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tv   Squawk Box  CNBC  May 22, 2019 6:00am-9:00am EDT

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>> welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernan and andrew ross sorkin. let's take a look at the u.s. equity futures you have to see that things are relatively flat. this comes after an update for the markets yesterday morning. you did see big gains that came. you can see all of the gains we saw yesterday. there are changes in the policy with huawei, and some of the weaker policies actually making people think that there's more hope than trade talks ahead. ha. s&p futures by less than a point, and the nasdaq off by 7 lerts ta let's take a look at what happened in asia you can see that the nikkei was flat, closed by less than a tenth of a percent
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and the shanghai less than half a percent. the chinese ambassador saying the door is open for trade talks with the united states but they are in no rush. >> i don't want to talk about that i watched that interview we were talking off camera about it andrea, you should have seen this we got to get to lowe's. i'll tell you about it in a second with a straight face, he was saying things like wow, it was like baghdad bob, we're not interested in global domination. no military build up on the islands. we're doing some jobs training in these interment camps they need jobs training. huawei, everybody knows it's a private company and he sounded like you, that trump's just doing this politically, and huawei -- right? you were totally on the same page with this guy. >> on that issue i don't know about the other issues we should take a quick look at lowe's because it's not good
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they missed on the number, $1.31 was below. $1.33. the revenue number of -- i think that's okay. 17.7 versus 17.6 but at first blush you can see the stock is down almost 2% let me just give the adjust the earnings per share guidance. 545 to 565 and we've got a 605 estimate, so you're talking about a $0.50 miss or so for the year. and comp store sales in the u.s., 4.2. total comp store sales 3.5 3.5. so we'll get to -- we've got that down, as i said, i haven't seen it trade. we'll see whether it stays about where it is or not and we'll talk to brian in just a second, but do you want to do this qualcomm news first, sorkin? >> let's do it right now news crossing on qualcomm, it is
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sending the shares lower in premarket trading. a federal judge ruled that the chip maker unlawfully suppressed competition in the market for mobile phone chips and used its dominance to charge excessive licensing fees qualcomm has not responded to the ruling but to put this in context, the judge effectively ruling not only against qualcomm but effectively saying that all of the things apple had been saying for so many years during that lawsuit against qualcomm were effectively accurate. now meanwhile last month you remember that apple made a settlement, a deal with qualcomm i don't believe that that deal necessarily gets upended by that decision, but i don't know >> qualcomm has to negotiate or renegotiate licensing agreements with customers free of unfair tactics. >> and so the question is whether that will apply, though to the settlement that was reached just last month or will
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effectively be for other companies. it very well may be there's a provision or should be a provision in the apple deal to open it up again, but we don't know, and we will of course look into it. >> this is interesting, the judge ruled that qualcomm has to license its patents to rival chip makers at fair and reasonable prices and can't sign exclusive supply agreements with smartphone makers like apple so there's no straight up siding with apple it's coming down on the same side with the ftc. >> it's got a nice bump on the -- on the apple settlement >> yeah, looks like it's made the round trip i mean, this gets right at the heart of the company and everything that it was about, and really is so suggestive of many of the practices that apple was complaining about the entire time were in fact accurate according to the judge. >> the judge said qualcomm has to submit to monitoring for the
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next seven years to ensure it abides by remedies there as well let's head back to lowe's,s earnings per share number was not the adjusted number, so it's more than $0.02 below. the adjusted net is $1.22, and the estimate is $1.33, and i said i haven't seen a trade because i've got a 1.06 bid and a 1.08 ask we have it done a little bit i don't have the bid or the ask there, so we'll wait for that to trade, but joining us to talk about lowe's, and some of the other big retail movers, brian nagel, analyzer. given the weather and the calendar, you said even though some of the numbers appeared to be light of expectations or same store estimates, you didn't think they really were you thought the estimates hadn't come down all the way. is lowe's disappointing or is this basically a report you were expecting? >> good morning, this is interesting. look, i'm digging through this
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lowe's report, the first number that grabs my attention is the 4.2% domestic comp we talk a lot about the comp spread between lowe's and home depot. this is the first quarter in a while that lowe's clearly outcomped home depot a 4.2, versus home depot did a 3 yesterday. that in and of itself is a huge positive for lowe's. what's happening below that, we need to get more clarity from the company. there was this reinvestment cycle. i read the release quickly ceo marvin ellison in the release is saying they need to make certain investments in order to drive the sales performance. that could be a negative like i said with home depot yesterday, when the dust clears it's going to be a positive. i think the market is going to say lowe's has been undermanaged for a long period of time. they figured out what they needed to do they're starting to see the results in extra sales there's this extra investment. >> you're talking where he says, the ineffective pricing tools,
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and he says something about cost pressure what's that? >> i would be guessing here, but it's probably, i mean, the pressure that most retailers are talking about when they talk about cost right now is labor. and look, the problem with lowe's has been store level operations i have not got the sense that they don't have enough people working the stores i don't think the people are trained as well. it could be something to do with that, basically the labor they have in their stores >> transition in the merchandising organization that's a good one to throw in there occasionally for weakness. gross margin contraction as i said, still not much going on pre-market. i'll be interested to see where that is. but when i hear you say that they have made up some ground on home depot, i think, i don't know, i initially thought there is ground to be made up. that's why it might be better. they're lagging, are they not in terms of operating performance from home depot?
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>> they have been a laggard for almost a decade now. >> the point is actually showing they are making some ground, and maybe this guy will finally close the gap a little bit more. ken langone doesn't think so. >> that's a bet i'm making, recommending lowe's aggressively marvin worked at home depot, he ran stores at home depot it's a great company, a lot of people working there. >> i think you're right, lowe's, there's a lot of low hanging fruit, they haven't invested for a long time. the back office situation and resupply and, if they're investing in that that may be a good long-term signal. >> i think so. we're going to see when the stocks start trading there will probably be knee jerk reaction when people think about this, given what we're talking about here, this has been a laggard for a long time, there's an opportunity to invest more and drive performance. >> they have altered some plans in mexico, that they had planned to exit the mexico retail arm.
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i mean, the guidance is not so great. 565. that's the high end of the guidance, 545 to 565 for the year that's $0.40 below where wall street is. >> you have to be patient. >> you missed $0.11 this quarter. >> there's more to come. that's a 10% miss, right, that's reinvestment, but you think that could be digested by people once they look into what it's resulting from >> yes, yes. >> so you came in with a buy, you see this, yand you still hae a buy. >> i have to dig more, but i'm looking at this saying lowe's is doing what lowe's has to do. this may be one of the knocks on lowe's, why didn't you see this beforehand this company has been undermanaged for a long period of time, and it takes a while to figure out what needs to be done, but the key there, again, you know, certain metrics matter
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more than others a 4.2 domestic comp in a quarter when home depot did three is a big positive for lowe's, and looking at the guidance for the year, yes, they did take earnings down, they were previously at 6 to 610, 4.45 to 5 h 5.65 reaffirmed the comp guidance >> what did you hear on the home depot call yesterday >> there were two big points that home depot was making which i thought were interesting and reflective of where we are in the retail economy they said the sales weakness and sales did track below their plan in q1 was a function of whether, particular in february, weaker lumber prices, and lumber prices are a pass through wherever lumber is priced they pass to the consumers. >> didn't hurt the prof
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profitability, hurt the revenue. what can you tell us about the u.s. economy based on what you heard yesterday and based on this initial release from lowe's tod today. >> from my perspective, the economy is in good shape here. take home depot's comments yesterday, and they are basically saying if it wasn't for these outside factors, weather and lumber factors our sales are tracking 4 to 5% we talked about lowe's having a better number here i spent a lot of time talking with auto zone yesterday they did a 3.9% comp they sell a product that people don't necessarily want to buy, right, but if they feel better, they buy it, and so if auto zone is doing a 3.9% comp, that speaks to the underlying strength of the economy particularly for lower to middle income consumers. >> i guess you say you have a slice of the economy, but when you're talking about autos and the home sector, that's a pretty important slice of what's happening with the u.s. consumer. >> those are big chunks of
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consumer spending, that's correct. >> i feel bad. yesterday was rough for kohl's and nordstrom, and we still throw j.c. penney in there and follow it because it's a household name, but $300 million market cap lowe's, you know what lowe's is 88 billion what happened to j.c. penney it's unbelievable. >> it's been a sad story for a long time. >> 88 billion. i like lowe's, fine, i see them around i don't go into them nice blue sign, you know. >> do you want to buy j.c. penney together? >> that's not a ridiculous idea. >> i have an idea too. buttons. >> oh, little buttons. >> call bill, the buttons. >> people don't remember that that well. >> burger king >> that's a smokey spray they put on it. what did the little buttons say, we can do it or whip inflation now or do you know. >> i can't remember. >> do you remember with
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inflation. >> that was jerry ford. >> you used to wear a button that said rise above. >> i didn't wear that button g guess who stole that? cadillac, escalade stole it. watch the commercials on tv. all the cadillac drivers are rising above that's us. that's cnbc. i guess we didn't have lawyers brand it. >> if you look at the group of retailers, we're seeing this more and more, there's a huge divide between those companies working well online, and those that are not, and home depot, lo lowe's, they're largely working online, because they have a product that doesn't sell well online >> maybe nordstroms should have piano music playing. remember the piano, and the ladies shoes, it put me in a mood. >> we're going to talk about nordstrom. the shares are under pressure this morning the company is cutting its profit and sales forecast for the year >> oh, here's the piano playing.
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>> after reporting weaker than expected first quarters earnings results were hurt by sales of full priced women's clothing, trends from the fourth quarter continued into the first quarter and had to ramp up promotions to clear out excess inventory also while we're on the topic of retailers, urban outfitters trading lower as well. company beating expectations for its most recent quarter and comp sales rose by 1% but forecasting a difficult sales environment for the current quarter. another retailer set to report in a few minutes. we'll be getting results from target around 6:30 a.m. eastern time ahead of that, target is trading up by about $0.24 to 72.20. >> so target is good or bad, what's your prediction >> i don't know. >> i don't either. it's different. >> you're the guy who's supposed to know this what do you think? >> targets would only be a
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guess, but i would say it's probably pretty good. >> it's different than kohl's and nordstrom, more like walmart. >> far less weather affected that's simply a guess because i don't follow it. >> we're not going to hold you to it. >> also on today's agenda, treasury secretary steven mnuchin will be testifying before the house financial services committee this is a continuation of a committee hearing that ended uncomfortably back april. >> remember that >> if you'd wish to keep me here so that i don't have my important meeting and continue to grill me, then we can do that i will cancel my meeting, and i will not be back here. i will be very clear, if that's the way you would like to have this relationship. >> thank you, the gentleman, the secretary has agreed to stay to hear all of the members. please cancel the meeting and respect our team who is next on the list. >> you're instructing me to stay here, and i should cancel. >> no, you just made me an
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offer. >> i didn't make you an offer. >> you made me an offer that i accepted. >> let's be clear, you're instructing me, you're ordering me to stay here. >> no, i'm not ordering you. i responded. i said you may leave anytime you want and you said okay, if that's what you want to do i'll cancel my appointment, and i'll stay here, so i'm responding to your request. if that's what you want to do. >> that's not what i want. >> if that's not a teaser, i don't know what is that will be a continuation of the hearing that starts. we'll bring you coverage that begins at 8:30 a.m. eastern time, also on today's schedule, minutes from the latest fed meeting will be out this afternoon. and high end real estate is in focus after the break, we're going to take a closer look at a builder's unsold mansion i don't know if you remember this mansion, and some major possible problems. you might remember this mansion because you probably were hanging out there or watching "squawk" as we head to a break,
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welcome back, everybody. the high end real estate market is under pressure with an oversupply of high priced homes and falling sales. among the hardest hit are the homes that were built on speculation. robert frank has a look at one mansion builder in l.a. who's facing some tough decisions. hey robert. >> good morning, becky celebrity plastic surgeon has made a fortune from stars like kim kardashian and jennifer aniston. his latest project, a 34,000 square foot mansion in l.a.'s bell air neighborhood may not be as possible. he has spent three years and $70 million to build a mansion he planned to flip for a big gain a year after listing it for 180 million, the house sits empty. the loans and maintenance costs are piling up and the market keeps sliding. >> in las vegas, it's called all in, like all in times a million. >> oh, gosh. >> he has plenty of company. now, after luxury boom of 2014 and '15, developers and
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investors raced to build ever bigger mansions to sell, but as foreign buyers have faded and the tax laws hit high tax states, the white megamansions are becoming the white elephants of the housing market. los angeles has a dozen homes priced at over $100 million. many now on the market for years and they are slashing prices looking to rent the house for 1.5 million a month, and he's considering offers of over 120 million. so that's a $60 million price cut. he's also looking to host events there maybe for money, maybe bring in investors in the meantime he's added a clinic downstairs in the house so he can perform more plastic surgeries to help pay the bills. if you look at the l.a. market. >> for me to even live in this house for one day, it's just excess it could be a mistake, but in my heart, and in my soul, and, you know, with my relationship, what
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i believe in, you know, i think it will all work out. >> a lot of prayer >> i'm back to the idea, he's a plastic surgeon, and does he publicly say he works for jennifer aniston and kim kardashian. >> your whole report started with a snark. >> a snark >> he has done work on jennifer aniston, and kim kardashian, you have to out them immediately. >> he does botox, a lot of injectables. he's famous for scarless rhinoplasties, that's his main thing but he does a lot of injectables and minor things too. maybe they got botox once. these big houses, when you move in the burbs, i'm always in the same place every day i'm going to hang out there for a while, do you see where those big spaces are, what do you do in those
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>> big parties host you know l.a in general, i need a remote control, table and couch >> you don't like other people at your house. >> i don't like other people in general. >> i invited you, you came becky, you were out. >> i came to the art gallery but it was natalie's birthday. it was on june 9th. >> sorkin was there. >> i checked out each room, the art work, the pool, all of it. coming up. >> my point is most of it is closed off i would be uncomfortable there with a basketball court and all that. cioneledina , includg desi day by the trade war. details are next we're calling it that now. full blown war the lexus es. every curve, every innovation, every feeling.
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time now for the executive edge some trade war fallout. one of china's auto makers is delaying in the u.s. bauch the trade war. gac motors entrance is postponed. a company executive said there's no new time line for selling in the u.s. because circumstances may change when we return, retailer target set to report in the next few minutes. we'll bring you the numbers and instant reactionig aer rhtft the break. target shares trading up $0.22
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so, servicenow put your workflows immhm. cloud, huh? your employees must love you. [ chuckles ] thank you. you could say that. i love you. servicenow works for you.
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welcome back, everybody. retailer target just out with its earnings and the numbers are better than expected produced strong on just about
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every metric that you're going to be seeing on this adjust the earns per share of 1.43, a beat of $0.10 there. comp store sales were up 4.8%. that's significant traffic also up by 4.3%, and if you look at digital, they are up 42% versus up 28% last year. that's huge. the company has been doing a lot of investing to try and make sure they can use their stores as fulfillment pull up to store and order pickup this seems to indicate that is starting to pay off and helping with traffic in the stores, too. they say that they see low to mid-single digit growth in the second quarter for comps also say they are looking for second quarter adjusted earnings of somewhere between 1.52 and 1.72 for the full year, they see adjust the earnings per share of $5.75 to $6.05
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street is at $5.84 again, i think if you look at those comps, up 4.8%, incredibly strong that's the 8th straight quarter of comp store sales growth they have seen at the company, and these are some of the investments brian cornell has been making to make sure they can use the stores as fulfillment centers. >> that's what we were sort of alluding to, could be different than nordstrom, kohl's, more like walmart remember when i was talking about lowe's, and i was like this thing is not trading, and this looks crappy, and we had mr. whistling past the graveyard over there, brian nagel, everything is fine still got a big buy. >> get a cheaper buy >> he's long and he's got to buy, got to defend the stuff, but i don't think people are saying, yeah, okay, we like the
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investments they're making and there's nothing wrong with the results. >> no question you're going to have to be patient with this if you know lowe's, and you followed it for a long time, they have not made the investments they need in the back of the office. >> if you're a retail broker, i know we bought it at 1.11. they're comp store sales were up 4.2, and home depot was only up 2 1/2. >> i know what brian is saying, and i understand his point you would have to be a patient investor. >> this is what we saw with walmart, and target, initially the -- >> i told you the bs was not matching up. what's happening. >> target shares are up by $5 now. >> that's amazing. >> brian cornell actually made those investments that other companies, same thing with walmart, remember when they made the investments, the street didn't lining it >> the street hated it >> take time, you have to be a patient investor >> for target it's a big deal. i think they have something like same day fulfillment really strong demand on this, and they have three ways to do it, shipped is the service if you want it delivered to your
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door, you can pull up to the store or go to the store for order pickup i think that's helping traffic 25% of total comps growth for the first quarter came from that same day fulfillment packaging all of those options they got in with it. they also are going to be facing stiff competition. you have heard from walmart they're doing same day delivery or one day delivery, without a membership, target says that they have been able to do something like fulfill 50% of two-day orders in one day now. they are working towards that same thing, and brian nagel did point out that you are seeing the companies, the retailers that are doing well are ones that have found ways to find this online delivery systems and find ways the customers want to get their product faster >> so 88 billion on lowe's that's a huge market cap loss today. 10%, right >> yep >> all right coming up, much more on target, and the broader markets as well, plus later, are tariffs an
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effective short-term negotiating tactic, we keep hearing that, nobody likes them, we can do it for a while, because we need to. barney frank and daifvid mcintoh will join us to debate that question and check out the shares on the top and bottom lines, with comp store sales up 2.7%. stocks up a little over a percent, 1 1/3%. stay tedun, you're watching "squawk box" on cnbc
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central bank news that was out overnight, st. louis fed president james bullard, a frequent guest on the show said further weakness in inflation could prompt the fed to cut interest rates, even if economic gains momentum he made the comments in hong kong bullard said a downward rate with relatively good economic performance may help maintain the credibility of the fed's inflation target not totally different from what he said last time he was on here >> yeah, but people are taking it a little bit more serious. >> a lot of people are shifting. it's that crazy dual mandate you've got two masters, and either it's price stability or growth, and it's hard, if you really only wanted price stability, you wouldn't necessarily worry.
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you'dment as much growth as -- you'd want as much growth as you can -- we think overheating automatically means you need to put the brakes on. what would china interest rates be at 6%, you would be like, wow, this can't last, but what if we could grow quicker and inflation stayed low because of technology or automation, whatever you want to tie it to we want growth, right? >> then it becomes complicated. >> we for a while, whenever we saw something hot, the indicated growth, we thought, wow they're going to have to raise rates we had a different idea, and also the idea that you can be -- that inflation can be too low where you try to engender it is weird too. it's a hard task to not be above or below it seems like you're asking the fed to do a lot. >> bplus they got to keep the stock market up. >> speak k of the fed -- speaking of the fed, a potential
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candidate wants to change the rate interest rates are set. judy shelton served as an economic adviser to president trump. she has been mentioned frequently as apossible candidate for an open fed board seat in an interview with the "wall street journal," shelton said she would like to see more market determined rates. president trump has said rates are too high and blamed the fed for holding back economic growth shelton will be on "squawk on the street" today. let's talk about the big retail moves, joining us is k h kathy rooney vera, and chris, the portfolio manager. good morning to you. you heard the comments, i would argue we heard mr. bullard's comments before. does it change your view of what's happening here? >> i would like to see growth from productivity, rather than growth of inventory. what's going on has changed some
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of our investment philosophy near term. we think there are real risks in the market, specifically around technology you know, when you cut the hea off the snake of huawei, there's going to be ripple effects i think we're going to see some of those initially in semiconductors i think it's going to be much broader. we're pretty cautious in the markets. >> katherine, you as cautious given the news out of lowe's, and home depot, i don't know how that's factoring into your process. >> i'm the buyer on chris's selling position i'm constructive i think opportunities are arising, especially when the markets are pricing in trade war, taking down the u.s. economy or bullard's comments or the collapse in federal reserve credibility. all of the above, i think, provide opportunities. i do think this trade impasse is temporary in nature. i could be wrong who knows what's going to happen in terms of timing but insen ti -
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incentives are aligned most directly impacted which are tech, which are industrials at this moment. >> you're buying tech right now, what are you buying, for example? >> so i like the broad tech space. i mean, if we do get escalation of trade tensions, then those names that have here to fore been unaffected will take a leg down, and if in fact, this impasse is temporary in nature, if huawei and president trump's escalation with regard to huawei is a negotiating tactic, which i think we all kind of know the president's playbook, right, it more likely than not is, then i would take an additional look to those sectors that are the most adversely impacted because they haven't been affected by tariffs yet, which are tech, and secondly, i would say in financials as well as industrials. >> chris, do you think this is like the antithesis of what you're thinking right now? >> totally. >> what i'm saying is we have
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been raising our cash position so we can deploy. >> but hold on, you know, katherine is effectively saying they're either right now is an opportunity or maybe a greater opportunity as this trade war tension continues and are you suggesting that you're going to try to take advantage of that because you also agree with her that this is a temporary situation? >> i think it is something near term that we need to be concerned with the question is do you have the cash to deploy when those opportunities arise, and i think that's what we have been preparing for. >> katherine, am i right, you're saying this is a flashing sign, it's arrived, the moment has arrived. chris, i need to know what the flashing sign looks like for you. >> you have seen reset, and earnings from semiconductor companies. i would like to get deeper into the summer because again, i don't think we know the full impact of cutting off huawei, although we have now extended that i think that could still come in it is a trade negotiation but as
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companies plan, they do pull back there's greater volatility you should be paid for that greater volatility, and that would cause -- >> what about industrial companies or transportation companies that historically are getting hit by some of these trade issues and other issues, i'm thinking of the boeings of the world. >> tariffs are different than what i'm talking about on huawei, which i think is much more significant the tariff companies can deal with it takes time. not all can move out of china but the companies we have been talking to have been doing that the last six to nine months. they are preparing my greater concern is around huawei and what are the ramifications back >> things are moving, by the way. >> they're moving to thailand, vietnam, the other areas that won't be tariffed but close enough to the supply chain. >> some of the viewers got upset when i made the point they weren't moving back to the united states. katherine are you in the same boat on some of these tariffed companies, i guess we'll call
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them now >> i think we have to be careful about overestimating the impact of what i think are temporary tariffs with regard to both economic impacts and inflationary impacts you hear a lot of this in the media about the negative impact on the u.s. economy throwing us into a recession or global recession. when you really look at the numbers, when we put tariffs on chinese imports, which are a fraction, it's a minuscule fraction, our exports to china, of the u.s. gdp, the real impact, joe, is of course on what we import from china, which is more than $500 billion. so if you up that to 25%, which we're at now, to 40% of the imports that we get from china, the impact on inflation is 0.22 points so we're talking minuscule and inflation is at 1.5% inflationary impact is muted. >> if the jobs came back here
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that would be a bonus. >> we're doing it to improve the terms of trade >> watching this interview, i'm not optimistic this guy was like, you know, he was like baghdad bob and he said the united states, we had settled on what we were going to do, and the united states kept changing things overnight, you know, and huawei, the stuff he was passing off as fact, if i were negotiating and people were saying this to me, i'd get so frustrated i would walk away. >> why are some things like utilities and retail staples rallying. >> i missed the first part of the question but what i will add to the point is huawei has an achilles heel. t"the new york times" had a gret piece. china imports computer chips t they are in a disadvantageous
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position president trump is playing his handme hand what we're hearing from both sides is an attempt to get the best deal possible and if in fact i'm right and china has, i would contend, a lot more to lose from an elongated trade standoff, then we are more likely than not, especially with elections in 2020 on the u.s. front. the president doesn't want to see the fed's third mandate which is definitively financial markets drop he doesn't want to see inflation pickup incentives are aligned to come to a deal. >> katherine, thank you, chris, thank you, appreciate it. >> my pleasure. when we return, home depot versus lowe's, our next guest says only one should be in your portfolio. can you guess which one. we're going to talk retail picks right after this. as we head to a break, a quick check on shares of target, they are up sharply after earnings were much better than anticipated. that's a gain of 7.7%. target shares up 5 1/2 dollars
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to $77.50. much more straight ahead let's talk. we have a pretty good relationship. you've done a lot of good for the world. but i feel like you have the potential to do so much more. can we build ai without bias? how do we bake security into everything we do? we need tech that helps people understand each other. that understands my business. we've got some work to do. and we need your help. we need your support. let's expect more from technology. let's put smart to work. ♪ ♪
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welcome back, everybody. home depot and lowe's reporting results in the last two days which of the stocks should be in your portfolio our next guest says that home depot is the clear winner. joining us now to talk about that pick and more is jason ware, partner and cio at albion financial group. and jason, saying that right now doesn't make you look like you're brilliant, except for you came up with this before we heard results from lowe's. lowe's out with results this morning. that stock, last time i looked at it, was almost down by 10%. you made this call ahead of that what did you see between these
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two that made you think home depot is the one you're going to be sticking with >> this has been going on for some time, if you look at the difference between home depo and lowe's and across all operating statistics we look at, whether it's return on invested capital, operating margins, sales per square foot -- you name it, home depot is a better operator, they're more efficient, and they've got a handle on both their supply chain and inventory management in a way that lowe's has been envious of for some time one of the other things that home depot really has going for it above lowe's is they have a pretty superior geographical footprint with their stores. they expanded earlier in this market they were later to the market. they were about 30 years later as a company they were founded in the mid-1970s, versus lowe's in the mid-1940s, but they expanded aggressively early on. so they also have a premier store footprint, less rural, so home depot continues to operate in a way that is impressive relative to lowe's, although both are benefiting over the
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long term on what are some secular trends in housing. >> lowe's said this morning that it's going to be coming in with lower than anticipated earnings for the full year, in part because they're going to be making a lot of investments that are probably overdue at the company. lowe's also this morning is down by almost 10%. does that change your mind about any of this? >> it doesn't necessarily change our mind i mean, as we're looking at what lowe's is trying to do, they've been playing catch-up with home depot for about a decade and again, looking at the statistics that i mentioned, most important is that net margin, they're about a third of home depot home depot hits about 10%. lowe's is around 3%. so, they're really trying to make the appropriate investments. home depot modernized, quote/unquote modernized their business about 10, 11 years ago, and ever since then, lowe's has been looking at their model and trying to capture what they've been doing really well for example, home depot's done a great job in the pro business, which is higher margin and has higher customer loyalty. so when you go into a home depot -- >> right, contractors.
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>> -- a lot of pros feel like they really serve their needs well lowe's doesn't really have that going for them so much, so they're looking to the home depot model and they're trying to make the appropriate investments to catch up to what they're doing. >> who did that? did frank blake do that? >> frank blake was absolutely integral to that growth, to those strategic investments they made. >> pretty amazing. >> absolutely. >> one person pointed out, the same-store sales at lowe's, they closed the gap on home depot the analyst we had on earlier -- >> 4.2%. >> yeah, 4.2% -- >> lowe's was 3% -- >> or 2.5% are they making gains against home depot, or is that just a one-off, do you think? >> i think it's probably more of a one-off. >> oh, boy. >> i think if you look at loyalty, home depot bests lowe's in just about every category so i think they had more room to make up, so there's going to be some ebb and flow there. but if you smooth out and normalize those same-store sale trends, i think home depot still
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looks superior relative. >> another stock you like is google, even though its last earnings weren't as impressive as you might have anticipated. what is it that you like about google overall, alphabet >> yeah, sure. google still has a great secular core story in their digital advertising. a lot of market share gains there still to have. there are a number of pricing power opportunities they have, for example like youtube, monetizing youtube they're making long-term, strategic investments in areas that right now don't have high profitability metrics as measured by traditional scores but you know, whether you look at health care, whether you look at transportation, whether you look at ai, some of these areas that they really think are going to be the next wave of growth, five and ten years down the road, they're making strategic investments today for that, so we continue to like google it's growing almost 20% sales growth while it's trading at about a 20 pe, so that's a nice valuation for a secular growth story. >> jason, great to see you thank you. >> thank you great to see you. two big hours ahead right here on "squawk. we've got two big movers in the
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morning also to talk about lowe's under some pressure this morning, down over 9%. we're going to talk about that then target on the opposite end rising sharply we'll talk about botof tseh ho big reports right after the break. a lot more coming up on "squawk box.
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this morning qualcomm shares plunging in premarket after a judge ruled that the company violated antitrust laws. details straight ahead. retail detail. lowe's and target reporting quarterly results. a roundup of this morning's big numbers is coming up plus, tariff tactics will the short-term pain pay off in the long run? we'll debate as the second hour of "squawk box" begins right now. ♪ got me under pressure, it's got me under pressure ♪ >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ good morning and welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin u.s. equity futures have been around the flat line they're down about 17 points
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this morning on the dow. the nasdaq down a similar level, exactly 17 at this point then the s&p indicated down a little over three points breaking news this morning regarding a big nasdaq player, qualcomm a federal judge ruling that the chipmaker unlawfully suppressed competition in the market for mobile phone chips she also said that qualcomm used its dominance in the market to charge excessive licensing fees. sounds like a great business qualcomm has not yet responded to that ruling >> the stock has, though. >> yes. >> stock has in a big way. >> 8.5%, 8.6%. >> we should look at apple, and i think we're all still trying to figure out whether this would have an implication on the settlement they reached a month ago, because they were the ones accusing qualcomm of this. of course, they decided for better or worse that they were in a better position to do a deal with qualcomm. >> apple shares down by about 0.7%, a decline of $1.34
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target shares are up this morning after the company reported better-than-expected earnings, revenue, and same-store sales take a look at the shares. you're going to see that they are up by more than 7%, a gain of more than $5 to $77.25. joining us right now to talk about this is charlie o'shea, retail analyst at moody's investor service, and courtney reagan, who is our retail reporter and court, these numbers are really strong. just about every metric, if you look at it the adjusted earnings per share beat comp-store sales up 4.8%, traffic up 4.3%. what jumps out at you? >> even the digital sales growth of 42%, that's pretty strong and kind of above what we've seen the last several quarters. i mean, i think this all just plays into target's narrative of using those stores and online together, and it does really appear to be working and when i talked to target, they said, look, we know that, you know, amazon and walmart are pushing this next day, but actually, we're already doing same-day in many of these cases
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with a lot of these options. shoppers are choosing to maybe order online, pick up in store, use the ship service and when they are ordering and it's two-day, in about half of the cases, it does end up getting there in one day. >> right. >> so, i think that's pretty powerful, at least when it pays off and you do it as a consumer, if you're pleasantly surprised that it only got there in one day, why not try it again? >> right charlie, we talked to an also this morning who said even before we got these numbers that what you continue to see in the retail space are just the differentiation between those who have figured out an online strategy and those who haven't. >> absolutely. and it's haves-have-nots it's the weak, the strong, however you want to describe it. there's a clear benefit to being big. you've got the ability to invest you've got money you've got the big store base, as courtney said you leverage those stores with your online business it's a tough model to compete with and you know, for target, this is a bull's-eye quarter. i mean, this validates everything that the company said it was going to do a couple years ago, and there's a lot of
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momentum building here we saw the vineyard vines launch over the weekend with people complaining, like they always do, with target's limited edition stuff -- >> there's not enough. >> there's not enough. gee, what a tough problem to have i mean, you know, i went on ebay a couple hours after it launched and the profiteers were really active, so it's resonating the exclusive brands -- >> oh, you mean people were buying it and then turning around and selling it on ebay? a market. >> oh, yeah, it's a cottage industry now with target's exclusive stuff. >> that's annoying. >> it can be but again, for the company, it's creating buzz, it's creating media, and buzz equals store traffic, and that's what target needs. that's what every retailer needs right now. get the people in your stores, get them on your site so they don't go anywhere else, and you lock them in. >> we still have a lot of unknowns, of course, with everything that's going on in tariffs. but if you have a business like target, you have a lot of different categories that are not going to be subject to tariffs, so that gives you a little bit of padding and a little bit more room to make some tough choices, if you have to so, if you have to raise prices in one area, you don't have to
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do it across the store and so, i think if you have a business that has multicategories, that can help, like a walmart, like a target. if you're apparel, and if that fourth tranche comes in, i just don't know what choice you have than to raise prices across the board. >> right charlie, how do you try and game that, with trade talks being such an unknown factor >> that's the issue. how deep will they go? will that fourth tranche come in how long will it last? there's a clear possibility here that the retailers could remember react to this, and then where are you? maybe you get stuck. if you're a savvy retailer, again, the bigger guys, you diversify your supply chain. we saw the hands in bankruptcy years ago, we saw port strikes, all sorts of disruptions, and retailers were moving their supply chains and sourcing capability to other countries. vietnam comes to mind immediately. so, you have to keep doing that. and you can't put all your eggs in one basket. and a lot of the retailers were looking at china saying, you know what, do we really want as
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much reliance on that one market for our goods? and the better ones said we need more balance, and they're already -- you know, they're prepared will there be an impact? absolutely, but i think it will be pretty muted for the big guys. >> what do you do in terms of looking at other retailers i know you don't cover lowe's or home depot, but do you cover any of the other ones we've heard from the last couple days, a nordstrom? >> i've got the big guys i've got amazon, walmart, target, costco, best buy, which reports tomorrow then i have the auto retail space, which is really kind of neat -- autonation, et cetera. and i've got some smaller retailers. i've got collision retailers i've got a little appliance retailer, billion-dollar company, called cons down in texas that has a proprietary business. >> the big guys you just mentioned are the ones that do have something figured out in terms of the online strategy so how do they duke it out amazon, walmart, target, costco. >> it's a cage match right now
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i mean, you've got walmart and amazon fighting over market share. costco is different because of the warehouse membership model it's a little bit different animal they don't need much of an online business. bj's, same phenomenon. but walmart and target are battling hard for a few years now. if you're a target, you have to pick your spots. even target at $75 billion revenue isn't immune to the collateral damage you can get from that. so for target, the exclusive brands are meaningful, and you really need to kind of work around the edges on price going up against amazon and walmart, because you can't -- i don't think you can win that battle if you're target. you can't compete with those guys just on price amazon's got those shareholders that don't really care that much about profits yet. and walmart's got so much pricing power with vendors that it's tough to compete with them on price so you have to be very tactical about it. >> but you would say in general you like all four of these players because they all do have a strategy >> absolutely. and i'd throw best buy into the mix as well. best buy has done a phenomenal
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job over the last -- >> it has been a huge turn court, when you look at the guidance that target is giving, it's not as strong as you might have anticipated, given the big beat that they see this quarter. do you think that's because of tariffs? >> you know, i think it could be, and i think that's going to be a big question today on the earnings call. you know, sort of what is the anticipation factor and how much do we know now i think there are so many question marks for this year that we've seen conservative guidance, and actually, frankly, i have to say, a lot of the retail ceos have been a little bit more honest, i think, with the investors. look, we just don't know there's a lot of things that could change and i think at least they're being transparent about that and sort of saying, look, we don't want to go out on a limb and make up these numbers that we may not be able to hit because of all these factors that could come into play that we frankly just don't have details on yet. >> courtney, thank you great to see you and charlie, thanks for coming in. >> thanks for having me. okay, we've got other headlines to bring you this hour the big one -- shares of lowe's, they are sliding, taking a big hit this morning in the premarket trading. the home improvement retailer
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reported quarterly earnings of $1.22 per share, 11 cents below estimates. revenue in comparable sales did come in above forecast, but lowe's cut its full-year forecast as it deals with higher costs and other profit margi pressures. and you're seeing that, looks like a cliff right there another earnings report out moments ago, vf corp reporting earnings of 50 cents per share, beat estimates by 2 cents. revenue also above wall street forecast but the company gave a weaker-than-expected outlook as well, and you're looking at that stock off close to 8% this morning. then, the federal reserve will be out with its minutes of its most-recent meeting. that's going to happen later today at 2:00 -- rather, i should say, the two-day meeting which ended may 1st. policymakers left interest rates unchanged. the minutes will be out today at 2:00 p.m. eastern time a lot more coming up on "squawk box" this morning. will short-term tariff pain pay off in the long run?
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that's the question. we will debate it in just a bit. then later, the road ahead for tesla. the carmaker lowering prices on its two most expensive models and bringing back unlimited supercharging in an effort to sell inventory we'll discuss these moves and the stock in just a bit. stay tuned you're watching "squawk box" on cnbc hurry into sam's club
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♪ welcome back to "squawk box," everybody. the robots aren't just coming for yourjob, they are coming t your house ford is partnering with agility robotics to produce two-legged robots that ford hopes will one day be able to deliver things right to your doorstep the prototype is called digit, and it's capable of lifting 40 pounds ford's hoping that the robots will come to you in ford's self-driving cars. no people needed ♪ >> i mean, it's all -- it is going to happen eventually, but -- >> science fiction movie >> what's -- only three legs i guess it's okay. seems much harder to do it with
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two, doesn't it? of course, i guess if three were better, we'd have three. evolution -- >> maybe we will in 1,000 years. >> yeah, maybe we will do you think we would ever have tails? >> it could be useful. i was reading a book last night with my son where a boy had a tail and he was able to play ping pong at two tables at a time or hang from -- >> a prehensel tail would be good, but what do you think? would we put it down or -- i think my tail would hang on the left, i think, in my pants leg, or would you have a hole in your pants? which would you do >> a hole. >> you've spent a lot of time thinking about this. >> i'd hang on the left, typically. >> i have no experience with these things. >> probably not. >> well, you know, it is called a tailbone >> yeah, right. >> there is some evolutionary -- you can actually -- there actually was one, i think, at one point. >> i'm uncomfortable. >> you are why? you still have one
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you're sitting on it we're going to discuss the broad -- that's right! there was a movie where his friend had one, remember, with jason alexander. that's right george costanza had a tail in that movie anyway, we're going to discuss the broader markets, the fed and more forget about that. thanks, greg the futures at this hour down about 34 points. "squawk box" will be right back after a break. yeah >> announcer: time now for today's aflac trivia question. what music artist declared bankruptcy in 1979 in order to free himself from his record contract the anerhecn'ssqwk box" continues aflac! but not when to use 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!
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kevin, how's your mom? life well planned. see what a raymond james financial advisor can do for you. ♪ baby even the losers get luck sometimes ♪ >> announcer: now the answer to today's aflac trivia question. what music artist declared bankruptcy in 1979 in order to free himself from his record contract the answer, tom petty. retail earnings and china trade anxiety in focus this
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morning for the markets. joining us, andres garcia-amia, founder and ceo of zoey financial. and mike, are they not going to intro you? >> i was supposed to be here. >> holy cow. >> i think. >> you know what, that's why someone that can think on their feet and solve the exclusion -- i'm just bringing you in and our own -- watch this -- our own mike santoli, our senior markets commentator. they didn't put that in. that's what you are, right >> that's what they call me. >> congratulations and welcome andres, you're negative. you're always negative you're negative again. negative now here -- let me see if i can summarize, and i don't know if you're still pitching those emerging markets are you still with europe and emerging -- or other -- developed markets in europe and emerging markets or -- >> well, from a location standpoint -- >> you are. >> i'm not going to change my mind week to week. this is more -- >> or even year to year. >> no, no, no, that would not be wise to change your mind that often. >> okay.
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so, but your basic thrust is that things have worsened as far as the prospects for a legitimate deal with china at this point and the market's only 3% off its highs, so something's amiss there, especially with interest rates, which seem to be indicating that maybe we don't get a deal, in your view. >> yeah. so, your comments just now are definitely more short-term focus, which is, if you look at what the bond market's telling you versus the equity market's telling you, they seem to be diverging a lot. and i just believe one of them's going to be right and one of them's going to be wrong. >> why would no trade deal cause bonds to rally, like they cause inflation rates to drop. why would there be inflationary expectations you would think a trade deal would look to inflationary -- if rates are falling, something good must be happening
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inflationwise. >> bond yields, the ten-year's at 2.4%. i don't see it as people being optimistic on the bond market of long-term growth here in the u.s. >> oyou think it's growth, not inflation? that's the ultimate argument we have every day, isn't it is it indicating le ining slow r low inflation? >> we do have low unemployment, so you should consider inflation at some point, but we haven't seen it. it's kind of been something everyone's worried about that hasn't materialized. but going back to your point about trade -- the way that i look at it is the situation has gotten worse in trade, rather than better. >> right. >> we're at 3% from all-time highs in the u.s. market and i think people were kind of assuming that because there's a g-20 meeting, that something will just magically happen, and i don't think that's a given i think there's still more uncertainty, rather than less, from that perspective than we had a couple weeks back. seems the equity market's not seeing it that way. >> i think what the market has been trying to do is place trade
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in context and try and figure out exactly how decisive trade is as a swing factor for what happens in the economy and the markets. i think the last week has been, you know, the stock market kind of finding a way to say, well, yes, these sectors are hurt and we can surf the headlines on a day-to-day basis, but overall, it was never going to be the make-or-break factor for the market now, the first four months of this year are mostly about burning off really negative sentiment, having really low yields support stock prices in certain sectors, and then waiting to see if we have the makings of a second-half rebound, right, to see if we can kind of hold the market near the highs until you have second-half corporate profit estimates validated. we still don't really know that, but i don't see it as this outright disagreement between equities and what the bond market is saying yes, the bond market right now on the short end is saying we should get a rate cut, and they're pricing it in pretty aggressively, let's say six months out. >> are they saying a rate cut or
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are they saying we're not going to see a hike any time soon? take that off the table. >> if you do the math, it says there's one, perhaps two cuts the next eight months. the problem is, this distance from that probability -- >> how accurate. >> it's not necessarily predictive it's just saying bond traders are kind of leaning in the direction of more likely an ease than anything else i agree, it could change very quickly. look how quickly it changed, you know, from october to december. >> right. >> to december, right, right >> so, i don't know that -- again, i don't think it's an outright fight i think the credit markets, talking about what part of the bond market you want to listen to, credit markets are okay. they're pretty firm. and i don't think that any of it is saying that one market or the other is profoundly wrong. >> right. >> just sometimes i wonder, though, andres, to leave here and span the globe in other markets, it just seems like if the u.s. isn't going to lead, that maybe even some of the other markets could be adversely affected maybe i should just lessen my equity exposure globally,
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instead of just shifting to places with really, that don't have the same positive economic fundamentals we have here. >> yeah. i mean, from an economic standpoint, it's clear the u.s. has been king -- >> your valuation. >> yes so there's valuation on two fronts one is on the equity side, but also the currency side the u.s. dollar's been rallying for eight years? it's been a pretty good run. and emerging markets tend to basically perform well in falling dollar environments. so, that could still not play out tomorrow it could not play out in a year. but if you have a time horizon -- let's say you're retiring in ten years and you're all in on u.s. equities, i think you might miss some opportunities to actually get some exposure internationally. >> some exposure internationally. >> well, of course look, if you're a u.s. investor, you're not going to go from all u.s. equities to all u.s. emerging markets i think the issue for a lot of investors that we see is that they have zero exposure internationally, right so, that's usually the battle that i have -- >> why is that a problem
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>> it's a problem with diversification, right so, if all your exposure is to one market on the equities side when u.s. economy's roughly 50% of the global index, you're basically leaving half on the table. >> i know, but i mean, it seems like you would always be getting whip-sawed by foreign exchange and other issues you're always going to be a loser on it, so it's going to moderate any gains -- >> and it's still pretty correlated with equities here. why not do what andrew did, buy some bitcoin, something totally noncorrelated, right sorkin >> i haven't bought the bitcoin is the problem. >> i know, killing you. >> in the mid-2000s, u.s. badly lagged the rest of the world this kind of emerging markets and commodities credit boom, there were specific circumstances about that, but there have been phases where it has mattered -- >> if you think about trade talks and potentially being more painful on a big, emerging market like china, i mean, it's hard to kind of think -- i know you want diversification, but if i'm buying the s&p 500, aren't i getting diversification that way or being able to ride out a one or two-year problem that you
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might -- >> you are there's definitely a lot of companies that have significant exposure internationally but also, it basically comes down to the idea of do you believe there's going to be some reversion to the mean, right so, we had an unbelievable run here in the u.s. for the last decade at some point, do you believe that other parts of the world might outperform, right? and this becomes a game of odds, right? like, what are the odds that the u.s. is going to outperform another ten years significantly, or that in essence at some moment they'll have their moment in the sun and you'll have exposure in your portfolio. >> jack vogel made that point, and vanguard pushes people to diversify globally and say you should start with the total -- >> there was a dispute between vanguard and bogle for a while. >> etfs as well. >> there you go. >> all right, gentlemen, thank you. mike santoli -- >> thanks for having me. when we come back, qualcomm shares under pressure after a federal judge says that the
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company violated antitrust laws. plus, tesla shares skidding nearly 40% this year, tracking its worst performance ever we'll talk about these names and much more right after this break. "squawk box" will be right back. [ honking >> what are you doing? ♪
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okay, still to come on "squawk box" this morning, qualcomm under pressure after a judge rules it has violated antitrust laws we're going to get street reaction right after the break. and then, no pain, no gain a look at the short-term effects of tariffs versus the long-term benefits of a good trade deal with china we'll have that debate and then later, treasury secretary steve mnuchin and maxine waters ready to face off again this morning when he testifies before the financial services committee we will bring you that hearing live, and sparks could fly "squk x"etnsitalawbo rur wh l that and more in just a moment w. this changes everything. you're right sir... everything. sucking up to me gary.
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let's get to dom chu, who has a list of this morning's market movers. we talked about some of them give us something we haven't talked about, dom. >> well, i'm sure you've talked about all of them, but we're going to try to kind of get you up to speed again with the newest developments we have here, just so anybody who's missed things haven't felt like
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they've really missed out on anything yet we'll kick things off with shares of lowe's right now, down just about 9% on 50,000 shares of premarket volume. this is america's second biggest home improvement retailer and they had a mixed quarterly report -- earnings amiss, revenues slightly better and sales growth at established store locations also came in slightly better, but lowe's did cut its full-year profit forecast, due in part to increasing cost pressures. so again, those shares off 8%. on the analyst front, we are watching shares of tesla, which are down about 1.5% or so on roughly 40,000 or so shares of premarket volume, helped lower by analysts at citigroup who said they'd see an increasing probability that tesla's stock could drop by around 80% to 36 bucks a share. that's the bear-case scenario, kind of akin to what morgan stanley analysts did with their $10 bear-case scenario yesterday that got so much attention the baseline, though, target price for tesla shares at citigroup goes down to $191 from a prior $238 and we're going to end with that
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drop, that big drop in shares of qualcomm, down by about 12% or so on over 2.1 million shares of premarket volume a federal judge saying that the computer chipmaker engaged in anticompetitive behavior by using its dominant position in mobile chips to charge excessive licensing fees qualcomm has been scrutinized, remember, over the past in the fees it charges to use its intellectual property. now we are in the process of reaching out to qualcomm for comment. we will let you know as soon as we hear back from them, but of course, they're based out in san diego, outside of normal business hours still, though, a big story, andrew back over to you. >> it is the big story of the morning and we want to drill down on that qualcomm news right now. dan ive with wedbush securities is here. we'll talk tesla in a moment, but your reaction to the qualcomm news and sort of -- how does it play out for qualcomm and how does it play out for all of its compliants it supplies? >> it couldn't come at a worse time, especially with the huawei news it's a gut punch for qualcomm
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and could have a ripple effect across the food chain. when they settled with apple, it was thought the ftc had a weak case that's why they ultimately settled. the fact that this happened now, it definitely pulls into question, specifically on 5g qualcomm that's really worrisome. >> does this reopen the apple settlement >> well, the jury's still out on what happens there it looks like it could open that up, but fundamentally right now, the bigger worry is that pricing power for qualcomm obviously goes down, and the biggest u.s. 5g arms broker, their power goes down, which especially with the huawei situation makes this a very, you know, kplern situation. >> bad new for the 5g situation, potentially, but maybe good news for the companies that rely on their chips. i mean, if this is true, if the judge is right, if this is anticompetitive behavior, what happens on the other side of the ledger who benefits >> i think there will be some semi players that now try to get into more potentially into 5g, and competitivewise, you could start to see pricing go down
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so there could be a positive over the long-term -- >> you remember cisco, literally the day of the announcement of the settlement with apple said they were getting out of the 5g business they didn't want to be in the business because they felt like they couldn't make money in the business does that change under this scenario >> i think it does you look at a lot of tech players that go to their whiteboard and look at this -- >> that's good news, from the competitive factor and for the 5g race for issues like that, if you actually see more players who are going to get back in and want to be involved and want to try and push things forward. >> it's a potential positive, but -- >> bad news for stocks potentially in the short term, but -- >> but also remember that qualcomm is the key 5g player. so, in the worries in the near term, especially with the huawei situation, does this basically take some power out of qualcomm, and does this even play into u.s./china talks going to the g-20, given -- >> but when we play that out -- just explain what you mean how does it play into the huawei conversation exactly >> two horses in the race here
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u.s.'s 5g horse qualcomm, china's is huawei. now -- >> you're talking apples and oranges here, because huawei is dealing with routers and bay stations and cell towers that's what we're talking about here, not the towers themselves, but obviously the signal, the microsites, if you will. qualcomm is in some of those, but mostly what we're talking about is the devices, i thought. >> but what you have to remember is that it's really around the 5g piece so when you look at where qualcomm is positioned on 5g, the worry here is does this potentially in the near term take power away from qualcomm? does it have disruption on the 5g race? i think that's overdone here in terms of some of those worries, but no doubt, this came out of left field in an uncertain time for semi stocks in light of what's happened with huawei, so investors will have to digest this move and the implications for the likes of apple and other semi makers. >> okay. while we have you here, i want to switch gears to tesla this morning. i want to tell you what the
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"wall street journal's" reporting, an article now questioning whether wall street is losing faith in the company you're looking at that stock, and maybe we can put that up right now. but tesla, obviously, you saw where it ended the day yesterday. and i wanted to get a screen up to see where it is right this moment but do you believe that wall street has lost faith in tesla >> look, i can tell you as someone who's been a long-term bull that obviously turned bearish, it comes down to the math the math doesn't lie in terms of what's happening to the pure numbers in terms of unit demand on model 3. >> right. >> and given the profitability for the second half. if they don't hit profitability, that's where this thing starts to spiral out in terms of where it could go, just given the $10 billion of debt, and ultimately, can they even get there going 2020 that's why you're seeing some of the draconian forecasts. >> where did the "wall street journal" get that article? are you sure they got two sources for that article how did they come up with that, you think? is that today that that came out? >> it was today, joseph. >> wow i've got to read that.
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tell me again -- >> ahead of the game wall street losing faith. >> didn't the guy say that shares could be worth $10? wasn't that -- >> so, you have morgan stanley saying that the sort of $10 scenario, that's a worst-case scenario, we should say, because i think they're really a $200-some-odd otherwise. you have tesla now lowering the prices on some of the higher-end models, but not on model 3 so, how -- you know, do you think that's going to change the demand picture because that's now the issue no longer it's a supply problem. >> the walls are caving in a bit in terms of what you're seeing if you look at ultimate unit demand, that's really right now we're looking at that to go down about 40% over the next two years. in terms of model 3, they've bet the company on model 3 so, right now in terms of base and midrange, if i look at what's happening in the u.s., we haven't seen the uptick that you'd want to see so far and -- >> what do you think the problem is why do you think you haven't seen the uptick that there was this expectation that was coming >> look, on the ev tax credit,
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that's come off. that's significantly hit them more than anyone anticipated at the same -- >> but it's not subsidized by the tax -- >> it's not subsidized, and that's gotten cut in half jan 1, gets cut in half july 1. >> remember when elon musk said the tax code wasn't going to hurt them at all i remember that, he used to make that point all the time. >> wrong. >> we're still going to have the self-driving taxis what'd you say about the walls >> the walls are closing in -- >> the walls are closing in on -- >> what's your rating on it? >> it's $230 we're neutral. what i would say is even some of the draconian worst-case situations -- i view it as this -- if they get through and you can see profitability in the second half, it is a short-term situation -- >> but is it a binary situation? >> i do, because we believe they'll have to raise $1 or $2 billion more capital -- >> do you think they're on track to do that, from your channel check, sources, whatever else you're looking at? >> right now there's darker clouds on the horizon. i think that profitability in second half right now, you know, knicks could win in championship
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maybe has a better chance than that -- >> you don't like to change your price target that often. are you comfortable? are you honestly saying you're comfortable at $230 right now? >> yeah, we just lowered the price target and i will tell you, that $230 is cautiously optimistic we're giving them the benefit of the doubt that they will be able to hit that profitability -- >> what was your price target? >> originally we were at three -- >> you should have changed that a long time ago, obviously you don't think you were late changing it to $230? it's under $200. >> and what i would tell you right now, to your point, if we start to see more tea leaves that profitability's not on the horizon in the second half, that's where you have to factor in another $1 to $2 billion of capital being raised. >> i don't envy you. i would hate to try to figure it out. >> we had an analyst on yesterday who suggested there is actually a floor on tesla that's much higher than $10 a share in that he believes they would ultimately be acquired and he talks about -- >> they've got certain stuff -- >> he talks, he says he has sources. i want to say, we don't have
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sources on this necessarily, that apple tried to buy the company. do you believe the company would become a takeover target and do you believe that elon musk would sell? >> we've covered apple for many years and i don't believe that in other words, there's always been the conspiracy theory that they've gone after tesla, but fundamentally -- remember, beats is the largest acquisition they ever did at $4 billion so, i think that's just more -- if you look at -- if you ultimately look at project titan, there's really, ultimately -- >> that's the car project at apple. >> there's a nail in the coffin at that project at apple in terms of tesla being arequired, i think right now it's going to be very difficult for any strategic to go to a board being like, okay, musk is going to be running this company and we're going to buy it. i think you'd have to see the stock go a lot lower for that to happen. >> somebody on twitter this morning was joking around saying there's no way it's true because elon would have tweeted about it, if there was a buyout offer. >> and that's one that culturally, cook and musk, i don't see them at a candlelight dinner. >> no. >> okay. dan ives, thank you.
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>> thanks. >> a lot more to talk about. i think we'll be having you back to talk more about this. thanks. when we return, tariffs as a bargaining tool. we'll debate if the president's approach on trade negotiations with china will be beneficial in the long run and later, we'll get to the question about whether there will be more fireworks this morning when treasury secretary steven mnuchin testifies before the financial services committee. en, icar monitoring today's evtswhh e expected to begin shortly. "squawk box" will be right back. . ♪ . to inspire confidence through style. ♪ i'm working to make connections of a different kind. ♪ i'm working for beauty that begins with nature. ♪ to treat every car like i treat mine. ♪ at adp we're designing a better way to work, so you can achieve what you're working for. ♪
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welcome back to "squawk box" this morning for the latest on the trade war, we're going to go over to kayla tausche, who's in washington, d.c., this morning kayla. >> good morning, andrew. the trump administration is expected to roll out its next aid package to farmers this week to blunt the effect of retaliation from china, even as retaliation from mexico and canada ends. three soybean farmers we reached out to did not know what was in the package, and a usda statement said "the program is being designed to avoid skewing planting decisions one way or another. farmers should continue to make their planting and production decisions with the current market signals in mind, rather than some expectation of what a farming support program might or might not look like based on inaccurate media stories." as the administration moves to try to diffuse these negative effects, though, a new quinnipiac poll shows deteriorating support for the administration's trade efforts on president trump's handling of trade, 39% of voters approve 53% disapprove
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on policy toward china, 40% approve while 50% disapprove and when asked whether president trump's trade policies are good for the economy, 40% say they are, 48% say they're not the white house is trying to move on to other agendas as trade tensions with beijing simmer ambassador lighthizer will meet european and japanese counterparts in paris this week, continuing talks that shelved auto tariffs and trying to see if they can make progress there. and the white house today will press democrats to pass the new nafta before taking up any infrastructure plan. they have a deadline for usmca in just a couple months. guys >> usmca i can hear -- i can't help it. i always think about that. anyway, i saw an interview last night, kayla people are talking about it, that they were taking it positively that the chinese ambassador said that the door's still open, but i watched that, and it just -- i don't know. >> well, china's position and its foreign ministry has said this, too, that it prefers to resolve these disputes through
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talks. but as i reported last week, there's a question of what they would even talk about. if neither side is budging, then how are you going to sit down and actually have a productive conversation so that's where things stand right now. >> nice weather we're having. >> but kayla, on the, is there any military build-up on the south sea on those islands no, that's not true. is there -- what about the internment camps for the uigh s uighurs? those are job trainings. it's hard to say things as fact, being on the other side of the negotiating table, i would be like -- just facts -- i guess sometimes they feel that way about trump, perhaps, but i mean, these were just complete fabrications and nontruths and bargaining positions coming from this guy that only baghdad bob would have believed, kayla so, how do you actually negotiate and try and get a good deal when you're negotiating with people like that? >> well, the team here has said that lee ha, the vice premier,
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is an honest broker and they say what he says he will agree to and be able to sell to the chinese president, but there are conservative members of the bureau who have different views on what china should actually be conceding. so there is a problem where there is not alignment among the upper echelons of the communist party about what they'd actually be willing to do here, and that's one of the main reasons that this fell out we know that chinese media is a propaganda machine, so we know that they are always going to be talking up their positions in a lesser way, the u.s. administration is, too. >> because, kayla, this gentleman said three or four times, the united states completely changed what it was asking for overnight the same thing that we've said, but he said it just as stridently so if both sides are just saying you keep changing your position, how do we ever know who actually settled on something and who's -- i don't understand it. >> at some point, we'll get a tick-tock behind the scenes, and perhaps it would take someone leaving the administration to divulge that or talks really hitting a speed bump here. >> all right
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all right, kayla thanks so, let's welcome former u.s. congressman barney frank, a cnbc contributor, in studio today and club for growth president and former u.s. congressman dave mcintosh and we're setting something up where i'm not sure you gentlemen will disagree on whether short-term tariffs can be effective or not from what i read, congressman, you said, i think you think that if it was done correctly, that it could be a tool that could be used to try to get some concessions from china is that fair to say? >> absolutely. look, this goes back in substantial part to our guiding china into the wto under the false promise that they would go to a market economy and the wishful thinking that it might democratize them i voted against that so, i am not changing any position on this i do think that you have a right to do tariffs as a retaliation and that they're a good bargaining tool. my problem with president trump is that he's undercut that by announcing that he likes tariffs. he's a tariff guy.
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he believes that they bring a lot of money into the united states government but that american consumers don't pay anything so, yeah, if that were the strategy -- oh, and one other problem, which is, if you're trying to do that well, you focus on china he's picked tariff debates with everybody, and that confuses it. so, properly executed, i think a strategy, particularly with china, which has been abusive, of saying we're going to retaliate, makes sense >> all right congressman mcintosh, a lot of times gentlemen or individuals that are on your side of the aisle -- i mean, i heard chuck schumer say, "stay tough, mr. president. so, sometimes the right is even more antitariff than -- i don't know how we set up a debate. that's not the normal teams that we have. so, you think -- but even you think that short-term, there was little left for this administration to do if it wanted to try to change china's behavior, a little left -- >> i'm a supporter of trade with china.
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i voted for the wto bill when barney and i were both in congress together. but i think the president is taking an approach of using these tariffs to negotiate, as barney pointed out, and there's a cost to that and the cost is borne by the american consumers you look at statements from companies like walmart, that essentially provide most of the less-expensive goods for the trump voter across america, and they're saying these tariffs are going to cause us to have to raise prices we're also seeing $1.6 billion a month in direct costs to american consumers with the higher taxes that are paid in these tariffs. so, there's a real cost to this type of negotiation, and it's borne by the american people i think the president's strategy is be tough with china, force them back to the table, let them know that he won't accept a save-face-type agreement -- it has to be a real agreement
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my hope is that they get to that sooner rather than later so that that ongoing cost to the american people doesn't continue keeping a trade war with high tariffs is the least best alternative, if you will, among all the different choices between -- the two nations face. >> i think about, even if it is a tax, congressman, there are times when even both parties realize that maybe a tax is one way to approach a problem that we have or a solution -- >> yes. >> -- or something and andrew, you're always ready for taxes, for entitlements or education or whatever. what if this tax on china is to bring them into the 21st century in terms of -- why not say it's okay you like taxes why not -- >> national strategy on the other side of it >> okay. >> i just want to say, first of all, that i'm very happy to be here with joe yelling at me for not being for more taxes iappreciate that
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but -- >> i haven't yelled! >> no, you didn't yell you just sneered but the point is, he's doing it badly. again, i voted against the wto the wto -- and that's a large part -- the reaction of that is part of what got donald trump elected. the wto, by virtual consentism among economists did more to cause jobs for working people, people at middle-level skills, than any other single thing. the problem with trump's strategy is this -- first of all, tariffs can help you stop tariffs, but he has a much broader agenda than china. he should. the chinese subsidy and intellectual property theft is terrible, but you don't get at that with tariffs. >> are you arguing against globalizati globalization? >> i am arguing against globalization if you do not accompany it with measures that provide for the people who are hurt by it globalization and trade -- >> joe, if i could interject for a second the wto has been a tremendous benefit to the u.s. economy for more than a decade, adding
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wealth and gdp growth throughout that whole period -- >> yeah, but not with china. dave, i agree with that. >> but overall, it's been great for the u.s. economy, and that's what we have to get back to. >> but dave, that's a false choice the question is not against the wto. >> the u.s. economy, i'll choose that any time. >> let me finish, please. >> yeah, sure. >> the question was, should china have been put in they don't have a market economy. they are not doing that. trump, to his credit, is trying to push for that, but he confuses the issue with the tariffs. but the point is, this is not about the wto, it's about letting china get the benefits of the wto while denying them for their own economy. and here's the problem -- first of all, trump does confuse them. he says he likes tariffs he is not saying that these are just a bargaining tool he's a tariff guy, he says he likes tariffs they're bringing us money. but secondly, he's got an agenda that goes beyond tariffs on the other side now, i'm for that, but tariffs alone aren't going to force the chinese to change their economy
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basically. i'm for that. >> congressman, we've got 30 seconds. >> sure. let me say republicans who don't like tax increases have come to the similar position in the sense of supporting the president. pat toomey, the author, really, proponent, biggest driver of it, just said he agreed with the president's approach on this. >> all right, very good. i want to say, congressman mcintosh, thank you very much. congressman frank, thank you very much. >> i appreciate, very soft-spoken, joe. >> wonderful to have you in, in studio this morning. >> then we'll talk about the republicans' position on debt, because they've come over to us on that side as well. >> enjoy the rest of your day. thank you. when we come back, a roundup of retailers reporting this morning, including target, lowe's, several others also, treasury secretary steven mnuchin back on the hill to resume a financial services committee hearing in which things got a little heated the last time around >> this is yelling >> sternly
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the final hour of "squawk box" begins right now. ♪ oh, we're halfway there, oh-oh, living on a prayer ♪ >> announcer: live from the most powerful city in the world, new york, this is "squawk box. good morning, and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernen along with becky quick and andrew ross sorkin and the futures have gotten significantly worse in the last hour or so we were positive for part of the premarket session this morning now we're down almost 90 on the dow. the nasdaq indicated down about 45 the s&p down about 11 or so. target was okay, but there are some other retailers -- >> lowe's was not, and lowe's'
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weakness is pulled down on home depot, which is a dow component, so you have seen additional pressure that's come from that. >> yields? stocks up for the first time in three days, tuesday. okay, yeah all right. anyway, there you can see 2.41% now on the ten-year. breaking news this morning on chipmaker qualcomm. a federal judge ruling that the company unlawfully stifled competition in the mobile phone chip market. she also said that qualcomm used its market dominance to charge excessive licensing fees this is a decision in favor of the federal trade commission, which sued qualcomm back in 2017 over what it said were anticompetitive tactics related to a key mobile phone chip qualcomm has not yet responded to the ruling, but the market has. you can see shares of qualcomm down by over 10% this morning and we've seen it down as much as 12%, as little as 8.5%. right now that decline brings it down to $69.45. we're 90 minutes to the opening bell on wall street. we want to get to dom chu to
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look at the biggest morning movers, and there are a number of them, dom. >> there are, andrew we'll put some meat to what becky was just referring to with regard to the retail earnings. it continues to be a big theme of the weeks so, on the earnings front, we're going to start with shares of target, which are up by around 7% roughly 275,000 shares of premarket volume the retailer posting profits and sales that both topped analyst expectations sales growth at existing store locations, comparable store sales, also beat estimates based in part to more robust online and e-commerce traffic, so that's a positive shifter in the market but shares of lowe's, as becky mentioned, down by around 7%, having an effect on home depot there are about 100,000 shares of premarket volume so far this is america's second biggest home improvement retailer. it had a mixed quarter profits missed expectations. sales were slightly better and sales growth at existing store locations also better than expected, unlike bigger competitor home depot. it did a disappointing
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same-store sales number, but lowe's cut its forecast due to rising cost pressures. and we'll end on advanced auto parts, up 3% or so on 3,000 shares of premarket volume the autoparts retailer posting a beat on profits and sales and also reported sales growth at existing store locations of 2.7% it was helped along by better profit margins and better inventory management so, a couple of green specks on the retail side and one big down one. back over to you. >> okay, dom thank you for that we appreciate it very much. today's mixed retail earnings coming after shares of kohl's, jcpenney sh, and home dt all fell on their quarterly reports. we're joined by a retail analyst at forrester research. it's been a tough morning. tough morning. what do you make of all this >> well, i think that what you saw is one good story, which is the target story, and that tracks the general merchandise story. walmart did really well this quarter, too
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and amazon is great as well. so, general merchandise and anyone investing strongly in e-commerce, general merchandise and grocery is doing well. now the issue is department stores and even home with some concerns around tariffs and just the fact that the home sector in general appears to be softening a bit. so, i think that's really what it is, is that we weren't expecting a great q-1. q-4 was dismal for a lot of retailers, but there were pockets of positivity, particularly in the online grocery space. >> what's your walkaway or takeaway from the lowe's situation? >> i think that the issue with lowe's is -- first of all, it's not surprising that the shares are down, partly because they -- >> by the way, we're talking about close to 8% right now, just to put a fine point on it. >> right yeah and we've seen some tanking stocks this week in general. i mean, nordstrom is like at a
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multiyear low right now as well. >> yep. >> but with lowe's, it's not surprising that they are not doing well they've been trailing home depot for a while. and the fact that home depot's numbers were soft suggests that lowe's was not far behind as well the issue i think is a sector issue for this particular quarter. i don't think -- i mean, i think historically, lowe's has had some executional challenges, whereas home depot was really executing well, but i think this quarter, it is as much of just consumers -- >> but what i'm trying to do -- >> it's not just that. this is investment for lowe's, too. part of what happened here is they are warning that they are not going to be able to meet the earnings expectations that they had given earlier or that the street had been anticipating this is more than just a one-off. this is going to be something that trails with them for a while as they make some of the investments. is that a good thing or a bad thing? >> right well, it's a good thing, assuming that the investments are the right investments. i mean, we have a new ceo with
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marvin alison, and he certainly is trying to invest in the store systems and the execution in the physical store that he thinks is important to growth. now, keep in mind that he came from jcpenney, and he is not a huge believer in e-commerce and omni channel he is much more of a store ops guy. and we know that the future of retail is about investing in e-commerce and omnichannel investments, and i don't know long term if these investments are going to pay off it remains to be seen. >> he came from home depot, too. >> yeah. and home depot's been a little bit stronger from an omnichannel investment standpoint. i mean, they really committed to it a few years ago and have been executing pretty well, but you know, i think that lowe's has decided to really double down and focus on the physical store experience, the store associates, the customer experience in the physical store. >> what i'm trying to make sense of here, though, is, is this a stock picker situation, meaning literally we're looking at each individual retailer on a very
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operational basis, or is there a larger call to be made about what's taking place in retail and where we think the consumer and the economy really are you look at an urban outfitters, obviously terrible situation so, it's such a mixed bag right now. >> yeah, and these are all -- they're different sectors with different stories behind them. fashion, department stores there is so much competition, particularly coming from e-commerce and these online peer plays, companies like stitchfix, and even amazon fashion, which is growing really rapidly. so, you have that really, really intense competition in categories like fashion. home should be stronger. i mean, the economy is doing well homebuilders are doing okay. but for some reason, the home retailers are not tracking maybe part of it is that some of those dollars are also going to e-commerce peer plays. maybe some of it is that these retailers aren't necessarily investing in the ways that
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shoppers want to shop, but i think that the home sector's a little bit different, and we have to disentangle that from the challenges in department stores and fashion. >> okay. we appreciate your time and your perspective this morning thank you. >> thank you. >> great to see you. and, sorkin -- >> what we got >> so, the justice department antitrust staff -- >> yes. >> -- is recommending blocking the sprint/t-mobile merger, but they've been recommending that for some time. the final decision lies with the top officials. >> yes, it does. >> they concede. but it's going to take at least a month. they're a month away on deciding whether to approve t-mobile and sprint merger. >> talk about a whip saw >> getting ahead of themselves -- >> earlier this week, yes, when the fcc -- >> it didn't really matter. >> no, but you saw equal moves up when that announcement came out earlier this week. >> right >> so, this is just a reversal back to the mean. >> but holding -- i -- i guess that -- are they giving back -- are they back to where they were i think t-mobile's still above
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where it was, isn't it >> i mean, what i don't understand is right this moment this reuters headline is not that different from the "washington post" headline yesterday, not different than some of the reports we've reported on this network and elsewhere over the past month or two about this division, not just about the two agencies, but inside the justice department and where they ultimately land it will be very interesting to see what the justice department ultimately decides to do. >> right >> but we'll see all right, when we come back, when's the right time to go public? uber and lyft thought they timed it right but then got socked by negative trade sentiment and latent investor fears. so, is there ever a perfect time to ipo and are companies holding out too long we're going to dive in tt nvsaonhe"squawk box" returns. ♪ eó2w
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welcome back to "squawk box. we're almost down triple digits now on the dow we're down 98 points we've been worsening as, i think, really, some of these -- some of the, perhaps, individual names we've seen in retail got
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to make you wonder, i guess. i understand it's a who's doing digital well, who's doing online well, who's making the investments, who's already made the investments to compete there. >> right. >> against amazon and walmart. >> absolutely. >> and maybe it's still china. you know, like i -- do you remember g-2 "the godfather 2." >> oh, yeah. >> michael is in cuba and says you know, i might invest down here, until he sees that guy get in the cab and he was a suicide bomber. and it's like, these guys are serious down here about the revolution i saw the chinese out last night, the ambassador, and it's like, i can't imagine we're going to get anywhere, honestly. the guy just straight faced, the stuff that he was coming up with. >> well, the ambassador, you have to remember, is not the one sitting down at the negotiating table. that's somebody who's supposed to get out there and say we're serious -- >> all around. it's probably all around >> you say that -- >> yeah, but some guys are running internment camps -- >> yes.
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>> and people leave and they tell you stories -- >> it's crazy, i agree. >> then there's guys over here wearing white hats trying to make a difference in the world do you really want the american dream in a economist country, sorkin don't you think we have the moral high ground deep down, or is it "the new york times," you can't have that feeling? >> no, i hope we have the moral -- >> you side with china every time on almost every issue on this stuff just because the enemy on my enemy is trump. >> that is not true. >> okay. that just seems like it. seems like it. because i listen to him talk about huawei and i thought it was you. no, no, no, everyone knows it's a private company. no, no, no, we would never do this no, no, no, trump's doing this because of -- >> no, on huawei specifically, the complication on huawei is that we have not found real evidence yet that they have actually used their devices to put spyware and other things -- it just doesn't exist. we have not -- nobody's come forward with that. by the way, there's other things that they've done. clearly, the cfo was arrested for some of the relationships
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that the company was having with countries that we have sanctions on so i'm not suggesting to you -- >> the ambassador said everyone knows that china doesn't steal intellectual property. he also said that last night. >> well, that i would not agree with. >> okay. >> all that matters in the trade talks, though, is what happens between president xi and president trump. they're going to be the ones to decide it, not everybody along the chain. >> worried >> you should be okay. a few stocks on the move this morning more retail action we had nordstroms under pressure this morning the company cutting its profit and sales forecast for the year after reporting weaker-than-expected first-quarter earnings results hurt by slow sales of full-priced women's clothing and the rollout of a new loyalty program. that stock down now 10%, and that's going to hurt this morning. who wants to pay full retail prices anyway, by the way? shares of urban outfitters also trading lower. the company beat expectations for its most-recent quarter and comp sales rose by 1%, but it's forecasting another difficult sales environment for the current quarter. treasury secretary steven
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mnuchin will testify before the house financial services committee today. this is a continuation of a committee hearing that ended uncomfortably back in april. >> what i told you is i thought it was respectful that you'd let me leave at 5:15, which is the current -- >> you are free to leave any time you want. >> okay. >> you may go any time you want. >> please dismiss everybody. i believe you're supposed to take the gravel and bang it. >> please do not instruct me as to how i am to conduct this committee. >> all right, uncomfortable is putting it lightly today's pickup of that hearing is scheduled to begin in about 15 minutes we're going to be monitoring it and bring you any highlights as they happen. all right, coming up, how to get a trade deal with china over the finish line. we'll see. president trump has leaned heavily on tariffs as a negotiating tool, but there's grumbling about that approach coming from within his own party, which is kind of interesting. republican senator marsha blackburn will join us after a break to shed some light on support levels in the senate for the trump tariffs and how to get
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to yes on a final trade deal u' wchg quk yoreatin"sawbox" on cnbc
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welcome back to "squawk box" this morning take a quick look at futures let's show you how things are setting themselves up now, just a little over an hour away from opening bell dow looks like it would open down 93, 94 points right now nasdaq off about 51 points and the s&p 500 looking to open down about 12 points
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many in washington are cheering president trump's use of tariffs as a way to try to get china's leaders to the negotiating table on trade, but not everyone is on board with that approach, including our next guest senator marsha blackburn from tennessee serves on the commerce committee's trade subcommittee and senator, thank you for being here >> good to be with you thank you. >> what's your position on what we're doing with tariffs right now? >> well, i'll tell you, one of the things we're really thrilled about is if the biggest obstacle to getting the usmca over the finish line has been lifted, and that is the steel and aluminum tariffs being lifted and their acceptance of our agriculture products and for tennessee farmers and pork farmers, dairymen, that is really good news it's also good news for our auto manufacturers. and as we look at china, we are hopeful that we're going to be able to turn the focus to that
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and as we get the usmca passed -- and we're hopeful it's passed in congress this summer -- we are hopeful we're going to be able to work toward resolution on these issues with china. >> how big of an issue have the china tariffs in particular been for tennessee farmers? >> you know, for -- well, the retaliatory tariffs are what get you. >> right. >> with china, with the soybeans and those products, and also with pork that is there in tennessee, but we're seeing tariffs affect our chemical producers that are large exporters as well as people that are manufacturing domestic ally wire products, charcoal grills we are seeing all of this take a hit. polysilicicone is taking a hit. so we've been working with the trade office, the department of commerce and the administration
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in hopes that it is not an issue of if the tariffs come off but we turn that corner and focus on how and when the tariffs come off. and that's what is light at the end of the tunnel for a lot of our producers and farmers in the state. >> senator, the take has been -- farmers, obviously, as a generalized block, supported president trump. >> right. >> the take has been that they have felt the pain, but they are willing to continue this fight because they think it's worth it in the long haul is that the sense you get from your constituents? >> you know, it really is. i hear from our ag community, we want trade, free and fair markets, not aid and they're very resolute in saying, look, if we can solve this issue with china and the way they continue to manipulate the market -- and we hear it also from some of those that are in the chemical industry -- they want a free and fair trading platform, and they know this is
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an issue that has to be dealt with and dealing with the intellectual property issues of china, the trade transfer issues, the forced tech transfer -- they want this resolved and they want it behind us, and they want open markets >> senator, thank you very much for your time today. it's always great to see you we hope to continue these talks with you, but right now we are watching treasury secretary steve mnuchin arriving on capitol hill this, of course, is for a hearing in the house financial services committee you can hear him being -- >> that was treasury secretary steven mnuchin just heading in for a second round of questions before the house financial services committee i asked him whether he would be returning to beijing for trade talks. he said that nothing is scheduled yet. i also asked him whether the lawmakers on the hill might be
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raising the debt ceiling he said that he is urging congress to do so. obviously, he is in the middle of negotiations over the budget, over spending, over the debt ceiling. trade talks clearly at the center of a lot of the biggest debates here in washington i imagine he'll get questions on all of those topics during the hearing today. back over to you guys. >> obviously, last time around, ylan, it was a bit of a tense back-and-forth between treasury secretary mnuchin and maxine waters as the head of that committee. any word from either of them between now and then as to whether we can expect that sort of tension to pick up, or have they mended fences >> reporter: well, i believe that in this hearing, the intent is to allow the lawmakers who didn't get a chance to ask questions at the previous hearing to go first, to air their concerns, to sort of try to press this treasury secretary on any number of issues. we'll see what the temperature in the room is like. we are expecting this hearing to last for a couple of hours,
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unless, of course, maxine waters decides to keep it going a little longer. >> okay. ylan, thank you very much. ylan mui we're going to be standing by again watching for that testimony that is scheduled to pick up in just about four minutes' time. >> okay. by the way, meantime, qualcomm saying they're going to be appealing that decision that was just announced this morning. we'll bring you that news. >> who do they appeal to that was a federal judge that made this decision -- >> it was a federal judge, so i believe they would go to whatever the next appellate court is. >> appellate, yeah all righty then! coming up, are companies waiting too long to go public? some less-than-stellar ipo performances this spring might argue for getting to the market faster and getting to the bagholders more quickly before they realize what's happening. we'll discuss that issue with thl president scott sperling plus, the headline-grabbing investment technique that goldman sachs says is going out of style as we head to break, take a look at u.s. equities futures stay tuned "squawk box" will be right back. get it.
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welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. let's get you caught up on some of the stories that investors are going to be talking about today. first up, shares of cosmetics maker avon are jumping this morning. it is reported they are near a deal to sell itself to a brazilian cosmetics company. by yesterday's close, they had a market cap of $1.4 billion and shares are up 14% this morning. biotech giant amgen also involved in a deal, although a relatively small one, buying danish biopharmaceutical company nuvolution, designed to expand amgen's drug discovery operation. amgen's shares are up 71 cents and wynn ends talks to acquire mgm. it is scheduled to open in june.
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local officials had been opposed to the idea of a sale. for its part, wynn said it was doing its fiduciary duty and reviewing mgm's interests. let's bring you up to date on qualcomm. qualcomm says it disagrees with a judge's ruling that it engaged in anticompetitive behavior and that it plans to appeal that ruling qualcomm was ruled to have abused its dominant position in the mobile phone chip market, ended up charging excessive licensing fees now, of course, big questions about the pricing, what it means for apple. of course, it settled with them just over a month ago. by the way, you know, i think in the 6:00 hour, i mentioned that it was cisco that said they were going to stop making 5g chips, but what i was really referencing was intel. so, just to clarify there. >> all right. >> joe. >> okay, andrew. short market positions if you're short, tend to get a lot of buzz. just look at the film "the big short" for hollywood's take. but according to a new report, turns out the actual practice of shorting may not be as popular
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as it once was leslie picker joins us now with more leslie. >> hey, joe, that's right. shorting individual names is becoming less and less common these days only about 1.7% of the s&p 500 market cap is held short, according to data by goldman sachs. that's the lowest level in 13 years, since the precise era of 2006 now, you'd think it'd be the opposite, right, with the stock market at near-record or record levels each day, it seems like the opportunity to ride any kind of market reset to the down side would be palpable, but instead, as one large equity long-short manager texted me recently -- shorting is so freaking tough. and because the market keeps going up, investors are increasingly abandoning individual short positions this environment has also put many short-biased funds out of business and for those managers who historically shorted individual names to hedge, many are turning increasingly to etfs to accomplish this same thing with arguably less risk now, one area with plenty of
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interest in short interest, recent ipos. lyft has the highest with 70% of its float up on loan to be shorted. beyond meat is around 40%, while uber and zoom are in the teens pinterest has just about 9% of its shares on loan to be shorted, guys. >> wow leslie, you tweeted something out yesterday that i thought was fascinating -- the top ten holdings of the hedge fund community and the top ten shorts. >> yep. >> and a lot of names you might anticipate, you might expect on both sides. >> interestingly, a lot of the faangs are among the top holdings you've got amazon, facebook, microsoft, all of the big suspects, which a lot of people criticize as saying, well, if their top holding is amazon, where are they really driving -- >> what's different from what the rest of the market is getting, right. >> exactly and part of it has to do with the fact that for a long time, hedge funds were trying their best to avoid the big faang names, but they were missing out on -- >> you can't fight the market, can't fight the tape at some
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point. >> exactly. >> you've got to hold onto it. but the same thing, why are you paying 2 and 20 to the hedge fund community if these are the top holdings they've got top shorts are some of the names you just mentioned. >> and one of the names that andrew mentioned and this is on an absolute value basis, so it's not percentage of shares that are held short relative to float, but on an absolute dollar basis, qualcomm, top of the list, which i thought was really interesting but it could be partly due to some of the concerns surrounding, you know, the risk, the regulatory risk that they're undergoing maybe some of the m&a concerns that have been, you know, brought up recently. >> right those shares, by the way, right now down by more than 12%. >> so, that's a win for short sellers in that stock today. >> drag out the old recording. i mean, we have talked about qualcomm a lot lately. not quite to the extent in the past, but almost time. almost time. the old qualcomm. meantime, we want to continue this conversation about investing in this market, particularly those ipos we've seen come to market and those waiting in the wings joining us is scott sperling,
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co-president at thomas h. lee partners good morning to you. >> good morning, andrew. >> in your world, there's a lot of companies thinking we've got to exit. we've got to exit the private market we've got to go into the public market is that a good decision in this market >> the public market seems to want more companies. obviously, you've had a situation over the last decade where they're the combination of stock buybacks and go-privates has reduced the amount of equity float available publicly i think the question that is often asked is are these companies waiting too long and what impact does that have on the valuation they get in the public markets at the end of the day, it's all about the fundamentals of the business model of these companies. the fact that they wait longer either allows them to develop a business model that is more clearly articulated to investors as one that can generate high
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levels of sustainable free cash flow or they go public and there are still significant uncertainties about their business model. >> but don't you look at these companies as quasi public companies already? if you look at uber, if you look at so many of these companies, they have blackrock interest already in them with the states. they have a t. row you know, morgan stanley's already put their private clients in there, goldman sachs has. why are we pretending these are private companies to begin with, and why -- you know, everybody laments, oh, they're not in the public markets well, guess what, they are and part of the problem and the reason they're not capturing the valuation or a higher valuation, all of a sudden, is because there's nobody to pick -- the bags aren't -- the public's already holding the bag! >> yeah. you're raising a point -- i guess i would call it a technical point -- that is a very valid point what you have to do is take a
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step back and say look, all of those players entered at valuations that were probably similar to or even than what a real public offering would have been priced at, at that point in time and what we're finding is, oftentimes, it is at a higher price than the public is willing to pay today based on the knowledge that we have about the fundamentals of the business models of these companies and the questions around their ability to drive high levels of profitability and free cash flow so, your point is very well taken because you do not have the technical strength coming out of the box on these ipos over time, though, the question is, which ones are going to be the facebooks and amazons, and which ones will not have that sustainable business model and i think you can't just assume because the company, you know, come out -- has come out, a lyft, for example, comes out and, you know, people say that, well, it's not profitable now, but it will be profitable.
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the business model there is so dramatically different than amazon, with aws, or facebook, that drives very high levels of return on invested capital and free cash flow through the model has it has so, every company has to be measured carefully based on the fundamental analysis, but it's also the case, as you point out, that technically, all of the major ipo buyers are already in. they already bought their large part of what they're already going to own in these companies. they're hoping that they bought it at a discount to where the public markets would have priced these things but again, we're finding out that that's not necessarily the case >> scott, do you think that because so much public money was invested in uber in particular, privately, that that impacted their ability to have a successful ipo, because the blackrocks of the world weren't willing to purchase more in the public markets and kind of helped support that stock, at least out of the gate? do you think that other unicorns will be kind of thinking twice
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about taking mutual fund money privately in the future as a result >> so, the conflicting forces are that a lot of these companies burn enormous amounts of capital and so, they really had no choice, other than to go to folks who have very large and deep pockets to provide the capital that they're looking for. but it is certainly true -- your point is well made -- it is certainly true that that's had an impact on the success of their public offering in two ways one, this need to price a public offering above the last round or above the last couple of rounds is a pretty powerful force that was driving the investment bankers to perhaps price at levels that had more down side, as we've seen, than up side in many of these situations and then the second is the technical factor of having people who might have been natural buyers either in the ipo
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or subsequent to the ipo after the company went public in the public markets, they're not buyers because they actually had already made that purchase earlier. >> okay. scott, thank you very much great to see you. >> you're very welcome >> talk to you soon. >> take care. >> thanks, leslie. we'll see you soon. when we come back, some key stocks moving ahead of the market open. we're going to get you caught up on all of the retails earnings action next. and we'll look head to the fed minutes and see if we have clues of what they'll do, cut or hike rates stay tuned to "squawk box" on cnbc
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welcome back to "squawk box. want to get you caught up on retailers we've been reporting on, their earnings this morning. target reported profit of $1.53 per share, 10 cents above estimates. revenue also beating forecasts, as did same-store sales, an increase of 4.8% there but take a look at shares of lowe's right now, because they're under a lot of pressure. the home improvement retailer missing estimates by 11 cents, quarterly profit $1.22 per share. revenue and same-store sales exceeded forecasts, but they are cutting their full-year forecast amid profit margin pressures they're down 9%. also, vf corp, while they beat
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on north face apparel, falling as vf's yearly forecast appears below estimates, although they point out that their outlook now factors in the spinoffs of its jeans unit which will be completed today. >> creating some confusion on wall street right now. it's not over there. we've got lots more to look forward to today investors will keeping a close eye on the minutes from the fed's latest meeting, which ended on the first of this month. minutes are due out at 2:00 p.m. eastern time today steve liesman joins us now with more and steve, all kinds of buzz coming out now about some comments from bullard earlier today, too. >> yep, exactly. interesting stuff. let me put those in context. two things stand out from fed chairman powell's press conference after that meeting. first it was the one where he labeled a decline in inflation transitory second, he said risks like trade and global weakness were moderating somewhat. so, some economists have pushed back on that first item, asking just how transient the inflation decline is they argue that every month it
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seems some category ends up tamping down prices, making the overall decline inflation persistent, not transitory so these minutes will be read for clues on how much others agree with powell and whether they will take out an insurance policy against low inflation i don't hear consensus about that in public speeches, but maybe they think differently behind closed doors. we'll get a feel for that in a few minutes. but jim bullard said reducing rates could help maintain the credibility of the fed's 2% inflation target, what you saw from that last screen, they're not hitting. the other issue on the table is trade, which looked like it was headed for a resolution around the time of that last meeting, prompting powell to say that the cross currents were abating then we know what happened since. the meeting, new tariffs have driven up market estimates for a rate cut this year to near certainty. 70% on -- there it is, 70% on december, 79% for january. unfortunately, minutes may not
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provide significant commentary on this since the new tariffs were put in place after the meeting. the question remains, will fed officials treat tariffs as inflationary because they can drive up prices or deflationary because they could drive down growth guys, so, i talked to raphael bostic on monday in jacksonville he said he's not ready to move things, the markets may have overpriced that cut, and rosengren was very clear from boston saying he's in a wait-and-see, not moving either way mode. >> bostic's not a voting member this time -- >> rosengren is -- >> and i'm trying to think through it. >> maybe he is, i didn't -- >> wait, they just told me in my ear that yes, he is. i'll take their word for it. >> okay. >> steve, we were talking with mike santoli earlier today, and we were talking about the fed fund futures, where you see them factoring in a rate hike later in the year. his point was they're not always predictive because it's a long
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way out and the market can change its mind pretty quickly. >> right and we've talked a lot about this and this is something that rick santelli has been very good about, sort of warning about it. it's like anything else that predicts the future -- the further out it goes, the less certain it is and the less -- the lower its accuracy in terms of predicting. as we get near to a meeting, if you could put up that chart again -- that's the one where you really want to focus on. and sometimes they're just taking out options against other sort of positions they may have in place that said, becky, when you see a 70% certainty of something happening in december, you have to take notice it tells you that a lot of folks are on that same side of the trade. usually we wouldn't make a big deal of these things being out there. 52% in october and you know what, september's not that far away. so, we really want to be careful and watch this and the reason you watch it, becky, is because when you listen to the fed folks talk,
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are they leaning against or with or neutral to the market stance? bostic was the first one on monday to really say the market has this wrong, and i'm waiting to hear that from other speeches that are out there to see if the fed is comfortable where the market is priced when it comes to the outlook for fed funds >> all right thanks, steve. joining us now with his own insights into the fed and the markets is richard bernstein, ceo of richard bernstein advisors and a cnbc contributor. and just for one reason i was glad i took -- because i understand the second derivative i can't believe isaac newton figured that out from an apple or something, because it got pretty complex but you think we have moved past an inflection point in terms of earnings and that there is evidence of deceleration and we haven't talked about defensive issues have outperformed since mid-april is that one of your key indicators >> exactly so, people tend to focus on the growth rate of earnings. >> right. >> the first derivative.
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they tend to look at the growth rate of earnings, and they ignore the acceleration or deceleration, the change in the growth rates and what started to happen, and i think the big issue for 2019, is those growth rates are going to slow. i don't think we're looking at a profits recession, but you're going to see growth rates slow during the year. historically, when growth rates slow, defensive issues tend to outperform since the first-quarter reporting period, as you pointed out, we have seen defensive issues outperform, so -- >> what if the previous year, the numbers were so much better than anyone thought that, naturally, comps are going to get tougher because you can't sustain that -- >> absolutely. >> and this is still good, just not crazy good. >> correct i mean, some people say that decelerating profits means you have to have a bear market that's actually not true you can have decelerating earnings with a reasonable bull market you're not going to have a screaming bull market, but a reasonable bull market the way to think about this for us, we were 70%, 75% weighted equities in our asset funds and
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now we're about 60/50. so we're calming down, but it's not armageddon is about to happen i think that's an exaggeration. >> is this the dot plot chart we all look at and say, something's crazy crazy here expectations being so slow do you think it is explained by seeing a deceleration in earnings have we pass the peak of the goldilock scenario >> i think we may be you had ford laying off people and lowe's today these are early cycle stocks if they're starting to have problems, it is hard to say that we should be looking at something that's going to be more robust down the road. these companies are sensitive to changes in the economy and the front of the economy starting to
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slow down. >> did we screw this up? is this trade? i think look if the economy can act on its own i think we continue on what we have seen for the past eight or nine or ten years. so you know you should and you don't have successes in the economy. >> what's the problem? you could have policies that can shut things down >> think of all different things that's going on around the world that makes it difficult for cfo to plan. >> will you let me know if we'll get into a period where the cfo know exactly what they want to do >> of course not that's when cfos max bullish they do things at the peak of the cycle. i don't think we are close to
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that in terms of the normal corporate sector >> you are not selling everything, right? >> no, we are not. rerotated from cyclical. all that kind of stuff now we are weighing healthcare and staples and quality is a big word in our portfolio now. >> so where do you go outside of the united states? >> for us is china china is seriously trying to stimulate their economy. massive monitorying stimulus you got to be looking at cyclical in china i would think. >> will you be able to return to your thinking? this is thinking interrupter you are okay with that in. >> we can do breaking news in washington, let's get to ylan
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>> steven mnuchin testified on the impact of terrorists he said he spoken to a top executive at walmart over the phone of the impact that tariffs could be having at consumer goods such as baby formulas and diapers and other items the company is concerned they may not be able to source those products from other country. mnuchin says he's speaking with executives to make sure that the impact to consumers especially those in low and middle income house hhold is not going to be de debtme detrimental. they're working on a process to exempt certain products perhaps on the next round of tariffs can go into effect mnuchin says he's spoken out
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with the top executive at walmart about consumer goods and there could be price increases going forward. back over to you guys. >> the breaking news i took out of that is we are sourcing baby formulas and baby diapers from china and selling to people here >> one of the things we reported on yesterday was that many of the baby products and baby year that you use, cribs and strollers and etcetera, all of that comes from china. >> i don't want baby formula from china >> right, that's the discussion that he had with the cfo of walmart. we are getting some headlines as well mnuchin says he'll not move forward with proposed tariffs increases for 30 or 40 days. there is some time for these negotiations to take place for the business community to weigh in with the potential impact and
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process with those products excluded >> thanks a lot. it is not just interrupter >> it is important, baby formula. nice to see you. >> good to see you guys, too let's get down to jim cramer, he joins us now. i have been wanting to talk to you about retail earnings coming out. more concerning from lowe's. do you this i the investment lowe's is making right now is a good long-term is this a good thing with cornell and mcmilan at walmart >> the company under sped dramatically it is why home depot was able to pull ahead we can't move fast enough. we are in a situation where everything is fluctuating. customer relations flux. in this particular case, lowe's lost a lot of contractor
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home depot quarter was not bad i have seen the handy god was not so great the activists made this seem like this is going to be cake. marvin is doing exactly what he said and the people that are selling or the people thought he's going to be further along delivering brian cornell, that's not the case >> would you tell people to buy. if you think it is right for the long-term, would you buy in today? >> it is usually the second day that you can buy because you get downgrade and system numbers cut. i have faith that warren is going to pull this off i am not giving up on marvin, he's doing what's right. i am surprised how weak lows was before he got there. >> jim, great to see you >> don't miss an interview with
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judy shelton, a former economic adviser to president trump and a potential federal reserve nemie. stay tuned, "squawk box" will be right back you should be mad that this is your daily commute. you should be mad at people who forget they're in public. and you should be mad at simple things that are unnecessarily complicated. but you're not mad, because you're trading with e*trade, which isn't complicated. their app makes trading quick and simple so you can strike when the time is right. don't get mad, get e*trade and start trading today. onmillionth order.r. ♪ there goes our first big order. ♪
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quick final check on the
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mark the dow is off by 74 points. s&p looking open to dow about 10 points we'll keep our eyes today on qualcomm of that suit, now they're appealed against that ruling with the ftc suing them make sure you join them tomorrow, "squawk on the street" begins right now ♪ welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer. we took a light lower as mnuchin told reporters he has no trips planned. our road map begins with qualcomm in a trust fight, shares are dow

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