombieification can look like. What a weird quirk and you know vastly more about this and i notice as the dollar is rallying, our long bond are selling off. Normally, i think to myself, Global Investors want u. S. Assets and thats basically treasurys. The yields would be headed down all across the board i guess this tells us in even trying to get their hands on dollars or dollar assets and its erring toward the short end and not the long end can you interpret that at all . My interpretation, i guess, is i dont know that theyre totally correlated i think the Dollar Strength here over the last three weeks and as you noted through the 200day and the last time the dollar traded upward through the 200day was back in june of 21 and a 28 move really where we peaked last october or not, but the last three weeks, if you think about the dynamics between some of this is china. Some of this is japan and some of this is a treasury refunding announcement some of this is central bank differential it is and what we learned in the last couple of weeks out of europe that those Central Banks arent as aggressive and i would also make the argument that the dollar was one of the short dollar, one of the most crowded excuse me, trades, short trades that weve seen against broader institutional investors, and i think that has something to do with it, too positioning was for the dollar to be weaker, specially before the fitch dynamics and remember back when s p downgraded the u. S. Aaa back in october excuse me, august 2011 it went on a major, major rally and there are different ingredients. Was it 2018 or 2019 when we went back above the 200 day . Actually in 2021 through the upside so im saying in june of 21, the dollar actually in may of 21 was kind of at a cycle low, and then this was really the beginning of the fed hiking cycle and i would make an argument that most of the dollar and the dixie price drivers are from central bank differentials. There was a long time, at least during that period when we knew our fed was on the back foot and needed to get front footed we didnt really hear from the fed until october and the currency markets i think sniffed this out back in may and it was june of 21 when it actually rallied through the 200 day to the upside and that was an auger of a very significant dollar run. Ill make an argument. Weve been in a dollar bull market for 15 years. Weve certainly been in one for 12 it doesnt end overnight, but i would still be on the side of dollar weakness over the next year, year and a half rather than the Dollar Strength. We were just showing the 2 hyundai and the sharp upward move and Dollar Strength is a headwind for corporate earnings, but it does defy the Dollar Collapse predictions that weve been hearing about time and again, specially after covid. Right Interest Rate differentials the last time around the fed was about to start tightening and lead the pack in talking that way and doing that, if im hearing you correctly. So what does that imply . Were talking about goldman and rate cuts next year and that kind of thing. So, Interest Rate differentials, i think, are going to continue to favor u. S. Investment and having said that, i think a lot of the move weve seen in the treasury market especially in the longer end over the last two weeks has been about the refunding schedule and the markets, i dont think are necessarily panicking around that dynamic and i do think that there are technical elements of why the u. S. Longer rates are moving higher and even though the projection that we could see fed funds in by 65 bits between now and a year the dynamics in japan are significant and the Central Bank Buying around the world toward treasurys are changing and thats where maybe the differentials and i realize small changes on a relative basis in japan, are significant terms in the Insurance Companies and some of the domestic buyers. I think japan has something to do with our higher rate it is, as well. I tried to correlate dollar and treasury markets and two of the biggest market and Asset Classes of the world i think isnt easy to tie them exactly together here fair enough, very quickly before you go, you mentioned japan and chinas currency, and the ruble collapsing and the argentinean peso is it just a coincidence, this timing no, this isnt a coincidence. The yuan pressure currencies is something to watch and unfortunately, for em investors, if you looked out about three, four weeks ago, frankly, i was very constructive. I remain constructive on em because the worst part of the fed and Interest Rates and inflation are behind us. I think some em currencies are going to suffer from Commodity Prices moving higher, but for the most part em currencies are going to suffer. If china is in a distress situation, which im want sure thats where we are. Em currencies will sell off and weve seen this time and time again. Japan in the region tends to be a beneficiary when you see this kind of weakness in the chinese currency the yen has been a puzzler because we have inflation or at least we have a world where the bank of japan does need to finally do something its very bullish for Japanese Equities and theyve often been a great edge when yields have been moving higher and Global Equity investors are seeing that and there are structural reasons in japan including buybacks and requirements on the tsc for Japanese Companies to play ball different than they did ten years ago and equities, fundamentally can still go higher especially if the currency remains under pressure tim, no one breaks it down like you do thank you so much for your time this afternoon thank you, kly. Tim seymour joining us. My next guest is boosting productivity in china to avoid the currency mess. It comes down to how quickly the nation can harness Artificial Intelligence the u. S. Has banned china from gaining from americas a. I. Chips which wont significantly slow china down as baidu, alibaba and tencent have been making development in their own chips. Lets welcome jeong chao welcome to the program. Thanks fior having me it seems obvious whatever the next innovation drives productivity and just connect the dots about why a. I. Is so important to china over the last 30 years, by the way, we are taking a very longview on this report in a. I. And over the 30 years china has reaped a lot of the dividends, i call population dividends, since the reform started and you saw the rice of thse of the economy rise of manufacturing and the increase of the chinese population, and now the chinese population is set to decline the population our socalled population dividends are running out and the only way out of this puzzle is really to increase productivity and china, historically, hasnt had a really big software of the industry and this a. I. Made easy may be the answer for Chinese Companies and for the chinese economy. It is a dilemma because unfortunately, the a. I. , i guess you could say could be used against american interests and thats certainly why theres been a crack ddown on access for the chips. How can they benefit the entire Global Economy and not give something too precious or valuable again, this is the expertise. I think the u. S. Administration has been doing it to slow china down, right . They ban the sales of the chips about the nasdaq 100 and Chinese Companies can get the second to the last which is h800. He was no china down we dont think that it would make him energy twaps and technology is very global and all of the entrepreneurs and scientists and engineers around the world are doing their best to make the next particular Tech Breakthrough we do not believe the band will have materiel damage to slow down chinese a. I. Development. My understanding is chinas good at developing some of these advanced chip, but theyre unstable, and so they can crash a lot and of months worth of work can be lost in the investments and theyre left to crack. Youre the China Technology analyst. For investors watching, which companies do you think are best positioned already in china to maybe crack this code, get it right and be the next nvidia stock . Well, the two companies that are leading the pack there there are dozens and dozens of companies in china making these foundational models just like in the early days of the advancement. Most of these guys probably wont make it, but the two leaders, alibaba and baidu are in my opinion, and they were the first ones that launched a model and see the top line to be approved and the chinese regulations are in this area and would soon befinalized later this week, in facts and we see the commercialization of approval will come short after that you see alibaba is the clear leader leader right now it is too early to declare the ultimate winner just yet. Those stocks are certainly up this year and that might certainly explain why. John, thanks so much for your time today we appreciate it jiong shao from barclays. If wti crude rides it will make the sixth week of gains and it rose 22 , as Global Demand continues to hit record level rs including china despite its struggles. My next guest is not an Energy Analyst and even he thinks this is the key trade for the Third Quarter and prices will keep going higher and leads bring in head of Technical Analysis welcome. If you talk to an energy bull there, but youre coming at this from a totally different perspective. Why does energy jump out at you here it does it speak to the rotational aspect a lot has been made of the unwind in the technology sector. I think that trade is still intact and it comes back and right now the key trade has been breakout in the energy sector. Its just finding what have been the laggards of the move to the upside energy is rather rangebound for much of 2023 and now just starting to break higher to the upside both in relative terms and theres some runway there. Exxon and chevron do not seem to be your top idea. Whats going with those stocks theyre the low volatility and high dividend paying stocks. Theres been a preference for more cyclical areas. Theyve risen and theyre actually underperforming versus xle and theyre more on the emp side and this isnt for exxon or chevron and theyre trying to find more juice for the stocks breaking in long term levels conceptually, its interesting to me that were bullish on the energy and production stocks while at the same time hearing that perm onproduction has peaked. I know youre still looking at the charts, but i dont know if we need to reinterpret what that means and even if product has peaked, oil prices will be supportive of higher stock prices its not i dont think a big structural, secular call on the overall oil. I think, which has found a fork and these stocks are finding a bit and after the underperformance the sector has phased from 2014 to 2020 and it was a big twoyear run there, and im sure the structural shift in the sector and i see similarities in the big moves in sectors Like Technology after the 2000 bubble and after the great in 08, as well you have a big run and then youre rangebound for a number of years and some of those stocks can work in the backdrop. Youre calling for a mini breakout within a range or do you think this could be a big one . I think this is a tradable call and it works through q3 season and there are individual components that work for the long term, as well if were looking at a structural shift, lets look at the stocks that have driven a shift they cleared the 2014 picks and conoco, is that the one youre referring to . Through some combination of folding less and acting as leadership on the way back up and thats where weve seen meaningful trend for the long term they have the sector year to date and theyre moving above the 2 hunday moving average the setup is there for those longterm multiyear breakouts that are starting to get going did you run into the xle more broadly or are you interested in the ones that have the more beta instead of the broad index looking at the xle, you can see a theme. Its a lot more on the emp side. Some of the Service Names can work for a short time, but if you pull back you run the risk where you have a long term trying to lower highs that can start getting going again. Ill just throw it to you because i cant lose the opportunity. Bannister, what do you think it hasnt run its course this seasonal correction. We argue the longterm positives outweigh the nearterm negatives and this is a seasonal correction that proves temporary and an opportunity to buy a bull psyche that we think is only in its inner innings can typically these corrections end in a way look, this is in the september months plenty of time to study the energy stocks. Ari wald with oppenheimer. Coming up, a major event is headed for the Health Care Space with the federal government three weeks away from negotiating directly with manufacturers over Prescription Drug prices. Well look at the names most at risk and why analysts are expected to deal with a flurry of deal making peter diamonds, and hes