We are live in beijing with the fallout. And how meta is planning to keep folks using the platform longer here is a hint artificial intelligence. It is tuesday, august 1st, 2023. You are watching Worldwide Exchange here on cnbc good morning welcome to Worldwide Exchange. Im frank holland. Lets kickoff with the new month of trading with the check on u. S. Stock futures taking a look right now. Lower across the board all three indices at the lows of the premarket it is early. The dow looks to open 88 points lower. This after stocks locked in a month of solid gains with the s p and nasdaq capping off five straight winning months. Longest such win streak since 2021 when it comes to yeartodate, the yousuperlatives get better. The strongest gain in the first rece seven months of the year for the s p. For the nasdaq, look further back up 37 y year to date the best since 1975. Big gains so far a lot of history made this market year. We are looking at the bond market the 10year treasury benchmark hovering below 4 . 3. 97 . Inverted yield curve is something to watch energy is coming off the best month since january of 2022. Wti back above 80 81. 50 lower right now, but significant gains with Oil Brent Crude at 85. 25 natural gas is making moves up 1. 25 . That is the set for the start of august now for the check of asia and europe is Arabile Gumede in our london newsroom. Good morning, frank. It is a story of gains in the month of july which was positive stateside. So, too, in asia the only dip is the nikkei in japan dipped marginally. Remember last month where we saw the bank of japan tweak the yield curve control policy which had some influence on the market 0. 5 on the negative and upside is where they decided to let things roll in japan the rest of the asian market is up hang seng is 6 higher in europe, we have a possiitive stance 1. 8 gain for the dax in july. It reached the peak levels in yesterdays trading picture. It did have the first negative session yesterday. The ftse mib out of italy is very interesting 5 gain thus far here. Italy is hitting the highest level since june of 2008 that is continuing the upward movement of positivity across the board in europe. Positivity in asia as well that will be question marks over whether that will continue for the month of august. Frank. Arabile, thank you. Arabile gumede turning back to wall street. Gearing up to kickoff the month to keep the track rolling. Data shows for the first 90 years of the dow from 1896 to 1986, august was the best month of the year rising at 1. 8 since 1986, the worse falling nearly 1 . For more on whether history may repeat itself, lets bring in Mark Avallone from potomac investments. Good morning. Do you see an august swoon . We may. Im not sure if it is related to the calendar im sure it is related to the r run up we had and euphoria not what i like to see as an investor where i want to see fair valuations for what the expected earnings are against reasonable flaginflation back d. The market is disconnected from 2022 and we were worried about rates and it effecting growth and tech that fell on its face. Conventional wisdom may be an evenemy here for the investor you need to be curious about the wage reports were getting of higher wages and question the quality of earnings were seeing and see Going Forward. You mentioned wages and that is something you are watching closely. We had the eci report from the department of labor. It showed a strong uptick in last five months with wages and compensation how do you see that weighing on the markets Going Forward . I think all this data were getting now is looking backwards. Yes, overall inflation has come down, but you are making a great point about the employment cost index. It has risen significantly had a little bit of positive movement in the last month or two, but that was before the massive Union Contracts with the united pilots and it made american go back out and give 1 billion to the pilots. U. P. S. And teamsters did a solid job for members which is what they are supposed to do. Now were looking at uaw negotiations even if you are not union and you see the 10 that the pilots got, you will look for a better ben papefits package. We have massive wage gains right in front of us you are looking forward at the forward impact is the issue revenue or margins or earnings . All three . What is the impact being and what is the impact to the market with the higher wages . That is a great question. It will not be no impact it will have an impact what will it be . Higher earnings . That could be at the cost of higher inflation at the least, it will be infla inflationary the worst case is it is inflationary and it hurts earnings im not sure higher wages have ever been a positive for corporate earnings in fact, a strong correlation with the cost of wages and stock prices. Fair point. What are you looking at with opportunities . You are looking at the xli big one up xli up 17 in the past month it had a strong run we talked about it here. I think it is a beneficiary of the stronger economy, but the infrastructure bill. Interestingly enough, there is a high defense component in the industrial sector which we like because of the situation around the world. We feel there will be Strong Demand and Companies Like boeing and raytheon stubbed its toe they will have a big demand with russia and ukraine and other countries wanting in on drone warfare. I think the industrial has that tailwind if the economy slows. I think having a broad divers diversification here and not focusing on tech we are looking for items for viewers outside of the magnificent seven. And we have more to come including the word of the day and the chips powering the a. I. Revolution and the u. S. Military drone fleet. Hear what jerry storch has to say about consumer spending. We have a very busy hour when Worldwide Exchange returns. fan 1 there ya go thats what im talkin about josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. Welcome back to Worldwide Exchange. To a developing story and china announcing exmport controls ar drones to safeguard nationality security this comes on key metals used for a. I. Chips eunice yoon is joining us from beijing for more on the story. Eunice, good morning reporter frank, the export controls on the two key metals for the chip industry, as you said, go into effect today the authorities have been stressing that they are not targeting any one country and said the metal curbs are protecting the country they described this as a first shot and quoted experts saying they may hit entities from countries that cracked down on china which implies this could be retaliation in terms of the impact, it is still unclear. The expectation is that this would have a Ripple Effect through the chip supply chain not only for chipmakers, but suppliers and including those listed in the u. S. However, what we are seeing is that there is a pattern forming, though the chinese have been warning of counter measures. We have not seen impact except for what appears to be retaliation against micron and also now these export curbs. The concern, though, from the chinese side is that we could potentially see an impact of the chinese of a boomerang effect because in the past, about a decade ago, the chinese have retaliated against japan on rare earths and there was an increase of propduction outside of china there is a concern within the industries here that china, with this export curbs on the two metals, could see its market share decline over the years again, that is in the long term. Eunice, i want to ask about Something Else we reported on. Contraction and the chinese Manufacturing Sector state officials held a News Conference to study and formulate policies, but no clear indication of stimulus are you hearing anything new about possible stimulus . Reporter we are hearing more and more, but coming in drips and drabs. They will boost credit for finance and finance for some of the small and medium enterprises. Not a lot of detail on that as of yet what people want to see is more direct fiscal support for the companies as well as the consumers to really get the demand side more robust as opposed to the supply side one other note, frank, you mentioned at the top of the segment about the drones and chinese who with have announced export curbs on drones this is for National Security purposes and drones targeted are for military use, but the components which will be restricted could mean commercial use drones from china will also be impacted. Certainly a lot to watch. Eunice yoon live in beijing. Great to see you turngsing attention to tesla moving down in the market now 1 a preliminary evaluation is opening on the model 3 and model y after receiving complaints of loss of steering control and power steering coming up on Worldwide Exchange, the big money movers and why this stock is set to open up at a fresh alltime low. We have the morning mystery chart. Wl ve iwh wcome back f you co analyzing a nks data. No big deal . Go on. Well, what if you partner with ibm and red hat, use a hybrid Cloud Solution to connect data across clouds, then analyze all that data with watson. Okay, but this needs to meet our. Security standards . Yup. Compliance standards . Mmhmm. So they get the insights they need. Yup. In real time. Check. To make quick decisions . Check. Aaaand check. Thats the solution ibm and a global bank created. What will you create . Ibm. Lets create. man what if my type 2 diabetes takes over . woman what if all i do isnt enough . What will you create . Or what if i can do diabetes differently . avo now you can with onceweekly mounjaro. Mounjaro helps your body regulate blood sugar, and mounjaro can help decrease how much food you eat. 3 out of 4 people reached an a1c of less than 7 . Plus people taking mounjaro lost up to 25 pounds. Mounjaro is not for people with type 1 diabetes or children. Dont take mounjaro, if youre allergic to it, you or your family have medullary thyroid cancer, or multiple endocrine neoplasia syndrome type 2. Stop mounjaro, and call your doctor right away, if you have an allergic reaction, a lump or swelling in your neck, severe stomach pain, vision changes, or diabetic retinopathy. Serious side effects may include pancreatitis and gallbladder problems. Taking mounjaro with sulfonylurea or insulin raises low blood sugar risk. Tell your doctor if youre nursing, pregnant, or plan to be. Side effects include nausea, vomiting, and diarrhea which can cause dehydration and may worsen kidney problems. woman i can do diabetes differently with mounjaro. avo ask your doctor about onceweekly mounjaro. I was having relationship issues with my old bank. It was just take, take, take. So i moved to sofi checking and savings. Get up to 4. 40 apy, and up to 2m in fdic insurance. Sofi get your money right. Time for the big money movers. Share of yum under pressure after lower than expected Second Quarter revenue and issued a muted Third Quarter outlook. They will take plans of the Summer Season and look to open up 1,100 stores this year. Shares are down 3 . Now to the morning mystery start. Z chart zoom info taking a tumble ceo said they delivered another quarter of growth and Free Cash Flow generation. Zoom info with shares down low level 20 . Similar picture for Western Digital. Revenue outlook due to weak demand for the cloud business. The companys ceo says large Cloud Service providers are scaling back on spending to clear out excess inventory which is causing Western Digital to cut spending shares are down 1. 5 we are morne than halfway through the earnings season and there is a conflict with the consumer spending. We have data from the cnbc allstar team. In general, Strong Demand with travel with airlines with Robust International traffic and cruise operators reported solid rates and comcast with the theme parks and livenation also reporting record numbers i spoke to the imax ceo after earnings he noted a paradigm shift with spending the outlook appears to end there. Mcdonalds has a challenging macro environment and cocacola and pepsi reported an increase of bargain spending. 3m and whirlpool and Harley Davidson is seeing an impact on demand and affordability lets tie this together with jerry storch he is the former target vice chairman and head of storch advisers jerry, good morning. Good morning. Lets talk about the macro head winds harle harleydavidson and lvmh and whirlpool. Are we seeing a shift from goods to Services Continue and do you expect that to continue for the rest of the year we are absolutely seeing that it is not as simple as consumers doing well or poorly it is clear the consumer is stressed lets give you a framework shifting from goods to services. Shifting from wants to needs with the stress. You see that with the services purchases for housing and medical care a lot of goods for consumables are for food you overlay the pandemic rebound. Products did well during the pandemic home goods or toys when people were stuck at home are doing poorly now other things like going on a travel experience or the movies or concert those are doing great. Almost everything can be explained by that. Auto sales are up. You couldnt get a car during the pandemic that is a rebound effect everything fits in the framework. Catch up spending with autos and experiences. I want to talk about the payment companies. Visa and mastercard called the consumer resilient that means they are going through something. You mentioned they are stretched. Credit card rates at a record 21 right now. If you start to see the consumer weaken, what withareas do you ec to weaken and when you look out longer term, how does that impact the earnings in the market keep to the framework i gave you. Products with wants. Apparel will only get worse. Other discretionary products or big ticket items which are rates sensitive. Whirlpool. Buying Home Appliances it will get to cars when people have gotten the garages full it is pretty easy to figure out what is going to happen. The Company Standing for value and a big fan of walmart they out performed because they stand for value. Even tjx which sells clothing, tj maxx, they will do well it is hes toeasy to figure out dont use inflation adjusted dollars. It is funny money. Look at units. P g telling you units are down, but making it up on price. Jerry, why are we seeing strong results from experience companies . Hotels are up. International flights are up why are we seeing that if the consumer is stretched and you believe they are starting to weaken that is in the overlay category pandemic rebound we couldnt do those in the p pan pandemic we have pentup demand the year over year growth in the categories with the airliness an an come d accommodations are slowing. Lumping in travel with housing which is seeing great inflation or healthcare which is up sharply from pandemic rebound where i can go out and get the new knees i always wanted or rising prices. If you look at the data, it is straight forward. Jerry storch, thank you very much. To get the look at the headlines outside of business is Jessica Leyton good morning. Frank, a major tragedy avoided in memphis of a man approached the door with a gun after failing to get inside. He fired shots and no one at the school was hurt. Police shot and wounded the suspect at a traffic stop when he got out of the truck with his gun. He was taken to the hospital in critical condition. In the reversal of the trump era position, the headquarters of the Space Command will not move to alabama and remain in colorado of the the statement said the decision came after consultation with President Biden and senior military leaders. Earlier this year, the Biden White House said it was reconsidering the move to alabama due to opposition to the states near total ban on abortion the white house denies that was a factor. Now to a not so sweet situation on the california highway where a tractortrailer carrying 40,000 pounds of chocolate burst into flames. It forced traffic delays and caused a happy of chocolate to melt on the road the trailer separated from the big rig and the fire started officials were able to keep the fire from presentspreading to te nearby forest. Frank, glad nobody was hurt. I think that is the important part nobody was hurt. Jessica, great to see you. Straight ahead here on Worldwide Exchange, why elon musk will have to wait a bit longer to reshape and highlight the San Francisco skyline. If you havent already, follow our podcast on apple or spotify or oerth podcast apps. More Worldwide Exchange coming up after this break. Old school hard work meets bold new thinking. Partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. Because grit and vision working in lockstep puts you on the path to your full potential. Old school grit. New world ideas. Morgan stanley. Let Innovation Refunds help with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall u