Transcripts For CNBC Squawk On The Street 20240713

Futures trading was halted yo ed overnight. If were down 7 , you halt for 15 minutes down 13 , you halt for another 15 minutes if down 20 , you halt the remainder of the day some people wonder how long we will be trading at the open. Yeah. Look, i think the problem is twofold no one thought oil was coming. Theres a very, very different approach by some to whats happening with the virus some people are saying not enough others are saying, listen, were making too much of it. Im in the distinct not enough camp i come back and i keep thinking about david tepper and what he said to me at the super bowl i dont know if we have that i think we do is the booth ready on that going back to midfebruary early february day before the super bowl i came back and have never been the same i know people have accused me of being fear mongering for weeks now. No, i think im realest mongering. Were trying to back into it, you have to try to figure it out. Ruined the environment of the setup right now. Whats important, i know you talked to joe, its a good time. Its a game changer, isnt it . You have to be careful because it may be a game changer. You have to be cautious. Two weeks ago, before the virus it was one thing this is a different environment now. It is what it is i spoke to david this morning and yesterday. It is the game changer make no mistake about it hes very, very concerned. The thing he wants to go over basically are fiscal stimulus, its time. This is the end of Monetary Policy he wants more leadership i think we all want more leadership we all want more test kits if were just talking health care we want the treasury secretary to come out and say we have nointerest loans. We want to take advantage of the curve and be ready we dont want golfing no, we dont. Listen, all things being equal, if we come in today and the fears about the virus had continued to get worse over the weekend, which i argue they probably have yes the spread continues we all know from our daily lives, people are treating this differently. Theres no uniform approach. Some people most people are just going on with life as normal, which is going to continue to exacerbate the spread yes all that said, if we walked in this morning and it was simply the number of new cases and us going through it as we were just now and talking about how serious it may become, the market might have been down. But it was not going to be down near where we are given the completely unexpected move by mbs, the leader of saudi arabia to tell mr. Putin, done with you, were going to try to drive you out of business. Thats what were seeing the reaction to this morning with oil down more than its been down since the gulf war, 91 and thats where so much of the focus will be today in terms of the Balance Sheets of the Energy Companies, the hyg, of course, the index for high yield what will happen there given the preponderance in that index t percentagewise with Energy Related debt theres the major players. Youve said for some time theyre uninvestable, but you were not expecting Something Like this. No. Were dealing with a demand crisis as a result of the virus and the economies, and now a supply crisis brought on by mbs with his decision to say im not going to let putin dictate terms. Of course putin wants to put our shale out of business knowing that a lot of the prices in shale are higher. My friend rusty brazil put together a good matrix the bonds are trading down 25 ticks. Occidental has a hedge, the stock is trading as low as 17, will be down as low as 35 they bought anadarko at an unfortunate price. You pointed that out many times. You said stay away good call. Chesapeake obviously very much in trouble. I dont think dont forget, these companies owe Pipeline Companies a tremendous amount. They have to pay whether they use it or not. I dont want to set up anything that is too frightening, these are companies that are not enough to bring the banks down many of them have hedges and they can last through a low, but not low for long thats the big issue energy is 11 of high yield the average energy bond is 11 points above treasury. Mike mayo out of wells today says hes not worried about the events because of the stress test we got after the crisis using these prices. By no means we all have to think about tone i remember in 2007, i said they know nothing its not its a different kind of situation. This is just the need for fiscal policy Monetary Policy is over. So what do you mean when you say the need for fiscal policy you do need leadership from washington saying we are going to make it so that small and mediumsized businesses that would otherwise go under have the opportunity for nointerest loans. Have support. Yes at this point theyre not dismissing their workers they may not be bringing in the changes in behavior that would slow the spread of the virus you need to support them to allow them to do that. Yes for travel and leisure the costs of the given week, payroll, so high so high many of these laws lets not forget, a lot of people want to see kits. Want to see some sign of the federal government has this under control when there is a cruise ship, ton this weekend theyre saying dont take a cruise, but people still are so we need to figure out whether or not the crew has a problem, but everyone you talk about the end of Monetary Policy, people cited the friday late rally, ill call it, the bounce, on rosengren saying the fed should widen their universal purchases. Thats nice you want to make sure theres no liquidity problems, they cannot solve the virus, its a biological problem and they cannot put actual money in Small Business hands you do not want to see businesses that are otherwise good businesses be put out of business youre talking to business, not households one argument over the weekend was what does helicopter money do when consumers are being discouraged from spending it were trying to keep the base healthy. We dont want to be in a situation where a lot of Good Enterprises go under because of a virus that will be solved. I dont think anyone believes the virus wont run its course i was speaking to the ceo of regeneron, he said as much as theres Community Spread theres also, lets say, immunity spread, meaning that everybody who will get it has gotten it. When we get there, a lot of people say you can get it again, but we need to make it known when we get to the other side, there is something to the other side which in your mind is a year . Yeah. Obviously we would like to have something that comes up with the gilead test were going to the likelihood of a recession seems exacerbated if we walked in today, any one of these would be the stories we would talk about, with the market down as much as it is, the tenyear bond yield or the plunge in oil prices. These are altogether now, and well be what are the limits here 27,6400 is level one thats 208 points then 386 what do we do in 15 minutes if we hit it and will people be calmed or be no. No theres such a look, i think that we all follow this closely. Well go to places where there are gatherings it is so interesting that people seem very unaware. Theres still a lot of handshaking. A lot of no you keep coming back to the virus today. The virus is very real. Without a doubt its a conversation weve been having for weeks its not gotten through to people im worried about the 30 decline in oil and concerns about what that will do. A benefit to the consumer when it comes to gasoline prices. But i would say weve been talking about this for the last few weeks we know that this thing is spreading. The fwovme megovernment is not out ahead of it. Lets say the president of the United States was right here do you think the president of the United States would agree that we talk all about it. Do you want to talk about what he was tweeting this morning . Its not about the virus it better not be about golf we have this close relationship with the saudis, but mbs you come back to its certainly not a good helpful thing, right declaring a price war. It was unexpected you came in, you saw the futures down im saying a lot of people at home are unaware of both the twin problem of oil and not enough kits. Dr. Fauci, who i totally respect, dr. Fauci at the end of the interview of meet the press, he says also, please dont take cruise ships. Why do we have cruise ships . Why . It would be great if the president says whatever it takes. Whatever it takes. Im not saying that he should panic. Im saying that if he wants to be the president come january, its a whatever he takes moment. Theyre not doing that, jim theyre not maybe because are we going to be silenced because we say it. Larry kudlow with us on friday said it was relatively contained. That may be an illadvised position the government is not asking them to change their behavior other than getting on cruise ships. Thats where we stand. Do you think thats an illadvised posture . We are seeing corporations make decisions that are slowing Economic Activity in a separate way and then we have this crazy oil thing happening. All right you say crazy. I say that the ones who are undercapitalized are not nearly as bad im not saying buy these things, but im saying will they stay solvent . The substantial number will. They did visit 26 in 2016 if it stays there, a lot of the companies that you see including some on that screen will not be solvent. Thats the expectations well have a number of potential bankruptcies but it is not going to be mike worth from chevron. Of course not so he can take advantage of this. He may be investor decide e they are continuing to they have 62 rigs operating in the permian . Spending more, not less . Again, illadvised. What is the dividend yield going to be on exxonmobil this morning if it opens at 40 it will look like bp does, unacceptable one thing i would i want to point out, we can sit here and talk about oil or we can talk about kits and fiscal stimulus we need confidence is what im saying theres no confidence in oil obviously. You can easily turn this into something thats positive for 316 Million People in the country. Understood. But the Financial Markets this morning are reacting a lot more to this plunge in oil prices i think then lets put it this way, i think it could be a twin today its oil tomorrow its were a cruise ship and then travel and leisure. Sure. Youre talking about milan, 16 Million People on lockdown im sure the president probably dismisses that as someone who goes to milan quite frequently, thats a big company. I dont know how monte dei paschi, the oldest bank in the world, it seems illadvised to keep money there they do have an fdic in italy. They cap it. They have an fdic over there a large economy with a significant outstanding amount of debt. Well keep an eye on their bond yields theyre moving in a different direction. A quarter of their population cant move around. We walked you through the Circuit Breakers at the top. Bob pisani is on the floor hell help us understand what the process could look like. Good morning volatile overnight, it will be a volatile open the key point is theres a lot of hang wringing about the idea that the futures will limit down, we dont have a clear idea of whats going on we have etfs trading they opened at 4 00 a. M. In the morning. Here is the bigge efgest one, t 500, spy is the biggest. You see it opened at 4 00 a. M. Its implying an open here down about 7 roughly thats the important thing weve seen this throughout the morning. This has been fairly stead did you. Down 6. 7 to 7 point something we do have some indications of how the market might open here if you doubt and if you think this is his hocuspocus, look a europe, the stoxx 600, its the same number, down about 7 this is what weve been talking about for weeks. Theres a global take journal of the market multiple across the board. Its in asia, its in europe and its in the United States. Its all playing out in a remarkably similar pattern saying this is truly a global phenomenon carl mentioned the Circuit Breakers these have a long history but only used once level 1, the s p 500 down 7 that would happen until 3 25 you would halt trading for 15 minutes. After 3 25, you keep trading the second level halt would be at 13 if youre down 7 , you reopen after 15 minutes, you go down 6 , you hit 7 again, you dont stop trading at 7 , the Second Time Around you go to 13 . Thats until 3 25 as well. Then you stay open regardless. The third level is 20 , that would halt trading any time during the day its a little convoluted these Circuit Breakers have changed over the years the first one was after 1987, the october crash when we dropped 22 . There were no Circuit Breakers people looked at that and said we should do something so they started Circuit Breakers originally based on points around the dow eventually over time, until 1997, they changed to a point rule and originally it was a point rule and then changed it to a percentage move these have evolved over the years. The only time this was actually used, believe it or not, october 27, 1997 at the height of the crisis, they did halt it briefly they were using a point system the idea here is there is a Circuit Breaker, individual stock Circuit Breakerers that were put in place after that bottom line here is well open here well see if we hit any of these Circuit Breakers ill be on the floor Walking Around looking at individual stocks and seeing how the open goes were all going to get through this together. Back to you. Thats true one other thing people are looking at, Morgan Stanley has a note out today, bear market territory would be s p 2708. 9 thats fair people are thinking about where was the market the last time we were going into recession. Lets go back to december of 2018 why would we not retest that level since it seems like were going to do that i dont think thats unrealistic. I think as david said the weightings will be different when we get there. It will be oil and gas but oil and gas has been reduced as a part of the s p as a part of the s p its small, but as the high yield its quite large what if mbs reverses or putin says okay, and they get back together then i think thats possible. But its something to guard against if youre dumping everything if youre a shortseller i think that then you default to the next issue, which is confidence in business in this country and belief that we have the Public Health system well funded its terrible to go back to the spanish flu. You say thats a fatality issue. Im not talking about that but the idea that some Public Health systems were strong, others were weak, particularly the one from philadelphia was the worse in the country why . They allowed a giant war bonds parade right we all read a little about the history. Isnt it amazing we had to go back to spanish flu where 51 Million People died . A lots will tell you by not allowing and changing behaviors and pushing back on the spread quickly you will present the overwhelming of the Health Care System you want to slow it down we dont have enough beds or test kits. I think if the federal government were to say listen, like dr. Fauci said, we have all the test kits. Well go to every cruise and find out whether people are sick well find out the real numbers. The president committed to the 500 number this weekend. I think we all say if thats the case, whats there to worry about. Thats a shame we have to get a more realistic figure in order to at least take it more seriously. I think a lot of people out there in america want more confidence, leadership i dont think thats wrong i think that at this time the idea that we can just it was president wilson who focused on the war. Here it is lets make it clear that its not that bad, go about our business, play golf, fix up what else . Thats one way to approach it. Its not the way i would approach it. But its one way keep calm, carry on. Winston churchill would not be doing that churchill the person i default to a lot when i talk about this. The people this morning are not talking about the virus as much, theyre talking about the fall in oil kris prices, the lo yields, what the fed will do monetarily orificically. Wh or fiscally. What will happen with the etf market how will you price etfs if underlying securities cannot be priced if were coming in four weeks from now the hypothetical cessation of Economic Activity if we did anything like the italians is a talking point. Absolutely. The vast majority away from the Financial Institutions that see Lower Oil Prices are good. The permian is a new issue, the permians producers are not as nearly as reckless as we make them out im more concerned david you and i are crosspurposes here, if we come in four weeks from now, the discussion might be different. In a good way no, in a Public Health way. That may be true. Well discuss the virus every day for weeks to come most likely right perhaps some good news along the way. We do want to hear something. Theres so many tests going on in china about things that could get people out of the hospital faster thats what i want that and the idea i want meg tirrell to come on and say theres been success to the gilead trial i dont want to come on and say i cant believe Certain Companies got trapped in oil right for now people are reviewing the banks that have the largest exposure to Energy Companies very true we did that before, did that in 2016 and the private Equity Companies, because the private equity is now the shadow bank, different from the shadow bank of 2007 and 2009 you know that world well you know the private Equity Companies have been bidding like crazy for oil. Illadvised. Speaking of 09, today is the anniversary of the s p crisis low and the day after mark hanes called the bottom. 666 yeah. Treasury tenyear was at 666. How do you take the treasuries having the biggest move between 12 00 and 3 00 on sunday night how did that happen . You mentioned meg tirrell we will turn to meg now for the latest on the coronavirus. Good morning good morning. Case counts around the world climbing past 110,000 with almost 3,900 dead. More than 62,000 have recovered. Chinas new case counts are continuing to decline with wuhan closing 11 of its 14 makeshift hospitals. South korea, italy and iran case counts increasing case koin in the u. S. Confirmed case numbers doubled over the weeken. Washington state the hardest hit with an outbreak at a nursing home new york and california also reporting more than 100 cases each the grand ss due to dock today to move those on board to Quarantine Centers 21 people on board tested positive for the virus in massachusetts, 15 more cases announced yesterday all tied to a Leadership Meeting in boston for biogen in late february. Though testing has been limited, Officials Say capacity is increasing dr. Steven hahn on saturday said the cdc shipped enough tests for 75,000 people to health labs 1. 1 million tests were shipped to nonPublic Health labs with up to 1 million more shipping today. Quest diagnostics and lab core are offering covid19 testing as well where are we in the actual cases . I saw you say a certain number of people on the cruise tested and showed they have covid19. Why isnt everyone being tested . Dont we want the notion that when there is a hot spot, why isnt everyone being tested . The biogen hotel fiasco up in boston why isnt anyone being tested . We cant have confidence without the number of kits being equal to those who may be having this. How many kids are there versus a cruise ship that is loaded with people who may be sick by the end of the week, there could be 4 million tests sent out. There will be capacity from academic labs and commercial labs and well ask lab corps about that as well when we talk about the number of tests, people often get more than one test in order to confirm they have the virus or that they dont have the virus so you have to divide that number so still, even though were talking about millions of tests, capacity is limited. We cant test everybody even as the federal government expanded guidelines for testing for anyone who with a doctors note can potentially get a test the capacity is not there. There you go. Its not there a great country. David . You want me to answer that question is that a question yeah. We are a little slow and late i think we allagreed on this and there is i know everybody has a different thought on there are many different thoughts on this virus right as you well know, most people seem to be just continuing their behavior the way they would. Thats wrong. No historically its wrong. A lot of people say listen, if we just act as if its the battle of london, no, its not that kind of thing we cant get confidence unless we get it from the federal government we all look for leadership we dont have enough tests we need those. Maybe by the end of this week, maybe everyone on a Carnival Cruise will be tested, but every time i look up theres a cash v Carnival Cruise. If theyre everywhere, i want to know do we just send them away well find out when the grand princess docks in oakland today. Thats 3,500 passengers who will go into immediate quarantine the other thing fauci said on meet the press is about air travel if youre elderly, maybe suggested you dont fly. Global air traffic is set to fall this year by 9 jeffries says today for that kind of number you have to go back to 1978 does america in its current form do okay in that fortunately the airlines have much better Balance Sheets, but i would like to hear from the federal government these companies will be fine i would like to hear that boeing will be fine despite the fact that the ceo did everything i thought in an article to make it so that the faa has to think twice because the culture is so rotten talk about an illadvised interview at a time when a Major American Company is theoretically on the ropes i know there was an apology issued i dont feel like he fully attacked the culture i know he went after his predecessor hard that was unfortunate. The faa wiring question is one we would be focused on that, if not for lets hold off a little we cant really hold off a little, thats a Major American Company, no one has the capital to sit there and have 737 mac parked on a parking lot. This is like this is not like used cars. This is not autonation to what degree is boeing agreeing to ask their employees to stay home the way tim cook called on apple employees to do . Tim cook said we dont know what well do with the numbers iphone sales will go down. But tim cook said from the beginning, this is a real problem. He has shown great leadership. Tremendous leadership at a time when i feel theres absence or at least a hole in leadership. Yeah. Corporations, as has often been the case in certain areas tip of the spear. Right google knows allotment we know that. They see a lot they know a lot. And look what theyre telling their employees to do. I want them to do more. What do you want them to do more of . I want the smartest people of google in a room, the smartest people from facebook in a room, from computer science, get them in a room and say, look, lets make this work solve this because the Health Care Community needs to be having the benefit of googles Health Care Business back to your larger point you want to do Something Like that, you need the lead to be coming from the government it aint going to come from us its not coming from the government either. Yes its not i want to know the people in the google Health Care Business, which i think is about the best there is, i would love to hear what fineberg says, i would like to hear what the what theyre saying and lets get them in a room lets get the smartest people kog together represent Something Like the manhattan project. Thats important well watch Circuit Breakers early. Looking for an s p decline of 208. That would trigger the First Circuit breaker. We would pause for about 15 minutes. As the headlines over the weekend have come fast and furious. Lets get the opening bell [ bell rings ] at the big board, it is citi celebrating citi women and International Womens day, which was yesterday. At the nasdaq, Market Access electronic Trading Platform for fixed income securities. So unchartered territory we wait for all of the s p to open, we see if were down more than 7 . Then well have a 15minute pause. I think ive always felt that those things in itself, while certainly created a time of where things were not able to work, because i remember even remembers in 87, the system failed now i feel that, no thank you. We dont want that you have to cleanse it out cleanse it. What does that mean i want the selling to run its course lets get where we have to go. Still so many questions, jim, its hard to you can adjust for oil prices if you believe theyll be at this level you can adjust for certain things we dont know if theres going to be how what the impact of the slowdown in Business Activity is going to be. Right we dont know any answers of the virus. No. So its difficult to why would you want to buy stocks down 7 if you think theyre going to be down 13 i have a tenyear yield at 0. 4 thats fools gold you want to look at American Electric power, aep, they have a Balance Sheet and can refinance. They can look at the treasury market and say this is gold for us real gold. I think thats a 3 yield that i would rather have than an 8 i dont think anyone should reach for yield from a company that may be strapped even as great as exxon okay. At these levels here, guys, Circuit Breakers are not yet triggered. You would need another couple points lower on the s p, 208 points and i mean, traders predicted we would see it in the first few minutes. Its still possible. Down 1,800. What a great time to hear from secretary mnuchin saying i dont think you have to worry. I think there will be low interest, nointerest loans for companies that would not be able to make payroll. Its involving covid you are trying to avert a wave of Small Business bankruptcy thats the base of our country. Procter at 115 no the base of the country is the restaurant, the hotel, the airline airlines, we dont want them to have a bailout, but we need to hear that companies that are involved in the daytoday management, small and mediumsized businesses that will not be able to meet payroll now should think they have to close their doors. I think door closing is something we have to think about. A host of cancellations south by southwest in austin, businesses there count on those ten days to make their year. The mill kkin conference it was postponed until july hopefully it will take place then its very much unclear what the world will look like in july you look at treasuries, the tenyear at its inside baseball, most americans dont understand that. Some might say this Mortgage Rate is pretty good. But then the ceo of Toll Brothers told us its not going to be a great selling season i question if you want to go through someones house. We are just teetering but not quite down the 7 that would trigger a 15minute pause in trading. Okay. Theres probably something to buy. I dont know yeah. We had some Corporate News this morning as well. We had a large deal, aon and tower of willis, im sure you willis towers, im sure you have seen that one. Any other day we would focus on that a twitter settlement as we are just about there it is. Yep there it is yeah. You see the cessation in the s p. That means the First Circuit breaker has been triggered how about this. How about we take a clinical approach, and look at companies that we know of the cash flow, and you can get that yield for instance, the drug companies. Some of the Food Companies i say some because we know that weve seen stores that are empty in milan i dont think that happens here. I think a drug company that has something that frankly cant be avoided, do you really stop taking ketruda here we go with merck, Trading Halted this is what i mean. Does that inspire confidence i want to see where merck is that also was a question this morning a number of people were raising. Were in a 15minute pause now does that help to i dont think so bolster confidence or do the opposite yeah. I think we have no price discovery on companies that are very good. Dont you want a 5 yield from a company that you know has a steady business . Yes as opposed to reach in this current environment anyone would be happy to take one where they felt the dividend was secure right that would be terrific this is the big quandary ill give you the one i spent a lot of time on this weekend. 61 years of dividend race, decent to good Balance Sheet, a lot of leverage to the economy but mass they have mass 3m i find 3 m is the great quandar. Do you go after a company with a 61year dividend race, had debt downgraded theres a litigation risk there. I think a lot of people say i want to buy 3m because they have the best mass. People tell us the mass dont matter the mass mattered for confidence hopefully that will be a relatively shortlived phenomenon this is when the treasury secretary should grab a microphone and say we understand that we have Circuit Breakers. Understand were watching this were not were not idle. I know that one of the ways to show leadership if youre the president is saying keep calm, carry on, play golf. Another one is for those who dont have the means, this would be a good thing to do. Yeah. It is good to hear from leaders to try to engender confidence. That said, i dont know who you would choose im going with mnuchin. Hes been through the worst. He knows finance he knows travel and leisure. Hes a very schooled person. I think that he is the guy im looking to the president is hard. The president is all weekend kind of telling us we dont have that much to worry about i would like to hear if we do feel we have something to worry about, fed is the best federal government, not the fed oil is still trading. Not everything stopped oil is moving dont you feel 15 minutes is just you want to look at oil talk a bit about that . 32. 44 on wti it went to 26 in february of 2019 hit 29. 50 last night. Yeah. Overnight low prior to the Circuit Breaker, the nasdaq was officially down 20 from the high. Interesting that would put it on course to close at a bear market. Are we declaring the end of the bull market today . I think thats a realistic thing to say the end of the bull market its been a great run. I think when you see Companies Like occidental with a 20 yield, selling 13 billion, a fraction of what they paid for anadarko, you have to say were in different times a bear market, well, we had one when almost, we were down 19 from levels, Jerome Powell averted recession. But hes helpless here i wish we would stop talking about fed policy its fiscal. We have not gone anywhere in the s p when you look at it now since july of 18. Were back where we were okay. How about this should you factor in a rise in Corporate Taxes because President Biden would immediately change the Corporate Tax rate is that a reasonable thing to do in an era where one president is not necessarily helping his cause . And another wouldbe president is not necessarily pro corporate . 2,342 on the s p is the level i expect what is that number 2,342 2,342 what am i doing yeah am i like just checking am i a legendary wall street funny man here im talking about a level that is perfectly realistic bob pisani is on the floor with Stacy Cunningham of the nyse help the viewers understand. Im grabbing stacy here the head of the New York Stock Exchange we had a halt here for 15 minutes. You want to explain what the market is doing right now . The market Circuit Breakers are designed to slow trading down for a few minutes to give investors the ability to understand whats happening in the market, consume the information, make decisions based on Market Conditions its a plan thats put in place for situations like this its been tested we test it every quarter the important thing is that this is not meant to change the fundamental facts were dealing with, this virus, the purpose is to allow the Trading Community to seek liquidity . Yes and to give investors a time to absorb information and respond so that is really what its designed to do its operating as planned. It is really a precautionary measure we put in place so that the market can slow down for a minute we like to say earlier, these trading halts and Circuit Breakers have a long history they go back to the late 80s with the crash in october of 1987 when it dropped 22 its changed over the years. It used to be a point system, now a percentage system. It used to be the dow, now its the s p. These are continuously updated yes as markets evolve, it gives us an opportunity to step back and see how things change and how the industry wants to come together and provide more resiliency in times of stress. So in august of 2015 we made a number of changes designed for conditions like this. The important thing is the market will halt at 7 , it will reopen in a couple of minutes. There are other trading limit halts at 13 so the next level, it wouldnt stop at 7 , it would go out to 13 . We will have another pause and then reevaluate that would be in place until 3 25, and then there wouldnt be a halt unless you drop 20 or more correct well be here on the floor. Stacy will be here bob, over the years weve seen we triggered these before the markets continue to operate. Its a longterm market for investors. Thank you very much thank you i know youll be around well be on the floor monitoring the action bob, thank you very much. Jim, for home gamers, thats the easiest thing to do today is to watch yeah. I think cash is king they shouldnt feel like this is a great opportunity yet. I do feel like a lot of people on pickfixed income will struggo what to do thats why we should build a portfolio that will have no problem with the yield you want to look at the Balance Sheet, if you cant look at that, stay in cash have some ability to judge whether the company can pay that dividend but i do think that caution is still recommended. And i do think that the longer the treasury secretary doesnt come out is the longer that the limits will be in play and well hit that magic level what do you say if you are the treasury secretary that you feel would be beneficial in some way . I think to say low or nointerest loans would be good. Can i be a person for a second before i leave i have a payroll of Small Business at your restaurant. Yeah. Its substantial we have lots of employees. How long can we go well, i will pledge we will go longer than youre supposed to thats because they are more for me, what do you do if youre a Small Business and you dont have customers for three weeks even during a period in the winter where you have two weekends where theres snow, a lot of companies cant make it what a great thing to say, you know what . I know the government has my back, as soon as this thing wraps up, which it will, i will still be in business we need a base of business that should not be threatened by covid. Now a rapid decline in equity prices can have a dampening effect on confidence are we at that level yet yes okay. Should we get to Corporate News in the brief time we have . Theres some. Twitter quickly, the twitter settlement that took place with elliott was quick. Yeah. It was fast. Thcame in did they conquer . They didnt get mr. Dorsey out, but they got jesse cohn of elliott, silver lake and a third independent director to be named later. Theyre forming a new committee to build on regular evaluation of leadership and government structure at twitter well keep an eye on those shares, which are down a little less than the overall market silver lake is making a billion dollar investment, the board authorized a 2 billion Share Repurchase it was a quick settlement. They got to it quickly they worked hard with the board over the last few days they did reach that. Last week jack indicated he had some second thoughts about his africa sojourn i think he has seen the light there. I thought this was an extraordinary injection of cash that hasnt really needed it what do you make of that i think theyll take it youre right twitter is certainly a platform that a lot of people are relying on now yes i know that the president was listening to voices that you think are worth while and credible to help you navigate. Yes covid, and i have to tell people dr. Gottlieb i feel has been the best on twitter, what hes done, a very good series of pieces on twitter about what has to happen. I take my cue from him i dont think its fake news hes quite a distinguished person hes calling for things weve not done yet no. And have not become a part of the consensus view in terms of mitigation when i went through what he wants, i thought hes fine, good game plan. It would be fine if the president said i tweet, but i also saw gottlieb, and he likes gottlieb, theres good ideas there. We want to hear from the leadership theres good ideas if it gets to within the next few days where you have that curve that we have all seen that seems like its unstoppable. Yeah. Guys, as you might imagine in an environment like this one that can put the brakes on merger and acquisition activity yes something we cover closely. Lack of confidence, the fall and volatility in prices makes it difficult to have a ratio or an overall price if youre a buyer or selling financing is not an issue, but there are many others. Ceo confidence is one of the keys we have a large deal again, we would be talking about it, aon buying Willis Towers Watson all stock deal something that made sense and theyre talking about 0 800 million in pretax synergies. Right and adjusted eps in the full year to the combination of accretion in the high teens. So, Free Cash Flow expected to be break even in the second full year of the combination. And those stocks are trading better than the overall market yes at least they were in the first ten minutes of trading, a little less than that. Right i think that thats that was a that was a very good idea now the most illadvised position going on in america, not unlike very similar to what happened when anadarko was bought, which was one of the most sub optimal you had a fiery tweet about that i was not jimmy chill on that you were negative on that all through. I dont think you could have foreseen that mbs would say we are going to price war no but its better to be right than wrong this hp deal, which is just factous and silly, jimmy chill has to say its humorous if youre hp, just take the money at this point . Because its they got their financing. Nobody called its a pc company what can you do without . What can you do without if youre a Major Corporation new pcs. Actually, when you have a lot of people working from home, you have to do an upgrade and make sure everybody has video capability you dont think thats foolish . You seem to have some credence i think in this environment it could be dangerous. Yeah. Well open in about 30 seconds. Its not comical. If youre going to do the movie, margin call, margin call about hp, maybe theyre all the redhaired fella in that movie i was in that movie you were in margin call no, i was in arbitrage. Could you speak up if youre in the next margin call . Ive been reporting on this, you guys are silly margin call was the best were about to hit the open okay. Lets look and see if there are not buys ill give people a buy ive been thinking about this while we see while we had the dell lug deluge abbvie, fantastic Balance Sheet. Buying allergan. That will yield 6 combination is excellent Richard Gonzalez is a good ceo theres the needle do you have the haystack were waiting on ftc approval im told by people i thought knew theres an issue . No, but it is taking longer i have their new drug in my bag. We opened again theres the open. In the interim, the tenyear yield held steady above the session lows does anyone here think you know what . Ill give you one, ill say this is not rhetorical, what an interesting time to buy a house. Were buying a house taking advantage of these fabulous Mortgage Rates. Fabulous Mortgage Rates are not yet reflective of the move o the move down. No, but you can buy you can expect the move in the 30year is going to equate to you can buy a house borrowing money from a bank. Borrowing money against your assets at a very, very good rate thats what im taking advantage of its not joyous, but lisa, my wife has said listen, theres some good real estate. We have to keep our eyes open. Im not saying this is where its not hyper inflation where the only thing that works are mansions and masterpiece we have an obvious deflationary wave thats probably threatening to central bankers indeed. The dow is down 2000 points thats going to be on the front page this will take you back to levels that we saw in january of 2019 so a little more than a oneyear low on the dow the s p 2015 for the second Circuit Breaker you would have to have gone far from that. Travel trust owns cclorox hard to find it right now. Are you recommending taking some off the table you couldnt take all off its nice to have a winner among a sea of losers. Those of us shopping for alcohol, hunted for it without luck wood alcohol youre blind for three days if you drink that stuff dont drink it paper products. Costco is no longer giving a Free Sample Program due to coronavirus virus concerns according to usa today thats okay ill talk to rich glanty and suggest they dont suspend that. Wouldnt it be nice with gottlieb helped pence. I would love to say youre in pence, fouci youre going to do a good job, provide leadership anything can happen. You can do that. Pence is meeting today with hes doing a teleconference with governors at noon the Task Force Meeting at noon a press briefing at 5 30 the president is in florida and holding a fundraiser a fundraiser . Yes for Small Business . No. Its a i think a Campaign Fundraiser the Vice President will hold the meetings your argument is bring in Health Officials from the private sector yes say listen, if we need to, well make it so that every well do kind of a wuhan plan in place. We know how to build hospitals too. Does it have to be only the chinese . What is this the eighth Army Building a bridge . We can build hospitals we need to be led. We could also borrow at ten years at less than a half percent. I would like a 100 billion bond why not go for a trillion what is this the producers . Whats the interest cost in a trillion dollars at. 4 lets get to bob and see how the process is working this morning. Bob . We are open hold on. A lot of stocks still have not quite opened down here i want to show you the boards over here. You see the green bands. They are stocks that have not opened theres halliburton. Opened a moment ago. Down 31 just opened. The other ones there you see are indications where theyre trying to open them right now theyll be open shortly. Turn over here to walt disney. Just opened a few moments ago. Down 6 . 5. 97 . Procter gamble you see just opened there, down 2. 9 . Some of the banks, you can see further out, citi group, go out there in the distance, you can see citi group there down 13. 7 . So slowly but surely the green bands are going away, and stocks are opening at a slight slowdown as we moved into the market getting open here. Again, you want to be in a situation where you open the stocks right thats the nycs attitude for many years that means a balance between buy and sell orders. That why youre seeing the stocks just starting to pen. Well keep an eye on this and give you an update in a couple minutes. Thank you very much coming up for the session lows of about 2000 points a few moments ago, jim, gold down says a lot. Right . Yeah. I think there liquidation there, too. What a great opportunity i know deflation people say well, why on gold . I say you need something to give you peace of mind. And i think gold gives you peace of mind. 10 of your portfolio should be in gold if you dont know what to do, buy the gld or the bullion. Put it in a safety deposit box its a nice ledge against whats going on i think its chaotic not chaos, but chaotic and i think gold is very good to have gold miners too what do you think there . The ones that are least leveraged, i think barrack had dr. Mark bristow on. Hes in great shape. Theyre in the lowest cost and theyre in nevada. And i do think that what a terrific place to be if it comes in dr. Mark bristow is worth banking. He was able to find a lot of gold in the heart of ebola he can do anything the other guys not as strong interesting. Do you know what youre doing tonight . I do. At 6 00 p. M. Ive e health, a company that helps you tremendously with medicare to try to figure that out. Obviously we a lot of the chaotic nature of the markets. There have got to be some opportunities. I said abvi walmart is down the stocks declined by 40 this year. Do i want to buy theyre not necessarily impacted by the recession if we have one do i want to buy walmart at 115 knowing it traded at 96 in march of last year how about a little more value . How about some value david . Okay. Im listening. Im seeing that could be down a little more. Why not be price sensitive i said buy something i did say that i said buy abvi. I like merck because of the cancer profile, the drug i think abvi is attractive buy a quarter position im looking for a tech stock to buy. Okay. I have to look more microsoft is barely down for the year thats a problem. Apple is only down 6 for the year i know. You got to be cherry amazon is down 2. 6 for the year i like that that compares to the likes of boeing down 28. 5 . Ge is down 23. 5 jpmorgan is down this is for the year, by the way. Citi down 31 . Dont you think you dont buy the banks here. No, but you buy amazon. You do . I think you start a position in mazon absolutely david, stay at home is going to be a theme amazon is going to get it to you. Especially with the Lower Oil Prices thats an interesting idea there are benefits. Oil prices. 4 Million People are drivers in this country. For a living. And you have to hope thats not a huge source of quarantine. I saw grub hub recommended. To me this is kind of not grub hubs not jpmorgan in the time of the crisis, but i think theres a tremendous amount of value in some companies that do better with lower oil and if we dont look at those, were being foolish. Again, the treasury secretary, i need a little more confidence. I need to hear that they are aware. And they are ready, and when they do that,ly feel better. Often times an announcement comes out at 10 00, jim. Well, secretary mnuchin, where are you . My watch is maybe the same time as you . The s p is at least off the lows by over a percent now there you go. Wow. What an opportunity to liquefy yourself if you are in your margin this is a chance to be able to refigure our portfolio and be more rational. Jim, well see you tonight . Yeah. Look, we have to remember its no time to be too upset. You just like to see more confidence a little more fiscal stimulus and then well get through this. Obviously we want the Public Health care system to be as wellfunded as possible. Jim, well see you at 6 00. Lets get to Rick Santelli good morning. Well, a couple of macro issues every maturity from the 5year out, 5, 7, 10, 30s, have made all time low historic yields not necessarily true for twos and threes look at a twoday of twos and realize 24 basis points was the low. The lowest ever is from 9 11 that close was 15. 5 basis points obviously weve moved up were at 32 basis points down 19. 24hour chart of tens, 31 basis points was the low currently its trading 49 and 49 basis points puts it about down 26 30year bonds may be the wildest of the bunch because it settled at 129 had a im sorry had a 69 low 69 low now, its obviously jumped a lot. Its currently at 94 which would be down about 36 basis points. Now, we look at bunds. All time low is 71 established in august of last year they are now at minus 89 we continue, of course, to see the spreads narrow what Central Banks do with this is anybodys guess does anyone really think throwing any eases at this made any difference at all . The market has its own mission here finally foreign exchange, i was there in 87, there for tidebot. They seemed so much scarier and so many ways maybe thats because of the machines euro versus dollar lowest level since january of 2019 and all of that, of course, the mirror image of the dollar index which is getting crushed if you look at the dollar yen, these are at the lowest levels should they close on the dollar side since september of 2016 now, if we look at the yield curves, its pretty easy to see 51 for tens and 33 for twos and see how much its flattened from its big skyrocket up to 30 plus on tens minus twos and other than 30 year bonds, the whole curve is 51 and under. If you look at the low yields, obviously the end game is a pancake yield curve. We see tens to 30s have a Nice Distance but much less on the spread than they had friday. Carl, back to you. Rick, thank you very much good morning, everybody. Youre watching squawk on the street. I i it has been an historic morning trading. Biggest gap at the open in about 12 hours Circuit Breakers halted trading for about 15 minutes coronavirus fears continue around the world lets get to bob back on the floor and see how trade is shaping up the important thing is the market has been open there are a few spots not completely open. Most of the major big cap stocks have opened. Weve rallied almost 500 points. A few moments after the market opened ill show you a couple of examples heres walt disney down 5. 4 it was in the 1. 18 range, 1. 08 range earlier here you see how 1. 09 its up off the lows come over here at Procter Gamble now only down 2. 8 Procter Gamble was 115, low 115s a little while ago. Want to point out some of the green bands above there. Those are some stocks still have not opened most of them are in the small or mid cap area where theyre trying to figure out the right price range. Theyre coming online right now. The halt was 7 . Theres a one time halt at 7 . If we drop 7 again, you dont stop it a second time. You go to the second level, 13 . That would hold until 3 25 after 325 theres no trading halt unless the market drops 20 . Then it halts for the day. We are well off the lows ill be on the floor and making sure everything is opening properly down 6 now a little less than that on the s p. Were joined by jonathan gollab and joyce chang. So jonathan, what do you tell your clients right now looking at this scary price action what should they do . You cant look at the price action and make a decision you really have to break it down one is what is the damage this is doing to s p profits not for the week, but lets say over the course of the year we just looked at we started the year, our estimate was 6 eps growth for the s p we think thats about a zero but thats nowhere near what you would get in a typical recession. But a lot of damage and the assumption there is that this plays out when you get toward year end and gets under control. So the damage in terms of profits is a first half issue. And in the back half how do you know that . Thats not what the market is telling you right now. Joyce and i were talking about the liquidity issue. You cant look at the ill liquid market as a signal if you listen to the experts and look at what past recessions have meant for earnings, thats probably about as good a guess and in a changing world as you can make joyce, the we didnt expect today to walk in with oil being down 25 Everything Else on friday at least we had a lot of questions. Very few answers about the virus. Certainly people over the weekend may have made assessments in terms of the spread but this was unexpected. What is the impact of this fall in oil prices in your opinion . What were going through is the great liquidity shock we were warning as one of the fallouts from the Global Financial crisis you had the stress in the funding markets and spilling over to the s p. You have uncertainty now brought on by oil prices its a question now of what gives . At what point do people feel like the prices are so low they need to come back to the table what pressure can the other 20 countries put on russia . Not just saudi arabia. But i think the liquidity moves that weve seen have been unprecedented. Its a reflection of how the market has changed how the Market Structure changed we dont have the Circuit Breakers anymore what do you mean . It used to be Banks Holdings in the inventory now you have to have the fed step in. The rise of algorithm trading, electric trading, record information because of pass i have we thought there would be a testing moment, but who thought it would be on coronavirus we knew it would probably be something. Yes and the problem is coronavirus for those quarantines that work, its taken eight weeks now were seeing china is peaking. But that was an eightweek process. We have a number of countries just coming into this. China did draconian things this country is unprepared to do at this point. Jonathan, how should we view the Oil Price Drop theres questions about in the high yield market. There are questions just overall about the impact and what a reflection it is still of reduced demand. Right well, so i think you raise an interesting point. What is this ultimately doing to credit what does this do to areas like employment what type of a spillover is this first in terms of todays news flow, we have to separate out which of this was just this Economic Impact which was already pushing oil prices down Something Like 30 versus something specifically around saudi arabia and russia and something thats independent . If you contextualize, the Energy Sector is only 3 of the broad market a lot more than the credit markets now. High yield but the credit markets really represent an issue if this effects the banks. Thats why to me, what am i looking at this Interest Rate move is really a sense you know, a creating a sense of strain what happens to high yield spreads and the availability of credit we were talking about what is it a coordinated Central Bank Action means you have to leave it open. And fiscal response, it does not look like an impact on the employment market and the like its too sudden, and the labor market is tight. But if there was a spillover, those would be the things that would concern me and so far its just too early to think those things are going to happen. You dont see job growth going negative no. I mean, do we think you could have a little bit of slipping here maybe. But if you take if you take a look at the way its likely to play, if we run through this process in coming months, and we had a labor shortage going into it companies are not going to want to let go of employees they may want to cut back hours a little bit, because its going to be its expensive to rehire. And it creates dislocation. If thats the way this plays, worse case outcomes economically and from a profit perspective, dont play through, and thats something were looking at joyce, what stems the extreme selling . Well, youre going to have to see fiscal measures. The Central Banks will have to go beyond easing credit easing, yield curve control. We saw the boston fed president talk about expanding the different assets that would be allowed for purchases. Its going to be more coordinated action from Central Banks. But youre also going to have to see fiscal policy like what so providing credit to small and Medium Enterprises announcements coming out of italy. In particular some of the European Countries youve seen they have said they will actually put a hold on actually counting it toward the fiscal targets these kinds of things that europe had been stalling on are now all on the table its not stemming the selling in italy, its down 10 . Coming into this tight market spreads. Third week of january, a lot of people were at their full year target i think youre going into an overshoot because the liquidity is so poor thank you for joining us dont miss markets in turmoil 7 00 p. M. Eastern time its all day today on cnbc back to oil. Lets bring in the former executive Vice President on the phone. Explain what saudi arabia is doing here creating this price war. Good morning. I dont speak for the saudi government, but i think what were seeing is an extended effort to try to rationalize the supply demand market the team that worked on the issue for the last several days came to the opec meeting with recommendations that were very firm to remove 1. 5 Million Barrels above supply i think saudi arabia found itself alone in taking this posture. We are all aware that theres too much oil in the market and its no good for the business so when everybody decided, the other players nonopec primarily decided they werent going to go along, saudi arabia realized that it couldnt fix the problem by itself, and so its protecting the market share and positioning itself for the longterm. How much pain do you think that saudi arabia itself could face i mean, it seems like i get why theyre doing this, but their stock market got hit very hard aramco got slammed the price of oil is down 20 on top of the 30 it lost this year theres going to be a lot of pain no doubt. I think everybody is hurting nobody comes out of this winning anything hopefully at these prices and just based on the past experience, other producers will come to their senses and the whole industry will start rethinking their production levels the industry cant survive at these prices definitely not north america most of the deep offshore, the heavy kruds, all of these producers are going to needto rethink their production and maybe well get a more concerted effort by going forward. Can the russians survive at this price or do you think this is going to force putin back to the table in some way . Its very hard to read what the russians are trying to achieve. They are well informed and understand the oil industry well what are they trying to achieve . Maybe its not the leaders maybe its the oligarchs we cant really figure out whats going on there, but they definitely declined to make any cuts, in fact, even extending the previous cuts beyondmarch. Its now open to question. There will be discussions monthly. The teams that support the opec and nonopec ministers will continue discussing this on a regular basis. So hopefully some compromise will be arrived at within the near future. Right so you do raise an interesting point. We cant necessarily fully understand putins motivations theres so many things going on in terms of his various relationships that are not easily understood, i guess this doesnt make sense on the face of it absolutely. If it was just a strictly supply demand question or strictly speaking a Market Positioning issue, it would be easy to negotiate. But the fact that they had no interest in any sensible cut, and we all know the supplies are over 3 Million Barrels in excess in the markets saudi arabia has been very prudent. We volunteered cuts, 400,000 barrels in december. Well below our target. And were holding 2 Million Barrels of capacity as a contingency for the industry saudi arabia is doing its best to try to rationalize and regulate these markets it cant do it on its own. So if youre a u. S. Player, then, what is the play book short of taking an ax to cap ex . Yes that is definitely one of the early decisions that has to be made, pouring more money into capacity isnt going to help anything both the oil and gas and the services have to reconsider their activities, the spreads that they are keeping. Producers in general have to optimize their operations, their fields, which ones are more prolific which ones are not i think everybody is going to put things on hold for a while until the markets become a little more rational sadad, weve seen President Trump form a relationship with the crowned prince of saudi arabia weve seen Jared Kushner what is your read of where that stands and whether President Trump would allow them to put this kind of pressure on u. S. Shale industry if we are talking about bankruptcies and a major hit to the Energy Economy in this country i think this is a situation where you dont need political intervention you need economics to go to work at the end of the day, everybody is convinced by the economic logic of a situation i think smart investors and smart operators will do whats right for their businesses and a political intervention probably would be counterproductive from my sites. It still why you would apply this kind of pressure during a demand slump is just unexpected i continue to think and many people believe that they will figure this out in the nearterm. Do you think thats a high likelihood i dont quite follow who is putting the pressure on the demand side. Well, the demand side the being pressured by the coronavirus. I mean, by the slowdown in Economic Activity by the fact that china was closed more or less 40 Million People not doing anything for weeks we all know theres less demand for oil right now. It seems like the worst time to introduce Something Like this. No. No because youre misreading it what the oil what the kingdom is doing is reducing the price thats not putting pressure on demand if anything, it would be to stimulate demand the turmoil in the markets is not because of the pricing being lower. Its because of all the other Financial Issues that are confronting investors and capital markets. Oil is just a small piece of the total story. But are you saying that you think that a 9 drop in the price of crude stimulates demand what is the marginal buyer who will drive or fly or buy a barrel of oil because it got this much cheaper . Well, we did not drop oil prices by 8 the amount of oil that goes to the u. S. From the gulf, from opec and other countries is a small piece of it. If the u. S. Consumes 20 Million Barrels, as far as imports from saudi arabia, its 5 or 600,000 barrels. Saudi arabia was not doing anything as far as the u. S. Market is concerned. The most the highest volume of saudi oil goes to the far east it goes to china, korea, thaila thailand, those kind of countries that have a no oil and consume a lot of energy that is imported so they the Price Reductions there were 6. Thats an average, because theres five different kruds that get sold, and theyre all benchmarked in different areas so the price drops in the u. S. Are not parts of the saudi Oil Marketing or exporting strategy. Ill just repeat davids question to get a clear answer is this going to be a shortterm issue or not what do you expect i expect its going to be dictated by the markets. Gdp growth, resolution to the coronavirus. Tariff issues between the u. S. And the far east so many different factors. The Brexit Issues have had a big overhang on european economy so all of those factors affecting demand the quicker those things are resolved, the sooner the demand will recover and the better prices will rise but on the saudi side of things, when it comes to slashing prices and ramping demand, you see this as this here to stay this is not just shortterm to try to get some reaction the way it works aramco is a company, and it gets nominations for oil on a monthly base sis from its clients, and they decide how much oil they want, and then on that basis, it gets delivered. And traditionally that number is around 9. 5 to 10 Million Barrels. I dont really see that changing as far as the price is concerned, it depends on what everybody else in the industry is doing saudis had to make changes in their own social policies, university, schools because of the virus as well. I wonder, this is a bit farfetched but is any of the Pricing Strategy colored by whats happening within saudi from a social standpoint no. Saudi arabia is reacting to the situations just like every other country in the world the government is being very prudent. They dont want any of the symptoms to become widespread. Theres a strict control on people coming into the country, and having proper procedures in place to evaluate their health and their condition. Schools have within shutting down all over the world for a period just to make sure that there arent any epidemics happening or about to happen so this is just prudent health measures, and i think most of these people i know really appreciate this. It makes them more confident because of that. Sadad, thank you for phoning in and helping us understand this wti down 17 brentd down 18. 5 bottom of the market down 15. 6 as a Group Financials a big mover willfred has more on what the banks might be talking about fred and relative to that story we just talked about very relevant to that theyre being slammed. The bank stocks. Strong correlation when the panic is here with what yields are doing. Thats at play again why banks make a lot of money based on where the yield curve is here is exposure to Net Interest Income citi is the highest. Bank of america is seen as the most Interest Rate sensitive because of High Consumer exposu exposure indeed, bank of america down 37 from the recent high when the Circuit Breakers came in out of that, the fears of exposure to the Energy Market and you have a slightly perfect storm today. Heres loan exposure to energy for the big banks. Fairly low overall around about 2 for the industry as a whole need to watch out for some of the small regionals with higher exposure individually. Now, unlike energy, bank stocks are still above their 2016 lows which was the last time markets feared rates are never going to rise again or oil prices are tanking. That might suggest more downside, but they are cheap today in relative terms. Priced earnings, price to book, dividend yield last week Autonomous Research estimates bank stocks pricing in a 50 chance of recession. Clearly that number higher still today. Here are the dividend yields higher than they were in 2016. We are at 6 dividend yield for wells fargo. One other comparison being made is this like 2008 . Well, two huge differences capital liquidity, so much higher than they were then and the epicenter of this crisis is not financial its not in the Banking System wrong to make that particular comparison nonetheless, a bit of downside to the 2016 lows where rates and oil prices were a consideration. As we watched the extraordinary market moves and were all sort of on guard to make sure the market is functioning properly and theres enough liquidity, i wonder how many Bank Employees are working from home. Werent they all in an emergency kind of experiment work from home phase because of coronavirus . Experimental. I spoke to almost all the big banks over the weekend and got updates on the positions the difficulty will be if you really have to have a total lockdown on a banks trading floor, its hard to execute everything from home thats why theyre all getting up and running their full back sites. For bank of america, its in connecticut. Theyve all moved roughly speaking, 5 to 10 of their traders to those sites already and they wont come back into the main trading floors over the next month or so so theres an off site fallback location its just about plausible. They could execute trades from home, but theres so many hurdles. Every single call is recorded for compliance and regulatory reasons on a trading desk. The speed of fiber connections to execute the trades, people dont have that at home. The fallback for them is the fallback sites as opposed to everyone working from home thank you well look at the big banks and regionals. For now, lets get breaking news out of the white house with eamon. Thats right. Ive been talking to three Senior Administration officials at the white house this morning to gauge their plan. Im told there is a meeting scheduled here at the white house for later this afternoon with President Trump who is going to be returning from florida. At that meeting the Economic Team is going to present the president with ideas for economic stimulus in response to the virus. Im told paid sick leave will be at the top of the list of ideas. A Senior Administration official telling me well have a full menu of options for the president at that meeting this afternoon. The president returns to the white house in the 3 00 p. M. Hour from florida later on today. This meeting will take place after that the official telling me the president is aware of the stock Market Action that weve seen this morning this official calling todays trading discouraging, saying its a tough one, but were going to work our way through it separately, on the oil market, i can tell you that there is a dilemma in the thinking of white house officials in terms of whether theres a need for any federal response to what weve seen happen in the oil sector last night and today this official suggesting that on the one hand for the macro u. S. Economy, Lower Oil Prices are generally good for consumers, but theyre aware of the pain that this represents for the fracking sector. Its not clear at this point whether the u. S. Government is going to see a need to do anything in terms of the oil sector but they are monitoring all of that very closely. As i say the meeting with the president will take place later this afternoon there might be more clarity after the meeting happens here back to you. Eamon, thats good information. Well hopefully stay on top of it with your help. Look at the markets right now. Obviously weve come in a bit from the session lows. S p down 175 dow 1500 points or so. Jeremy siegel joins us professor of finance at the university of pennsylvania good to talk to you this morning. Good to talk to you too lets start with what eamon was saying about a fiscal response what do you think is necessary right now . Well, first, i agree. You know, we really i think have the president has not started this well. We need leadership at the top, and jim cramer is right last hour we need leadership at the top. Fribs t for instance the betting markets are saying i think biden might be the next president. If he comes out with a strong statement, he might be able to clench it. We need leadership at the top. We need a plan it seems scatter shot. Im glad im hearing that something is might come, and it absolutely does have to come. What to do, what the testing again . Unemployment compensation. People that have to stay home to be tested should not be able to lose their income. I mean, this requires Emergency Action and we need that leadership at the top. We also, by the way, and i know everyone is going to say its not going to do any good, but the fed needs another 50 basis points cut what does that accomplish because theres trillions of dollars of loans of Small Businesses based on the primary based on the and theyll all go down. It will help the cash flow the cash flow is going to be critical its not going to solve the problem. Its not going to cure the virus, but it just gives another bit of help. And. Before we get to a recession . Yeah. You go down another 50 basis points this is marginal i think leadership right sara says the market is there. Any concerns overall in terms of the market and the Market Dynamics you know etf well. Wisdom tree, obviously, theyre so important in our market overall. Price dislocation is so significant, professor any concerns at all about that operating properly well, i think personally, i think things have gone extraordinarily well not in terms of prices but in terms of trading. We really didnt need that 15minute point halt this was designed 20 years ago i think we have trading. But the etf is trading stocks are trading youre not going to get the liquidity as before, but we who have to get it off can get it off. We dont see any crazy gaps like we have before i mean, i think that this market has given us the speed of which is unprecedented in the decline from highs its actually traded well. So i think that thats not a concern. Not if youre robin hood user that site is down again. The free trading app that caters to younger millennials who had outages all of last week you can have access to your brokerage account right now. What would you tell people to do what moves would you make, if any . Well, right now i think from a longterm standpoint theres value out there. Could it go down another 5 , 10 . Of course it could and 15, and then you have a barg than you get once in a decade or a generation in terms of buying stocks and people who have done that at that time, but right now at this particular time, if youre young, you have your 401k, i should have been out two weeks ago, its at this point just hold. I mean, again, as i pointed out to you, forget about this years earnings maybe people talk about its 20 . Thats the answer. Look toward 2021 are we going to get back to something more snrnormal and what is the stock market trading now, 2021, even earnings the same as last year, 16, 17. These are values that pay in a low Interest Rate world. My whats your take my opinion is stick it out. Your take on house stimyoulative helicopter money or household relief, however you want to phrase it. Whats the multiplier when the money that households would get is tougher to spend if youre being told you cant go to the movies or fly or take a cruise or even leave your house in some cases hyphypothetically . This is a demand shock. Exactly what youre talking about. People are just going to stop doing the whole entertainment sector of our economy. Could totally tank but what we need is i mean, im worried about the people who dont have a corporation thats going to continue to pay theyre working on their own cash flow. Suppose theyre waiters or whatever it is that suddenly is going to disappear we have to be able to provide these people with cash we have to give them the ability to do that we also have to give them the ability somehow if its worse and we decide to shut down like italy or something, that bills dont can be delayed 30 days and mortgages delayed. People wont get the cash flow its not going to be a total disaster i mean, were going to get our economy back but we have to make we have to make those those are much more important, i think, at this particular point what about the kru cruise li. Norwegian down 14 some of the companies were looking at 40 moves just so far this month that is a total shock im old enough to remember 1986. Saudi arabia tried to negotiate with opec and opec said not going to cut on these, said screw you, and they just let the oil flow it crashed from 10 to 30. They have a history of doing that and yeah, this is going to be serious. I mean, theyre going to put the shale people totally out of business youre talking about oil. Yeah. I mean, who knows . Next time you know, maybe the big ones that are better capitalized, i mean, maybe theyre going to be picking up oil at 10 a barrel on the ground just in terms of bankruptcy going to mop it all up at some particular point you know, oil will deaf in tfing back it will get back to a more normal rate. Who is going to pick it up in the meantime dont forget, weve become an oil exporter in fact, i think we exported 4 Million Barrels a day recently its unprecedented were going to be hurt theres a trillion dollars of capital locked into the Energy Industry thats really one beginning to think about well, how viable is this oil did go back, remember, several years ago back to 26 i member how shell shocked that was. It only stays there for a week or two this could stay down to 30 or less for longer. So this oil, i think i have to decline today is at least the shock of oil and how thats going to effect that region. Its serious yeah. A shock on top of the shock we already had. Professor, thank you jere Jeremy Siegel joining us a news update. Keeping our eye on the markets down 1300 on the dow thank you for that. Heres your news update right now. An endorsement from senator cory booker endorsing joe biden for president. Booker and biden are scheduled to Campaign Together today in michigan a day before that states primary. Passengers aboard the cruise ship regal princess in florida have gotten the go ahead to disemba disembark. They were awaiting test results from two crew members. The state is advising americans, social those with Underlying Health conditions, to avoid traveling on cruise ships altogether to your earlier point, sara. Boris johnson finished up an emergency meeting on the coronavirus outbreak saying the countrys Health Service is well prepared theyve accepted the virus will spread a key religious festival going on in kathmandu. People were masked during the holiday celebrations officials have been concerned about the spread of the virus during the holy festival in fact, the indian Prime Minister said avoiding all of these celebrations because of the risk of catching coronavirus. Thats our news update this hour back to you. Thank you one hour into the trading session, boy, has it been eventful lets check on major averages. Declines across the board. For the s p 500 now down 5. 5 . The low of the session was down 7. 4 . Just in the opening minutes of trade we did get the Circuit Breaker triggered down 7 . The market halted 15 minutes opened lower and that has recovered. Energy stocks, the worst hit down 15 on a 20 slide in crude oil. Among the biggest questioned this morning, will the Federal Reserve step in and take action again . Steve joins us with answers. What do we expect . They already have taken some limited action this early this morning, about 7 20 the new york fed increased overnight repo operations to 150 billion from 100 billion increased twoweek repo operations to 45 billion. They say its to mitigate the risk of money market pressures its flooding the market with liquidity so the fed can hit the funds rate from the committee which is 1 to 1. 25 . I checked in with some folks before coming on camera. It appears to be trading normally with rates about where youd expect them to be. One trader i talked to said its a little hard to get a figure or feel ill get to that in a second people are working from home okay now, on the outlook for the fed funds, a 76 probability of fed going to zero. That means by the end of march the market betting the fed will cut by 125 or 1. 25 Percentage Points also, sara, i dont remember ever seeing this, but there is a 15 probability of negative rates by july. Those are moving around as we speak. I will tell you it could be plus or minus thats what they were in the last 10 minutes. They move around volatilely. But there is now for the first time some possibility of a zero and also now of negative rates for the fed. David . Wait. Steve, that is something to see that i want to ask you quickly i have a spread sheet set up for worst Case Scenarios as you move to the left, i moved this thing think of this as seven or eight columns to the left, and the possibilities that are out there continuously move further and further to the left on my spread sheet for what its worth in ways i havent imagined. What should the treasury secretary do he was criticized when he came out and said i talked to the Bank Executives and liquidity is functioning perfectly. Isnt now the time where he should be doing that let me just say, there is always afine line for any official between announcing what theyre doing and being on top of the situation and creating additional panic this could be a situation i think that as you bring up where the treasury secretary might provide some comfort to the market though, i dont think right now im hearing that there is an interbank problem or a repo market or a generalized collateral problem the kind of plumbing problem that gobbed up during the financial crisis im just not hearing that. I dont see it in the actual trading that takes place other than where theyre pricing the fed. So whether or not that would help or not, what i think i keep hearing from fed officials from economists, is they would like to hear the treasury secretary step up with the president and the congress with some form of fiscal package because of what everybody talks about are the limitations of the Federal Reserve in this kind of situation were in right now steve, thank you. I should mention you mentioned the president. He is weighing in on the market volatility with as you might expect, tweeting saudi arabia and russia are arguing over the price and flow of oil that and the fake news is the reason for the market drop no mention there of the coronavirus. Lets move on, though, for a discussion of the economy and what we can expect as a result of the dampened activity from the he says good for the consumer, gasoline prices are coming down. Mark, let me start with the prospect of a recession. What chances of one and how deep will it be more likely than not. Id say the probability are well over even. If you price me id say 65 . I think its going to be very difficult to avoid a downturn. How deep how severe really, it depends on the administration and congress. I mean, the fed is going to cut rates to zero. And then the owness quickly shifts to the president and the congress to come up with a fiscal stimulus package and depending on how aggressive and how quickly will determine the type of recovery we get. I think under any scenario, its going to be t not going to be a v. I dont see that i mean, just take a look at what is going on in china its a pretty good case study. Its going to take a while before people feel comfortable to come out and get back to work and do all the things they do. And the travel sector, i dont see that coming back for quite some time. Even under the best of circumstances, hard to see this being a vshaped kind of situation. Yeah. Well, we have not in any way taken the steps the chinese have to stem the spread of the virus in that country. Unclear we even will do those things there has been a significant dampening in activity as a result of cancellations of so many conferences and other gatherings of people, particularly on the corporate level. Mark, what about the fall in oil prices unexpected, i think is certainly the word you can use today in terms of whats gone on between the saudis and russians and obviously this supply increase that is going to push the price, is pushing the price down sharply. Is its a benefit for consumers. What are the other impacts to keep an eye on when you think about it well, when you look at the broader economy, it will have no net impact on the economy. Certainly if you look out six, nine months. You have winners consumers winner lower gas prices, airlines get a benefit from the jlower jet fuel prices that plus happens pretty quick well get gas nationwide below 2 a gallon. It does a number on the Energy Sector, and because the Energy Sector is so large we produce more oil than anyone else on the planet, and at this point we dont really import any oil. Were net neutral with regard to import it will hurt them. Net its basically a wash, six, nine months out. Mark, you talk about the lack ofa vshaped recovery. From a corporate behavior standpoint, what is the all clear . What would make a company like amazon or jpmorgan or nestle go back to prior policy on cross border travel . What is that key thats the problem. I dont think we know. I mean, i think the worst thing would be you let all your employees go back doing the things they do, traveling, going overseas and the virus regenerates and you become sick again. I think corporate managers are going to be very, very cautious and reluctant to allow people to go back and travel and get back to normal. Even getting back to work may take longer than people anticipate because i do think Corporate Executives are going to be cautious here and appropriately so what is that going to mean for job growth in this country cautious Corporate Executives cancelling meetings, working from home . I mean, how long before you have to start worrying about what has been a really good bright spot of this economy . Job creation and very few layoffs . Yeah. I think were going to experience job loss here it would be pretty tough i mean, at the very least businesses will pause in their hiring in some degree, its practical literally i cant bring people in to interview them if i cant do that, im not going to hire them its going to immediately effect hiring and in some sectors there will be layoffs. Travel, tourism industries, retail youre going to see i suspect layoffs pretty quickly and then obviously if, in fact, the virus becomes widespread here and starts disrupting businesses, people just cant literally get to work. Theyre sick theyve got kids that are home because they cant go to school. Their parents are sick and they have to take care of them. Thats going to hit the job numbers. If they dont work, and they dont get paid, theyre not going to show up as someone employed i think well start to see some job losses here over the next few months now, the good news is the job market is strong we have a lot of open positions. Even a labor shortage. Businesses are going to be reluctant to lay off any significant way because they know once they get on the other side of this, theyre going to need people. And theyre going to have a hard time finding them. That should mitigate some of the job loss, but well have job loss in all likelihood mark, on the Interest Rate front, Steve Liesman was introducing i think its 15 what chance do you think we get to negative rates . What would that take, or are we just going to avoid that fate . I dont think the federal will go there. You know, were not europe were not japan. Those are bank centric economies. In a bank centric economy system you can go negative. In ours, we have banks but a lot of nonbanks. In fact, heres an interesting fact almost half of all the credit that goes to consumers and u. S. Businesses come from nonbanks. Those nonbanks rely on shortterm funding markets, the repo market, lines of credit from the big guys and i dont know if those markets, that plumbing operates in a negative rate world, and i dont think the fed knows and they dont want to go there im not so sure they would want to see long term yields go negative they may do what the bank of japan does and try to manage longterm Interest Rates and not allow them to go negative in a significant way. Id be surprise first down we go negative not because of any other reason than its really going to do a lot of damage to the shadow system, credit flows and the economy. Be a heck of a time to ash lot of treasuries for a huge infrastructure push, wouldnt it yeah. Well, i mean, kind of makes sense. Right . This is the time to really go at it i mean, look, the the only way now the only way out of this in a reasonably graceful way is for the president to call nancy pelosi on the phone and say look, we got to do something here, and theres lots of things they can do, and theres plenty of room to moo nooaneuver. Pay for the medical expenses incurred here, and theres going to be a lot of medical expenses. Whether youre insured or not. All the people who cannot work for whatever reason, kids cant go to school, business is disruptded, they should get a fom of compensation. You do those things and go a long way to stimulating the economy and helping the people that need it and then you think about the tried and true fiscal stimulus, payroll tax holiday, so on mark, thank you Global Life Sciences company is launching a tres for coronavirus on thursday. The president claims anyone who needs a test gets a test we are with the chief scientific officer. Good morning. We understand that you started offering this test on thursday of last week can you give us a sense for how many people youve been able to test so far . Yes thank you. Yes. We did begin receiving samples into friday, and over the weekend. And we have begun reporting those results. Give us a sense of the capacity that youre able to add to the system now that youre online yes so we have capacity now for several thousand a day and are working almost around the clock to increase that capacity over the next few weeks. And right now if Patients Want to get tested, they have to be giving samples at the doctors office. They cant walk into a Patient Center and do it there can you tell us about the process. Thats correct the type of samples being used, oral and nasal swabs are actually collected at a Physicians Office when a patient sees their physician, if they believe that the testing is appropriate, theyll collect the samples as they would for any other type of respiratory virus. And actually send it to us via their normal routing how are you looking at the geographic distribution around the country given there are hot spots in washington, northern california, massachusetts, new york state do you try to make sure you have more capacity closer to those places or does it matter for us, it doesnt matter were a national provider. All states can actually send samples into lab corp. We understand the turn around time, three to four days will that speed up as you bring more machines or get this process kind of speeding up a little bit more . So the turn around time is up to three to four days. And obviously were reporting samples once they actually are tested we have to go one last question for you. Just the cost. What can you tell us about how much this costs, and anything that patients may billing . So right now were still awaiting cms and the ama to finalize pricing and so at this time i just dont have any information for you. Stay tuned and hope to keep talking with you dr. Eisenberg from lab corp, thank you. Thank you. Meg, thank you very much. Well continue our markets discussion now joined at post nine with a chief global strategist at Morgan Stanley. With the dow down and oil crashing 20 , nice to see you. Nice. Youre an emerging markets guy. Have we seen stress on emerging markets sovereigns or other ripple effects from the mo ever in oil in terms its like a violent selloff markets in saudi arabia and these are down roughly 15 russia close but thats the implied fall i dont think weve seen the kind of stress globally as yet in terms,but i think that this is such an interesting juncture were at let me tell you why. The s p is down nearly 20 from its peak this is a very important dividing line because if you look at it historically and we have done some work on this, whenever the s p has fallen more than 20 the probability of a recession rises to more than 60 . I think that twice in this bull market, we have pulled back from the brink. We went to about 20 and sort of pulled back from that the issue here is, that if it declines more than 20 , the fear is that you get a vicious cycle then the recession fears rise and remember this is the story that ive been sort of pushing for a while. The size of the global Financial Markets today is four times large than the size of the Global Economy if something happens to that the feedback loop works in the reverse. Its not about the economy reflecting whats in the market. This is the Market Driving what happens in the economy. So weve been talking about this in recent weeks that old saying, the stock market is not the economy. Right. Is a fallacy. Absolutely. Given the wealth effect. Its risen over time. In the 1980s, when we had the 1987 stock market crash, at that point in time the economy and the stock market were roughly in line globally. The value of global Financial Markets versus the economy now its four times larger if you get a massive decline in the market it has a feedback loop i think thats the kind of vicious cycle we have to look out for and try and see whether we can avoid it. Its interesting even today, we have just about pulled back from the brink of the 20 line. What about rates markets pricing in the 90 chance of recession . In terms of the fact that you have different markets doing that im looking as to what could happen if you get a vicious cycle. Whats happening here is the fact, i think this has not been spoken enough, that we had a massive Global Corporate dead bubble over the last ten years or so with low Interest Rates. On metrics, the u. S. Today, the corporate sector is more leveraged than in 2008 the underlying assumption as long as Interest Rates stay low this can go on but the fault line here is this, that no one has been able to sort of discount for the fact what if you get a sudden shock to your cash flows, what happens then the fact that we discussed on the earlier show, 16 of companies in the United States today are defined as zombie companies. These are companies which dont even earn enough cash flow to make their Interest Payments they have to keep coming to the market to be able to refinance if the debt markets shut down or freeze and you dont have new issuance you get a vicious cycle there too. Thats the fear about the vicious loops developing. Youre not seeing any evidence of that, are you . We have seen sort of a big drop down as far as new issuance is concerned over the last few days some evidence of that. Nothing which is sort of crisis level. A crisis level. The fear had been we would see fallen angels when rates spiked and that would cause the triple bes to fall into trouble but this came out of a blind spot, the demand, the cash flow shock. Thats right. We are seeing some of that, downgrades begin to sort of increase the number of falling begin to increase so i think that we are poised on a knifes edge here and the single most important statistic to watch for globally has to now be when does the growth rate in the new cases being reported peak the Chinese Market offers a template out here that moment that number peaked, you ended up getting sort of restoration of confidence in the Chinese Market and activity back to some sort of normality. Deutsch has done work on this morning, their point is what matters is when the Second Derivative of confirmed cases begins to flatten out and in their view quoting if the u. S. Follows the path of china exhubei, that could happen within the next week or so if that happens, then we it means we pull back from the bink if this goes on for another three or four weeks, then the risk of getting a vicious cycle here is great. What youre dealing with is a Global Corporate dead bubble which meets once in a century epidemic. Thats scary. Peso is down 6 in mexico. The contagion factor is sort of alive. Where, if anywhere, do you want to be putting your money, moving your money globally . How do you reallocate and rethink the outlook given things are changing quickly you have to look at what is going to be the enduring effects of this, whether we cross the dividing line and get a vicious cycle or not i think the deglobalization is just going to be the really big term of the decade you want to be in economies and markets which are not going to be that dependent on the rest of the world. In that regard the cheaper places new oil order. That is going to last for a while in terms of the fact that the price of oil just keeps, you know, sort of settling at lower levels and so you want to be more with the Oil Importing countries. You want to be in countries with large domestic markets and beneficiaries of deglobalization, the enduring effects. What we have to get through over the next two or three weeks is hoping that the analysis which this pointed to is correct, this followed the china template and peaks in the next week or so if it goes on for three or four weeks my fear about the vicious feedback loop developing with the global bond market and the stock market crossed the line of 20 i think you end up getting something which with is much more sinister thats whats priced in today. Thanks for joining us that sharp drop in bond yields led to what some are calling a historic mortgage refinancing boom diana olick joins us from washington and has the deals on this diana . David, the average rate hit a record low agorgds to freddie mac but not falling as fast as the track. Part of that because lender are pushing back unable to handle the refi volume up over 220 in a week at Cross Country mortgage, they were answering the phone before 8 00 a. M. With refi volume triple their usual it is a supply and demand situation. The industry right now is certainly inundated with requests put it this way, we are like home depo during a hurricane. He says as a smaller lender they can lower rates more than the big banks. Big lenders wouldnt say that exactly but a small pox person from chase home lending told me we paused email Marketing Campaigns on refinancing due to the thousands of customers already aware of the low rates and applying for them on chase. Com. And from wells fargo, we continue to hire underwriters and processors into our fulfillment and executing on opportunities to shift team members from other nonfulfillment groups into our operation. Lenders are also watching their Profit Margins their cost of boring is going lower and they can profit more if they keep rates slightly higher the mortgage Bond Investors their risk is rising because so many are refinancing so theyre paying less for the loans which squeezes the lenders thank you well, this is quite a day weve already had. Were only an hour and a half into trading weve stopped for 15 minutes so actually weve only had an hour and 15 minutes of trading. What can we look for at the closing bell were going to track every action into the close, every Price Movement a number of voices to get you through the final hour of trade including Niall Ferguson from the Hoover Institution hes one of the economists that focuses on societal issues like pandemics, and not just sort of the Economic Impact but making some predictions with that out with a new piece in the journal today and covers geopolitics. So the move in oil a number of investment pros and Portfolio Managers were going to find out what their doing today and what action tells us into the close well see you this afternoon. If not before lets get to the cme and santelli exchange. Good morning, carl. You know, the yield curve is getting as flat as a pancake to the 10year. Still a little horsepower in the knob the difference between 30year yields at 96 and 10year yields at 52. I say, if the front say let them eat cake, i say let them eat 10year notes. Mark zandsedy said were going to try what the japanese did and control the yield curve because we dont want negative rates on the long end a movie in 1968 called hell fighters. No matter how much liquid you put on an oil fire it never went out. Put an explosion the fire goes out. The liquidity didnt help the eurozone or the japanese, yield curve strategy didnt work this week, on sale, this week special, 10year note yields step up folks with the flat yield curve this is the best way to put a little religion back in the long end, make the most out of a flat curve, issue tbills, why not issue 10year notes now, the yield is not much higher and think of the bright spot if you want a yield curve that doesnt invert, doesnt turn negative on the long end, this is the answer carl, back to you. Rick, thank you very much good morning it is 11 00 a. M. On wall street and squawk alley i