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good tuesday morning, welcome to "squawk alley." i'm carl quintanilla we've got the best rally here since april 12th or so as stocks are in the green after yesterday's steep drop nasdaq coming off the worst day of the year. our bob pisani is with us with more, good morning, bob. >> good morning, carl. we're bouncing off hideously oversold positions particularly in industrial stocks and some of the semiconductor names. the s&p 500 is only 4% off historic highs i keep noting that because it's true but we've seen a lot of damage in the markets here big trade names are bouncing, 3m, boeing

freeport a horrible month, metals are a mess. there's a lot of concern about margins on the iphone, you get morte far -- more tariffs coming in here. intel is back to where it was trading in december. intel gets maybe 30% of its reference from china look at that, sitting right there. other big names like 3m and dowdupont also down dramatically here the tariff impact is hard to model, we don't know how long it's going to go on. people are taking stabs at it. ubs on friday said a quarter point gdp will be taken off because of tariffs sarah was mentioning some of the retail stocks at new lows. it's true, big names are down. why is this happening? 52-week close. 70% of footware in the united

states is imported from china. 70% of the footwear comes from china. that's why some of these big names are getting impacted in the last couple of weeks what's going on, what's the question to ask that we need to have answers to? the most important question is this what is this about are we dealing with elections or just with trade as a separate issue? a lot of people believe we're essentially dealing with elections which means this could be going on for a long, long time if this goes on for a while, it's very hard to model that because the other big question is, are tariffs a permanent part of the u.s. economy or not we don't know the answer to that we don't know if the president is going to refuse to essentially take them off the table as part of the negotiations the chinese want that, he is resisting. the market is resetting lower because it cannot answer this fundamental question and that's not going away today. guys, back to you. >> bob, that's a good setup, thanks, bob pisani joining us for a closer look, jim paulson, chief investment

strategist, guys, good morning to you both. i'm curious to get your views here given that we don't know really even what the strategic end game is for the white house. >> yeah. you know, carl, we probably knew a correction was going to come this year at some point. if it wasn't trade wars, it would probably be something else i look at it more in that light. i think the direct impact of the trade war would have to go on quite a while before it really damages the economy tremendously and you've got to put that alongside those point 3/10ths gdp, greater fiscal stimulus as a percent of gdp we also have inflation that's a lot lower. if tariffs raise inflation in some places, it will fall

elsewhere. if there's an outright panic, let's say the dow doesn't fall 600 points like yesterday, but what if it fell 2,500 in a single day and froze up financial markets for both businesses and consumers, that would be the serious potential of this. but i think it's more of a bug opportuni -- buying opportunity than anything else. >> investors are arguably used to the idea of markets putting pressure on both sides to do a deal but they probably don't want that pressure to come all in one day >> that's correct. i think ultimately tariffs are a tax. they're a tax on growth and a tax on consumer confidence and business sentiment that's an important factor but i think if you take a step back and you recognize that we are just 4% off our all-time highs and the fact that information technology and other higher beta areas of the market continue to lead the market, you ask yourself the question, has

the long term view of secular tail winds that we've talked about for many years like ai, like cloud computing, like cybersecurity, are they going to change all of a sudden or are they going to accelerate and therefore bring the companies that are participating in those tail winds with them? and we think the ultimate answer is yes >> jim, i just want to take a step back here and get your thoughts on why we're actually seeing a rally today what has actually changed fundamentally in the last 24 hours? >> yeah, well, you know, i think just a really short term basis, morgan, the market didn't continue to collapse, it did find a bottom and showed a little support there, if you will, before the close yesterday. the other thing in the background is you've got so many portfolios that came into this underweighted to risk, because they kind of went off of that

after the december swoon they never got back in and you've got a lot of them that are waiting for an opportunity to buy and not only that, if it goes back up, there's going to be more and more pressure, particularly because of new highs, a lot of portfolios will have to canpitulate and reduce their bets you have people looking for an opportunity to buy, you give them a 5 to 7% correction in technology, and they're saying, maybe we can add a little bit. i think that's what's driving this rally >> yana, you mentioned that drivers like cloud and ai haven't changed, that tech i guess should look good still from here. it seems like the global canvas has changed, if we assume some u.s./china antagonism at a higher level going forward that affects cloud and ai and how 5g gets deployed how does that change the way you invest based on those things >> you're absolutely right over the short to medium term, who knows, right

and ultimately business confidence is what drives capex spending that has really ticked up as it relates to software spending and such. but this disruption that's taken place, you know, you talk about infrastructure, you talk about nextgen, telecom transition, that's not going away. the question is when and not if. if anything, this give us us an opportunity with our portfolios. we have 30 positions over nine different sectors, so not just information technology, but you have stocks that have come in for no reason whatsoever, and morgan is absolutely right, fundamentally fnothing has changed other than the sentiment of near term risks of uncertainty weighing on the markets longer term. longer term pricing power cash flows will remain the leading indicators of stock price performance. and those are companies that we think are in the sweet spot, particularly within information technology and communications

services space >> one final point to you, jim, when you call it a buying opportunity, are you thinking specifically about cyclicals or staples or something else? >> well, i like -- i put -- i take advantage of the core leadership which yana spoke of to have an opportunity at a discount to buy into that. that would be tech and coms and consumer discretionary if you give yourself more time for the rest of this week, emerging markets and financials both look very attractive to me and will be part of the leadership story going forward >> yana, jim, thanks, guys, a lot to process for our viewers today. appreciate it very much. meanwhile, disney striking a deal with comcast, taking full operational control of hulu, effectively immediately. david favor joins us back.

they've got disney plus getting ready to roll out, they've got hulu comcast gets a guaranteed price, i guess, for the hulu stake. and investors like both sides of this, up 1.5%. >> they'll both argue it's a win/win, you're right, jon our parent company comcast owns 33% of hulu. there has been a lot of speculation after of course the disney/fox deal and comcast's purchase of sky as to whether this asset would trade hands -- change hands it's going to be some time until that happens under the deal, it's called a put call agreement it values hulu at the minimum at the end of this agreement in january 2024, $27.5 billion. in that would be worth. however it does allow for an appraisal process on both sides conceivably if in fact the value is seen as higher.

it gives comcast essentially what they would call a free option, to participate in the increased value over time of hulu which currently has 28 million subscribers. jon, your point is a good one, it gives disney operational control for what is a key to its strategy, namely correct to consumer, between espn plus, disney plus, and humlu which it wants to roll out internationally. bob iger explained what operational control will allow disney to do in the near term with hulu. >> it's the third prong in our direct to consumer strategy with espn plus and disney plus. we'll be able to manage customers across all platforms customer data, of course, password, user name, billing, all those sorts of things, gives us the ability to bundle, which is a big deal, share data.

advertising sales is another benefit to all of this >> that's freedom for them to actually do what they wanted to do with hulu and use it in a full-fledged approach to the consumer that's the key you mentioned for come past, $27.5 billion is far more than what hulu was originally valued at it is 4 1/2 years hence that we're talking about, it could even be more >> by doing this, comcast is essentially betting the value of hulu will go higher, otherwise why not just offload it today and take the money >> there is an opportunity to do that, that's right there are also capital commitments along the way that comcast could be on the hook for. however, it doesn't have to fund them but its ownership position could fall as low as -- the lowest would be 21% $5.8 billion they know they'll get in 4 1/2 years, that's 21% of $27.5 billion conceivably, jon, it could be

more than that, if hulu succeeds and if disney will include it and fully pursue their strategy without concern about what comcast might or might not do. >> interesting too, disney to a lesser extent but both names have been pretty resilient in the face of this new selloff we've had overall. comcast almost ties to the year. >> yeah, comcast is still largely a domestic company sky gives them an international component that we haven't previously had but it is seen as a domestic play in the same way verizon is. shanghai disney is very important, though. >> so much has changed, we keep hearing about the head start netflix has, but when you see reports of a deal like this, "the office," netflix's most-watched series will be heading to the streaming service, it's hard to see what this will look like.

>> you're right, 4 1/2 years, maybe they'll be happy with the partnership, who knows i'm glad you mentioned the programming, because nbc of course does provide a lot of programming to hulu. that licensing content deal will continue for at least the next three years. but they will have the right to put a lot of the programming on the direct to consumer offering that nbc universal will roll out next year within about a year from now, and then three years from now they can start to pull a lot of the programming off of hulu should they choose to do so >> game of streams >> yes >> all right i'm so disappointed with the last episode but we're going to go -- >> i'm on board. >> really? >> i'm definitely on board >> we'll talk about this more later. thank you, david after the break, shares of apple rebounding today after falling nearly 6% on monday. trade concerns and that supreme court ruling weighing down the stock. now is it a buying opportunity that investors have been waiting for or is apple's china exposure too much of a red flag

key questions. we'll discuss them after the break. the latest innovation from xfinity

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yesterday's session. jpm out with a note this morning saying apple would need a 14% price increase on hardware to absorb the impact of tariffs so should apple's long term exposure to china keep investors away from the stock or does yesterday's selloff present a promising buying opportunity jeffrey cabal is with us along with steve milunovich. guys, good morning jeff, i wonder if too much is being made of this iphone pricing issue. apple adjusts the pricing every fall there are things they can do with memory configurations, all kind of things they could do to mask a price increase. are people going to necessarily see it the way that some fear? >> i think the first thing that we should note is that apple does have some time to wrestle

with these issues before it hits inventory, they have a little time for the trade war to settle down before the implications really hit them. but i think yes, your broader question is the right one. apple does have a number of levers that they can pull over time in order to manage that and apple has proven very thoughtful about managing both the costs of its phones and in adjusting its prices appropriately to balance its univolumes and asp appropriately. >> steve, apple was already but shift the narrative away from hardware towards services. maybe this is another incentive for them to do so. how much do you think this china exposure is an issue for them, and how much of it is because they manufacture in china versus their sales in china which are affected by the overall atmosphere >> well, it's definitely both. and i think it is a pretty

serious issue. you get 20% of your revenue from china, and although they won't have a tariff on the iphone there, you know, the "china daily" is talking about this becoming a people's war. so you could very well see a move away from the apple phone there. then of course manufacturing is a very big thing that's where you get the tariff in the u.s very difficult for apple to move significant manufacturing out of china in a reasonable time frame. there are three existential threats to apple, two of them came up yesterday. one is what's going on with china and the other is legal threats to the app store we would tend to stay away from the stock for now. >> steve, why would it be so hard for apple to move manufacturing out of china they're sitting on a giant pile of cash, economics are shifting with these tariffs especially if we see them in place for longer than everyone is expecting what would it take to see that supply chain be changed? >> a number of tech companies

are trying to move manufacturing and component sourcing out of china. in apple's case, almost all the hardware is manufactured there so it's obviously moving the equipment, but it's more the people foxconn has, you know, hundreds of thousands of people that are working on these iphones and one of my companies actually tried to set up a plant for apple, i think to do pcs in the u.s., and they found that people are physically too big, their thumbs are too big and so forth. it's not that it can't be done but it would be very expensive and would take many years. >> yeah, it takes a village to raise a child, but a city to build iphones. about a million people, various skills it would be very difficult to move jeffrey, last word to you here, how much is apple going to move for the rest of the year, based on trade worries versus wwdc and the hardware and services launches that we've got coming later in the year? which matters more >> yeah, i think the question

you asked before the break, actually, is a good way to address that, is this a buying opportunity for apple now. i think something that people tend not to consider perhaps as much as one would like is that the services business is linked to the devices business. those two are not independent. the greater the device sales, the faster the user base is growing, that allows for a faster services business i don't think that we should use our sum of the parts analysis and say, okay, well, let's forget about devices and focus only on services the two things are dependent i'm even, on top of that, worried about the services business some of the pieces, the high margin pieces of the services business like the google tag payment, for example, are tied to device sales. i do think there's reason to be worried not just about the device business but about the services margin structure as well and that's why we, like steve,

suggest staying away from apple here >> all right we'll see how many investors do. jeffrey, steve, thanks well, the dow rallying today coming off its second worst day of the year. currently trading near session highs of 245 points right now. take a look at the names leading the index higher we'll show you those, dow, visa, coca-cola. more "squawk alley" straight ahead. at mercedes-benz, we make every vehicle

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welcome back to "squawk alley. the delivery wars continue to heat up with walmart taking on amazon, announcing next-day delivery for more than 200,000 items on its website, beginning in phoenix, las vegas, southern california, with plans to reach more than 75% of the country by the end of the year. this of course following amazon's announcement of one-day delivery for prime members last month, guys, one of the things that really jumped out to me in this news today, tech is making all of this possible, but

also the fact that in terms of walmart, the products that shoppers are going to see available for next day delivery are only going to be items that are close enough for ground shipping and what that means is that walmart is not planning on incremental investment to do next day, where is amazon has said that this quarter it's going to be spending $800 million to pull off its next day deliveries >> very different models here, though >> yes >> while amazon has prime and you pay your $119 a year to be a part of that, walmart has a minimum order size, 35 bucks if you want to get that delivered more quickly i wonder how much of this is going to be tech and how much of this is going to be just labor, just wheels on the ground, in this tight labor market, how they're going to scale that up as quickly as they want, as many places as they want. that's going to be tough amazon is trying to pay its workers to leave and deliver packages >> i have some thoughts on that. walmart has basically said

they're implementing technology that enables, you know, faster human labor targeting within the warehouses in terms of being able to pick and pack those items for delivery and then on the flip side, you do have reports just in the last 24, 48 hours that amazon is starting to implement more machines within its warehouses which i think think is part of the reason you're seeing them also trying to incentivize workers to leave >> we'll see how many workers answer that call meanwhile european markets set to close in just a couple of minutes. leslie picker joins us with a breakdown of today's action. leslie >> hey, jon. across the board, green for the major averages today, particularly in the uk after the country's unemployment rate hit the lowest level in four decades. oil prices rebounding today after new reports of alleged attacks on major saudi production facilities. luxury retail stocks also bounce back, clawing back some of the steep losses we've seen since

trade tensions ramped up on may 3rd. meantime two german companies in focus, bayer was ordered to pay $2 billion in damages related to its round of weed killer that's the third roundup trial bayer has lost in the previous two cases the company faced just $159 million in damages now the question becomes will this third loss force bayer to ramp up talks on a global settlement analysts say that could top anywhere from 5 to $10 billion bayer shares have lost nearly half of their value since the company formally acquired monsanto in june of 2018 italian bank unicredit has moved toward a potential takeover bid. guys >> leslie, thanks, leslie picker let's get to sue herera this morning for a news update.

>> good morning, carl, good morning, everyone. a powerful 7.5 magnitude earthquake has struck sparsely-responded papua, new guinea, triggering a tsunami alert for the country and the nearby solomon islands papua nes located on the eastern half of the island of new guinea to the east of indonesia. the archbishop of colombo appealing for calm as attacks on muslim communities in sri lanka continued in the wake of the christchurch bombings. the country temporarily blocked social media and messaging apps. a large pallet fire in stockton, california nearby communities have been called in to battle the blaze. so far, no reports of injuries the w.h.o. issuing guidelines to lower the risk for dementia they include getting plenty of exercise, avoiding smoking, overeating, and too much alcohol. the agency says there is

moderate evidence showing a mediterranean-style diet may reduce the risk of cognitive decline. you're up to date. that's the news update this hour back downtown to you, carl i think that advice would work on a lot of things >> thanks, sue, sue herera when we come back, senator marco rubio will join us with his take on u.s./china trade talks. is there a solution ahead? meantime, dow is up 274 as we get headlines from the president whom we expect to see momentarily. the dow at the moment has retaken its 200 day. ♪ feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies,

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♪ ♪ ♪ ♪ stocks making a comeback coming off the second worst day of the year for the dow and the s&p. the president speaking a few moments ago says his relationship with china's xi is extraordinary, referring to the u.s./china trade dispute as a, quote, little squabble we'll bring you more of those comments in a moment for the time being, the ubs director of floor operations is back to talk about the rally we're seeing today and the degree that it undoes some damage that we stand over the last couple of days. >> yeah, no, it's pretty responsive it's a turnaround tuesday. the president has been reasonably quiet, in fact

somewhat supportive in saying things are going to go along well i think the other thing is, most people realize that he really needs some kind of deal for the election, and that, you know, maybe we can wait until late june but much past that, it will start to really begin to pinch a little bit so the bulk of the traders down here assume that you're going to get less bad news or less contentious news, and that's allowed for the kind of bounce we're seeing here. as you alluded to earlier, you're picking up some little benefits, you know, moving above moving averages and things of that type. >> when you say that the president needs a deal, how much of a deal does he really need? because the chinese want the tariffs entirely lifted. i'm not sure how much investors should expect that to happen do you expect both sides to kind of give in

>> well, i think both sides need some help. look at it this way. two fridays ago, the assumption was that the deal was just about done, that it was probably 90% done and that is why the president snapped so badly when the chinese came back, because he thought he was going to have a victory parade going on here so he snapped, threw the tariffs on, presuming that that's a typical china ploy, you get nearly to the end, withdraw, and then get concessions, and he didn't want to give any concessions out. but if you were once 90% to a deal and both desperately need a deal, then it shouldn't be too hard to get back to close to 90% of a deal. i think that's what's helping the market out here. barring some surprise tweet, i think they're going to try to repair things a little

>> art, how much of this is hopes around a deal and how much of this is based on the data we have, the u.s. is still the best house on the block >> before you answer that, let me just interrupt, we're about to hear from the president who is -- >> more important. >> yes >> -- anywhere, any time in the history of our country we're having a little squabble with china because we've been treated unfairly for many, many decades. for actually a long time it should have been handled a long time ago, it wasn't, we'll handle it now. i think it's going to be -- i think it's going to turn out extremely well we're in a very strong position. we are the piggy bank that everybody likes to take advantage of or take from. and we can't let that happen anymore. we're losing many years, anywhere from $300 billion to $500 billion a year with china, in trade with chain. we can't let that happen

the relationship i have with president xi is extraordinary. it's really very good. but he's for china and i'm for the usa and it's very simple we are, again, in a very, very strong position. they want to make a deal it could absolutely happen but in the meantime, a lot of money is being made by the united states and a lot of strength is being shown. this has never happened to china before our economy is fantastic theirs is not so good. we've gone up trillions and trillions of dollars since the election they've gone way down since my election so that's the way it is, that's the way it stands. we're going to do very well. yeah [ inaudible question ] well, you never can say that, but we're doing very well. i think we've probably had the greatest economy that we've ever had. employment numbers came out, as you know, they're record levels in almost every category

african-american, the best in history. take a look. hispanic-american, the best in history. yesterday, asian-american numbers came in, they are the lowest in history. the history of our country women i think it's 61 years, soon that will be historic too, so that we are doing -- and as far as employment numbers, we have the most people working today in the united states that we've ever had before, almost 160 million people so it's really good. [ inaudible question ] no, i wouldn't -- we have a very good dialogue. we have a dialogue going it will always continue. we made a deal with china. it was a deal that was a very good deal. it had to be a good deal, otherwise we're not making it. because we've been down so low in trade, and other presidents should have done this a long time ago we can't just make a good deal i told that to president xi.

we had a deal that was very close and then they broke it they really did. i mean, more than just -- more than renegotiating, they really broke it so we can't have that happen [ inaudible question ] no, i didn't ask him to do that. i didn't know it i didn't know it but i think it's a great thing that he did it i saw it last night. and they want to look at how that whole hoax got started. it was a hoax. and even mueller, not a friend of mine, even bob mueller came out, no collusion. and he had 18 people that didn't like donald trump. they were hillary clinton fans they contributed, many of them, to hillary clinton they came out. it was the greatest hoax ever perpetrated on the people of this country and you know what? i am so proud of our attorney general that he is looking into it i think it's great i did not know about it, no. [ inaudible question ]

no, no, i wasn't surprised but you have to understand, they do $600 billion, meaning we buy $600 billion, they buy $100 million. we have all the advantage. it's a very small for us, and we have a much bigger economy, since my election we've gone up so much, we have a much bigger economy than china but if you take a look, $600 million versus $100 million, it's a different world [ inaudible question ] we're looking at that very strongly, about the $325 billion. we're looking at it very strongly >> reporter: did you tell dhs to back off >> i don't know anything about that, probably fake news i read that this morning i don't know anything about it >> reporter: why is it unfair, [ inaudible ]? >> you know, it's really a tough

situation, because my son spent i guess over 20 hours testifying about something that mueller said was 100% okay and now they want him to testify again. i don't know why i have no idea why but it seems very unfair to me [ inaudible question ] i think it's fake news, okay now, would i do that absolutely but we have no plans for that. hopefully we're not going to have to plan for that. if we did that, we would send a hell of a lot more troops than that but i think it's just -- where was that story, in "the new york times" well, "the new york times" is fake news. [ inaudible question ] go ahead [ inaudible question ] yeah so you have no tariff to pay whatsoever if you're a business.

all you have to do is build or make your product in the united states there's no tariff whatsoever so that really works out very well [ inaudible question ] i think we're winning it we'll be collecting over $100 billion in tariffs our people, if they want, they can buy from someplace else other than china or they can -- really, the ideal is make their product in the usa that's what i really want. yeah, we're winning it you know what? you want to know something you want to know something we always win. we always win. >> reporter: do you have confidence in christopher wray >> well, i didn't understand his answer because i thought the attorney general answered it perfectly. so i certainly didn't understand that answer. i thought it was a ridiculous answer thank you. >> that is the president

obviously market responding positively to those comments calling the standoff with china a little squabble, saying that we made a deal, a very good deal, they broke it, more than renegotiate, they really broke it and adding, eamon javers, that we have a much bigger economy than china if he had said otherwise that would have been very big news. >> reporter: that's right, carl, i had the opportunity to ask the president two questions. one was i asked him if he was surprised by the chinese retaliation in terms of trade on monday he says he wasn't surprised by that although it came very shortliy lafter china tweeted tt he should not retaliate. then i asked him about the $325 billion in tariffs which is just pending on the horizon, he said we're looking at that strongly, so no commitment from the president to impose additional tariffs on the chinese then he was asked if we were winning the trade war, and he said, you know what, we're

always winning this was the president trying to project strength in the midst of what he calls a little squabble with the chinese, carl >>y mond eamon, he seemed to deh times" reports about plans to send 100,000 troops over there >> but at the end he said, if something really happens we'll send far more than that. that's going to keep my attention. but you can see from his presentation, the stock market has gotten his attention, and his conversations about the trade deal we'll keep that in the back of his mind >> art, thank you. >> my pleasure joining us from capitol hill, florida republican senator marco rubio, also out with a new op ed calling on u.s. companies and lawmakers to increase capital investment to keep america competitive. senator, thank you for joining us today >> thank you >> before we get into your op-ed, your reaction to the comments from the president a few minutes ago, this idea that

the trade dispute is a little squabble and talks have not collapsed, how do you see it >> i don't think talks have collapsed. ultimately i think both sides will talk. i think he's doing the right thing. we have no choice but to address this imbalance with china when it comes to trade. we have to deal with it now, it only gets harder from here i live the president credit. the easier thing for him to do in the short term is to leave the status quo in place or cut a fake deal. but in the long term it continues to chip away at the underpinnings of our economy and will ultimately leave us in a worse place. this existing relationship between china and the u.s. on a number of issues particularly trade and industry is out of balance. if we don't balance it and balance it soon, the long term ramifications to the country will be catastrophic and devastating. >> senator, we've seen quite a number of administrations over the years try and address these

issues or at least some of these issues with china. some have failed and some have maybe made a little bit of headway in specific areas of specific industries. but looking at the situation more broadly, the fact that, as you put it, we're at this precipice, are tariffs the right way to move forward right now? >> no, ideally you wouldn't have tariffs. but i would argue we already face tariffs and all kinds of impediments to access to their marketplace. you add to that their sub subsidization of their industries, and if they can't force transfer of technology, they steal it from you we are losing our capacity as a nation to lead in the critical industries of the 21st century and that will redefine the century. ten or 15 years from now this debate will be nonexistent

because this will be over and they'll dominate in these important fields this is the last chance for to us address it. >> senator, you say if we don't balance this relationship soon, it could be bad. but what if it stays this way and the tariffs have to remain in place, will you be satisfied with that? >> no, that's not the ideal outcome, but ultimately what will end up happening is the american consumer market is important enough that you'll begin to see and are already seeing a number of companies decoupling from the chinese economy. eventually the markets will respond to this by moving their producti ivive capacity to placs where they aren't facing these impediments or it will be cost effective to go into domestic production of these goods. ultimately i would love to see the u.s. and china get along and have a fair relationship but to allow this imbalance to continue is dangerous. it's danger fours the global

peace and security eventually this unbalanced relationship between the u.s. and china will lead them to take aggressive measures both economically and potentially militaril militarily we've got to bring symmetry and balance back to this relationship for the sake of global stability and peace >> it's certainly a conversation i've had with quite a number of people in the pentagon, this concern about what this could mean longer term over the coming decades, this dynamic between the u.s. and china you published an op-ed today focused on this need to invest in america again the last line of the op-ed sums it up, "if we do not change our public policies to reflect long term investment as a priority, we will not be able to compete globally or build the america our values demand. what are you proposing and how crucial is it to take steps like this right now in the face of these trade tensions with china? >> well, first of all, we have to have a cultural realignment about short te-term-ism and long

term thinking. government has not done its part in basic research and investment since the 1970s, our private sector and public policymakers have gravitated towards giving immediate short term return to t the expense of investing in new product lines or new ideas or in creating the capabilities here within the united states so we're not a command and control economy like the chinese are and that's not what i'm advocating i'm advocating that our public policies treat everything fairly but incentivize things like making immediate expensing permanent so that we accurate a tax incentive to say if you do anything else with your profits we'll treat you fairly but if you take those profits or a significant portion of them and use them to reinvest, whether in adding capacity and developing and innovating new ideas, new product lines and so forth, we are going to incentivize that. it is important that our public policy reflect that priority because the end product of that is the creation of strong and stable jobs which is the cornerstone of strong communities and ultimately a strong country

>> senator, you mentioned we're not a command and control economy, all of our viewers would agree with you but if we're going to write $30 million to farmers and lean on the fed to cut rates, does that weaken our argument >> i think there's a role for government to play in times of emergency or significant national challenge i think there's a difference between saying we're going to abandon the free enterprise system and make central planners at government make decisions and having public policies that reflect our priorities in this particular case, in which specific industries are facing a sort of transition period in which they're being badly hurt there's an appropriate role for government to play in helping them. it can't be our permanent policy forever. you would hope that would serve as a bridge to an adjustment >> for how long, senator >> well, i think -- >> how long can we afford to do that should we do that? >> agriculture's a good example of it. agriculture faces two challenges the first is obviously now that their products are getting hit, they're losing market access, we never want to lose our agricultural capacity. we never want to lose the

ability to feed ourselves, not to mention the world, but i would say the second challenge is farm equipment and heavy machinery in the farm industry, the chinese have made it very clear they intend to dominate the world in that field and we have to ensure that doesn't happen because ultimately, no matter what we grow, we depend on them for the basic equipment necessary to farm and grow we have a big problem too. so, i don't know how long it will take. i don't think it takes forever but what is the alternative? the alternative is to accept the status quo or some symbolic agreement that changes nothing and the status quo with china is not just untenable, it is dangerous, it is honestly catastrophic, and we will wake up one day not far off in the future and realize that america is no longer the world's most important country or most important economy and that is not something i want to be a part of. >> senator, i want to shift gears a little bit you're also on the committee of foreign relations. iran, tensions really ratcheting up there right now you've got ships being sabotaged, a saudi pipeline that's been attacked we've got an aircraft carrier headed into the region, the u.s.

does we have had sorties that have included b-52s being flown yesterday. how great is the risk of an armed conflict with iran, either intentional or as the brits have been warning, by accident? >> well, it's all on them, and it's a grave risk. i don't want a war we don't want a war but that's up to them the fact is the iranians believe that in order to go into a future negotiation with the u.s., they have to do it from a position of strength they have developed this model through the irgc in which they empower these surrogate groups, these proxies to attack people on their behalf, and they think this is what they're banking on, they will attack us, we will not be able to respond forcefully because the world is going to condemn us and we're going to have to back down and they'll be in a position of strength. that won't happen. if the iranians do not attack the u.s., there won't be a war but if they do, they're going to be met with a forceful response as it should be. i'm not cheering for this. i don't want this to happen but there's no way the president of the united states can ignore clear movements on the ground coupled with clear intelligence that indicates that iran is

moving towards or has in many cases ordered strikes against u.s. personnel and u.s. interests in the region. that can't happen. we have to respond to that, and i would say think about the alternative. imagine if an attack like that did occur and americans were killed and we didn't have assets in the region to respond to protect them, then the criticism would be, why weren't you prepared for it. we're doing absolutely the right thing and the question of whether or not there's an armed conflict, that's now in the hands of the irgc, of general solomani and ultimately of the ayatollah and iran >> thank you for joining us today. session highs on the heels of the president's comments. let's get to scott wapner. >> thank you very much we're going to get in the middle of all this with our investment committee here we're going to take a look at apple, the role it is playing in the overall market performance it's up today, the market's up big. we'll talk about how much the market needs apple to continue that on a time when tech stocks are getting banged up pretty

good we'll talk about a credit card stock today in our call of the day, positions ahead of big earnings, names still to come from a number of critical sectors and we'll do that in about five minutes time. guys, back to you. >> all right, scott, thank you and for now, let's get over to the cm ex, rick santelli has the santelli exchange. rick >> thanks, john. i had to switch things up. this story just keeps changing with regard to trade and all the issues involved and anybody who thinks this is just a u.s.-china issue, sorry, that bus is past, this is definitely a global trade recalibration, supply lines, production, facilities, i had brad tank on and he travels the globe and one thing is clear, diversification isn't only good for your portfolios, if you are a global entity, it's good for all the aspects of your business as well you know, when it comes to china, just think about everything simply. past, present, future, child, adolescent, adulthood, it's the same thing if you look at the past,

1.2 billion people, there's no way world trade back around 2000 when wto opened its arms for china, that they could ignore that many people, both as consumers, even as exporters, as cheap labor, but even more so, to be inclusive to that many people then all of a sudden their adolescence arrived and here is where we're at you know how adolescents can be. and marco rubio hit on this. they're going tb moo be one of largest economies in terms of people and little incentive to change remember, you know, people need to think about the future as marco rubio said typewriters, gasoline, oil, sugar, coal, canned milk, food, these are all the things that were rationed in world war ii. people knew there was something bigger at stake and believe me, quit looking at your portfolios

and think about what everything's going to look like if china has no desire to change in the year 2035 carl, back to you. >> all right, rick, anthks "squawk alley" is back in less than three minutes her the assura 165-point certification proces. or it isn't. it's either testing an array of advanced safety systems. or it isn't. it's either the peace of mind of a standard 5-year unlimited mileage warranty. or it isn't. for those who never settle, it's either mercedes-benz certified pre-owned. or it isn't. the mercedes-benz certified pre-owned sales event. now through may 31st. only at your authorized mercedes-benz dealer. pnc bank has technology to help a pnc business line of credit, because sometimes inner peace requires a little external soundproofing. or pnc total auto. a place online to easily find and finance the right car for you. and your passengers. or pnc home insight, to search for a new house within your budget.

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what a morning as the dow is

up 316 you got the vicks back below 18, obviously the market responding to encouraging signals about at least in the general relationship between the president and xi after those comments >> much of what was down yesterday is up today. >> we're going to watch and see if this holds in the afternoon session. for that, we're going to start with the judge and the half. >> carl, thanks, i'm scott wapner, with a trade war takedown of apple is the key to your money if that stock can't stabilize, can the only overall market? it's 12:00 noon, this is "the halftime report." >> announcer: trade war casualties, tech, industrials, retail and beyond. we'll show you the stocks and sectors most likely to bear the brunt. plus, at what point does the market stop believing? >> we were getting very close to a deal and we're starting that paperwork today so we'll see. >> announcer