further move than the down side. >> in the ibbs >> yes. >> watch that for sure thank you for that doc? >> dva, stock's roughly 44.5, 45%. buying in big numbers. >> dow's barely holding on to 25k. exchange begins now. thank you, scott hi, everybody. here's what's ahead. the bonds market message, was that invertaled yield curve, what it's telling us where the economy is headed and what the fed may do next. on a brighter side mortgage rates declining as rates continue to drop will banks put a floor on just how low they'll go we look into that. and big trouble in retail from teen clothing to expensive jackets to high-end handbags nothing working today. break it down with the biggest decliners there and begin with the sell-off today with seema mody. >> what a day. driving stocks lower without major development on the

u.s./china trade front, fixated on the move in the bond market coincided with new data. technicals a part of the discussion right out of the gate s&p 500 breaking below 2800 and taking out its 200-day moving average, 2776 around the european close the next level to watch according to art casian, 2632. with yields continuing to fall it's those growth sensitive sectors leading the market lower. no place to hide out even dividend-paying stocks, utilities, real estate, trading to the down side also worth noting. the russell 2000 generates a large percentage of its revenue in the u.s. and getting caught up in the sell-off a lot of traders saying, yes, russell 2000 more domestically driven but a lot of small cap companies rely on sourcing components from china. back to you. >> down a little more than 400, low this afternoon for the dow >> yeah. down about 408 points at the lows currently lower by 350

you saw losses steepen right around the european close. look at the global market setup. yes, dow down about 5.5% from its record high but much steeper losses in europe with the german dax now down 10% from its recent high back to you a. great point wow. 10%. seema, thanks. seema mody. adding to today's sell-off to an already rocky month, dow and s&p down nearly 6% in may. nasdaq down 7% all of this as that yield on the ten-year hits a 20-month low bring in senior global market strategist at wells fargo invest institute and brian roeynolds strategy welcome to you both. brian ask you first, you've watched bond markets closely a long time. are you as concerned as everybody else about the recession signal it may be sending? >> no. i was on your show in january, january 10th, talking how the shields dropped precipitously calling for the fed to cut

rates. now the rest of the markets, the treasury market and other markets around the world are following the yield of eurodollars, followed libor. the message sent to the fed five months ago and other markets, investors, are catching on. >> but is the fed? in order to get out of this situation, do we need them to come out and at least say they're going to cut rates >> no. because the fed usually lags the market tremendously. they look at the economy they -- and they have their economic models. traders in the financing markets and the money markets are much more sensitive so typically those markets lead the fed. the fed would be a confirming indicator if they finally cut. futures down 150 basis points since november the equivalent of six fed cuts, meaning when this correction ends we're going to have more shadow banking, not less a more intense credit boom going forward. >> why you're still bullish in the long run what about you, again, how much

do we need the fed to do and when for markets to pull out of this >> we don't think the fed cuts this year. the most part, economy slowed, moderated from last year that was expected. again, things going on with taxes and fiscal spending that weren't going to be repeated think things are okay in the u.s. unfortunately, the international side continues to disappoint especially europe. that's really what's weighing on u.s. yields. for us, when we look at u.s. stocks, with pretty good, healthy earnings growth even now, compared to u.s. yields which are dragged down by international yields we think u.s. stocks are interesting, and then on the emerging markets front also kind of beaten up if you think the fed will cut, probably a disproportion beneficiary. >> even though you don't think they're going to cut. >> exactly, ok lyexactly. >> okay. ask you ash what's happening overseas

so german yields are negative again, deeply negative the last time that that was true, three years ago, our u.s. ten year was below 1.5%. we're well above that. >> tells you again markets tend to overshoot technics take over and room for yields to move low perp trading below fair value. mutual duration not extending duration at this point. >> if he's right, brine and their view fed will not cut rates. what happen then >> a climactic blowoff in the stock market may be approaching that point today. probably doesn't happen today. probably take as few days to a few weeks. the start of may entering the 36 correction of this bull market they typically end with a really high volume, scary blowoff low probably need that to happen and probably also want to look at

the two-year treasury, because we've written it's 100 basis points too high compared to forward libor. if you are shadow banking, free money. you can bipartisan orrow at a l. >> great point two-year treasury yield, brian, whole percentage point too high. you're saying get that blowoff low in stocks, and we saw one christmas eve, also it coincided with powell coming out changing his language it we have a blowoff bottom, whether this week or today or whatever you're saying, and get past this even if there's no change from the fed? >> sure. typically markets force the fed to act the fed does not want to cut rates. the market has been telling them could tut rates five months. the market has to say it more loudly to force the fed to act. >> yeah. with your point about stocks bringing this back to the equity market, seems everybody there is pointing the finger at bond yields saying i'm nervous about this and nervous about that.

should they be concerned about these signals, brian, or can they stand pat in the their investments? >> seven months ago people worried that rates and yields were going up too much mow worried yields are going down too much. >> right. >> every time yields have fallen in this bull market over the last decade stocks rallied and gone on to long, strong gains. since every time there's been a drop like this in yields, to the present, stocks returned annualized average between 8% and 12%. this is nothing more than one of those temporary but scary panics. >> guys, thank you both. good stuff today appreciate it. special counsel robert mueller also spoke out for the first time on the russia investigation. eamon javers is live with action and reaction. >> right special counsel broke his nearly two-year silence in public on this issue, and now the debate is raging in washington over the potential impeachment of a president of the united states, a number of democratic presidential candidates coming out this afternoon saying they

are now for impeaching the president. robert mueller, though, special counsel, made clear that he was not able to exonerate the president on the issue of obstruction of justice when he conducted his investigation, but due to department of justice policy he never considered indicting the president. here's what he said. >> if we had had confidence that the president clearly did not commit a crime, we would have said so. we did not, however, make a determination as to whether the president did commit a crime >> for his part the president is declaring victory issue as tweet saying nothing changes from the mueller report insufficient evidence and therefore in our country a person is innocent the case is closed thank you. now the political case is very much open for nancy pelosi and house democrats deciding on whether to move forward with impeachment. pelosi has been a skeptic of the idea of impeachment suggesting she wants to continue to

investigate, but not necessarily that she wants to impeach. other democrats have taken a different line and we'll see whether that, the politics around that changed throughout the course of the afternoon. as for his part, mueller suggests he is done speaking in public about all of this he's been asked to appear before congress, and suggesting here today that if he does appear before congress he won't say anything further than what's already in his written report. >> likely further steps, eamon, either the democrats pursue some kind of impeachment or the president when a private citizen could face some of these charges at that point? >> in theory, that's right mueller said today the department of justice policy against indicting a president, a sitting president, also applied to filing any sealed indictment. suggesting no set of charges is waiting to hit the president at 12:01 p.m. whenever he steps down from office either in two years or four. or in six, rather. so at this point, seems unlikely

he would face any charges after resigning from the presidency for a case that at that point would be two or six years old. the question is whether democrats want to move forward with impeachment that's something they view as potentially politically dangerous, but nonetheless a lot of members in their base are agitating for it a tough decision for democratic leaders this afternoon. >> eamon, thanks eamon javers at the white house today. still ahead on [ expletive] -- "the exchange." coming up, the yield can curve dilemma. the traditional recession indicator is flashing a yellow warning sign how reliable is it. plus a look where mortgage rates could be going, and they might not end up as low as you think. and a hard landing for candidate. fancy shoes can't save one stock and hardships of being a teen retailer

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welcome back everyone is looking at the bond market today, some experts warn is flashing a warning signalling a recession. inversion between the yields on the three month treasury bill and ten year note could be wide and different. instead are similar and not the direction they're supposed to be in fact, widest inversion since

the financial crisis joining me, chief fixed income strategist and also seen jer economic correspondent steve liesman. welcome to you both. steve, how much do you think the fed watches this senate? this indicator >> watch it carefully. i don't think they've come to definitive conclusion what it means. not forced majority this happens and we have to cut rates to avoid it they'll look at it and take into consideration making policy. >> do you think, just talking about this, a lot of people say this happens when the fed makes policy error and that they hiked too much last year, shouldn't have done the last hike, all that price generate a rate cut at this point >> this year, yes, it has. i thought it bizarre that this would be blamed on the fed here. right? this is so clearly an issue of trade. the idea that somehow the people who support the president and his tactics on trade have now turned around to blame this on the fed strikes me as bizarre. >> the first time this happened was in april when it seemed like trade was at a resolution.

it's only this month that it's looked like it's falling apart. >> agpril. >> first time inverted -- >> right soaring market rebounded, outlook fairly rosy coming to agreement. this looks like it draws back with not a dotted line, not a bold line, but several lines drawing back from this downturn to trade that's the way i think the fed will see this. >> and how do you read these developments what do you think is happening with the economy >> actually, a little shorter term look at how the yield curve flattened particularly over the course of the last, this big ralry, interest rates. flattening a lot has come actually between the last fomc meeting may 1st and today. right? i think we're seeing very, very clear evidence the market at least thinks the federal reserve is making a policy mistake by potentially cutting too late we saw the flattening accelerate in the wake of the fomc minutes

last week. all this evidence connects it clearly to the federal reserve for trade policy trade is an exogenous but the perception. >> wow go back, ian, find a whoa bunch of correlations between everything that happened, reaction of the bond market and what's happened to trade look what's happened to the ten year since the president put the tariffs on china i mean, straight down. >> coincides relatively closely to the may 1st fomc meeting. >> wow a stretch. >> the power the federal reserve has to dominate shape of the yield curve overwhelms anything trade is going to do. >> i can go back to the monday, no fomc meeting when the ten year, do you have, the monday, sunday that the president put the tariffs on >> about three weeks ago. >> straight down and fomc wasn't even meeting a little surprised, steve, but go ahead. >> shape of the yield curve.

>> yeah, but -- >> absolute level. >> i have to look it up now. >> let me ask about that to me interesting to compare this experience with what happened in 2016 chart of the ten-year note going back about the last 30 days or so you can see in the last couple of weeks, sharper down draft in 2016, the yield on the u.s. ten year hit a record low around and correct me if i'm wrong, 1.375 or so. >> right around the time of brexit first round. >> exactly and bund yields end there. what's the difference between then and now sitting a percentage point higher than we were what does it tell you about prospects now if anything? >> short-term interest rates came up roughly 200 basis points a little less, actually. ultimately that's the federal reserve. trajectory of the fed's fund rate over the next ten years single largest determine knit of ten year treasury yields back at the yield curve started

this discussion telling us markets think the federal reserve will cut rates when one of two circumstances one, a recession, or significant economic down draft leading up to one and, two, a really, really big dip in inflation, already signaled on the second point not such a big concern now. >> so what you're saying, there is a policy mistake here, how is it rectified what does the fed need to do to get things back on the right side here? >> to be clear, not saying there is is a policy mistake saying the markets are starting to price the assumption of one right? so essentially the way to fix this in the market's eyes, cut more aggressively and sooner. >> how much? >> a lot of theme sort of within market plumbing signaling that might be necessary as well. >> how much are we talking how quickly? >> by how much i suspect that the rate cut that is priced in for 2019 is a maybe event, but could see as many as four cuts in the year 2020.

>> the market is pricing in four rate cuts next year, in order for the -- >> no, no. >> yeah. go ahead >> i'm suggesting that that is what may likely end up happening. the longer the fed rates -- excuse me. the longer the fed waits to ease policy, the more they're going to have to ease policy to have an affect. >> steve, parting thought. >> just looked at the tail of the tape wasn't prepared for what the take was the market yields rose after the last fed meeting and they have fallen 40 basis points since the president tweeted out about tariffs. and i think there's two important things for powell to consider one is the cause of this down draft. is it his, a mistake or something else exogenous and figure out if he should react to it and if he does will it have any effect i'm not sure if the problem is trade cutting rates is the

solution, because the initial impulse of tariffs is higher prices >> uh-huh. >> it may be weaker growth on the back end of that, but it's going to be a little weird to be cutting rates at 3.6% unemployment with tariffs potentially on another $325 billion of goods coming into the system and having the fed cutting interest rates i don't think that's exactly what the manual says. >> the last word quickly respond to that. >> i don't think there is a manual for the inflation influence of tariffs, simply isn't one. see what the impact on the economic activity is, 6, 12 months afterwards. >> thanks. good stuff appreciate it today. coming up, mortgage rates and yields are moving south. you may think it's good news for home buyers but there's a catch and we'll explain ahead, and plummeting retail stocks, are they sending a snool consumer is tapped out and prepping for rder times ago

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welcome back to "the exchange." get you caught up on markets today. stocks in the red but off session lows dow down about 410 points. earlier down 282 that's 25,065 blue chips s&p 2779 now 22 point drop, nasdaq down 62 points dow biggest loser today. some movers.

shares of general mills sharply lower. goldman sachs lowering rating on the stock to sell from neutral and cutting its price target this after the company was warned about its pet business. general mills shares down 6% shares of worth also in red after its earnings report. posting better than expected results but sales shifted more to the fourth quarter than normal stock still at 26% but down 4% today. not all red. two recent ipos, coffee up same for beyond meat a good 15% gain in two sessions. beyond meat at $92 close to the highest price target on wall street now to sue herera for a cnbc update. happening at this hour, everyone, white house counselor kellyanne conway defending president trump's latest attacks on joe biden saying he and kim jong-un came to the same critical conclusions of the former vice president separately >> the president came to a conclusion about joe biden he

has said i don't know how many times. read his tweets. he has said it in precipices an out on the front lown r lawn tons of other people, kim jong-un have come to the same conclusion. and meeting with kim mohammed vi along with the crown prince at the royalty residence in rabat and discussed strengthening ties between the two countries. it's being called the worst ceremonial first pitch ever. the chicago white sox employee of the month throwing out the first pitch before the white sox/royals game. hit the photographer standing a few feet away. whoops there you go it made the pitch fiasco of 25 years ago look pretty tame. >> employee of the month >> infamous employee of the month. >> oh. employee of the year sue, thanks very much. >> got t. sue herera. up next, investors hope the

clock runs out on this brutal month all right. bad news and machines going wild a crushing cocktail for markets. is the summer of pain ahead or just a bull market breather? "the exchange" will be right backng the f and unrivaled netw. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.

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welcome back a sell-off today on concerns that are lingering about that escalating trade war and investors running to safety in bonds. setting up for a big flush bring in senior markets commentator and great to have you both here. mike, what's the talk today? what was the catalyst? are these technical levels we broke through? are people concerned about the bond market? give us whys >> yes i think you had an intensification of lingering concerns that have been out there. right? bond market clinching up in advance of some kind of potential threat just a global stall perhaps in growth and obviously sort of making its voice heard that it thinks the fed ought to think about easing rates, and then i think the stock market has no reason to believe that corporate earnings forecasts are about to lift off again

we did lose potential catalyst of a quick trade deal. all that in the mix. and we'd been really captive to the technical mechanical stuff here. >> yeah. >> definitely broke through the 200-day level today on the s&p 500. widely watched area. the other hand, sentiment turned negative in a hurry. watching now a reversal now, maybe. >> what was the reversal 200 day? >> i say -- i was in the 2770s. >> 2770s kind of playing around with that right now. kenny, on those things that matter a lot in the short-term obviously? >> yes. >> what's the most important thing to kind of get the market it's off to a better start in june >> you have the workings, not necessarily over

right? a break in the technicals. very long term that's key nasdaq, the dow. what happened in december, not that i'm suggesting you'll get that december kind of wave of sell-off rallied so much in anticipation of a deal now look and saying, where's the deal so naturally it's going to reprice. >> yes. >> i don't necessarily think that's a complete negative by any stretch. i think it will give people, long-term investors, opportunity to jump back in on some of these names unduly that were punished. >> mike, everyone watching for the fed again? kenny brought up a december reference. a good one awful fourth quarter, then a great first quarter for growth second quarter is okay >> yeah. >> trying to figure how much emphasis to place on the financial markets and the messages they're sending and back then i guess powell took three rate hikes off the table making a big difference where we are now. >> without a doubt it's ambiguous now

in other words yoshs think an investors should wish for the circumstances under which the fed would rush to cut rates right now. ip do think that perhaps some lip service in the direction of, you know, okay maybe we're no longer purely neutral in terms of which way the next move goes the next move is likely down in no hurry to do that that can do okay we have to get out of the idea we need an absolute clear catalyst because sometimes a lot of stocks are over sold market is cheap enough people look around, bond yields low. dividends okay maybe things aren't falling apart. we can buy stocks. >> thanks. see you later on, mike, kenny, see you in florida unbelievable thank youboth. beijing making veiled threats to cut off the u.s. from rare earth minerals. noting rare earths would be a powerful weapon if used in the china and u.s.

let me bring in joel, professor of international life. >> thought this before before going after this listen, no way that -- if it's truly the administration's intent to, to really go after huawei, kill that economy, clearly there's going to be a counter. this is a powerful one listen, you cannot run an advanced economy without these rare earth elements. so incredibly crucial. doesn't mean if there's a boycott or embargo, that our economy's going to collapse tomorrow but it would be disruption in the goal is not to disrupt the economy, especially before an election from trump's point of view you really want to avoid this. >> if you go back and look at the 2010 example, that then with

japan, china hiked rare earths ten times, still a black market. chinese themselves used to get those materials in the hands of the japanese not a lot of people remember it was supposed to have been a major issue. how serious a threat is this really >> it hads a great deadds a gref costs. as james said, a serious problem for united states high-tech production, including in the defense industry so this is really a tit for tat. if you're going to -- >> we only toursz blaourselves e

the u.s., that's a long time working on bringing these things together >> critical elements thought it would take at least 15 years to develop an independence from china. you know, across the entire value chain. obviously that hasn't happened again, really makes you wonder whether off of this -- whether all of this will -- right now, to go through. ultimately a negotiating tactic. i don't think we're ready for a cold war involving rare earth. putting the two tech ecosystems, china, and the united states, but certainly it's of concern now to go through that would be bankruptive. >> yeah.

i wonder, professor, if the incentive especially of chinese economy lagging. >> from a health standpoint people working -- >> getting that stuff into the black market ultimately into the hands of the -- >> it's also true the united states doesn't want to -- could be smuggling, could be ways we get it, but it's going to be more costly and less reliable for u.s. producers causing, you know, reluntens to invest in the united states in these industries. >> interesting. >> the blue collar jobs, not what we want >> exactly yes. china can have them is the attitude think, i guess. this is a problem even with that approach

guys, thanks appreciate it today. coming up, his last day as director is friday before he goes, he'll talk to us about navigating tariffs

welcome back to "the exchange." check on the markets now dow down about 410 at the low today. making its way back. down 255 now plenty of time still to go. 1% drop. s&p down about 7/10 of 1%. same for nasdaq. s&p around 2783 with a lot of technical levels in focus today. look at the nasdaq drill it down a little more approaching correction territory bertha coombs is there for us. >> hey, kelly. small caps the biggest drag of the russell 2000 down 1% large caps buoyed a bit by reversal in chip helping the nasdaq 100 touched an average today the chip sector would snap a four-day losing streak, on pace for the worst month since the financial crisis biggest losers with strong

exposure to china in particular. higher today, bounce in microchip and xilinx putting them up for the week apple shares not sustaining the move higher. in and out of positive territory, but if remains in the red the stock's first five-day losing streak in over a year on the flip side, sell-off in consumer names on the back of disappointing retail earnings. until today the nasdaq 100 took out the tech names actually outperformed today that sector down collectively 1% about, twice as much overall, kelly, lump in the tech namescromby and fitch shed a quarter of the market cap. on tap for its fifth straight

down day here in the appropriate color choice. >> that's right. >> all names reported earnings today. it's hard to find a common theme asks looking for holdings and canada goose, looking this year, both going through investment years. right? which means you're not getting a lot of growth there, because the companies are spending a lot of money for the longer term. >> did canada goose's theme, watched it as broarometer of u.s./nine cha relations. anything about that? >> told us i look down at my numbers. so all over the place. rest of world, does include china, up 76%. looking at sales u.s. and canada up 6% and 10% compared to last year's comparison of 123% growth in the u.s. 120% growth in canada. in general, part of the issue with canada goose. crazy growth numbers as the business scales you can't continue to grow at 120%.

>> suggesting no slowdown in china now. >> no slowdown in china indicated at all and really no slowdown in consumer demand for inventory is a bit of a problem. talk about weather impacting a company. look at these jackets. expensive. buy them when you have cold winters. if the winter shifts one way or another, dramatically impacts performance quarter to quarter. >> the deal with abercrombie today? >> interesting one they are going through a number of changes and to give them credit actually grew in the u.s. 4% and international down 4%. a reversal of what we saw we yours. international was the strong point. lowered second quarter outlook, second quarter outlook and cap holdings same thing. a little disappointment for the immediate quarter we're looking at, but the full years don't look so bad but also not so great either for a lot of these companies. >> investors in an unforgiving mood. >> exactly. >> courtney, thanks very, very

much courtney reagan. this friday marks the official last day for cbo director keith hall and what a tenure it's been between debt and budget negotiationing, tax cuts, fiscal impact of paris, a lot to navigate. before leaving his post has agreed to talk to cnbc about all of it. standing by live in washington take it away >> thank you, kelly. thank you, keith, for joining us on your final days in office here start with the economic outlook and the impact of trade. dow down something like 400 points at one point today. investors clearly worried that trade tensions are weighing on the long-term outlook. do you share those concerns? >> well, absolutely. of course, the real impact depends on how prominent they are. if they're temporary, better than if they're not. even in the short run it can have a noticeable impact. >> how big an impact are you expecting? >> shouldn't expect, if they continue a while, a drag on growth this is sort of tariffs are

taxes. taxes slow down the economy. that's how this is working then, of course, the other side. retaliation. also another anti-stimulus on the economy. >> and you guys are already projecting that growth this year will be lower than last year projecting already growth will not even hit 2% over the next few years. so the 3% idea of hitting that long-term economic growth of 3%, is that unavoidable? >> we just don't see that. right now we're working through a lot of stimulus in the tax cuts, from increased spending. that's going to wear out in a year or two. then we'll run into supply side constraints where we have labor force can only grow so fast. productivity can only grow so fast we think there's going to be a slowdown something like under 2% in a couple years. >> when you think about the impact of the trade war, you said a lot of it depends how permanent some of these measures are. do you think that the recent

escalation we've seen the imp tigs of tariffs 25% perhaps tariffs everything imported from china, is that action already changing your forecast for the coming years >> i think it's quite likely if those really continue, then we probably -- even make a point, probably, this summer, to re-do our forecasts, probably downgrade it a little. >> with a new baseline >> right. >> trade policy intact also want to talk about something else you've warned a lot about. which is the american fiscal situation. consistent in saying that spending is on an unsustainable course no one in washington appears to want to address this are we in a crisis mode just yet? >> we're not i'm sure that's part of why nothing's happening yet. we've been saying for a decade straight the current trade is unsustainable. levels are getting very, very high right now we're in a position that's unprecedented

we're in a, a time when the economy is very, very strong yet deficits are very high that's never really happened before last year we had almost 3% growth and the deficit was about $800 billion. >> some would say, though, that's an indication maybe debt and deficits don't matter in the way they used to do you agree with that. >> i don't they do matter we do think that as time goes on, deficits will raise interest rates and have an impact on investment and slow down growth. >> when you look at some of the proposals that democratic lawmakers, others put out there for sweeping expansion of the safety net is that something america can afford >> it's almost like anything else if congress wants to spend money, if they want to give tax breaks, they need to for your heart...

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welcome back oil is coming off session lows right now being having a rough week it's down 4 %. brent and pace are both on pace for -- scott, you think we're going to continue to retrace is it going to keep dropping? >> no. i think we have an overreaction in the market. there's a lot of head winds pushing the price of oil down. i think we've had an overreaction and quite frankly, i wouldn't be surprised to see ahead of the opec meetings, oil push back above 60 that's my stance i'm looking at. >> there's a battle right now, a war of words is it too much supply? is it too little demand when we get a move down like this? what camp are you in >> i think it's too little demand i think that's going to change i think we as we get closer to

the opec meeting we'll see tensionings come off the market doesn't like uncertain uncertainty. that's really hitting what's happening in oil right now >> uncertainty so like you said, it's tracking everything else. we'll see if opec changes things thank you. >> coming up what you need to know about mortgage rates if u' ithmaetor new home

welcome back to the exchange yields on the 10 and 30-year treasuries are at their lowest levels in 30 months. here to tell us why home buyers aren't rushing into the market diana olek with doug duncan. diana, how are things going lately are we seeing knit boost from the low rates? >> not really. it's been a boring spring, really we've seen very little interest because high home prices are plaguing those first-time buyers there's little supply on the low end. there's a lot on the high end but not as much interest there when you see these moves in mortgage rates which should

juice buyers they're not doing enough to offset the home prices >> doug, if we unpack last year, when the ten-year went to 3.25, that helped the housing market why isn't this decline helping >> even if you can get credit at a low interest rate, if you can't find the house that fits your financial profile, that's not much you can do. it's at the low end of the market usually the existing end of the market where people are moving up the boomers are aging in place that part of the market is at 30-year lows in terms of supply. >> we also mentioned there might be a floor under rates that the banks would put into place can you elaborate on that? >> well, they do have to make money. the mortgage rates are a spread over the cost of funds now the cost of funds, if used the treasure rate as a proxy suggests that mortgage rates should get around the 4 % range

given their spread over the 10-year treasury which is at about 2.2. banks don't make money unless they have some spread. that said, their cost of funds has fallen as well but consumers need to be confident of a couple things one is house prices have been slowing. so they don't want to step in if they think there might be an outright decline you don't want to catch a falling life, so to speak. if they think rates are down for a while, they may say well, i'm going to wait until the house that fits my profile is available, because rates don't look to be going anywhere. that's sort of what our survey data say they expect rates to fall a bit more >> and that's what's interesting. it's not like rates are down here and people are figuring it out for the first time this is almost becoming the new expected normal. >> yeah. i mean, if you talk to a millennial and tell them you got a mortgage rate at 9% in the 90s and you thought it was great, think look at you like you're

insane doug, i don't want to get wonky on this question, but i've been hearing while we say mortgage rates follow the yield, they are bonds that investors have to buy that dictate rates we're hearing this talk that fanny and freddie might come out of conservativeship and the head of the faha hasn't said there's be a government guarantee, investors are keeping back >> well, that's a possibility, i suppose. however, it's also the case that the fed continues to run off its portfolio of mortgage backed securities even though they've slowed the overall portfolio run offer, they are running off mortgage backed security. >> finally, doug, and this is the hallmark question. what are the impacts on the market you're seeing in certain areas of the country

>> well, we had anticipated that the level of home sales this year, that is in 2019 would be the same as 2018 it's actually running below that by about 3.4 % new home supply is up in actual measured houses available for sale existing home supply, however, is flat. and for entry level buyers which are now the driving force, it's that existing home number that's really the challenging number. >> in other words, for a market, high priced market like new jersey you're saying you're not seeing enough people leaving their homes. that's allowing new people to move in. interesting that's the overriding factor. >> yeah. >> diana, you have a spider sense of how low rates would have to go to spur a boom? >> i think you have to get back into the 3s. we saw 3.5 a couple years ago. that boosted sales i think you have to get steadily into the threes to see movement.

>> yeah. you need a ten-year treasury of about 1.5 to 1.6 >> oh, thanks. good to see you. appreciate it. exchange".oes it for "the it's time to join tyler for "power lunch." welcome, everybody, so "power lunch." new at 2:00 today, worries about an economic slowdown sending stocks and bond yields much lower. is the u.s. economy about to slow maybe grind to a halt? that's maybe a little extreme, but slowing? that's certainly possibly in the cards. it's a retail wreck today. canada goose getting cooked. is this another warning sign for a looming recession? plus with all this market volatile is now the best time for you to amp up your savings for college? we're going to talk about 529s it is 5/29 today "power lunch" starts right