Were peppy boys. Three down weeks in a row for stocks. It looks like weget out of the gate in a positive way. Dow would open higher by 133. The s p is good for 21. Still early with the nasdaq which has been beaten up is up 89. Bond yields here come after declines of 2 last week for each of the major averages. Treasury yields spis part of th story. 10year treasury eased off last week, but still at 4. 29. Steve. The upper end of the range recently. 4. 30. Some people telling me 4. 50 is not out of the question. A lighter touch from the China Central bank. Lowered the oneyear prime rate by ten points. Economists expected 15point cut. The economists expected a 15basis point rate cut to the fiveyear prime rate. Major indices in china were down across the board. Palo alto here for liesmaniacs want to talk about the fed. Palo alto. You must have been talking about this. It is odd they did the release on the summer friday in the afternoon. It wasnt a bad one. It was a good one. Everybody thought it was a bad one. Why would you do a release on a late august summer friday . It never happens. I like the way they did it. After the closing bell. It turned out much to do about nothing. Palo alto guidance came in higher. The stock is up sharply this morning. I know this guy. Big hitter. Big, huge swing. Did you play with him . No. He hits it far. Address the buzz and he is a good ceo. Saying they want to give ample time for analysts to have oneonone calls over the weekend ahead of the sales conference that began yesterday. That is what i was going to talk about with the fed. I thought they had gone too tfa. Now im worried about this is just a stopping point at 4. 2. Now im worried it may turn into something. You know what i mean . The inflation rate at 4. 2 . No. The bonds may go to 6 eventually. If everyone is saying it is a great buy is if Interest Rates go down from here if were near the top. 4. 3 for ten years is not 7 which is what stocks average. Nothing good about it. If rates go down from here, you can make money in the bond market. If they go up historically at 6 or 7 , it is not the time to buy here. I talked to Bond Investors last week. They like it . They are nervous. The market never hits the fundamental rate on the first go. Thats what im thinking. You know, one guy who does a lot of bonds said 5 is cheap to me. I might dabble in there. Another guy said me and my clients, as long as i can get five and change on the shorshor short end, i cannot take the risk on the long end. You lock it in. Let me go back to the first guy who was talking about the fundamentals. 2 yield. 4. 30 is not crazy. It might be that is where we are. You might keep up with inflation. You wont build wealth. Jeremy siegel is going to be on. You wont build wealth. Im here. Youre here. They think long and hard about who will do each one. A Committee Meeting sdplchlt ri. It started with caplan. We have Jared Bernstein coming on. I am interviewing him. Lets talk to him about it. I can run through the guest list right now. Who is doing what, scott . Another guy . Joe is leading china. Senator mike braun. China. Is this a nightmare gone bad . A communist socialist gone bad. Now a lot of debt. No one living you can buy a nice apartment if you want to live in one of the provinces. I lived in moscow. I was comfortable with people trying to i dont know what they were trying to tdo. Were you insinuating rates to get back on track that it is a threehour show. The risk this week is that yields go up more because powell says something thats more hawkish in jackson hole . Last year it was eight minutes. A sharp do you have the chart in the background . I want to show the fed funds last year to this year. Last year going into jackson hole or just after, 3. 55 funds rate by the end of the year. Now were up to 5. 40. You see the drop in the middle. That is the Silicon Valley bank. I would say somewhere along the line p that is a success of powell. He was able to convince we are going higher for longer. I dont know he has a need to convince the market of much this august ju august. Just doesnt mean he has to make a major statement. He is in waitandsee mode. I didnt make this chart. Look at the inflation rate. Inflation rate last time at jackson hole was 8 . It has come down 5 depending on how you look at it. He has that success there. The recession call is still out there. Look at that. Why doesnt he use jackson hole to declare victory before they snatch defeat from the jaws of it . Because this is a good question and jason has a piece on the journal this morning. He doesnt want the market to think they changed the inflation target. He this the feds credibility is on the line. Just because they are not hitting to doesnt mean they will change to 3. Are on the way to 2 . They are on the way to 2. The threemonth annualized rate is down. I dont think he will declare victory. He may like the fact the higher rates are out there on the long end. That helps bring down the question i have going in and it is not like we have big questions, but are they ready to say the economy has operated well above trend for last year . Now we will do a 3 or 4 this quarter . Inflation has come down. Are they ready to get rid of the model to run below potential . Do we have to bring down growth . Do we have to have the rate increase or am i chilling and let the process play out . As a worrier, i cant believe after everything in the last ten years that you can bring inflation down and the economy doesnt have recession and we all live happily ever after. I wonder maybe we are replacing printing by the fed with the fiscal stimulus of. That will take time. Sooner or later, a bigger reckoning is happening. The fine gymnast on the balance beam has done the landing part 11 times and stumbled six or seven. Three or four times the gymnast has stuck the landing. You are right, i think, to bet against the landing. It looks like at the moment, joe, that we did that story i want to believe. I think it is good do be a little afraid. What they do on the balance beam i will never understand. Never. Have you tried to get up on one of those things . They spin around. I cannot get up on it. The balance beam . No way. Steve, take us to break. We go to break . We did none of the stories. You never go to break at 6 10. Coming up, more on jay powells speech at jackson hole. Later, we take you live to Southern California where Tropical Storm hilary is wreaking wre wre wreaking havoc. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. This is dr. Arnold t. Petsworth, hes the owner of petsworth vetworld. 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Purple mattresses exclusive gel flex grid draws away heat relieves pressure and instantly adapts. Sleep better. Live purple. Right now save up to 900 off mattress sets during purples labor day sale. Visit purple. Com or a Mattress Firm near you. On this weeks planner, several earnings reports of the we hear from Toll Brothers and macys and dicks sportsing goos and we will hear from kohls and dollar tree. We will have jobless claims and durable goods on thursday. We will have jay powell speaking at jackson hole on friday morning. We will have live coverage starting thursday morning from jackson hole. Joining us for a look at the potential market catalyst in the week ahead is the stifel economist. Lindsey, ill start with you. Why dont you tell us your expectation for jackson hole and the chairman speech on friday . You talked earlier about the fed not wanting to declare victory because they have not reached the 2 goal. The fed has made progress restraining price pressures off earlier peaks. The intention was not to get inflation down 8 to 3 , but to get to the 2 target. I think the fed has reason to be confident and they are continuing to make improvements. As we saw in the july fmoc minutes before the latest hotter than expect ed inflation number, there was still a significant upside risk to inflation. I do think the chairman is going to emphasize the need for more work to be done and potentially resulting in a higher for longer rate scenario. Karen, is this an event as far as the stock market is concerned . Is there only Downside Risk to the chairman talking hereand he will be hawkish and that is not possiblitive for the stock mark . It is not much of an event like last year where we were looking for guidance from powell. It will be subdued. We are looking for powell to give us guidance of progress with inflation. I dont think it will be as groundbreaking as last year. The market knows we have a way to go with inflation. It has stronger than normal Economic Data as of late. I think the fed chairman is only going to say what we already k know. Karyn, are you advising the fed is going to stick the landing here and it will come off the balance beam and stand up with its arms in the air and get 10s across the board here . Are you concerned more like joe over the end here . I am concerned. That not an easy stick on that landing as you were discussing. If we do see a recession, it is not going to be severe. We wdo have buffers. We may see a mild recession. It is not off the table yet. It is very difficult to thread that needle and have a totally soft landing. We know Monetary Policy has a lag. We havent seen the effects of what is going on with raising Interest Rates so much so quickly. Therefore, im cautiously optimistic. Lindsey, i want to ask the same question of you, but make it more geeky. What does the fed do as it brought down inflation as much as it has last year and unemployment has been flat and gdp so far this quarter is running crazy. The last several quarters it has been above trend. That is not comported with the forecast or their view of the economy should work. It certainly hasnt. I think they under theestimated number of supports that were deployed during the unprecedented time in the pandemic and immediate aftermath that continued to artificially extend to the consumer and broader economy. I think the fed underestimated the timeline needed to see the intended effects of tighter Monetary Policy. That doesnt mean the weakness has been deferred. There is an expectation the recession in early 2023 and pushed out to 2024 which is the expectation for the downturn. That doesnt change the fed focus and tighter Monetary Policy which is to raise rates and tap down investment and consumption and eventually see the slowdown in topline growth resulting in benign inflation. The fed has achieved a good portion of the intention. Getting us down from 8 to 4 . In order to reach that last 200 basis points and getting back to the 2 target, the fed will have to eventually tighten enough and reach that restrictive level and policy to slow growth enough in order to see that more benign price level. We will see the downturn. We pushed it down. Karyn, it is scott. How at risk do you think stocks are here . Some of the high flying names, we have a connecrrection territory. We know this is a weak time for markets. When i look at earnings, it is hard to be bearish. We held our own in qq2. It is hard to be that bearish. Companies are telling us they are resilient. The economy has been resilient. If we have a downturn, it will be mild. The china data is concerning. The guidance held its own in q2 and im optimistic we will have a good end to the year for the markets. Lindsey, your story here is it is the government and Government Spending which is responsible for the strength of the economy and that runs out some time in 2024 and thats when the economy slows down . Government stimulus was part of the artificial support. We have to look at what the consumer is relying on. They had a tremendous amount of savings estimated over 2 trillion. We have drawn down a lot of that. Consumers are turning to credit cards and taps into 401 k . The local stimulus or support coming down the pipeline. There is a number of temporary support to allow the consumer to remain resilient. When we look at the spending patterns unless the supports remain deficit, we resexpect th weakness to set in and eventually resulting in the benign pressure on the demand side allowing the fed to achieve the 2 goal. Great discuss, lindsey and karyn. Thanks very much. Thank you. Are they sticking around . We need diversity on our table. We have plenty of diversity. I have no hair. You have hair. You have the blue shirt. White shirts. Blue trie. Black tie. You want me to put my jacket on . I said, if you want to wear jackets, whatever you want to do. New tolerant joe. What am i going to do . Look what im dealing with most days . Coming up, a live report from beijing on Chinas Central Bank moves overnight. That is coming up at 6 30. First, we are tracking Tropical Storm hilary battering Southern California this morning. We will take you live to our friend jane wells. Janes great. I wo e erc tax refund, so i called Innovation Refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. 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The only way you can move a Society Forward is a true expression of freedom. sfx Stock Exchange bell ringing Tropical Storm hilary battering Southern California. Jane wells is joining us live from palm springs. I have seen rain twice in my life. Its bizarre . Reporter joe, this creek is bone dry in august. This is the middle of fire season. Nothing is normal this year. In palm springs, as we show you video trying to get through the flooded intersection yesterday, they got walloped. They get 5 inches in a year, but as california had the first Tropical Storm warning, there were all kinds watches. We had to drive around a massive boulder. Watch. Friday, a farmer sent me this video as south of here they are trying get everything out of the ground before yesterdays rains with the tornado watches and whipping winds. In the valley, they grow most of the vegetables most of the americans eat in the winter. We are getting hit hard and working overtime running double shifts and asking employees to please work to prepare the ground and get things ready. Reporter disneyland closed early. Sunday baseball games moved to saturday. The chargers still played at sofi yesterday and lost. Hundreds of Flights Canceled and many schools closed today and we had a 5. 1 earthquake in ojai. All things considered, it could have been worse. Thats the take. 5. 1 is thats rocking and rolling. To really get your attention. A 6. 0 is the weird scale. It is ten times as strong as a 5. 0. Reporter it doesnt sound like they had much damage. A 5. 0 will wake you up. Once you get to 6. 0, you will get destruction. We know the song it never rains in Southern California. When was that . Albert . Reporter im sure that was before my time. Not before my time. Okay. Ill let you have that, jane. Ill let you have that. Barry manilow sang it, too. He cov