Transcripts For CNBC Squawk 20240704

Week the s p is tracking for a third week in a row of losses, down 1. 3 nasdaq futures up 73 points. Weve got a lot to talk about on a summer thursday. Our road map starts with earnings walmart posting better than expected results fellow down component cisco gets a lift, beating with its Quarterly Results and talking up a. I. Ceo Chuck Robbins will be joining us here. Plus, investors continuing to digest fed minutes released yesterday. The tenyear note yield hitting a fresh high were going to begin with walmart, raising fullyear forecast the retail giant benefitting from customers seeking bargains. U. S. Comps up by a better than expected 6. 4 and ecommerce jumping 24 led by pickup and delivery theyre clearly taking share because theyre out comping their competitors and the industry theyre crushing it i want to straighten some things out here when you have ecommerce up 24 , when you have advertising, which is just free money, what are the Gross Margins there, 35 , much higher margin. Flywheel, i think, is cranking price gaps back to school, all very strong. So, they give a little bit of a light guide. Thats what people are freaking out about. There are no other holds, and i have to tell you, its really a light on the operating income growt growth buy it youd buy it . Even though sentiment is very strong already it ran up into earnings up 5 or so. Sams is just okay. But ive got to tell you i sit here and i look at this number, and i think, the general merchandise was unbelievable okay down low single digits, 300basispoint improvement. Lets sit back for a second and enjoy what is happening here the stocks had a monster run. We can compare it to target. By the way, and i was just i kind of missed yesterday i was too soft there was a pride issue in the month of may in target, and they acknowledged it. I soft pedalled it. Shouldnt have done that it does look to have stabilized i think that walmarts really good if you want to sell walmart, ill buy it from you how about that well, its certainly better valued than well, targets better valued than walmart at this point but walmarts outperforming. Walmart is the place to go. Other than tjx so far. Tjx has been the star of the retail show. You did not get that at tjx. Thats okay. I love tjx. You know what i thought was interesting was that tjx had a positive inflection in home goods, which all the doom and gloom we hear about housing from target and home depot when you go there, the selection was much better this morning. I was thrilled and by the way, the thanksgiving selection, im told, is going to be fantastic ollies is calling it super cycle of merch they are using Bed Bath Beyond once the leases ive been trying to get some for pickle with my friends. Theyre taking them from us. Tjx in home goods well, you know, when the bed bath go under, you can fit 12 pickleball courts. What are you laughing about . Youre on trend you play pickleball . Ive taken some lessons i mean, along with everybody else does that somehow make it worse . Its a good thing thank you for minimizing it what ubs is saying, they were bullish into the print, everybody was on walmart, was that results set the bar high for other retailers this quarter, and it should be supportive of its premium multiple yeah, why not they doubled down i mean, its very easy when you see a stock thats up this much to say, you know what look, its its done. Back to school, which is going to be good, is already factored in what i think people dont understand is that the buy side is always looking for a couple to get behind, and theyre getting behind i thought theyd get behind home depot more they did have two Straight Days at home depot that was good. Aisle to aisle was great, and decker was very positive but when you see tjx, people merely think if thats so strong, its bad no its just theres a lot of companies that had a lot of extra inventory, and they came in and said on the call, this is the best inventory theyd ever had to pick and choose from. So, walmart raised guidance they raised second half sales guidance, but in the implied guidance, though, marks a step down in the sales growth than what were seeing and thats causing concern. Theyve been conservative they could be conservative you know, were going to be talking to Chuck Robbins, ceo of cisco. I think he was conservative. Right good quarter its not a bad thing to underpromise, overdeliver. Im looking at chuck hes doing his fantasy team. Hes drafting the falcons running back way too high. I think it raises a question about what these retail results say about the overall economy and the market this morning, what is in focus, the tenyear treasury yield. 15year high set yesterday at the close. Overnight goes to 4. 31 the economys very strong you read the fed minutes i know you did that. Of course you have to understand, the yield curve is wrong everyone tells you the yield curve that book that i know that you love, bestseller, along with peyton place. The people that were buying the tenyear, they were just wrong, but you never hear from them they were wrong. No, now theyre selling the economy is very strong. There is no this soft landing hard landing dichotomy, other than in the incredible apple sevenpart hijack, there is no crash landing and there is no soft landing. Theres no landing that could be a problem for the market why because of what the minutes signalled yesterday. Most policymakers still see significant upside risk to inflation and there is a tightening bias. Well, jay is jay my pal, jay, of course jay is doing exactly what you really want, not if youre some person on wall street whos really rich and doesnt want anyone else to get rich. He wants people to be employed im sure he looked at the African American numbers and asian numbers and wasnt happy they werent that good what hes trying to do is make it so everybodys employed he is, i think i think what hes trying to do is make sure inflation doesnt creep back up, and theres risk now of another wave yes youre going to lower the boom on the jackson hole . Youre going to do a jackson hole lowered boom thing . I know theres a lot of hype into jackson hole, and traditionally, hes used jackson hole to signal some kind of shift. I dont see how he can do that next week, because theres not enough data evidence for them to either signal that theyve done enough or that theres more to do clearly, there was a split in the minutes. Amen. Youve got it dead right i dont know that hes going to say anything. Oh, no i think its split. I would be concerned that were way away from 2 inflation i think he just needs to see employment tick to 4 , and it hasnt it had 3. 5 today, weve got jobless claims, and this was an important number because it measured the august nonfarm Payroll Survey it was down, which is good fewer americans it came down from the elevated level that we saw the week before. Theres no major layoffs in this economy. There havent been. Philly fed was also an upside surprise best in a long time look, how about we go at it the other way . We have a big story today. Cvs loses a contract to mark cuban and amazon we need every single line item needs to be down we need to see rents down. We dont have actual homes down. But if you can just pick at the lines, maybe you dont have to have a spike in unemployment just what does that have to do youre talking about the blue shield california. This is the nonprofit signing with amazon. I think thats a considerable mark cubans drug company we know that mark cuban has worked hard to try to develop a system where your drugs so has amazon i tried the amazon policy. Theyre down im just saying, one after another after another, if you can tick down at whats been high, we know theres been a big surplus lately of the departments being built in some areas. Maybe we dont have this is my noncrash landing, nonsoft landing. Maybe were going to be winning as long as we play for time, sara i think were playing for time i think jays playing for time but i think the question that the market is grappling with is, fine, no landing thats certainly showing up in the data but is good news really good news does it mean the answer is yes should you buy stocks on that then dont you have to worry about the fed being higher for longer we have a pause right now, as i think people are same people who were wrong in bonds are now, of course, selling stocks, because theyre just wrong. Its okay. One of the things that i really hate yes, the bond markets big. I hear, the bond market is really big so its right how about if its really big but its wrong the economy is good. How about this one 20 years, 17 years, playing that game, how long its been you know what . It never should have been down here and then you start hearing, well, the governments selling a lot of bonds why should the Mortgage Rate be as low as it is . Why should everyone have enough money to be able to buy homes with cash . Youre saying its not such a bad thing were at these elevated levels . You are a horse whisperer, which makes me a horse i dont know if i like that. Dont call yourself a horse since the financial crisis, we have not seen yields like this its fine its been a lowyielding environment. Im saying its a positive sign im saying what it says is we have the best economy in the world. For tech even i mean, affects multiples. No, tech look, i know there are people using 800 target for nvidia now. I wish they werent doing that it should hurt tech. But this is not the end of the world. We are in an adjustment period its going to last another three, four weeks. Were adjusting to this new world where Interest Rates are higher, which they should be, because the economy is better, and were also you know we can talk all about the money coming from washington, and it is just hitting. Just now i know. Inflation reduction act. Chips act. Its always funny, isnt it so much the chips act is just hitting right now. I know. So, were going to talk about 2024 and whether norecession trade is in there. Good morning, sara. Good morning. Were also going to talk about that 800 price target on rosenblatt, calling for 2 trillion for nvidia much more. Well be joined by ciscos ceo, Chuck Robbins, on the other side of the break everything from the companys earning beat to his a. I. Strategy he is here at post nine. More squawk on the street straight ahead my cpa told me i wouldnt qualify for the erc tax refund, so i called Innovation Refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. Wow, you get to watch all your favorite stuff. Take the first step to see if its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Were going to have some fun on this one. Cisco is rising. Get this, reported a beat on the t top and bottom line. The stock is moving up Chuck Robbins, cisco ceo, joins us now for a first interview i have never heard you this exuberant, including things like saying, 57 billion in revenue, the highest Revenue Growth in a decade and how about the fact that you have got this 30 total sequential product line, which is the highest second highest in 20 years . You came out firing last night well, its just the facts tell us how the facts happened well, if you think about whats happened over the last year, with our sales organization, when they open a quarter, they give us a forecast, and when things are getting worse, they tend to miss the forecast by the end of the quarter. And this quarter, they came, opened the forecast, they nailed month one, they nailed month two, and they ran through month three by hundreds of millions of dollars, and the year over years are all wacky because of the pandemic and the supply chain stuff, but the sequentials are what weve been watching, and you know, normally, theyre 18 to 20 , and they were in excess of 30 from q3 to q4, so its one quarter, but it was certainly felt better than the ones weve seen in the past. I like the pastiche of how you did it, including what youre doing with hyperscalers, where, by the way, half a billion in sales for what is basically a. I. So, i think that a lot of people feel like you got left behind, including yourself, in the last revolution that didnt happen this time no. The first wave, we missed, and we have been very open about missing it, and the last few years, weve reinvested, built some very highend silicon thats very Energy Efficient and superpowerful, and so we are well positioned as we enter this next phase, this Artificial Intelligence phase, we Just Launched a new asic in that for june were working with some of the hyperscalers theyre giving us input for the design on the next chip, and were talking about designing silicon specifically for the customer i think were in good shape. That was true its going to be sticky. And also taking share, which i thought was terrific three points i also like the fact, and you didnt play it up, i would have more, that youre becoming a Software Company with absolutely with this recurring revenue, which is what you and i have been talking about for years, and its fantastic we have 35 billion in rpo, and english, please run pass option its a remaining performance obligation i like your wide receivers, and i like your running back, but please, lets just keep going. Remaining performance obligation scott hearn, our cfo, between rpo, the 18 billion on the books for this fiscal year, and the backlog, we have about 40 of our revenue thats already inside cisco for the year. If you go back seven, eight years ago, that wouldnt have been the case. We were trying to chase down orders every quarter the other data point i gave on the call is we launched in 2017 subscriptions on our networking hardware, which everybody thought was a bit crazy. And i always told them, when the renewal opportunity for that became meaningful, i would share that with our analysts and shareholders, and yesterday, we gave that number for the first time, that this fiscal year, we will have close to a billion dollars in Software Renewals on hardware that we would have just monetized one time in the old model. And so absolutely. So, were feeling good about that some people thought your guidance was a little light. Including jim given how enthusiastic i did you mentioned it. Given how enthusiastic you were about the pickup in Enterprise Spending that youre seeing. It was still down 14 year over year, and there are a lot of unknowns and dynamics out in the marketplace right now, and so, we took the forecast from the team, we took the backlog, we took the ar, the rpo and everything like that we run the p l we were probably prudent is what i would say. But is that code for conservative we were prudent jim also said that. We were prudent we think we were prudent but its look, theres a lot of theres still a lot of variables, obviously, that are happening in the marketplace right now. What does the macro look like what do we take away from this as it relates to how companies are feeling about spending the good news for us is it was our largest quarter ever of Enterprise Software agreements i didnt hear much, you know, well, were going to hold off on that so, that was Service Provider remains challenging. The telco space remains very challenging. Verizon and at t are very distinctly hobbled from the old days of cisco when John Chambers ran it and that was just kind of money in the bank. It was a much larger percentage of our business back then and today, as you look at the Service Provider segment for us, the hyperscalers are a very significant percentage of that business now were talking about the big guys here. The cloud providers, the big cloud providers. And so, you know, theyll continue to spend, and we think sort of the second half of the our fiscal year, we think the telcos will stabilize, and then we think in the next few months well start to see the hyperscalers tend to buy in sixmonth cycles, so we think middle of our fiscal year, theyll buy for the first half of calendar 25. Do you think that the hyperscalers actually know what theyre going to do with all this equipment they bought from you when it comes to Artificial Intelligence oh, yeah. I think they know. Well, if you look at what theyre doing today is theyre building out these a. I. Networks, and fundamentally, these gpus have to be connected and theyre sharing information, and they have to do it very quickly. Weve talked about the fact that we think the networking opportunity underneath the gpus could be three to four times this is underneath nvidia they have to connect it to azure. They have to connect it to amazon web services. And the historical way of connecting that is through a technology called infini band. Owned by . Nvidia. However, the cloud providers are telling us they want to move to ethernet, which is what we do, and we actually are a Founding Member of something called the ultraethernet consortium, which is designed to actually tweak the standards a little bit its a little geeky, but tweak the ethernet standards a bit to make it more adaptable for these super highperformance environments now, you have been a leader in two things. One is work from where you want, and the other is, helping the homeless in what was your headquarter area still is give us a sense of where people are working and also, frankly, what are you doing for the homeless youre probably the most active ceo in the country, best rating for for the glass doors number one place to ork number one place to work. Number one ceo for homeless. You dont talk about either one. Im asking you to talk about them for a second. I think from a work perspective, what weve said is were leaving it with the teams, and weve seen an uptick lately. People are starting to want to come back to the office. Including you our new york office was packed yesterday yeah when im but im traveling all the time my office is an airplane but we really we left it with the teams, and so our engineering teams in particular are spending a lot more time in the office, but you know, our theory is, lets make the office a magnet and not a mandate, and so were really working hard to create experiences and create environments that people want to come spend time. And so, thats important, and we made a fiveyear commitment back in 2018 of 50 million to try to help with the homelessness problem in san jose. Unfortunately, during the pandemic, a lot of the progress we had made was reversed, and were currently discussing with the organizations out there right now what the next phase of that looks like, and well be announcing that sometime soon. I want people to know that youre the leader of that, not just a member of the team, but a leader did not know. Chuck, thank you. I did think this was the breakout quarter i know that the buyside people i speak to totally agree the sellside people, they have been wrong for i dont know how many points. Theyll probably stay wrong. They were pretty positive last night when we talked to them on the phone. Once theyre not talking to you, its a little more mutual thats okay congratulations, you got a real good coach, because his dad was one of the great ceos in our country. Thats right. Youre correct yes were on to fantasy football, for those keeping track. Real football coach smith and fred smith from fedex coming up, its my mad dash. I want to this is may part. Its our mad dash. Chuck, thank you for being here. Lets contribute to the show today. I talked to my wife is going to kill me, she is, but she loves you and she loves your wife, so maybe i get away with it hope you have good weather tomorrow thank you thi hows the chicken . The prawns are delicious. Oh, i have a shellfish allergy. One prawn. Very good. Did i say chicken wrong . Tired of people not listening to what you want . Its truffle season ah thats okay. Never enough truffles. How much are they . Its a lot. Oh okay im good, that its like a priceless piece of art. Enjoy. Or when they sell you what they want . Yeah. The more we understand you, the better we can help you. Thats what u. S. Bank is for. Huge relief. Yeah. With your hearing, if you start having a little trouble, youre concerned that its going to cost you money. To this day i only paid what i had to pay for the device. When i go back everything is covered. Theres so much youre missing by not having hearing aids. Well find you a hearing aid that fits your lifestyle and budget at one of our over fifteen hundred locations. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Later this morning, do not miss an exclusive interview with walmart Ceo John David rainey, 11 30 a. M. Eastern time. The stock has been up and down around the flat line after reporting very strong earnings and raising guidance opening bell just minutes away our customers dont do what they do for likes or followers. Their path isnt for the casually curious. And thats what makes it matter the most when they find it. The exact thing that can change the world. Some say its what they were born to do. Its what they live to do. Trinet serves small and medium sized businesses. So they can do more of what matters. Benefits. Payroll. Compliance. Trinet. People matter. The citi custom cash℠ card automatically adjusts to earn you more cash back in your top eligible spend category. Hi. You dont have to keep tabs on rotating categories. This is the only rotating i care about. Or activate anything to earn. Your cash back automatically adjusts for you. Can i get a cucumber water . Earn 5 cash back that automatically adjusts to your top eligible spend category, up to 500 spent each billing cycle with the citi custom cash℠ card. I love it. [voice vibrating] announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Time now for cramers mad dash. Some love for adobe . We and had Chuck Robbins, ceo of cisco, what are people really doing . Are they using Artificial Intelligence the company that is ahead of the curve, bank of america upgrades adobe. I think they are number one in terms of they have put out products that make us look like walmart on our pages because of it it is so good, this fire fly a lot of people are buying the subscription i like this call yeah, i mean, they say 38 upside to that new arr as soon as 2024 from a. I everybodys looking for reasons that while they were doing a. I. These guys have a. I. People think its nvidia and microsoft and alphabet youre talking adobe and cisco, fresh ideas. These stocks tend to roll over during the day, as we know. Watch cisco. If it rolls over, and you know that the buyside really did love it. If cisco rolls over, were back in this world where we say, lets be patient lets sit on our hands theres nothing cooking right now. Theres higher yields, and that could stand in the way. By the way, opening bell is here and the cnbc realtime exchange here at the big board, weve got life science cares, a Nonprofit Organization celebrating year one of its project Onramp Program and at the nasdaq, sezzle up on the podium. Were going to talk to them in the 11 00 hour of squawk on the street. It is interesting, jim, to see a little more resilience today in what has been a string of losses i think its early. Its early. But like 9 30 its very early. Because asia was worse overnight. Teeing off high yields, more bad news from china. You know, lets 2015, i used to go to my old bar at 9 00 because my wife said, get out of the house. I dont want you sitting there depending on being how the chinese stock market opens and every day, we were concerned they could bring down the world. Went to the 200day moving average. Thats when xi stepped in. Were doing it again every single one of them sounds like a really good magazine. Country garden. I used to take Country Garden thats town and country guns and garden how about Country Garden its more touchy feely im not buying it. But im now not buying its going to affect our stock market. You are thats what youre not buying no, but i want you to opine on something that you know better than anybody at cnbc. Why are so people worried about the currency, and what can the yuan do to us and the rest of the world . Could we have a 1997 situation walk through that. Theyre worried about the currency because its a managed currency, and what chinas been doing is it has allowed it and in fact blessed it, weakening. And weve seen some real substantial weakness over the last few months. Interestingly, overnight, they stepped in and went the other way. Interesting the people with the big bear thesis would perhaps take a pause and say, wow, maybe its not as negative. Thats a very bullish call there are incremental signs that china is willing to get more active on intervention, piecemeal efforts. They cut reserve ratio rates they are trying to come up with, you know, ways to they need to go through a major deleveraging, and i think the concern on wall street is that they dont have the tools or the appetite to do it. Wait a second here was the headline overnight that people liked. The premier said theyre going to yeah, that is the headline. Now, mason, my head writer and only writer and nephew, my sisters boy, said to me last night, wheres keynes . Why dont they do any keynesian economics . Its a debtfueled economy already. Theyve built a lot of infrastructure they can print. They have trillions of dollars still in reserves for sure okay. Thats a very bullish call you just made. And cant they just pull back from belt and road is that so small that it doesnt even matter . I think thats not the focus right now. Theyre dealing with longterm issues of demographics, of property sector issues, of debt issues but im not hearing anything that could make it so that we should be sellers of meta off that well, if the chinese economy goes into recession, or at least is weak, if the german economy, which we know is weak i mean, these are Major Economies that usually have spillover effects on us. Were not the biggest open trading no, were not 12 trade, our economy, so its not huge, and so far, weve been pretty resilient to it. But you have to be aware the reason i bring this up is because its the big bear thesis the small bear thesis is that the economy is overheating and once again the fed is going to keep raising, which has not really meant that much because we are not as sensitive to the short rates other than the autos. For me, the Biggest Issue coming up is the september 14th strike deadline for the autos uaw that is a walter ruthlike uaw. This is not like the old days. We are in of course, unions are much smaller than they used to be, but we are in a moment where unions are trying to be asen ascendant, and thats bad for profits. Also bad for the inflation fight. We saw what happened with u. P. S. Was that a giveaway contract . I dont know about that but it was inflationary. Mary barra was on this network yesterday. She talked about where things stand with these contract negotiations i think we have the sound. About negotiations. Were right in the middle of it. And we are working very hard were at the bargaining table, and we want to make sure that we have reached an agreement that is going to be good for the gmt members, good for the company, good for our shareholders. Why are you so worried about this when you go back to the Conference Calls of the last quarters, mary barra, i thought, glossed over the issues. Jim farley of ford is far more concerned. Both these companies have the wherewithal, a lot of money, but i just think that if you think about where our country is, what you dont want to see is this notion that we are anticapitalist again. When you listen to this to the head of the uaw, shawn fain, hes saying things, rhetoric that we havent heard in this country in a very long time. Fat cats billionaires look around here, not liking what we see, not as capitalist as im used to from a major union. Its been a theme all year long. Its not just the auto workers, not just the teamsters does it bother you . I think its a factor right now thats happening as a result of the tight labor market where companies are still struggling to hire workers. Wages are rising and the workers have the power youve got it thats very disconcerting. I happen to be prounion i know that thats not fashionable. I was a member of two unions it is if youre in Biden Administration can we just talk about things that are going wrong theres a meeting friday for palo alto, which my travel trust owns oh yeah why dont they do earnings on friday everyone has decided en masse that Nikesh Aurora is going to die down friday after the bell what happens i know. I know what happens if its not bad this stock has now gone down 30 points on the fact that he announced it on friday i dont know you have to speak to 40 different customers and i just think that maybe people are overdoing whats going to happen i just point that out because that is the short call that i keep getting people are worried that they are going to bury some bad news, that its a pr mistake, why would you do this . Theyve never reported on friday after the bell look, i im bringing it up because of all that. I point that out as another negative im trying to braing up the negative so people understand why the market has been in such a funk well, i think the other thing is that it had been very strong up until august. Absolutely. August is seasonably weak we know that werent necessarily expecting the data to be so strong i think theres a difference between goldilocks Economic Data and 5. 8 gdp growth, which is where the atlanta fed is currently tracking the Third Quarter gdp. I think weve gotten into a false dichotomy here when we have really good growth, its bad and you asked me something earlier that was very important. You said, is good good and im willing to say that we get 5. 8 growth, when i look around the world, im not getting that and its i think its positive and not as fueled by debt as people think in other words, i like growth. I like employment. And youre not scared of rate hikes . No. Im not. Interesting, i dont know if you saw the bank of america spend data its up a little bit higher. But if you listen to what ted decker said about how few people are people are not stretched. Doug yearley from toll brothers. People are not stretched Stewart Miller from lennar, people are not stretched i worry when our consumer is hurt i worry when the consumer is borrowing like mad the mastercard data doesnt indicate that. These are things that make me not have the qualms that many others have. I think were in a notgreat period for the market. People are always going to worry about bonds and sell some stocks im just urging people to be patient. Be patient like my friend, larry williams, said great market historian patience is warranted until september. Goldmansachs trading note, overnight, said, no longer buy the dip markets. Its a sell the rip market theyre looking at options theyre looking at the ctas. Thats another, like, you know, the language that weve developed in the last eight, ten years is kind of being thrown out by where the tenyear is telling us im like heres a good one. Oil goes up, sell. Well, remember, it used to be, if oil goes up, buy. Now oil goes up, sell. Oil goes up because a lot of the companies are doing well in permian. Im saying, company by company its a little too granular oil has gone up a lot by the way, Energy Stocks are outperforming today again. Theyre at the top of the market and its a good debate what do you think of that i think that its inflationary weve been trying to fight inflation. I think it raises the costs across Companies Like Transportation Companies its good for the Energy Stocks. Im not going to disagree its just that im saying that maybe we have to recognize we have a little higher inflation the fed will try to bring it down good is good we have an economy look, if youre in china right now, if youre president xi, heres what youre saying. I cannot believe that in america they are, like, how can they be doing this how can they keep the h200 from us how can they keep the h100 from us how can they keep the big buses from us and they have good growth we have country and garden, and theyve got town and country its all wrong that is that there. I would rather be us. I like the hand we have more than the hand so does the market, by the way. Weve outperformed china weve been such an inferiority complex in this country for so long. I dont like the inferiority complex. I dont want superiority i like competitive nature and i like more of a level playing field. I like that you inject the patriotism into the stock market i thought you were going to say the patriots no, no, only you and Chuck Robbins can talk football. I want to talk tapestry, get your thoughts on the quarter carol king. I loved her. Carol king . Shes one of my favorite. Musician . Singers . The tapestry album. Her best song how about youre talking about two drunken sailors being propped up youre talking about the capri tapestry it wasnt great on north america in particular, but the deal overshadows exactly because they talk about creating a luxury powerhouse. I know l slvhm. They are not lvmh. If they get this done, an 8 billion acquisition, theyll have versace, jimmy choo they wrecked jimmy choo and versace, we have to go to milan in february to see whether they are a factor. They became a factor, and now theyve really pulled back for the milan fashion show a lot of people think theres a lot of potential in versace. Its up because they like the you know, they like the theory how about the fact that Ralph Laurens been acting so poorly, even though that was the quarter . Theyve really outperformed theyre doing poorly right now. Because theyre exposed to china. Thats true 50 growth. And in ralph lauren, 50 growth. Well, chinas in the that important for them yet i just think, look, i dont want to really slide tapestry because i know dollars at a twomonth high. That doesnt help ralph either no, it doesnt. It follows yields and makes and part of the equity weakness here you mentioned the dollar against the chinese yuan a lot of people are watching the dollar versus the yen because were approaching key levels japan has made a comeback the reason i bring all these up is because these are the kind of levels where things could break. I know youre not scared about the yield on the 4. 3 i dont want to use scared, not scared the scared, no scared versus what im saying is concerned, not concerned. Im very concerned about all the things that you brought up, yes, and did i see svb coming i dont think svb saw it coming. Nobody did. And by the way, i think the focus on the regional banks is that is just almost punitive theyre taking it out on the h bands and the keys theyre taking it out on the comericas, not great quarters, necessarily, but certainly more deserve First Horizon thats who the governments taking it out on give those guys a break. Charlie scharf at wells . Wells is killing it. But theyre not Everyone Needs higher capital. By the way, cisco is at the top of the s p now, more than 5 coming off that interview. We did a solid interview. We could sit there and listen to the negativists and say, listen, nothings good, or we can listen to a man whos talking about the numbers being better than anything in the last 20 years. Thats significant scott heron is a nojoke cfo you know that because you have run the cfo conferences. Council, yeah we learn a lot at those. When you do that, you do a great job. One thing i really learned from thank you, jim. Thank you jim. Love you, jim. Love having you there at them too. You know, last the last time we met, it was a few weeks ago it was good some of the cfos were thinking, like, we dont want the fed to keep raising rates, but theres not a real sharp pullback in demand and theres so much spending you mentioned the i. R. A. , which turned one yesterday the chips act. I had them on yesterday, up 4 , and they are deeply involved in the designing of chips and they say they havent even seen the money yet from the chips act. It hasnt been disbursed. Its only just applications. By the way, caterpillar could tell you, look out, 2024 i think theyll be sold out, which is pretty amazing. Look at eton if you want a great bellwether of whats going on with Climate Change and with the notion of wind by the way, ge has can you believe that dog of me renewables no, ugly duckaling is now a swan. Are you saying, no recession, 23, no recession, 24 is that the call exactly what im saying coming in, everyone thought recession this year, okay, we push it out to 24 am i supposed to listen to everyone how about doing our own work youre against consensus here i am. Im against consensus. I thought that tjx was going to be the best retailer this year and not just because shopping over here at this one is so good tjx yeah, right here. 6 comps. When you go there its treasures. Which aisle do you go what child . Which aisle in the tjx . I like their shoe aisle i think they have very good shoe brands well, you see some jimmy choos there . Theyre doing barbie collaboration. How about we talk about the barbie effect on the economy it was my favorite slide from the target Conference Call they called that barbie merchandise and then an exclusive album, vinyl theyre doing with taylor swift. Should we revisit target and talk about whether pride hurt them so much that maybe their numbers were their samestore was not back enough and they chose to be more sensitive targets climbing up today. Cadence was excellent how things went. Tjx, by the way, the cadence was unbelievable we should i dont know if we have a chart of dtjx, but that going to hundo you love tjx. What about nvidia . You mentioned the 800 price target we had to have a guide. It was like ledger i dont know how we got there. Guys like, well, were going to here it is its amusing this is rosenblatt saying that, we are taking our price target to 800 from 600, applying valuation framework of 35 times pe on earnings of low 20s. We had been at 40 pe on ten. I mean, come on. What is this its like algebra. Theyre all trying to raise the price targets ahead of earnings on wednesday. Was geometry seventh and algebra was eighth did you know to drop out of that chemistry class . I was never good at science i tried premed for one quarter, one semester did terrible in biology. Did you ever walk into a philosophy class were you a philosophy major are youkidding me i was polysci. We didnt mention all the hmos are down cvs is like the book of job. Everybody else is getting hurt by that, all the competitors. Its not just cvs. Well take them up tomorrow so, s p is higher by about six points nasdaq, negative yesterday i told you the nasdaq has got these people that are in a funk. They come in every day they say, oh, maybe today theyll buy them, then they go down not happening tesla, microsoft, apple, amd, netflix, all weaker today. Its all the same guys. Alphabet and cisco are helping. Oils up. Oils up. Actually, a number of sectors are higher its oil, materials, indu industrials. Did you hear what he said on the Service Providers . Att and verizon . Not great but smaller share of their business wheres the money show me the benjamins. That music means i have to go to break i dont hear anything before we head to break, lets hit the bond report. Check out how treasurys are faring this morning. The big headline is that yields are at the highest in 15 years the tenyear pushing to 4. 3 overnight, i think we got as high as 4. 31 . Scary well, it is acting as a headwind, certainly, for stocks. Its not a tailwind synopsis is higher off that new ceo and the jim cramer interview. Squawk on the street will be right back s p laggards right now and you can see theres a theme, cvs health down 8. 5 , cigna, resmed, cardinal, cvs in particular because blue shield of california said its dropping cvss caremark pharmacy benefit manager and go in favor of mark cubans cost plus drugs and amazon instead the group is under pressure today. This is the nonprofit. Clearly a big deal amazon is a little bit higher. Up next, stop trading with jim weve got more movers for you when we come right back. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Time now for stop trading. Research talking about how a. I. Will help usher in consulting golden aim and they talk about ibm we havent heard ibm as way to be able to get hooked in, so to speak. We heard of accenture. I thought it was worth reading nice piece. Because the conventional wisdom is that a. I. Replaces those hundreds of thousands of consulting jobs. And thats why i thought maybe you need to hire someone to figure out how to do it i like the piece it read well to me i thought you bring in accenture. You have to bring in someone. They can compete with accenture. Look, if you knew how to a. I. , i have to get a. I. In, servicenow is a Company People use to figure out what to do salesforce will say the same thing. Your a. I. Basket is bigger. Thats right. I learned a lot today. Same. What do you have tonight . My Investment Committee convenience at 12 00 we have a good meeting and talk about stocks you can buy in this period and then ive got a Realty Income which pays the dividend monthly which ig like very much. Cincinnatis cintas which happens to be near you. The uniform company where i grew up. I pass it every day on my way to high school. Do you really i was always in hurry because i was late. You were good. I wasnt. I got detention because i was so late. I never got detention what i had perfect attendance. Of course. One of two people never missed a day. Im not surprised. And thats why you went to harvard. I went to a good school too, not harvard. When we come back, thank you, this was fun. Had a good time. Whartons jeremy seeingle what he sees ahead for the markets. More squawk on the street when we come right back iegel, svb, sl good thursday morning. Welcome to another hour here of squawk on the street. Im sara eisen with mike santoli. We are live from post nine of the new york Stock Exchange. Carl and david have the morning off. Take a look at stocks attempting to rebound just a little bit not convincingly here. Up 0. 1 on the s p energy, materials, communications, services, and industrials are leading us higher financials are up as well, but tech cant catch a bid really and health care is under pressure as well thats why the nasdaq is back and forth, positivenegative territory this morning were tracking for a down week s p down almost 2 heading into friday here. About 4 from those highs of the last month or so were 30 minutes into the trading session. Here are three big movers we are watching cisco shares in the green, rallying on a rebound in orders, despite an outlook that came in below some estimates the stock up 4 at the moment. Cvs shares headed in the opposite direction biggest laggard on the s p after blue shield of california announced to use mark cubans pharmacy as its preferred Network Going forward. The stock has been a big under performer this year down 30 year to date including that 9. 5 drop today were watching walmart, raising its fullyear forecast after a beat on the top and bottom lines. More on those numbers in just a moment as the stock is up 0. 5 . More Economic Data. Leading Economic Indicators out. Rick santelli has that for us. Rick yes sara, this is a very unusual data point leading Economic Indicators for july expected down 0. 4 . Is exactly as expected down 0. 4 . So whats so odd about that . First of all, its the 16th month consecutive month, that weve had negative month over month change in l. E. I. Whats more, minus 0. 4 is the best number, the highest number, because its the least negative in just about a year, since august of last year. The last time we had a positive ente ger was up 0. 3 and that was in, going all the way back to february of last year. So we could see that leading Economic Indicators is not leading us to think more on the upside of the economy. Its leading us to think more on the downside deinverting yield curve again because long rates are outpacing short rates to the upside. Sara, back to you. All right rick santelli, thank you it is one of those puzzling indicators we get, where leading Economic Indicators being negative for such a long string as rick said, the inverted yield curve inverted for so long and deeply, normally that would signal a recession. Yeah. The Economic Data is telling us otherwise. It boils down, exactly the debate right now, the longest stretch ever, when leading Economic Indicators have been in negative territory for 16 months and we have not been in a recession. Every other time you had this long of a stretch, in retrospect the economy experienced recession. 18 months since the fed started raising rates. Yeah. Like 15, 16 months. Long and variable lags. We got to be watching the bond market right now where yields are at the highest since 2008. Last time this happened, this was the fall of Lehman Brothers right. Yes the fall of Lehman Brothers is what compressed yields for 15 years to come in a sense and brought in the disinflationary mode. Were back to the era, 4. 3 on the 10year yield and its being driven by better Economic Data. Yeah. I have to say that. Today it was philly fed went the other way of new york empire manufacturing. Jobless claims 239, that was better than the week before. It showed a little bit of a deterioration. You want to see that going to in the right direction. The fed minutes which were still digesting, net hawkish, they didnt tell us anything new, except for the tightening bias intact ahead of the september meeting most officials are worried still about inflation and upside risk to inflation, even though some of them were happy to pause in july. Yeah. Theres a lot of ways to read the longterm bond yield rise, definitely pricing out a recession, pricing out potential rate cuts perhaps, but its real yields going up. Essentially the market saying, this economy either requires or can handle higher actual inflation adjusted Interest Rates. Its almost as if, with the fed potentially looking to skip a meeting in september, in the face of very Strong Demand in the economy, its like the long end of the Treasury Curve is going to ration demand for the fed in a way, right. Youre saying, well, were going to have to we have to reflect the fact we have a stronger economy somehow. Supply issues, heavy treasury supply, global yields going up a lot of stuff working into it it is fascinating. A liquid august bond market to see the moves click above the triggers and, you know, try to deal with the implications for the stock market the stock market has to make its peace with yields at this threshold. Its done it before. I was looking back at last years news stories when real yields went positive for the first time in a long time around 3 on the nominal 10year and can the stock market handle positive yields. Over time yes. If the economy is okay, if profits are pointing in the right direction, you can, but its a challenge. You mentioned weve got a lot of debt issuance. Yeah. This is going to raise gornnt which could be a. S. Headwind and then on the economy, yes, very strong signals, especially from the consumer, but i did note this San Francisco fed paper that came out last night, did you see this on consumers and how a lot of it has been driven by excess savings and pandemic stimulus. Well, our updated estimates according to the San Francisco fed suggest that households hold less than 190 billion of aggregate excess savings by june and expect it to run out considerable uncertainty in the outlook. These savings are likely to be depleted during the Third Quarter of 2023. That has been one of the biggest economic questions, is when does that pad that consumers have, the excess savings theyre drawing down on their savings, spending money, when does that run out . Heres an estimate we dont know exactly. Right. No, yodont. 3q of 23. Its a bit of an inexact science to figure out what excess savings are, although this would be a bigger issue if we didnt have 4 employment and wage growth. Did not feed off big cushion of excess savings to the point about longterm yields, thats probably going to have to pinch the Housing Market again and maybe punch it back to, you know, in terms of level of activity and so in other words, the market does have these ebbs and flows of were too strong in the economy, well, we can correct that with making longer term debt more expensive. People are rolling at higher rates. Its not a crisis point, but it is an undertoe potentially for growth. No question higher yields for autos, housing. Its been resilient because of weird covid factors like everyone refinancing and buying homes with 3 Mortgage Rates and not being able to buy cars because of chip shortages. Then walmart which 6. 4 u. S. Comps came in much strongerp than expected. What does that say about the environment and consumer heres what Doug Mcmillon said on the Conference Call last hour. Our customers and members are resilient. Theyre looking for value, and they trust us to be there for them we see people across income cohorts come us to looking for frequently to save on everyday needs. That gives us an opportunity to drive more discretionary categories. And by the way, the discretionary categories that are under pressure across the board, including from walmart home and apparel and electronics were better than expected and showed a sequential improvement from last quarter. Ecommerce sales 24 they raised guidance, but maybe not as much as the street wanted this was a pretty strong sentiment kind of stock heading in. Very High Expectations. It was a consensus long going in high valuations relative to its history, relative to its peer. Obviously, the stock is handling it okay and hanging on to the gains, but growing 6. 5 is great, top line comp sales, but thats kind of what nominal growth is doing in the u. S. Economy. So, you know, when you already have sales equivalent to more than 2 of u. S. Gdp, its tough to theyre not selling taylor swift tickets or airline tickets. Theyre selling groceries and pharmacy, their prescription business did well. [ inaudible ] in goods. And theyre gaining shares and their competitors. John rainey is going to be on next hour. What do the latest fed comments from those minutes mean for jackson hole next week lets get to Steve Liesman with what comes next. Good morning, mike. As fed officials head to jackson hole next week for the annual summit in the mountains, weve seen Economic Data and minute to that july meeting raise questions about just where policy is going. Quick recap on the minutes a lot of inflation concern and as sara just said, a bias to hike, a slight bias to hike, but more twosided risk was seen up and down on the economy. Two officials rejected the idea of hikes, but they did say theres a need for below trend growth to bring inflation under control. I just want to remark that that comment in the minutes echoed a statement that jay powell made last year at his landmark jackson hole speech when he said, quote, reducing inflation is likely to require a sustained period of below trend growth powell didnt get what he was after there. Every quarter since jackson hole, take a look here, has been at or above trend growth, and estimates for this quarter range from 2 or 2. 2 all the way up to the atlanta feds crazy but very high near 6 number what powell and the fed did get, a sustained decline in inflation in the absence of a growth slowdown when the fed met in jackson hole, cpi was north of 8 a little above 3 . The topic of the conference this year, structural shifts in global economy, but investors, what they want to know, how the current combination of higher growth, lower inflation, and a still tight job market is going to shift fed policy. Were going to be talking about that we have two days of full coverage live from jackson hole next thursday and friday well bring you the latest on Monetary Policy from the mountains. Guys steve, looking forward to it. Thank you very much. Steve liesman ahead of jackson hole. Our next guest says our economy is strong and yields are strong because of productivity, good for profits, higher yields will keep housing in check Wharton School professor Jeremy Siegel joins us now. I was really interested in talking to you today because youve been beating the drum on the disinflation story and that fed should stop raising rates. Are you worried we might see a new wave of inflation with all this strong data no, im not let me tell you why. This is a very interesting fact. I was just reviewing the data. Last year we hired almost 5 million new workers, net farm payroll and we have gdp growth of less than 1 . It was the worst productivity performance in over 70 years this year we are hiring at less than half the pace and we have two to three times the level of gdp growth that we had last year why is that . One of the biggest bouncebacks in productivity that i have ever seen, and thats to saving jay powell, thats why we could have this tremendous gdp growth and yet still have the disinflationary trends that are in the economy now, it is true, oil stopped going, commodities have stopped going down, but i dont see those as starting a new trend. I see the productivity as being a basic Deflationary Force that will keep that inflation in check. I get it, but we still have a tight labor market and that is pressuring wage growth higher. In the past, 2 rise in the Unemployment Rate was required to bring down wage growth by the amount that we that is needed today. But wage growth is, first of all, two parts to wage growth, one is productivity. If the worker is actually producing more than he or she should be getting paid more, so if we have 2 to 3 bounce back in productivity, we have at least that, that would actually justify wages being 2 to 3 higher also we have a catchup. You know, even though the last year over year real wages have increased since the pandemic in march of 2020, real wages have fallen behind. Take a look at uaw, they were under threeyear contracts 3 a year when you have 8, 9 inflation youre going to fall behind. Theyre asking for some payback for the lost real income thats going to hurt the profits forward and General Motors and several others, but nonetheless, i think in many ways, they deserve some of that payback and tee serve a growth in productivity im not as worried about the wage growth as powell seems to be, because i dont think that that actually means a new inflationary spiral. Professor siegel, in terms of how the stock market has been digesting all of this, it seems as if there was great comfort that we were headed for something aproximating a soft landing in the economy and very quickly that turned into wait a second, maybe the economy is reaccelerating, maybe a little too quick, maybe rates have to go higher on the long end and can stocks handle that you could say that the stock market needed a pullback because of the run it had before this anyway how does this play out it seems the economy can handle means we might be looking into next year for saying do we have to check off growth, does the fed have to do more or will rates themselves tip us into a downturn well, mike, one of the basic things we teach in economics is that real Interest Rates are very linked to real gdp growth you were talking about that earlier quite correctly. The acceleration of real gdp growth means higher real interests and, therefore, higher nominal interests for any given rate of inflation. Why is that not tanking the stock market now because real increases in productivity and real growth increase profits so, therefore, we have that great battle between the enumerator and denominator of what gives stock prices. Prices in the new mer rater look ber even though the dough nominator has gone up. The stock market is holding its own you think it can continue, despite this wobble . I think it can continue now, you know, this is a big increase in real rates justified by the increase in growth. I think that chairman powell and the fed have to be very twosided if they see a slippage of that productivity growth and, you know, any sort of increase in initial claims and again, we have another good number for claims this morning. He has to think about not only holding, but do i have to decrease the rate. We are going into political season i guess you could say were in political season and have been for long time. Pressure is going to be mounting not to get a bad employment print. And he needs a dual mandate, so i think that he will be responsive, certainly more than i thought that he would be 6 or 12 months ago. All right professor siegel, sticking to your guns on that call, appreciate you joining us today. Thank you as we head to break, here is our road map for the rest of the hour live to beijing as one of the countrys biggest Asset Managers misses payments to investors and contagion fears grow. More on walmarts results with one analyst who calls the stock a buy here. The road ahead for automakers and what the street is calling an imminent risk to names like ford and gm big show still ahead dow up 100 points. Stay with us swords clashing had enough . No. Arthritis. Here. Aspercreme arthritis. Full prescriptionstrength . Reduces inflammation . Thank the gods. Dont thank them too soon. Kick pain in the aspercreme. New natures bounty hair growth. Clinically shown to help grow thicker, fuller hair with just one capsule a day of advanced hair complex. Conquer hair thinning. And fall in love with your hair all over again. Only from natures bounty. You cant buy great conversations or moments that matter, but you can invest in them. At t. Rowe price our strategic investing approach can help you build the future you imagine. T. Rowe price, invest with confidence. Welcome back to squawk on the street. Walmart beats on the top and bottom line, raises their fiscal year guidance. Our next guest believes consumers are, quote, buying smaller sizes due to Budget Constraints or larger pack sizes for value. Raperson is an analyst at oppenheimer listening on the Conference Call, a price target of 175. What do you mean about the pack sizes . Why is that important . Yeah. I think youre seeing consumers right now go towards more value with larger pack sizes you get better value the same time lower income consumers could be squeezed gu to inflation out there buying smaller pack sizes youre seeing some shifts to larger and small pack sizes. Walmart did not call that out specifically but weve seen that through our coverage of Consumer Staples companies. What did you take away from the Earnings Call . Why is the stock down 1 this is case it was a very high expectation setup investors going to print thought walmart could do 6 po 6. 5 u. S. Comp and they did do that, and they raised guidance if you look at their guidance for the back half of the year, it was conservative, so i think investors are taking profits and shares theres really nothing wrong with the underlying report tremendous momentum in the u. S theyre doing great internationally and with sams club in the u. S. As well just very strong allaround report just very High Expectations going to the print. That seems clear, but i wonder what type of environment is going to make walmart work well as a stock from here . Typically, its a bit more defensive. Its when you get concerned about discretionary purchases. We have a hot running economy and also have walmarts relative valuation up near highs compared to target and other peers. Historically walmart does well when seeking defense. Whats unique about walmart going forward, next year and beyond, they can grow operating Income Growth faster in sales, so i think the profit delivery in the years is going to be strong i think walmart can work in weaker environment as investors seek defense and in stronger environment given that youre going to see much stronger profit flow through in the coming years. A lot being made about the market share gains as they are growing faster than peers in the category who do you think theyre taking share from groceries tremendous share in dollar and unit perspective a lot of it is coming from conventional grocers broad based, outperforming dollar stores, the club channel. Its coming from many players. I think you under appreciate the story with what theyre doing with walmart plus in pickup and delivery ecommerce is a reason as well. Why are they gaining in ecommerce share yeah. So i think ecommerce, first you look at pickup and delivery pickup in store, they answered well i think they have one of the strongest offerings out there. Free pick up in many stores. Online with the marketplace, more and more skews, significant increase in the marketplace skews year over year thats helping to drive more customers engaging with the ecommerce website leading to strong 20 plus growth in their ecommerce business wishes is stronger than amazon. Thank you very much for joining us with your initial take. Thank you for having me. As we head to break, check out the biggest gainers on the s p 500 this morning cisco is at the top up almost 5 on better numbers. Discover financials rebounding, its been a tough slog for that one after losing the ceo recently and etsy up 3 it its been at the low list. Squawk on the street will be right back the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . upbeat music [narrator] what if there was a hearing aid that could keep up with you . notification dings this is jabra enhance select. Its a smart hearing solution that makes hearing aids more convenient and less expensive. It connects with your phone so you can stream calls and music. With jabra enhance selects premium package, better hearing doesnt have to start in a doctors office. 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And fall in love with your hair all over again. Only from natures bounty. Industrial stocks have been an under performer since march after a strong start to the year, but that said, there are names to watch in the group. Dom chu has been drilling down in the sector and joins us with more. Mike, the sector yes, an under performer, but the gap has narrowed and even outperformed the s p slightly off the past three months or so as we reach the tail end of the earnings season with all but three rr having reported. We wanted to take a look at where things stand from a Bigger Picture perspective. The total earnings per share figures reported by the industrial sector overall have been up 14 compared to the same time last year according to data from refinitiv now on average, the actual Earnings Reported have been just around 7. 3 above the consensus analyst system decent figures on the earnings side are playing out right now now if you turn to the revenue side of things, a slightly smaller, but still a gain, with the reported revenue up almost 4 and 4. 5 compared to last year and the actual revenues are up 1. 8 above estimates on average, according to refinitiv. But theres still a few names to watch in the weeks ahead, and that includes deere amongst many, set to report before the opening bell tomorrow morning. The ag and heavy equipment manufacturer has lagged, trading in negative territory. Its down 6 from alltime highs it notched late last month well see if tomorrows Earnings Report is enough of a catalyst to send those deere shares higher deere one to watch as it is in some ways an economic bellwether back over to you folks. Certainly for the ageconomy thank you. Chinas contagion fears as one of the countrys biggest Asset Managers misses payments to investors the latest from beijing after the break. Were back in 2 minutes. Dow hanging on to a 100point gain here. Well be right back. Opportunity is using data to create a competitive advantage. Its raising capital to help companies change the world. Opportunity is making the dream of Home Ownership a reality. And driving the world forward to a Greener Energy future. [applause] sometimes the only thing standing between you and opportunity is someone who can make the connection. At ice, we connect people to opportunity. Welcome back with your cnbc news update, emergency officials in maui are defending their decision not to sound warning sirens as a deadly wildfire raged the wildfires north of the coastline are used for tsunamis and to communicate to residents to seek Higher Ground which would have been in the direction of the fire. The death toll from the fire has now topped 110 the u. S. , japan, and south korea plan to reveal new joint defenses against chinese and north korean missiles during a joint summit at camp david friday analysts say the summit reflects a dramatic improvement in ties between tokyo and seoul after years of strained relations over japans clone nall occupation of korea. And nba it fans in china bought 10,000 bottles of james hardens new wine in just seconds this week. The 76ers point guard was promoting his harden wine to 15 million on a live stream hosted by a chinese online celebrity. Harden said he usually only sells a few cases of the wine each day sara i guess thats what happens when you go to china to the chinese audience where the numbers are bigger thank you, sylvan na. Checking into the markets an hour into trading and s p is higher by just a little percent. The narrative continues to be around the back up in yields we have seen 15year highs on treasury yields. The nasdaq remains under pressure nothing really changing in that story. Energy, materials, utilities, financials and industrials are green today. Tech is under Pressure Health care is under pressure. Some of these pharmacy benefit managers like a cvs under pressure after that deal was signed with a big California Company that loses cvs as a provider and goes instead to mark cubans drug company and amazon that having a Ripple Effect on the Broader Market theres china. Concerns sitill about the econoy even with positive comments from officials overnight. The concerns around some of the biggest players in the countrys nearly 3 trillion shadow financing market are taking center stage lets get to eunice yoon for the latest what is the issue here well, the issue, sara, is that this big shadow finance company, its a trust firm called zhongzhi, looks like it missed several payments to investors. Over the past day or so, several videos emerged online and have been censored which purport to show angry investors visiting the offices here in beijing. We went to the beijing office and when there, it looked definitely the company set up a Registration Desk to address some of these issues with investors. Many of them we saw about a dozen or so, said they were upset about the situation. They were very, very worried about whether or not they were going to get paid back and the staff did confirm that some of the products would not be paid back because of the liquidity issues involving the underlying investments. So this company zongrong has had a sizable real estate exposure and that is an issue for a lot of its investors and many who are not their investors, but worried about the contagion effect rippling through. Some of the issues we had seen were investors actually filing hundreds of questions to shanghai and shenzhen listed stocks and whether there was greater exposure at those firms to zongrong and Country Garden which is the real estate giant facing default a lot of concerns there. Security presence at the company was very heavy and also quite tight around the new financial regulator. We went over there because there have been reports of the investors are looking to take their case to the government authorities, and to them, the that office of the financial regulator is really a symbol of the ones who would be in charge and might be able to help them. Eunice, so the immediate issue, it seems, just a lack of liquidity to sort of continue paying out on some of these investments. Whats going on under the surface in terms of the actual real estate sector and what the chinese authorities are trying to do in terms of, you know, either restricting further investment in there . Are we dealing with an overhang of over capacity whats happening economically behind this . Well, the main problem is that there arent as many homes being sold, and many of them not finished you have on the one hand consumers who are choosing either they dont have the money to buy an apartment or they have the money, but are actually seeing that prices are declining and so are holding off on purchasing you have a demand issue there. But also, you have a structural problem within the real estate sector where before there wasnt really any question a lot of developers would be able to raise financing and continue to expand and finish their big products and in the past couple years, the government has been cracking down on some of the expansion and the debt for these developers so that made it much harder for the developers to be able to finish their projects. We had already seen issues with Companies Like evergrande, a big real estate giant that ran into problems because of its expansion plans, so were already seeing problems there, and then suddenly on top of it now, we had the economic problem where people are just buying property differently before the thinking was we just put our money into one of the few things that chinese can put their money into, which is real estate, and so why not do it because real estate prices always go up, at least that was the thinking now, theres this thinking that, you know, maybe thats not true and, you know, i feel a lot poorer, im feeling much more pessimistic, there have been a lot of job losses here, people even though the government has kind of disappeared the youth unemployment number, people are talking about how difficult it is to find a job, not only if youre a young person or older just because people are feeling poorer, theyre not as incentivized to buy a home and a lot of people are saving instead. Yeah. That seems to be one of the headwinds on the economy there thanks so much for breaking it down for us. Our next guest is an investor in china arguing beneath negative narratives its a market thats cyclically much better positioned than the usa he owns names like neo and others ben harburg joins us now lets talk about that. Its good to see you first of all, address the macro picture. Its been something of a disappointing several months people anticipated perhaps a greater growth push with the country reopening, and the markets have reflected that to a large degree. Were not surprised by the lagging numbers over the last two quarters it was going to take a long time both for domestic consumers to build back up their savings and feel that they could spend discretionariry income and Global Investors to trust this market after so many lashings at the hands of regulatory intervention and technology names. The zero covid draconian lockdowns. A slew of policies that felt like they prioritized stability over capitalism and over free market so we expected a lot of turbulence in the first two quarters were starting to see some chutes of growth and improved Consumer Confidence out of the numbers we saw the likes of alibaba and some of the numbers out of tencent were feeling a little more optimistic heading into q3. And what do you make of the current moves both in terms of talking about stimulus and also even overnight, when, you know, they tried to defend the currency a bit after a stretch of weakness there . Are these good signs are we back to the playbook of listen, buy when china wants to stimulate . Or is it more complicated now . The Chinese Government thought that they could inorganically find their way out of this recessionary environment. If they reopened the market and teased stimulus, teased inteInterest Rate drops and Infrastructure Investment injection that would stimulate Global Investment appetite to rush backinto the worlds second largest market and that didnt happen as we anticipated, theyre going to have to get more active in terms of how they inject capital into the ecosystem, reduce Interest Rates and buoy investor and Consumer Confidence they can continue to operate as they had precovid in this market. I feel like i have to ask, you know, i wouldnt have asked this question a few years ago, why are you investing in china because Foreign Investors have been bailing i get it was always the promise of growth, but without that, and the increasing geopolitical tensions and now executive orders around investment from the u. S. Government, i mean, this is Risky Business its great question actually, now, more than any other time, its probably a better time to be where i am and a participant in this market as capital flees, what is undeniably the second largest market and still on track in many ways to be the largest across many categories, and as people walk away from the market because of kind of headline news, but without looking at the true fundamentals of the market, as people are swayed rather than by financial reasons, but by political overhang, geopolitical risks, that provides incredible arbitrage opportunities for investors like us sitting on the ground, to understand where washington is going with its trajectory and which companies will fall on the regulatory black and gray load zones there. The fundamentals, you point to the fundamentals, the fundamentals are that Global Companies are moving their supply chain out of china after building them for years and years. And the fundamentals are this economy has more than 20 youth unemployment, so bad theyre going to scrap reporting the number and that premier has to come in overnight and say were going to defend our growth targets. Are the fundamentals really appealing . The scale is still there. I think that james harden kind of analogy you flashed before the segment was is indicative of that. There is still huge, vast demand in china and while there are had headline numbers that look negative on the numbers, they needed to get rid of the bad debt and sovereign and kind of s. O. E. Overhang and businesses that were government owned and racking up debt, still is a fundamental market in terms of the scale, 1. 4 billion people all buying things over homogenous platforms like alibaba and communicating over tencent and businesses with global range like tiktoks of the world and sheins this is a company and a country that is capable of tremendous growth still and one that has Global Investors create significant unnecessary depression on valuations that those here still can capitalize upon. I wonder about the ability to capitalize on that the global competitors or comps in china like alibaba or neo as you own, do you ever get credit for owning the best company in that market . Does it get the value get realized beyond what the sentiment towards china macro . Those stocks end up looking cheap compared to the western peers because it seems as if theres not enough lift there or enough permission to for them to really kind of meet their profit destiny so to speak its been a great run for a lot of those stocks. We entered neo at a billion dollar valuation went up to 98 billion over the pandemic period. Its dropped down, still far beyond our wildest upside expectations where we thought the business would be when we invested on the private side the key for us is timing for instance, we called the market properly last october after the Chinese National Party Congress when a lot of investors fled the market and valuations nose dived off of what was fairly mundane news who had been reappointed or brought in as part of the pullette bureau. Because were sitting on the ground to leverage that and because we have good connectivity in washington, we know whats coming in terms of some of the capital bans and which sectors to avoid theres an angle to invest in the chinese regulatory stream as well as in sectors that do not contravene American Interest rate and values and tap into the Consumer Base to make capital returns. Ive heard the case made when the u. S. President calls the chinese economy a ticking time bomb on a contrarian basis it might not be the worst place thanks very much appreciate the thoughts today. Coming up, what some on the street are calling the most imminent threat to detroit automakers as those shares under perform in ausugt. Find out why after the break dont go away. What do you mean . These straps are mindblowing they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. And you are . Im an investor. In invesco qqq, a fund that gives me access to. Nasdaq 100 innovations like. Wearable training optimization tech. Uh, how long are you. Im done. Im okay. upbeat music constant contacts advanced automation lets you send the right message at the right time, every time. constant contact. Helping the small stand tall. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Automakers like gm and ford underperforming amid labor negotiations with the United Auto Workers union whose demands if unchanged could cost each billions phil lebeau joins us with more. Hey, mike robert almost everyone ive talked to the odds of a strike, whether short or long, there will some type come september 15th or a day or two later the impact for the big three could be substantial now were just talking about an estimate in terms of what it would cost them on a weekly basis. This is according to bank of america it could be as much as 770 million if its General Motors, 470 million if its stelantis. All are gradually increasing their production and have been for several months since the supply chain has improved. That said, their investors are well below the historic averages so they have some investor that will help them offset the impact of losing production if theres a strike, at least for a week or two, if it gets more extended it becomes a different question entirely this is all about hours or hourly labor costs 63 to 67 is the average for the big three. Compare that with foreign automakers this is what big three want to talk about compare with tesla as they transition to an ev portfolio in the years to come, tesla will be a more relevant example of what they need to be concerned about in terms of labor costs. Tesla is not a unionized labor force, so thats at the heart of this remember the uaw is demanding a 40 pay increase theyre not going to get 40 , but they will get substantially more than what they received in previous contract negotiations take a look at shares of the big three. Remember that uaw rank and file, the local shops, will all be taking strike authorization votes next week. That is a way for the locals to say, to the union leadership, we give you the authorization to call a strike if the contract ends and theres no progress we dont have an agreement, et cetera doesnt mean there will be a strike but every time these contracts come up, you do see a strike authorization vote usually approved by 95 of the members. Aside interest just straight hourly pay, what are some of the issues, if any i know sometimes in these negotiations the uaw wants commitments to production levels theres less complexity in the manufacturing. Maybe the Companies Want to try to negotiate some way to transition that in terms of the work flow . Biggest issue, 10 ev battery plants here in the u. S. Or being built, the uaw wants those plants to be unionized under the same agreements. They are joint ventures, opens up a can of worms. So 11 59 september 14 thats the dead lip leading up to that, any important dates they may extend it a day or two. Typically they do. It doesnt mean theyre immediately on the line on the 15th i wouldnt be surprised if they are, however, this ear. Phil, thank you coming up at 11 00 a. M. , walmart cfo breaking down the results and where he sees consumer demand going from here. Thats in the next hour of squawk on the street. Well be right back. The dow is still up 77 points. S p barely positive. Nasdaqs down 0. 3 those losses are being dragged down by apple, ielmiost nt, crof and netflix. Elp with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy. I run a wax museum. Let Innovation Refunds help you get started on your erc tax refund. Stop waiting. Go to innovationrefunds. Com you really got the brows. I did have hearing aids from another company. I was just frustrated. I almost gave up. With miracle ear its all about service. Theyre personable. Theyre friendly. Im very happy with them. We provide you with a free lifetime of aftercare. Meaning free checkups, cleanings, and adjustments. I see someone new. Someone happy. Its really made a difference. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Nice footwork. Andman, youre lucky,e, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Every business thats why comcast business de is launching theal. Mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 49. 99 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Lets get to bob pisani with more on whats moving. Hovering around the flat line. Apple on the flat line. Break down in tech in general. Very modest bounce in some market leaders recently. Energy is doing a little better. Remember, oil was down four of the last five days oil up today helping a little bit. Were also getting a little bounce its modest but Interest Rate sensitive sectors like utilities and reits, they have been clobbered on higher rate concerns theyre among the worst performers mike mentioned technology. You see the tech index down a quarter of a point the big tech names are having a rough time intel has been down the last couple of days on the steel for Tower Semiconductor they lost. Thats been a drag on the dow. Just on a largescale level, semiconductors topped out in june and july. Theyre very good leading indicators advanced microis now down close to 20 off of its recent highs, believe it or not. Apple, mike was mentioning apple recently its in correction territory the new high was in july and were down about 11 from its recent high. If you want to argue below 10 from recent highs as a correction, apple is in correction territory meta has had this fantastic run going into 2023. It has been for sale almost every single day in the month of august so, there is a big slowdown in the tech space in general. You can blame this on concerns about higher rates, which puts particular pressure on technology stocks. Its noticeable. You want another one, lets call it speck that live technology, cathie woods ark, its been down 12 of the last 13 days. Theres the threemonth chart. Straight down 12 of the last 13 days that represents Speculative Technology where are we on the markets . Lets say i think its fair to say the big risks are the macro risks from the strong economy. The market is worried about the higher for longer story from the fed. And even to a certain extent, this sounds counterintuitive, but the market is starting to reprice the Recession Risk, believe it or not. The higher othds of a fedinduced recession. The market is just terrified of the historic realization that any time the fed keeps pushing up on Interest Rates, it creates a higher risk of a recession at this point the funny thing is earnings are still strong cisco at a new high. We have one new high on the s p, thats cisco earnings coming in good. The earnings are not reflecting any Recession Risk but i think its fair to say higher for longer is a real problem. No doubt about it to your point about recession, the slow and steady soft landing type scenery yoe, where growth doesnt really go fast, but it stays positive, and yields stay moderate, that seemed to be the comfortable spot and we can deviate from that in either direction now. Its funny how narrow the goldilocks scenario is we want just enough slowdown in the markets for housing, just enough of a slowdown in the jobs report and any sign its a tiny bit stronger, a millimeter above the goldilocks scenario, the market has a problem with it thats the territory were in. You and i made the case we were due to have a pullback for any reason whatsoever coming into august. Theres nothing wrong with the market right now on a technical level. And youre not seeing panic in the vix. You might want to see some more. Not on the volume either. Not heavy volume. Bob pisani. More squawk on the street after the break. Were coming back with the walmart cfo. sfx people cheering sfx Stock Exchange bell ringing sfx people celebrating sfx people celebrating sfx Stock Exchange bell ringing fan 1 there ya go thats what im talkin about sfx people celebrating josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. 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Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Good thursday morning. Im sara eisen with mike santoli live from post 9 of the new york Stock Exchange walmart in focus after strong earnings and boosting guidance walmarts cfo joins us at the bottom of the hour. How to avoid falling for the elon musk distraction team Jessica Lessin breaks down her provocative thesis. As investors go bottom fishing into depressed commercial assets. The s p 500 clinging right around the flat line the nasdaq is the source of downside pressure. Apple down more than 1