markets? >> i think this market is going to be higher in three years than it is today. this trade stuff and tariff stuff will work itself ut, i don't know if it is june or december but it will work itself out. >> noah, great to see you. make sure you skrojoin us tomorw "squawk on the street" begins right now. ♪ >> good tuesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber. cramer is at cnbc conference in new york city. dow futures is up 190. we may win back of some of monday's losses despite mixed results of kohl's and home depot.

ten-year yield near 243. we begin with huawei about face. the white house eases trade restrictions temporarily >> plus, department stores, kohl's are slashing its outlook. >> stocks are on track to open higher after two sessions of trade losses the telecom equipment still prohibited from buying american parts and components to make their products but it will be allow to buy what it needs to maintain their network and providing updates to existing hand sets. how they're going to try to develop their own operating system but who knows whether futures is reflecting this a bit of a give back to keep things smooth >> perhaps something unexpected given what we have seen earlier

and late last week and yesterday in terms of the 90 days. give some flexibility towards the talk and the prospect of some sort of a branch to the chinese that would allow them to consider resuming talks. but it does not necessarily mean that huawei is still not a p precarious over the long-term. we are ta you cannilking about bought $11 billion over the last year and relying on many of those companies for both chips as you point out as well and as we know from google yesterday, things in terms of software and android operating system and things offered as apart of that that's not off the rack. >> jim, president xi telling crowds in china we are embarking on a new long march and we must start all over again the rhetoric over there is not

letting out. >> it is a mass killer one of the greatest mask killer of all time. i think president xi ought to start realizing that our president is not waiting our president does not want to talk he wants to decave i don't think it is going to occur. this new reprieve, it is good for the stock market how much of it moves by the white house or congress department are dictated, the markets start to fall. they're not in the move to deal with the chinese the president is going to run on this issue they don't want the long march, the long march tells me the p.a.l. may be in charge in

china. some people may regard my view is extreme but i think it is accurate >> south korea export over night, pretty ugly export is down 11. chip export is down 33 this is for the first few weeks of may maybe the semis are getting a little wash out here what do you think? >> look, it is 8% to 15% maximum earnings hit there is a lot of research out today that says these are all over done. the one to watch is sky work solutions. that has the most exposure it is a really good company. we talk about texas instrument, that's a stock that got hammered by this. watch apple, apple is the one they're supposed to retaliate and the long march is away from apple. i have not seen that happening yet. wow, that's been powerful. >> apple has been decidedly

weak, jim. you have pointed to that as the name as we have gone through of what would be the response to huawei despite this 90-day period what would be the response and you come back to apple because you said it is not starbucks and it is not nike and it has suffered right there >> yeah, it has been abysmal and everybody hates it we have seen both tech has expenditu exposure to china. it is pretty simple, why joe biden does not favor single payer. that meant all the dircfferencei the world. maybe it will get reprieved.

>> for every 5% dropped in greater china for apple likely to lose an incremental 15% on eps. we'll see how long that trend will last. jim, i got retailers out with results, home depot at the bottom line and and a steep decline of lumber prices and there is kohl's. c the ceo says the year has started off slower than we have liked. comps down 3/4, we were looking at 2/10. >> yes, what's interesting the world is out the company who's close to the company said look, we feel there is going to be disappointments

right now they are in the are you kidding me camp because they were talking a pretty good game down 11%, it makes sense and it is going to be protected by the yield, is it a value trap? these guys have a good relationship with amazon i think people are sick of retail and look at nordstrom and macy's, they're saying amazon is is -- i do believe a longer term theory these guys have in place. i want to see what michelle gass says it was daunting verses tjx or je verses home depot. >> you mention tjx, that would seem to say hey things are okay in certain areas of retail

they put up nice number. overall sales up 7% and same store sales up 5% of last year's 3% increase. that's moving in the right direction for marshal's and tjx and home goods and everything else >> david, go across the street with me to 14th wall, you would not believe in bargains in underwear. >> and socks and things. >> i bought some socks >> how about them socks? >> what are they called? all the stuff you can't see i buy them >> the under garment february was familiarly tough, jim. highly competitive especially in home goods and she goes onto say the weather did not help at all either

as for home depot, a lot of us want to know if it had anything to do with the quarter >> i always liked michelle gass input. some people think salt valuations have peaked, houses in that area as a gardener, are you kidding me there has been nothing yesterday, home depot, still nothing. the ground is too wet and the season is being missed nie these guys need sunshine >> we should just for those viewers who are wondering if we are talking about salts, soils, we are talking about the state local tax income deduction that's no longer available except for $10,000 for people.

it is a secondary measure sort of hitting the likes of home depot because you don't want to put money in your home >> jim, that sounds logical to me >> well, i have trek on tonight and let's see what they say. the longer number is daunting. if you want to do some sort of refurbish, you will need lumber. i am not going to dismiss it the multiples have gotten lower for these. you will want top invest in your house or fix up your house there is still renovation. it is brutal i mean as a homer -- i can't look at zillow the hills have eyes. chuckie may have been in my house. >> overall real estate taxes

we'll monitor the call see if anything comes up at home depot. >> it is still home depot. they know what they are doing. >> also we should say the quarter was slightly shorter, the calendar is a little bit shorter than a year ago. when we come back, the tesla slide does continue. morgan stanley cuts its bear case down to ten bucks per share. another look at the premarket as we watch retail and huawei and tesla, we'll talk about what powell says last night don't go anywhere. ♪ you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse.

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[ screaming ] oh, snowball. uh, is he ok? not in any way no. take that ok. you were just beaten by a rabbit. you don't even know it. [ ding ] oh, my pizza rolls. tesla is set to open at lows not seen since late 2016 since morgan stanley cuts its worse case scenario to $10 per share the firm's price target for the stock does remain at 230 they have an equal rating, jim

at adam jones is at it again arguing they saturated the market for retail evs and two big really to support anything but the fundamentals at this point. this is the demand problem issue. demand is the heart of the problem. i don't know -- i question these piece of research. he on the one hand he's saying listen there is a real issue here and on the other hahn hend part of the under writing. bond is down to 82 it is ashamed that elon musk's tone had been tied to the fcc. he'll come out right about now and say demand is strong would he say demand is strong? >> he may be saying something that would get people excited, figure something out he went with a thousand or a

million robo tax by 2020 he went with that one. he's got to figure out a new one. >> does he have wiggle room on that >> they successfully raise money and there is anticipation, they're not funding obviously right now for free cash flow, not able to fund the company because they're not generating it at this point this guy talks about china being an important market for them where they are trying to build production as well so they don't face the import deal >> no, this is a pivot issue they really talk about chinese demand i come back to the idea that he's talking about the money they raise won't last that long. how much are they really burning?

that if they are burning it fast, makes it feel like a chump if you bought that bond morgan stanley, they merchandise it i find it difficult for corporate finance guys saying hey, this is great and the analyst say 10 bucks, 10 bucks -- i don't know. >> the 2025 bond yielding about 9.14 now they missed the china's volume forecast by about half >> yeah, look i don't know maybe he's got the first name. maybe prior to the situation, remember the first man in sun is hopping around there they need to do something quickly. they need to do something quickly to be able to say we have other irons in the fire if this is going to be a bleed issue, it is a sucker punch.

everybody liked it until the bond bear came out and said negative things today. >> how did this happen >> they don't wander into these things you can do math. 13.3 billion total debt, sending this year with 5.5 times ratio getting that down by half by 2020 >> the auto component about $185 he's assuming almost 350,000 deliveries they have to get these cars off the line >> what's the price they'll be getting for it they make money at $50,000 they don't make money at $35,000. >> what i find is the $10 price mark i mean it is really insane how about eight or twelve?

10 just basically says we'll get talked about on "squawk on the street." there, we just talked aboutit. if we have done 47, would we talk about it? 10 is right in your face and that's the problem i can't be a whole and have a $10 bear case. >> it is part of the morgan stanley research of these bear cases getting a lot of attention. we'll take a break take a look at the premarket, we still look to see a turn around for tuesday. resqwkn e re" at the nyc straight ahead at carvana, no matter what car you buy from us, you get the freedom of a 7-day return policy. this isn't some dealership test drive around the block. it's better. this is seven days to put your carvana car

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you are watching "squawk on the street" live from the financial capital of the world, opening bell in about five minutes. it is cnbc's healthy return conference today you a cramer made his way closer to the stage. he'll talk to the ceo in a few minutes, novartis och we are joined with mike here, good to have you with us >> any sign of talks getting back on track or huawei getting permission to buy. >> along that front absolutely semis are going to balance

that was going to be a negative if semiconductor is going to be in for a long period of time i think it is a little bit of reprieve i think the mark is tryiet is t contain the issue. while pricing out i think any kind of quick switch negotiating or settlement or anything like that that's where we are. i think it looks choppy and oscillating in this range for a while. right now premarket and the vix is down 16 again it shows you the market is some what settled down. >> despite everything else we gotten new news on boeing out of the journal today. phil lebeau is here to comment on that. >> hey carl, this is an interesting story. it gets to the question that's been swirling around these 737 max accidents about whether or

not a bird strike may have caused the angle of attack indicator, remember there were two of those veins at the nose of the plane for a bird strike caused fully damage coming out of one of the indicators this story looks whether or not it is a possibility that's thrown out there by investigators. a week and a half ago, the ceo of ethiopian airlines was here in the u.s tom costello interviewed him and asked him this very question, here is what he said to say. >> no, absolutely not. there was no bird strike there was no evidence of any fallen objects >> we should correct ourselves, it was on friday that the interview happened, not a week and a half ago >> the ceo of the airline says

there was no bird strike the bottom line is this, investigators and they look at the 737 max zeroing in from the fact of data from one attack and not two featuring the mcas software of the control data pushing the nose of the plane lower automatically. that's at the heart of the investigation. shares of boeing did move up a little bit once the story posted, it did not change the fact that ultimately it is the mcas software that needs to be modified and receiving data from two angle attack indicators and not one. >> all right, phil, obviously everybody is learning a lot of avianix and safety we'll keep our eyes on this today. our phil lebeau from chicago >> a couple of things, guys, housing trends continue to support the outlook.

x lumber and weather comps would be up 45 we were looking at 4.3 online is 23 working through the impact of the tariffs have not included them in our guidance >> right >> i think home depot is one of those retailers where you can buy the weather story. i think they have operator quarter to quarter where you can say fine, you can back out the exceptions retail stock in general are not in a great seasonal stretch from may to august. they are usually chopped around. also the rule that guidance does not include in the next round of tariffs. you wonder if it remains over the group as you kind of hash out winners and losers not in the leadership area >> jc penney on their comments today. minimal impact on business but

that fourth try would go into effect and having impact on private labels and especially of course -- the opening bell, s&p 500. at the nasdaq, a consumer product company, ot troy >> so many headlines yesterday, what do we need to know today? >> a lot of people trying to take accountable landscape here. yesterday the big story is we presented to you was the fcc essentially promises t-mobile and sprint in terms of covering 5g, boosting mobile to a viable

party. as we reported yesterday and then there was more details from i think bloomberg and the journal later in the day as well the doj is a different story the fcc's public interest and doj, there is competition and we certainly start to get light of report that they're going to look at it differently and does not necessarily mean because the fcc says yes that the doj will it does not mean they'll say no. while the staff may be against it, it is not clear that the man who runs the antitrust division competition is will there be a need or desire for them we'll see. but, it is not an automatic. sprint stalk did end the day up 19%. it was up as much as 27.28% while we report it first people familiar with the process

don't believe just because the fcc is favorable the doj would be, later in the day, we went down further with specific stories of bloomberg and the journal. another part of this that we don't see but included in many analysis of the likelihood of a transaction. california, new york, they may not feel enough have been done to address the competitive aspect of the transaction if it is approved. >> i guess pull it apart to say what now is built into this spread >> right >> clearly before monday's news is not much. you had a tremendous out over hang >> you had the basic idea, it is the most important bill. it pays every month. what will it need for price competition. yesterday things changed dramatically there is still the case. this deal is likely to happen.

but, we still got sort of wait and see what the company is potentially give if there is a further need to give there the fcc and the doj don't disagree there is analysis done it was 70s the last time we saw them on opposite side. they candace agree within saying they agree but to actually be an opposite side of the deal is very rare. so yes it is becoming much more likely. we are going to have to watch and wait as we head into june and jget more specifics and see what develops with the department of justice. >> the focus of downside today, top s & p losers, kohl's and dollar tree and lowe's and home depot. kohl's loss of 13% severe disappointment. the comps cutting their guide.

>> yeah, really the stock is kohl's stock is following the guide direct lilly low reduce guidance by 10% for the quarter. not expensive stock to begin with this is all in the context of a group that's known to be challenge and putting it together the tariff thing is one word excuse even tjx conceivably had a strong quarter, 5%, verses talking marshals and tj max and home goods is down it looks as though it is opening up but it is getting way down by the other companies that have failed >> the department have not been in love with the idea of

planning for reacceleration or the investor side in the last little phase, we saw beginning of that and more cyclical before the latest tariff jolt hits. i think that's one of the bigger stories that the markets is kind of backing off, it supports equity valuations, big growth stoc stock. they're sort of a little skepticism or sort of presumed guilty mode when it comes to cyclical it could be opportunity. at some point we get some good news on trade and clearance to have earnings estimates ratcheting up on the industrial. >> we'll learn more of nordstrom after the bell this evening. have not touched much on powell and tony took on corporate debt last night, sort of raising awareness about it and telling businesses to pause and reflect, saying it is far from anything we saw precrisis

a lot of the triple b's starting to delever in advance of a down trade. >> it had a tone -- this is for the fed chair to bring attention to and to say look we are watching we are aware of the fact that it has been very long active credit side especially on the corporate side that's where the lever has built up to some degree. you have people in the bond market, the issuance now is mostly discipline in the sense of refinancing old debt and not taking on new debt for aggressive purposes. >> it seems like the market itself is comfortable with how things are trading >> i don't know and the market did not rush to kind of take the clues from powell to say they're going to use financial stability to be an excuse tighter. that could be something that becomes a story line

t powell wants to often point to that, look that's part of our job, too >> we'll get minutes tomorrow and a lot of people are on alert to see anyone else in the committee didn't hold enough water. we'll wait to see that >> chips though obviously on the bright side, xilinx is up and qualcomm and micron. the whole back buy story, people are pointing to the whole pattern of selling over night futures and you have some strength during the day. now that it got widely noticed, the pattern was broken over night. >> s&p is up about .6% apple is out pacing that for one in the first time in a while technology is doing fairly well. apple share is up 1.3% after earnings of course the

market cap climbs above a trillion dollars and now it fell down about $850 billion. you lost well over $150 billion in market value at apple over these last couple of weeks on fears of the renewed tension of china and what it would mean for the company. it is still up 17% >> yeah, it is still weighing down relative to the highs of last year. i don't want to call it a trillion dollars curve none of the companies held it long h you had microsoft and amazon and now you have three stocks in the 900. right. amazon is not far in below in terms of the nines anyway. >> a couple of comments on uber today as ups out with a note

saying huge opportunity, slowing growth does complicate the picture and they initiate with a $42 target interesting note on kroger, bernstein calling it a dark horse with some hidden weapons they suggested merger with walgreens and definitely thinking out of the box. >> there is the big picture look you think the case being made that there are some winners here and a big category winner whether it is walmart or target or costco that have scale. maybe you can try to include them in there with a big company incumbent with options >> dow is up 130 here. we are back to 28.58 we want to get to our healthy return conference where jim cramer is interviewing the ceo of novartis. let's listen in. >> look, i think there is different models all around the world as we know we deal with single payer

systems in europe. i would say in general, single payer system has lower level of access and delay the entry of new innovation, i don't believe it is the right thing to do in the united states. the united states has been a place where patients get the latest innovation and gotten in a sustainable way. i don't think that's the right solution i think there are thoughtful policy solutions right now in washington if we could just get all the players to find a common ground >> let's go away from democrat republicans. if you were the the house speaker, would you say it is too hard which is where nancy pelosi is right now would you say you know what we got to tweak obamacare, or would you say i got another solution entirely that gives it and people who are not thinking about because it is politically -- >> i think there is a couple of places where i like to think

abou incremental move that the system can handle with the united states healthcare is to move all of these pieces in an radical way is challenging i think we can make fixes in our sector and in the health and medical care sector. there is important shifts that we can make. we believe in rebate reform, that's one thing that's coming on part b, we need to reform part b and 340 b this is a system that needs to be sensibly ministered and needs to have more elements of competition, i believe in that we need more transparencies. we need to end elements of gaming blocking the ability of generics to enter. we can do all of these sensible things if we can get the party to talk. that gets us a lot of the way there talking about more radica

solution >> you guys have had tremendous success at it but it seems success overseas and not the u.s. >> it has been a challenge in the u.s. in europe now we have eight similar launched in the u.s. has been a challenge because every step it is taken longer to get through the regulatory hurdles that you have and now fda is under dr. gotlieb and from the ip standpoint is much more complicated to navigate the ip landscape in the u.s. you need part b and part b reform you think of an opportunity, there is probably about 60 to $80 billion in the united states that should be susceptible and in europe we see rapid price decline in those segments. all of those money could be plowed into innovation that's the role that we need to

pay attention to >> that's amazing. you are talking about a dramatic decline but you are talking a bt a government that they receive regulations when it comes to oil and gas but not regulation when it comes to pharma >> yes, it is a challenge. within the industry of course it is different views on of course on --s if we resist the abilit to take out cause for medicines that are older and trying to preserve it too long we'll lose the license to have the protection that we have. we need those protections. after appropriate ip protection are gone, we need to allow for competition. >> i know the topic is we focus on pharma. i am being remissed if we are not talking about the change that you embarked upon as a 42-year-old doctor taking the

company to a level you got rid of alkline point it was shocking that was supposed to be your cash cow, how did you do that? >> iwhat is the future of our company. then i ask myself how can you really be a strong capital allocator? to be from anything of consumer health and contact lenses, any therapy is too broad since taken over, we have done about $50 million in deals, we did consumer health. and then the deals we combine it with $15 acquisition.

now with the acquisition of of -- going closer to 19 billion of stuff we are bringing in on the medicine side. what my team and i trying to create is one that's positioned uniquely in the system we are not a healthcare conglomerate we are not an overly focused medicine company with a lot of binary risks if you look at novartis today, we are diversify we have 15 blockbusters in line. >> show a little here? >> we are hopeful that we'll get the results and approval soon. i don't know -- >> oh, it is all guess work. >> i can't give you heads up either we don't know when the approval will come.

it will be transform activiof s cell >> that's jim with novartis' ceo. >> let's get down to bob pisani. >> industrial is putting up a scream here. they're one moving the china's stock. dow components is all trade related names. you got dow dupont and boeing. apple was down you can see these movers here today. where are we is huawei apart of this deal that's what we don't know. if the final huawei order, is it final or just part of a trade deal we don't know.

we got that trump/xi meeting and that's providing some support for the market huawei and the china trade deal are linked together, the question is how linked are they? 52 week lows as many of them out there, most of them are on trade related gains. kohl's has a big decline here. it is amazing to me. they lower their full year earnings dramatically, 11% even more for the first quarter why did they lower so much yet they seem to think the full year is going to be down a lot do they think revenue is going to be weaker we had the conference call and it is still ongoing. they talked about more aggressive and they did say their higher costs due to tariffs and continuing into the second quarter although now they're talking about things will be better in the second half of the year this is a little concerning because it seems to indicate

kohl's does not believe there is going to be much revenue growth at all this year we continue to monitor that conference call. >> big story bob pisani. let's get to rick santelli >> we are seeing interest rates up a little bit looking at a one week of twos if we look at the two-year or five-year or ten-year. 30-year bond, the odd man is out. let's look at a march 1st, charter technical note yield, what i want to draw your attitude is our double bottom right at 237 we want to pay close attention to that. look at the two-day dollar index getting closer to 24-month highs. you see what i am talking about. 98.20 or so, april 25th, we are

getting close to challenging that i know there is been talk and jay powell is talking about issues related to corporate bonds. whether you look at the hygl or any security indices, it looks like they are well behave. at 10:30 eastern, i will have james loree, the ceo of stanley black and decker we'll talk about all things china. you don't want to miss that. carl, back to you. >> stay tuned for that dow is down 144. w .6hee belo280 re don't go away. that's what happens in golf nothiand in life.ily. i'm very fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself.

you need someone to guide you and help you make those tough decisions, that's morgan stanley. they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley. r .

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markets where it has the strongest demand and growth potential and this is sort of endemic to the space it seems. it's like focused on a few specific urban areas. >> the debate over uber and lyft is whether it could survive a duopoly so a smaller scale player >> we'll watch that. when we come back little caesars jumping on the alternative bandwagon and talk to the ceo with the dow up 118. it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover. get to know us at aflac.com

♪ not i never want you to stop please save me ♪ ♪ please save me ♪ i'm waiting good tuesday morning welcome back to "squawk on the street." i'm karl quintany joe. markets are doing well dow's up 113 session high was up 168. >> our road map begins we retailers, home depot, kohl's, jcp out all with results. the u.s. is walking back some restrictions on chinese

telecom giant huawei. >> and fake meat feeding frenzy. the first pizza chain is venturing into the chain the ceo of little caesars is going to be here. economic data. exist home sales and diana has the number. >> good morning. this from the national association of realtors existing home sales down 0.4% to a sea n seasonally adjusted annualized rate of 5.19 million units a disappointment the street was looking for a 3% gain because we saw the sharp job when they would have been signed down 4.4 annually. the 14th straight of annual declines some good news in the inventory up 1.7%. year over year to 1.83 million units, homes for sales a 4.2-month supply median price is up the home price gains are

shrinking. in the northeast where sales were the worst, sales were down 4.5% prices were barely up 1% year over year and in the west sales were also higher and prices still up but by very small amounts so we did see low mortgage rates in march, the expectation was for better sales. the realtors are saying that they're still needing to have sellers get more realistic about the market and lower prices in order to get more buyers here. a disappoint in april. back to you guys. >> diana, thank you. well, we'll start off with retailers reporting results. home depot did beat quarterly estimates on the top and bottom lines. global comps up 2 1/2% when u.s. comp stories up 3% a little bit of a miss, shares down less than a percent shares of cokohl's are getting smoked revenue came in before estimates but comp stores sales and colkos

cutting its full year forecast and jcpenney, worse than analysts expected. my big takeaway, t.j. maxx, upping its forecast. this is the parent company, called tj ax and comp stores up 3.5% forget the department store, not turning it around. this fakeout, there was hope they would do it over the last few years or so or months but it's back to what was working. off price, t.j. maxx, home depot which continues to do better than the rest, department stores not figuring it out. >> difficult and good color from home depot on the call out of the cfo a moment ago said that of the tariffs that they've already worked on or had received through 018, roughly $1 billion impact on the company's business >> yeah, i mean they're dealing with -- they're all dealing with the head wind of tariffs especially if the president does

go through with this and 00 million of extra chinese imports falls into consumer goods and already they're starting to feel on the higher tariffs. that's a head wind but the backdrop here is that it's still hard for them to bring in traffic and get those comp store sales up even like kohl's that had so much promise because of the amazon partnership is not getting it done. >> full year guidance as well is actually also down significantly and, of course, the stock suffering. interesting that tjx shares as you point out, t.j. maxx and homegoods, strong quarter with above expectations in terms of comp store sales is down and actually losing over 2.5% or roughly of its market value this morning despite those good numbers so it shows you some sense on sentiment. >> it's been a relative winter but if you look across their portfolio on comp store sales up across the board

home goods, t.j. maxx canada, tjx international if you want to know who is taking share when the department stores are losing. on the flip side tech stocks are leading the markets higher on the easing of restrictions on huawei a volatile market and joined by shawn matthews, chief investment officer and founder of hondius and head of asset allocation, good to see you both we always try to pair bulls and bears but on a target basis you guys do have some differing opinions >> yep. >> you've been cautious for awhile. >> i have. >> is the current mode we're in how you expected to play out that cautiousness. >> i came into the year bullish on risk assets but after the first quarter and great returns it made sense to take some off the table. i still believe that's the case so you have to look at risk capital and unless you have a long-term horizon as something that has to sit within a belt there so if you return

expectations are in that bell curve that's fine but once they get outside you have to take your risk down and been taking it off the table because that have. >> thinking not so with you, right? >> so i would say i'm tactically negative and hesitant to say sort of bearish because i remain very, very constructive further out and have a target of 3250 for the s&p 500 for year end but would argue that we sort of began to have this pullback we were calling for, you know, s&p 500 typically pulls back 3% to 5% every two to three months and sitting atthat 3% mark and i would argue, you know, u.s. growth is going to slow and it's going to slow further. i mean if you look at the manufacturing ism in the u.s., we've gone from 61 to 53 if you look at the export orders this there, they tend to lead the ism. they are pointing to 49 over the next three months, so i would argue the growth slowdown is coming and one point of the pmi

is worth 2% in the s&p so we have another 5% to go so i'm very much of the view that things need to get worse for them to get better but i do believe they will. >> you think that can happen by year end or do you see -- >> i would say the sell-down happens over the next three months basically and then we come back, yeah. >> coming back strong. we're -- your talk is 400 s&p points from where we are right now. percentagewise that is a pretty significant gain. >> equity markets tend to pull back the way i look at it, the peak last year in september was 2930. you know, 32.00 is about 10% from there so a lot of it is just covering up lost ground from the negative rather than new push up. >> i mean if you look at the sectors, the industries by breakdown of who is incorrection, a lot of cyclical groups, energy, materials, industrials. airline, the transports,

household durables what does that tell you. >> it tells you that the market doesn't believe what i'm saying and, of course, you know, you want to believe what i'm saying and therefore that is the sector you need to buy. >> do you think -- is it -- if you were to believe binky's rescue -- >> everyone is relying on the fed in their corner at this time and make sure the markets are okay if we look at real demand out there it's from buybacks that's 85%, 90% of the demand is coming from the buyback sector so all of a sudden as we look at the political climate and what's going to happen over the next year or so the democratic party gets to get ahold of that and try to figure out ways to either curtail it or stop that from actually happening so i think there could be some damage to the marketplace from a political standpoint and, again, demand

drivers are the key. right now corporations are buying back their stock so it's an underlying base to the market but can't continue at this pace forever. >> powell seems to be concerned about businesses increasing their debt levels mentioning, of course, there are strong fundamentals but unless they're supported by it could increase vulnerables. >> absolutely. they're using cheap cash and using that to buy that stock it makes sense inherently if your one job is to drive your stock price higher in the long run you're trying to drive your business higher so we have a little bit of a disconnect going on in the marketplace. long-term growth prospects of your company versus short term where your stock is going to be. right now it's going higher based on you buying back stock. >> surely you can push back against that. >> fungibility, buyback dollars. >> i would push back hard against that and say, there are aggregate or top down sort of macro measures for looking at

leverage and, sure, the traditional one known to gdp looks high but the problem is the denominator. gdp is outdated for looking at u.s. corporate debt. in 1960, 3% came from the rest of the word, now it's 35 or 40 cash leffs are higher and take out the cash that the s&p 500 holes and divide by corporate profits in the national income accounts itself and corporate leverage looks very low but macromeasures notwithstanding and the other is a micro issue if you look at the leverage of the most highly covered companies it's stable to down over the last two to three years and many are up because companies with negative leverage have now less negative leverage. that cannot be a corporate leverage problem if you look at the motion highly levered companies in the u.s., in the s&p 500, 45% which is an all-time high are defensive

companies. the most highly levered companies in the s&p 500 have abated the s&p of 0.6. i mean, corporate leverage by itself is not an issue and these companies -- are not responsible for any -- basically the buybacks they are all happening from companies basically not -- i'm pushing back very hard. >> i would disagree. you don't look at the whole market when you look at credit credit is talking about the bottom 10% or 20% of the credit stock and all of a sudden if there are problems there that works its way entirely through the stock so unfortunately, that's the problem we've probably given capital to those that didn't deserve it. >> a note about triple bs delevering in advance of trouble which we didn't see last time. >> the average is small in nature and if we talk about 50% of investment grade credit is triple bs.

even if 10% of them has a problem that kills the high yield market if you look at the top down approach you'll have significant problems at the bottom which then works its way back up to the top again. >> yeah, we totally agree. don't look at top down but bottom up. it's even more reassuring than top down >> guy, thanks good to see you both david. >> well, late last night u.s. officials softening their stance again huawei offering the company some reprieve. deidre. >> good morning, david commerce department saying it will grant some temporary exceptions to its export likely against huawei so this means that google and some other chipmakers will have some time, 90 days to figure out a way to move forward under this ban. have a look at the effect it's having on chipmakers they are rebounding. you see qualcomm, broad capitol

hill, xilinx, micron, skyworks all up between 1% and 2 1/2%s and do significant business with huawei that have been hit really hard since that ban was announced last week. their gains today certainly not enough to make up for the heavy losses they have seen since last thursday wednesday was when the ban was announced. it's because investors know that there are longer term ramifications here huawei has already been preparing for a time that the supply chain would be disrupted. particularly early in the united states so this makes it all the more urgent for them to find non-american suppliers and develop their own chips. op-ed, an editorial in the state-backed "global times" says that even if china and the u.s. reach a trade deal, last, china is unlikely to use a large number of products provided by american companies anymore whether or not they have a choice that is certainly up in the air, especially when it comes to the android operating system huawei has been developing its

own but so far experts aren't convinced. they say u.s. software and chips are still the gold standard in the industry, back over to you. >> huge story, thank you so much when we come back a weapon in the trade war president xi highlighting china's production of rare metals is there an aunt too self and jeremy powell sounding an alarm on corporate debt. we'll discuss further. little caesars pizza chain getting in on the fake meat craze selling pitz haves with's plant-based sausage, "squawk on the street" is back in a moment. alright boys, time for bed.

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manage your wifi network from anywhere when you download the xfi app today. welcome back dow's up 140 time for etf spotlight bob pisani looking at rare earth metals getting a boost overnight. >> trade wars and etfs, the intersection here today so metals are in focus again after chinese president xi jinping visited a rare earth plant overnight highlighting that china is the largest producers of rare metals in the world and could us it as a weapon in the trade war. just take a look rare earth metals used in hybrid and electric cars and fuel cells and lcds and particularly cell phone, even nuclear reactors the problem with investing in rare earth is the lack of opportunity. the largest company went bankrupt back in 2015. now, there is a believe it or

not an et fochlt for this. van eck vectors rare earth, the symbol remx but it's small and holds foreign small companies weighted by market cap and almost all of them are in china. they include china northern rare earth, china molly bendam. shamin tungsten. this is where the line of attack is going to come the -- it's not a coincidence he visits one he tells you all the cell phones you guys have molly, lithium, yoe chromium, are all made here and maybe there will be a shortage of them. what a coincidence. >> a shame if -- >> wouldn't that be terrible all that pork we ordered oh, that happened last week and maybe, oh, look, caterpillar didn't get a new deal with a big

company in china maybe cue botha gkubota -- >> i like you turning xi into a comedy routine >> china is far and away the largest producer somewhere in the area of 80% to 90% produced there and used to be a few and all basically went away. this was a big story about seven, eight, nine years ago we used to do rare earth metal stocks most have gone away and china cornered the market in rare earth metals so i think this is a significant story and the fact he shows up there, holding your hand and telling you, saying, okay, guys, here i am, pay attention. >> there are many different areas and levers that they can access in terms of responding asymmetrically i guess to what is the trade war and gets into my world in m & a. concerns about deal approvals and the like which we saw with qualcomm and there is an nvidia

deal and there's so many different areas where you could go and say, maybe they'll do this maybe they'll do that. >> if things go better we get another way and that gets to the question how huawei is linked in with the trade deal. if that order stands is there going to be a trade deal would that be a deal killer? this is the major company and maybe not the apple of china but they view it as so on etfs waiting for a big coin, vaneck, no, kicked the can down the road and s.e.c. says not again. i think they have not addressed the two big problems which is custody. how do we know the people holding these are going to be able to hold them and not get stolen and international exchanges, how do we know -- you can give us assurances they're not broken into. i don't see them approving it until they deal with that but i think it will happen eventually. i'm still in the camp that we'll sigh big coin etf.

the security is not there yet. >> bob, thanks. let's check tesla falling again obviously down 10 in 11 days morgan stanley cut it's worse case scenario from 10 to 97 driven by concerns around chinese demand for tesla products the price target still at 230 and adam, it does keep an equal weight rating and cramer mentioned the 205 bonds that continue to show uncertainty about the company's future. >> so the stock is down 31% in the last three months and the whole community is catching up there are a few bullish holes out but these analysts are pointing to lack of demand, margin pressures and just overall, you know, problems with regard to the access and capital and financing. constant refrain. >> by the way, tesla is still way above its ipo price of 17

back in 2010 and also in 2010 -- >> yeah, but down 40% this year, of course, successfully raised capital a few weeks ago. but certainly concerns including about their efficiency targets, as well. their ability to save money and making the batteries and making the cars and automation, for example, in terms of the cars haven't quite met what it had been hoped for among some of the analysts. coca-cola teaming up with netflix. we've got the details. plus, new parents, listen up trade tantrum now threatening the baby industry and your money. we will explain when "ua osqwkn the street" comes right back

welcome back to "squawk on the street." parents know having a baby means a lot of new costs but probably didn't budget for the president's trade war. we have more on that story

hi >> hi. well, this is the warehouse where they ship out to major retailers across the country, target, walmart, amazon. you can see the gliders just came in from china they'll be loaded up over there and sent out for delivery. delta is the largest manufacturer in the country, 90% of the cribs you see at target come from delta and the company president said he's had to have tough conversations with his retail customers because almost all of their products could be affected by a 25% tariff he says the company has to pass those costs along and that means some retailers are canceling orders >> if i buy it today at a 25% increase and tomorrow the tariff goes away, what happens? so there's uncertainty in the market and it becomes the same thing for me how do i buy overseas if i don't know when and if

so shamie said some are trying to run lean inventories as they wait out the trade war but this will be borne by consumers ultimately. >> if we put the tax on baby and i don't know how a living on 50, 60, $70,000 a year will be able to afford it >> now, there are 58 containers, most of them if not all from china scheduled for delivery at this warehouse through the fall. guys, the first containers hit by the tariffs should be here within a matter of weeks back over to you >> i mean, ylan, the trump administration might say buy your baby products that are made in other countries or some of these products should be made in the united states. is that possible >> well, the irony here is that as you know, sara, global supply chains are incredibly intricate and very tightly connected so the company actually makes match tresses here in the united states in wisconsin, but the

fabric that goes on those mattress, the crib mattresses comes from china as well so even when you make products here in the u.s. there are going to be components that come from overseas and they all get filtered through the system. >> birth rate fell 2%. 32-year low. this probably doesn't help i wonder how much is because it was so expensive to have a kid >> you and i know that's very true, sara it's not cheap have all right, ylan, thank you. coca-cola and netflix announcing an unlikely partnership. coke is bringing back new coke you remember, the well-known flop from the 1980s. it's all part of a partnership with the new season of "stranger things" on netflix which is set in the summer of 1985. somewhat a surprising move from coca-cola because new coke was introduced in april of that year and received so much backlash they brought back the original recipe three months later.

now, a limited supply of the vintage beverage will be available starting if you missed it three decades ago treaters of "stranger things" recut a coke ad which you can see. it is a big marketing push which doesn't have ads but is also ramping up its partnerships with brands and netflix says it teamed up with 7 accompanies including baskin-robbins and levi's to draw attention to the new season no money changed hands between netflix and coke but still interesting to think about a product placement as a potential source of income for netflix and from the coca-cola side chasing a new demographic, right younger audience the first time they've done anything big with a streaming company and also, you know, someone as someone who covered it kickty of the new coke under this new culture you know, you wouldn't have seen in previous eras of coca-cola them embracing one of the biggest debacldebacles

it's a new eye and making fun with it and making a big marketing push around it. >> is it targeting millennials i'm trying to remember who would remember the original coke debacle? >> i goes so i guess you have to be old to remember 1985 but millennials do like the sort of vintage culture and stranger things has been great on their period pieces and sort of -- you do watch stranger things, i do. >> i do. >> it's about young people so i don't know exactly but i think netflix in general has a younger audience than say a lot of the big movie that is coca-cola worked with in the past. >> that's for sure. >> kind of buzzy. >> sue herera, hi. >> good morning. here's what's happening at this hour we begin with iranian president hassan rouhani calling the trump administration, quote, novice politicians with naive ideas, end quote. he added that president trump

step back from his threats against iran after military aids advised him against a war with tehran. the venezuela ambassador to russia says yours sanctions against his country have resulted in losses of $130 billion and claimed with those funds they could have survived for nine years and also denied rumors that russia was planning to set up a military base in venezuela. alitalia canceling half of its flights because of a 24-hour strike at rome's leonardo da vinci airport dozens carried sciences as they stood outside departure term nalls. niki lauda died and had a horrific crash and passion add way peacefully on monday

he was 70 years old. you are up to date that's the news update carl, i'll send it back downtown to you. >> thank you so much when we come back the ceo of stanley black & decker weighs in own the company on his company's bottom line and will join santelli pretty steady here 'rw session up 168 wee about 40 points below that don't go anywhere. man: stand up if you are a first generation college student. stand up if you're a mother.

if you are actively deployed, a veteran, or you're in a military family, please stand. the world in which we live equally distributes talent. but it doesn't equally distribute opportunity, and paths are not always the same. i'm so proud of you, dad! man: i will tell you this, southern new hampshire university can change the whole trajectory of your life.

federal reserve chairman jay powell speaking in florida last night. his big warning, rising business debt our steve leishman is here with more. >> jerome powell giving his most detailed speech yet and while the express considerable concern in jackville, the issue does not yet rise to the level of subprime lending that we had before the financial crisis. >> at the moment the business

sector is quite healthy. health profit margins and because interest rates are low, by historical standards, the cost of servicing today's higher debt levels remain low relative to business income >> that's the good news. at the same time powell noted corporate debt levels are high and underwriting standards are weak he called cough advances that protected lenders endangered species. >> business debt has clearly reached a level that should give businesses and investors a reason to pause and reflect. investors, financial institutions and regulators need to focus on this risk today while times are good. >> powell suggested the fed will be monitoring the problem through its normal bank stress test and financial stability oversight committee and other things the fed is doing but didn't sound like any action was imminent in part because he said the regulated banks do not appear to have much exposure to corporate debt. >> did he say anything about the economy? >> yeah, he says the economy is

in pretty good shape despite costas are out there i guess that's a wink and nod to the trade issues going on as well as oversea growth issues and part of what colors his reasoning on this and his idea basically is they should use these good times to get ready for times when some of the dealt out there is going to be stressed by potential economic weakness. >> doesn't sound like any clues on the next move and i know you've been talking to fed presidents yesterday with atlanta. hard to read they're firmly patient. >> if anything i thought it was significant yesterday that the atlanta fed president said -- leaned against the market certainty of a rate cut and asked him about where the price is priced and thought the market was overdoinging it i think they're in a wait and see mode 70 or 0% probability of a hike

would be overstated in that regard >> all right be been a busy week. >> minutes tomorrow. >> cme group, let's get to rick santelli, a special edition of "the santelli exchange". >> very special edition. i'd like to welcome the president and ceo of stanley black & decker jim, thanks for joining me i'll get right into it you purchase craftsman tools in 2017 -- thank you. you purchased them in 2017 now you'll build a state of the art automated plant in ft. worth, texas to make the line of craftsman and many new things added to the line. is this plant there so that you can sort and diversify regarding what's going on with trade >> absolutely. diversification of our

manufacturing base is a very important -- it's a great thing because we don't want to be reliant on any one geography because the craftsman and tradesman who buy the product really want to buy product in the usa. what better idea than to manufacture in the usa $90 million investment 425,000 square feet. 500 jobs it's a beautiful thing >> you know, and there's a heavy accent on automation, a.i., 3d printing a variety of advanced manufacturing techniques an while i was reading that i was reading a report by deutsche bank that says automation or robotics in the u.s. specifically will enhance jobs, not destroy them your thoughts? >> it will, i i understand people fear automation but this reality what -- where we are today is industry 4.0 as it's called is going to enable the onshoring of hundreds of jobs

for us, thousands of jobs for our industry and tens of thousands, maybe even hundreds of thousands of jobs for america so a wonderful thing but there is a huge issue with skills. they teed to be brought up to speed so our u.s. industry really has a rescaling project ahead of us. these people need to have the capability to use this technology and to be effective in their jobs. >> you know, when it comes to china, it's just a really politically charged topic and i totally understand why i read that bringing these manufacturing jobs can cost hundreds of thousands per job and it's a really dumb idea. i get that but if i'm seeing all this migration of large manufacturing back to the u.s., doesn't that cost have to be looked at in a grander amortized picture that it may be the beginning of something big or am i wrong? >> well, i think you're right. this is the beginning of something big. it doesn't matter what happens with the trade war

the big picture is ultimately there's a nationalistic trend going on and ultimately there's going to be a light of migration back to whether it's developed markets in europe or here in north america. there is going to be a major shift of production across the entire world and it's all tied up with the geopolitics and power shift that's going on with the advent of the rise of china. >> now, before the tweet and tariffs moved up and, of course, things are still in tran sit on that first batch cbs nbc was talking about i read you said the tariffs prior to the raising of them was going to cost you guys about 150 million now you think maybe 250 to $275 million. can you give me perspective to your revenues and cash flows as to how big of a ding it is and do you think your productivity, new plants and others will offset that over time. >> reporter: $275 million is a

pretty substantial earnings per share amount for us. it would be about $1.00 a share so we've had to take pretty significant actions in order to offset that so there have been price increases and supply chain moves and there have been cost management actions taken as well but we managed offset that and reaffirmed guidance at our analysts' day in new york city and it was very well received by the marketplace. >> excellent, jim, what a pleasure speaking with you i would love to have you back as this progresses to monitor, not only the automation side of the equation but how the transfer of domestic manufacturing is progressing. thanks for your time today back to you. >> great >> good stuff. when key cowe come back, th little caesars ceo is going to

join us.

one wall street bull says there is a silver lining to the trade war. find out what that is on tradingnation.cbs.com. more "squawk on the street" coming up.

little caesars pizza latest food chain getting into the meat substitute business partnering with impossible foods. the company joining the ranks on burger king's impossible whopper and joining us to discuss the future of meat alternatives for the industry and more, cnbc exclusive is little caesars's president david scrivano i get while the burger chains are going after the meat alternatives but do people

really want it on their pizza. >> i think so. possible treatment impossible stream is a great pizza and want something new every once in a while. >> are you doing testing or people asked for plant-based meat alternatives on their pizza. >> what we've seen is a trend. kind of a long-term trend but really kind of hit a helping point in the last year or so where so many people are meat eaters but trying plant-based alternative to help their diet or want a differ flavor. >> is this a fad or here to stay. >> i think it's here to stay i'm really excited about it. this pizza is a great product and it's for meat eaters i'm a meat eaters and love this but it can be for those who use a plant-based diet also. >> all of the chains are eating up with either impossible or beyond meat, explosive ipo do they have enough supply to

fill all the demand and orders you're placing >> you know, little caesars just celebrated our 60s anniversary a 60-year-old company and impossible foods started in 2011 so, of course, with demand so high they might have some supply challenges, but we feel comfortable. we've talked with them and we think they'll meet that supply need and we'll meet the demand >> david, i mean i assume you've done a lot of consumer research. on this. who is most likely to my great over >> the most likely consumer is a meat eating consumer right now we have a five meat feast on air nationally promoted and think some of those would love to improve their diet, a little lower cholesterol, better fat and will try that in addition to their normal meat plate but we'll also attract those who are plant-based. >> in general are we talking about obviously i would guess younger consumers?

are these high frequency companies, more urban, rural >> you know, i think certainly millennials and younger consumers are an important demographic for us but i think it's meat eaters in general and i think there's an evolution of thought in diet that people want to eat healthier regardless of age so i think a focus will certainly be on a younger generation but it really is to convert those who eat meat regularly to try something different. >> well, you referenced it earlier so how does it taste in your opinion is it similar to or is it a different taste than meat itself. >> you know, it is a it can taste. i've tried it many times we've tried many iterations. impossible tested over 50 different varieties of sausage and met what we're looking for and what we believe is the perfect sausage. tastes just like our product in consumer taste panels, many can't tell the different caramelized onions, green

peppers and mushrooms so along with our mozzarella and romana cheese blend great tasting pizza. >> is it so hard for to you make why can't you or burger king -- does this have to be grown in the silicon valley labs. >> you know, the impossible meat is really unique it's got an ingredient deltaed heme which separates it from other plant-based products and allows for that flavor and texture of meat to come through. >> how long until you, sir, get a cleanse of in the marketplace as to how successful this entrant will be? >> you know, we've been selling it for one day so just started yesterday. we planned this test market for 30, 60 days and get a good feel at that point. one other reason it's important for us in tests you can order through a mobile app and through our pizza portal which we just introduced last late year and more teen for the customers and

see how well this adapts to our pizza portal as well. >> finally, a supply constraint nowithining are margins higher than your traditional sausage, for example? >> the ingredients a little more expensive because it's unique, overall the product sells for $12, recent margin in line with our other products and we think it will make sense for consumer that is want to try it >> so, david, we don't get to talk to you a lot. you're a private company but right up there with the little caesars -- how is it doing how is the chain doing overall. >> the chain is doing spectacular. we had another great year in '18 and '19 we're growing and opened two new countries last year and will hope three more years so in 4 countries around the world and continue to grow each and every year privily held so that is very good for us.

we like that but our consumers love us, of course, we're the third largest pizza chain in the world have have you taken share from papa john's which has had some issues. >> we really focus on our ownpee independents are really where we've taken some share from. and of course some of the other big players are doing a good job as well. so we've competed for many years. i've been in the business 31 years myself and love it it is highly competitive, but a lot of fun >> david, thank you for joining us >> thank you let's send it over to jon fortt now with a look at what is coming up on "squawk alley." >> if we're ever going to get real drone deliveries, somebody has to figure out air traffic roll for drones. the government is working on that and we'll take you to the location where in nevada, coming up, onsqwkll." "ua aey

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welcome back stocks extending the rebound currently trading at the best levels of the day so far we are seeing relative strength in the materials and technology stocks, so more cyclical names but let's drill down on the

health care sector among the really trade negotiations between the u.s. and china, that sector has been the best performer in the s&p subpoena over the course of the past month it is up around 4% or so among the names that have led that sector higher, you have names like anthem, also mckes n mckesson, united health. all up between 12% or 14% or so. health care the best performer last year, a laggard year to date, but up today always a big hour or two hours actually i don't mean to -- >> closing bell is two hours >> last trading hour of the day is always big. what have you got coming up? >> and we'll be all over the market rally and in the 4:00 hour, an interview with sean parker we'll talk tech regulation, opportunity zones which he is very into.

the administration's push to try to get investors to go into areas that need them in terms of development. plus we'll get earnings, results from nordstrom, urban outfitters and toll brothers. and keeping a close eye on the retailers after results from kohl's, t.j. maxx, home depot, jcpenney overall theme was disappointing showing that the department stores just aren't turning it around the bottom line, a contributor wrote me, an expert on all things retail, she said that the companies have been trying to drive traffic through fewer promotions and it just does not drive traffic. they are trying to drive comps that way, but it is not a sustainable way to do that and therefore they are paying the price on that. she also said you just have to look at the stores themselves. you go into a target, and you see the venerated revamp and it is a whole different ball game than going into a kohl's which does not feel she says fresh and

they have not done the restoration program that some. walmarts and targets have done >> and the take among the bulls is that. >> caller: -- kohl's is in a better position from a land perspective. >> and a lot harder to pass on pass through the tariffs if they continue to get hit and if the trump administration does go through. so that is another big headwind people are talking about today >> all right busy hour obviously."squawk all next we'll talk to roger mcnamee. dow session highs up 188 geico makes it easy to get help when you need it.

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good tuesday morning welcome to "squawk alley." a busy morning as we see the dow at session highs up almost 190 tech stocks are rallying google delaying its decision to cut ties with huawei after the white house eases some trade restrictions for 90 days last week the u.s. blacklisted huawei from doing business here in america over national security concerns. the company's founder dismissing the importance of the temporary reprieve though saying that huawei has already made preparations for the u.s. ban. joining us today, early facebook and google investor roger mcnamee, he is joining us from san francisco. good to see yo