Welcome to power lunch. Scott walker the dow off the lows of the day when it was down nearly 300 points on the trump comments we just mentioned the s p 500 coming back a bit. The nasdaq the big loser down more than a percent. Check out the small caps in the transports, goth groups rebounding yesterday, but sinking deeper into correction territory. More on those moves a little later. As scott mentioned, stocks in the red as President Trump told reporters no deal is coming with tauschh china. Reporter the comment by President Trump calling into question whether talks with china would even happen next month is what moved the market because it raised expectations those new tariffs september 1st could go into place. Listen were doing very well with china. Were talking to china were not ready to make a deal, but well see what happens we have an open dialogue well see whether or not we keep our meeting in september if we do, thats fine. If we dont, thats fine but its time that somebody does what were doing reporter President Trump says the u. S. Is in aed goo place with regard to china candidates and farm representatives say the Financial Reality here on the ground is actually getting increasingly dire. Causing a lot more than a little financial pain. Its going to cause a lot of them to go bankrupt. Soon our bankers are going to say you need to liquidate some of your assets to continue when a sixth generation farmer says i hope my son doesnt become the seventh, you know we have an issue. Reporter its unclear just how much President Trumps support among farm voters deteriorated because of that financial pain, but many farmers here say they want trade certainty before that iowa cauc caucus Kayla Tausche in iowa shaping up to be a wild end to a wild week. Bob passisani watching all the g moves. What a wild ride. S p 500500 closed friday, 2932 a week ago dropped to 2,785 on monday before coming almost completely back late in the week. Its shy of that right now its been tough since the start of the month perceptions of the two issues moving stocks, central bank dovishness and tariffs number two. The perceptions changed about them the fed is initiating a global round of surprisingly strong Interest Rate cuts around several banks around the world and new potentials for tariffs for china. No surprise the two sectors turned into nogo, energy and financials a complete bust down over 5 . So is retail very exposed to china tariffs. Down about 5 as a group this month as well. The market has been held up overall this week in particular by the consumer names. Cocacola, kimberly clark, hershey, all up this week. Also held up by a small group of utilities, and a few, a few Health Care Stocks like johnson johnson. One sector benefiting from the volatility, stocks and future and options exchangers cboe, new highs as the volume ramps up Investor Sentiment has been horrible this week we see new lows for the year, bearish of the aaia survey thats normally 30 , scott you know as well as i do, when these get into extreme positions, thats kwrd a built on the bullish side. Maybe sentiment starting to get washed out. Bob, thanks so much. How should investors digest the head on on trade, the economy and the markets. Libby cantrell the head of Public Policy at pimco ron insana, nice to see you both libby, good to have a head of Public Policy on a day and a week and months when everything is being drink ven by policy. What do you do this week our view as it relates to china, things are likely to get worse before it gets better. Our base case is you will see the president move forward with the 10 of tariffs then its a question of do things similar her at that point or escalate. You cant rule out escalation. Ron, if that, in fact, happens, what is the market going to look like i dont know. Its funny, in the pre interview i shared with your producer, i said the world is lousy and the stock markets dont care that much the bond markets do. They do. The u. S. Is not lousy. The uk just had a contraction in growth and theyre going to crash out of the eu on october 31st hong kong is having a political and economic crisis. Venezuela we have an embargo and a blockade around. We have north korea which someone said in the prior show is low on the list of worries and yet there are provocations then theres china, italy, with the government there falling apart. A lot of stuff going on. Ill see your risks and ill raise you, libby, a fet put, a trump put, all that stuff people talk about. Look, i think the fed has certainly indicated especially around trade policy, that they will be accommodative of any market dislocation thats based on trade policy uncertainty. Its a question of whether the feds can keep up with what President Trump is doing i dont think people should expect that the president at this point is going to reverse on china look, the president believes that tariffs work. He believes tariffs brought china to the negotiating table he believes tariffs got a better usmca, a nafta 2. 0 deal. Which has yet to pass. I dont think Speaker Pelosi has incentive to bring that up. Dont let the facts get in the way of a god story i think the point here, theres been a narrative that President Trump puts out a lot of threats and doesnt follow through. If you look at china, he has followed through with them i think we should expect him to continue to ratchet up pressure on china. Libby, do you think a fight is just as good as a deal for President Trump . Or is the deal very necessary for him . Thats another thing that i think in the market, were maerg from clients, this expectation, of course he needs a deal going into 2020. Im actually not sure thats the case if you look politically, even among the farmers, he still has a lot of support, especially on china. He may not have support for nafta withdrawal or for auto trifrs which are the other sources of trade policy uncertainty. China is a different beast democrats support him in rectifying this relationship with China Defense hawks support him. I think theres a lot of political runway that he has in order to go hard on china. In some ways, no deal could be better than a weak deal. I would say runway stops at a recession. If you get a global recession that takes the u. S. With it, that certainly historically has never been good for an incumbent president. On top of that, you could start to see some disruptions that are not yet priced in. Competitive currency devaluations worse than what weve seen so far. That creates dislocations in Financial Markets around the world. Its funny, libby, to your point about the farmers, just yesterday we had a rm faer from ohio saying i voted for trump but what hes doing is all wrong, this is putting me out of business, i cant succeed. Kaylas story, were not going to have a seventh generation of farmers because we cant sustain going through the policies hes implementing at what point does he push the farmers too far . Consider the source on that that is governor Steve Bullock running on the democratic side he has an incentive to say that. Purdue university came out with a survey earlier this week that showed almost 75 of farmers think that this china escalation will result in a better deal for them he still has their support of course, he has given almost 30 billion in subsidies to farmers. They can actually give them more he has more latitude to give more. At least as of now, it looks like this very important constituent base is holding firm with them. You dont think volatility is going anywhere any time soon today is a perfect example the president makes a comment about huawei and the market didnt like it the white house comes out and clarifies what the president meant, stocks recovered a bit. Volatility is here to stay with these looming tariffs. Always has been and always will be. I look at volatility in a different way than most people periods of low volatilery are unusual, periods of normal are the norm as long as you stick with quality, youll ride out whatever storm comes its very hard now to play the stock market from a policy perspective. Good stuff. Guys, have a good weekend. Roib by and ron, thanks for being here. Shares of uber falling after a posting a huge net loss. The company ceo was on cnbc this morning to explain the results deirdre bosa has the results. Reporter so he reiterated he expects the business to be profitable at maturity he didnt tell us when that would be he was vague and he said the thinks 2019 will be a year of peak investment. Today he clarified i think our spending declients as a percentage of revenue. When youre growing trips 35 year on year, your spending is going to increase. Were going to get leverage we believe on the marketing line and get fixed cost leverage going forward. I think this quarter proved that out. I think we have to keep hitting our markets in the next couple quarters its a super competitive marketplace. Were confident and we like what we saw operationally in this quarter. Now, he may like what he saw operationally. Clearly the markets are seeing something else, likely it is that big glaring 5. 2 billion loss even when you take out ipo costs and even if you go with their preferred metric, losses are expected to be 3. 2 billion this year the top line number, thats not pretty either. Total revenue grew 14 this is supposed to be a High Growth Company ride sharing revenue, their core business, grew just 2 so guys, shares continue to trade well below their ipo price, down more than 6 in todays session. Certainly well below that 45 ipo price. Goldman sachs and apple teaming up on a new credit card. It could mean trouble for goldmans brand. There are still oh, my goodness 138 shopping days until christmas. Retailers are worried about a weak holiday season. Those stories and more coming up on power lunch. What do advisors look for in an etf . Dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. No matter what you trade, at fidelity to the wait did we from thejust winners. Rouders everyone uses their phone differently. Thats why Xfinity Mobile created a different kind of Wireless Network, with a different way to do data. One designed to save you money. Now you can share data between lines, mix with unlimited and switch it up at anytime. Design your own data with Xfinity Mobile. Its wireless reimagined. Simple. Easy. Awesome. Welcome back, Goldman Sachs is seen as a White Shoe Firm that caters only to the rich and powerful in a story from our banking reporter hugh song, we found out theyre about to dip into the subprime lending market. Here so explain the move is the writer of todays piece, the person who broke that story. What is goldman looking to do. Casting an unexpectedly wide n net. People with fico stores in the low 600, even the 500s are getting the card it only takes two minutes to get an application in and get a response a z those answers are coming in, people are posting their results online its pretty interesting to watch. It sounds to me, if you say why is goldman doing this, they probably want a lot of customers and want a lot of customers as quickly as possible. This is a mass Market Product for them up to this day, they have markets, somewhere like 4 million customers, and the fact that theres about 100 million iphone users in this country, this could be an order of magnitude larger product for them theyre looking the scale, scale up fast and change the narrative. This is not just an new York Investment bank thats tethered to trading and the slowdown in trading. This is a Fast Growing Bank with exposure to some big, big retail markets. Lets be clear and careful, too based on your reporting. Its not like goldman is giving 25,000 or 35 or credit limits to people with subprime Credit Scores goldman guys say reknow risk, done it for decades. So if you look at some of the people who are sort of more morning nall credits, theyre getting Something Like 750 credit limits, 250 credit limits you cant even buy an iphone with that, at least a new one. They have the highest aprs are theyll get compensated for the risk a little bit. Basically, if you believe this is a Financial Product that is that leads to better financial outcomes for their users, you should want some of these people to have this card if youre apple, we put up a graphic that shows theres 100 millionplus u. S. Iphone users you want as many of them to have access to the card as possible the mandate from early on, regardless of who is the bank partner, they wanted as many of their user base, iphone user install base to be using this card and have it as their default, their primary card. So in that population of 100 million, theres going to be people who are in the whole spectrum of credit range i think basically it shows they this, by the way, goes back to even during the steve jobs era i talked to someone at capital one in the late 90s he said steve jobs in the early talks of the apple card back then, he didnt want to say no to any of his clients, any of the customers at the time. Hugh, good reporting. Our own hughson reporting for us. After the break, why retail could be facing a very unhappy holiday and how tariffs could be to blame kwhip sfoks getting crushed in the trade war. Down 5 in august so far could there be value in that space . Trading nation is next the key question that seems to be driving all the Market Action are we headed for recession or are we not well talk it all overcoming up on power lunch lets do it. [ sniffing ] come on. This summer, add a new member to the family. Hurry into the mercedesbenz summer event today for exceptional offers. Lease the glc 300 suv for just 419 a month at the mercedesbenz summer event. Going on now. Retail stocks getting crushed since trump announced an additional round of tariffs on china, down another 2 today, sinking deeper to a bear market. A Credit Suisse note this morning saying it could lead to a sober holiday for the Retail Stores former toys r us ceo said last week zblg the Department Stores are in trouble big time. The last few Monthly Retail reports that have come up have looked terrible for Department Stores apparel in general, particularly any mallbased apparel is really on the rocks. All this comes as were gearing up for macys and walmart earnings joining us, liz dunn, founder and ceo of pro forma i feel theres so much going on. Were having big problems in the Department Sector in general because the format doesnt resonate as much as it once used to now we have the idea of the tariffs coming on september 1st. Put it altogether and look at a retailer like macys i think being the devils advocate and macys has a few National Brands that could help absorb some of the pain, if not all of it. Youre not going to see price increases on every single item, and likely not in time for christmas. Arent those goods already here . A lot of them arent here yet. I do think well see some price increases for christmas. I do think, youre right there are several people that will feel this pain and spread it out the factory owners will take some of it, the manufacturers, if its a wholesale brand will take some of it. The retailer in the case of macys some of it might be the consumer. Going into an earnings like a macys earnings, is this too dangerous to wade into because of the uncertainty, or is there a possibility of an opportunity here i think macys is already in a difficult position i think there have been attempts to turn things around. We had a bit of a head fake last year where things looked a little better. Performance so far has been weak this year. I think theres some concern that guidance needs to come down were seeing across the Retail Sector theres weakness, the Second Quarter wasnt great foot traffic is down there are these rising costs, not just tariffs but rising cost pressures from wage increases. And so i think there are a number of things, a number of cracks in the armor and it was an armor that already sustained some damage. You still think the consumer is going to hold up in the face of everything thats been going on its been a real pillar this par . The challenge for the u. S. Consumer is we buy too much discretionary stuff. When there are these external hits, we can pull back well buy fewer units. I think the consumer is fine and in some cases, obviously record low unemployment, wages rising will we buy less things if prices go up i think absolutely. In terms of stocks that you like, i find this interesting, you like target over Walmart Walmart has pulled back a little bit from its high, but its still been a great story, both fundamental fundamentally, the charts look good why target over that i think target is a cleaner story. Theres a real tension right now between the growth and profitability for a lot of retailers. I think none more so than walmart and target with some of the investments walmart has made, theyre scratching their head. Seems like theyre facing a bit