ourselves. >> be the person he has a great dog be the person your dog thinks you are and you'll be a great human. good luck. good luck houston and corpus christie and we'll see you on monday make sure that you join us for squawk on the street now >> futures are up. yellen speaks in an hour gary tells the fte he is staying in his job and harvey makes land fall tonight moderate gains in europe

plus texas bracing for hurricane harvey the strongest hurricane to hit the u.s. in more than a decade. >> the e-commerce giant said to slash prices in whole foods as soon as monday investors though will focus their attention on jackson hole wyoming and the kansas city fed symposium. yellen will speak in about an hour from now while draghi will address the gathderring this afternoon. 3:00 p.m. eastern time powell is somewhere in there around 220 but the conference title is about synchronized global growth which some argue is a different, will mean jackson hole will be different this year. >> it seems different. they're trying to drain the drama out of it whether they suck said in that or not i don't know. >> it became something never

intended but it finds the markets in an interesting position of being overly comfortable with what they think is going to happen here. not believing the fed is going to normalize in a rapid way thinking that the run off in september or the balance sheet won't be much of an event. so we'll see if there's anything that yellen says or chooses to focus on that disturbs that. >> well, the topic of her speech is financial stability and we'll start to get the headlines around 10:00 a.m everyone wants to know does she give a clue as to whether they're going to raise interest rates again this year as many of the fed presidents have come out and said they would like to do and how do you explain what's going on with the lack of inflation given the jobs market is so robust economic growth is pretty much okay and yet they're missing on that mandate which sort of gets me to a chart that i picked up on cost of living and what we're actually paying. >> this is the best chart ever. >> this is the chart of the

week. >> it's why not we're not seeing inflation they're going to be cutting prices and you'll see prices cut across the grocery space as well. you talk about it making it cheaper to buy cell phone service. technology putting pressure on prices again so this is why prices are falling at least on the goods level. >> the bottom is the goods we pay for and the prices are falling. >> and you see health care in there too and the stuff that you're paying for or feels like it's getting more expensive is stuff you're not choosing to overpay for so it is almost like

a break on other disgresh nary spending the stuff you can put in a bag and take home is cheaper i also feel compelled to voice my distress over the events of the last two weeks i will not allow neo-nazis ranting jews will not replace us to cause this jew to leave his job. we saw a pop in some global indices early this morning as that interview dropped and last week they were looking for assurances that he would settle.

on the other hand if they're trading these dead lines it's because they think other people think that's what is important to trade off of it isn't anybody saying this tells us exactly what is going to happen on taxes but allows us to get 2018 earning estimates or anything like that but certainly in that positive for the economic side of the agenda. >> it's interesting that he comes out, clearly he wanted to get this message across. it's sort of carefully worded. he is considered a top contender for the next fed chairman when that comes due that decision comes due for the president early next year and aman made this point on twitter was he too critical of the president? and a president that demands loyalty? he wasn't overtly critical and didn't mention his bosses name by name but it was a stronger

condemnation of the administrations approach than say treasury secretary that defended his boss and said he's not a nazi sympathizer or white supremacists he says it will be up to ways and means to start writing this bill in his view. and she sees it as one of the bright spots part of the reason she is looking for 2% growth is she

does want to move a combination including because of the concerns about financial stability as well as heading off existent inflation at fasz and then i asked about market valuation. did she have concerns. here is what she said. >> it's one of the risks of having low interest rates as long as we had is it can gender fiscal imbalances and search for behavior so i'm focused on that as one of the risks to the forecast earnings have been good but with low interest rates you're discounting at a lower rate. >> janet yellen and mario draghi on what janet yellen is going to talk about she is going to talk about financial stability. we know that but the question is how far she goes there thinking about the possibilities we know

she has had concern about dodd frank. advocate to support some dodd frank but more concern about the roll back or deregulation and then the question does she mention this issue of market valuation concerns on mario draghi my understanding is he's unlikely to give the market what it wants which is some cue on when the ecb will reduce quantitative easing it's supposed to happen and is expected to happen next year but probably not going to happen until they have a press conference that could be september and maybe even not until october. mario draghi talks about it. finally additional guests coming up from here that will be a key issue on closing bell happy birthday to the national

parks day 1916 signed the order creating the national park system and that's one of the places where we are right now. >> it could be another beautiful day there. >> thank you. >> we await the walk first of all. >> white smoke >> but that's the signal for more on the market and federal reserve let's bring in jason. good morning to you. >> thanks for having us. >> are we expecting policy change or positioning from janet yellen in the speech that could move the markets >> i wouldn't expect anything but it's important to listen to the undertone. what we're trying to diseacern not when they're tighteningor when the next action is going to be it's more about the broad pace

of implementation and given that this is a little bit of a global form for central bankers there can also be intertwining as how does the fed policy pack interact with and effect japan and europe's policy path so it's really more broadly about the policy paths over the next say, 6 to 18 months >> all the major averages are higher for the week. a lot of people look at the fed. how big of a risk is that for you? >> the fed is important because at the end of the day they control business cycles. i don't think investors have concerns the fed is going to do something that causes the business cycle to turn

but there's been a much bigger deterioration of the equity markets that may not be related to what the fed is going to do. >> you're citing the erosion of strength in the average stock so below the surface in the index as you have seen a lot of pull backs and things the big question for me is are we in another one of these periods just as everybody notices there's weakness below the surface that means the corrections run it's course quitely and we can get on with it or does it mean the indexes get dragged down. >> in 2017 it's exactly what you said it's been whirling corrections which means the index is held up the market ended up below the average. >> that gets you the 5% pull

back you haven't had in over a year. >> yes. >> something is missing before this conversation. there's a dichotomy and big difference between the u.s. market and what's going on internationally. we see this split and concentration and unusual behavior in the u.s. market. it's stronger fundamental underpinning so it's an interesting scenario for more globally oriented investor that brings me back to this earlier point about the fed m t meeting and tightening it introduces that as a risk to the system when you're not on a tightening path there's not that much risk of overtightening but when you are there's a risk of overtightening and we have a lot of things that we're talking about doing. ecb is starting to talk about that and the fed is talking about this selling of bonds which we have never actually done before.

there's a risk of that being in there. we don't think it's a material risk that we really need to be that worried about but we need to be watching it closely. >> in your research you talk about revisiting the 200 day on the s&p. but you also salak of a down side catalyst. is it an earnings story? is it a policy story >> that's right. that's the reality you need a fundamental catalyst to sort of force the risk. the conditions are there these are the conditions that you normally see a correlation spike but clearly it could be something as government shutdown it could be more hawkish than people expect. it could be a geopolitical event so things could happen in the next two month window but in general we just think look this is the time to see this sort of 100 point move down. >> thank you very much for joining us on jackson hole central bank speech today. jason and tom. >> we're going to watch gas

prices today they are spike as harvey continues to gain strength now a category 2 hurricane in an area where there are a lot of refining operation jackie is live look at the impact on oil and gas. >> good morning to you, carl that's right this is a two-part story as you said a lot of refineries. less than 50% of the u.s. capacity here along the gulf coast and many of those are in the path of this storm that's projected to become a category 3 by the time it lands tonight or early tomorrow morning now some refiners have chosen to evacuate employees taking precautionary measures to ensure that safety comes first. the second piece of this is how actually hard this storm hits and if those refiners will have to shutdown for a week to three weeks period of time to be able to recoop their operations and get back up and running. that's going to have an impact on the gasoline market we've already seen an increase

in gasoline and crude prices as well i can tell you here on the ground, people are being urged to get out of corpus christie. it's one place expected to be hit the hardest. we have surveyed around and seen people leaving and filling up at gas stations we have seen people getting food and hitting the road and also others that may not have learned from the past stock up on food and hunkering down as well so it's going to be interesting to see how this plays out but the advisory out right now is speed up the precautions and get out of here as safely as possible again this is a storm that when it hits may be one of the worst we have seen in over a decade of time at the same time you have people around the city saying they can endure it. so that's a personal decision they need to make. we have been out here. the rain has stopped right now for the moment but the winds have been severe what could happen here is 25 inches of rain combined with the sea, you get flooding and then

you have those kinds of winds. we expect to see power outages which could cause some real damage and shut this place down, especially with a storm that's expected to hover for three days back to you carl. >> jackie we'll come back to you later on this morning. when we return, the amazon whole foo foods deal set to close on monday already the first order of business cutting prices we'll look at the ramifications after samtaples had the worst dy of the year yesterday. we'll talk about that when squawk on the street continues sse we'll continue to track this maivstorm set to make land fall tonight stay with us finally. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard.

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2% together six grocery retailers lost a total of $12 billion in market value guys though i'm not sure why anyone was surprised that whole foods once it was aquired by amazon, this is the amazon playbook right? slash margins. >> yeah i don't think they were surprised they were moving this direction. i do think barely 70 days after the announcement that monday after it closes that they are going aggressive on price cuts in stores. linking it to priechme it's ready to go what i also found interesting, maybe this is a side wrinkle, is that the stuff they're cutting prices on, its fresh stuff you can't stock pile it and bring it home. >> frequency of visits they want frequency of visits to whole foosd. >> organic avo cadcados too.

>> the quote in the times about if you're a supplier how scared you must be that whole foods is a loss leader. the idea that amazon will be willing to lose money in order to drive prime that's new. >> it came in a week when the packaged goods companies were under pressure. >> hormel and smucker both had negative quarters. i'd say about kroger though, 10% of kroger stores are actually in direct competition with whole foosd. whole foods is big in urban markets and big in new england where kroger doesn't operate as you pond whaer ter what the over is going to be, kroger has a $16 billion natural and organics business that they say they have created with their loyal customer base. they have consumer insights. you'll see it heat up. it's an open question guys about whether you see, what happened to the book sellers for instance, this idea that they

would swoop in and totally disrupt the industry and put the competition down amazon has been in the grocery business for a decade. >> in two hours, $3.5 billion came off of costco's market value. that's one where it's different than a super market even. >> all the stocks by the way, costco and kroger went back to the lows following the announcement of the deal so they have come back a little bit and now they're back at the post announcement lows. >> we'll talk more about this. a couple of interesting wrinkles not the least of which is that amazon's stock is also down. when we come back an exclusive with game stop paul raines about his growth strategy and challenging facing the video game following an earnings miss. nasdaq is trying to break a four game losing streak with the dow 400 points off the all time high baa baa black sheep,

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we'll get the opening bell in five minutes.

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mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. let's bring in director of floor operations with ubs that joins us here this morning good morning to you. >> good morning. >> so what's top of mind for you? >> well, you know, i don't think yellen is going to say anything tremendously surprising. so you know, and certainly draghi i doubt that he'll say anything at all and i looked at the rest of the agenda and i

don't see any earth shattering academic papers that are lined up either so it looks like jackson hole may turn out to be a duller than expected event she can always surprise us but i think she wants to be very careful about not disturbing the market it could be an opportunity to talk about shrinking the balance sheet which is something we have never done before. >> what is the buzz around the interview to the financial times? finally speaking out after charlottesville? obviously he was saying he was under a lot of pressure to re-sign but also says the administration can do better when it comes to condemning these groups how do investors read that >> well, that he is staying on board but they're concerned about saying the administration

can do better. how will the president take that. >> there's been some speculation about what the president will think when he reads this interview. don't go anywhere. the s&p at the bottom of your screen it's the u.s. tennis association. u.s. open starts this weekend. the 20th anniversary of arthur ash stadium. at the nasdaq, con fwresz womgrn from morning nonew york commemog women's equality day. >> so jackson hole, potentially not a market mover like we're perhaps used to but you were worried about harvey hitting the gulf coast. >> i am. i don't think it will be a market mover today this will be a really tremendous storm. it continues to gather energy. the temperature in the gulf of mexico is, in some cases almost 10 points, 10 degrees higher

than normal and that really feeds a hurricane so this thing is going to have a massive surge coming on shore. it's going to have drenching rain for days. so the potential for flooding and the damage it can do is much larger than the normal storm and as you and i were discussing off camera there's at least one model that shows it coming in and hitting and then back up and reorgani reorganizing it's into a storm all over again. >> how does that play out market wise we're seeing the dynamics in the strength in gasoline and things like that but then has an economic effect. >> no question about it. it will be slowing down a great deal of the activity down there. a lot will depend on what the final course is and where does it hit the hardest

if it moves a little further east it could put some refineries basically out of business that could take weeks to put it back in and that could reinforce the idea that maybe less demand for crude and shortage of gasoline we'll have to wait a couple of days for this to play out. we should know more by monday and then we'll see if it has an effect on the market. >> we'll clearly watch any impact, market and human as the storm gathers strength and we'll check in with jackie just looking at the movers here at the open, ulta beauty is at the bottom of the s&p 500. this is a company that's comping 11.7%. i don't know where else you're finding that in retail wasn't what analysts were expecting at the 12% but also growing e-commerce 50 to 60% and the earnings guidance came in in

line the bar for some of these stocks is high. >> it's getting a good deal higher we went through a reasonably good earnings season we had a higher level than normal and people got their expectations raised. particularly if you are viewed to be a super star corporation as they have been. >> yeah. you know also point out that broadcom another earnings reporter from late yesterday also a little less than 2% but that's been the theme. so whether that's true or not they're not waiting around to see. >> the high end of any consumer

category being dragged lower foot ware, nike in cosmetics with ulta. that's interesting. >> i think it's a concern for margin pressure. and already in inflation that has to make people edgy across the board. >> in an already crude inflationary environment you're referencing the chart of the week that shows there's a lot of impact on the goods that we buy as the fed struggles to explain this puzzle of why they can't inflate this economy toward their 2% price agenda. >> absolutely.

he wouldn't commit to 15 on the corporate rate but wants to keep a referred rate for capital gains. it sounds like they had conversations the usual let's have the rich guy go in. if it's a jumbo package over a couple of million maybe we shouldn't have that. so we'll see what they come up

with you know you're going to get feedback nobody is going to say wow that's the best idea i've ever heard. so there will be pushing and shoving. >> the folks today were wondering whether september you could see the stock market throw a tantrum and be a stock market vigilante type story if they see dysfunction and not progress being made maybe the patience in the market finally runs out. the market hasn't had to rely on policy moves to have reasons to stay supportive. earnings have been good and the world is growing et cetera that's the noise we have in

between. don't they have to keep the u.s. from defaulting on its debt before that happened two risks that the president formally raised on twitter and in the rally this week is it surprising that traders don't see more jittery around those two risks? >> they're hoping that everybody learned their lesson and we wound up getting our credit downgraded and there was more than a hiccup in the bond market so everybody knows it's really dangerous. so they're assuming that the bluff is a bluff and no one will try to call it it will get passed over in the last minute. >> journal op-ed today republicans need to think of trump as a political independent. legislative success is the best way republicans can protect

themselves from any trump under toe in '18. >> i would think that's correct. look they're going to say we asked you to elect us and this is what we accomplished. if they don't have anything in their hand it's going to be an uphill fight to hold on to the seats and so i don't think that they should abandon the president but they should set forth on their agenda and try to sbet something accomplished because if he keep winding up with an empty hand, the democrats are going to take both houses back. >> another mover i would just mention to your point that early this morning around 6:00 a.m. hour when the financial times headlines started hitting that he did affirm he was staying in his position as chief economic adviser the dollar came off the lows and you saw this steady increase on this idea. the dollar has been very sensitive to the policy risks

and headlines and the day by day sentiment swings around this presidency. >> i think it was a sigh of relief waentd across several markets. >> thanks. good to see you. nice to have some time got almost every dow component in the green except for boeing let's get to morgan on the floor. >> hey that's right. now all eyes on janet yellen that will give remarks in about 20 minutes there this could be her last from jackson hole as fed chair. her current term does end in february the focus then shifts to ecb president mario draghi that will be speaking later today at

3:00 p.m. eastern on the storm front, harvey now a category 3 hurricane barrelling toward the texas gulf coast expected to make land fall later tonight energy stocks are moving on this including exxon mobil, shell, all have production and operations in the area also refiners like marathon petroleum, phillips 66 which are all modestly higher today. lastly as we close out the week here the other big things to keep an eye on is retail if you take a look at the xrt that is up more than 2% for the week it is higher again today up about .5% after better than expected earnings reports this week now among the week's retail wirns, dollar tree, macy's tractor supply, all the names in the green again today. the biggest loser is ultimately at a beauty. that's now almost 9% today down almost 13% for the week after smaller than expected

increase in comp sales and current quarter guy dance. game stop, big loss for the other two retailers falling today after quarterly results and just to look at the dow we're up about 78 points right now. guys back over to you. >> morgan, thank you we have bonds firmer along with the u.s. dollar. lest head out to the bonds pit >> good morning, sarah just think 219 here's a two day chart of tens we have descent data points with respect to some of the internals on durable goods like the proxy for business spending but if you look at a one week chart you can see mostly sideways. we settled yesterday at 219. right now we're at 219 last friday we're at 219 so you get the picture. if we look at the early part of august we could see how it started to go sideways

it was a little bit of nervousness and kicked it off regarding a lot of issues in the markets and one of the fews we had and it moved lower but as it moves higher as you see on the mid july chart which includes the high for the year you can see that the markets, even though they're down, the safety issue, that nervousness, they're not going down farther and the real issue is many are starting to wear a little thin on the notion of getting paid being long the price of treasuries and basically looking for yields to drop if we look at one week of the dollar index it demonstrates the same type of pattern as tens and i think what central banks being so important it's such an exciting time with central banks and you can define exciting anyway you want about to begin an exit of policies that have never been done on this type of scale and many of the policies have never been done at all and we need to exit them. but yet, jackson hole seems pretty boring. i find that an interesting brain puzzle at this point and finally

if we look at the dollar index in the context of it was mostly driven lower by a lot of the dynamics of europe but maybe that switched over that if we do believe that rates are going to hold here and move higher it seems to be also suggesting that it's going to grab on for the ride potentially as well should rates rise sarah back to you. >> still to come more on the impact of hurricane harvey along the gulf coast we'll talk to the former fema director that picked up the agency after katrina we're still waiting on the fed summit ahead of the much anticipated speech squawk on the street will be right back

how much is at risk here >> significant amount. one out of every three barrels of u.s. refining capacity is now in the direct path of harvey so at this point, the market is behaving the way you would expect it to behave. this is a very bullish event as it is right now for the products it's very bearish for crude oil because as these refineries go into their emergency protocol they shut in and buy fewer barrels and turn out fewer barrels so whatever goes in is bearish and whatever comes out is bullish so that's the story and of course as i have been telling my readers, now what we have to watch out for is what kind of damage there's significant storm surge watch for the texas gulf coast and these refineries get flooded out and you can see any prolonged delay to bring these units back on then they should continue to rally. i will be a very bullish event

for the products not for the oil. that said if we go through and we don't see any lasting damage and these refineries are back online quickly then the cracks, the difference between gasoline prices and crude oil won't come crashing back down we'll have to wait and see what the damage reports are over the weekend. >> any areas of what steven said that you disagree with >> no, he has it mostly right but the likelihood looks like it's going to be on the more bullish side we have to wait but, you know, 30 inches of rain over a 7 day period of time along a gulf coast likely to see surging waves looks like refineries will be out for longer rather than shorter period of time and we have to wait for an saeszment of damage but with over 3 million barrels a day likely to be in the path for heavy damage with a

42 plus percent gasoline deal that makes for a potentially large loss of gasoline and the question where is it going to come from depending on what the damage will be so he's right. it's a gasoline story more than a crude oil story at the moment. >> and in that context, what are the scenarios in terms of gasoline production down the road is there a prospect for anything economically significant. >> sure. i think the history of these gulf coast hurricanes and the last one was 2005 really and a big hurricane season with three really big hurricanes hitting the gulf coast, there were refineries that were out for months not days not weeks but months and i think that is really the prospect that is the outlier if we had a couple of million

barrels a day refining capacity, where is the gasoline going to come from? how is it going to get to the east coast and i think that supply lines look really, really tight at the moment in 2005 the big lesson learned was they had to allow european refiners and it well may be that we'll need that protocol again. >> so steven if much of the market move is in gasoline what does that mean for prices at the pump for consumers across this country? what increase are we talking about? >> a significant increase in the short-term so we also have to keep in mind.

we're one week away from the labor day holiday so the driving season is over on september 15th we start to downgrade to a cheaper gasoline to blend so we're at a point where crude oil demand has peaked in between now and halloween, crude oil demand in the united states will drop by at least 1.2 million barrels a day. you have the drop in gasoline demand so you do have this potential pick up as it were and of course the speculators are moving understand it all comes down to how much it lingers. now i also want to point out this is a very bearish event right now for crude oil you add essentially the same play book that went back in 2005

they sold crude oil and bought the products on that speculation but what happened when the crude oil contract in september came to expiration. all of them had to buy it back because of course speculators don't make or take delivery but what they found out was not a lot of people are willing to sell them that oil back because a lot of refiners, especially in the chicago epi center bought that crude oil because they secured their product. you had about a $25 barrel move. one day because you had historic short squeeze so any speculators out there looking at this event, selling the crude oil and buying the products at this event is going to continue to expand. you have to be very very careful because you have to be careful in the crude oil market who are you selling to because it's a good chance they'll take delivery of that oil. >> that's a great history lesson for at least a subset of our

audience >> when we return awaiting fed chair janet yellen's arrival at the jackson hole symposium markets bracing for a speech scheduled to deliver minutes from now so far the market is in rally mode all 11 sectors are higher. hard hit consumer staples from yesterday are actually on top alonwig th industrials squawk on the street will be right back we have a question about your brokerage fees. fees? what did you have in mind?

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we're getting close to where we expect to see janet yellen make her way to deliver her address this morning 10:00 a.m. eastern time we respect remarks. we already heard from the likes of kaplan and george yesterday start normalizing now. she called it the right thing to do about a 44% chance of a december hike but it will be a lot to watch over the next hour. >> we talk about the policy but what about the politics here is this going to be her last time attending jackson hole as fed chair? it depends if president trump decides to reappoint her in february you know she was criticized on the campaign by him and then

afterwards, complimented he likes low interest rates he said he likes the weaker dollar just how much pressure and how much does that go into her thinking. >> it's hard to know whether policy would feed into that decision by the president either. >> true. >> we don't know what matters. >> more on yellen and jackson hole in a moment dow is up 101. olay regenerist

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good friday morning and welcome back to squawk on the street dow is up 98 as we're looking to break a losing streak on the nasdaq looking for janet yellen comments out of jackson hole steve joins us. >> thank you very much the fed chair making very few comments on monetary policy saying only substantial progress has been made toward maximum employment and price stability the rest of the speech is essentially full throated defense of regulatory reform with some acknowledgment that maybe some changes are needed but pushing back against this

need to dramatically alter the dodd frank reform. she is concerned about the risk of excessive optimism in the future that can lead for the new of new additional regulation the resilient financial system is critical. to the global economy. and regulatory reforms strengthen that financial system it's in line with the economy which is her way of saying you have not had a huge decline in lending as a result of the new financial regulations. there's sizable economic growth particularly with the bounce back after the financial crisis which is the envy of other parts of the world that didn't have the bounce back. the fed is committed to evaluating reforms she mentioned specially the idea of reducing regulation there

and it's negative effects on liquidity. when she talks about reform should consider a broader chance of regulatory reform but do so only modestly. the political context is is clear to you president donald trump has talked about making sizable or big changes to regulatory reform and fed chair janet yellen as she has done in the past has really tried to resist wholesale. so you're saying no market moving comments on the economic outlook or monetary policy >> i wouldn't say whether or not they're market moving. only the one comment that i

mentioned off the top sarah about saying that they made substantial progress toward maximum employment and price stability but no other comments on monetary policy or the economic condition in the context of financial reform. >> all right got it steve thank you. thank you for bringing us the headlines. for more on the jackson hole speech and it's impact on the markets we're joined by bank of america head of global economics research and paul christopher wells fargo head global market strategist steve broughtup the point mayb the biggest take away from this is that if the fed chair is defending the post crisis regulatory environment for banks that could have implications for whether president trump reappoints her as the next chair of the federal reserve in february do you agree >> that's right. if you look at her positions trump is supportive with her dovish approach to monetary policy and he'll want to name a chairman that has similar views

about a very careful exit by the fed. but could be that the regulatory issues are left to the other rather than the chairman but i think like most economists yellen probably will not be reappointed. where does that leave us in the way of figuring out what monetary policy means for the rest of the year for stocks and bonds. >> that's where the markets are focused. if you hear janet yellen say something about we don't think lending has grown excessively.

that's a good sign for the markets. liquidity is not considered excessive therefore rate hikes will not be aggressive and the market can can return to the focus and the consensus, strong consensus that there's going to be a very gradual pace to rate hikes and not even december. so that's going to be a reason for the market to rise here. >> there's internal headlines here she is talking about credit availability that despite the regulatory frame work post crisis that credit is still broadly available to small businesses with a solid credit history. maybe there's some less availability to say a home buyer with less than perfect credit scores anything in there where she is wrong? how does it frame up with arguments that say in fact they have cut down on lend something. >> i do think there's some going forward. just the fact that morgan lending is harder to do means that small business owners in

the past use their home as a source of collateral has a harder time getting money but i think she's right in the sense that there isn't some massive credit constraint going on here. we have very open capital markets. credit spreads are low if there's restraint in the economy, it's a modest constraint. >> so just reviewing some of the market action that we're seeing, the dollar pulled a little bit against the euro and the yen after janet yellen doesn't make any comments stocks a little bit higher the fact that she didn't need any comments on the economy on the monetary policy outlook. is that a signal that thinks the market has it right at this point? not fully pricing in a hike but maybe a little. >> i don't think so. i think that janet yellen decided to let sleeping dogs lie here right now the bond market is

very aware that the fed is about to announce balance sheet shrinkage so no message she needs to send there and while the market is questioning whether they're going to hike in december it's much too early for her to give anything that sounds like guidance around the december meeting i still think the markets are too optimistic here. i think the fed will hike in december i think the markets are underappreciating how easy financial conditions are and how that's driving policy so i do think it's got to be a reconciliation with the bond market pricing in higher moves by the fed but it's not the right time for yellen to be trying to push that debate. >> why >> a number of others came out and said they do expect a december hike. if the market was off on that, this is an opportunity for her to reset the expectations. >> yeah, there's a big difference between what the chairman says and what the individual members say she knows that jackson hole has

a massive spotlight on it. the other thing i should point out to the viewers there is that jackson hole is less of a vehicle now for the fed to announce policy changes than it was in the past. because we no longer had that personality around alan greenspan and yellen and bernenke want to use official venues to announce big changes so they tend to treat the jackson hole speech as more just one of many speeches over the course of the year rather than as an opportunity to kind of make a official fed statement so i don't -- my expectations going into this meeting were pretty low and i think what she said today was exactly what i

expected. >> paul all of this being said, you mentioned maybe a patient fed is in the baseline of what investors expect but what about september, not just about the balance sheet but also just all the political stuff that's going to happen, do you think the market is capped here going into september? or can it start to lift after this little backdrop the past couple of weeks? >> yeah, the market is pretty complacent right now we do think there's room for valuations to compress a little bit into the end of the year some fed uncertainty as ethan mentioned will be part of it how we manage the debt ceiling going forward here sals going to be very tricky and is liable to deliver surprises to the market. even as they are what we have seen in recent months. could be a rocky september going forward and we do expect that valuation compression to year end but we still expect the markets to be higher next year it's going to be something for the markets to look through and investors to look through.

>> ethan harris, thank you for joining us and paul thank you as well paul christopher from wells fargo. >> hurricane harvey gathering strength in the gulf of mexico it's now a category 2 hurricane. harvey is expected to make land fall later today we have you fully covered on this very big story. jackie is live looking at the impact on oil and gas refiners in the region. we'll talk to the former director of phoenix but first let's get the latest on where harvey is headed. >> hurricane harvey is continuing to barrel toward the texas gulf coast in fact they're already feeling some of the impact some of those bands have been pushing on shore all morning long bringing in the locally heavy downpour that's only giving them a taste of what's to come in the upcoming days. right now it's a strong category 2 hurricane with sustained winds at 110 miles per hour. just one miles per hour away from being a category 3 hurricane: a major hurricane

moving to the north and west at 10 miles per hour. it's going to slow down as it approaches land fall later this evening and once it makes land fall it's going to sit there and bring in very damaging rain. so as we head through the day today we'll see it gather strength and turn into a category 3 hurricane make landfall overnight tonight into saturday morning. that's going to inside with high tide that's going to worsen the flood threat here's what we're watching moving forward this storm is really a triple threat we have the rain, we have the surge and we have the wind rainfall expected anywhere between 15 and 25 inches locally up to 35 inches. that storm surge between 6 and 12 feet so catastrophic flood threats as we head through the next few days and this is going to be a category 3 hurricane with winds in excess of 120 miles per hour that is the latest on hurricane harvey we'll have much more coming up but for now back to you. >> thank you for that. let's get to jackie as well this morning who is looking at how

the storm could impact oil on rags in the gulf she he is live for us with more on that. good morning once again. >> good morning to you, carl that's right we're watching the refineries closely. five of them located here in corpus christie. they have instituted shutdowns and they're evacuating employees to be safe rather than sorry others are saying they're monitoring the situation now but whether or not the refineries choose to shutdown or this storm packs a powerful punch and makes them shutdown is of course the question now it's interesting because before when i was reporting it was dark so nobody was stirring. now you're starting to see people come out. they're walking around i saw a guy jogging. someone walking his dog. even somebody that came up to take pictures of the beach we asked some of these folks if they were staying on leaving you would be surprised at how many told us they were staying here or waiting to make a last minute decision. one gentleman in particular that we spoke to. take a listen to what he said.

>> we filled up our bathtub with water. we have plenty of food, canned food and just the essentials just batteries and things that we're going to need in case it knocks us back into the stone age. >> now we spoke with the executive chairman of the corpus christ christie ports he told me he thinks this is going to be the worst storm he's seen in 40 years he's staying because of his job function but he said he packed up his family and sent them out. better to be safe than sorry it's misleading right now because the rain has stopped and the wind gusts are a little bit strong but hopefully folks here are taking the warnings more seriously. back over to you. >> jackie, thank you for that. for more on the aftermath of what hurricane harvey could look like we're joined by david, former director of fema and global emergency solutions senior partner it's good to see you again welcome back. >> good to be back. >> things we know about this storm, right, it's not a

category one yet hopefully it will not become one but slow moving with rain the overriding dynamic how does that effect fema's strategic response >> well, fema's logistical plan will be the same regardless. they're moving in early. he has a lot of experience he was emergency manager of alabama when i was a fema director did an outstanding job so i know that fema is already there they're already moving they know what they have to do and on top of that, texas emergency management is some of the finest in the country. they have a great emergency management system so they'll be on top of it also. however this is a very dangerous storm. as you saw earlier, it's going to be moving very slowly and that means it will be pushing a lot of water in front of it like we saw in katrina so those people on the coast need to pay close attention and evacuate if they're asked to do so. >> as a very response specialist, what's more difficult?

responding to the effect of high wind speeds or heavy rainfall? >> it's really a little of both. the response is going to be the same the problem with the rainfall when you have a lot of flooding sometimes it's very difficult to get in some areas like we saw in katrina where hurricane andrew we did not have a lot of flooding so it was easier to move around except for the debris and it's just going to be -- they're going to have to wait and see what they have but flooding can make it very difficult to get in some areas. >> some of these models are pretty worrying. we mentioned one earlier the so-called european model that has it making land fall and being pushed back out to sea, regaining strength and making land fall a second time. how much weight do you put in some of those scenarios? >> you have to watch them. you have to watch what the mo models say but the problem with this storm is the models are all over the place. we're not sure what it's going to do. what we do know sits going to be sitting on top of corr russ

christie area east a little bit and it's going to be putting a lot of rain down that's what you have to plan for. >> not trying to politicize this but disaster relief and response say test of leadership does the trump administration have the resources in place to fight this we know that there is a fema director there's a acting homeland security secretary after general kelly is now serving as chief of staff. what's your saeszmeassessment o preparedness of the administration. >> i'm very comfortable. brock long is there. a lot of experience. we have a new administrator there. also very experienced in oklahoma city bombing. put a good team together general kelly in the white house so they're going to be prepared. a lot of military people in the administration so with the politics aside, i am comfortable from what i have seen that they're going to be able to handle this as well as

possible. >> governor abbott declared that state of emergency we have 700 members of the texas national guard called up but people are trying to make some comparisons now to say ike in '08 where we had $22 billion worth of damage. would it surprise you to see that number be higher this time? >> it would not surprise me at all. the way we have been responding to does assisters and the amount of money is not sustainable anymore. we have to start spending more money on the front side prior to land fall as opposed to the backside we have to look at our building codes like we did in florida after hurricane andrew came through. we looked at why did they fail 100,000 homes destroyed. some of them brand new and we looked yacht they failed and changed our billing codes to mitigate that effect we're not seeing that across the country and we need to to that congress needs to start take more money and putting it on the predisaster side

predisaster mitigation efforts and award the states that do that and maybe shouldn't get as much money as those that put strong building codes in place and enforce the building codes. >> andrew, almost to the day, the anniversary of andrew's land fall pretty harrowing given the damage that did. we'll watch this thank you for your time. >> thank you. >> former director of fema. >> when we come back, white house chief economic adviser gary cohn speaking out today when he says the public push for tax reform is coming plus amazon's whole food deal is about to close the first order of business, lowering the cost of your kale grocery stocks falling yesterday. what it means for the future of the industry next.

we're seeing some of the parameters. >> a little bit about where we're going in terms of tax reform but also a whole lot of new information on the decision not to re-sign from the white house in the wake of the charlottesville virginia racist violence incident and the president's handling of that nbc news is reporting he went as

far as to draft a resignation letter last week in protest to the president's handling of that matter we're also hearing that his wife was one of the people putting pressure on him to consider resignation from his white house post and talking to the financial times this morning from the first time since the incident offering insight into his thinking here's what cohn said. i have come under enormous pressure both to re-sign and to remain he said the administration can and must do better when it comes to these issues and he said i am reluctant to leave my post going on to say i will not allow neo-nazis ranting jews will not replace us to cause this jew to leave his job. so cohn there signaling he wants to stay on board but also offering criticism of the president of the united states and his handling of this and the way the administration approached this issue. we'll see how the president reacts to that the president often doesn't like criticism from his own staff but we have no indication what the

president thought of this interview just yet aim told by white house official here that this interview with was authorized by the white house. but the sense now is he has more leeway to offer up criticism. >> we had chairman brady go to ups and at&t this week we had ryan visit boeing and come on our air. we had cohn talking to the ft and next week the president goes to missouri. are you sensing this is going to be a coordinated push that starts next week >> it's absolutely a push that starts next week we'll see how coordinated it s. we're told that the president is likely not going to make more than one stop. he'll just do this missouri stop and that will be it and we'll see whether there's infighting between the white house and republican leadership up on the hill impacts the tax reform effort you saw the white house yesterday saying that they're

not going to put out their own bill on tax reform they're going to let had hill take the lead. they were criticized when they did it with obamacare. this time you heard paul ryan say on our air they're confident they can stick the landing on tax reform there's a sense of confidence and optimism in the white house and on capital hill that republicans can get this done and we'll see whether that's the case but we'll see a roll out next week. a lot more activity around tax reform. >> to your last part about gary cohn, he says the administration must do better condemning neo-n afr neo-nazis and white supremacists on the same day janet yellen gave a strong defense of post crisis regulatory reform something this president has railed against and is trying to undo do both of them lower the probability of them becoming fed chair next february? >> that's one of the big questions here does he want to be fed chair the answer to that appears to be yes.

the other question is does donald trump want him to be fed chair and the answer to that is entirely unknown right now and we'll just have to wait and see what the president decides to do there but it seems like this white house would like to have their own fed chair in place whether that's gary cohn or somebody else. >> we'll see how he takes the subtle jabs and criticisms thank you. >> as we go to break, take a look at stocks at this hour. dow is at 106. s&p up about 12.5. here's a live shot of houston texas preparing for category 2 hurricane harvey we'll monitor that as squawk on ide street continu oth esn is fray

vp and senior internet analyst so first the impact on the rest of the industry, some of these stocks like kroger,

walmart, costco, target, anyone with a grocery business got slammed on this idea that we're going to see a lot of price war and the race to the bottom and also low margin industry is that an overreaction or do you expect it to happen. >> no that was the perfect reaction to hurricane amazon coming ashore on the grocery aisle and it's going to be a meaningful presence and they have said, i'm going to mix metaphors here, they have lobed the first shot on the pricing and they don't even own them yet and they're telling what is going to happen. so after that happens, you know, it's just going to get worse for these grocers. >> so erin as the amazon analyst here, how deep do you hi these cuts are going to be we don't know what the price cuts look like we do know that it's focused on produce and fresh meat, ro

gatt -- rotiserie chicken and how much is that going to cost for whole foods that has an operating cost well above it's parent company. >> these groceries are still relatively low margin businesses so there's a limit to how much amazon can cut you can cut in certain areas they talk about those areas yesterday where it's avocados and there's a limit whether it's a 5%, 10% cut and if you cut too much you're going to destroy all the operating profit for whole food and that would be a concern for amazon shareholders which if you look at amazon today clearly strong growth but the reason we downgraded it is we're not seeing the profitability that's becoming a concern for investors. >> i was mentioning earlier that the things that amazon is cutting prices for at whole foods, you mentioned the produce, things like that are obviously high priced and they're premium, organic but they're also stuff you can't just buy and stock away and stock pile you have to have frequency of

visits seems to be one of the priorities amazon is doing to reinforce it's rewards aspect of the prime membership what else do we know about what amazon is trying to do strategically in terms of interacting with customers. >> yeah. so clearly with the prime membership integration that will be key with how they use that data we don't know how they're going to use for amazon fresh which we thought is one of the reasons they bought whole foods how are they going to leverage whole foods to deliver goods to people's homes that will be a key consideration going forward. >> there's an interesting debate going on when amazon eners a new category whether their disinflationary behavior actually means they don't get as much as their competitors lose if the whole category essentially shrinks largely because of the margins we're talking about. does that make sense

>> i think it really does and i think you have to go back to what they really are we have never owned amazon because they don't care that they're owned by shareholders. that's really apparent and what they want to to is they are a growth story they're interested in growing that top line and i think they'll take losses on the food but more importantly i don't think they care if it's a zero sum game they're going to use these stores to be a distribution network for all of their products and yes that includes amazon fresh to the home but i think this deal is brilliant for them as a business not necessarily for investors in the business but i do think that they are really going to be able to leverage this as a distribution network and also to grow that top line which i think that is exactly what they want to do. >> so it's not like it's the first for amazon into groceries.

they have been trying to get into this market for the last decade is there too much optimism and credit being given to amazon in this category? it's a lot different than book selling, getting into the grocery business where walmart has the biggest hundreds of millions of sales across the country and kroger is not too far behind a dominant long time consumer player. >> this someone of the areas they have struggled in they have been at amazon fresh and hasn't figured it out yet especially how to get consumers more engaged in the platform it's a bit of an admission that they struggled whether they can take it to the next level and whether it's an online play with amazon fresh or maybe a new retail concept coined piano alibaba in terms of online with off line could be a concept that they're more willing to have off line platforms in the future as well. >> we'll leave it there to see what happens guys.

>> thank you. >> let's get over to sue and get a news update at this hour. >> good morning, carl and good morning, everyone. here's what's happening at this hour the navy says it has recovered the remains of another soldier and sailor that was missing aboard the uss john mccain 26-year-old dustin of connecticut. in a statement his family called him a wonderful son, a big brother and a sailor the navy destroyer collided with an oil tanker near singapore this week. >> the state department says at least 16 u.s. diplomats in cuba are suffering from moderate to severe health issues following what the agency is calling unprecedented incidents. intelligence officials investigating the attacks tell nbc news sonic waves could be to blame. gentleman pab japan is bearing the brunt of the bad weather. the northern part of the country was hit with torrential rains. here at home this was just one

of three bench clearing brawls last night between the new york yankees and the detroit tigers the drama started in the 6th inning when a yankee batter was hit by a pitch several players were ejected no surprise there. that's the news update at this hour >> bracing for fines and suspensions and all of that. >> i'm sure. >> probably a good thing that nobody got hurt because baseball players fighting is usually not -- >> it's not a good thing no. >> yeah. it was good at least right now nobody got hurt. thank you. >> you got it. >> when we come back, maybe the new key to the kingdom new york times columnist jim stewart weighs in on disney splitting from netflix and what that means for the content wars. just over an hour from the trading session. let's take a look within the s&p 500. you see signet jewelers. leading up almost 7% airlines getting a bounce.

they have been a weak group. earnings up 5% yesterday and kroger advancing after yesterday afternoon's losses ulta beauty following descent but worse than expected earnings down 10% and you see trip adviser, energy and broadcom also reported stla night slightly squawk on the street will be right back

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>> harvey right now a strong category 2 storm just off the coast of corpus christie any minute now we're awaiting an update to upgrade it to a category 3 as it continues to approach the texas gulf coast. it will make catastrophic land fall overnight tonight into tomorrow morning we're expecting that new information any minute now and we'll have another update coming up at 11:00. >> thank you very much

two decades ago bill gates famously declared that content is king but with news that disney plans to launch it's own direct to consumer streaming service it's asked now is it the platform that's the most important? joining us is jim stewart and we should mention the author of disney war it's good to have you back, jim. this is going to be a fascinating business case study right? >> absolutely. bill gates 20 years ago, that's been conventional wisdom ever since and for disney particularly this could have been their corporate slogan content is king. if i heard that from everybody out there once i heard it a thousand times and it worked well for them. they put all their money into pixar, marvel, these investments paid off well but what we see now is whether content is king or not it's not enough

if you don't marry it with your own distribution you're at risk. that's a change for the entire entertainment industry. >> netflix is coming, there's a conclusion here and they have for sometime know they need to control their own content and have something propietary and it seems to drive new usage everybody is converging at it from both sides. >> exactly which is why disney made the argument in one sense content is more king than ever you have google and facebook moving into the space. amazon is there. they're ultimately ruall rushin. they have the traffic but if you don't have something to draw people to that it's essentially worthless. content is still super important but think disney has recognized and i don't think they have much choice here that they have got to move on iinto the technology space. the other thing here is disney has never been a technology

company and it's attempts have not been that successful are they content companies more technology companies and now they're moving into an area that's unfamiliar terrain for them as well now you can say netflix has been fabulously successful. well if you and i had the checkbook at our disposal they do we could be successful too. they have been buying most of this paying high prices for it if you look at their earnings the margins are not very high there. the question is can they now develop their own original programming so they again shot across about disney they took sho shonda rhimes and planted her at netflix so they're moving very aggressively into this turf but it will be a multiyear experience before we see how this shakes out and before ke can answer the question whether content is still king.

>> it's all getting blurry the gut reaction to disney's announcement from investors was to sell. worried about lost revenue on licensing and just what business model and the economics of this is going to look like. if your reporting did you find that to be overdone? how optimistic are you >> i think it depends. are you a short-term investor or long-term investor there's no question they're going to lose, estimates are somewhere 200 or 300 million in licensing revenue and there's going to be a curve. incrementally they're adding several billion dollars. i think if you're a patient long-term the holder it's the right strategy for disney and i don't think they have any choice netflix's leverage son-in-law getting bigger and bigger and bigger which means the ability to strakt the value of that

content is going down, down, down the only issue i heard is they should have done it sooner. >> i love the line someone gave you. disney served it's purpose for netflix. it's almost as if netflix was a rocket and disney was this booster that manages to get it out of orbit and now they might have escaped velocity. >> netflix went down too on this news that's more short sided because i do believe netflix has the original content it's enough material that the disney brand entertainment leaves there people are not going to drop their netflix subscription. >> the question is who would you rather be at this moment when everyone knows everyone is going to be plague in the other person's turf right? disney has the more recognizable content brand but netflix has relationships with going on 100 million people >> they have penetration to half

of u.s. households now they are starting from scratch here which say huge challenge. i think that's what we're going to see what is it easier to do? is it easier to move from content to technology or move from the platform to content honestly i don't know the answer to this. if i was going to bet my money on it i'd put some on both sides here. >> it's not like people are taking their kids to netflix world. >> no, they put a lot of money into developing children's programs that's one of the areas they're targeting. that's a tough, disney brand there is really incredibly strong a lot of people tried over the years and nothing has dented it. disney people are telling me can we get a little bit of the multiple expansion in there because we're doing the same

thing? maybe as the results start to come in you'll see multiple growth there but it's going to be quite awhile before that happens. >> read the opening chapter. we'll see you soon thanks. >> thanks. >> when we come back, more reaction to fed chair janet yellen's speech at jackson hole. former federal reserve governor mark olson joins rick next and we have a live shot for you. we're closely watching corpus christie as we continue to keep a close eye on hurricane harvey. dangerously roaring toward texas. we'll give you an update squawk on the street will be right back you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go!

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good morning, sarah, i like to welcome my special guest former fed governor mark olson great to see you thanks for taking the time. >> thank you, rick thanks for inviting me. >> you know another wise man i have great respect for, today earlier on cnbc basically paraphrased jackson hole's pretty much a dull event thus far and doesn't expect that's going to change. i'm surprised we use the word dull when central bankers are about to embark on something historic with many question marks. are you surprised? >> first of all, i think that it really hasn't started yet and it's going to start with mario draghi speaks and i think that janet yellen started it out the fed just released her statement. it is a look back over the last few years. it is very noncontroversial in nature and i think she is letting the focus go under mario draghi because they announced the theme of this year's jackson

hole was going to be global so i think she is going to allow him to have the primary voice in this year and it's going to get better but as you know because all the media to all the player out there, a lot of sidebar conversations are going to be the real news. so dull for the first 20 minutes but don't think it will be dull for the whole day. >> all right now, you brought up her speech which is mostly on -- it was on regulations and i found it very fascinating as i skimmed over it that ultimately what she's saying is she's defending regulations, they are needed but not to the point where they hurt growth a balanced output all in all is there a bit of campaigning. do you think janet yellen would like to be reapointed deep down inside >> i don't know about that i haven't seen president trump re-appoint an obama appointee

yet. i think she's objective about those opportunities. but that's a very wearing job. i think she would take it if offer but i don't think she would be deeply disappointed if it doesn't come her way. >> since i brought up who is going to potentially be at the helm of the fed next february, it's hard not to think of economic adviser gary cohen. now the trump administration has made no secret they like low rates. has there been a new pillar added that's become a benchmark for thinking who runs the fed. price stability. maximum employment two dick indicated by congress in tea 70s is there a third one that low rates are good and we should have them as often as possible >> i hope that's not the case. and there's certainly nothing written and i hope there's nothing practiced that would support that with specific respect to gary cohen, my advice to him is if

he's offered, don't take it. he might be a genius or might be one of the top financial experts in the world but he's a beginner in monetary policy the last person that tried that was -- >> what your saying -- >> he did not do well. >> what you're saying, i can see it but i can see, mark, there's another sign that basically if you look what's happen we had a lost decade. we can argue as to how deep it would have been if the fed's policies weren't enacted early on but there's no questioning that the end results have been disappointing in terms of level of growth anticipate productivity what's wrong with fresh? just to finish it out. >> because, i think for one thing there's only a small portion of productivity that

monetary policy impacts. you can't do it without a fiscal policy that makes sense and i don't see that in the card >> great point thank you. back to you. let's send it over to john ford with a look what's coming up on "squawk alley" >> game stop ceo will join us. there's a short rift of retailers expect to be clobbered by amazon game stop you expect they are short on earning. stock is down. we'll find out what the nintendo switch and collectibleha ts veo do with that that's coming up on "squawk" alle alley"

>> i think i like the new taylor swift song s&p was up half a percent. up a third of a percent. pretty broad based rally in rebound for markets. telecom, staples leading the

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welcome back to "squawk on the street". energy is on pace for its best day in a month tracking for four straight days of gains led by oil and gas driller helmrick and payne good morning it is 8:00 a.m. at uber headquarters in san francisco. 11:00 a.m. on wall street and "squawk alley" is live ♪