Transcripts For CNBC Squawk On The Street 20240713

Weigh s wider restrictions on huawei road map begins with apples coronavirus warning cautioning it does not expect to meet quarterly revenue forecasts. Shares are sinking and dragging the dow down with it plus big tech needs more regulation. Why Mark Zuckerberg is calling for more scrutiny of facebook. And walmart earnings look to fall short as the whole day season takes a hit well hear exclusively from Doug Mcmillon in a few moments. Apple warns it will not meet prior revenue projection due to the coronavirus outbreak the virus limited iphone production and resulted in weaker demand in china jim was talking about getting hit on the supply and the demand side although that original range was above estimates. So how much are we really losing i think that people dont want to hear this. Everyone that i spoke to the chatter is come on, jim, its really bad i disagree in terms of the rest of the world its gotten better part of what i hear, the work i do dont forget, a lot of Service Revenue that changes the way you would normally look at this, why people want to look at it as a Hardware Company there are six or seven plants in this wuhan hubei area that are not theirs, that supply, that are kind of off line they have to adjust. They can adjust outside of china, but the shopping and eunice yoon has done a remarkable job theres not a lot of shopping. In the end, what do you do when people dont shop and youre selling something . And the answer is, well, you say look, we cant make the numbers. I am surprised the stock is only down six it was down 12 earlier i guess there are people who think this is more under control than i do. Dave and i have been speaking off camera how nervous i am. Yes well talk a bit more about that and about the impact on apple and others in the country. Yes i know we do want to get to walmart this morning walmart is another big story. The Investment Community taking note of their earnings, big meeting under way here at the big board on the day in which the company did miss lets go to Courtney Reagan with ceo Doug Mcmillon. Good morning, court. Hi, good morning to you, carl thats right, we are upstairs from where you are at the new york Stock Exchange. Walmart is holding its investor day and weve grabbed ceo Doug Mcmillon for a couple minutes during a break thank you for doing this with us. You bet you reported Fourth Quarter and full year, a little disappointing compared to what analysts were looking for profit comparable sales still strong. What happened in the Fourth Quarter . Overall were pleased with the year the Fourth Quarter wasnt our best, 1. 9 comp. A strong november through cyber monday was good, thanksgiving was good, had a strong january but there were a few weeks before christmas where sales in stores were softer. It was good to see our ecommerce growth continue we grew 35 for the quarter, that was terrific. Customers continue to come to walmart. Com and ecommerce is well under way but things we did in stores we need to change up for next year. Had a hard time finding a hot toy, had issues with apparel some of those things were selfinflicted walmarts grocery has been strong general merchandise sometimes not as strong. Wal marpt needs to mart needs to grocery or can the merchandise be fixed its fixed, big and growing we had issues in toys, media, gaming and apparel we had strength in electronics gm is important to us and we want it to grow faster we just have to do both at the same time. We have to have store growth and online growth, food and consumer growth and general merchandise growth to make the mix work so thats what well get done youre talking about the full year Going Forward here. You just were speaking with chief Financial Officer brett biggs about that the range is below past analyst expectations you said the coronavirus is not having a major impact because your stores in china are open and youve lowered your expoerneexpoerposure to sourcing, tariffs own other reasons. How is coronavirus embedded in there or not its not in our guidance. Let me talk about our expectations we think the consumers economy, the economy for the next year will be about the same as it is this year. Were growing 3 top line and 3 operating income we think is a strong performance, what results in that guidance as it relates to the coronavirus, its too difficult to tell at this early stage exactly how to forecast it what we shared this morning is you go to the priorities we have first its our associates and customers and safety on the ground in china. Were still operating our stores, almost all of them, i think all are them are open but operating in some cases majority of casesduced hours and the shift from selling the whole store pivoted to food and consumables. If youre living in china, focused on fresh food and the staples you need to have at home were seeing delivery from our stores into apartments and into homes grow at an even faster rate than it was before and almost triple digit last year. So a huge amount of growth as it relates to delivery from our stores shipping and product come out of china into the u. S. And other markets is an issue but in the u. S. About twothirds of what we sell is made in the usa. The other third doesnt all come from china and weve been acting to buy goods that are already here, made in the usa, already in the country to try and offset some of the things that we may not otherwise feel pressure from its too difficult to call right now exactly what will happen in the quarter but we said because of whats happening on the ground in china, our Chinese Business not the rest of the world, we do expect to have some impact but were not currently putting that under our guidance. Walmart is a very International Business a lot of focus on the u. S. Business this quarter you saw some impact from disruption, political unrest in chile, and you had a number of store issues there the uk, canada continues to be soft should you maybe exit some of the international markets, focus solely on the u. S. We have some great businesses outside the United States. The business in mexico is the first one that comes to mind, but our business in canada over time has been terrific its a really big business, and has a really nice return weve got a tremendous opportunity in india, with the investments we made in flip card and phone pay. China, sams club continues to be really strong, a little bit later today were going to be walking through the International Portfolio. Do we need to be in every market were in no but well make good decisions at the right time, as it relates to how the portfolio changes shape. We shouldnt lump all of our businesses together into one bucket because some of these are outstanding businesses help us understand whats going on with ecommerce for a while you were acquiring a lot of the smaller businesses. That seems to have stopped and youve sold off mod cloth, seen executive departures, jet black is closed. What is going on under the surface . Let categorize them. If you go back to what happened when we acquired jet, we found that it served as a tremendous catalyst for walmart. Com mark and the team joined, we saw lower cost to acquire a customer in walmart, saw the opportunity to focus on it and grow it, so thats what weve done the other acquisitions we made some have been just what we thought they would be, increased our assortment, shoes. Com, art. Com, hayneedle which came with jet when we bought jet helped us get category volume, buyers, category special e specialists, brands we didnt have before. Over the last couple of years we added over 7,500 brands to well mart. Com in the category of assortment acquisitions wed do those all over again really has been beneficial to the company. Mod cloth is one of the examples we had a digitally vertical native brand hasnt worked out like we planned but taking risks some things arent going to work im okay with that as long as its not too sig cannnificant aa repetitive issue food, ecommerce, walmart. Com and flip card and phone pay, the year we started well be 50 billion in net sales just in ecommerce so we have the right chess pieces were learning how to put omni together which is how customers want to shop and have strengthness to play with. Im glad we did. Youve been through a period of a lot of innovation and some of them are not going to work out, thats sort of the nature of being innovative and entrepreneurial. Has any of that sort of curbed your appetite for pushing that further with the recent closure of jet black as an example lets talk about that i dont think we handled the conversation around jet black as well as we could have. We wanted to learn how to do conversational commerce, voice and text and we learned how to do that. Whats happening is were taking that function, that capability and were going to pivot it to apply to a walmart market with walmart products and were really excited about doing that. The way we set up the test in bullet black, could you order anything via text and we would run over town buying from any retailer in addition to walmart. Thats got a high cost to serve but we did it to get the data so wed understand what people were buying and how they would respond to using text and voice, big checkmark on learned that. So this was kind of always part of the plan. We didnt think we were going to scale a big business with this mod until manhattan and so we look at that as a successful experiment as part of store number eight and now we pivot in walmart world and take advantage of it. Inhome delivery putting the groceries into your fridge im super excited about that. We pent to pittsburgh, vero beach and kansas city last fall, a few stores in each market and have a high retention rate i go the to visit the associates in kansas city recently that do deliveries into the home and make a delivery, and customers love it. I think theres going to be a time when a lot of americans are either into their garage or some sort of a box outside their house and in many cases all the way into the kitchen theyre going to let us serve them, and just pay a membership fee and the itemles you buy all the time we keep in stock like do you stores and a winner. Some people cant get their head around, others think it will be great. People are skeptical and try it and dont want to stop. Like uber, getting into cars with strangers we dont know for example, one business thathas scaled there have been a number of executive departures at walmart which has been different from what weve seen in years past. Folks like yourself spending their entire career at wal marpmarpwalmart. The tenure of an executive changing at walmart . Should we read something into this no, id like to say thank you to them, take greg did an incredible job the reasons they left are personal reasons and theres no Common Thread related to them and the people that are now in these roles im super excited about. John verner is a 26year associate, worked all over the company. Hell take the foundation greg built and make it move faster and become more innovatetive scott mccall became our chief merchant, a longterm walmart associate and dacona smith got promoted to run operations, been with the Company Almost 30 years. We have a lot of depth and we have a lot of officers and there will always be a story to tell about officer turnover at walmart because we have so many. Before we let you go, you have a meeting to get back to down the hall. State of the u. S. Consumer changing the same steady pretty much the same, low unemployment, low fuel prices no, inflation, all those things are helpful. We think the next year looks like last year keep us in check and keep us updated on everything going on with the company Doug Mcmillon, ceo of walmart, hell get back to investor day for now, down to you guys downstairs we wish we had more time with you and him, courtney, great stuff, Courtney Reagan with Doug Mcmillon shares positive on the heels of the div hike give it a mobile north of target thats roughly around where lowes is, not as good as home depot and you come up with a price thats exactly where it is, if not a little bit higher we care about the future, not the past were dealing with an incredibly selfefa selfeffacing man willing to say they disappointed even though i dont think it was nearly as disappointing as others. Although it is the biggest earnings miss relative to expectations in what, five years . Well i think what you got is after target, you had everybody kind of frantically trying to price in what the story was. So you werent dealing with something that was a miss of the magnitude that a lot of people felt it would be you know, also, this is a company, people are willing to give this company the doubt because its done a remarkable job. I met with the team on jet and i thought they were doing better than they were i think they think theyre doing better, but mcmillon lowers the boom to some degree on them, which i thought i know i liked, was gratuitous because in the end, what is he offering hes offering the future hes offering a vision that is, look, theres a box. Theyll put it in if you trust your walmart guy, why dont you . Its a local business, we dont have it in new york. Im more sanguine than doug which is incredible. Listening to him, though t reminds you of the lack of defensive innocence his tone, willingness to take risk he just said willingness, to well take risk, we are seeking growth sometimes well get it right, sometimes they may not but its a different tone and it has been for some time, certainly since he took over, and its been a number of years. Yes i can remember when they surprised everybody, the last time they were here, remember they were on in the morning and it was a terrible day for the stock. Came back on mad money. Thats no longer the case because investors seem to believe and you can just hear it there in terms of again, hes not defensive. Hes willing to put it out there. Hes obviously got the benefit of having an incredibly large shareholder, almost a 50 shareholder in the family. Take risks. Which is behind him and allowed them to do things perhaps other retailers were not in a position to do, to try to compete. Right also 50 billion in ecomm for the year say dramatic increase from last year 30 is remarkable given the base, which is very high i think this is a person who has taken more lessones from costco than hes taken from others. He is a cut above what im used to from walmart. I think that he has got it figured out like david said, he took a lot of risk he said he takes a lot of risks and i think others cant because of that remarkable shareholder i think that i know this sounds etherial i think the stock is going up because people are saying damn, hes good. Hes a multiplier of a turn or two higher, not unlike what well talk about with dupont later, if you feel like ahh, i like that. When i deal with the jet guys, when i first heard they could come in your house could i really want them in my house . They have body cams. You can watch them come in if they touch anything you give them a code, the code is one time only and the code disappears i think its fascinating to hear them talk about the vision undaunted and how the delivery will eventually take place at scale. Right, if youre me and youre jammed, ill stop at the supermarket on the way home, get my chicken, get my milk, get my orange juice, throw in a salad give me a break. Cant you put that in my refridge if i judge by the number of amazon trucks on my block with endless unloading, endless and the boxes piling up by the way, great job bezos on the 10 billion but lets start thinking just about boxes and that shrink wrap, the shrink wrap is all over the neighborhood blowing out of the truck, blowing off the, i dont know, but the number of boxes is unbelievable. Its the way people shop and i think people are all about time i think doug understands time better than anyone targets initiative is not bad, the pick up, the shipped but i believe when people hear this, if they have a house like i do, in new york theres space constraint theyre not coming to your apartment in new york. No, i have a house where i just want to go online i lose about 22 minutes going to the store. I like to check or say hi. If people are trading up on the wow, hes good idea, will that translate to apple later today . Apple is getting the benefit of the doubt beyond what tim cook would say you have two problems with apple. You have the supply and the demand and the demand. We have some market could i just say, this is a bull market excellence. I got the word on apple it was like all right, here it goes this is the beginning, and micron goes down, qualcomm goes down and apple is down 11. Then apple is down 7 if apple closes up, i have no valueadd whatsoever by doing my work which says that apple what is my work . Im trying to figure what isnt buying its not apple has been discounting the possibility. The shares are performing extraordinarily well in the face of mounting evidence that people were not going out in china and going to work. They also did give you, they caveated their downside when they reported. Yes i think frankly that we were all kind of surprised that they have so much capacity supply chain away from what is basically a marshal law cordoned area no, its almost, somebodys put it like this, if you had an economic experiment and you said for a month everyone is going to stay in their homes. What happens to commerce what happens to markets . Its exactly what were witnessing you need a hall pass to get outside your home and when youre outside your home buying food, its a warlike footing. We talked about the benefits perhaps to ecommerce because people can deliver things to your home. However, alibaba told us our delivery guys are in short supply your iphone has a million things on it and people, i dont know what people do in china when they play video games, they can do it on their iphone, they have a lot of time on their hands and we hope that they dont get sick i believe theres a lot of people who get sick that we dont know about and they get better but obviously chinas more opaque were getting most of our information from a damned cruise ship i would like to be able to get more your point is a good one on the death rate seems little doubt there are many people who are not being included who have mild symptoms and therefore the numbers are going to look a lot more in terms of cases and fewer in terms of mortality a lot of disinformation, too, that we had dr. Fauci, 2 , this naught number is 2 we had a guest on that basically said everybodys going to gather and im saying come on, i wish it werent and am i ready for it . I got all the stuff like everybody else you should be ready for it why not be ready for it . You have the carbon mask ill give you carbon masks. Thank you dont miss a special report tonight as usual on the krn outbreak ou coronavirus outbreak 7 00 p. M. Eastern. Well get cramers mad dash and opening bell dupont, buffett kroger, youll love the calls on tesla today. Here is a look at futures. Squawk on the street is back in a moment. We made usaa insurance for members like martin. An air force veteran made of doing whats right, not whats easy. So when a hailstorm hit, usaa reached out before he could even inspect the damage. Thats how you do it right. Usaa insurance is made just the way martins family needs it with hasslefree claims, he got paid before his neighbor even got started. Because doing right by our members, thats whats right. Usaa. What youre made of, were made for. Usaa but when allergies attack,f any the excitement fades. Allegra helps you say yes with the fastest nondrowsy allergy relief and turning a half hearted yes, into an all in yes. Allegra. Live your life, not your allergies. All right, we get started with trading a few minutes from now as for the first week for the first day of a shortened week lets talk semis of course the apple warning, evolving situation, certainly potentially going to have an impact on other names. Right its almost as if these companies are being hurt and i get that the guessing game is on. I think Morgan Stanley provides you with the best answers, they are saying that Skyworks Solutions is the greatest exposure to apple 50 of sales, followed by corvo 30, broadcom into the mid teens qualcomm above 10 people are going to bet against these companies. I understand that. I would say that if you bet against them and theres any continued decline in the deaths outside the cordoned area you say why did i sell it. Where did the sellers go to knock down a 4 yield the hedge fund would i would be careful in shorting them youre really making a bet that things will get considerably worse. I dont know if thats a good bet or a bad bet ill tell you one thing, its certainly not within the purview of anyone that covers stocks its a medical issue right theres also this question as to whether youll make up for the lack of demand later exactly right i do my work what people tell me is its going to be deferred david we are in some happy moment i first heard this yesterday with my wife a walk around town, this is the beginning what will it mean . There is an incredible other worldliness, not meaning that much in another market the stocks are down 10 what is the other market, jim . What you and i are used to, not this market. This market is dominated by s p funds 60 say. No s p fund takes action s p funds buy the algorithm day is probably maybe in the sunset. S p comes in, fees go up its new, david. Its new triceratops thank you for not calling me a brontosaurus i think more of a trex. A lot more squawk on the street coming for you opening bell in about four minutes. Stay with us a lot more news stories to get to, too, this morning. Stay restless with the icon that does the same. The new rx. Crafted by lexus. Lease the 2020 rx 350 for 419 a month for 36 months. Experience amazing at your lexus dealer. Lease the 2020 rx 350 for 419 a month for 36 months. Yes im stuck in the middle with you, no one likes to feel stuck, boxed in, or held back. Especially by Something Like your cloud. Its a problem. But the ibm cloud is different. Its the most open and secure public cloud for business. It can manage all your apps and data from anywhere. So it can help take on anything, from rebooking flights, on the fly to restocking shelves on demand. Without getting in your way. We see eat emerson,mulating when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Youre watching cnbcs squawk on the street, the opening bell in 90 seconds holiday shortened week but a lot thrown at the market today weve beenthrough apple and walmart today. Two weeks from super tuesday, nevada caucuses on saturday. Empire was pretty good, 12. 9 versus estimate 4. 5. Ninepont hi ninemonth high, market is not paying a lot of attention. Oil is down 7 in europe, oil is hit up hard in china. The bright light everywhere. Again, i think that were just a function of employment thats abemployment number employment remains incredibly strong in this country you get terrific numbers if were doing employment around the world were the best we just have a good insulated economy. I think con agra talked about food service being weak. I wonder how much kroger would be down if it werent for buffett buying that position in kroger commenting on china sales, only about 4 of the total but a lot of that is hagendaas, 40 of china and those stores closed. [ bell ringing ] i was thinking how does nike stay up here they are the equivalent of an until china and you dont have don ho coming out and saying it the new ceo. People seem to be saying so what should eventually bring out sellers who say why not get out when the getting is good im waiting for those sellers to appear later today nike, general mills. Well look at that. At the big Board Construction supplier Alta Equipment Group provider of aipowered assistance to automakers you were talking about the chips the dynamic is the same with st micro, dialogue. The apple supply chain is not just u. S. Based. There are lots of people who say more than i thought by the way that you know what this thing is going to be solved and solved in a time where its not going to hurt. It will hurt a quarter this is a v, not an l is that settled . I like that yes. People are saying the equivalent of a bomb went off in this one part of china and the rest of china is doing well and our knowledge of this, all it is a cab driver in taiwan some singapore and then Carnival Cruise gatt leeb ottlieb is saying could be on the cusp of an outbreak hes been on the cusp of this. Hes been a beacon. I went on the carnival website for ships that you can take. Tallyho so what is carnival doing . Its up. If there is a company that has got worse publicity than carnival i cant find it carnival is out. The Balance Sheet is good so that makes sense but doesnt anyone think there would be sellers . Carnival is it impairing the longterm ability of the company to absolutely. Absolutely you think it is yes, i think it is. It has a longterm . I think its going to, here is what i think people came saying to me, its a 9 11 airplane and there was a period where you didnt want to fly and then there was a period where you said youre okay i tend to think there are people who say i dont want to be in a congregated area and im surprised that that one diamond princess seemed like an incubation area. Just more and more but then waiting for the 14 days with the plane, i think people were surprised there was a tent within a plane, didnt expect that there is a plethora of narratives about how bad this is i am surprised people are saying its not that bad by carnival. Why do you have to buy carnival . Why do you have to court that . If you look at the cruise site ill pick that one chinese flight capacity in Greater China is down 80 . Its smaller than portugals Aviation Market right now. You know what this market says the portugal market is booming we should get to other movers this morning conagra down 6 . Cagney this week all of the Consumer Companies or many of the big Consumer Companies will be starting today but in front of that conagra said fiscal year 20 fall flat to up 0. 5 originally forecasting 1 to 1. 5 it is citing issues encountered mainly industry wide in terms of softness across both food service and retail channels and so the question is how many other companies that present at cagney this week will similarly confirm some of those question marks or some of those confirmed some of those concerns we heard from craft times last week the stock got hit, downgrade in its debt by fitch as well. Well keep a close eye having an impact on conagra. Hedge fund manager thats like cisco so lets short cisco and bang it down the stock is barely down tulsa is down according to the reports increasing it. Just in terms of the ironic, kraft heinz teams one six flags. You have the worst of the food and you got the worst of the entertainment. Two drunken sailors get together and the Aircraft Carrier runs well no what are they teaming up to do yen rgeneral mills went in bn pet food not a bad decision wubuff came in very low after buying a lot of stock high but blue buff is the antidote to what kind of dog food . Chinese. So do we use blue buff yeah, it has that American Flag on it. You feel really great about it do we use chewy . No, i guess we should. Chewy makes nice pictures of dogs nvidia looked great. Hits an alltime high on friday after falling 50 in the second half of last year the cfo its intim nating to talk to her, coleg cress they got rid of the bitcoin, theyre about ai, machine learning, about data center and about being smarter than we are which they are by the way inside arrogance its reality when im out there, i had stanford as my backup school and turned it down i was be alivious because if you went to stanford, david, youre smarter than we are. It was different. Elizabeth holmes dropped out. Yes if she had gotten her degree would we be speaking with her . I dont know. I didnt expect that name to pop up you never know. Look, they have the chips we want dont forget they make every video game the equal of a movie. I was reading about that in the Conference Call last week. Good Conference Call. The Conference Call is a window on the future the Conference Call is like s seisan still life . Impressionist i think i know this is outrageous it was a modern art class. It was about the evolution from realist. We didnt get to roth. Close to it. You were a cultured son of a wow i dont get there often we got a deal in the Asset Management business we havent gotten to, nascent 4. 5 billion deal and legg mason standing debt with roll in. 50 bucks was the number. I am more impressed by the response in Franklin Resources ben is up sharply they have a lot of cash as much as 8 billion in cash and investors seemed to be applauding the decision to use cash to acquire legg mason it is an all cash deal at 50 bucks a share and will therefore be accretive the use of cash helping as well. Gives them scale in what may be a rapidly consolidated industry. We were talking about earlier in the telestratotelestrator, the proliferation of etfs and index funds and the money going in there, constant pressure on fees, is certainly a key thing legg mason was trying to deal with as it tried to rein in costs but had difficulty in doing that they didnt run a process im told by people who would know but the expectation is shareholders will be happy with that outcome and Franklin Resources shareholders are seeming happy as well. 1. 5 trillion theyll manage when the Companies Get together and they get that jewel in western asset, for example western Asset Management, fixed income thats a look thus far at this deal a lot of bank news, consolidation in italy hsbc cutting 35,000 jobs and Balance Sheet by 100 billion over three years as they face not just the hong kong protest, brexit, china. Large job cut number. There is tremendous retention in europe. Where there isnt santander. I am continuing, annika teen bought a huge amount of stock personally, this is san. They are a growth vehicle. Spain is a growth area, portugal executive changes we need to address, ed breen taking over as ceo of dupont. Oh, boy we talked about dupont here and there and mentioned its over four years ago since they got the deal, dupont and dow and got them together and a lot of din companies. Its do you, its dupont, and they put the agricultural businesses together and created that dupont has not performed well at all. The question becomes how much is unexpected concerns about liability. How much of it has been the lack of execution on the part of the ceo and cfo, both of whom have left ed breen coming back in as ceo, jim. Whats important is the company did buy down three times. Three times is not a charm if youre a guide down. I question whether mr. Doyle gave the board an accurate read. I believe ed breen is like this is not a temporary ceo i think he wants a shot at fixing it. I know the sales were down, there was no lever am. I thi lever am if you own the stock they have china exposure they have nobody who has coronavirus who works in china exposure 13 facilities in china cant get them running at the speed you want i think this is good metaphor, running with a third of the people showing up. One of the reasons its so hard to show up the chinese dont want you to leave your place and you have a lot of people working at home which is why zoom should continue to go up but i believe that being full time it is fantastic. You do . Its not that often we see a ceo and cfo dismissed, thank you very much obviously breen very involved with the company. Some believe hes more of a company who deals with all the things he did when he was running dupont, the merger, the divestitures and the running of the portfolio so to speak to maximize value this is a day to day nuts and bolts job. Cutting costs where they need to be and dealing with the broader question of some of these liabilities they didnt expect i think the pfoas, youre finally coming to reckoning on foam for firefighters. I believe 3m has far more exposure one of the things that people recognize the markets hurt in electronics and auto, hard to believe those can be good, but i guess auto is tough they could be better and stranded posts are not taken outs much to please ed breen i think ed breen had enough of doyle and doyle was not delivering repeatedly. I hate to say it but determining good reads i think the stock if you have a positive view of the world which a lot of people do, you want to buy the stock. I am not as sanguine as others Mark Zuckerberg is making the rounds in europe yesterday met with top eu officials in russells asthey get ready to release new proposals on regulating ai over the weekend zuckerberg outlined his case how facebook should be regulated. Heres what he said at a security conference in munich. There needs to be regulation in at least four areas, touching our company. They are elections and political discourse content more broadly, privacy and data portability the reason why i really believe this needs to happen is because there are a lot of decisions in the areas that are really just balances between different social values. Interesting on a day where we learn bloomberg spending about a million a day on facebook. I was impressed what mark had to say one of the main thrusts is that they are doing what you might want in temples of fraudulent advertising. There is a sense people feel its totally laissezfaire theyre spending a lot of money trying to figure out what is fraudulent and what is not i regard that as a more positive posture than where they were during the fabled georgetown speech, there was a notion that mark didnt believe that anything should be regulated, maybe thats a misinterpretation, that the little snippet we had is different from what i feel which is that i hear you people and i am not going to let us do what a lot of people feel we do, which is caveat emtor nobody is telling the story. I found myself telling the story which is odd 166 to the downside, down 103. Bob pi san see happy tuesday, carl three days in a row down for the dow, mostly apple and a little bit of boeing. You look at the Global Market this is a serious statement from apple but not enormous reaction hong kong was down 1 . Japan had a couple of weak days, their Economic Data is not great, theyre down. Shanghai was flat. The stock 600 in europe is the main indicator for europe is flat 1. 500 down 0. 2 , either side of positive or negative the typical morning. Look at the sectors of course the semiconductors will be the weakest sector out here because the apple suppliers are weak energy is down but its been terrible performer all year. Industrials flat, either side of normal 0. 2 , 0. 3 . New high on the utilities. This is not dramatic reactions for the market the usually apple suppliers you see here todown 2 or 3 . This could have been worse under any market people believe there is the biggest threat to the Global Economy. Look at the bank of america fund surv survey biggest threat to the Global Market economy is the 2020 this is a survey of global Fund Managers, 26 say its number one. How is that possible were all worried about coronavirus. Its got to be number two . No, not even number two, bond bubble popping is number two concern. Number three, way out there is coronavirus. Fund managers have other things on their minds besides coronavirus. This is like a what, me, worry, attitude about this. Good or bad, longterm it will work out if its a short term blip well, the economy will bounce back in the second half. Whats everybody worried about if its a longer term issue well dealing with this for months, dont worry, the Central Banks will step in the Australian Central Bank had the debate over the weekend. They made it clear if it got worse theyd be stemming in. Everyone believes the Central Banks will step in if its better, we dont worry if its not better, dont worry, theyll fix it thats the attitude were dealing with a couple things that are moving, everybody asks for the last week why is Virgin Galactic going uhm. The important thing is space in general is a really hot concept. Satellites are a really hot concept. They have been moving small groups of satellite manufacturers moving strongly, iridium, maxar, dish network, loral space, contractors in the satellite business have been strong theres a general interest in space. David was mentioning franklin buying legg mason. Active Fund Managers continue to see dramatic outflows. Vanguard is the one getting into the passive managers a story franklin was seeing 10 reductions in its asset undermanagement in a month over month basis for a full year in january. Thats a serious number and thats going to force these kinds of mergers to continue to happen carl, back to you. Bob, thank you very much. Lets get to the bond pits as well and check in with Rick Santelli at the cme in chicago good morning, rick good morning, carl. Close twoyear note years would be closing about a oneweek low yield and a week and a half almost two weeks for tenyear note yield look at the 24hour chart of tens they have dipped of course, closed yesterday the entire yield curve is down two basis points so its a parallel shift look at a year to date of tens and do realize that on the 31st of january, the last days when we made the low close of this cycle, right under 151, open it up to september, could you see the work were doing down at levels that are only a stones throw away from very historic lows, and that really makes many investors a bit apprehensive about looking for yields to bounce too high. As a matter of fact, most of those selling bounces are met with buying. Dollar index its up a third of a cent today its taken out that very significant high at 99. 37 from last year, so as you look at the oneweek chart here we surged over 99. 40 may of 2017, the best of 33 months and the euro has lost the 110 handle its now trading with the 109 handle, as we continue to see the european currency reflect weakness carl, david, jim, back to you. All right, rick, thank you very much. Everybody make sure to check out our podcast. Listen to the opening bell hour this hour of squawk on the street, wherever you listen to podcasts dow down 188. Wherever you listo podcast. Dow down 188, cut initial losses roughly in half and 30year yield is back above 2. Back in a minute vo in every trip, theres room for more than just the business you came for. Whether thats taking in every moment. Or capturing a moment worth bringing back. Thats room for possibility. How far we can go, oh oh i need all the breaks, that i can get. At liberty butchumal cut. Liberty biberty cut. Well dub it. Liberty mutual customizes your Car Insurance so you only pay for what you need. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. its been a wild day for tesla as far as sale Side Research Morgan Stanley up targets to 730 and 500 but keep their rating. Stocks up moalst 6 . Dow is down 112. Were back in a moment well, audreys expecting. Twins grandparents we want to put money aside for them, so. Change in plans. Alright, lets see what we can adjust. Wed be closer to the twins. Change in plans. Okay. Mom, are you painting again . You could sell these. Lemme guess, change in plans . At fidelity, a change in plans is always part of the plan. Theres been a flurry of commentary regarding u. S. China trade policy lets get to eamon. Some of that coming from the president in the last several minutes. This is a fascinating tweet from the president. Folks im talking to in the last few minutes at the white house dont know exactly what hes talking about but this tweet seems to have some significant bearing on General Electric because wall street journal reported friday the administration was considering holding off on allowing General Electric to sell a certain jet engine to the Chinese Airline industry now the president tweeting out that he wants the United States to be open for business, saying the United States cannot and will not become such a difficult place to deal with in terms of Foreign Countries buying our product including always used National Security excuse that our countries will be forced to leave in order to remain competitive. The president saying we want to sell products and goods to china and other countries. Thats what trade is all about we dont want to make it impossible to do business with us that will only mean orderswill go someplace else. As an example, i want china to buy our jet engines, the best in the world. I have seen some of the best in the world circulated including contemplated by congress they are ridiculous. I want to make it easy to do business with the United States, not difficult. Ern in my administration is being so instructed with no excuses. So carl, that seems to be a direct recitation they were considering to halt deliver yes, sir of jet engines by General Electric for a new airliner being developed in china the particular engine here was called leap 1c jet engine that would be going to the chinese industry comac jetliner. Were going to get more information from the white house what the president is ordering his administration to do he seems to be signaling he wants American Companies to be able to sell their product in china despite National Security concerns that do sometimes crop up around that issue carl. Thank you for that. Jim, this is like the opposite of section 232 tweet. If the president the best engine in the world, they might disagree with that but does not impact the leap so therefore its not significant the story on friday is significant. The president is correct, not significant story making it very clear there should be no interference with china. That is very important. Youve dealt with in your reporting with factions of the white house that were antichina do we think there are people working a different agenda and they have been told through this tweet to back off nchts correct. The only thing they are worried about the tweet on there, who knows the back story fascinating. I was with a company this weekend that was very confident that friday was not right. All right, jim. Well see what happens price action wise today but what have you got tonight . The company is not a known company, private clo cloudflare spend, spend, spend, stock down big. Weve got to find out what the hell went on its not going to be positive, its going to be informative. All right, jim. Good stuff as always see you tonight. Mad money 6 00 p. M. Eastern time coronavirus tips to weigh on businesses apple warning it will not meet revenue projections due to the outbreak eunice with more hi, eunice. Reporter state tv quoted president xi jinping saying china would be able to meet its Economic Growth target for the year this its despite all of the destruction to business. In fact 760 Million People now are effectively quarantined because of travel curbs or community lockdowns. This came as apple warned it would miss march quarterly for lack of demand and production for iphone other companies as well expecting production delays. In fact, amkham had a survey in china finding half expected to struggle with lack of workers for up to four weeks the beijing auto show is set for april and usually comes around that time is just the latest corporate event to be postponed. Also beijing Major Political gathering which happens in march, National Peoples congress, is also going to be delayed. Lawmakers said they will have discussion about that next monday one industry hoping to make a comeback, came no operators, mgm, Las Vegas Sands Authorities Say they are allowing the casino operators now to reopen as of thursday or any time within 30 days from then now, authorities here are taking very extreme measures to contain the virus, even though president xi jinping sounded quite confident tonight. In fact, one measure is by the central bank the central bank decided its going to deep clean its cash just in case the virus can be transmitted through the bills. The bills are going to be sanitized through ultrauv rays and then after that quarantined seven days in most parts of china, 14 days in the most affected areas at the epicenter. The hospitals, the markets as well as the Public Transportation in the epicenter are also going to have all of this cash destroyed. Guys. Just a remarkable Ripple Effect of this story eunice in beijing. Thank you. A reminder dont miss special report on coronavirus outbreaks something were doing every night at 7 00 p. M. Nice basket of news for all the coronavirus headlines you might have missed during the day good tuesday morning, welcome back to squawk on the street, Carl Quintanilla and sara eisen. Premarket did tell us a drop at the open session down 166, well above that right now as the data on the tape continues. Yeah, weve got the monthly Sentiment Index for Home Builders crossing the tape National Association of Home Builders coming in at 74 looking for a reading of 75. 75 was the prior reading as well slight tick down but still not too shabby our roadmap for the hour starts with supply chain slowdown apple warning it will not meet projection due to coronavirus outbreak. Walmart misses on earnings this morning weve got exclusive comments from ceo Doug Mcmillan. Big tech needs more regulation why facebook Mark Zuckerberg is calling for stricter rules on his own company. Lets begin with apple. The revenue warning weighing on major averages bring in our own jon fortt on set to dissect exactly what we heard from apple julianna. We heard what a lot of people expected to hear three weeks ago when apple reported earnings, which is more caution than they gave in the guidance remember back three weeks ago they guided to revenue between 63 and 67 billion for the quarter. Traditionally slower quarter for apple. You know, with all the of the mounting coronavirus headlines, covid19 we should call it, people thought it would be worse, a billion dollar bigger range than usual due to developments over the last weeks apple saying theres a twoprong issue here one is a supply chain issue. We have suppliers all over but china is a nexus and its unclear when were going to be able to get people back to work and their safety is a primary concern. Then just on the demand side, people arent going out and shopping and therefore theres an issue with actually getting things like iphones sold out there. Apple saying were going to give you another update when we next report earnings, which is at the end of april so thats about 10 weeks from now. I think this tells us more probably about apples planning than it does about overall virus impact apple had a choice in earnings to either give a conservative guide or say we cant give guidance as all. They chose to give guidance, now, yeah, second thought, do the way this is progressing, we cant actually give a guide. I think we have to be careful. Even analyst notes out now downplaying the impact because this is a slower quarter for apple. We just dont have great numbers yet about infections, about deaths i was just thinking about china specifically they are in the midst of 5g buildout and going full steam ahead trying to get 5g built out in all the major cities to lay the groundwork for consumer 5g i dont know if they are going to be able to do that with so many workers inside, not out on the streets. If the 5g Network Buildout is slowed down a bit, that means theres not as much of a market for 5g phones there. That could have impacts on handset makers all of that were going to have to wait and see. I guess the question is with that issue and the numbers and the supply and the demand, do we have a sense of whether this is just lost business or pushed out business a lot of people again are saying this is pushed out business again, im skeptical if you think about it, if youre at home, youre planning to go out and buy an iphone because you had disposable income, now you cant go out and buy that phone. In fact, you might be furloughed, you might not know what your cash flow situation is and you might have new costs to deal with this outbreak. Friends, family who need money are you really going to go out and buy a premium phone now even when you go back to work, are you going to immediately do that or wait until things are stable. I dont know. By that scenario youre starting to bleed into what some say is a moat and transition to services by the phone answcillary servics on the margin. We saw from alibaba saying in shortterm a boone to esummers because they can get things done delivery. If couriers are working. Delivery guys are working prosecute of a bigger boone in a sense, dont want to talk in terms like this of an epidemic costing lives and threatening lives, they control the supply chain. The situation with alibaba they rely on third parties, jd more amazon like has more control over Logistic Network so they are better able to plan in this situation. For certain types of ecommerce, youve got to be more granular than that. Business in the shortterm isnt constrained as much. Everyone saying if the impact of this, just in terms of the spread of the disease continues on beyond the shortterm, thats bad for everybody. Supply chain, thats where well beyond apple theres a lot of focus right now who is coming back to work, how many people are, what is the capacity of the manufacturing that that returned or will return over the next few weeks were already talking and hearing, certainly anecdotally about supply chain disruptions the question is how much is there and how long will it go . Weve got to go more than company by company were here at the Stock Exchange were constantly looking at data from analysts, from individual companies, then overall from countries. We rely on good data to make decisions, so do these companies. We dont have it yet. Well, as made clear in the Earnings Call last week by the way, jon, finch is out saying if the situation drags into march or april, the effect could be more disruptive for u. S. Tech sector seems like obvious on the face of it. March is 11 days away. Not sure what kind of bar they are using to connote danger. The numbers keep changing just last week we had a change in the way infections are being counted. So on the one hand people who are exhibiting symptoms but maybe a test kit hasnt gone out to them, they are now counted as having the disease there was a report from eunice saying people who tested positive for the disease but werent showing symptoms, well, they werent counted in the number then youve got stories about people getting off of a boat when they werent showing signs of the disease and then showing it later i feel like we thought two or three weeks ago wed have a better sense by now of what the real numbers were and yet the numbers are still changing. On the stock, jon, about why wall street is taking it in stride, 2 down move for apple, a stock that rallied more than 100 last 12 to 14 months is a blip. I was also looking at tesla its been a few minutes. Who knows where the stock is now. Last i was looking at tesla, it was up 6 which tells you something about Market Sentiment for risks overall, general bullishness despite this, up 7 . They have got a lot of their growth stakes in china but investors this morning are not worried about that should you believe what investors based on what investors are doing one particular morning i think we know the answer to that its been a long bull market and a lot of people are betting it will spike. China added stimulus. Jon, thanks. J jon fortt. Still to come walmarts difficult quarter. The Holiday Season did disappoint hear what ceo Doug Mcmillan has to say about the road ahead for the retailer a quick reminder, you can watch us live on the go when youre moving around. Weve got the cnbc app you can download it today. Squawk on the street will be right back the Worlds Largest retailer, walmart, hosting investor day at nyc after reporting latest quarterly results. A bit of a disappointment though stock is up. Sat down with ceo in the last hour and joins us with highlights what did he say about the quarter. So many things going on here. Such a huge company, large operations and messy thing there. They are holding their investor today right there at the new york Stock Exchange after reporting Fourth Quarter results. Earnings and revenue disappointed while u. S. Comparable sales extend growth streak gaining 1. 9, that metric shy of the streets expectations we sat down exclusively with ceo mcmillan during that investor day in the last hour. The Fourth Quarter wasnt our best we had 1. 9 everyone come, strong november all the way through cyber monday, thanksgiving good, had a strong january. There were a few weeks before christmas where sales in stores were softer than what we planned. Good to see our ecommerce continue, we grew 35 for the quarter. That was terrific. Customers continued to go to walmart. Com and ecommerce under way through theres some things in store we need took change for next ear. Mcmillon said some issues like categories were selfinflicted the consensus. At this time the company is not incorporating any impact from the coronavirus. In the u. S. About twothirds of what we sell is made in the usa. The other third doesnt all come from china, and weve been acting to buy goods already here made in the usa, already in the country, to try and offset some of the things we might otherwise feel pressure from its too difficult to call right now exactly what will happen in the quarter but weve seed because of whats happening on the ground in china, our Chinese Business, not the rest of the world, we do expect to have some impact but were not currently putting that into our guidance. Walmart stores in china do remain open. The company expecting ecommerce losses will be flat to lower in this coming year compared to the year that just ended mcmillon said walmart doesnt look at closing its new york city jet black text messaging shopping and Delivery Service as a failure. It learned a lot about conversational commercial and always knew it would be a tough business to scale. So many things going on managing International Portfolio and trying to grow innovative digitalbased businesses as well. Stay with us. Walmart and the entire Retail Sector joined by jay rogers wwe ceo, welcome to you, sir why does walmart get a pass . Walmart gets a pass because they performed better than anybody thought they would perform despite we said it was disappointing. It wasnt disappointing. We knew walmart had a tough quarter, electronics, trois were tough for people that was already in peoples process. Why is the stock up . People looked at it and says, hey, it was okay the guidance was, id say, mediocre, but everybody feels okay about that because they are showing growth for next year, performance in the u. S. Stores, growing 35 a year online. We used to saad off small base now talking about 50 billion in sales, no the a small base. 35 online growth is it fair to compare that to walmarts 19 growth during the year and say they are doing it better. Its fair to say walmart has been growing faster online than target and a heck of a lot faster than amazon they are growing off a really big base so clearly they are doing something right and coming because they are doing such a good job with the store, drive through store and deliver from store. They have 32 hundreds where you can pick up in store and 1600 that will deliver to your house. Courtney, we were talking earlier about mcmillon i knew him years ago when he ran international. Youve spent a lot of time with him. We talked about how hes not necessarily defensive. Hes a guy that talks openly about embracing risk and growth and potential failure. It seems to be helping in some ways. Absolutely. Thapz pabd that was part of the line of questioning, jet black yes, they shut it down we didnt do a great job about what we went after we were trying to find out about conversational commercial. Box checked he said. Does any of that give you pause continuing on that innovative entrepreneurial streak with something that havent worked. He said, no, gives us information to use forward he uses the word faster a lot. He thinks they moved too slow. He keeps wanting to push the envelope. Can they buy their way out of this, door dash and postmates reportedly considering new listings what should they buy they dont need to buy their way out of this. They need to do what courtney said, be aggressive on ideas and incorporate them in, whether buy or build them. Mcmillon is doing well with the street because hes doing all the right things, right . Hes degree the right thing with shareholder and shareholder and dividend hes doing the right thing for the customer, giving them what they want, where they want, when they want it the associates are happier the reason they missed part of the Fourth Quarter was because they were nicer to the associates than they had been regarding scheduling the fact they didnt cut back on hours when they showed up to work on the holidays hes doing the right stuff for the community at large, right . Hes a guy its woke walmart. Its a woke walmart. Are we surprised they havent been impacted or at least he cant quantify impact from the coronavirus . When you think of americans paying super low prices you think of imports from china. I was kind of surprised to heefr him say we dont know and we do most of our manufacturing out of there. Right when we have the Big Conversation about tariffs and thought maybe on first blush walmart has to be impacted, think about everything they sell like he says in the United States, twothirds of what they sell is actually here. Thats because a lot of it is food they are buying from food and farmers that are right here in america. Another third in imported. Not all of that third comes from china. So the supply chain doesnt have potentially an impact as much as we thought when you think about demand, Walmart Stores in china have actually stayed open they have said a lot of what is being purchased right now is shifting towards consumables food, beverage, really sort of basic necessities. You might see an impact to some of the margins because they are not selling clothes and higher margin items in china. So far so good for walmart they are not incorporating it into guidance in a material way. Would you close chile if threequarters of your stores were destroyed ynchts. I think they will take a responsible decision on all markets. They know which are, which arent, where to stay. They are doing that right. In china, the supply chain is already started to come back yes, its harder for some people but in the retail side of the business, the kind of retail were talking about, supply chain coming back already. As long as its back by sometime in march, i dont think its going to be that big a deal for most of the people bringing product out of china nobody is that devoted to china anymore. Clearly walmart is not on the sales in the china side walmart is doing the best because they have been willing to stay open and provide services to everybody that needs it so youve got to give them credit they looked at all this and said weve got it figured out they have already started prebuying stuff they need from china. They have done that already. Talk about home depot as first open post hurricane this is like that on steroids. Walmart does that everywhere, not just coronavirus they do it here when theres an issue. Real quick, you put out a money note quantifying exposure retailers have to china. Name some names. Who is the most exposed from a supply and demand side and have we seen it in the stock . If youre looking at it on the supply side, people like wayfair have a big i believe if youre looking from the demand side, selling into china, the people hit the hardest is the high end so if youre high luxury retailers thats a big problem because its affecting all of asia not just china. Greater china and asia those are issues, too. In general you can look at every retailer and right down through the game of all the brands its a big deal when china and asia arent working tourism stops completely, not just here but everywhere, then those impacts really havent been accounted for i think the market is taking the coronavirus very light ly they have looked at it and said its not that big a deal, supply is okay. Well reopen for business sometime between now and june as far as sales the back half of the year wont be that affected i actually think the market is right, but boy thats a big bet. Thank you. Still to come, more regulation for big tech. Why Mark Zuckerberg is calling for stricter rules even against his own company. Stocks up more than a percent today almost getting back to where it was preearnings quaukz back in squawk on the street back in a minute were down 113. Repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Dow is down 125, time for etf spotlight. Today were zeroing in on semis, semiconductor etf smh coming off its best week since june, taking a hit today after apple had a coronavirusrelated warning on revenues its down about 1. 6 that etf. Top Holdings Taiwan semiand intel among worst performers in that group philly semiconductor up 4 but is underperforming Overall Technology sector has been very china sensitive. Last year on trade, this year on coronavirus. Meantime Mark Zuckerberg calling for more regulation for facebook in munich and brussels over the weekend this is during his meetings with eus digital and industry chiefs follow that up with oped in ft saying new rules might hurt facebooks bottom line in the shortterm but will help longterm. Lets bring in cnbcs sylvia mara who sat down exclusively after her meeting with Mark Zuckerberg. Mark zuckerberg was in brussels yesterday and met with the chief in eu. When he spoke with her, she told me she had a good conversation with Mark Zuckerberg and noticed a change in the company when it comes to tech regulation as you mentioned, facebook has published new ideas on how the Company Believes tech regulation should be done when i asked european commissioner for competition whether she felt perhaps facebook was opening up to this debate rather than talking about taxation and other antitrust issues, she said that if this is a strategy, then this would not work with european commission, executive arm of the eu. This institution is still very much focused on ensuring fair taxation when it comes to tech giants theres an ongoing debate in particular in the United States about whether these companies should i asked whether she thinks she should also ask for the breakup of these companies lets take a listen as to what she had to say one of the things that makes that discussion difficult is that very often its suggested but with no further detail as to how actually to do that and what would be the outcome would you then just this two googles or two facebooks if you have great powers, how, then, to make sure the responsibility that comes with great power actually allows for the market to stay open and for competitors and also for neighboring markets to remain open the thing is that we are in some sort of urgency, so its important to be able to finalize those discussions within a relatively short time frame. So the head of competition policy here in the eu saying splitting up big tech giant is a difficult process and a difficult issue yet she did not rule it out. David. Okay. Thank you, silvia. Lets get a news update for that back to hq. Hi, carl, everyone. Here is whats happening this hour secretary of state motorcycle pompeo meeting with ethiopias foreign minister today they are focusing on improving trade between the two countries and discussing how to counteract growing chinese influence on the continent. Boy scouts of america is filing for bankruptcy this is from a surge in lawsuits on alleged abuse they will set up a trust to compensate victims and continue its mission. Former new york mayor Michael Bloomberg qualified for democratic debate for the first time he qualified by finishing second in a new poll thats out today behind only Bernie Sanders finally ryan newman is in serious condition with nonlife threatening injuries after a wild crash in the final turn of the daytona 500. Newman was leading when he and ryan blaney locked bumpers sending his car into the wall. He went on to win the daytona 500 for the second year in a row. Youre up to date. That is our cnbc news update this hour. Back tu. Thank you as we head to break, take a look at worst performing stocks on the dow. Biggest loser down after warning on the coronavirus dow, semiconductors getting hurt as well. Walmart is the best performer hosting its investor day disappointing quarter but investors seeing through that. More squawk on the street when more squawk on the street when we come back . Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Welcome back to squawk on the street, im sara eisen with Carl Quintanilla and david faber. Post 9 from the new york Stock Exchange as always, one hour into the trading session lets see where we stand stocks under a little pressure, sentiment hit by that apple warning that because of coronavirus it wont meet its sales targets though keep in mind s p is half a percentage point away from a record high. Steve liesman is back at headquarters looking today at how the coronavirus is one of the many items potentially shaping the First Quarter up to be, steve, a writeoff quarter. Its a way to think about it. In a historical way, sara, First Quarter for growth, they end up being a writeoff quarter. Its to the point where First Quarter growth of the United States may look like a startup tech company with a bunch of onetime items here are those items now coronavirus estimated right now take hov 01. Boeing 3 tariffs question mark there. They still exist but come off from where they were in december they have warm weather and an idea the whole country was basically warm in january. That utility output fell 4 in the month of january the decline in bond yields recently telling the story of a lackluster bounce to growth in the Second Quarter Cornerstone Macro writing, the freshry market is taking the coronavirus seriously and its pricing a significant hit to 2020 growth followed om by partial rebound in 2021. You can imagine two effects from coronavirus, a drag from decline in chinese quarter hits u. S. And saves a couple tenths off. A Second Quarter drag from the falloff in supply. Companies in the u. S. Didnt get the stuff they needed to make the tough in the states, and that could lower sales hfe writes, the longer the outbreak lasts, the longer the Recovery Time for these supply chains will be jpmorgan is more upbeat. They say the size of the nearterm growth dip is primarily important for determining the magnitude of the midyear bounce that right there is for all investors out there. Conventional wisdom underlying economic strength perhaps backed up by central bank easing will result in First Quarter dip and Second Quarter bounce. The risk oneoff items threaten expansion making it more than just a single writeoff quarter, sara. Thats sort of where i want to go with the response from central bankers. If investors and wall street and stocks and looking at the Growth Numbers are considering it a writeoff, then wont central bankers as well . How high is the bar for them to actually provide stimulus in the thought is the activity is just going to come back first off, thats a great question for which i dont have a definitive answer. My best gis uest is federal resv look through a quarter look down and detail one off items and effect they have had on growth then thats okay if it doesnt affect jobs, i think they are okay looking through it its this idea that maybe it bleeds into the Second Quarter, brings growth down to that level, starts to affect jobs and then this market probability thats out there as you know, sarah, being 60 probability of a july cut, then that will end up being correct. Steve, thank you for that great setup. Were going to stay with thi thesis of a potential writeoff quarter as steve says as the Coronavirus Impact widens. Should markets prepare for evaluation chief Market Strategist is with us. David, good to have you back. Good to be back how are you this morning good so far youre on board with the notion Central Banks will be there if this starts to become more dramatic i guess the question is where is the feds tolerance for pain you were going through that with steve steve is right, its a tough question, how do they decipher this data. I think its going to be really hard to get Market Reaction out of the data over the next two or three or even four months of releases these will be very crowded by coronavirus as well as other topics steve brought up. Its going to be easy to tell two stories. Youll have the recession camp excited about any weakness youll have the writeoff camp saying, you know what, just look through to the second half it is very much a stalemate kind ofsituation which i think play pretty well for the equity market i dont think you can get a huge selloff and grind it out as sara opened up the segment, she said were only half a percent from record highs, up 4 and change for the year, feels pretty much okay even if we get weak data youre just going to have the tussle like we talked about, keeping things reasonably set in the equity markets. So when it comes to inflationary effects, powell has said its got to be significant and persistent they want to see this thing run hot before they change policy to the upside sounds like the tendency to listen to coronavirus, theres a hair trigger response to the downside why is there that asymmetry right new . More people focused on demand side issues than supply side which should be negative well see. Most of the things that disrupted activity, whether tariffs and the like have been more disflationary than inflationary, tariffs as well. We want to watch the demand side, whats coming out of asia after this theres a fair amount baked in in the technicals and seasonals with inflation data that its likely to come out on softer side and grind lower in the next three to six months. The fed actually has a really difficult task ahead in terms of sort of sticking to their playbook and doing nothing if we continue to get disflationary pressure that may be more of the story that gets that july story of 60 more of a reality. Interesting. Weve had this dynamic for a while now. When theres fear in the Global Markets, everyone rushes to the u. S. But this b of a fund manager that pisani pointed out said the 2020 election is the biggest risk factor to Fund Managers what happens to that global u. S. Dynamic when we get closer to november i mean, its still far enough away we have super tuesday, which looks like it will be pretty exciting now, weve added bloomberg to the mix that will be a fun one to watch. The markets would love a bloomberg, trump fight either one would be pretty positive on the market setup Going Forward. They are trying to price in the rise of bernie and how to hedge that were still far enough away they arent going to go too far down the rabbit hole for what it means for outlook on returns of capital which would not be particularly good in the event we do go down that path. So i think were far enough away and too many other things that are going to keep the markets focused on the shortterm, particularly the virus, the downside from that and trying to decipher this data. What do you mean . Why do you say the market would like a bloombergtrump matchup. I kind of think, look, bloomberg has been they have both been democrats, both republicans, both pretty market friendly people. They arent anticapitalism. The big risk here for the election is we move on a sharp trajectory to the left where, you know, we sort of push aside some of the sort of capitalist structures that helped drive returns on capital in the u. S. To be some of the best in the world. We become more european or more japanese in that setting where we look like we have a more for lack of a better word socialist capital structure. I think the markets are going to key off that the reality of the sort of trumpbloomberg fight would be, i think, for wall street, would almost be a nonevent it would be much more about personalities and much more about Foreign Policy and how all of the other personality issues driving this election rather than real specific market stories that are going to drive a wedge into the returns on capital that have been driving s ps higher for many, many years. Trash talking tweets for one ymplts disbl you mentioned, europe or japan. Both europe and japan had dismal Economic Data over the weekend zew out of Germany Economic index very poor overnight. Gaps gdp poor underestimating spillover impact from the Global Economy which feels coronavirus worse than the u. S. Does. I think a lot of people are pretty nervous about it. Im nervous about it its part of the reason im looking at the u. S. Stock market and Global Growth trade dont appear to be correlated right now. I guess i would take a slightly different tact with that and say i think the global stock market is keying off the idea that if it gets bad, which it might very well do, theres going to be a very severe and aggressive response by the Central Bank Many have thought the chess game if we go down an ugly path more rates and qe before you blink. Thats how the stock market is looking at this. Not a big deal, saying Monetary Policy response toss a very severe outcome could actually nullify some of those effects or reverse some of those negative effects that were seeing. Maybe the reason europeans and japanese markets arent performing as well is they dont have the same faith in the Central Banks that the s p has faith in visavis the fed after the last 10 years and in japans case the last 30 years of kind of screwing it up. This is true. Weve not gone there, not yet anyway david, thanks. Its really getting interesting now. David zervos of jeffries see you soon. Always fun. As a we head to break, check out shares of dupont, a bit off the highs. The Company Appointed executive chairman ed breen as ceo, effectively dismissed ed doyle ceo and current cfo. Breen led the split last year. Also there during the putting together of some of that as well but dupont has had a rough go of it if you take a look over the last year or actually even more than that. Mo ua othstet when we return. Practical. These five stocks have the most ratings on wall street but only two might be worth a second look find out which two on trading nation on cnbc. Com more squawk on the street coming time to get to the group in chicago and join Rick Santelli with Santelli Exchange rick. Good morning, thank you id like to welcome my guest from Goldman Sachs johnny fine thanks for joining me today, lets get right into it. Theres three letters that describe a phenomenon thats taking over wall street, if not many investors around the globe. Its called esg environmental, soes social and governance. Why dont you explain to viewers what it is and why its so hot. So its become front and center in every client conversation were having around the firm thats true in our skut decisec division, Investment Banking its true clients care they want education and understand how to prepare themselves for what could be a pretty substantial wave of reallocation in the coming years. Now, this capital is going to reallocate theoretically to companies that are more environmentally, socially, and, of course, with regard to governance doing the right thing, being politically correct, kind of taking earth day to the next level. My question is as an investor, is there a standardization so i can look at various companies and all the same guidelines used to give them a rating of esg. So this is part of the problem that exists in the market today is that there is no broad framework by which companies can be compared on an apples to apples basis theres a couple of institutions that are working to change this. Theres sustainability accounting standards board and tcfd, which is Climate Related Financial Disclosure task force. I think once we have that, then theres going to be a much more level Playing Field to compare companies and investors will be able to do work in a standardized platform to be able to understand who is doing the right thing and who may not be up to task. You know, back in the early 80s, johnny when i was more into the business, discussing on media, derivatives were the hot commodity in the early 80s. We all learned it was an interesting experiment but many took it too far and ultimately maybe make of those derivatives led to the credit crisis when it comes to esg, certain assumptions like battery cars are better, but are battery cars better what do we do with the batteries. What im saying, we dont know how it will turn out but may affect many peoples investments. 100 . But what you have to bear in mind, rick, is the amount of money moving into this space first of all, esgum is growing double digit pace annually the u. N. s charter principles for responsible investment, that stands with close to 2. 5,000 signatories in 2018 and under management which have to be under esg mandate by 2021. The amount of money going into this space is so substantial, its going to drive real cost of capital benefits for companies that are scoring well under the esg framework and going to create cost of capital punishments for those that are o capital punishments for those scoring less well. Thats the future for the next three to five years. Johnny, if i recall, this is an idea that was originally adopted by former u. N. Secretarygeneral kofi annan thats correct. Early 2004. And i guess my final question is, were out of time, in the final analysis, are investors going to ultimately end up buying into more of a religion with regard to the environment or will there be an ongoing change as new information changes the rules of social governance well, we need better data and real data on what matters the most that will enable investors to make their decision and drive this cost of capital differential its coming in a really big way, and companies are i dont knwell see if its not. It has its heart in the right place. Germany, their hearts are in the right place, their electricity costs triple what the u. S. are. Carl, back to you. Rick santelli quick programming note as we go to break this morning. Dont miss an exclusive with leon cooperman today on the half beginning at 12 00 p. M imagine traveling hasslefree with your golf clubs. Now you can, with shipsticks. Com no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. Sending your own clubs ahead with shipsticks. Com makes it fast easy to get to your golf destination. With just a few clicks or a phone call, well pick up and deliver your clubs ontime, guaranteed, for as low as 39. 99. Shipsticks. Com saves you time and money. Make it simple. Make it ship sticks. Welcome back im dominic chu. The sectors leading to the downside, the energy sector, the worst performer so far today, and as we take a closer look at some of the worst performers in that sector so far, weve got the list of usual suspects, the names that have been badly beaten up over the recent weeks and months, baker hughes, also schlumberger and noble energy as well not only are those names trading lower today but theyre all down by a whopping 17 or more so far this year, and thats another down day for oil prices as well, snapping a fourday winning streak, off more than 20 from their april highs as well. Keep an eye on oil sara, back to you folks at the new york Stock Exchange. Dom, thank you. We are watching shares of kroger today surging up almost 9 Berkshire Hathaway revealing a stake in the grocery chain in the latest quarterly s. E. C. Filing this takes the price back to november 2018 highs but still off the highs in 2016 for this stock, around 42. Obviously, people dont want to be on the other side of buffett but it continues to be a battleground stock the company has lost share in recent years jeffries put out in a note theyve been losing share to other grocers like walmart and costco and target since mid2016 when it comes to kroger, its always about the competition, not just amazons s investing heavily in whole foods, but everybody else doing it as well. The bull case on kroger is it has not been sitting still p its been investing in building chains in the u. S. That it has now put in online and curb side delivery and all of its stores, the 2,750, about five times the amount of Stores Whole Foods has. This continuing to be a back and forth. We dont know who bought it at berkshire but getting a little love is a bik heg help for the s saying kroger can compete. Always important to identify it may not be a buffett position but somebody else. Whats come ug ing up on the cg bell . We ran into dr. Anthony fauci. The apple warning on revenues and were always trying to figure out what are they learning about how transmissable this disease is and what the risk is for the u. S. And china getting these factories back online and trying to get back to normal life. See you this afternoon. After the break, our early facebook and google investor Roger Mcnamee will talk about ckbesall. Taxes . Sales tax, real estate credits, solar incentives. And we have no way to integrate all that . No. But bdo does. announcer people who know, know bdo. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. You should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. Make ice. Making ice. But youre not mad because you have e trade which isnt complicated. 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