Network Dagen Mcdowell as always, pwc partner and cfr Mitch Roschelle and lindsey bell maria markets this morning, quiet situation going do what could be fireworks in next 2 days, dow industrials down 71 points, nasdaq down 27, Federal Reserve jay powell testifying before the House Financial ServicesCommittee Later this morning, markets are watching specifically to see if powells comments indicate signs of a future rate cut, a lot of people yesterday, Jon Hilsenrath said, well, if its not july, itll be september, lindsey, you have a lot of thoughts on this. Yeah from the testimony today and tomorrow, im not speaking anything new out of fed chairman, he will stick to the language that we heard in june that hes here to support the Economic Growth that weve seen so far, i dont think we will hear anything about the change of Monetary Policy or any type of rate cut, how much it will be if there is one to come, and the thing i think that the investors in the market are really going to look for is going to be what he says about the risks to the domestic economy at this point in time because he pointed to a global slowdown and trade tensions as reasons to reason to consider rate cut, parsing those words, we dont necessarily a rate cut is needed at this point in time, by the way, inflation is another reason why they are considering rate cut but we dont think its needed at this point in time, habit impacted growth. We will find out how divided the fed is on the topic, the minutes are also coming out tomorrow, i think its 5050 split, do you cut or not cut, im with you, lindsey, i dont think hes going to have a script and stick to it. Dagen many people have made much about what they would call the politicization, did i say that right, of the Federal Reserve with President Trump talking about jail powell to cut jay powell to cut rates, to cut rates, you know democratic lawmakers will going to harp on the fact that President Trump called out jay powell and try to make that an issue and get powell on the record. Hell really got to navigate this very carefully because you know try to make it about President Trump, they do about literally, even shopping at home depot which we will get later. Especially maxine wattes during. Dagen Charles Payne used to make light of when congresswoman watters would say grill other fed chiefs because asked questions that they werent prepared to answer or correct her. That will always be interesting, if the fed chiefs testimony can deliver some fireworks, maybe that will happen. Maria we got light on china, resuming trade talks, representative lighthizer and secretary Steven Mnuchin spoke with counter parts yesterday, larry kudlow weighed in on it last night, watch this. These are preliminary discussions, staffs will be meeting, details will be poured over, probably visitations will be arranged, this is the the restarting of a process that was going pretty well, a lot of headways as you know and then stopped out in may when we believed china and team reneged on a number of agreements. Maria they didnt want to put into law, thats unlawful to steal from the United States intellectual property, we will see what happens, the u. S. Allowing sales to Chinese Telecom huawei now where theres no National Security threat, what do you think markets do with this . I think thats somewhat baked in because a lot of that has been leaked. Nothing that came out of yesterdays conversation that we really know, we dont have the transcript of it and i think the market yesterday was a little edgy because of trade was back in the news cycle but until we know something definitive, i dont think markets are going to really react. Dagen the word constructive, if you ever watched the robust [laughter] dagen sounds meaningful, but its not really that meaningful. Its not bad but what does it really mean . Hey, at least talks are like continuing or at least progressing. They are talking. I think you will hear how trade is impacting the u. S. Over the next several weeks as earnings comes out and you hear from coos and cfos on the ground realtime operating in this environment where tariffs have been in place for over a year. Dagen if you read the details in the book, any pressure that businesses are feeling or particularly smaller businesses. Its very regional, you can see where in the country, if you get the farm belt and the country, they are starting to feel pressure you know it has something to do with trade. Political implications. Maria whens your estimate of earnings . Decline 1. 8 , i think we will get positive growth when its all said and done, the s p 500 has beat initial earning estimates since 2009 so i dont expect any change this quarter, what the important thing thirdquarter numbers come down expecting slight decline, Fourth Quarter is still expecting almost 7 year over year f trade continues and tariffs remain in place to remainder of the year i expect the numbers to come down sharply. Maria title does the baltics suggest the worst is over, increasing dramatically since the First Quarter, indicater of Economic Growth, shes basically saying second half may not be as bad as some people were expecting. Lets talk about what you mention, dagen, President Trump lending support on home depot, using twitter, facing backlash over contributions to the Trump Campaign and subsequent calls to boycott of the retailer. Truly great patriotic and charitable man, Bernie Marcus, cofounder of hem depo, at the age of 90 coming under attack radical left with often used weapons, they dont want people to shop at the great stores because he contribute today your favorite president , me. These people are vicious and totally craze but remember there are far more people, deplorables in the country, quote unquote, markets marcus voiced support for the president and talked about the president s policies, dagen, actually moving the needle on Economic Growth which is, of course, obvious to all of us. Dagen i need exedrin to deal with this. Bernie marcus along with kim langone created one of american Success Stories in terms of not only employing americans but empowering americans, how long ago did Bernie Marcus leave . He hasnt been involved in the company 15 years, guess what, youre hurting the people who work there, youre not hurting Bernie Marcus, hes not givingateway to President Trump, hes giving it away to charity, lets spit on success in this country, thats where we are. Maria why cant he have an opinion to say that President Trump is doing a good job and moving the needle on Economic Growth without being just roasted over the call . Dagen youre only allowed to have free speech unless your free speech lines up with what they think and say and it is a problem particularly on social media of the left really dominating and having the socalled loudest voice. To be fair, President Trump has come out against nike, Harley Davidson for their different operating practices, so he has also done the same dagen and, and on this program i have called the president on all of that, the leader to have free world, commander in chief dont take sides when it comes to business, dont go out of your way to hurt business. But this boycott call is just absurd of the absurd. Do you agree . Think about the supply chain there, Small Business owners who are contractors, those are the people who shop there, those Center People who work there, so youre really harming the engine for Economic Growth at the local level. Maria we will take a break, battle on the hill, two highprofile lawmakers trading barbs over progressive democrats, thousand war of words, disappointing Second Quarter, despite being one of the most successful ipos of the year, stock is getting tumbled this morning, we will be right back. I cant tell you who i am or what i witnessed, but i can tell you Liberty Mutual customized my Car Insurance so i only pay for what i need. Oh no, no, no, no, no, no, no. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. Maria welcome back, facial recognition in the spotlight today, governments use of controversial technology, cheryl with the news, cheryl. Cheryl morning, officials from department of Homeland Security, includes customs and bonder patrol and tsa expected to face tough questions, Immigration Enforcement representatives will not be on hand but the agencys use of technology to scan drivers license databases without individuals consent is expected to be a point of discussion. Some lawmakers are calling for regulation. All right. Shares of levis sharply lower, almost 7 , the company suffering growing pains following initially Public Offering in march, sales growth will slow due to weakness and the company also spent 29 million in cost associated with launching that ipo. Well, one of the biggest pieces of news to hit streaming friends is moving out of netflix. [laughter] [laughter] cheryl yeah, friends is set to move to warner media newly announced streaming service, hbo max, its going to feature content, media library, movies, cnn, tnt and a lot more, no word on how much is actually going to cost to subscribe, early reports say it could cost than hbo goes currently which is 13. 99 per month, maria, i pivot back to you. Maria thats really funny, everyone can relate to that, thats really funny. Listen, its getting crowded out there in terms of streaming service, with the valuation nesm felix is out, you have to watch your back if youre netflix. Theyre being disrupt bid the oldschool cable companies, the question is now that everyone is separating, at some point you will have to bundle back together, right . You cant have 10 different i cannot have 10dollar plus subscriptions just so i can get one show, right, at some point everyone will want it back the way it was. Dagen i did resubscribe to hbo now because i wanted to watch pretty Big Little Lies little lies. Some show that you need to be be able to watch and rewatch, is it friends, because you have friends in the sopranos together, thats kind of a marriagemade in heaven. Friends were one of the most watched shows and both of them are out. Maria thats a big bite, earning season in focus, europe is down this morning, we preview Second Quarter earning reports, we are in it, now, in the Second Quarter reporting season, then it is party time, soccer fans gearing up for parade celebrating the womens world cup champs, we will talk about it, back in a minute. And. 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Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Maria welcome back, take a look at future, theres uncertainty with 2day fed meeting where jay powell will testify in front of congress, we are waiting to hear what the chairman says during first day of testimony on capitol hill today, joining us right now anderson Capital Management cfa Peter Anderson and good to see you this morning, thank you so much for joining us. What are you expecting from jay powell and whats priced into the markets . Well, im expecting some really bland testimony, i think that hes really in tough situation, maria, he isnt the first chair thats been under pressure or criticism by president , if you look at history, lbj, if you look at history, he actually physically assaulted his fed, from that perspective trump isnt being that tough on the guy, however, its a public display and because of that hes going to be extremely cautious, try to straddle both sides of the field as they say. Maria whats your take on the broad backdrop right here and whether or not the economy really warrants a cut in Interest Rates, europe is not generating much growth, we know that, asia is questionable where china is and the u. S. , lindsey just said shes expecting earnings from Second Quarter to be down 1. 8 , Third Quarter to be down 2 tenths of a percent but the Third Quarter to show a gain, whats your take. I dont think earnings will be that tough, that might be the average Earnings Growth or decrease, when you look at individual stocks, for instance, i own 18 stocks, im hoping that all 18 stocks will show better earnings performance and down 2 , thats one point, the other point is i think the u. S. Do not need Interest Rate cuts right now and the momentum that weve had recently, youre looking at the fed futures market, we always reference that as an incentive or indication that rates should be cut, well, maria, if you look at the history of that too, you find the feds future market really doesnt have a great track record of predicting those kinds of things, i would actually throw that out of the picture, take a look at the economy, Unemployment Rate is exceptional right now, job growth might have slowed a bit but in general i think we are doing very, very strongly. Peter, good morning, Mitch Roschelle, i want to pivot a little bit. [laughter] right now we have the s p 500 up, but if you look at the small cap stocks they are down and down considerably double digits, going into the Second Quarter earning season, are we going the see earnings departing a big difference in time of large caps versus small caps to make sense why theres big difference between performance of the stocks . Yeah, i think thats pretty obvious, the classic story is largecap stocks, multinational, they are going to be under much more pressure from International Perspective but the small caps, they are really in sweet spot because they generally are very concentrated on u. S. Revenues and as i said, if you buy the thesis that the u. S. Is strong, it makes obvious sense to me that small caps should do very well continuing on in this economy especially when you look at the alternative, theres a lot out there thats uncertain, that trade negotiation isnt really wrapping up the way most people thought it would, so small caps look to be very attractive space right now. Maria peter, when you say the economy is doing well, what do you make of the bond market, though, what are we talking the inversion now at a month, the yield and shortterm treasury higher than longterm notes for more than 30 straight sessions, as much as 1 quarter percentage point, most since 2007, while the economy feels real strong, whats the bond market telling us . Well, the bond market, i mean, again another history lesson, this is going to contradict what i said earlier, maria, if you look at inverted yield curves, perhaps they do pretend recession, we have to put that in perspective. We get too caught up in the Mathematical Modeling details which the fed is very well known to do, all this stuff has to be in moderation, right, certainly we look at inverted yield curve but i would not run the country based on the fact that yield curve is inverted. I do not think that that gives you 100 accuracy at all of where the country is heading, my sense look at the window, Interest Rates are very, very attractive and things are very strong and continue to stay strong despite pressure from people saying that rates should be cut at this point. Peter, lindsey bell quickly, where do you put new money, if you have dry powder on the table, where do you put it to work, the stock market is up 18 year to date, the bond market is giving some mixed signals, what do you . Individual stock selection, thats the key point opposed to putting in etf. Start using common sense, let me give you an example, the cybersecurity, we