What we had seen with the weakness last month. Overnight in asia, the nikkei actually was down almost 1 . The shanghai was up by a half percent. In europe you will see the dax is flat. So is the ftse cac is up. There are green arrows across the complex of stocks. The treasury markets this morning will be closely watched. The tenyear at this point is yielding above 2 . We want to start with some developing news. The New York Times reporting that President Trump approved military strikes on targets in iran that would be in retaliation for shooting down a surveillance drone but the mission was called off at the last minute eamon javers joins us in washington, d. C. With the latest good morning. The New York Times and the Washington Post are reporting that the president authorized these air strikes last night but backed off at some point subsequent to having authorized it the New York Times is reporting that the mission was under way. There were planes in the air, but missiles had not been fired at the point at which the president called off the planes. The president sent a message to tehran earlier in the evening before this apparent calledoff military strike suggesting that he wanted talks, not war we dont have any confirmation of that from the american side were waiting on confirmation from the white house in terms of what the president s decisionmaking last night. The New York Times is citing multiple Administration Officials involved or briefed on the events of last night and suggested the president ordered this attack and then backed off at some point after. The big question of the morning is did the military or diplomatic facts on the ground change after the president authorized these strikes or did the president simply change his mind and the approach he wanted to have. Yesterday in the oval office the president suggested he didnt want any military intervention he said he was a president elected to get out of wars, not into them. And he suggested also the iranians may have been the victim of a rogue iranian general who ordered the strike without the approval of the iranian government, and that this might have been a big accident some questions this morning in terms of what president s mindset was, what the facts were that caused him to reverse course after the operation had already begun last night eamon javers, its a developing story hope we can try to suss this out. Weve been pinging some Administration Officials early this morning no response yet. You do expect the white house will have some explanation for it it went from, yeah, they made a big mistake to, yeah, maybe it was a mistake. Difference in tone, right . One means youll pay for this, the other means maybe it was a mistake. The president seemed to be offering them an out but the iranians didnt take it. The president said if there was a person on board, personnel on board that would have been a different situation. Its a 1 125 million piece of equipment, but as we tell our kids, look, anything that is just property, anything short of hurting someone or a loss of life, its not even close. Fires, accidents, whatever youre talking about i was going to say, can you raise your hand, anyone who is glad it didnt escalate yesterday . We are all raising our hands, right . We dont i hope cooler heads prevail we are fatigued from this stuff. Though again, if it was more than a piece of equipment maybe we wouldnt be raising our hands. The bigger challenge for the president is he pulled out from the iran nuclear deal, he intensified sanctions on iran, but the iranians said this week they want to restart their nuclear program. The president will have a difficult decision on his hands here the sanctions may be working. Maybe thats why things are ratcheting up. It could be why theres real pressure there one reason for exiting the deal was that all their activities didnt change other than maybe the enrichment. As Condoleezza Rice said this week, he didnt act rationally it wasnt the Campaign Promises he made to pull out on the first day. He gave it a year to see what would happen so how do you keep the Iranian Nuclear ambitions in a box without using force. Thats the real conundrum, especially if the iranians are set on a provocative course. The bombings of some ships, the shooting down of some drones, the iranians are taking measured provocative steps. With the iranians in that mindset, how do you keep them contained given that you have already used the sanctions to the maximum extent that can be used all right thanks lets look at the reaction to the Financial Markets with all these things oil, currency, gold. Oil is back to 57. 30 system of the tension started when we were at a 4 handle even though were up 10 or 15 as somebody pointed out earlier this week on the show, look, iran, because of the sanctions, is getting below market value for the oil it is selling. Its a harder place as a result. They have to sell more to get the same revenue i saw 1. 13 on the euro i heard a politic yesterday calling the Federal Reserve the feds the feds did this. The feds did that. A little different. The feds. Sounds like al capone this is the same politician grilling people on Student Lending activity yes yes. Thats a buffett thing, right . Check out gold. I was talking about a big green monster, you said the name of the big green monster. I wasnt going to say it you said shrek, like that. Remind me that was way too much information. I did name him by youre more like cicero yes, i wont mention Maxine Waters coming up, the bulls are running hot. The summer begins with the s p 500 at an alltime high and the nasdaq topping 8,000 again i have a question about this you know how people criticize the trade war, they love to calculate the market cap losses, trump cost us 5 trillion, 10 trillion it comes back, you never hear about it the market has not been affected has the underlying economy or is it just the fed action that has widened the gap between a weaker economy and i think it depends on which company you talk to. Target says they can manage it to this point because they have so many different products has it really not ban big deal or is the fed flooding us with liquidity again and exte extending the disconnect its 65 degrees, do you want 75 or 80 . Well look at challenges ahead as we head to break, a look at premarket winners and losers in the dow give me the yew foeuphoria, il with the aftermath when it comes to your customers expectations, theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Cool. Mno kidding. Rd. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Breaking news this morning theres a massive refinery fire taking place near philadelphia lets get to brian sullivan. He has the details i know that you lived in southwest new jersey when you were younger people as far as southwest jersey felt the explosion. This is not just a refinery. We got video coming in, hopefully we can run it. Thats a live look at the fire now. Lets be clear, the Philadelphia Energy solutions refinery, 330,000 barrels a day, it blew up about 30 minutes ago. That explosion actually was felt tens of miles away thats the video of the explosion. Watch this its on fire you will that is the Largest Oil Refinery in the east coast Philadelphia Energy solution are a private company. They filed for bankruptcy last year they came out of bankruptcy earlier this year. Its part of a joint venture between the carlyle group, sunoco and enterprise transfer partners thats the 54 billion pipeline company. So the refinery employs about 1,100 people, makes gasoline and jet fuel gasoline futures, we just hope no one is injured in this. There is right now an Economic Impact gasoline futures are popping right now. We know its tough already with gasoline on the east coast that refinery, whatever the cause, we dont know how long it will be offline. The biggest gas refinery in america, not only on fire now but as you saw from that video, literally blew up about 30 minutes ago. Ow. Brian, thank you. Well be watching this story all morning long i want to talk about a story were watching all day long yesterday. Workplace messaging service slack coming off a successful wall street debut. The stock jumped almost 50 relative to its Reference Price. Stewart butterfield explained to us why he opted for the direct listing. I think theres a lot of investors who are used to a model where they get a small allocati allocation they wanted a big one in direct listing, at least they have the opportunity. One of the hopes is that theres not too much volatility. And we are hoping this model, where theres many sellers, many buyers, we hope we reach a market clearing price earlier. The gain was the 17th best of stocks that debuted so far in 2019 the biggest first day gain belongs to beyond meat, which was up 163 when it debuted on may 2nd. Now questions on whether airbnb will follow this model i asked you yesterday what the picture of success would be. This is success. The other piece of it is theres no money to be left on the table. In a traditional ipo, if it set at a scertain price, the price goes up, you say thats terrible, or if the company wprt lower, the xeen tocompany took advantage of the lenders the 26 Reference Price was too low, but it was only a Reference Price it wasnt a price to anybody. The analysts we had on with a 31 price target i think 37. He had 31 the guy we had we had two. We only spoke to the one analyst of the two i was thinking 31 its 26. I know youll have to either raise it or change to a sell has to be a sell now to him if he has any convection. Now watch, he wont hell raise his price target and stay at a buy. Youre right. I was thinking that yesterday and i was going to tell him. I learned my lesson. With uber yes trying to figure things out. This is like a 50 bump. Its a different lesson i learn ted my lesson the lesson right now is enterprise companies, you saw it with zoom and a number of big Software Companies that deal with enterprise. This will an profitable company, and you can say i see the light at the end of the tunnel the guy we spoke with said the problem was its overvalued because you with have to get lots and lets of s p 500 companies willing to take this on, get rid of microsoft and put this in. As a way of actually justifying the valuation. I think youll have more Traditional Companies did you start using it as a verb yesterday slack he was using it as a verb before i have been slacking for a couple years now. I think ed lee said i cant slack you, but i can slack myself all these things sound weird to me im googling you, googling this can you say go slack yourself. Its nicer than what i heard you say. Thats what i mean. Im uncomfortable with that on tv if that makes you uncomfortable on tv lets get to our guests a fed induced rally lifts the s p 500 to record territory as invests welcome the possibility of a rate cut. Lets talk about the markets with Janel Woodward and anastasanastasi ash anastas anastasia amaroso. The comments bring back what im trying to figure out, is this based not only on recessionary fears . Its based on inflation . Or does this actually widen what i talked about earlier is there more risk now because the markets are at new highs and here we are with bond yields way down here. Is the economy weaker and now theres even more risk the economy is definitely weaker the fed is trying to take out an insurance policy if you look at global growth, the pmis are 50. Philly fed came out earlier this week and Business Confidence was almost at a threeyear low all these indicators suggest to the fed that there is downward risk developing to the economy you couple that with inflation consistently below 2 , Inflation Expectations are weak. Thats the best case for why the fed should be cutting rates in their opinion. You throw a little bit of trade fears on top you have a case for them to do something. So i dont think its because were just on the cusp of a recession here, even though our recession probabilities have been going up. I think the fed is trying to extend this expansion and the best way to do that is to preempt it theres a guy coming on later, hes always bearish, hes at 43 prgs f for a recession. Is that possible is our recession probability at jpmorgan. It is yes 43 for 1 mont2 months out its been consistently trending higher the estimate is usually 20 yes you youre seeing double that, even though unemployment is at 3. 5 you look at a labor market thats tight tight because its strong, right . It is, but where does it have to go from here. If you have wages rising, not the pricing power, and then on top of that youre facing tar f tariffs. We had 43 recession probability back in 1995 we had a bit of easing of Monetary Policy in the market and the economy kept on going. This is what the fed is trying to engineer. We have to see if theyre successful janel, i found the line in your note. What we are watching, the disconnect between rates and risk the s p at a new high yesterday, the fed in cutting mode. Thats not usually the way it is i think thats definitely what were watching. When we look at risk assets, we look at spreads. Investment grade veries spreads. Our concern is that theres a bit too much optimism. People are looking through to what does broader accommodative policy mean, but not thinking what that means for the data and the fundamentals so were more balanced in here, a bit more tempered than the market does the fed still have the power to offset what were seeing with the trade war . Is the trade war not yet reflected in an economic slowdown its not been reflected in the averages unless the s p is at a new high because of the fed. Is the trade war effecting the underlying economy or is it just not doing anything yet were seeing some softness in data flow through but not in material its not about the direct impact, its the indirect impact we look forward to data points one important piece here is going to be what does the Second Quarter earnings season look like what are we seeing out of guidance are we seeing changes in capex and Spending Plans this is one thing that chairman powell highlighted earlier in the week the fixed investment what does that look like when we look at the data points and what weve seen them look like, were not quite there. We think the market may be underwhelmed, it may not be july or 50 basis points initially and so we think that this risk asset and the bid for risk assets needs to be tempered. All right thank you both okay. Have you changed your libra have you seen my that ive back cult hero with the bitcoin . You said it was a fine cryptocurrency, you liked it i hope they start seeing youre not really that woke that im not into bitcoin no, that youre not woke. You dont understand that one is blockchain the other one is just based on the dollar, so its not real the other one is blockchain, too, but not crypto. One is digital gold one is a currency. Different things youre still lecturing as if you know something people you can talk to your woke people on twitter. Theres thousands of woke people there was a promise of billions of investment dollars pouring into West Virginia from china, but so far nothing, zero. You have to hear this story. Well talk about it right after the break. My experience with usaa has been excellent. They really appreciate the military family and it really shows. With all that usaa offers why go with anybody else . We know their rates are good, we know that theyre always going to take care of us. It was an instant savings and i should have changed a long time ago. It was funny because when we would call another insurance company, hey would say oh we cant beat usaa were the webber family. Were the tenneys were the hayles, and were usaa members for life. Get your usaa Auto Insurance quote today. Instateoftheartn Technology Makes it brilliant. The visionary lexus nx. Lease the 2019 nx 300 for 359 month for 36 months. Experience amazing at your lexus dealer. As President Trump tries to negotiate a trade deal with china, here at home the biggest deal the administration has already done with china is serving as a cautionary tale the state of West Virginia was supposed to get 84 billion from chinas stateowned energy giant, a boon for workers that helped give President Trump his widest margin of victory in 2016 we found that promise nearly two years later to be a pipe dream under the foothills sits a gold mine of natural gas. Vast reserves of underground energy eyed by u. S. Companies and foreign powers thats what china wanted when it reached a deal in 2017 with West Virginia, more valuable than everything the state produces in a given year an 84 billion promise endorsed by President Trump and president xi jinping billed as a game changer to the Mountain State imagine the magnitude of what were talking about. This is the best thing that could possibly happen. Really and truly, its coming reporter 18 months later,