And welcome, everyone, to power lunch. Im Tyler Mathisen glad you could join us on a summer monday. A new trading month, a new half, and record highs for the stock market, but were off the session highs, as melissa just mentioned. The dow was up 290 points earlier. Apple leading the dow, boeing, the biggest dragger. And chip stocks soaring on that trade truce. Kelly. Tyler, thanks the rally is losing steam. Lets get to seema moda on the floor of the New York Stock Exchange with more on the action this hour. Hey, the key question for the market is whether those talks between u. S. And chinese officials over the weekend and japan will actually lead to a trade deal what youre seeing is some of the optimism around the trade talks starting to fade we started the day higher by about 1 the intra day high for the s p 500 was 2977 were currently at 2957. Still up about a half a percent on the names on the day. Names that initially jumped higher on g20 trade talks have come off their highs as well take a look at caterpillar its reversed its gains. Negative on the day. Deere, same story there. The other big story is earnings. Second quarter earnings estimates have come down substantially from 3 in march to 0. 2 here in july and Morgan Stanley says further downward revisions are ahead and that the second half of the year tends to be seasonally weaker time for earnings revisions. Whats working today, energy, as oil prices are set to close up ahead of the opec decision financials, the second day of gains after a number of banks increased their dividends last week Goldman Sachs having its best day in two months. And another thing to watch out is the number of safe haven related trades gold, the japanese yen, the tenyear yield, even real estate kind of unwinding today. You can look at the Real Estate Investment trust down about a third of a percent thank you very much the s p building on its best first half in more than 20 years. Also coming off its best june in almost 65 years. Should you keep riding this run . Lets bring in mona bahajan, u. S. Investment strategist, and paul hickey, cofounder of Bespoke InvestmentGroup Welcome to both of you mona, bet he begin by asking you, do you think a lot of the good news on trade is now discounted in the market i do think what happened over the weekend is an incremental positive, only because the last tranche of tariffs was going to impact the consumer severely 25 on the 300 billion affected apparels, textiles, et cetera. The consumer has been the one area of the u. S. Economy that has been pretty resilient. Those tariffs coming off are an incremental positive that said, were up 18 year to date we dont anticipate this return to annualize in the second half of the year. We remain somewhat cautious given the uncertainty around global economy, even other parts of the u. S. Economy, manufacturing, we see it come through in pmi data. The other supportive factor, though, the fed is still in play and has indicated easing it would be expecting a lot to see a second half, up 18 on top of a first half up 18 paul, let me turn to you with this question. And that is this, i read someone say earlier today that what happened over the weekend was kind of the minimum thing to get the maximum result that we have seen today in other words, it was a good outcome. Right but it was kind of the least good outcome well, yeah. So i mean, coming into this last weekend, we were getting hints that this was going to be the type of outcome we were going to see, so we did rally we have rallied on that. So its its a little overstated coming into today, the rally we saw at the open it is an incremental positive, as mona was saying i think whats really important about it is we have seen earnings warnings come in in june at the highest rate for the month of june since 2014 a third of those warnings, all tariffs on china they have been associated to so if we were going into earnings season and we were hearing escalation of trade tensions and Companies Still warning about china and tariffs, that would have been a big problem. The fact that we have that escalation to the sidelines now will make it more palatable to accept some of this weakness on china and say okay, maybe things are going to get better going forward. Along the lines of tylers question, it also allows the fed to potentially still cut rates in july. If it is true were going to get data this week, get jobs, but also, a raft of earnings reports by the time the fed meets again, and we hear warning after warning because ultimately, because of the truce, nothing has really changed we could see the fed step in what we have seen historically on fed easing cycles, when the fed eases and we are not in a recession, the market outcome is pretty positive when the fed eases and were headed into recession, market outcome is negative. We saw that in 07, we saw that in 01 what were seeing now is the u. S. Economy still no indication of were entering a recession here the tariffs are off the table. Thats another positive. Well see how the jobs report comes out. Well see how earnings reports come out but if the fed is able to orchestrate what we call the soft landing, we could actually see, like we said, we dont expect 18 , but we could get another 5 upside from here. It could be interesting second half of the year, but we still are cautious we dont expect major rallies ahead of any fed easing cycle. You put out your second half newsletter and a list of pros and cons the pros outweighing the cons by a vast majority. One was the disconnect between the fed and market where do you stand roigd now in terms of what that is some it looks like the fed is looking for a july cut and maybe more. Normally market predictions of the short term are pretty accurate regarding the fed, but when you look out further, they lose their accuracy. The fed isnt very accurate with predicting the economy, and the economy isnt accurate at predicting the fed by this point in july, they will probably cut rates at least 25 bips, which should get this yield curve uninverted the longer its inverted, the more of a problem it becomes as the yield curve has been written off as not as important, but its not necessarily its signaling a weak economy, but when it gets to inverted level, its less likely final quick question, are the odds greater than 50 or less than 50 that the market will be higher at the end of the year. Greater or less . I go with greater greater than 50 . I say youre going to 67 greater chance were higher. Two out of three chance there you go mona and paul, thanks. A breaking news story we have been watching closely at this hour. Protesters clashing with police in hong kong at the annual july 1st march when marks the hand over of the city to china from britain. Protesters storming government headquarters following weeks of democratstrations over a controversial bill that would allow extradition to mainland china. Joining us from hong kong is bill neely bill yeah, melissa, i dont need to tell you this is one of the worlds Global Financial hubs, home to, you know, 13,000 companies, 1300 companies of which this is their asia hub and they have witnessed mayhem here today right in the heart of the city about a couple hours ago, riot police moved in behind clouds of tear gas to break up thousands of protesters who had taken over the political heart of this city they have done it by storming the main government building here they did it with steel rods and with improvised battering rams it took them hours they smashed glass and eventually they got in to the main legislative building here so hong kongs house of representatives. Or congress. And then they went up to the Main Debating Chamber and quite simply trashed it. They broke the computers they scrolled graffiti on the walls. They covered the signs, covered up the signs of chinese rule and they put up posters that said, for example, we are not rioters. You are the tyrants. They are protesting against a number of things principally, an extradition law proposed by beijing but also proposed by the chief executive of hong kong, carrie lam, which means anyone in this country could be extradited by china not just locals, but for example, employees, ceos of foreign banks. They dont want that to happen the bill was withdrawn, but in fact, hong kongs chief executive has not decided to scrap it the protesters are furious about that and they want to see her resign. She did make an extraordinary public confession earlier this morning saying i didnt listen to the people enough i have learned my lesson, but the protesters really werent listening to her so they went into this government building. We havent seen that before in hong kongs recent history and just one other thing, this isnt just a hong kong political crisis this is a real challenge to president xi in beijing. It is the biggest popular challenge to him in his seven years of rule. The big question now is, okay, this situation has been cleared. The protesters are out of that building and off the streets but what happens next . Will there be a backlash from beijing . Melissa. Bill, thank you bill neely in hong kong for us and coming up, after the big meeting between president s trump and xi this past weekend, the u. S. And china have agreed to go back to work on a trade deal so will anything be accomplished or will we be right back where we were last week in just a few months time plus, ever find searching for something to watch on netflix or another streaming service so exhausting that you just give up if so, youre not alone. But you should just stick with power lunch, folks well be right back. Stocks well off session highs. A number of big stock winners from the u. S. china ceasefire, especially the chip makers, but the hard work of the trade talks now begin. Kayla tausche is in washington with more on whats ahead for both sides the most anticipated truce in osaka created a long todo list for washington and beijing, including revisiting Unfinished Business from may that killed negotiations back then President Trump said the u. S. Will sign china a list of products to buy. Chinas deal announcement left this part off, but President Trump said it will happen immediately. Second, wilbur ross says licenses will be granted to u. S. Businesses to sell parts to huawei as soon as this week. And third, negotiators will schedule teleconference and in person talks to pick up where they left off in may treasury secretary Steven Mnuchin has said theres 10 of the deal left, but the part china backtracked on, the legal enforcement, underpins the entirety of this deal, and it is a make or break part of it and the u. S. Will need to get china back on that track finally, the Administration Needs to sell lawmakers in both parties on what was brokered in japan. Several republican senators have come out against the huawei reprieve senator marco rubio even suggested there would be enough support to veto the president on legislation reversing that part of the deal. Congress is out on recess this week, but you can bet, kelly, as soon as lawmakers are back, theyre going to have a lot to say. Yeah, kayla, thanks President Trump and chinas president xi jinping agreeing to the trade truce, but are we any closer to getting thetinal deal done lets ask erin, Vice President of the u. S. china council, and they represent about 200 American Companies doing business with china. Erin, so whats the advice to them full steam ahead well, you know, our advice to negotiators on both sides is with 10 of the work left to be done, find your way forward. What we know of the outstanding issues are ones where it seems like there is a middle ground to be found if both sides are interested in finding a deal the key right now is to figure out if thats indeed where both sides are. Right, but you know, again, i kind of go back to the Business Community in this, which you can sympathize with them here, china was the biggest market, the biggest investment destination for so many years. It comes to a screeching halt. At least in terms of the relationship, but mane not in reality. Are they expected to still pour investment dollars and resources into this market or not . Well, it really depends on where your Customer Base is. What we hear from companies is that if your ultimate Customer Base was in the United States, you might be pulling out some of your investment from china to get away from the cross border trades and if your Customer Base is in china, you might be moving some production out of the United States. We actually hear from more companies, though, that are looking at doubling down on their investments in china because so many of them are doing business in that market to access chinese customers yeah, doing business in china in order to access the Chinese Market so do they also think thats a way around any further escalation of these issues because theyre not worried about tariffs if theyre saying were not importing that material, necessarily . Well, the overall relationship between the United States and china will still be relevant because if things were to go poorly in these negotiations, American Companies may become a target of consumer boycotts or other efforts of that nature. The bottom line is right now, because of the uncertainty in the relationship, many American Companies are viewed as unreliable suppliers so right now, getting to a resolution of these issues will shore up confidence that American Companies will still be able to deliver regardless of whether theyre doing that through a cross border transaction or from within china. Why did the president , im sure he would not use these words, why did the president back down on huawei . You know, i thing that this is an issue that is a priority for the chinese. If there are violations from huawei that result in actions that need to be taken against them, that needs to happen, but there was no denying there was a lot of disruption happening in supply chains because of the speed with which the administration took this action. Our ideal goal is to keep National Security and commercial issues separate, but in this case, really what needs to happen is to bring some predictability back to that situation as well. Did the council read it as a good sign or did your businesses say, you know what, maybe its not so bad when apple announced it was going to move mac book production to china. That seems like, you know, tim cook often has a line straight to the white house and they decide to make this very, very big decision in the midst of a china trade war when it comes down to it, our companies would prefer the government stay out of how they make their Business Decisions but they have to make those decisions based on all the available information to them. So right now, i would say our Companies Feel like its good the two sides are talking. Its certainly better than having them not talking, and its certainly better than having the threat of an additional 300 billion of tariffs out there. Right now, were looking for more answers whats the timeline for these negotiations how serious are both sides to coming to a resolution what happens if they cant reach an agreement on these issues that 300 billion list of tariffs is still looming out there. Its just put on hold for the moment it would be fascinating if that turns out to be a canary in the coal mine, that mac book pro. Interesting timing thanks very much coming up, the trading nation is about to take a bite out of apple. The stock is up 27 this year. Will leadership shift. Health care is the worst performing sector, up 7 so far. Well see if a secondhalf turnaround is in the cards for them hi walter. Join us for a walk . Id love to, but my legs and feet are so tired and achy. Walter, you need revitive its the circulation booster it really got me moving. I use my revitive every day to relieve my aching legs and feet. Its so easy. Drug free. And its electrical muscle stimulation really improves the circulation in my legs. Im back walking this guy everywhere. Check it out online. Revitive. Fda cleared. Clinically tested. Only revitive relieves aches and pains, increases oxygen rich blood, and strengthens leg muscles. Weve gotta do this. Dont suffer any longer order revitive medic with a 60 day money back guarantee. With Free Shipping and free returns. Someone got revitive. Order now and well send you our most popular treatment boosting accessories. A 50 value absolutely free go to revitive. Com or call. Get moving today welcome back to power lunch. Im mike santoli at the New York Stock Exchange check out shares of apple moving nicely higher to lead the dow after the u. S. And china put additional tariffs on the back burner to continue trade negotiations is it safe to jump into this trade sensitive stock here matt and chad are your trading nation team today. So, matt, apples got a decent little head of steam right here, but where does it sit now . Right above the 200 level, obviously still a good deal below last years highs. Well, its at a key technical juncture right now, at least on an intermediate term basis this huge rally its seen this year, especially the most recent one, 16 in one month, has taken it up, right up the upper line of whats called a symmetrical triangle pattern so if it can break above that, it will be bullish for the stock. However, the more important level is the early may highs, right around 212. You break above that, not only will you get a break of the triangle pattern but a nice high or low, higher sequence, which should give the stock another leg higher but when youre at key technical junctures, it can fail right now, testing the top end of that range, that looks good but we need that move to a higher level before we can say that the thing is going to have a lot more momentum going forward. All right, chad, on a technical level, seems like a bit of suspense in the stock what about more fundament