♪ to err is human. to anticipate is lexus. experience the lexus rx with advanced safety standard. experience amazing. welcome back to "squawk alley. i am jackie deangeles, build in crude oil stocks of 6 million barrels.

a big build. you can see crude oil is trading 71.63, still at session lows crude stocks in the united states and globally are increasing got numbers from opec from production from the cartel that it increased from august to september. the big story isn't about supply, it is about demand that's linked to the market story. when stocks go down, perceived demand for crude goes down and so do oil prices carl, over to you. thank you very much. 11:00 a.m. on wall street. "squawk alley" is

♪ ♪ ♪ ♪ good thursday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt it is the morning after the worst session for stocks in 8 months nasdaq dropped more than 4% wednesday. as you know, the dow closed down more than 800 points, down 206 two-thirds of the s&p ended yesterday's session in correction territory today, major indexes are lower, close to session lows. the s&p below the 200 day moving average for the first time since may. to help us navigate, david rosenberg. good morning, guys good to see you. >> good morning. >> david, you have been skeptical on a lot of things regarding growth and inflation what do you make of the action yesterday, how much technical damage being done as we fall below the 200. >> quite a bit of technical

damage has been done and there are all sorts of leading indicators ahead of what happened whether you look at home building stock, down 30%, relative strength of financials peaked seven or eight months ago. giving us a little bit of a signal that we could get another round of corrective activity which we are seeing now. one thing i would say is this. we always focus on the u.s. stock market the market is a global market. we talked about an economy, global economy also a global stock market if there's anything we learned from the crisis in 1988 and the last cycle, there's no such thing as global decoupling i think everybody seems to base their thoughts on the stock market based on what the s&p 500 is doing, but there's another 70% of the world out there, and heading into the negative action in the u.s., the ex-u.s. global msci index was down 15% from the january highs. so i think to some extent we're

seeing some lag on the rest of the world hit the u.s. stock market right now as the s&p catches down to the rest of the world. >> you say that yesterday's sharp decline left the market, quite oversold technically, and been all over the place so far this morning but right now down 227 points on the dow, the s&p down almost 1%. your guess is we stabilize here. do you think this is the day we stabilize or do we have to see how the rest of the week plays out? >> that's a very short term focus of course. yesterday the market did get short term technically oversold. i saw one proproprietary survey, you look -- proprietary survey volume spiked, et cetera, et cetera there are anecdotal evidence

that on a short term basis the market was oversold. whether that means we have a low today or tomorrow or yesterday, you know, who knows of course. the bigger picture is we are in a range, have been in a range since january, now nine months ago. we kind of went to the up side of the range around s&p 2900, spent some time there, we're kind of now back below it. lows back in february, 2550, nowhere near that. but we're somewhere in a range and that's what the market should be doing per the discount model. when earnings are strong but starting to decelerate, and liquidity conditions are tightened because the fed raises rates, we have monetary policy between the u.s. and rest of the world, making the dollar go up and conditions tighten up. when you have the intersection of those opposite movements between the numerator and

denominator, you have a market that can't go up at the rate in '16 and '17 as a result, we have a prolonged period of indigestion as the market consolidates based on these different dynamics my guess is we are going to keep doing that for awhile until we get closer to the end of the fed cycle which as we learned in recent weeks, we're not near yet. i think the market is doing what it should be doing, whether that means it should go down 800 points in one day, obviously i don't mean that. the market should be treading water. that's what it has been doing since january. >> david, we have been talking about the fed and rising rates in the past weeks. mind you, yields are lower today, but the other piece of this that seems to be driving the action this week is china and trade tensions starting to ech effect more companies. just the last couple of days, making comments or lowering

guidance based on trade tensions what are your expectations getting to earnings season and do you think we see more impact from the trade situation >> i don't think there's any doubt we see more impact from the trade side if anything, hostilities with china have gotten worse and you're 100% correct. the tenor of the market changed, not just on interest rates but earnings fundamentals. we have a lot of good news priced in. you mentioned a slate of negative guidance. we also have a situation where the analysts for the first time in a long time are no longer raising earnings estimates we are seeing evidence of large scale insider selling and eft flows drive up substantially my sense is it is not a valuation story, i think it is largely a liquidity story, not just from the fed perspective, consider what china is doing

china and japan own more than a trillion dollars of treasury notes and bonds. looks as though they're showing up at auctions less than before. one of the reasons why the market has jitters, it is not just the fed, you had a couple of bond auctions this week that didn't go well the big cover, sub par, the street with a lot of 3 and 10 year product on the books. right now, the street is heavy in terms of bonds. that puts upward pressure on yields when the dust settles there's a lot of confluence of factors causing ahigher level of uncertainty than we have had previously that's one of the reasons why the stock market is reacting the way it is now, because of liquidity concerns and new general high level of uncertainty out there. >> indeed. amazon below 1700. we haven't seen that since july which reminds me, we lost the semis, the autos, the home builders, and then lost momentum

and really faang more recently what needs to outperform to give you the semblance of all clear >> we still have financials. we have energy, utilities doing very well, which shows you that stocks with low beta, high dividend yields will rise, catch a bid. there's some rotation going on which kind of makes sense. we are approaching the late cycle of the economic cycle, and you would expect to see some rotation there towards higher rate plays, more inflation plays in the case of energy or more defensive plays with utilities as david mentioned, there's a large gap between the u.s. and non-u.s. and certainly between the u.s. and china and emerging markets in general that's also a very big opportunity set. it is needing a catalyst and we don't have that yet. that will be something that will

be interesting to watch in the coming weeks and months. clearly there's rotation and you would expect that. this is a market that is mature, we are sideways in consolidation, not unlike what we saw in late '14 to early '16. it is a pause, it is not a bear market in my opinion it is a period where there are more cross currents that are holding the market back. the pe tends to come down in that kind of regime as is happening. forward pe of 60.5, we were 19.5 in january the market is doing what it needs to do, it will sort itself out. >> yep there's definitely some moderate chop, today included, down 292 on the dow we'll keep a close eye on it with your help thanks, guys >> thank you the nasdaq is lower again, down 54 points or 7/10ths a

percent. we'll ask geror mcnamee where it goes from here more "squawk alley" after this break. it's easy to trust geico! thank you todd. it's not just easy. it's-being-a-master-of-hypnotism easy. hey, i got your text- sleep! doug, when i snap my fingers you're going to clean my gutters. ooh i should clean your gutters! great idea. it's not just easy. it's geico easy. todd, you will go make me a frittata.

you can do things like change your settings, learn tips and tricks, troubleshoot, and even manage your account. finding your xfinity username or wifi password, restarting your equipment, or paying your bill is easier than ever with x1. x1 help. another reason to love x1. say "teach me more" into your voice remote to get started. you can see the major indexes near session lows, the dow down 365 points at this point. energy stocks also continuing to get slammed after every single oil and gas company stock saw a

drop in yesterday's session. brian sullivan is in midland, texas with a look where energy stocks go from here. brian? >> reporter: yeah, jon, good time to be here. energy stock exchange the worst performing oil and gas took a hit today call it a hat trick if you will. number one, you get all of the things we talked about on cnbc rolled into one industry, oil and gas. this is the most heavily indebted of all industries that industry behind us, those rigs don't function on people, they function on capital, and cost of the capital goes up, there's concern debt payments go up down the road and cash flows which are already tight could get tighter. so you have higher interest rates. number two, will that slow down the economy and lead to a slow down in demand like gasoline if we useless gasoline and oil, petro chemicals and whatever,

you may see slow in demand for services of the companies that are here, those stocks fall as well let's not forget the third, steel and aluminum tariffs the most heavily used industry of them all. oil and gas, while there's still a lot of optimism, global demand is still strong, capital floating around, debt services made at 75 a barrel. the concern those three things could slow things down you talk oil stocks, xop, eft for oil and gas exploration is down 2.5%. xle, broader based eft down over 2% oil and gas, hardest his sector of all of the s&p sectors. for those reasons, one industry is caught in the tidal wave of everything you talked about so well this morning. >> indeed, brian what a day to have you in midland, texas huge story with oil at 71.18

interesting levels we mentioned s&p below 200 first time since may nasdaq down, worst month for the nasdaq in a decade going back to november of '08. and russell, if you follow small caps in correction territory, some don't like that term, it means a full 10% from the all-time high. >> nasdaq fairing better than the dow and s&p in this morning's trade, but the stocks are near session lows, extending the massive selloff in which tech stocks had the worst day since august of 2011 joining us, roger mcnamee, early investor in facebook and google. roger, good morning. >> hey, jon, how are you >> pretty good better than the major indexes when you look at how tech stocks are behaving in the past couple of days, granted, it is just a

couple of days, it has been a strong year for stocks overall, what's the concern and how closely are investors watching this in silicon valley. >> on, for me not much changed in the last year we lived in an environment where the expectation was interest rates would be up, higher inflation on the horizon, major changes in u.s. fiscal policy in terms of tax cuts, you have major changes in trading policy, what with all of the tariffs we're putting on the chinese and others, so i think all of that backdrop is finally catching up to the market. i look at this as one of the things where we as investors have a call to make. the economy is still strong but there's an awful lot of signals out there that suggest that equity prices suffer due to things like t bills.

i am personally conservatively postured i got there too early. feels better this week than last month. but we have only come down to august levels. the market has been going up really hard. i look at this and say some stocks are giving us buying opportunities. but candidly, that's not where i am looking i am in a different posture because of what's going on with the election >> i wonder about ancillary impact, ipo here down 3% today, a different story than we were seeing from the past couple of ipos with the volatility the past couple days, wonder about impacts on companies trying to come to market >> i think it is definitely going to be an issue it always is it is weird. jon, we talked about this before historically the companies that go public in tough markets are usually the ones that over the long haul perform best they come at a reasonable price,

buyers do well, they hold the stock a long period of time. in my mind if i am the ceo or investor in a company ready to go public, i would not let this correction keep me from going public at the end of the day, strategically you're better off to get the transaction done, even if it doesn't quite meet the short term pricing guides. >> roger, you said something that caught my attention you said you're defensively postured coming into the election where do you think we go in terms of election outcomes and what do you think it means for equities through end of the year >> it is a really great question i don't honestly know the answer i think there's a lot of uncertainty in the marketplace now, and i'm not personally comfortable being heavily long stocks with all of the uncertainty out there. the election is the next big milestone. >> bonds >> t bills i don't want to own anything

long because rates are going up. so very, very short. carl has been teasing me correctly because i got there a year ago. >> you were way early. >> but again, carl, one of the points i made is i'm at an age i don't want to have to earn it all back i made a choice for me and i was very open about that, tried to say to everybody who is watching these are very personal calls. we all have different risk profiles and we should invest accordingly. for me right now this is a time to be defensive. >> roger, i mean, two things one, midterm years or years following a midterm are historicallybullish. >> yeah. >> the other is what about the midterm makes you cautious on the outcome? is it about somehow control on government purse strings or us getting mired in impeachment hearings what specifically worries you? >> carl, think about it this way. what are the stocks i own? i own tech stocks. now, what is it about midterms i

would be worried about i'm worried if there's a lot of interference using facebook, using twitter, using youtube and instagram. what does that do to my sector what is the government going to do if it turns out these platforms are still vulnerable, and i think they are we don't know whether it effects the outcome this time, but they are vulnerable in my mind, the companies have left us with no choice but to trust them and if that doesn't go well, i think it will be terrible for stocks i'm cautious >> roger, want to mention major indexes coming off their lows a bit. dow is down 1%, 265 points, was down well over 300 points. i want to ask about the fundamentals fundamentally you said you owned tech stocks. what's going to make the difference for them moving forward, despite this volatility is it access to global markets,

is it access specifically to huge markets like china and getting that figured out or something else >> jon, i think it is a real huge policy question for our government exactly what we're going to allow, what we're going to restrict with respect to china now. it seems obvious we don't want american companies doing joint artificial intelligence projects in china it seems obvious the chinese have concerns on other things we're doing. i'm nervous about what it does to my mind the most important thing for tech now is that we find a way to create space for startups to do whatever the next big thing is we talked before about 5g with the internet and things that could be the problem we have in that now is that the market leaders, specifically google, amazon and now facebook, you know, they have really powerful positions in the internet of things.

as a consequence, i'm concerned we're not going to see the level of startup activity, the level of innovation you would get with a more diverse economy as i look at things going forward, i think the big stocks are really well positioned because in the absence of regulation, they get to do whatever they want i don't think that's good for the economy, but i think it is good for those stocks, assuming we don't have more problems on trade, assuming inflation doesn't go up too much, assuming interest rates don't go up too much i'm not sure any of those assumptions are ones we can be comfortable about. >> roger, really quick, square is being used, gone from 100 to under 70 in the span of -- since the beginning of the month at what level is that a bargain in your mind >> i don't honestly know i look at that company as a great example of the challenge of competing with the giants

they built a nice squpace in there, but seems their success going forward is dependent if you will on failure by google or failure by apple and others with larger asset pools, much larger market share, so i don't know. i don't follow the stock that closely because i typically want to be cautious of any company where the ceo is also ceo of something else, i think that's a tough way to run a business. and doesn't use computers, as much as that's good for the average person, i don't know about running the company. >> unless the companies are pixar and apple, then it is a good bet roger, thanks. always good to have you. >> take care thanks, guys. i want to mention major indexes have had quite a climb in the past few minutes. the dow down less than 200

points about three-quarters of a percent. joining us, senior research analyst and founding partner michael nathanson. good to have you good morning want to talk about some tech stocks and the impact of the volatility so overall, some stocks are doing worse than others. snap is off 50%, twitter is down more than 35%. stitch fix down 30 alibaba, facebook, netflix down more than 20%. what's the impact on stocks like that during this period? is it merely because they have arisen a lot and concerns on the china relationship how do you read it >> okay. thanks for the question. there's a lot there with those six companies you mention. we cover four of those companies. i would argue they all have their own idiosyncratic issues

if you stop to look at snap, did a note saying could be running out of money, that's a snap issue. twitter, you think cost of ramping into '19, that's their own issue. facebook guidance was terrible people sold it on that news. now netflix which is up 60% year to date, hard to defend if rates are rising and they use ten year d.c. and we have a hard time valuing it, there's no cash flow, it is a ten year view. and rates start to rise, you have to adjust the ten year dcf. the four you named on their own issues, that's what took them down >> you mentioned netflix it is down 22% in the past three months

certainly seems that more and more competition into the space is playing a role too, especially when you look at losses the lags coup-- the lasto days how much of a threat is that to the company and given that, where do you stand on that stock moving forward >> another great question. we have been neutral enough, netflix is the wrong call, stock isn't anything but neutral our concern because we cover some of the names you mentioned, our concern has been that margins will never be as buoyant as the bull sinks because competition drives up the cost of content and marketing as more people get in the space, people take back their rights and our view is that netflix is a great product, it is incredibly well established, but the bulls on the stock have a fairy tale view of rising pricing, rising margins, lowering marketing span than in

crowded space that don't hold true we can't clearly with the neutral, it has not been the right call, but fundamentally what you talked about with competition to us is the heart of the question. what's the long term earnings capability of the company. what's the discount of stock today. that's been the basis for why we're neutral. we understand to beat numbers, but stock up 60% year to date. it is worth more than comcast and disney which didn't make sense. >> they co-existed with cbs all access awhile, disney is coming online yesterday at the vf summit, at&t rolled out their plans at what point does that competition hit a tipping point? >> what we -- netflix to their credit saw this coming i was at a tipping point actually a couple years ago when netflix started to spend more money on original content.

you think of the sequence. three years ago, fox and disney start taking content away from netflix. the fact that time warner wants to do their own service, that could be a hit to licensing fees what happened was netflix had to double down on content spending. they had to borrow money to grow the content spending to us, with the markets reacting to today's realization that probably you will have more investment spending and less licensed programming, licensed programming is not why people sign up for netflix but it is a cheap filler for consumption if you like to watch "friends" or "the office" will those shows exist in a couple years time or do the owners take them back netflix will spend more money on original content that's my debate that's what we have been talking about. i think that's where the market will start to focus on, how much

margin leverage is there in this model, how much price leverage is there if apple is doing a free service and time warner and hbo and disney out there i think you've got it. to me the tipping point was a couple years ago, that's when they realized they were licensing the content on netflix and need to pull it back >> all right along with everybody else, we continue to watch the volatility michael nathanson, thanks for being with us. >> you got it. staying with the markets, another volatile day of trading, let's get to seema mody for the european close. >> european markets following steep losses the european benchmark is trading at the lowest level in nearly two years banks are leading the market to the down side today, but take a look at the three key sectors that posted significant losses since june basic resources, auto,

technology all in correction levels or worse, down more than 10% from the recent highs. amid higher volatility, private equity ipo pulled from london, comes after two high profile listings had notable losses on the london stock exchange. aston martin has fall in more than 16% since ipo last week the spotlight on italy's bond market among eu budget concerns. the deputy prime minister saying that the country will not budge an inch on deficit target. the past two weeks, yield on the ten year italian debt has risen 84 basis points, now yielding 3.57%. a four year high still a lot of attention on higher rates, not just in the u.s. but europe as well. back to you. >> that's a global story thank you. let's get a news update with

sue herera at hq >> good morning, carl and everyone here is what's happening at this hour a new york judge dismissing one of six criminal charges against movie producer harvey weinstein, after prosecutors couldn't oppose the dismissal in light of new information learned while investigating the case the dismissed charge concerns an alleged sexual assault of a woman by weinstein in 2004 nasa says two astronauts, one from the u.s. and one from russia are in good condition after a booster rocket failed minutes after launch they lifted off as scheduled from kazakhstan before an emergency landing at an unspecified location in that country. indonesia's disaster agency says the disaster relief period due to expire saturday will be extended two weeks official death toll from the earthquake and tsunami stands at 2073, and many more are still missing.

and tens of millions of social security recipients can expect an increase of 2.8% in 2019 as inflation edges higher that means another $39 a month for the average retired worker you're up to date. that's the news update this hour back downtown to "squawk alley." jon, back to you >> thank you, sue. as we head to break, the nasdaq continuing its october slump, down about seven-tenths of 1%. stick around for half time, coming up in a half hour bond king jeffrey gundlach joins them at noon more "squawk alley" after the break. my name is chris hughes

and i am a certified arborist for pg&e. i oversee the patrolling of trees near power lines and roots near pipes and underground infrastructure. at pg&e wherever we work, we work hard to protect the environment. getting the job done safely, so we can keep the lights on for everybody. because i live here i have a deeper connection to the community. and i want to see the community grow and thrive. every year we work with cities and schools to plant trees in our communities. so the environment is there for my kids and future generations. together, we're building a better california.

stocks continue an ugly week another volatile day of trading. investment legend byron wien joins us good to speak with you. >> good to be on the line, even though it is a dreary day. >> back on september 26th, you were on with us. you said beginning of the year, i said the market would reach 3,000 on the s&p 500 and it will do that in spite of fed rate hikes. s&p is 2752. are you holding with that target >> i am. i think there will be a post midterm election rally i don't think we were in a position to start it i think we had to knock some of the complacency out of the

market, and god knows we're doing that right now >> in terms of what you like now in the market, what would you say to investors where would you tell investors to position themselves now >> i think there are opportunities in technology, in health care, particularly in biotechnology, and in some of the stocks like the faangs some of them have been knocked down pretty hard and they have opened to earnings and i am optimistic about that. i think the economy is plowing ahead, you can make money in the industrials. those would be the ones i would pick >> byron, how concerned about the impact on stocks, whether they're going too far? >> i think the fed continues to raise rates.

i think they'll do it in december and likely to do it at least two times next year in the beginning of the year. i view it as return to normalization of rates i think the economy is strong enough to withstand that and i think we have to get rates back to a normal level and i think the fed has to shrink the balance sheet down to something more manageable from the 4.5 trillion before the wind down started >> they're working on it slowly, byron. what is neutral now in your view where do you think that would be >> 3% i would think would be neutral. we're still a long way from that >> when we talk about the fed continuing to raise rates, you're not concerned about ballooning deficit, doesn't sound like you're concerned given your take on the economy

moving forward on potential trade tensions and impact that could have what do you see as risks to the market >> i'm worried about all of the things i think rising rates are not good for the market, and my view is ten year treasury probably will go somewhat higher, but i don't think it will go too much higher because i think inflation is still under control my view is maybe we see 3.5 on the ten year treasury, but i think the market can continue to move forward on that basis i think the key view that i have is that the next session is probably not until 2021 or even later. i think the market can have a more serious downturn a year ahead of that, but i don't think this is the beginning of a bear market i think this is a correction in an on-going bull market.

and i think we'll see the market higher at year end >> kudlow says there may be a meeting. should investors invest in that emotionally? >> i think so. i'm pretty confident that if the market has a rally after the midterm election, regardless of the outcome, whether the democrats take the house or not. but i don't think it was in a position to do that rally earlier. investors were too complacent. the market was pretty fully valued i think we had to get the market into an undervalued condition and had to shake some of the complacency out of investors we are clearly doing that now. i think the market is setting up for a post midterm election rally and i think we'll have one.

>> all right pier thank you >> good to be here. leaving a trail of destruction across the panhandle in what was one of the most powerful storms to hit the continental united states. courtney reagan has the latest good morning, court. >> reporter: hi, carl. we moved from panama city beach to panama city, this area is harder hit you can see what used to be a papa john's behind me, a dry cleaners next door and move down the street, you can see power lines are lying in the road this is the case almost all over this part of panama city almost all of the metal signs are gone marco, if you can swing around, bring us back to papa john's, look at the comfort inn. the windows are blown out, you can see curtains blowing through what used to be glass in front of the comfort inn used to be a pet supermarket

it has been kpleecompletely destroyed. we went to the lowes major destruction, unable to open one side was collapsed, roof was missing, damage in the back. trailers turned over in the parking lot. there's a t mobile not far from where i am, it was almost completely demolished. really the ceiling caved in on it, glass pushed in. this is all from wind from the hurricane. with likely tornadoes that touch down within. it is hard to do business here, with 841,000 people still without power throughout the five states that got hit by the storm. we spoke to some of the chemical companies to see how their facilities held up during this, and bsaf took preventive steps to shut things down safely luckily everyone is safe, but it is early to tell the damage. there was a curfew until

8:00 a.m., so many businesses did not send crews out to make assessments. international paper has a paper mill here, they said that's fine creighton had damage at their chemical facility. lot of destruction here. back to you guys. >> what a story. incredible damage and the wind speeds off the charts. courtney reagan covering michael today. getting headlines, the president saying he is not firing fed chair powell, he is just disappointed. says the fed is out of control, far too stringent, making a mistake on policy, in his words not firing him after comments to fox news this morning and last night. >> and again, saying the correction was caused by the federal reserve which has been a source of debate among quite a number of investors and

analysts >> and we had byron wien saying the fed will continue to raise and needs to get to a point of normalization. it is not as if everybody feels as the president does that the fed has somehow done this to the market >> yeah, byron said he doesn't see recession until 2021 or later. byron has been stubborn, bullish in the face of all kinds of crazy surprises all year long. it is turning out to be one of the worst starts to a fourth quarter in ten years we mention the nasdaq having the worst month since november of 2008, although on a short term basis, we are off lows of the session, we were down almost 400. >> i always wonder how much to put it into context with how the rest of the year has been, and by the way last year when stocks in major indexes were having such, such a run that individual run, hedge funds were having trouble comparing to the s&p because off the charts

almost. >> i think it is important to put it in context. also, october tends to be the most volatile of the year, and coming into the midterm election, we had a number of guests note the fact there seems to be uncertainty around that. historically you tend to see stocks rally after you get the results. >> some big key names we are watching, amazon fell below 1700 for the first time since earlier in the year. but back above at 1710 watch that let's send it down to d.c., eamon javers for the latest in terms of comments from president trump regarding the fed and other things eamon. >> reporter: we'll see the tape in a moment. we are getting flashes from wire reporters in the room with the president now, as you have been reporting, the president says the fed is out of control. he says the fed is far too stringent and making a mistake the president says that the correction yesterday was caused by the federal reserve, and says

he is not going to fire fed chair powell, is just disappointed a lot to chew over his reaction. for several days he has been dumping on the fed i talked to him tuesday earlier in the week and he was very critical of the fed at that time he told me then that he hadn't spoken to jay powell at the fed about his concerns we heard larry kudlow on cnbc this morning with you, carl, suggesting that the president is not directing the fed to do anything, he is just voicing concerns trump is reiterating that today in the oval office, suggesting he is not going to fire fed chair jay powell and then there's the fascinating question of whether or not the president of the united states can fire a fed chair if it is not for cause, can he fire him because he doesn't like his policies that's an endless debate in washington clearly the president believes if he can appoint him, he can fire him. >> what's the sense that this is politics, this is the same

president as a candidate was saying that the employment numbers were bogus, but now touts them as the lowest in memory there were a lot of people saying the fed kept rates too low too long, that was causing the market to artificially be higher now that we are normalizing, it is the fed's fault i wonder what the read is on the ground in washington, how much of this is economic talk and how much is politics >> jon, you'll be shocked to learn there are politics here in washington look, this kind of talk gives the president two things that are good for him, right? the first is he gets the jaw on the fed. he is sending signals to the fed. we'll see if the fed feels the political pressure inbound on them the second thing is it gives the president a scapegoat. if the dow moves suddenly like we saw yesterday, drops 800 plus points, the president can say it is not my fault.

my policies are working. it is the fed causing this problem. when the market goes up, this white house and this president have been eager to take credit, and when the market goes down, we're seeing now an opportunity for them to place blame elsewhere. so this president very much used himself as president of sort of the business class, he is a businessman first and foremost, you heard larry kudlow saying that this morning, saying look, the president has his views and shares them and we all have our views about the fed and interest rates. larry kudlow trying to pass it off a bit. there's a two pronged approach, jon, you're absolutely right. >> indeed. eamon javers, thanks i'll note the dow is down 176 points it was down twice as much earlier. very much off the lows let's get to rick santelli for the santelli exchange. rick >> thanks, jon before i get into it, it all meshes together, i want to weigh in with regard to the fed and

the president, i would think about it this way. we don't know whether inflation is going to come back to the extent the fed is nervous about as it tries to get rates to a higher level tobuy some insurance, but one thing we do know, that is the president needs to look at this in a more global context maybe generically in a normal tightening cycle with the reactions we have seen in stocks he would have solid foundation to stand on. the reality is we are witnessing the largest reversal of liquidity experiment in the history of man, okay quantitative tightening is humongous. the elephant in the room every day, every minute of every session that we don't really talk about but in the end, i understand what the president is saying and i differentiate between edict, policy and thoughts. he loves to let us know his thoughts in the end, i wish he would take a more macro view. reversing the biggest liquidity

experiment in history may be a big deal the other thing he may be for getting abo-- forgetting about, are the biggest in town. the world's corporate structure and european banks able to satisfy things like swaps 24 hours, thomas, welcome back good to see you, you turned bearish, when, mid summer or so? >> in mid june or so the. >> a little early. >> are you feeling now that your thesis is coming home to roost >> well, yeah, there are several signs, interest rates being up

obviously are one of them and i agree with many of the things that trump does, i do not agree on him coming down on, with him coming down on the fed because wage inflation is right around the door. we have no tech employees and the only way to hire them is to pay them more. doves would argue cpi print today does not bear that out >> but it hasn't worked its way through that yet >> you don't think this is -- >> it's wage inflation it's wage inflation, for tech workers. that is what's going to drive the inflation. >> for tech workers. >> tech workers. >> not for retail. not for drivers. >> not yet but it will work its way through to the entire economy. >> so you believe when, when kudlow was on this morning, he said he believes powell's on target >> yes >> do you believe that the fed is rightly looking ahead to some of those pressures >> the fed has to do this. and it has to do this up until

the there comes a point where companies who have a lower profit margin have to look at partnering with a deeper pocket. wages will rise. >> you don't believe they can cover that with final-stage pricing, raising prices on customers? >> well when they do, then we have inflation, right? >> yup all right so why can't the market co-existent with rising rates, at least for a while? >> i think it can. so i'm not worried there is there is an issue about the chinese tariffs. and i do not believe that there will be a deal before the mid-terms. because china basically feels that if there is no deal, until after the mid-terms, trump at that time will have a weaker hand to deal with them the blue wave obviously it could hurt the market. >> you believe that's coming >> oh yeah >> you do? >> yeah. >> some polling has shown a bit of a shift in the other direction. >> i don't know, i'm not a

politician but so, but encouraging the most to me is that interested brokers, customers have over $50 billion of idle cash in their brokerage accounts and that is an historic high so they have lightened up in the last few weeks and that enormous pile of cash is there waiting to come into the market. >> right to get a rate, get a return on bonds or to take a flyer on equities? >> i think it will come into the equities market. and part of the reason is that we pay a very high rate, 1.68%, in idle cash, but that's a huge amount of money. >> you so you were bearish in the summer, but potentially turning bullish post mid-term? >> post mid-term and give me another 2, 3% down and i think the market will turn so i would not worry

>> we'll see about that. thomas, thank you, good seeing you. >> thank you very much i think we're going to take break as we see the dow down about 82 points, back in a moment

the president has his own views, there's nothing new here as far as i can tell we all know the fed is independent. the president is not dictating policy to the fed. he didn't say anything remotely like that. as i say, they are independent they're going to do what they're going to do. >> that's larry kudlow this morning talking to us about the president and reaction to his comments about the fed chair powell which raises some interesting comments and theories on whether the president has the power to fire a fed chair not exactly clear. >> it seems based on the comments we gotten from him a few moments ago that he's not looking to do that or investigate looking at that. i would note taking a look at the markets right now, we are bouncing back off lows of the day. you've got the dow down 104 points, the s&p down 14, but the nasdaq has turned higher although just modestly up about six points now. >> saying you're not going to fire somebody, though, would it

imply that you think you could we'll see how he phrased it. >> let's get back down to washington, d.c., and ayman javers with all of these comments on president trump. >> the president trump continuing to jaw-bone the fed he's not as you heard larry kudlow point out, he's not calling the fed directly and issuing any kind of directives, whether or not he has the authority to do that, he's not attempting to do that. according to larry kudlow. he's attempting to do put a maerker down that he thinks the fed is being too aggressive and place some blame for yesterday's sell-off saying it's the fed's fault, not his administration fault and not the trade policy and not tariffs with china that are the problem here underlying the sell-off yesterday. we'll see how the president continues to play this we'll see him on tape in a few moments. kanye west is expected here at the white house momentarily. kid rock is here the number of other things going on at the white house to occupy attention. we'll see the president before cameras here a couple of times throughout the afternoon we'll see what else he has to

say on this. >> and ayman of course we get this just after news tha president trump is going to be meeting with chinese president xi next month. to talk about trade. one of the things that actually jumped out -- go ahead >> i was going to say white house officials are saying that that is not punned down. lar request kudlow said this morning and other officials have told me, that's not pinned down that he's going to meet with xi jinping at the g20 in argentina. it sounds like it's in the works, but they haven't said yes we've squared this away and it's going to happen. so stay tuned for that but still obviously it's an important meeting if it does happen >> ayman javers, thank you for the latest by the way we talked to kudlow this morning at the top of the 10. tomorrow morning, 7:00 a.m. eastern. "squawk box" will talk to the treasury secretary, steven mnuchin not just about the market correction this week. but his recent comments on the chinese, on devaluation of the

yuan and whether or not we do get a sit-down between the president and xi at the g20. >> as we look at the way the markets are behaving this morning. well off the lows. the dow an s&p both down little more than .5%. the nasdaq in reversal from yesterday, doing better than the other two. >> the judge has gunlock, let's get to the half. i'm scott wopner, stocks in the midst of another sell-off. the question facing your money, is one of the worst periods in months a sign that the bull market now faces its biggest threat yet it is 12:00 noon and this is the "halftime report." i think the fed has gone crazy. i think the fed has gone crazy >> it's the shot heard round the financial world. president trump throwing fed chief jay powell under the bus bond king jeffrey gundlock weighs in for the first time since the drop he's with us live and exclusively and morgan stanley's chief equity strategist got it right before the fall. in his note, the tippi