final check on the markets moderated a little after the gdp number up 8 on the nasdaq s&p up a little. you'll be here tomorrow? >> santolli will be here. >> kyle, you won't be here tomorrow >> no. >> why you got plans. if i beg you to come in, will you come in. >> getting ready for first grade. >> and a play date. >> thank you for letting him come. >> yeah. >> we'll see you kyle, good luck at school. "squawk on the street" is next ♪ take me on a trip i'd like to go someday take me to new york i'd love to see l.a. ♪ good wednesday morning welcome to "squawk on the street." futures pretty steady here as the dow, the s&p, nasdaq shoot for a fourth positive session.

we're watching trade, obviously, as canada rejoins the marketing table. q 2 gdp revised up to 4.2. europe is pretty mixed 10 year not far away from 2.89 road map begins with records records and more records the nasdaq and the s&p at new highs as the u.s. economy has the best performance in nearly four years canada, cars, and tariffs. last-ti last-ditch talks ahead of a friday deadline. and, quote, treading on troubled territory." president trump delivers a warning shot for google, facebook, and twitter. futures are bouncing a bit between gains and losses today the s&p and nasdaq coming off another record close, as you know investors getting a second read on q 2 gdp revised up to 4.2 economists were expecting a 4. 1% some of the internals are impressive consumption revised down a

touch, but corporate profits before taxes full final demand is the best since '06. impressive numbers. >> business spending was one of the reasons. we got a lower energy bill we imported less oil that helped. if you're averaging the first and second quarter together, you'll get healthy 3.2% for the first half of 2018 can that sustain itself? well, president trump said he wanted 3% annual growth. he's on track to get that as long as we continue to see this kind of growth and that's a big debate. so the atlantic fed, which everybody tracks their gdp estimates is above 4% for the third quarter. the new york fed, which also does the tracking, is the below 2% for the same quarter. everyone is talking about the divergence one of the key questions is how long the tax cuts can continue to juice growth. >> i mean, what is the why that divergence between the two what is the key variable there

>> i don't know the internals, but i think there's a debate about consumer spending. and how healthy it is. i think there's a debate about how much activity was pulled forward ahead of tariffs for instance, the soybean distortion in the last gdp number there are some oneoff questions. overall consumer confidence yesterday showing -- >> we're now through for the most part the retail earnings. as we have reported time and again, they have been quite strong on the whole and certainly reflective of what is strong consumer. no doubt about it. we'll quote brian cornell many times, i'm sure. >> there's a big debate this morning on squawk regarding, to your point about tax cuts and the impact they've had it seems like it was a long time ago it was passed in december. but the way corporate budget processes work, you know, it takes a long time for companies to react to changes in the law like that. and we may still be waiting to see additional changes in cap x

in q3 and q 4. >> i think a big question is trade. that's why it's important to follow what is happening with nafta and china or what is not happening with china sort of europe seems to be on hold, as well. and now canada is in the mix on trade. if you look at the markets, the canadian dollar and the canadian stocks market is betting on a deal that canada will join. >> yeah. i think the canadians have been backed into a corner. >> we continue to keep an eye on trade talks. canada rejoins today u.s. lawmakers warning a bilateral u.s. mexico trade deal would struggle to earn congressional approval ayman jabbers is with us >> right we're in washington, d.c

take a look around the corner where i'm standing at the white house is the office of the u.s. trade representative they're awaiting her arrival expecting 9:00 a.m. beginning talks today. she often talks in on the way in and way out. she gives us a couple of comments to give us a sense of where things are going last night emerging from talks she offered some positive comments in terms of the canadian perspective on this deal that was announced this week between the united states and mexico stressing some of the mexican concessions as key to canada's perspective here. >> what canada believes will be a good week is the fact that mexico has made some significant concessions, particularly in the area of labor and these concessions will be valuable for

workers in canada and in the united states. >> so some positive commentary from the canadian side in terms of the possibility of a deal by the end of this week, which is when the white house wants to nail it down and bring canada into that agreement and make it a trilateral deal. the one question, sara, you bring up is an interesting one is there a possibility here of a bilateral just u.s. mexico deal. the white house said they'd be comfortable with that. lawmakers on capitol hill a little bit more skeptical that is allowable under the process larry kudlow, the national economic counsel director here said yesterday that the white house position is that it is legal for the u.s. and for the white house to negotiate a deal just with mexico and they're proceeding under the assumption that is legal. we'll see if that has to get tested here. because if the canadians come in before friday it's a moot point. if the united states tries to go at it alone with just a deal with mexico, well, then, we might see symptom battling up on

capitol hill about whether that's possible under the system that is in place now back over to you. >> meanwhile, reuters has a piece about the u.s. and the ability to perhaps impose tariffs on mexican auto parts. depending on their volumes what should we know about that >> well, that's an interesting one. reuters reporting that this morning saying there is a previously unreported side component to all of this in terms of the cap on mexican cars that could be brought into the united states as a part of this deal we've got an e-mail here from phil lebeau who is explaining this in terms of the auto sector he said last year the united states imported 2.15 million vehicles from mexico, according to the center for automotive research so this side agreement doesn't leave much room for growth in auto production in terms of cars and trucks coming into the united states. so phil knows this sector better

than about anybody alive i think that's good analysis there in terms of what the agreement means. not allowing a lot of room for growth we'll see how it plays into canada's appetite to get in the deal, as well. >> does the president have his party's support on this? there have been complaints from free trading republicans about questions a., would the u.s. go through with just u.s./mexico as you brought up but also some of the requests and changes that the trump administration pushed in this agreement to try to get the u.s. to be more of a manufacturing export power house the question whether it's good for american industry. >> sure. i mean, look, the president is not a free trader. the president very much feels that you have beef up u.s. manufacturing and globalization has been bad for american workers over the past 40 years or so. i think ultimately republicans on the hill will go along with

the president if he comes up with the deal. if it's a bilateral deal with mexico, i think there are more question marks there if canada comes in, i think you'll see republicans on the hill fall in line with a president who is very popular among their own base and a president who campaigned on this. who campaigned on increasing manufacturing in the united states whether you respect it or not from a pure free market perspective, i think a lot of republicans will say the president is doing what he said he was going to do our base is for it, so we're for it. >> >> the president continues a tax against google and what he's calling the, quote, rigged search results against him after tweeting about the company's content yesterday morning. he spoke out during the meeting in the afternoon with the president of fifa. >> they better be careful. you can't do that to people. you can't do it.

we have literally thousands and thousands of complaints coming in and you just can't do that. so i think that google and twitter and facebook they're really treading on very, very troubled territory and they have to be careful. it's not fair to large portions of the population. >> comes, of course, as executives from twitter and facebook get ready to head to washington for hearings on the fifth over their algorithms and content policing, again, david we've had the discussion about reformed regulatory framework might take shape. >> unclear exact my what tly wh executive is able to do without congressional approval, as in perhaps a law. because it's not clear there's a regulatory framework but we've had president many times sort of voice objections to certain things and that, itself, can move things to some

extent, but i don't know. >> i don't know. >> it dies out. >> yeah. it doesn't seem too threatened. >> amazon is back up to the highs after a number of attacks from the president >> that's true. >> even called into question anti-trust, which is what they might spook investors. >> but didn't. >> we make this point a couple of times the anti-trust idea of these companies having too much power is certainly one that is not going to go away, but if you look at that recent decision, the american express decision from the supreme court it gave them more cover on the anti-trust front it was an important decision in terms of how it dealt with the two-sided market and that you have to show arm on both sides they were not able to do that. american express won that. that's one route you can go, it doesn't appear it would have a lot of traction at this point. and the question becomes, well, could you get congressional action of some kind? i don't know. >> and while it does seem like a bipartisan kind of of issue, you've got the democrats bashing

for the russian election meddling and the conservatives saying they're getting censored. there's no agreement, exactly on what to do or what exactly the problem is i think that the testimony will be interesting on september 5th. as it stands now, google is not sending its ceo. it's sending the global affairs kent walker. i think you'll hear the cries from congress. >> right by the way, it sort of brings us to the price target increases today on google from morgan stanley which we'll talk about after the break. the u.s. economy logging the best performance in nearly four years. what it means for stock when we come back.

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bargaining table do markets have more room to run in the face of this? let's bring in charles schwab chief global investment strategies good to see you. thank you for your time today. >> thank you. >> jim, let's talk about gdp here it's farther and farther in the rear view mirror some of the internals, especially corporate profits, best 12 month gain in four years. what dough you make of it. how does it color where we are now? >> well, it's fabulous numbers it really is on top of that, you know, over the quarter the treasury yield stopped going up, as well. you had, you know, golding locks kind of growth where growth accelerated without interest rates moving up. so fabulous first half fabulous second quarter but it is starting to feel, carl, a little like prior to 2008. the old time recovery around 3% growth

i think the problem is we're finally getting, you know, good growth at a time when the unemployment rate is 3.9%. if we keep up at anything close to 4% growth in the rest of the year, i just got to believe you're going to push, you know, cpi inflation, wages, the 10 year yield above 3%. we'll be struggling a little bit with good growth but maybe too good on the other hand, if we slow down a little bit, i think is more likely, then you're going to see calls and recessions worries, i think, elevated i think the market is still going to have a struggle finding this silver lining path because you could get either too hot or too cold in a hurry here this late in the economic cycle. >> all right jeff, that runs counter to another narrative we're hearing more of this week. that is it will be an easier fed in 2019. you look at powell's speech last

week you look at what paul tutor-jones said about a potential melt up in q 4 do you lean one way or the other? >> i think the fed is clearly going to be data driven. as jim talked about, the data is wanting to further lose from the fed. one of the most interesting and reliable indicators of the cycle you need to begin to worry about the peak is when the inflation rate and the unemployment rate are the same number. that proceeded everyone in the last three recessions by about a year there's 1% apart now could close that gap fairly quickly under rapid 4% growth. >> that's an interesting indicator. jim, i want to talk about the market's take on trade the posture is hopeful is that right to you >> well, i think the deal i think the deal particularly with canada, sara, is really a wonderful thing long-term.

i think it has greater impact than it does immediately now the trade impact, to me, on the stock market hasn't been that great. it's affected certain industries very dramatically but a lot of economy not very much. you got to remember the stock market collapse the in february because of a hot number not because of trade it rallied up to highs long before, you know, we had a trade deal with mexico i think trade had less impact than we think on the market, but, boy, if we can bring a new, better for the united states deal between the north america that's going to put a lot of pressure on china. a lot of pressure on europe and could literally lead to a much less restrictive global trade. >> jeff, turkish lira is falling. there's problems overseas. global growth is not set to run

at a rate we saw last year how much longer can the u.s. market ignore what is happening with the rest of the world when jim talks about the fact that the markets take the trade uncertainty, as well, not so much overseas market like china. it feels like the u.s. is decoupling how much longer can it last? >> in the last couple of years, the international markets have outpaced the u.s. in terms of both performance and gdp and i think a lot has to do with the dollar this year we saw a fairly sharp move in the dollar tied to a reevaluation or devaluation of the chinese yaun that seems to have stopped that 11 days ago now china seems to decided to stop that depreciation and stabilize that currency. and in lock step you see the emerging markets react in a positive way if that's the case, the dollar appreciation and devaluation of the yaun is behind us, that can set up a better environment for

international equities maybe keeping up with the u.s. in the second half of the year. >> some discussion this morning, jim, about flows stock flows. we are sort of net an on an outflow move by the flow numbers, i see their point. the entire bull market has been one based on fear. you see a chronic -- so by old standards, you have a big run in equity flows at the top of the market maybe we'll get that, but it's just one factor, i think, and there's too many other ones, in my book, that probably make this a struggle for stock market.

>> interesting good stuff talk to you soon thank you very much. >> thank you. >> thank you we'll get more "squawk on the street" in a moment. futures tick up a touch on this wednesday. don't go away. ♪ hawaii is in the middle of the pacific ocean. we're the most isolated population on the planet.

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wednesday for the last week of august going into a labor day weekend part of this being driven today by some bullish calls out of morgan stanley on amazon and google, guys they take their google target to 15.15. bull case 1800 and one of the lines that stands out we see the launch of a waymo ride hailing service by year end as a potential catalyst for value realization. waymo being valued as a call option that's interesting given some of the stuff written about waymo's experiment in the southwest united states now. >> it's interesting how these antonymous driving programs are going to be valued eventually, if and when you can try to think about monetizing them, at the very least, get something out there. whether it's imbedded with tesla and what it's worth. what uber is and the automakers themselves are also embarking on

so many of the different efforts. but waymo has a lot of miles driven a lot. >> i mean, there are questions about roll out, consumer adoption, legislative hurdles which the note mentioned but said it's a $45 billion business by the way, all of wall street is bullish now on google there's not a single sell according to fact set. 91% of analysts say buy the stock. the average price target at $13.77 not quite as high as morgan stanley is going it's a beloved stock now. >> look at the top line and they look at the multiple and, i mean, dan yesterday talking about the reasons heowns it.

[ applause ] [ opening bell ] players are having trouble keeping up in the heat and what the usda is doing about breaks. >> djokovic they took a 10 minute break there. >> wraps himself in a towel with ice at the u.s. open trying to lower the body temperature. >> it was 95 it's got to be -- i don't know what it is on the courts i don't know how the guys and ladies do it it's frightening. >> it's insane. >> we mentioned the google club.

morgan stanley call on google. 2500 for amazon. that's their call about 30% potential upside, they say, would take amazon to about $1.2 evaluation. >> brilliant. >> it's a street high. a street high and a lot of their thesis is about sort of ancillary businesses, advertising a big piece of it. along with aws. >> somebody has to be the high you said the stock would be up 67% by, let's call it the beginning of september you probably would have been the high and you would have been right. >> but it is interesting how amazon transitions into high margin business like cloud and advertising. we think of it as a retailer and now interested potentially in doing a competitor. and building up the tv and movie business. >> yeah. the prime subscription is incredible engine and i know we

were talking yesterday about this very notion that we don't talk about amazon as often in retail and the competition is brought to so many other retailers seems to be not as much a focus for their hard times. because so much of retail has been positive. but we talk about the high margin businesses in amazon that aren't necessarily contributing to the top line because, of course, retail is still the main business but contribute mightingly to the profits themselves. >> by the way, amazon typically doesn't respond much to public criticism but they have a blog post out this morning responding to bernie sanders who has been critical about working conditions of the company. theysaid we've been in regular contact with his office and offered several opportunities for senator sanders and his team to tour one of our fulfillment centers. today he still hasn't seen one for himself. >> i don't know if the democrats or the republicans will be tougher on these companies as we get into the midterm elections >> it's a political vice from the right and the left.

>> yeah. >> good old fashioned bipartisan bashing. amazon, google, facebook, twitter all better be gearing up there's uber and earnings to talk about today dick's sporting goods is a loser on the session profit came in better than expected but sales missed. revenue, comps comps were down 4% oh, we are looking at the canadian foreign minister. she's speaking in french so we won't bring it to you. if she starts speaking in english, we'll monitor for headlines, we'll let you know. jared kushner representing the administration ambassador lighthizer is there it's at the usdr the pressure is on canada. guys, 75% of canada's exports go to the united states. >> yeah. >> i don't see how they walk away without a deal. >> yeah. that's what the market is betting on. >> right. >> it will be interesting to see the response in congress

so there are any number of red states where you have a great deal of interest in this >>well, they are our second largest trading partner. >> right. >> behind china. >> right excuse me. >> you're going hear discussion whether they're willing to comprise on dairy quotas take a listen. >> the entire team they worked late into the night last night and started again early this morning. we've already been having some meetings today and this morning i've already been speaking to ambassador lighthizer on the phone and our officials are already working very hard at the official level engaging with the u.s. yesterday we had a bilateral meeting with mexico.

i'm going in now to have a meeting with ambassador lighthizer i'll have more to report after we've had that meeting. >> all right short and sweet. are we going to get -- here is an encore. >> but as we said yesterday, we are encouraged by the progress that the u.s. and mexico made on some of the key bilateral issues obviously, as people who have been following this know, rules of origin is an incredibly complicated issue, but we had reached a high level agreement with the u.s. in the spring. we are encouraged by the progress they made with mexico

this summer. mexico has made some significant concessions, which will be really good for canadian workers. on that basis, we are optimistic about having some very good conversations this week. thank you. >> okay. [ speaking in a foreign language ] >> sort of the rhetoric they've been delivering pretty much all summer long. that's optimistic about talks. progress being made. talks being productive in this case, optimistic about having some good discussions >> and optimistic about what the u.s. has struck with mexico. keep in mind, canada is negotiating under a double threat from the administration that if canada can't come on board, u.s. and mexico will move forward quowithout canada.

>> will they >> that's been the threat from the administration they could face additional tariffs. >> just the counter argument would be they have, in a way, do they have the white house in a box if a bilateral runs into more friction in terms of domestic passage. >> whether congress would be on board. >> the administration is convinced they got through the key sticking point with mexico, which was the auto industry. for canada, i think it's going to be more about opening up their dairy industry president trump has been fixated on this. so far canada is spinning what the u.s. and mexico have reached, including higher wages for mexican workers whether it comes to the auto plants that's a good thing. >> i keep thinking she's going to come back to the mike one more time. but that's probably the last we've seen of krista freelund. we haven't touched on retail names this morning dick's sporting goods revenue is shy. comps were a miss. and they saved the best for the comment about under armour.

>> two comments in the press release. this is some name calling and flame gaming, for sure double digit growth in e commerce, he says. but continued significant declines in under armour sales as a result of their decision to expand distribution. also, called out under armour as one of the weak spots in the quarter overall. so under armour is expanding the distribution in fact, kohls one of the places it's doing that, called out under armour on the flip side for positive growth and helping its own sales. clearly dick's is not feeling the same way investors not giving dick's the benefit of the doubt. >> there's a name that i used to follow closely hpe, of course, back in the day when meg whitman and the companies would join us every quarter. she moved on, of course, with jeffrey katzenberg but hp reporting earnings after the bell last night. there were third quarter net revenues

it was up 4% 1% when just adjusted for currency most importantly the company did raise the 2018 gap to $1.85 to $1.90. and as well as nongap also moving up. new outlook $1.50 to $1.55 so raising that return 1.1 billion to shareholders above free purchases and dividends and raise the quarterly cash dividend by 50% aligned with what they indicated previously would be the case and you can see a positive response for what has been a fairly good year of shares of hp after last year not the case the stock up about 19.5 or 20% this year. >> i want to bring up campbell's soup our interests collide here as an update tomorrow is the day this company is supposed to release the results of its strategic review and its earnings which have

promised the last time it reported which was the time where it was revealed that denice morrisson, seven-year ceo would be abruptly stepping down. all sortsds of questions about what the review will entail. it doesn't look like they're heading in the direction of a sale it could set us up for a proxy fight from investor dan lo. >> it could. we're going to hear tomorrow morning from campbell. i don't have a lot, at this point, to share other than it doesn't appear likely that an all out sale of the company is in the cards at this point but from what i understand mary alice malone and bennett were on the board remain opposed to that potential outcome. to your point, it's about 15.4%.

>> i'm expecting there's going to be some sort of comprehensive plan presented here from the company. there could be some unexpected things, perhaps, has been rumored some sales of certain units. and as well, you know, we'll have to see what they put out there in terms of numbers, sara. in terms of potential targets. >> yeah. >> they have for earnings and the like we'll see. >> not a lot of hope there. >> no. >> and to your point, one i've made priestly the entire board is up the window will be open in time will be available to dan low. it's possible you could see him come if he's disappointed with the plan for the entire board. even if they were removed, it doesn't necessarily mean you can get a deal done because it would require the vote and the economics, as we outlined, are fairly significant right there

so it was a weird situation. we'll have to wait to see. >> the fifth biggest investor $12 billion company. unclear who the buyer would be the drama continues. >> the smuckers earnings, for example, it just continues to be a very difficult area. >> jams, peanut butter not working well it's about the fresh and organic stuff. it's about the smaller brands. i wanted to mention, though, brown foreman reported very strong quarter when tennessee whisky up 8% jack daniels family up 10% international growth up double digits overall a pretty good quarter there. the stock is up 2.5%. >> retail overall kind of weak

but record highs for amazon and for the nasdaq let's get to bob this morning. hey, bob >> reporter: good morning, everybody. still record highs a little bit on the flatter side that's not surprising. we're in august. it's flattish in europe and asia even on theed advanced decline line slightly less impact from the trade juarwar resolution story modest move on the tech and energy staples are kind of flat as consumer discretionary kind of flat industrials and materials are a beneficiary of the trade war story improving are slightly flat, too. overall it's true the marginal mover of the market has been the trade story. we have been seeing this for awhile now this has been going on for a couple of weeks. even this week anything associated with trade war improving, chinese internet stocks, copper miners, any kind of material names, any kind of emerging markets stocks like

south africa and global autos have been improving as well. and not just the united states but all around the world that's the big story on trade, of course, this week we'll see a number of the big auto names, general motors, ford, the parts makers all moving to the upside. but it's been a global story it's been quite surprising to see even chinese internet stocks in the last couple of weeks the european names are up nicely volkswagen and honda motors. everything is up 3 to 4% in europe among the automakers. clearly it's trade that is the marginal mover of the stock market that pushed us into new highs. we're sitting at 2900 now on the s&p 500. finally, is it me or is it suddenly just popular to keep bashing technology names i've heard the name tech lash thrown around a couple of times

this week. i'm not sure it's going to worm the way into the vocabulary. i've heard the word thrown around we've had the president saying google, twitter, and facebook are biassed. yesterday we had a former reporter with his book out "winners take all." he's been critical especially of amazon and openly said should be considered possibility of breaking that up there seems to be something in the air. the sight shifted from unabashed for the companies a year ago even now to a situation where the criticism is much more

harsh. even really the opposite of google's motto, don't be evil. there's something going on we should pay attention. you can see today most of the names around this alphabet, twitter, facebook are on the flat side. a new high 2900. back to you, carl. >> >> i'll take it, bob. thank you. rick santelli at the cme group in chicago good morning, rick. >> good morning! we have pretty good data this morning with regard to gdp and, yes, one quarter doesn't make the entire year, but this year is shaping up to be one of the better ones. even to move from that point of view one week of tens we held yesterday in the morning. hovering around the thin 280 mark next three marks are zooming look at a month to date, we have 3% popped early in the month definitely gained that back. but came into an area that should have, as you can see on the next chart, starting in

early july from a month multi-perspective we're close to unchanged with where we're trading in early july maybe the key chart the next one the third week in may. that's the key there ye just like our high yield spread charts, we took from bar clay yesterday, they're doing pretty well the spreads are hanging in there's not a lot of anxiety in the fixed income markets as evidenced by the lqdt which was the investment grade you talk about a wild month but we had a rollercoaster ride. like every roller coaster you get on it but one place and get off the same place that's true for this chart, as well the month of august turned out to be a wash with respect to the

dollar yaun. carl, david, sara, back to you. >> thank you, rick nafta negotiations with canada get underway this morning. there's a shlook at the s&p.

a few big retail movers to get to this morning.'s sporting goods, express, american eagle, some of them getting whacked in the early going. courtney r courtney reagan is joining us with more with >> the big box players, the department stores all fared pretty well. now we get into the specialty names at the end it's a mixed bag.'s sporting goods there was some good here and some bad. unfortunately i think the bad is going to overshadow the good here.'s sporting goods earnings did beat gross margin came in pretty well, too, above expectations, pretty strong but that's going to get overshadowed

by the sales miss. i know you talked about it a little bit earlier and they had disappointing guidance ceo ed stack gave us a little color in the release because the conference call is yet to start where i'm sure there will be more questions ceo stack said there was weakness in the hunting business and the electronics business and that was about half of what the problem was. remember, they changed their firearm policy some time ago and for electronics that really means the personal fitness tracking equipment they're exciting all together and beyond those two businesses he pointed to the weakness in underarmo ar. it's dragging down shares. und underarmour sales distribution declined because you can buy it in more than dick's sporting goods. american eagle is beating earnings and revenues, comp.

sales up 9%. guidance is weak and as you can see it's pulling shares down about 6% for american eagle. let's round things out with express. we don't talk about this one a lot because it is small you are but worth looking at today they turned in a really strong report beating on earnings and revenue, they're upping their guidance they actually say their online sales were up 37% and is now responsible for a quarter of all of its sales so that's pretty significant along the lines of something like a nordstrom back over to you guys. >> court, interesting day for your sector, watching retail closely today. as we go to break an interview you do not want to miss, becky quick tomorrow with warren buff fate, 11:00 a.m. eastern time on "squawk alley. with the nasdaq gains today it is official best august for the nas nc20sie 00 "squawk on the street" is back in a minute.

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eisen, and david faber at the new york stock exchange. the dow struggling a little bit, 13 points to the downside but the s&p is back to 2900. nasdaq record high today along with an amazon record high nasdaq as we said a moment ago having its best august so far in about 18 years let's get to diana olick with spending home numbers. >> pending home sales down 0.7% in july compared with june, according to the national association of realtors, that's a miss the street was looking for unchanged. the index down 2.3% compared with july of 2017 and that is the seventh straight month of annual declines pending home sales are an indicator of future close sales. the realtors continue to blame a lack of supply and serious affordability issues buyers are stepping back as prices continue to rise. the pace of home price gains is moderating slightly but not enough mortgage rates are also considerably higher this summer than they were a year ago although they haven't moved much in the last few months sales are worst out west,

pending home sales in the northeast rose 1% for the month but were 2.3% lower compared with a year ago in the midwest sales basically flat monthly but 1.5% lower annually, in the south, sales fell 1.7% monthly and 0.9% annually and out west sales down 0.9% monthly and down a whopping 5.8% annually all these numbers are on cnbc.com right now back to you. >> diana olick, thank you. a road map for the hour starts with a warning to big tech president trump continuing his attacks on social media saying google and other technology giants are treading on troubled territory. s&p is back to 2900, what can derail this rally? the canadian foreign minister freeland is in washington as canada renegotiates nafta regulations with the united states we'll see what plays out this morning. >> trade talks under way this hour as canada makes its way

back to the nafta negotiating table. eamon javers, good morning >> reporter: good morning, carl you're right krista freeland of canada walking around the corner here from the white house, making positive comments on her way inside to begin the day of negotiations she was asked whether or not she thinks that canada can hit that friday deadline that's looming later this week. here's what she said >> we are encouraged by the progress they made with mexico this summer. mexico has made some significant concessions which will be really good for canadian workers. on that basis, we are optimistic about having some very good productive conversations this week >> so freeland saying there that canada is optimistic they can have good discussions here, not committing necessarily to meeting that friday deadline the white house strategy has been to cut that deal and

announce it earlier in the week with mexico. we saw the photo opp with the president on the phone with the president of mexico in the oval office the idea there to put pressure on the canadians to come to the table and sign something this week if that doesn't work the white house says they're prepared to go it alone in a bilateral deal between the united states and mexico, but it's not entirely clear that can pass muster on capitol hill where some republicans and democrats are saying wait a second, we authorize you to negotiate a three-way deal, not necessarily a two-way deal we'll see what kind of buy-in the administration would get for that on capitol hill if they're forced to go that way. for now fingers crossed at its white house, they're expecting things will go will in the negotiations with the canadians and hoping they'll get a deal by friday >> looks like that's the markets take as well thank you for the setup, eamon javers nasdaq hitting another record high. investors closely watching the trade talks. let's bring in jpmorgan global market strategist ben mandell

and partner larry glaser these levels back above 2900 for the first time ever, if we can hold this, the s&p, what does that tell you the way the market is viewing trade talks >> well, i think it tells you that markets are optimistic. there's clearly some good news in the nafta negotiations and the forward progress there but here's what worries me, it's a binary outcome you may well get a deal on friday, but that deal would be a regional deal, a trilateral deal the other alternative is no deal, and something that happens later on, so there's no middle ground of bilateral deal that happens by friday. you can see that in the details of the deal hammered out with mexico that is a regional agreement, so they talk about 75% of content in automobiles coming from north america, not from the u.s., not from mexico, but from north america. 40% of the passenger automobiles have to be manufactured in a high wage part of the region, so

not the u.s., not the mexico, but north america. >> are you saying this has economic implications? >> i'm saying that this is a regional agreement and it has to include canada if something happens by friday it will include canada there's negative assem tree in here lot of the good news has already been priced that you see that in the mexico peso, up 5% since july, you see that in the trading of let's say automobile stocks which are having a great week. that wouldn't be the case if nafta was expected to crater so my worry here is that a lot of the good news is priced in. i also worry about china the other front of the trade war. i worry that a deal on nafta is just sharpening the knives on the next china tariffs i don't think trade as a narrative and source of risk in markets is behind us just yet even if you do get a deal. >> larry, do you agree with that do you think the prospect of a successful deal with mexico

makes you more or less hopeful for a deal with china? >> look, there's no doubt, you don't have to be a financial expert to know that canada and mexico have to make a deal with the united states. they don't want a trade war with the united states but where i agree with our other guest is with respect to the fall, we think about september volatility, historically challenging creative time for the market midterm elections, throw in unresolved issues around china trade. that is the elephant in the room here that is the one that's really going to catch this market i mean, who didn't think we were going to make the deal with canada and mexico? of course we'll get it resolved. china you have a president for life, that is a big elephant and huge elephant that the market will have a tough time swallowing coming into the fall. of course the domestic economy remains very strong, consumer confidence, smallbusiness confidence and gdp revisions, all of which are supportive, that goes right out the window if the china deal gets prolonged. the trade war is one issue

the president's war on big tech is a whole nother animal that this market average will have a much more difficult time swallowing come this fall. trades have no impact on the major market averages. it's an issue in china, not in the united states. big tech war is a whole different deal, that would bring the nasdaq down, it will bring the s&p down i think that's the one we have to watch, not necessarily what comes out of canada this week. >> doesn't it seem like trade and to a lesser extent tech regulation are manufactured worries? in the end you look at adjusted corporate profit numbers in the q2 report >> right >> 8% before taxes, year on year >> yes kind of view that as a risk the dominant narrative even before trade is u.s. growth leadership >> sure. >> 4% in q2, 4.2, you don't expect that to persist but the details suggest that a lot of that strength has broadened out, consumer capex, et cetera, and we've taken that on board for

the latter half of the year. the rest of the world is not doing poorly by any means but it's not the same. >> the chart u.s. percentage as a global mark cap is 40% we haven't seen that since '05 >> that's u.s. growth leadership coming through >> larry -- >> i think that's a problem. that's a problem for this market because in a global economy you can't expect the dow to continue to advance if you don't have the rest of the world supporting it. if you look at the volatility in emerging market currencies it is enough to make you sick and nauseous mexico may be rebounding but look across the world there is clearly blood on the streets in turkey and venezuela and in south africa, literally blood on the streets in some of those places so those are going to be a headwind for em currency you need the globe to contribute to the growth. the u.s. can only do it so far on tax cuts and that's where we are right now. >> i actually disagree i think it is your best bet for offense and defense in this environment. offense because that's where the

action is and defense because if something goes wrong in the rest of the world if you get an explosion in terms of trade, trade disputes then the u.s. is your high quality defensive market here. i think it's helpful in both dimensions >> arry, on that point, turkey venezuela and what was the other name, south africa, they're not exactly the biggest contributors to global growth and the market doesn't seem to have been particularly concerned about volatility in any of those markets. >> right >> why should it be in the future >> first of all that's where the growth is in the global economy. when we look at u.s. growth we look at europe these are still mature developed worlds the developing world is where the future is, and conceptually it's easy to say we're an island in the late '90s contagion continued to grow because of technology in the case of today it's more of a global economy. i'm not saying china will not

get resolved but the impact we see some of the other places and impact on currency could show up to bite us into the fall right in the middle of midterm elections. the u.s. needs to think of turkey to spread to european bhankz banks if europe gets in trouble that's a whole different can of worms that's to affect the global banking system >> we've heard those words before larry, you raise the risk around the war against big tech which is a theme and only ramping up except for the nasdaq is trading firmly above 8,000 >> no doubt. >> investors don't fear this why are you? why do you expect this to be a major headwind for the nasdaq and what would take it to that level? >> no doubt when i was brought into this business, they said don't fight the fed. the concept was don't fight major policy issues coming from the government they'll withstand you longer than you can withstand them. i think the same is true when you have the president opposing

large technology i don't think i'm going out on a limb saying it's a secret he doesn't like big media and big technology bernie sanders in the last 24 hours talking about the wealth concentration, some of the companies not paying their fair share so it becomes a populist rhetoric on the right and the left to drum up the face into the fall and midterm elections to go after these companies and if you believe you don't want to fight the fed, you don't want to fight the president where he has a vendetta against some of the companies and he is a man who has a temper and going to go after these companies in the long haul could you see policy issues and the populist base wants to see them pay more than their fair share i worry about the major market averages the dow may be exempt from that. dow 30,000 you could see within spitting distance unimaginable before it's not bad for the u.s. economy. it may be bad for certain parts of the u.s. economy. >> larry glazer, thanks for joining us from mayflower, and ben from jpmorgan. >> thank you when we come back a big warning for big tech the president doubling down on

threats against facebook, twitter and google, we'll talk more about that. plus nafta talks with canada resuming, what the negotiations might yield. we'll talk to a former u.s. w wne rep. ahead dodo 5, s&p is up 4 now. don't go away. that's tough to d. schwab does it. next question. do you offer a satisfaction guarantee? a what now? a satisfaction guarantee. like schwab does. man: (scoffing) what are you teaching these kids? ask your broker if they offer award-winning full service and low costs, backed by a satisfaction guarantee. if you don't like their answer, ask again at schwab.

if you don't like their answer, this wi-fi is fast. i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy. wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. just wanted to point out some market action in the british pound spiking against the u.s. dollar, getting comments from europe's top brexit negotiator, michelle barnier, who is expressing

optimism here, the single market, europe and the uk means single market, this is not negotiable, says we expect britain's red line and in return they must the where we are saying we are prepared to offer a partnership with britain never seen before with any other country, so it looks like the eu is offering some concessions or at least conciliatory tone when it comes to negotiations, moving the pound up giving hope that they will stay within a single market or negotiate what will be a complex deal that's favorable to the uk inside the eu when it actually leaves. >> tough week, may has been out of the country on a trip to africa the president here continuing to criticize google saying the company's search engine is biased and requesting rigged" against him ramping up his call for regulation issuing a warning to other tech giants as well take a listen. >> they better be careful, because you can't do that to

people you can't do it. we have tremendous, we have literally thousands and thousands of complaints coming in, and you just can't do that google and twitter and facebook are treading on troubled territory and they have to be careful. it's not fair to large portions of the population. >> to discuss the likelihood of regulation, we're joined by rbc capital's lead internet analyst mark mahaney and ethan glass, good to see you both again >> good morning. >> good morning. >> mark, we've been around the block a couple times this year regarding big tech and regulation is it different when the president says it? >> it probably is. we just faced though the biggest most thoughtful piece of regulation related to these companies and privacy that came out of europe with this gdpr what we found so far is that it hasn't had a material impact on these companies. it hasn't deterred advertisers from the google or facebook

advertising platforms and doesn't seem to have deterred consumers. it's possible new regulation will arise in the u.s., it will take multiple years to play out if it does occur the bigger risk remains its competition and its maturity of the industries it's not regulation. >> ethan let me get your perspective from a doj/law enforcement/legislative perspective. what would be the road to go down here if you wanted to actually regulate this >> it would be virtually impossible to regulate this type of speech. these aggregators of press are entitled to the same first amendment protection as the rest of us. less than ten years ago the supreme court decided in citizens united that both natural persons and corporations are entitled to the full protection of the first amendment and the president, the executive branch, the judiciary,

and congress cannot invade upon thing aglators, the press or individuals right to free speech so i think it's going to be very unlikely there's going to actually be any movement to regulate how the aggregators are aggregating the various press articles >> however, if the government wanted to make a statement or punish these companies how easy would it be to go after a google or anti-trust reasons? europe has three cases open against the company. >> that's right, and we've seen that when the administration is upset with the statements made by particular press outlets, it's maybe a coincidence, maybe it's intentional that all of a sudden they are subject to anti-trust scrutiny. we saw a lawsuit which is an appeal to the d.c. circuit by at&t and time warner we know that "the washington post"/amazon relationship has garnered quite a bit of interest and has potentially pushed

amazon into an area where they've been investigated for basically competing. so in the u.s., it's possible that investigations will be open as they have to investigate competition based upon trying to placate these noncompetition complaints >> all right, mark, we hear more and more about the market power of these companies, the power of their platforms, their perhaps inhibiting innovation in some ways as a result of that the narrative seems to be changing a bit at least in terms of public perception does that actually matter in terms of the narrative and the perception of the investors? >> david, i don't think it does near term. the two points i'd make if you look for companies that could abu abuse monopolistic positions they are google and facebook, these are massive platforms so there's no question in my mind these are companies that should be scrutinized and they are

scrutinized intensely. whether there's clear evidence that they've undermined the innovation that's not clear to me i look at the other services that have risen up and fallen in social media and haven't seen a better social media network that's come out that somehow facebook undermined and the same thing with search. i don't think there's a better search engine out there, at least statistically speaking if it you look at it relatively objectively. it doesn't mean things can't change in the future new technology like blaockchain could undermine future models, it would be healthy it did but i haven't seen anti-competitive or anti-innovative moves by the companies on a consistent basis and frankly, i haven't seen it in the case of facebook. >> speaking of facebook, mark, your point is well-taken about gdpr and minimal clues about engagement impact. we know what they said about expenses for the back half of the year and next year and how that sort of changed certainly sentiment surrounding the stock, we're watching the nasdaq today

record high. facebook has nothing to do with that wouldn't margins be a concern at the very least if regulation really caught traction here? >> absolutely. look, this is i think the most interesting question, the most confounding question that came out of the earnings cycle this last season was what the heck is going on at facebook they're guiding to material revenue growth deceleration, margins coming down on the margin side. this company is doubling the number of data centers, doubling their capex so they're clearly investing. is that a structural defensive or offensive move. my guess is there's a product cycle coming out of facebook that they're not talking about but telling you the engineering plans that will support those and building deeper moats around the business we'll find out in the next 8 to 12 months. i doubt the company is wasting capex spend. we look at this as a buying opportunity on facebook. >> so ethan, you need your anti-trust expertise here. google, facebook, twitter, amazon, who has the most to

worry about when it comes to a potential investigation into anti-trust and competitive behavior >> well, i think in terms of straight competition none of them should have anything to worry about. i totally agree that innovation doesn't seem to be hampered in any way. i would remind everybody that about 20 years ago we were all very concerned about a company called america online acquiring time warner. that hasn't turned out to play out the way that the critics predicted it would america online doesn't exist anymore. i think especially in the fast moving innovative space it's very hard to say that any one point in time we should lock a company in and say they're dominant we need to see them engaging in some conduct that limits competition. >> none of them you're saying. >> yes >> the only thing i would add on innovation, we had john chambers on last week who is a pretty good entrepreneur in his own right. you don't know what ideas are not being funded as a result of the fact that they might be

competing with the likes of facebook or google and therefore you're not really going to get actual great deal of venture money around them just because of the prospect of it. that is a real potential hindrance to innovation, isn't it >> i would say that often we hear this argument that the large player discourages capital coming in to the competitors but we usually don't actually see it happening if somebody has a good idea, if somebody has a product that's better than the existing products, they almost always find the money to get the scale to launch and be part of the market then there's the market that decides, consumers decide whether or not they like the new product or the newer product and especially in technology where consumers are fickle you see a lot of movement. i think the venture capitalists are smart about this they put their money where there's likely disruption. i don't see any reason why venture capitalists wouldn't put their money in disruptive companies. >> good discussion

really good stuff in there appreciate it very much, mark, ethan, hope to talk to you again soon >> thank you very much >> when we come back, a new study claims climate change is taking a direct hit on home values we'll take you to one city dealing directly with the changing real estate market, next

a controversial news study 1,000 family homes across miami were tracked going back 45 years. climate change is altering home values on the coast and on higher ground. >> what we found is that the higher elevation properties are essentially worth more now increasingly, will be worth more likely in the future >> reporter: because multiple predictions like this one from climate central are dire the ocean overtaking vast

swathes of miami in just the next few decades, precisely keenan argues why climate gentrification, wealthier investors displacing low-income residents in high elevation neighborhoods is already happening in little haiti. fabiola florenville is a community activist and investor in the area. >> the community sees new people raising their property values and taxes, pricing them out. >> reporter: on this street, most of the homes are valued around $100,000, but this home renovated by an investor is listed for sale at $559,000. its value has almost doubled in just the last three years, and the neighborhood around it is upgrading as well. >> you have long time commercial tenants been here for 10, 15, 20 years and new investors and developers no longer want their rent checks, why they're redeveloping it. >> one miami developer we spoke

to is actually hedging his bets building luxury towers on the coast but also investing in a major new residential and retail plan on higher ground. he argues the property taxes from those luxury towers help the city invest in new technology to safeguard miami from water to hear that interview and more it's up new on cnbc.com. back to you guys >> great story, diana, thank you, diana olick let's get over to sue mo moreira. >> a big upset in the florida primary race gillam won the democratic bid without winning a poll ron desantis won his bid thanks to be aearly endorsement from president trump. both candidates are 39-year-old. president trump unblocked some twitter users yesterday

federal judge prevented people from following him violated the constitutional rights. there were 41 blocked accounts, 20 of those had been unblocked as of yesterday. comedian rosie o'donnell she remains blocked. the jhung did say president trump can mute users so he wouldn't see their tweets but they'd see his aston martin gearing up for a public offering, planning to list $1.3 billion worth of shares on the london stock exchange check this creepy site out that is a swarm of more than 2,000 honeybees that took up residents on a hotdog cart umbrella in new york's times square officials had to shut down the intersection but no worries, the nypd has that guy, a bee guy he was brought in to safely vacuum up the critters and transport them to a hive far from the city. those must have been really good hotdogs. that's the news update this hour back to you. >> that's crazy video.

sue, thank you >> you got it. coming up, canada is back at the trade negotiating table at the u.s. tr, the trade representative office in washington, today. we'll talk to president obama's former trade rep. next we passed the 2900 level yesterday for the first time ever, and we are watching these record highs "squawk on the street" will be right back

be. getting some breaking news, from the white house, we go to sue moreira. >> don mcgann is going to leave his position in the fall the president thanked him for his service. we don't have a date, just the fall "white house council don mcgann will be leaving his position in the fall shortly after the confirmation hopefully of judge

brett kavanaugh to the united states supreme court i have worked with don for a long time and truly appreciate his service. so he will be departing in the fall keep in mind this is taking place when we're still right in the middle of the mueller investigation, so it will be interesting to see the reaction to mr. mcgahn leaving. sarah, back to you >> all right, sue, thank you for the update let's look at where we stand on the major averages, record territory for the s&p and the nasdaq nasdaq in the lead up half a percent. we're watching the levels, technology is the best performing group within the overall s&p 500. dow turned positive up 5 points which is pretty much around the flat like. british pound is spiking sending the ftse 100 to session lows on some positive news and comments from eu/uk brexit negotiations, as we watch the trade talks in this country >> the nasdaq up the most by far in part because of that move at

amazon, which is fairly significant for an upgrade up to price target but given its cap weighting in the nasdaq 100 it has a significant impact >> record highs on amazon, apple, adobe, paypal, visa, all-time highs today canada is back at the negotiating table looking to value san salvage the nafta trade pack we turn to phil lebeau >> carl, what's interesting is the report from reuters today there is a previously undisclosed agreement between the united states and mexico, basically a side deal when it comes to a potential cap on the number of vehicles imported from mexico over which vehicles then would be subjected to a 25% tariff the cap that has been mentioned in the reuters article 2.4 million vehicles the reason that's important when you look at the number of vehicles imported from mexico,

it has dramatically increased over the last several years. according to the department of commerce, 2.44 million vehicles were imported from mexico last year, meaning we're already above that threshold, above which basically 400,000 vehicles would be subject to some type of a 40,000 vehicles would be subject to some type of a 25% tariff how that would all be worked out remains to be seen and details are sketchy here look at total vehicle production where we get our vehicles that are bought here in the united states about 56% are built at plants here in the u.s., mexico is the number one import country for us, we get most of our vehicles when we import from mexico close behind mexico canada so what happens between the u.s. and canada is important in terms of the auto industry, not just with final vehicle production but also on the parts side and whether or not there are any side agreements there. let's look at shares of general motors the reason we show you general

motors, fiat chrysler we're showing you this week because they did move higher on the announcement that there was an agreement between the u.s. and mexico regarding amending nafta, but they've plateaued since then because people are saying okay, what exactly are these side agreements if there are side agreements, what are the particular details, gm and fiat chrysler, the two largest importers of vehicles from canada and mexico between each of them, each of them guys i think getting about 850, 860,000 vehicles combined from canada and mexico. these talks critically important to them. >> we'll watch the stocks as we get any news out of washington phil, thank you, phil, lebeau. the talks between canada and the u.s. ongoing as trade ministers from both countries are at the negotiating table at this hour. we heard from canada's foreign affairs minister chrystia freeland last hour ahead of of the talks saying she was optimistic joining us former u.s. trade

representative under president obama ambassador ron kirk. ambassador kirk, what do you expect now that canada has joined the talks >> i think we're going to have to see what happens. i think canada will vigorously make the argument that nafta has worked well for the three countries over the last 20 years, and that as a consequence of that, we effectively have an integrated supply chain and manufacturing community among the united states, mexico and canada and that canada should be given the same amount of time to bring any issues to the table as mexico would, but i know canada does not want to be left on the sidelines of a potential agreement, and as you've referenced, i think many in congress want to see canada included, because they are not only our largest economic

partner but one of our most reliable strategic partners as well >> so jimmy, is congress going to reassert its authority over trade here clearly members of congress are frustrated they've been left out of this process but do you expect them to do anything >> yes, they are frustrated, and there have been some efforts to limit the president's power, for instance, which would be a congressional reassertion of power that's faded over recent decades. they haven't gone too far. i think what's interesting, circling back to what phil was talking about, just because you have anagreement in principle doesn't mean there's an agreement. there are details we don't know, side agreements we don't know. even if the u.s. and canada come to an agreement by the end of this week, that's not the ball game there could be a lot of negotiations and haggling after this week, pushing any final agreement further down the track and there's no guarantees speaking of congress that they'll go for this. this will take some time

it could move us into next year with a new congress. nafta could be with us for some time the original nafta >> right so mr. ambassador, it us that mean trudeau has leverage here or not walking away at this stage does it put the president in a box, given some of the dotted is and crossed ts they need to handle with congress? >> well, i want to be careful. i think -- look, the reality, phil, is, look, we both need one another. i know there's been a lot of frustration over nafta, and in fairness, our administration addressed the issues of modernizing nafta through the transpacific partnership, and the greatest leverage canada and mexico both had with the united states unilaterally withdrawing from that agreement, the other 11 countries have signed it, and that gives canada and mexico an extraordinary leg up as a second round for american businesses

that want to access what's going to be the largest economic zone in the world, but in this case, i think the reality is notwithstanding their personal differences, the u.s. and canada are one another's largest trading partners, are still aluminum, auto manufacturing companies, all mutually invested in one another, andhopefully w can find a way to get this resolved i echo what jimmy said, we forget, congress constitutionally retrains authority over entering foreign trade economic agreements, and i think they're going to have the final word on what this final agreement looks like and whether or not it meets the litmus test of at least being as good as it's been. >> ambassador, what do you think of the deal that's been struck with mexico, does it make sense to you is it something -- you know. >> i'm going to be like jimmy, i'll say the challenge i have is we don't know the details and i

know ambassador and his team are working very hard but we have an unfortunate precedent of the president announcing agreements after the g20 and nato in which we basically had a pronouncement without any real substance so i want to reserve judgment until the talks wrap up this week and we have a fuller idea of what, in fact, has been accomplished and what's been agreed to. >> don't the markets strengthen his hand, jimmy? this market rallies on word of a deal with mexico, makes it look more likely canada will come to the table. not sure if you can extrapolate what it means for china. we're seeing record high levels on the s&p and the nasdaq. doesn't that back up the president's strategy here? >> well, yeah, it supports the idea that markets would really, really like a deal they would quit trying to play scenarios about with drawing, what that would mean they want that certainty to the extent that anything

happens boost that certainty o maintains it, that's great news. i'm sure markets would love to see canada sign on to something, even somewhat vague by the end of the week but there's still going to be certainty -- these are not final deals and listen, just a few hours ago you had marco rubio bad mouthing the u.s./mexico part of this agreement. just because these countries sign on, congress does not have to sign on >> we'll see what happens. for now looks like investors still don't want to see conflict thank you. >> thanks. a big interview on cnbc tomorrow morning, becky quick will be sitting down with warren buffett, the real warren buffett, ahead of his lunch with the winning bidder of the annual glide foundation auction quk 's tomorrow, 11:00 a.m. on "sawalley. "squawk on the street" will be back with the dow up almost 20 back with the dow up almost 20 points

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liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪ time for the santelli exchange let's get down to the cme group in chicago and join rick >> thanks, david jim bianco, withal come. mr. mnuchin, the yield curve doesn't mean what it once does, should it invert most traders i deal with agree your thoughts? >> everybody seems to think that right now, using the excuses of term premium which means the ten-year yield is too low. i think the yield curve matters a lot. every cycle the yield curve inverts we always make these arguments. in 2006 it was global savings. 1990s tfz the s&l cri a -- it wl

crisis it inverted the ten-year three-month curve means money is too tight. it doesn't matter what the inflation rate, it means money is too tight the ten-year three-month curve 75 basis points, it has a i woulds to go but if it inverts that's a problem >> there's no way to sugar coat my next question why is the curve in danger of inverting? one word i want to hear. who is responsible >> the federal reserve >> i rest my case. >> the natural state of expansion, the natural state of the economy is expansion. the leading cause of it breaking is federal policy. what do we do every time -- >> you make an argument the way to normalize isn't raising rates. it's the reduction to the balance sheet. >> exactly where i'm going if i was the chairman i'd stop raising rates and look at the bloated -- >> here is the problem, the 1970s and '80s, hyper inflation

by many regards was the anomaly to what is generally been for a century a rather low-rate global environment. how does the fed do it now do they wait until inflation heats up and try to address it or do they overcompensate taken doesn't show up and they kick the economy down >> central bankers make the same mistake over and over again. they fear the sin of inactivity in the face of a problem, a bigger sin than doing the wrong thing. so the feds raising rates because they're afraid of inflation. >> isn't that the definition of what a government is, an entity that overreacts when it should stay pat >> they're afraid of inflation they'll keep raising what they worry about is if they stopped and inflation came back they'll break something. >> it was wrong to keep rates 0 to 25 for that long. >> absolutely. >> to think you could make up for that mistake by making more mistakes is crazy. finish us off. >> yeah, i think that you have to be very cognizant of what the yield curve is saying, the size

of the balance sheet it matters even though the chorus is saying it doesn't matter if it inverts, money is too tight and puts the economy at risk we have a ways to go, 75 basis points on the ten-year three-month. >> every time chorus -- >> they've always inverted. >> so that argument only takes us so far. we can't go on for a long time gave faber, back to you. >> thank you, rick as we head to break, a quick check on marks the s&p and nasdaq being helped by significant move by am and apple with a nice move as well apple with a nice move as well that's the break really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't?

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take a look at dick's sporting goods right now down on pace for its worst day in a year.

dick's pointing a finger at underar morgue the ceo addressed it -- we experienced continued significant declines in underarmour. they have struck a deal with kohl's, which called out strong underarmour sales. compared to kohl's, dick's typically sells at a higher price point. our mike san tolli joins us at post 9 that's what the analyst would call a negative read-through >> but also to dick's market share, that is the other part of the equation you see that chart, but up almost 18% that's the story of retail if you look right now this is an equal-weighted indeck, lots of special retail in here, but it's less that 2%

of the overall it's up 3.2% month to date even after being down 1% today. up 13% to date, up 33% from its low, so the whole story is everybody got comfortable, and traffic is up, the stocks were very cheap i think that's the other piece in terms of the general strength, are the stocks cheap enough kohl's has had an amazing run. pretty similar story with the likes of macy's, even target trades at a discount to the market, so the question here, just a gut check for those companies that can't live up to heightened expectations, but is there something we'll have to worry about. >> which the the cheapest group? >> i would say the depend stories. macy's is at 110 times earnings, so the big integrated would be the cheapest the likes of gap have very low

multiples, but they have stumbled of taking advantage of this environment in terms of earnings people say one of the clues to the retail environment is j. crew has been timely able put numbers up. >> it's been a chronic underperformer, i think willing to pay full price very often is something we don't think about there's a fashion cycle, an apafrl cycle we haven't seen in a while. >> the only 52-week low we have today is lb. >> it makes it that much more conspicuous. people think the brand is just kind of broken in this environment. if you have that much real steal and, you know, you're not getting people to come in, it's a big overhang. >> they're also a key beneficiary of the tax cuts --

>> the retailers, yeah. >> mike, thank you speaking of retail, coming the later we were the ceo of pbh, the company best hind tommy hilfiger and other brands, manny chirico will be with us. 4:00 p.m. eastern time i will see you then. >> you'll have salesforce i think to kick around too. >> absolutely. when we come back, big tech caught in the cross hairs of washington the president continues thinks attack on tech and we're getting some headlines on trade this morning, as we take another look of the ustr's office. "squawk alley" is up in just a moment ♪

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