Yesterday thanks to walmart and the good numbers we saw there. S p futures are indicated up by 28 points. The nasdaq up by 96 points again we are on the worst week for the stock market since may well see what happens today with the gains, or if they can hold on to them through the opening and the close later on today. The treasury market was different story. A lot of concern about whats happening with yields. The 30year fell below 2 for the first time in history. This morning its yielding 2. 026 the tenyear fell to the left level in three years this morning that yield is slightly higher, 1. 564 . Tenyear twoyear no longer inverted overnight in asia, we saw some green arrows some gains there the nikkei up barely the hang seng was up a percent the shanghai was up by a third of a percent in europe, londons ftse ohm ed higher after a nearly twohour delay because of a Technical Glitch elsewhere in europe, you can see the green arrows are there across the board the smallest advancer is the ftse, which is up by almost half of a percent totally uninverted totally uninverted were fine it was bad when we were one basis point over that was scary i like what you said the fed will save us temporarily. You know we all die. Everything is temporary. Australia has been in expansion mode since june of 91. Theyll say until the real day of reckoning comes or the market has an uncanny ability to sniff things out and anticipate things before the data if you look at the last year and a half, the yield curve was inverting well before the trade discussions. It was based on weak Global Growth and the fed last year realized maybe we shouldnt keep tightening, but were not close to neutral well keep going the market was saying too much you mean the bond market. Yeah. The bond market stock market might have been saying something, too. In december at that point powell felt like they wanted to get the four in the president may have put extra pressure on. The fed made a mistake by going in december. Worse is the press conference where they hinted they would do more, and then within two weeks he did a 180 i thought it was funny that you said the fed will safe us t save us temporarily. It would be a mild recession. You know what i told you, to satisfy you, theres a story that men sometimes dont change their underwear usa today says 45 of men go two days or longer without changing their underwear we had one man on air tell us he had toe fungus once he never lives it down you see when i leave sometimes in the middle of the show . You tell me you have your august pair on now thats not true you know when i leave the set, im changing my underwear before i come back. Im because of something happening on the set thats the other option if you cant wear it two days in a row, you have other problems what about people who dont wear underwear im sorry i rescind my snarky comment. Eunice eunice is like has show is this . Yesterday President Trump said september negotiations with china are still on lets get to eunice yoon in beijing for the latest trade talk im hoping you just put your ifb in you did hear that. I apologize. Its beckedy edbeckys fault. Thats okay it sounded like a good, heated conversation there are a lot of heated conversations over here as well about the trade talks. Especially because President Trump had said overnight that he believed that china wanted to have this trade deal over here the read of his comments was that perhaps President Trump is really the one that wants to make the trade deal faster than the chinese overnight he said the september trade talks were still on. That the chinese wanted to move ahead quickly to buy more american Agricultural Products he also said that he and president xi jinping would hold a phone conversation soon. The government here has not confirmed whether or not that phone call will happen again, a lot of people think that china does want to have a trade deal, but just not at any price. The bottom line is that chinese sovereignty cannot be infringed. Xinhua ran another piece today which said china would never give in on major issues of principle no matter how extreme the pressure President Trump touched upon chinas Counter Measures saying he didnt believe china would retaliate because of an increase in tariffs well, again, no confirmation officially, but in state media there were plenty of stories about how the retaliation will take place at some point soon. The peoples daily said retaliate firmly, fight to the end china daily was saying titfortat action is ready for the latest tariff plan not a lot of detail. The message being sent is that china will be fighting to the end if they feel that at the en of the day their economy is threatened thank you, eunice well played at the edges, youre still like people should be happy on a friday. We need to take a break from the world, right im hoping at least for the weekend. Im excited about the weekend. Is it blue behind me now the skies are clear. Then after this report or maybe one more later today, im going to make an attempt to go for a run. I want to take advantage of the clean air that beijing so rarel has. We hope that happens for you. Were coming all the way back here mexicos Central Bank CutInterest Rates yesterday for the first time in five years in this case citing slowing inflation. Thats not something you always hear in south america. Increasing slack in the economy. The move follows rate cuts by a handful of Central Banks around the world. Its been a source of frustration for the president who would like to see the Federal Reserve cut Interest Rates at a faster pace here is President Trump speaking yesterday on the way to a Campaign Rally in New Hampshire. Jerome powell should be cutting rates because every country all over the world is cutting. We want to stay sort of even i dont mind if were higher, but were way too high jay powell made a big mistake. He raised them too fast and he quantitative tightened last month the fed cut the rates for the First Time Since way back in 2008. Bridgewater Associates Founder ray dalio speaking with cnbc he said the u. S. Economy is taking a turns for the worse and handicapped the odds of recession before the 2020 president ial election. Of course recessions are always inevitable. The only question is when. Do you see one coming yeah. I think in the next two years, lets say prior to the next election, theres probably a 40 chance of recession. And i think that youre seeing this around the world. Dalio warned that rate cuts by Central Banks this late in the Economic Cycle may not be effective in stimulating the economy. That brings us to our guest now. James camp is managing director of Strategic Income at Eagle Asset Management and our guest host is joe lavorg lavorgna joe, you said you think the central bank will come and save us ray dalio says it may not be effective. He said 40 chance. I saw the notes james had. I wanted to ask the yield curve is inverted but the credit spreads are contained. That would tell you maybe the fed has some time to actually ease and get ahead of things before credit markets deteriorate. When credit deteriorates, you have some problems we had a number of conversations about the yield curves that matter in the fall we had a 3. 25 tenyear i looked at that december experience as a deleveraging moment the folks that funded libor were looking to fund their positions. Now were looking at the twos and tens, thats probably a better real economic signal. In credit spreads are still positive, meaning short credit spreads are 70, 80 basis points, longterm spreads higher, the math of Financial Engineering still works. Credit is readily available. Most investors out there want yield. Theres an ample amount of activity in the short end of the credit curve to keep us from a credit inversion you dont think what weve been seeing is a signal of recession . I think the bond market is telling you loud and clear, global slowing, inflation is a nonstarter im suggesting what weve done is created a massive credit cycle in the u. S that is likely to continue giving the credit configuration. Real economic activity, i might be higher than mr. Dalio we are curtailing in the face of tariffs and trade talk and Federal Reserve complete policy blunder. Ive been doing this for 30 years, ive never seen a retraszment retras me retracement of a fed misstep as quickly as we have seen. Is that good news or bad news i think theyre trying to quickly correct it, but the policy mistake on the table in november would have put us into recession, full stop the point i would make is were seeing a slowing in capex, which was exciting to us we were seeing productivity growth, all kinds of good stuff. But that was cut short. Cut short by trade and uncertain Global Growth. Because businesses dont feel confident. Economists have been around since the beginning of time. Im still waiting for one to be right about something. Careful, joe. Sorry you would think that we would have made the point that maybe its not the absolute level of Interest Rates its where where are versus the rest of the world that determines things. No one could believe the fed could be too tight at these levels why didnt they take into account other countries and currency factors you have other countries much lower than you, theyre doing qe, negative yields, even if youre only at 2. 5 , youre still so much higher than they are, you can actually cut off the economic expansion xhurss didnt think we had a proble problem. Central bank policy is fungible it doesnt matter where the machines are turned on, just that they are. Weve seen that throughout the cycle. The fed cannot afford to be completely out of phase. Thats unfortunate for that reason you cant blame the fed that much. If not a single pro economist warned that we could get too tight under 2. 5 , then why should they actually, i wrote a piece you wouldnt think that that you could be too tight coming down from 8 to zero. The thing is if you look at the fed and where neutral rates theoretically could be i wrote a piece for cnbc in february of 18, i said the fed needs to steepen the curve stop the rate hikes. Let the Balance Sheet sell off a bit. I think its there im guessing james might agree that the fed is way too academic theyre too model centric and too into the numbers and the math Jerome Powell doesnt come from the economic side of things, he comes from the academic side of things. You still these to know the economic history and be a practicing economist, and his experience hasnt been that. That set up why the yield curve was so inexpensive we had prognosticators 5 s all r the streets in new york saying were on our way to 4 and 5. The Retail Investor was not served by that i like what youre saying about scarcity of duration assets, 30year treasury is at alltime lows Pension Funds have to fund longterm liabilities. Theres a scarcity of Long Duration yield thats why were seeing this massive rally in the long end of the Treasury Curve 30 year treasury at 2 extraordinar extraordinary. James, you go on an overnight trip, you will take four pairs of socks its not as much an underarea thing. Intraday you need to change out. Midday you go to new socks you go to dinner events, youre a new man or woman its all good to go. You would never know that about james. You said that like you were talking about the yield curve. Just as seriously people at home are like what . Whats happening stay with us. Theres a theme. I agree with you on the socks. Coming up, new details on the smile direct club. That story after the break. And President Trump out with a new tactic to try to salvage trade talks with china, linking those negotiates with unrest in hong kong. Brian sullivan is there. Hell join us in a few minutes as we head to break, a look at the premarket winners and losers in the dow your daily dashboard from fidelity. A visual snapshot of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. You need decision tech. Im professional stylist calyann barnett, and i know that style starts from the ground up. For a lot of teens, shoes matter. The right kicks, make the outfit. Kids like to make a statement, they want that wow factor. And for parents, you want to pick shoes that theyre going to wear over and over again. So i put together some of my favorite kicks for the new school year. When it comes to back to school shopping, your year starts at dicks. 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Smile direct club filing for an initial Public Offering lets get to leslie picker for the details on that. Smile direct club was disclosing its prospectus this morning with the 1 100 million place holder cnbc learned that the ipo target will be about 1 billion by the time all is said and done. One of the biggest ipos of the year they are filing with two classes of stock today jpmorgan and citi Group Leading the ipo. It will be list right here at the nasdaq under the Ticker Symbol sdc big growth on the top line revenues increasing 190 year over year to 4 423 million of course they do show significant losses the top risk factor is the history of losses as weve been known to see from these ipos other risk factors include changes in laws golf eaverning e healthcare what smile direct club does is offer clear liners for people who want to straighten your teeth. Its like visalighn but you dont have to go to the dentist. Dont even know how it works they will send you a model forev for your teeth you make it yourself . You make it yourself. They will send you the various liners and the program of how you do it and when they work with a set of doctors that help them kind of craft this and set up a plan so youre relying on or hoping that you wont have operator error with the situation. You doing your own molding exactly and you have gotten push back from the orthodontist community, certain people say you need these inperson visits to straighten your teeth properly its 1,900 versus braces which could be five times that so they are here at the snazz dak. They nasdaq, they could have gone with smile, but they went with smd yeah. The ceo is an expert in disruptive models. They have 700,000 members. They were founded just a few years ago. Leslie, thanks. President trumps continued to link the hong kong protests to trade negotiations with china. Brian sullivan is in hong kong he now joins us with the latest. Hey, sully joe, thank you very much. Tonight is going to be a very, very important night its going to be a big tell for the way things may be going over the next couple of weeks and the next couple of months. Tonight in this park where we are now in a couple of hours, this will be filled with thousands, tens of thousands, maybe 100,000 protesters, marchers, rallyists, whatever you want to call them listening to speeches. Its called the power to the people rally the reason we say its an important night is because its been relatively quieted for a couple of days well see how the Hong Kong Police respond to this rally and how the protesters here respond in return. After this is over, about 10 00 local time, many of these folks are expect the to leave and march down the street. Its in those marches where we have seen the disruptions. The fear gas, the fighting weve seen on tv well be here and following them throughout the night why does this matter weve seen some of this unrest our markets have gone down yield curves have fallen the hang seng has fallen Cowen Research group put out their morning note chris kruger said the gist is this, even if President Trump and xi want to do a deal for domestic concerns external forces and events could complicate it if not make it impossible the situation in hong kong now tops that list so many people in wall street and in washington saying that if trump and xi want to come together on a macro trade deal, they both, at least xi needs to figure out how to handle the hong kong unrest situation tonight will be a big tell humanly, the president keeps talking about. Its it is hard to see how we get from one place to another. Hopefully it will be you know, trump keeps saying its all hopefully going to work out where both sides win in some way. Im not talking about the trade. Im talking about the protesters and the Chinese Government yeah. We all hope for that, right im trying to figure out, you know, weve heard that president xi thinks that would be showing weakness i dont know what road map looks like so what i would say to you, brian, you have to your credit cards are good . How many days you think you can make it over there scheduled to come back soon this week