Transcripts For CNBC Squawk Alley 20240714 : vimarsana.com

Good wednesday morning, welcome to squawk alley. Im carl kinquintanilla, with Morgan Brennan the dow down 538 and the other big story is the inversion of the yield curve which has preceded every u. S. Recession for the past half century. Were going to watch that carefully along with the vix above 21 dom chu is looking at some various factors about the curve and how it might affect assets all around the whorld. It was just around 6 00 a. M. Eastern time that we did see that inversion, the difference between the two and the tenyear looking like its moving higher. You can see the tenyear note yield curvely 1. 584 , no longer inverted however, it has widened out just a little bit two basis points separates these two particular yields. Thats going to be a big deal. Like you said, it has been a possible reliable recession indicator, and one of the ways youre seeing it here is how long its been since weve seen the last move in that particular yield curve. You have to go all the way back to 2005. That was the last time it actually started to invert, and then in 2007 its kind of exited that move. So you can see that move here, have to go all the way back to that 05, 07 era prefinancial crisis now the reason why its important, according to data from Credit Suisse and many analysts who are out there crunching some of these numbers, you take a look at the reasons why, since 1978, the analysts at Credit Suisse note the last five to ten inversions led to recession. Recession occurs on average about 22 months, so almost two years after that inversion actually happens, and its usually about a year and a half, 18 months before markets turn lower when an inversion happenings thats something to keep in mind the Silver Lining here, though, is one year later the s p 500 is up on average 12 , so as we take a look at the Market Dynamics setting up, this is the key to watch here lets talk about whats happening with rates and why its important ill send things back over to you guys. Dom chu thank you for breaking all of that down for us ian linion is with us here at post nine. Ians been ranked number one on the street by Institutional Investors for the last two years. Welcome to you thank you happy to be here. Okay. So we know when you see an inversion between the two and the tens in the past, it doesnt cause a recession, but it is an indicator that a recession could be coming in the coming months, in the coming year and a half. Are you worried about that here now, or should we be taking some of these other factors into account, for example all the easing weve seen from Central Banks around the world im worried about a recession. Im worried about a recession in 2020 i think that what makes this particular event different than inversions weve seen in the past is that powell has already cut once typically we dont see an inversion inuntil after the poi the feds needs to cut but havent yet. Still the curves inverted. You think theyve been more proactive this time despite all the criticism from the white house . Theyve been more proactive, but the market is telling us today they havent been proactive enough, which really gets us back to what were watching in the equity market right now is a selloff thats going to increase volatility when we think about the powell put, which is kind of a relationship between the spike in volatility and the equity market and tighter financial conditions, thats what im worried about. Im worried the feds going to need to do more. Is the case building for a 50 basis point cut or an intermediary cut. The case for a 50 basis point cut was pretty high before yesterday when we saw that surprisingly high core cpi the feds got themselves in a bit of a box its going to be hard for them to deliver 50. Im glad you brought up that inflation data, these latest developments around this latest round of tariffs and the fact that some of those have been pushed off to december definitely the reason you saw the market or equity market rally yesterday, but given the fact that you are seeing this inversion in this key spread within the yield curve, does that essentially force the feds hand here . If it does, when you do look around the world, we see 15 trillion in negative yielding debt globally, when you see the fact that you have an inversion in the uk between twos and tens curve as well, how much does that actually do very good point theres very little that the fed can do at this point the expression pushing against a string comes to mind because you know, frankly the market is not con vinsed that the fed can actually sustainably stoke inflation. And we had a little bit of a rally yesterday in the equity market but the reason we sold off overnight really had to do with chinese data and whats going on in germany. Germany just had their first negative gdp print. Is this stacary when you already knew you were watching a horror movie i focused on the bond masht market so its really, really fun to be in the bond market right now. That said the relationship between all Asset Classes has started to go in a way that what ends up being bad for american stocks can also be bad for american bonds sometimes good news is bad and bad news is good, so i do spend a fair amount of time worrying about that what about people who point to refis today, mortgage purchase apps, argues maybe theyre not pushing on a string. Whats wrong with that argument . Its a strong argument. We have seen core consumption spending on the house held level has driven the bulk of the expansion thus far anyway. Pushing that forward is good and it might get us to the point where the trade war ceases to be an issue. Also 18 months is a long time, right . If we look at historically what these inversions have meant. What should people actually do versus just reacting to a yield curve inversion . Well, at this point the damage has been done to the economy in terms of investor and Business Confidence. Once Business Confidence rolls over, weve seen that in europe, weve seen that here as well, then companies are less willing to expand, theyre less willing to hire. Im more worried were going to see an Inflection Point in the employment market. When that happens, thats when you want to be out of risk. So things upyou want to look for are a sudden spike in claims or Something Else . Historically, if we see the Unemployment Rate increase 3 10 of a percent or more on a threemonth moving average basis, that means were in or actively entering a recession. Im watching the Unemployment Rate. Anything more High Frequency we can count on. The challenger survey that gives us layoffs thats a good one. Its that empirical it correlates extremely well to spikes. What about softer data like consumer confidence, anything like that . Consumer confidence only matters if it rolls over into spending tomorrows retail sales number is going to be huge. Weve been focused a lot on government debt, government bonds. What about the corporate side of the fixed income market . What is that telling us . Are we seeing similar yellow flags or recessionary silgnals s well credit spread have been seeing upward pressure people need a little bit more compensation however, at the end of the day, the credit market has performed remarkably well in this cycle, and spreads are probably unlikely to really, really gap higher unless theres a much more significant slowdown than were expecting. How are you factoring whats been a strong dollar into all of your analysis right now . Do you expect that continues to stay strong or do you think that weakens, and what is that what is the carry over to the bond market . Well, the most important aspect of the dollar in terms of the real economy is what it means for importing inflation or not importing inflation. The fed is actively trying to change the way that the market perceives its relationship with inflation, and for that reason a weaker dollar that actually brings inflation into the system would make the fed happy a stronger dollar only serves to tighten financial conditions and that will get the fed to move. All right, were in a blackout window here, were not getting any fed commentary this week jackson hole is next week. How does messaging start to sound next week . Newscathats a great questio. Weve been worried about or concerned about the point at which the fed wants to transition to price level targeting or more average approach to inflation. We thought it might be at jackson hole, but right now jackson hole sounds like the bigger concern is going to be can they justify going 50 . Will they need to do more . Less discussion about dallas fed trimmed mean kind of stuff. More concern about Global Financial conditions. What do you think happens to the ipo market now in this environment . I mean, weve been talking about wework which is one of the more anticipated prospectuses and ipos of 2019 we just got that out last night, and then we got a yield curve inversion in the morning what happens to the ipo market typically when these things happen historically you would think there would be a period of slowing, and then as the fed becomes more active, valuations start to become more attractive, so after a period of adjusting to what monitory policy is going to do, id expect it to pick back up. Ian, thank you for joining us today. Speaking of ipos, wework, parent we company releasing its ipo prospectus earlier this morning. Deirdre bosa has the details from san francisco. Not only is this another startup losing enormous amounts of money, 1. 9 billion last year, but it is extremely complicated. Take a look at its corporate structure. This is a photo from the s1. Three classes of stock, multiple levels here. Another thing that sticks out to me is what this prospectus does not include. I was eager to get some numbers or color at least around occupancy rates, especially key to what might happen in a downturn, and this is one of the biggest questions wework is facing we do not get that another key metric is average revenue per member that is delivered to us in the prospectus on its own, 6,320, but there are no past numbers given telling investors what the trajectory has been. Theres a note, however, a few pages later telling us that this number has declined, a trend that wework expects could continue in the nearterm. Now, guys, what the filing does tell us could be concerning to prospective investors. Wework has long touted the growth of its enterprise members which makes up about 40 of the total. They typically sign longer leases and lead to a larger committed backlog of revenue the proportion of these memberships has exploded over the last few years, but this year the growth rate has ticked down moving on to another metric, contribution margin, uber and lyft, they use a similar metric to show unit economics, how they eventually reach profitability in weworks case this is membership and Service Revenue minus operating expenses and stockbased compensation what you need to know, though, is that the growth rate of this metric has been flat or declining over the last five quarters lastly, guys, ill just point out that expenses at wework more than quadrupled from 2016 to 2018 major questions about its path to profitability in short guys, this is a prospectus that probably raises more questions than it answers. It raises a ton of questions, deirdre, among them and you touched on this a little bit, wework says that 70 of its markets are not mature, meaning they say that after two years in the given market it tends to reach maturity occupancy stabilizes, cash flow stabilizes, their expenses stabilizes 70 not secure the fact that they dont give occupancy rates on such a huge market of their markets, it seems arent mature and probably dont have great occupancy rates raises the question of what does happen when inevitably things slow down or we get a recession . Absolutely, jon, and the fact that we dont get occupancy rates but we dont even get a breakout by region is latin america faring a little better than china. There was another line far down on the prospectus saying its China Business because it is still developing, probably took off three Percentage Points from that continribution margin. Im wondering whats happening in other areas around the world. Wework is operating in many different places you touched on another point that i think the prospectus did not answer that investors are going to want to know. Yeah, they also point out that they have a kind of complicated Ownership Structure or financial structure in which they have partial ownership in investment, Real Estate Investment vehicles, that they also then do business with, so it could be that if those investments go south, even if it has nothing oto do with wework business, it could affect weworks finances. This is a controlled company also, so the amount of general governance that were going to get this this company is also a question mark . Yeah, its a good point, jon, and you touch kind of overall this is adam newman, the cofounders role in all of this. Theres a lot of unusual things relating to him, particularly what could become conflict of interest relating to arc that is the company youre referring to that holds actual assets, Property Assets that then wework can lease from theres some other parts about Family Members involved in the business adam newman pays a direct Family Member less than 200,000 to be the director of wellness at the company the so there company. So theres a lot of unusual quirks within this prospectus. Some of them could be glaring conflict of interests. Some other ones that like i said where a little bit smaller but still raise questions as to what is adam doing with the money, especially that hes taking out of the company he has a rien of credline of cr to 500 million. Deirdre bosa, the dow is now down 623, obviously a session low. One big reason for the selloff of course is about hong kong flights are resuming at the airport after those violent clashes between riot police and protesters our Brian Sullivan has made his way there on the ground at the airport, has the latest. Hi again, brian. Reporter hey, carl, hi again. You are exactly right. One of the reasons the dow is down over 600 points is because of what is happening here but for a couple of Different Reasons well get to in just a minute the airport is open. We obviously came in, protesters, its 11 00 at night here, they are settling in for the night. You can see people sleeping in a guys got a sign, welcome to tear gas city. Theyre bringing in food here. They have no plans to leave. This is now a protected protest zone by the Chinese Government in caloun across the bay there are reports of a protest there protesters are shining laser lights on the Police Station theres two sides to the story about why this matters to the Global Markets number one, just the idea of global unrest, youve got brexit, youve got some of the issues around the world. You factor in argentina a couple of days ago. This adds to the story everything thats happening here is happening under the framework of a major trade war between the United States and china as a whole. This adds to that level of uncertainty global volatility. Number two, just from a purely economic perspective, guys, is hong kong that big, not really, 340 billion in annual gdp, maybe 2 to 3 of macro china this is as everyone knows the key hole, the bridge, if you will, between china and western financial markets. This is the Legal Framework that a lot of the transactions go to. There is concern that as we enter our 11th week of protests, if this were to slow down, hong kong financially generally, it could already be a drag on a slowing chinese economy. Industrial production for china coming in today at the lowest growth rate since 2002, 17 years ago. Tourism is down. Our flight was nearly empty coming here. Theres a real concern that if hong kong, which is so much of tourism, if macau, which is so much of tourism, if that slows down, it will just be sort of another drag, guys, on the macro chinese economy, which is already slowing. Youve got the trade war factor Everything Else thats going on nin the world and what you get is a dow down 650. A couple of days ago we were hosting worldwide exchange, dow futures were up like 30 points nothing was happening. Then word came that this airport got shut down and dow futures fell 150 like that i guess the closest thing i could say is imagine if l. A. X. , carl, was shut down or jon, imagine if heathrow in london were shut down were open now, but this is a big economic worry and a big economic drag, and that is why we are here. Yeah, brian, its morgan, its obviously a big airport for passengers, also a very big airport for all the cargo thats moving in and out of the region as well. Im curious what your sense is for the rhetoric and the sentiment on the ground given the fact that chinese officials have accused the u. S. The u. S. And other Foreign Countries of backing these prodemocracy protesters i mean, yesterday we had chinese officials rejecting a u. S. Request to have two u. S. Navy ships make port there in the coming weeks as well is there a sense that this is adding to tepgnsions between the two countries . Reporter well, i think it has to, morgan we just got here a couple of hours ago by the way we dont have our feet on the ground yet just been Walking Around reading some of the signs, chatting with people now and then. A lot of people dont want to go on camera. Theyre not worried about tear gas, theyre not sick, they dont want to be fully identified because their families may be at risk as well if this tends to accelerate. I think your point is exactly right. I think thats the reason the world cares. Weve had protests in hong kopg before you go back 2014 heck, i could change it up we had the sars virus scare a number of years ago. There have been things that have happened in hong kong that have spooked the global or Morgan Brennan<\/a> the dow down 538 and the other big story is the inversion of the yield curve which has preceded every u. S. Recession for the past half century. Were going to watch that carefully along with the vix above 21 dom chu is looking at some various factors about the curve and how it might affect assets all around the whorld. It was just around 6 00 a. M. Eastern time that we did see that inversion, the difference between the two and the tenyear looking like its moving higher. You can see the tenyear note yield curvely 1. 584 , no longer inverted however, it has widened out just a little bit two basis points separates these two particular yields. Thats going to be a big deal. Like you said, it has been a possible reliable recession indicator, and one of the ways youre seeing it here is how long its been since weve seen the last move in that particular yield curve. You have to go all the way back to 2005. That was the last time it actually started to invert, and then in 2007 its kind of exited that move. So you can see that move here, have to go all the way back to that 05, 07 era prefinancial crisis now the reason why its important, according to data from Credit Suisse<\/a> and many analysts who are out there crunching some of these numbers, you take a look at the reasons why, since 1978, the analysts at Credit Suisse<\/a> note the last five to ten inversions led to recession. Recession occurs on average about 22 months, so almost two years after that inversion actually happens, and its usually about a year and a half, 18 months before markets turn lower when an inversion happenings thats something to keep in mind the Silver Lining<\/a> here, though, is one year later the s p 500 is up on average 12 , so as we take a look at the Market Dynamics<\/a> setting up, this is the key to watch here lets talk about whats happening with rates and why its important ill send things back over to you guys. Dom chu thank you for breaking all of that down for us ian linion is with us here at post nine. Ians been ranked number one on the street by Institutional Investors<\/a> for the last two years. Welcome to you thank you happy to be here. Okay. So we know when you see an inversion between the two and the tens in the past, it doesnt cause a recession, but it is an indicator that a recession could be coming in the coming months, in the coming year and a half. Are you worried about that here now, or should we be taking some of these other factors into account, for example all the easing weve seen from Central Banks<\/a> around the world im worried about a recession. Im worried about a recession in 2020 i think that what makes this particular event different than inversions weve seen in the past is that powell has already cut once typically we dont see an inversion inuntil after the poi the feds needs to cut but havent yet. Still the curves inverted. You think theyve been more proactive this time despite all the criticism from the white house . Theyve been more proactive, but the market is telling us today they havent been proactive enough, which really gets us back to what were watching in the equity market right now is a selloff thats going to increase volatility when we think about the powell put, which is kind of a relationship between the spike in volatility and the equity market and tighter financial conditions, thats what im worried about. Im worried the feds going to need to do more. Is the case building for a 50 basis point cut or an intermediary cut. The case for a 50 basis point cut was pretty high before yesterday when we saw that surprisingly high core cpi the feds got themselves in a bit of a box its going to be hard for them to deliver 50. Im glad you brought up that inflation data, these latest developments around this latest round of tariffs and the fact that some of those have been pushed off to december definitely the reason you saw the market or equity market rally yesterday, but given the fact that you are seeing this inversion in this key spread within the yield curve, does that essentially force the feds hand here . If it does, when you do look around the world, we see 15 trillion in negative yielding debt globally, when you see the fact that you have an inversion in the uk between twos and tens curve as well, how much does that actually do very good point theres very little that the fed can do at this point the expression pushing against a string comes to mind because you know, frankly the market is not con vinsed that the fed can actually sustainably stoke inflation. And we had a little bit of a rally yesterday in the equity market but the reason we sold off overnight really had to do with chinese data and whats going on in germany. Germany just had their first negative gdp print. Is this stacary when you already knew you were watching a horror movie i focused on the bond masht market so its really, really fun to be in the bond market right now. That said the relationship between all Asset Classes<\/a> has started to go in a way that what ends up being bad for american stocks can also be bad for american bonds sometimes good news is bad and bad news is good, so i do spend a fair amount of time worrying about that what about people who point to refis today, mortgage purchase apps, argues maybe theyre not pushing on a string. Whats wrong with that argument . Its a strong argument. We have seen core consumption spending on the house held level has driven the bulk of the expansion thus far anyway. Pushing that forward is good and it might get us to the point where the trade war ceases to be an issue. Also 18 months is a long time, right . If we look at historically what these inversions have meant. What should people actually do versus just reacting to a yield curve inversion . Well, at this point the damage has been done to the economy in terms of investor and Business Confidence<\/a>. Once Business Confidence<\/a> rolls over, weve seen that in europe, weve seen that here as well, then companies are less willing to expand, theyre less willing to hire. Im more worried were going to see an Inflection Point<\/a> in the employment market. When that happens, thats when you want to be out of risk. So things upyou want to look for are a sudden spike in claims or Something Else<\/a> . Historically, if we see the Unemployment Rate<\/a> increase 3 10 of a percent or more on a threemonth moving average basis, that means were in or actively entering a recession. Im watching the Unemployment Rate<\/a>. Anything more High Frequency<\/a> we can count on. The challenger survey that gives us layoffs thats a good one. Its that empirical it correlates extremely well to spikes. What about softer data like consumer confidence, anything like that . Consumer confidence only matters if it rolls over into spending tomorrows retail sales number is going to be huge. Weve been focused a lot on government debt, government bonds. What about the corporate side of the fixed income market . What is that telling us . Are we seeing similar yellow flags or recessionary silgnals s well credit spread have been seeing upward pressure people need a little bit more compensation however, at the end of the day, the credit market has performed remarkably well in this cycle, and spreads are probably unlikely to really, really gap higher unless theres a much more significant slowdown than were expecting. How are you factoring whats been a strong dollar into all of your analysis right now . Do you expect that continues to stay strong or do you think that weakens, and what is that what is the carry over to the bond market . Well, the most important aspect of the dollar in terms of the real economy is what it means for importing inflation or not importing inflation. The fed is actively trying to change the way that the market perceives its relationship with inflation, and for that reason a weaker dollar that actually brings inflation into the system would make the fed happy a stronger dollar only serves to tighten financial conditions and that will get the fed to move. All right, were in a blackout window here, were not getting any fed commentary this week jackson hole is next week. How does messaging start to sound next week . Newscathats a great questio. Weve been worried about or concerned about the point at which the fed wants to transition to price level targeting or more average approach to inflation. We thought it might be at jackson hole, but right now jackson hole sounds like the bigger concern is going to be can they justify going 50 . Will they need to do more . Less discussion about dallas fed trimmed mean kind of stuff. More concern about Global Financial<\/a> conditions. What do you think happens to the ipo market now in this environment . I mean, weve been talking about wework which is one of the more anticipated prospectuses and ipos of 2019 we just got that out last night, and then we got a yield curve inversion in the morning what happens to the ipo market typically when these things happen historically you would think there would be a period of slowing, and then as the fed becomes more active, valuations start to become more attractive, so after a period of adjusting to what monitory policy is going to do, id expect it to pick back up. Ian, thank you for joining us today. Speaking of ipos, wework, parent we company releasing its ipo prospectus earlier this morning. Deirdre bosa has the details from san francisco. Not only is this another startup losing enormous amounts of money, 1. 9 billion last year, but it is extremely complicated. Take a look at its corporate structure. This is a photo from the s1. Three classes of stock, multiple levels here. Another thing that sticks out to me is what this prospectus does not include. I was eager to get some numbers or color at least around occupancy rates, especially key to what might happen in a downturn, and this is one of the biggest questions wework is facing we do not get that another key metric is average revenue per member that is delivered to us in the prospectus on its own, 6,320, but there are no past numbers given telling investors what the trajectory has been. Theres a note, however, a few pages later telling us that this number has declined, a trend that wework expects could continue in the nearterm. Now, guys, what the filing does tell us could be concerning to prospective investors. Wework has long touted the growth of its enterprise members which makes up about 40 of the total. They typically sign longer leases and lead to a larger committed backlog of revenue the proportion of these memberships has exploded over the last few years, but this year the growth rate has ticked down moving on to another metric, contribution margin, uber and lyft, they use a similar metric to show unit economics, how they eventually reach profitability in weworks case this is membership and Service Revenue<\/a> minus operating expenses and stockbased compensation what you need to know, though, is that the growth rate of this metric has been flat or declining over the last five quarters lastly, guys, ill just point out that expenses at wework more than quadrupled from 2016 to 2018 major questions about its path to profitability in short guys, this is a prospectus that probably raises more questions than it answers. It raises a ton of questions, deirdre, among them and you touched on this a little bit, wework says that 70 of its markets are not mature, meaning they say that after two years in the given market it tends to reach maturity occupancy stabilizes, cash flow stabilizes, their expenses stabilizes 70 not secure the fact that they dont give occupancy rates on such a huge market of their markets, it seems arent mature and probably dont have great occupancy rates raises the question of what does happen when inevitably things slow down or we get a recession . Absolutely, jon, and the fact that we dont get occupancy rates but we dont even get a breakout by region is latin america faring a little better than china. There was another line far down on the prospectus saying its China Business<\/a> because it is still developing, probably took off three Percentage Points<\/a> from that continribution margin. Im wondering whats happening in other areas around the world. Wework is operating in many different places you touched on another point that i think the prospectus did not answer that investors are going to want to know. Yeah, they also point out that they have a kind of complicated Ownership Structure<\/a> or financial structure in which they have partial ownership in investment, Real Estate Investment<\/a> vehicles, that they also then do business with, so it could be that if those investments go south, even if it has nothing oto do with wework business, it could affect weworks finances. This is a controlled company also, so the amount of general governance that were going to get this this company is also a question mark . Yeah, its a good point, jon, and you touch kind of overall this is adam newman, the cofounders role in all of this. Theres a lot of unusual things relating to him, particularly what could become conflict of interest relating to arc that is the company youre referring to that holds actual assets, Property Assets<\/a> that then wework can lease from theres some other parts about Family Member<\/a>s involved in the business adam newman pays a direct Family Member<\/a> less than 200,000 to be the director of wellness at the company the so there company. So theres a lot of unusual quirks within this prospectus. Some of them could be glaring conflict of interests. Some other ones that like i said where a little bit smaller but still raise questions as to what is adam doing with the money, especially that hes taking out of the company he has a rien of credline of cr to 500 million. Deirdre bosa, the dow is now down 623, obviously a session low. One big reason for the selloff of course is about hong kong flights are resuming at the airport after those violent clashes between riot police and protesters our Brian Sullivan<\/a> has made his way there on the ground at the airport, has the latest. Hi again, brian. Reporter hey, carl, hi again. You are exactly right. One of the reasons the dow is down over 600 points is because of what is happening here but for a couple of Different Reasons<\/a> well get to in just a minute the airport is open. We obviously came in, protesters, its 11 00 at night here, they are settling in for the night. You can see people sleeping in a guys got a sign, welcome to tear gas city. Theyre bringing in food here. They have no plans to leave. This is now a protected protest zone by the Chinese Government<\/a> in caloun across the bay there are reports of a protest there protesters are shining laser lights on the Police Station<\/a> theres two sides to the story about why this matters to the Global Markets<\/a> number one, just the idea of global unrest, youve got brexit, youve got some of the issues around the world. You factor in argentina a couple of days ago. This adds to the story everything thats happening here is happening under the framework of a major trade war between the United States<\/a> and china as a whole. This adds to that level of uncertainty global volatility. Number two, just from a purely economic perspective, guys, is hong kong that big, not really, 340 billion in annual gdp, maybe 2 to 3 of macro china this is as everyone knows the key hole, the bridge, if you will, between china and western financial markets. This is the Legal Framework<\/a> that a lot of the transactions go to. There is concern that as we enter our 11th week of protests, if this were to slow down, hong kong financially generally, it could already be a drag on a slowing chinese economy. Industrial production for china coming in today at the lowest growth rate since 2002, 17 years ago. Tourism is down. Our flight was nearly empty coming here. Theres a real concern that if hong kong, which is so much of tourism, if macau, which is so much of tourism, if that slows down, it will just be sort of another drag, guys, on the macro chinese economy, which is already slowing. Youve got the trade war factor Everything Else<\/a> thats going on nin the world and what you get is a dow down 650. A couple of days ago we were hosting worldwide exchange, dow futures were up like 30 points nothing was happening. Then word came that this airport got shut down and dow futures fell 150 like that i guess the closest thing i could say is imagine if l. A. X. , carl, was shut down or jon, imagine if heathrow in london were shut down were open now, but this is a big economic worry and a big economic drag, and that is why we are here. Yeah, brian, its morgan, its obviously a big airport for passengers, also a very big airport for all the cargo thats moving in and out of the region as well. Im curious what your sense is for the rhetoric and the sentiment on the ground given the fact that chinese officials have accused the u. S. The u. S. And other Foreign Countries<\/a> of backing these prodemocracy protesters i mean, yesterday we had chinese officials rejecting a u. S. Request to have two u. S. Navy ships make port there in the coming weeks as well is there a sense that this is adding to tepgnsions between the two countries . Reporter well, i think it has to, morgan we just got here a couple of hours ago by the way we dont have our feet on the ground yet just been Walking Around<\/a> reading some of the signs, chatting with people now and then. A lot of people dont want to go on camera. Theyre not worried about tear gas, theyre not sick, they dont want to be fully identified because their families may be at risk as well if this tends to accelerate. I think your point is exactly right. I think thats the reason the world cares. Weve had protests in hong kopg before you go back 2014 heck, i could change it up we had the sars virus scare a number of years ago. There have been things that have happened in hong kong that have spooked the global or Asian Financial<\/a> markets. The reason this time it feels a little Different Number<\/a> one were already in a trade war with macro china, so now president xi in beijing has kind of go two fights to go after on two different fronts or what else happens now where does this go youve got on october 1st, the 70th anniversary of the peoples republic of china, the communist party. Thats going to be a huge day, a hugely important event for the entire nation, and they want the country to be at peace, and they want the country to look from the outside world like everything is in order as well so i think the next couple of days and weeks are going to be highly critical to see to your point, morgan where that goes, as far as answering your question, were here for a couple of days were going to be working during the day. Were going to be on tv at night, well get hopefully more answers. Get our feet on the ground, talk to more people, and see how this thing plays out. It does contribute to that dow down 600. Thats why youre there, brian, luckily for us, get some intelligence on whats happening in hong kong Brian Sullivan<\/a> is at the airport there as were down 600 points by the way, its not the worst day of august at this stage. Youd have to exceed the 767 point loss on august 5th, got the vix above 22, obviously were going to turn to our right and talk to bob pisani about this price action in the first half of today. I was talking to some of the traders. What would be the pain trade right now . The pain trade is what would cause the greatest number of pain to the greatest number of traders. There has been a buy the dip thing for a while now. The pain trade would be we drop another 5, 600 points on the dow. The 200 mf day on the s p is 2795 thats a good number to look at. I think the problem is two issues number one, the Economic News<\/a> has not been great we saw the China Industrial<\/a> numbers, the german gdp turn negative, and i think theres some concern President Trump<\/a> doesnt have as much leverage with china as people thought before given the actions yesterday interpreted all sorts of different ways. I saw this as a positive for the markets. Other people saw his position is a bit weaker i dont necessarily look at it that way i think those two issues are combining to create a lot of concerns about whether the market is valuing things properly, and you can see all of the european autos weaker. Thats a direct response to the chinas problems the semis are Global Growth<\/a> plays. These are all down the other thing youve got to remember is this is august there are liquidity problems always in august so what happens to these Market Makers<\/a> when theres not a lot of people playing and the market moves down 500 points, you get them pulled back they widen the bid and asks and dont play as much on the bid and offer. For example, suppose you got a big stock, a bank of america, jpmorgan, something that moves easily, maybe it would take 50,000 shares on a normal day to move these stocks 0. 10, pick a number, on a day like today it might only take 10,000 shares o move 0. 10 theres less playing on the bid and offer. Theres less shares suddenly this is they call this Risk Management<\/a> other people say where the heck is everybody theyre supposed to be Market Makers<\/a> this is what happens on days like today throw in the tariffs and it makes it very volatile. What are you hearing about these levels i mean, even though were down quite a bit roughly 600 points on the dow, more than 2 on the s p, were still not at the low levels that we saw last monday on the 5th is that a key level to watch over the rest of the week or what does this mean overall . The answer is i think its very good news were not there look how weve just sort of rolled over here i see this largely as a liquidity question theres not a lot of people playing in the market right now. Its hard to pick Technical Levels<\/a> but a good one is the 200day moving average i would Pay Attention<\/a> to the 2795 level what youre seeing here now is sort of breakdowns in key sectors. Daimler is at a multiyear low in europe theyre taking the multiples down i know this doesnt sound attractive right now, but youre starting to get at levels that are actually kind of interesting for buy opportunities. Im obviously not a strategist here were not in any bull market right now, and a lot of these sectors in no bull market industrials, no bull market in autos. Were in a bear market in energy, and ox dental is a 40 billion market cap its gots a 40 billion market cap and is at a tenyear low today. Thats a pretty shocking number. What do you make of the conversation at this point has been about global trade, the impact on american manufacturing, the consumer will save us because its mostly our economy. Then macys comes along. Are people going to excuse macys away as execution or do we have to worry about the bleed from manufacturing to services and consumer i think macys was an execution problem. They obviously pout out clothes there, particularly womens appar apparel. I hope youve listened to courtney, shes been doing a great job, that people didnt want essentially thats the definition of an execution problem. The American Consumer<\/a> if you look at the numbers are pretty darn good. The spending is pretty darn good overall. Theyre spending in a lot of different ways theyre not spending it in places like macys necessarily theyre finding it in other online places. I look at the health of the American Consumer<\/a>. I think its pretty good, but the market globally is a little bit different, and i think that, for example, the decline in tourists coming into the United States<\/a> specifically referenced by macys. Look at tiffany today, the action at tiffanys is not good. Same situation there. I think there are lots of opportunities still out there. My concern is the market now no longer believes this multiple is worth it if you look at the multiple now for the s p its down into the mid16 level this is getting closer to historical averages. The market is certainly not overvalued anymore two nt mmonths ago i was sayings is pricey right now. Theyre starting to take the number down. Lower prices makes the market more sane at this point. Im not thinking its good news for anybody. Im not happy when the stock market goes down, but we certainly have more sane valuations that are starting to reflect the greater global uncertainty, so to the extent im looking for a Glass Half Full<\/a> way of looking at this thing, the market is more sanely valid. And certainly one of the things weve talked about many times is how important that first hour of trading is in the session and that last hour of trading. The last two days weve seen technical difficulties play out with the exchange as well, and where averages were closing. Is that hammered out i know wroyouve been digging io it. The source of the problem on monday appeared to be a hardware problem with the servers in mahwah that are run by the new york stock exchange. A failure that caused some trade reporting glitches yesterday in the middle of the day we saw suddenly for about a tenminute period the s p and the Dow Jones Indices<\/a> stop computing. This was not, i dont believe, a technical fwli Technical Glitch<\/a> im still waiting for an explanation. Theres some technical things that are going on, but yesterday and today everything appears to be working fine. Again, i think the problem on monday was actually a hardware failure. This just goes to the point, the whole technology industry, we are still slooifaves things still go wrong. I dont mean a code error, i mean a component physically failed at a server over in new jersey that caused a trade reporting glitch that occurred we saw this in airlines scheduling, maybe some maker of that component, who knows what it was, there was a failure there. It wasnt the fault of any particular person miscoding, it was literally a hardware failure. This stuff doesnt work perfectly all the time. Yeah, thats old school failure. Real old school. Wait until we get ai. Some little component sitting in some little lot suddenly failed, and there was ripple effects around because of that. Bob pisani. Thank you. Now, lets keep talking about it, as a matter of fact because right now weve got the dow still down quite a bit, though its off session lows we were down more than 600 points, now down 570 technology does not seem to be suffering the most i mean, you talked about a number of industries that are suffering, but you know, if we take a look at microsoft, its holding up okay. Take a look at amazon, that too even though its in the past been a big value yeah, yeah what do you make of that well, its nice you picked out microsoft, which is the one survivor of the last 20 years. You could construct a list longer than your arm of the companies that have not succeeded. Microsoft has because i think they brilliantly moved towards the cloud and brilliantly expanded and a great, a good example of what visional management can do. I dont want to do that was a company that did a brilliant about face in execution on new fields to go into, particularly cloud. A lot of others are not, though, and a lot of others are in serious trouble. I look at the stuff that hasnt worked energy used to be if you go back to the 1970s, energy was almost 20 of the s p 500. Its 5 of the s p now thats in a depression, not a recession. That industry is in a longterm depression right now i dont even know where we stopped finding oil analysts who can tell us were buying bottoms here nobody talks about it anymore, and i dont have a clue, even when oil is up, Energy Stocks<\/a> tend to be down. Bob pisani, thank you. Dows down 583 right now european markets are set to close shortly. Seema mody joins us with a break down of todays actions there. Were seeing a bigger move in european stocks following that weak data from germany and china, more warning signs of the european bond market as well the yield on the u. K. Tenyear breaking below the twoyear rate for the First Time Since<\/a> 2007, and so far the selloff in european equities has been more pronounced with germany down 9 compared to the s p 500, which is down just about 5 from its recent high. But lets dig deeper into germany. Heres the story there german gdp contracted in the Second Quarter<\/a> by 0. 1 from the previous three months underscoring how europes largest economy has been suffering from slowing demand for german cars and a drop in construction activity. Barclays says germany is now one step closer to entering a recession and expects the ecb to deliver not one but three deposit rate cuts starting in september followed by the restart of quantitative easing in january the question now is if germany will introduce its own stimulus package given the domestic pressures its facing, germanys economic minister labeling the data as a wakeup call and a warning signal while also keeping a close eye on the u. S. Companies with notable exposure to germany, thats names like ebay and cody. Guys, back to you. Seema mody at the hq watching that for us. Thank you very much. Lets go not too far away and get the news update with sue herera. Good morning again, carl, good morning everyone. Heres whats happening at this hour at least six people have died under piles of rubble after their house on the side of a hill in the chilean port collapsed. Two children were rescued alive and taken to the hospital for treatment. The iranian president said persian gulf countries can protect the regions security are not needed he repeated a long standing rejection of the u. S. Maritime security in the region one that the u. S. Launched backed by britain. A swedish teen climate activist has set sail for new york crossing the atlantic in a racing yacht to join protests in the u. S. And take part in a United Nations<\/a> Climate Summit<\/a> she is hitching a ride on the yacht outfitted with solar panels and underwater turbines to generate electricity. And its not going to be comfortable but that i can live with im not at all worried about my safety because i know this is a very safe boat and that the crew, the sailors are very experienced. Best of luck to her thats the news update at this hour, guys, ill send it back downtown to you. Jon. Thank you, sue. And the nasdaq is down close to 2. 5 joining us on the phone alpha one Capital Partners<\/a> found dan niles. We have the yield curve inversion this morning the market responding, what do you make of it i mean, quite honestly think about this, what really changed today . The yield curve, the two and the ten did invert, but the three and the ten has been inverted for quite a long period of time. I mean, part of this is youre getting people are just getting whip sawed daily by thing that are impossible to predict, the tweet yesterday that tariffs are getting postponed until december 15th. Im not sure what exactly changed in the two weeks from when we talked about tariffs being put on september 1st so youve got all of this stuff going on so the markets up over, you know, a percent and a half yesterday on the s p. Today its down 2 , and youre just going through this violent churning and its causing huge issues for people who are trying to participate because its very hard to focus on the fundamentals when youre continually getting whip sawed by this policy uncertainty yesterday we were sitting in our hedge fun at 5, 6 cash. When the market whipped up we increased our cash position to 12 to 13 on a net basis you know, for us were trying to become, you know, much smaller play in less positions and in stuff that were more convicted in this is the toughest environment to invest in that ive seen in the last 20 years because of that kind of policy uncertainty that we havent had in the past. The last 20 years, dan, i mean, youve seen some crazy cycles this is more difficult to navigate than dot com boom, than financial crisis it is because heres why ninp my opinion, back then one of the best pieces of research i wrote when i was a research analyst, i wrote it in 2001, i think, ask it was called dont fight the fed. We say dont fight the fundamentals what we meant is you focus on the fundamentals you could just invest off of that you knew things were going to get bad in 01, 02 and thats what we stuck with we didnt upgrade a stock for over a year during that period of time. But you had a very clear direction in that you were more focused on what the fed was doing. The problem now is you look at and you say okay, were going to put tariffs on two weeks ago no, were not, were going to push it off until december 15th. You know, these things keep changing it seems like on a daily basis in some cases and so its making it very hard to deal with that because on the one hand you do have the fed well, actually, you have Central Banks<\/a> all around the world easing, and so you know thats pretty clear the bad news is the policy decisions keep switching back and forth, and these are big ones, right . When youre in a trade battle with china, if you knew that, you know, you were going to put on tariffs definitively, you could at least invest based on that if you knew that we were all settled, you could at least invest on that the problem is youre not really sure what the environment is, and it changes on a weekly basis, and thats why im saying its actually more difficult because its not you cant just focus on fundamentals and go with that youve got all of this other stuff thats whip sawing, you know, very consistently. Dan, in light of that and the fact that youve increased your cash right now, are there certain names or certain stocks, certain sectors that you would be looking to put that money back to work in if the price was right, or are you just going to sit on the sidelines increasingly right now because of all that uncertainty . No, i mean, i think, i firmly believe you want to invest when theres blood in the streets theres not blood in the streets right now. Yes, the market is down, but its not down that much, and so you havent, you know i think, i forget who said it, one of you said it, but you know, theres been sort of this buy the dip mentality. Thats dangerous then you feel like im immune. Im never going to lose any money. That creates people who arent invested because they have strong fundamental convictions, its oh, the feds going to save us dont worry about it. The s ps up 14 yeartodate, the nasdaqs up 18 yeartodate, theres a lot of people sitting on some very big fat profits in big indices, and other regions of the globe, argentina obviously yesterday may have suffered humongous losses but we havent in the u. S. Weve made a lot of money, so theres not enough pain being inflicted right now to make me say i want to wholesale jump back into stocks if you look at my twitter feed danieltniles, youll see that on december 24th, were down to one short, weve gotten really long. I think we had an interview with you at that time, we really got ourselves aggressively long, but thats because we had been in the worst Fourth Quarter<\/a> in, you know, since pearl harbor got bombed so thats a different situation. Right now thats not what were sitting at yes, i am looking to deploy cash but and the names im focused on are the ones that are not involved with china, that are not hardware related im looking at more of the internet names that arent affected by this as much they dont care about tariffs, you know those are the ones that the googles and the facebooks of the world that were interested in, and you know, sectors that are secularly growing versus things that are challenged, like i look at oil and gas, and it looks interesting on a valuation basis. I look at banks. That looks interesting on a valuation basis, but secularly lower Interest Rates<\/a> are terrible for banks and if we go into a recession thats bad for oil and gas. Those are things we think about a lot more, even though they look extremely cheap. You make an interesting point about how much were up on the s p yeartodate mom and pop at home, if theyre doing a good job and kind of checking in every quarter looking at results, i mean, theyre not seeing this daytoday what do you think a smart investor whos not in the market every day, not running a hedge fund ought to do during this kind of period of turbulence you know, that is a brilliant observation, and i think, you know, more people kind of thought about it the way you just expressed it, things would be a lot better because, yeah, when youre doing our jobs, when youre doing what im doing, youre looking at this on a daily basis, but youre absolutely right the mom and pop investor whos looking at this more on a quarterly basis, you know, they have a job, its the lowest Unemployment Rate<\/a> in 50 years, right . Youve got people getting paid more at those jobs the Housing Market<\/a> is still pretty strong across the board, maybe not the high end but across the board because Mortgage Rates<\/a> are low for the average u. S. Citizen, things look pretty darn good if youre not looking at every tweet ask every tick of the market but i think the problem right now is were in the longest economic expansion in history. Were in the longest bull market in the s p in history. I think for the average investor, what i tell people, they say look, youve made if you just kept up with the averages youve more than tripled your money from the lows in march of 09. You know, take some of that off the table, put into safer things put it into cash, i mean, thats the safest investment to some degree, right . You cant get killed with that so just get yourself a little less risky because when youre in that kind of environment and the feds cutting rates for a reason as i mentioned before, you know, it doesnt hurt to just like you take out life insurance, car insurance, you know, health insurance, you know, take out a little bit of insurance on your portfolio and become a little bit more defensive, and i think thats the right thing to think about. Dan, as youre talking, the president once again tweeting about the fed quoting a guest on fox business saying the fed has got to do something, that they acted far too quickly, and now is very, very late too bad, so much to gain on the upside i mean, you talk about erratic trade policy and white house policy, what if the fed cuts 50 in the coming weeks . What if theres an intermeeting cut, does that change your thesis at all . You bring up a really good point. Think back, the real question becomes this has the riots in hong kong, whats going on in argentina, the stuff in italy, the trade war with china, you know, what are we going to do with auto tariff, is all of this stuff caused so much uncertainty that we do end up in a recession, which doesnt seem likely with unemployment where it is, et cetera, in the u. S. , but the rest of the world isnt doing nearly as well as the u. S. If the fed does cut 50, the market obviously will have a knee jerk reaction of it will rip up it will go straight up, just like the market did yesterday off of what, you know, happened with the tariffs being pushed out. But were getting all that back and for more today because, you know, concern is more about the economy and whats going on there. Ultimately it comes, who said it, that the economys stupid, right is the famous phrase that trumps everything so thats what, you know, youve got to think through, and if the fed cuts 50, the positives are, yay, its an intrameeting cut of 50 the market will go up for a day. Youve got to worry, what are they seeing that were not with unemployment at a 50year low. Interest rates are low by historical standards already. Dan niles, thanks for checking in with us today. Always great to get your thoughts, especially as all of the major averages here in the u. S. Sell off each down more than 2 right now. Every sector in the s p 500 save one is lower right now industrial stocks are among those names that are trading in the red and seema mody has a look at that sector and what the action there is. Seema. Morgan, youre exactly right. The Major Industrial<\/a> stocks are lower, caterpillar, 3 m, boeing, General Electric<\/a> in total accounting for roughly onethird of the losses on the dow right now. Analysts say its the data from china and germany that highlight not just the slowdown in economy but the sharp decline in instruction production which is comprised of manufacturing and construction activity, especially in a market like china where a number of the industrial giants are seeing rising competition from local players. The other concern is that a weaker yuan and the ongoing trade uncertainty will incentivize more chinese firms to select local suppliers which would make it harder to win new deals in what was once a very strong market for the industrial names. I should point out its still up to a yeartodate. Its had a pretty strong year, a lot of that has to do with the outperformance in defense and aerospace names. Another name were going to have to watch coming into friday is going to be dooer and the earnings there one of todays biggest movers to the downside, apple down more than 2 along with the major indices, bernstein Senior Analyst<\/a> Toni Sacconaghi<\/a> joins us now. Big move in apple yesterday off of that tariff reprieve news is that more important or is the yield curve inversion reaction more important i think uniquely and good morning to you, jon i think uniquely for apple, the tariff news is more significant, certainly the Interest Rate<\/a> environment and the fears of global recession affect everyone including apple. The news yesterday where apple had a temporary reprieve on potential tariffs was really significant because apple is uniquely exposed to china essentially all of their products, not their services obviously, their products are made in china, and those would have been tariffed, and chinas very big end market for apple as well, about 12 to 15 of apples revenues gets sold into Mainland China<\/a> so the risk of retaliation was also significant to the degree that you have a reprieve, which also provides apple time to try and seek out alternatives to making its products in china, thats uniquely positive news for apple, and you saw its stock notably outperform yesterday evening there were three a lot of questions about how apple would handle iphone pricing in this upcoming cycle given the looming tariffs, now not so looming. Is that a key number youll be watching and thinking about margins with this launch a lot of people dont expect to be a super cycle but still important. Yeah, obviously if the tariffs do go into effect in december, it will have an impact next year. We dont think apple will really be able to meaningfully move manufacturing of its products by then apple has a choice on two ends one, it could just absorb the tariffs. That would be about an 8 hit to earnings, or it could pass along the prices but the dilemma of course is apple received quite a bit of pushback this cycle that its products were too expensive to have a, you know, 10 increase or close to 10 increase on prices, you know, could create negative demand elasticity thats a conundrum for apple i think the potential good news is that component prices have fallen a lot typically when apple introduces new iphones, it offers a lot more Storage Capacity<\/a> and or lowers the price on storage, and perhaps they wont and be able to benefit from the fact that prices have fallen about 50 in the last year, and that may be one tactical way for them to try and absorb some of the tariffs yeah, one way for them to pick up some margin, Toni Sacconaghi<\/a> from bernstein, thanks. Thanks for having me. Phil lebeau is taking a big look at the moves in the autos thats taken a hit during the selloff as well. Well talk about autos, well talk about airlines like much of the market, both sectors are under pressure first off, when you take a look at the airlines, most of these stocks are down anywhere between 2. 5 and 3. 5 weve talked about this for some time, the big concern being that if we do see the economy slide into a recession, that you see demand fall off. So far they havent seen this, at least domestically. Internationally, especially when you talk to asia, theres a few hot spots there. Take a look at shares of boeing. I know that seema mentioned this a little bit earlier youre seeing the shares now trading well under 330 a share, down at 323. This is not a 52week low. A 52week low would have to get down to the 290, 295 range thats where that would be again, this stock down 3 . In terms of the automakers, all of them under pressure, General Motors<\/a> perhaps has the most exposure to china. Its the number two automaker in terms of sales in china, ask thats why you look at that stock down almost 5 today as the chinese auto market slows down, the impact is going to be greater than it would be for ford, clear skihrysler and toyoa whenever the market swings higher or dramatically we see usually an outsize move from tesla. That hasnt been the case today, just under 9 bucks a share finally, guys, one last thing, all stocks are being taken out to the wood shed today there was an upgrade by goldman of ferrari saying look, race, this is the stock that should do well its a luxury play but even shares of ferrari under pressure today. Thank you for that market check. Lets get over to the cme now and Rick Santelli<\/a> with the santelli exchange. We will start with tens minus twos there was an inversion of close to two basis points. Its righted itself to some extent, but the psychology behind that and the history behind it is going to make it very difficult for investors to overlook as for 30year bounds, also big things going on for you, options traders out there, just talk to the options pick the skew, the call skew, lets make this easy when you buy an option, you pay a premium, volatility goes up. Those premiums get bigger. The premium to buy calls is now at cycle highs in 30year bonds. Why is that important . Because it most likely means that the trdrop is going to be more substantial now, as you look at some charts, look at a yeartodate chart of whats going on with respect to the note over bond spread. Now you see on yeartodate that its mostly been climbing, but youll also as of june 1st chart, that its starting to dip. Its starting to shrink. Look for that dynamic to mostly continue, maybe even feed on itself to some extent. Then the dollar which right now is up a little less than onefifth of a cent. We had a very smart guest on arent all our guests smart on cnbc the fed wants a weaker dollar. And the reason they want it, it will bring in more inflation thats great, too. The problem is, i dont think they have the tools, and if they did the leverage to make that happen theres a lot of reasons for dollar demand, and most of it are by investors and structured payments where people dont have choices here think about emerging markets or en entities, countries, large institutions that have to fund dollar liabilities with a strong dollar while their open internals are depreciating or deteriorating. And thats a big deal. So maybe the fed lowering rates isnt going to have an influence there which means you have to question policy when times are unique and finally, negative rate pull is just increasing the gravitational pull increasing and many would say it makes such little sense why would anybody be buying into this theres three reasons i can think of the first is a bit of a complicated spread structure the other two are kind of easy one is a greater fool theory if you front one, theseptember 12th meeting or other meetings with the ecb and mario draghi, and i have a weapon to take care of all this, you know that quantitative easing and Government Policies<\/a> by the ecb is the central bank are going to create a dynamic where if you front run that and buy something with a negative yield, theres going to be something behind you thats going to pay more the other one is this. Its fear. Look at the bank look at the health of the banks. Nothing to brag about. But if you buy in to millions if not tens of millions if not more into the government securities mark eme market, may not get all of it back, but youll get some of it back Rick Santelli<\/a> in chicago. Obviously, red across the board. Dow down 600 the vix close to 22. The ndx down 2. 6 . Art cashin, director of floor operations at ubs is here. Youre watching not just the august lows but that average as well at 2790 and change, right the 200day moving average. The first level i would look at is the august lows, as you mentioned, which would be 25,440 in the dow and 2822 in the s p you get a feeling they want to try for it weve got a lot on our plate not just the inverted yield curve. Dan niles itemized things from italy to wherever he left out kashmir, the fact that india and pakistan, two people with Nuclear Weapons<\/a> are nose to nose, that cant be dismissed. So i think you want to watch for a market that will remain under some stress here, and it looks like theyre almost too tempted to test those levels that we just discussed are the bears who are the shorts trying to hammer, are they getting too much credit because of weak breadth liquidity, depth this week in august well, i think they are getting too much credit in the fact that as i think you are pointing to, the liquidity is very light we dont have markets that are in depth here. And, therefore, a little bit of selling goes much further way than ordinarily it would gold higher again today how much higher can this go . Its been you talk about assets that have outperformed and bucked the trend gold has been one of them. Yeah, it is returning to that storehouse of value routine. And i think people are seeking protection it used to be you go to the dollar, you go to the treasuries and maybe go to gold but treasuries have been strange behaviors here and that has led the dollar to not perform assadely so, you know, they move to gold because all others are questionable we had a rough may. Do we look to what turned us around in june for what might turn this around here . I am not entirely sure. I think, you know, they would like to see something constructive on trade. Unfortunately, theres a growing feeling that president xi might not have a great deal of trust in President Trump<\/a> that he may reverse on a deal on any time and trump already has that feeling about xi because we were 90 of the way to a deal and they backed off. So trade is going to be a bumpy road all the way through well see if that bleeds to other areas, art art cashin lets get to dom chu for a market flash lets reset whats happening with markets were about ten minutes removed from the lows of the session so far. When it comes to the s p 500, not far from those lows, the only sector in the green, utilities up 0. 3 . Manager one of t energy one of the biggest decliners. Weve seen a decent range to the down side. We were down 637 points. That happened about ten minutes ago. At the highs down 244. Decidedly negative day dow, goldman sachs, Walgreens Boots Alliance<\/a> down nearly 4 or so. The one bright spot in the dow so far today is cocacola shares up about 0. 5 . So as we watch the trading play out today, it will be about those defensive sectors to see what happens overall there but the dow still down 637 thats the low benchmark today, carl well keep an eye on that. Back to you, carl. Dom, excellent point. Speaking of defensive sectors, all sectors on the s p are in the red except for utilities, which have hung in there currently trading be ining up a. Looking for yield. Even some of these troubled stories like macys earlier this morning saying he believes the dividend is safe and when you compare it to what bonds are giving you, fairly attractive. Its one of those days where its worth looking at whats down the least ive got my eye on walmart just about flat. And we know walmart. How people feel about when a slowdown hits. Walmart sometimes benefits i cant help but think if youre in a troubled industry sector Like Department<\/a> stores which weve seen these secular declines if youre ever going to come out, lower your outlook and go for that and now is the time to do it given the fact you have all these trade angst and volatility in the market i also wonder what this is going to do to the ipo pipeline. We got that feeling from we work today. If you start to see more volatility, more choppiness, bigger selling in the coming weeks and months do you see some of those potential ipos put themselves on ice . Indeed. And lows for august on the s p, 2822 which is about 35 points below the levels that were in right now. Thats going to do it on squawk alley. The half starts on the other side of this bak ngoway. Re soft music when i see obstacles, i create opportunities. When i see adversity, i find a way. When i hear never, i say now. [announcer] Southern New Hampshire<\/a> university is education made to fit your goals with over 200 degree programs, flexible class schedules, and some of the lowest online tuition rates in the nation. cheering so when i face barriers, i can break through. [announcer] breakthrough at snhu. Edu. Stocks are dropping, begging the question is the longest bull market cycle ever all but over its 12 00 noon. This is the Halftime Report<\/a>. The market flashing its biggest recession warning signal are stocks on borrowed time . If they are, how do you protect your portfolio the next move for your money macys getting mauled. A big earnings miss and a slashed forecast what its saying about the consumer and what it means for the rest of Retail Investment<\/a> committee is ready to go. The Halftime Report<\/a> starts right now","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia801000.us.archive.org\/21\/items\/CNBC_20190814_150000_Squawk_Alley\/CNBC_20190814_150000_Squawk_Alley.thumbs\/CNBC_20190814_150000_Squawk_Alley_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240716T12:35:10+00:00"}