More in payroll pay. And ford unveils the new f150 with new options including handsfree driving it is friday, june 26, 2020. You are watching Worldwide Exchange on cnbc. Good friday morning. Im dominic chu in for Brian Sullivan we are seeing a bit of negative activity right now, the s p is implied lower by about 12 points the dow would open down by 170 and down another 14 points for the nasdaq this represents moves off the low so far on the treasury yield side of things, we are seeing movements across the yield curve slightly lower at 67 basis points or. 67 ticking higher at 18 basis points or. 18 there the fed announcing it will force big banks to suspend share buy backs and cap Dividend Payments for the Third Quarter. The firms must resubmit their pay back plans the fed found several banks could get too close to capital levels amid the pandemic induced slow down. Shares of nike, dow component as well the company posting an unexpected loss. Was hurt by Retail Store Closures the wholesale business saw a 50 drop in business on line sales rose by 75 . Well talk to an analyst in the next half hour about that nike trade. In asia, those markets in Mainland China were closed for the dragon boat festival hong kong stocks lower the Senate Passed a bill to sanction people and companies if viewed as helping china to restrict the territory autonomy. Hang seng and sax both up. Christine lagarde says the world may be past the worst of the crisis but she cautioned the recovery will be in her words, quote, incomplete and might be transitional in europe, you can see generally positive there catching up to us in positivity. Dax up 1 . Coronavirus headlines drive much of the conversation yesterday, the cdc said it estimates for every case reported, there are likely 10 other infections that means the real number of americans may top 20 million frank is here with the latest this morning on those headlines. Good morning that is right. We have the outbreaks in multiple states, the governor announces that hes pausing the efforts to in his word, corral the spread hospital rates spike in 16 states this week 35 states are using the Contact Tracing technology from his company. Here is what he said on mad money last night just wearing a cloth mask reduces a spread by 90 . Second thing is test and trace you got to test. Once you do test, youve got to trace. That is true for states like weve heard from these incredible governors and corporations as well the ceos of Major Airlines to hold a white house meeting with Vice President pence and others to talk about European Union travel restrictions on americans, temperature checks at airports and Contact Tracing of passengers unions representing Airline Workers are seeking billions in more aid in order to keep jobs to the end of 2021 as travel demand remains weak. Stocks lower in the premarket ba being to you. Back to the markets now. U. S. Stocks closing higher yesterday recovering some of wednesdays losses nasdaq rising the ninth time in the past 10 sessions up more than 11 so far this year joining me now, patrick armstrong. Patrick, the market moves weve seen as of late have been stunning for some. How is it we can see so much positivity and bullishness in markets given everything weve seen corona wise and Everything Else the real driver of the markets to the measure of money supply wh which is coins and bills growing at 27 the past year that is a huge number. Before covid, the biggest ever got to was 14 money is being pumped into the system it has to find a home. Things are going higher whether safe haven, gold, equities the market is unprecedented. Thats the real driver of markets right now. Patrick, we are showing viewers and listeners we are showing a chart of the m2 money supply in the united states. Im curious that you see this spike higher it has not led to inflation on certain fronts oil and fuel prices certainly no maybe food prices but that is because of some covid19 supply chain issues are we on the verge of inflation, it doesnt seem like it now we are not. Money supply historically fed through into real goods prices when money was distributed it got moved through the economy. The way money supply and generation is going right now, it is going to the rich. The institutions quantitative easing doesnt give money to everybody it buys off of institutions, endowments and after fluent people and they put that to use in the markets it is not creating real goods inflation, it is creating asset inflation. That seems to be the emphasis of the process right now. We do have inflation years down the road eventually, this will be transmitted. Right now, the mechanism is creating asset Price Inflation it cant be that easy, right . You cant just say im going to be pumping money into the system and asset prices will go higher with no real repercussion whatsoever what are traders missing about the possible down side in this kind of scenario it is unprecedented we are doing an experiment right now where we dont know the outcome. Japan is further ahead if you look at all the etf holdings in japan. The bank of japan owns 75 of them the may may not just be the qe, they are already buying equities there is going to be consequences inflation is the ultimate end point. You have to print new money to payoff old debt. Weve got deflationary measures. Supply is coming back following demand people are going back to work because they have to but staying in a little more than they would have otherwise the end game may turn into helicopter money, which is more equity that is when youll get real goods and real higher inflation. It is an experiment right now. No one knows in fact where the end game will be patrick armstrong, thank you. We appreciate it coming up on the show, a new survey about optimism on a covid vaccine. What investors are saying right now about the likelihood there as we head out to break, take a look at this mornings s p 500 leaders and lagardes coty, net app carrier global among the gainers there. Stay tuned to Worldwide Exchange here on cnbc [narrator] the shark vacmop combines powerful suction with spray mopping to lock away debris and absorb wet messes, all in one disposable pad. Just vacuum, spray mop, and toss. The shark vacmop, a complete clean all in one pad. Bbut what if you couldg do better than that . Like adapt. Discover. Deliver, in new ways, to new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back, but bounce forward. And now, with one of our best offers ever, were committed to helping you do just that. Get a powerful and reliable internet and voice solution for only 29. 95 a month for three months. Call or go online today. Welcome back if you are just waking up or driving to work, if you can go to work, we are seeing a slight bit of negativity if these futures hold the dow down by about 140 points, nasdaq off by about six. Oil a key point of focus west texas intermediate at 1. 34 . We continue to track the surge in coronavirus cases and hospitalizations in parts of the country. Namely arizona, texas and florida, which according to the cdc are now above 80 above icu utilization. Some within 10 days of capacity in those intensive care units. Top bio tech analyst says while the surge may not lead to a second total national lockdown, it is likely we see something as serious. If there is going to be relockdowns, im of the view it will be more regionally based. If you have a county or locality where you are seeing a strain on the hospital systems, you may have to take that area to take more precautions a state wide or National Wide lockdown is unlikely what we are saying, i got to say, mark, this is an interesting time for biotech a massive spotlight has been shined right down on it. How is that changing Investor Sentiment and responding to such a degree of focus on the entire industry it has been a lot of investor interest in the space. Not just from Traditional Health care investors we see this in flows into the sector also in index performance, we follow the index and it is up 15 for the year. Since midmarch, it is up 46 Biotech Companies have raised 15 billion in a Strong Capital environment. The environment for Capital Raising is there a lot around what is happening from covid19. What are the expectations. Are we going to get a vaccine sometime soon is there a threat of a second wave or extension of the first one . These are people who understand the science. 98 of those surveyed thought we would have a vaccine over 67 thought that would happen over the Third Quarter this year or next. A lot asked when another they are ptherapeutic would be approved i think those are both positive signs from a group that understands the difficulties in understanding these types of treatments weve focused on the companies and right fully so that are in the coronavirus eco system directly working on the vaccines or treatments. What is the outlook for the rest of the biotech industry. The vast majority are not working on covid19 or coronavirus issues is there still a Bright Future for those types of companies i do believe so since the down turn has not been necessarily for covid19 related companies. I think the crisis and the pandemic has shined a spotlight on the importance of the sector and of having the latest cutting edge developed and that is exactly what these companies do. Thank you for joining us this morning. We appreciate it still on deck, amazon reportedly buying a selfdriving startup for mo trehan a billion dollars. Those details coming up next thats been through multiple market cycles for over 85 years . With capital group, i can. Talk to your financial professional or consultant for investment risks and information. Weall around the world. Ally tough time right now, tant and covid19 is still impacting so many people. If youve survived it, then youre the heroes we need. The plasma thats in your blood can literally save lives. But we have to act fast. So please donate. You fought for your life. Now, lets Work Together to take down covid19 to donate plasma go to thefightisinus. Org good morning welcome back to Worldwide Exchange on cnbc. Making headlines this morning, amazon has reportedly agreed to buy selfdriving startup zoox and will help with its Autonomous Vehicle technology. Virgin successfully completed the second glide flight test in new mexico and plans to begin commercial operations this summer aims to be profitable by next year those shares up 5 premarket. Pg e has raised 5. 5 million and plans to emerge from chapter 11 bankruptcy next week shares up roughly 3 in top trade. Now to the headlines phillip mena is with us with the latest good morning to you the Trump Administration is asking the Supreme Court to strike down obama care amid a pandemic and recession if justices agree with their argument, an estimated 20 million americans would lose Insurance Coverage and nullify protection from preexisting conditions coming one day after the nation hit a new record for the highest daily total of cases the George Floyd Justice and policing act passed last night banning choke holds as well as noknock warrants like used in the shooting of Breonna Taylor in kentucky. One has already shot down the plan saying it goes too far. The disney splash mountain ride is getting a makeover changing the original song of the south theme to princess and the frog after an outcry of the 1946 film betrayal of africanamericans, so much so, song of the south will not be featured on disney plus but will instead feature the song of the black disney princess. You can see banks lower in the premarket trade more when we come back after this can i find an Investment Firm with a truly longterm view thats been through multiple market cycles for over 85 years . With capital group, i can. Talk to your financial professional or consultant for investment risks and information. Talk to your financial professional or consultant bbut what if you couldg do better than that . Like adapt. Discover. Deliver, in new ways, to new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back, but bounce forward. And now, with one of our best offers ever, were committed to helping you do just that. Get a powerful and reliable internet and voice solution for only 29. 95 a month for three months. Call or go online today. Good morning financial stocks under pressure after the fed puts new restrictions on big banks. Nike is posting a surprise quarterly loss the company hit hard by the pandemic and ford with a new pickup truck with hightech options including handfree driving. It is friday, june 26, 2020. You are watching Worldwide Exchange on cnbc. Welcome back to the show im dominic chu in for Brian Sullivan the futures are indicating what could be a lower open for the major indices in the u. S the s p is implied open lower by about 10 points. This morning, down roughly 100 points lower on that nasdaq down by more than 100 points right now check out this particular chart. Checking out a chart of Growth Stocks versus value stocks these two etfs, the iwf which tracks growth and iwd which tracks value you can see always a slight tilt towards better performance in growth that gap is slidely wider here since the pandemic, that has widened out considerably a trend to see if those growth Oriented Companies continue. Meanwhile, check out what is happening again divergence wise when it comes to Investment Grade corporate debt generally speaking, those bonds have been performing from a price basis better but since that pandemic here, weve seen the gap again widen out. Not exactly bad bad credit problems right now but still some of the noncredit Worthy Companies are fairing worse. Also watching what is happening with financial stocks closely following yesterdays stress test results joining us on the news line. We know about dividend issues and buy back issues. I would say the dividend issues by the way. The headlines said, quote, the Banking System remains well under even the harshest of down side scenarios despite that with some headline grabbing aspects that had put pressure on bank shares overnight. Given the uncertainty, banks would have to resubmit their plans and be retested this year and late september markets with the uncertainty and the plans now for the next couple of months as for the current level, banks will announce their individual fed results next week but based on the back out, it looks like goldman sack is just below their required scb but will not have to wrraise capital. On the flip side, the biggest positive surprise is Morgan Stanley because their required scb fell as opposed to levels rising that is likely due to the e trade acquisition. Second, a limit on dividends which now cannot be higher than trailing four quarters of earning, ie cannot be above 100 payout ratio there is plenty of head room, each quarter of low earnings replaces the last that will change wells fargo was 51 last year, they are trading today 52 cents it is expected theyll have to reduce their dividend. Overall, down 2 overnight in the scheme of 2020, not necessarily an enormous move so wilfred, what is interesting is how specific it was to a specific kind of stress weve seen with the covid19 pandemic they are looking at a vshaped recovery also looked at a ushaped recession, they looked at a doubledip, a wshape. What does that tell you about what the fed is thinking given the current environment we are in right now caller those extra pandemic methods of recovery were led in on top not part of the original outline. I think the shape around that result what a lot of analysts are pointing to are the finance closure. The second chunk of tests is thought by analysts that the higher cards would be out for the slightly more exposed area having to go through a second test in the same year is a big surprise and big blow. The positive spin on all of this is that the fed needed to thread a needle to make sure no banks would increase their dividend or reinstated buy backs that led to an uproar. They wanted to disrupt abilities to lend or spook investors more broadly. One could argue seemingly that fed has achieved that. We dont ghetto official releases to the banks until next week and that sort of sums up reaction overnight thank you for that. We want to talk about what investors are doing. Joining you now michael, you heard what wilfred brought up there. That capacity of whether or not the capacity to lend, what is the key take away from you is it as big a deal as it would be in the markets. Those cant be overlooked at the end of the day, we continue to believe this is an earnings as opposed to capital or liquidity issue the fed has taken measure. Going through an additional stress test to prepare and navigate the choppy waters. Over the past several months and years, weve known banks in america are better placed. Investor what is getting in the way of investors saying i want to buy banks. That is a good question this is the longest recovery weve had going back a hundred or so years. There is a fear that credit losses would materialize i dont think anybody thought it would happen as sharply and quickly as we did with covid19. In the cause of the great financial crisis you have a fairly wide coverage universe there. What exactly will be the strength, the relative strength in this kind of environment and what type of banks would fair the worst if we did see a w or a doubledip scenario . It is going be about loanloss