increases, which are not grounded in innovation but short-term thinking in earnings per share. that's what i've criticized. it's easy for me to criticize, but the public deserves that and the payer and private deserve it. >> it's been great to hear about this thank you. i want to know if you end up charging $10 million in the u.s. that tells you what the current pricing set-up is like nick >> we're not planning on doing that thank you for having me. >> meg, thank you very much as well that does it for "the exchange." "power lunch" begins right now >> kelly, see you in just a moment thank you very much. i'm tyler mathisen welcome, everybody, to "power lunch. along with melissa lee new at 2:00 today, chips taking a dip. a new and clear sign that trump's trade war is inflicting pain on these stocks a bad sign for the sector. is it also a bad sign for the market overall we'll look at that demand for oil set to drop

lowest level in years and growing tensions with iran we have the energy secretary rick perry will weigh in first on cnbc. the growing threat to housing. why it may turn into the biggest risk for the housing market in many a year? "power lunch" starts right now welcome to "power lunch. i'm melissa lee. holding on to weekly gains pressure coming from semistocks as tyler mentioned getting whacked following broadcom's warnings about slowing demand. kelly? >> we begin with the red hot stock of the day shares of chewy soaring. leslie picker is tracking the action for us this afternoon leslie >> reporter: kelly, we knew people loved their pets but who knew investors would have loved their pet supplier this much chewy shares soaring up 54% after three hours of trading the company priced a dollar

above the range, it boosted earlier this week on stronger than expected demand it was also able to up size the number of shares sold through the offering chewy's parent company pet smart will be taking home the bulk of the proceeds, $900 million worth. chewy will retain $120 million to invest in the business. it's a quick buck though for pet smart which acquired chewy only two years ago. purchase price at the time, $3.5 billion and trading around 4 times that valuation today's gains make chewy the 14th company this year to see its stock surge more than 50% on the first day of trading the momentum is clearly there for ipos despite the fact the large majority are unprofitable and many including chewy are debuting with dual class share structures but for investors in a hot ipo market, ipos are a quick and easy way to generate al fach alpha. thanks >> the other chuy.

dominic chu. >> i have been here and heard so many of those chuy remarks >> not original. >> it is the theme of the day so far. let's talk about the markets because we are hovering near some of the worst levels you can call them today but it's really not that much. talk about the dow only down 40 points and a quarter of a percent and half a percent for the nasdaq and just because of those chip stocks and those particular movements here and bigger sector movement and overall, the utilities of course, energy and technology cyclical, economically sensitive, the underperforms so far in trading today much of the focus on that energy side of things has turned towards what's happening with crude oil as well as tensions start to flare up a little bit

in iran, in the middle east in general. you can see here up about three quarters, almost two-thirds of one percent here but still near term down trend for crude prices stays in tact and one other thing i will end on, traders watching, the development between relationships on large caps versus small caps as you can see here, the russell 2000 etf versus the s&p 500 etf, that gap may be narrowing a bit but still fairly wide there. as we talk about the dynamic, guys, this is going to be one of the risk indicators people watch whether small caps can play catch-up over to the large cap cousins. >> dominic chu, chuy, thank you. dom mentioned broadcom those shares plunging. dragging the other semi stocks with it. the sector caught in the cross hairs of the trade war with the u.s. and china on the phone now is stacy rasgon great to have you with us. >> thanks. >> a lot of analysts expected that broadcom would be taking down the full year sales

guidance you included, but the magnitude was significant, more so than what the street had been expecting. hoctan said this was a conservative outlook and the attempt to take into conversation the effect of another round of tariffs on chinese imports. does that give you any solace? >> so we've expected numbers to come down basically to remove huawei from the revenue trajectory this is something almost all semiconductor companies will have to deal to a greater or lesser degree. what hoc is seeing though is not just the direct huawei impact, which is not fun but manageable. you can quantify it. he's seeing a metasticization. i think that's the direct impact

we're seeing from broadcom i think this is something that everybody is going to have to deal with. semis in general are very macro related. very global in terms of their supply chain and anything disrupting that's going to be a problem. >> you maintain your perform rating on the stock. cut price target to $300 a share, stacy i'm wondering what you think the catalyst will be a lot of people hoping prior to this report that second half would show signs of hope and now that looks like that's gone. >> yeah. so we've been hesitant on these general kind of second half snapbacks for the injury we've been quite cautious. we actually downgraded the sector at the end of march and downgraded stocks at the same time i have to say this most if not all semiconductor companies regardless of what they say about visibility, the demand, it's precisely zero. back of the supply chain they don't know. always a risky call for any of these companies to make. i think it's becoming increasingly clear it's not going to happen and with huawei,

it causes more problems. with broadcom, you ask your first question they are trying to be conservative and they are, look, if you're going to cut, go ahead and cut they're doing that and they believe at this point, you know, hopefully that they've taken enough of the broader extension of this into play that they've cut enough the problem we'll have and why the stock is down today is because it's just hard for the company as well as investors to actually have total confidence at the bottom. if this was a direct huawei impact, you could size it and it would be fine but generally broadening of the uncertainty causes problems. >> how broadly vulnerable is the entire sector of u.s. semiconductor makers, to what was happening in china not just with huawei >> so the direct impact from tariffs is minimal the trade in loss semiconductors between the u.s. and china is absolutely quite small it's less than $10 billion in

each direction and the context of a $475 billion industry, that's not much of a problem the bigger worry is, most semiconductors travel between the country inside other things. that could be impacted and so far, they really haven't, but if more tariffs could apply, that's a problem. itcauses prices to go up for products and demand, everything else semis are very macro driven. very related to the macro environment and to the extent that uncertainty and trade and everything else is dragging down the global macro environment, that will cause problem for semis. they're kind of at the tip of the spear. >> great to speak to you stacy. let's talk about the stock market with the pressure you're seeing not just in broadcom but really across the board this hour and that's especially true in the bond market yields on the benchmark 10 year treasury fell to new lows around 2.05% this morning and gold headed higher on pace for fourth straight week of gains

oil prices plunging and the fed meeting next week, what do investors do from here valerie grant is senior vp and portfolio manager and ron insana, cnbc senior analyst and commentator. ron, i guess the overarching question about for all this is about a slowdown, today you had much better data this morning, but yet bond yields keep sinking. >> and i think there's maybe a three pronged series of events going on it is the global slowdown you were just discussing with stacy and the uncertainty around the trade war. will the president move to put more tariffs on the remaining $300 billion of chinese goods that come to the united states and saw very soft chinese manufacturing data out this morning, slowest pace we should say since 2002 with the pullback, affected asian markets and broadly speaking in bonds of all kinds whether here at home or whether they're in germany now yielding nearly a negative quarter percent, i think part of it is geopolitical with the iranian tensions going on. gold would not be going up if it

were an inflation scare. this is a different kind of scare. >> you're positioned how for that stay long, stocks, we'll work our way out of this or no? >> our perspective on the equity markets is that the market is actually neutral to positive we still see opportunities in the market, currently we are overweight consumer discretionary. >> feel good about the retail sales this morning. >> i felt very good about the retail sales number this morning and why it's very important not to overestimate or overinvest based on short-term fluctuations because we know that some of these economic indicators really can vary and they're subject to restatement as was the case for last month's retail sales figures. >> what would change your positive view on stocks? what would it take >> it would take sustained evidence of a slowdown in the u.s. economy because what we know is that with global trade, the economies are much more interdependent and we tend to invest in large cap equities which means these are multinational companies.

so it really matters what's happening with trade, the macroeconomic environment can have unintended consequences. >> what about the people who say i don't want to wait for the slowdown to show up? we've seen that for a decade people are quick to jump out because i don't want to take it down 40% again. >> it pays over the long term to stay invested, particularly in equities our outlook for a 6% long-term return coming from the equity markets, based on our expectations for corporate profits as well as probably about a 2% dividend yield in the market again, over the long-term. so i advise people to stick with your asset allocation and stay exposed to equities. >> i was going to say quickly, one thing people are not pricing in is a sideways market for an extended period of time. >> way up or way down. >> where we were in january at the highs of last year, 3% off of those highs that we hit three times in about 15 months and we've had periods where the markets slammed between a couple of levels for an extended period of time until certain developments resolved themselves whether it's geopolitical risk,

whether it's concerns about a growth recession or profits recession, those are the thing that is appear to be on people's minds right now. as much as the market is 3% from its high, it's also really not done much in the last several weeks, months or the last 15 months so no better off than january of '18 a lot of sounded theory maybe signifying nothing or something. >> ron insana and valerie grant, appreciate it. new tensions with iran today. a rough ride for oil over the past couple of months though trade war growing fears about demands. rick perry will join us weighing c on all of this first onnbc next when we come right back stay with us ♪ feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise

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you're connected to wifi, saving on data. when you're not, you pay for data one gig at a time. use a little, pay a little. use a lot, just switch to unlimited. it's a new kind of network. call, visit or go to xfinitymobile.com. oil is front and center for the markets. u.s. central command releasing video showing iranian boats receiving device from one of the two tankers attacked in the strait of hormuz and preventing tug boats from tugging away the damaged norwegian tanker. and the iea with a new report showing oil demand is falling to its lowest level since around 2011. with us now to discuss these cross currents and more is the u.s. secretary of energy, rick perry who's currently visiting shahnear's saving pass, lng terminal

i hope i pronounced that correctly, sabean pass. >> you got it pretty close. >> close enough is good enough for me glad to have you back. let's talk about the threats in the strait of hormuz how worried are you and how worried should we be this could turn into something very, very detrimental to the supply of oil let alone to international security >> i was briefed this morning on the situation and obviously, iran continues to be a bad neighbor in the neighborhood and, you know, when you think about the sanctions that the united states has already put on place and the world has really changed. i'm not sure the iranians understand that as well as they should from the standpoint of the united states, now the number one oil and gas producing country in the world, right here at sabean pass, the second largest lng facility in the world only behind ross over in

qatar, so the dynamics really changed. iran should be thinking about do we maintain our market share how do we act like good neighbors? how do we, you know, continue to be a part of the global community instead of these obvious acts of treachery we've seen over in the strait of hormuz obviously, we're concerned about the neighborhood over there. whether it's our allies in saudi arabia or the uae or qatar they're concerned about this, but hopefully cooler minds will prevail and the country of iran and we can get this behind us and continue to have good global economic growth that's powered by, in a lot of cases, united states energy. >> i don't want to catch you on the wrong foot but roughly what percent of the world's oil flows through that strait of hormuz,

if you know, and if there is prolonged tension there, as we see today, the oil price is up a little bit even in the face of falling demand what would the effect on oil prices be if there is a prolonged stretch of tension there? >> the market is always going to respond, have a knee jerk reaction to some activity like that but here's what i think is really important these facilities like i'm sitting at in the united states, they're starting to develop substantially more of the world's market coming out of them and again, it would be disruptive if there were a prolonged conflict in that part of the world but it's not anywhere near as bad as it historically would have been without the united states' ability to deliver the fuel, particularly this liquefied

natural gas. you've got to keep in mind a decade ago, this facility i'm sitting at was being built as an import facility and because of innovation, the shale revolution that's happened in the united states, these are now export facilities and we're going to see a 50% increase in europe of gas from the united states by 2020 it is some fascinating numbers out there about our ability to deliver energy around the world, particularly in the lng sector. >> mr. secretary, if i can connect the dots of what you've been saying, are you saying you belie believe, the administration believes iran has less leverage in this whole potential negotiation because the u.s. is the number one oil producer right now? >> yeah, i think that's certainly a part of it and listen, being able to disrupt the markets, they think

impacts not just their part of the world but the united states as well. i don't think they have anywhere near as much leverage as they may think they have and certainly, i think the numbers back that up as well >> talk to us a little bit more about your purpose of being there at the pass today where you, i believe, are with the president of poland among other dignitaries there. how big is the market ultimately going to be for american lng and who will our biggest export customers be >> i'm not sure we know how big it can be yet. and part of it is going to be how fast can you build the infrastructure in the united states to be able to get this product to the market? there are numerous countries that are in direct negotiations right now doing long-term contracts. day before yesterday, we signed a contract i say we the united states and poland

through this facility to be delivering gas long-term, 20 year contract, and, you know, here's an interesting fact the price of fuel is now going down in europe because of u.s. supplies fati baro, the international energy agency estimates $18 billion was saved last year in the european market because of the united states being able to deliver this gas and not having to rely solely upon russian gas. so there's a lot of powerful positive messages that are coming out around the world about the united states' ability to deliver, not only a diversity of fuel but also fuel that's really economically good for those countries. >> secretary perry, we appreciate your time today thank you very much. >> you're welcome. thank you. >> all right, thank you. before we go to break, we want to mark the passing of

friend and former cnbc chairman bill bols ter. he was a pioneer in our business and made cnbc the force it is today. he joined in 1996 after a long and legendary career managing local television stations across the country, including wnbc in new york city. he was formidable. he was creative and entrepreneurial and he left every property he ran stronger than he found it for those of us who worked with bill including our current chair of mark kaufman and for the hundreds of cnbc employees who benefitted from his energy and vision, we sent heartfelt condolences to his wife eileen and his entire extended family

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welcome back to "power lunch. i'm michael santoli at the new york stock exchange. investors rushing to safety and pushing gold higher in its best month since january. the commodity now trading not seen higher since april of 2018. jake and mark are your "trading

nation" team to break down gold a little bit jc, very good run for gold although if you look back a few years, i feel like it's seen these levels five or six times since early 2017 early 2016 not been able to crack above them how do you see it now? >> i really think the short-term positive momentum really caught a lot of investors off guard and that's exactly what you said because for the last five years, gold has basically done nothing. if you look at a chart of the gld, it's basically been sideways over the last few years. however, the technical shape that it's slowly starting to take on is that of a base. so what we're really looking for is if the short-term momentum continues and we see a break above that 129, 130 which was that former resistance unable to be broken over the last few years. we get above that level and investors come running back into gold there's not much between there and i think we'll be buyers of a

breakout here. >> of course, physical gold in that trust mark, from a fundamental perspective or a portfolio perspective, how would you treat gold at this point i mean, sort of responds to all sorts of different macro factors. >> right so we don't own it right now we're not a poopposed to it butt has to be for the right reason two reasons to own gold. one for risk off purposes and the second is an inflation hedge and right now, gold is benefitting from the risk off trade. outperforming copper since the end of april and that's a great risk off indicator so i do think it's great to own as a calamity hedge, but there's no inflation in sight. i don't think the rally in gold is sustainable and we'd only be owning it for protection purposes and quite frankly, i don't think this bull market is coming to an end i think the market trades sideways and range bound unless and until a trade deal happens but consumer data still looks

pretty healthy so if there's no recession or inflation, it's just not a fit for us right now. >> yeah, i mean, the gold fans will say it doesn't just take inflation. sometimes it's about central bank uncertainty or low yields or who knows what purposes but we'll watch to see if it can break out here jc, mark, thank you very much. for more "trading nation," head to our web site or follow us on twitter at @tradingnation. melissa, back to you. >> thank you, michael santoli. ahead on "power lunch," the tariff impact. many companies saying more tariffs cost american jobs plus, what could be a growing threat to the housing market and biden versus bezos going after amazon all this when "power lunch" returns. >> and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> overbought and oversold indicators are generally used differently depending on whether the stock is range-bound or trendy look to buy a range-bound market when the oscillator such as the

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here's what's happening this hour pat bowlen has died. bowlen's family announced in a statement he died last night following a lengthy battle with alzheimer's. king arthur flour recalled more than 110,000 bags of all pu purpose bleached flour due to risk of illness. the world's lightest panda born, weighed in at 1.5 ounces it's about the weight of an average chicken egg in case you're wondering and disney is on pace to earn a record $9 billion with a

"b" dollars with fans still awaiting "the lion king," "toy story 4," "frozen 2" and "star wars" rise of sky walker all due out later this year. that's our cnbc news update for you this hour and let me add my condolences to the family of the late bill, he was a force of nature and we owe him a lot. >> bill, thanks. bill griffeth. the oil market kate rogers at the cnbc commodity desk. >> up a quarter of a percent crude up here just under 1%. both with weekly declines. 1.5% to 2% analysts with a deteriorating demand outlook the opec both got their 2019 in global oil demand this week and attacks on two oil tankers did raise concerns about potential supply disruptions the international benchmark was about 1% higher following

reports this afternoon of iranian boats preventing from tugging away one of the damaged tankers and called for an independent investigation into the attacks this week. all of that factoring into the moves we're seeing today thank you. to meg tirrell with the news alert on the drug makers, meg? >> melissa, remember the rule we're going to require drug makers to put the list price of the medicine in their tv ads three drug makers with the association of national advertising are suing the hhs trying to prevent that from coming into place. we've got the lawsuit right here amgen along with this association of natural advertisers and quote, a statement from amgen what it doesn't agree with the government approach with the direct to advertising rule and not only serious freedom of speech concerns but mandates an approach that fails to account for differences with treatment of patients themselves most importantly, it does not answer the fundamental question the patients are asking. what will i have to pay for my

medicine they're suing to try to stop this back to you. >> thank you very much jamie dimon and leaders meeting with trump to talk about getting a trade deal done. more than 600 companies including walmart, target, they've written a letter to the president urging him to resolve the trade war with china saying tariffs hurt u.s. businesses and consumers. joining us now is neil bradley from the u.s. chamber of commerce which represents a number of the companies in that letter but we should point out that the letter was not specifically from the chamber. mr. bradley, welcome good to have you with us. >> thank you, it's a pleasure to be here. >> i want to begin the president earlier this week spoke to cnbc and he was quite critical of the u.s. chamber and i want to run, it is an audio clip of what he said and get your reaction to it. >> we lose a fortune with virtually every country. they take advantage of us in every way possible and the u.s. chamber is right there with them and i assume, and i'm a member

of the u.s. chamber, maybe have to rethink that because when you look at it, the chamber is probably more for the companies and the people that are members than they are for our country. >> i'm not sure mr. bradley what the president means when he said the chamber right there with those who take advantage of us in every way possible. but i do understand what he means when he says that the chamber is probably more for the people and members of its group than it is for the country what do you think of that? >> well, we represent the interests of over 3 million american businesses and the folks that work for those businesses no question that we occasionally differ with every president on policies we've had differences of opinion with the president with respect to tariffs but the great thing about our political system is at the very same time you're disagreeing with an elected official on one thing, you can be working with them to advance something else that's also critically important. the president's number one legislative priority is the

enactment of the usmca and happens to be the u.s. chamber's number one legislative priority. >> you think it's a good deal for american business, a good deal for american workers. do you think it will pass before this congress passes from view a year and a half hence? >> i do and in fact, i'm very bullish on that. i think it's going to pass because it deserves to pass. there are 12 million american jobs supported by trade with canada and mexico. this deal takes nafta, written before the age of the internet and modernizes it as a digital chapter. it's great for small businesses, which heavily export and import between canada and the u.s. and mexico frankly, whether you're a republican or a democrat, if you claim to be pro growth, pro business, you're for american workers, this is an easy call and we're talking to lots of folks on the hill. they like to say they're for american workers and the economy and our response back, we expect

you to be voting back on usmca. >> in the long run, mr. bradley, in terms of a trade deal, potential trade deal with china, the things of the administration trying to rectify, ip theft, unlevel playing field, things like that. in the long run, would that be good would your organization say, yes, we are behind those goals but in the short-term, we don't like the tariffs how are you going to get there is that you don't think the president can get there with another round of tariffs >> well, let's break that out into a couple of parts first, the president deserves a ton of credit. he's the first one willing to take on the industrial policies of china which use state subsidies, intellectual property theft, forceful localization that has to come to an end and the administration is right to take it on now, there are a couple of tactics you can use in taking it on we would prefer an approach that involves gathering allies and confronting china together, using trade forums, wto and other levers that we have with

respect to china rather than simply continued escalation of tariffs. one of the things we're concerned about this next escalation to the final $300 billion is it's really hitting consumer products. for the first time, what we're going to see is that american families, when they go to the store, when they buy things, whether it's apparel or toys for their kids, they're going to be paying these tariffs and that is going to punish american families just as much as it punishes china and it's not clear that it's getting us any closer to a solution. >> i suppose the president, if he were sitting here, would say that by making china pay a hard dollar price in his view, it's china who's paying i'm not sure i see it that way, but by putting those tariffs on china, you are putting the burr in the saddle that may drive them to the negotiating table the way, i'm sure he feels, mexico was driven to make whatever concessions it did last weekend to avoid the escalating

tariffs that he was threatening there. so my question basically is, when are tariffs an appropriate device to try and force a negotiating partner or adversary to do things that they otherwise wouldn't do? >> well, i think the first step in thinking about that is tariffs are a trade policy, right? and as a trade matter, they should be confined to the trade space. that's one of the things that really concerned us about the proposal of mexican tariffs. the crisis of the southern border, which is very much real. it has nothing to do with trade policy or tariffs. the second thing is tariffs are a tax that we impose on ourselves. our own businesses, on our own consumers. when you take that step, you have to recognize what you're doing to your own economy. what you're going to your own businesses and that's, frankly, a position that we've been trying to talk to the white house about that our point of view is that this is just as damaging to american families

and businesses as the administration has argued it might be for china. >> do they take yaour calls or say you're unpatriotic >> we have a great working relationship with the white house. we were talking to them. we've talked to them virtually every day. our ceo, tom donahue, over at the white house yesterday for the president's announcement on hiring, returning, folks who have served their prison sentence and getting them back into work. it happens to be another priority of the president's. it happens to be a priority of the u.s. chamber so we have a great working relationship with the white house. >> mr. bradley, thank you for your time today. >> thank you for having me. >> bradley of the u.s. chamber. to the bond market now, rick santelli is tracking all the action at the cme. rick >> reporter: h >> hi, melissa lee good day, good retail sales, good revisions atlanta gdp ticks up to a level of 2.1 now, let's look at some two-day charts two year, 10 year dollar index twos are basically unchanged on

the day and the week two day of 10 year shows you down a little on the day and down on the week dollar index the most aggressive chart up a penny on the week and some of that data might be fed related, quickly to the white board. university of michigan, 5 year to 10 year inflation, 2.2. do you know when this chart starts 1979 the lowest reading on the entire chart. i'm sure the fed will pay some attention to that next week. "power lunch" crew, back to you. >> that's a great looking chart. i'm impressed. looks computer generated >> rick santelli generated as it turns from spring to summer, the housing market usually starts to cool down. but not this year. we'll tell you why what's going on out there and whe trehe heat is coming from when we come right back my old friend ♪ess, announcer: more details incoming involving volkswagen and the growing scandal. dissatisfied customers filing complaints

against the german auto maker. ♪ because a vision softly creeping ♪ ♪ left its seeds while i was sleeping ♪ ♪ and the vision ♪ that was planted in my brain ♪ ♪ still remains ♪ within the sound of silence ♪ in restless dreams i walked alone ♪ ♪ narrow streets of cobblestone ♪ ♪ when my eyes were stabbed ♪ by the flash of a neon light ♪ ♪ that split the night ♪ and touched the sound of silence ♪

your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity. spring is usually the hot time to sell a home but this year thanks in part to falling mortgage rates the summer is heating up for housing and diana olick joins us from washington with the details hi, di >> reporter: hi, ty. home construction is not where it needs to be but mortgage

applications to buy a newly built home jumped 20% annually in may according to the mortgage bankers association. now, that coincided with falling mortgage rates throughout the month. rates continued to fall into june and now at the lowest levels in two years. so which builders are in the best positions john burns real estate consulting breaks it out public names look like this. kb homes are best because they're concentrated in the southwest where the market's outperforming. nvr as well because they build in the northeast, bouncing back from weak demand a year ago. dr horton, concentration in texas and entry level product. biggest footprint in texas as well and florida and the southeast. on the other hand, tri-point and williams is slowing permits because about a third of their exposure because costs are highest but the problem for all home builders continues to be high home prices

half of the public builders have an average sale price above $400,000 >> stay with us. the mortgage market, as you know, is booming declining rates pushing applications higher which benefits buyers and lenders. the ceo of quicken loans saying there have been record loan volumes. like quicken loans seen their shares of the lending market grow but many including jerome powell and jamie dimon say they need to be watched more carefully. joining us to discuss this, the professor at the georgetown university law center. chris, great to have you with us you see that this could potentially be a risk when the economy turns. can you walk us through the steps as to why a non-bank mortgage loan could present problems >> it's a little bit like, do you want to put katie out on the basketball court against the raptors, right >> no. >> right now, you have the opportunity where you have these

loans. they've suffered different kinds of catastrophic injury back in 2008 but they have this shot of adrenaline called low interest rates, called strong economy, certainly low taxes, probably have helped but again, when the pressure is applied to those legs of these instruments, are they going to end up blowing out their achilles that's the question that's being asked. when the economy starts to decelerate, are you going to have a challenge posed to these non-bank lenders who are subject to fewer capital constraints and are they going to ultimately be able to withstand the economic pressure >> i think to understand this issue, chris, we have to focus on the last part of what you said and that has to do with the regulations. for non-bank to extend a mortgage, they're subject to fewer regulations or lighter regulations than say a j.p. morgan or wells fargo, any of the traditional banks. is that what you're saying

>> that's right. ultimately, these banks are subject to fewer capital requiremen requirements, fewer liquidity requirements and much more rigorous stress testing which can ultimately impact the amount of capital they have to hold >> diana, you're shaking your head. >> reporter: i'm shaking my head because you're talking about the capital requirements and that may be true for the non-bank lenders but focus in on the loans. the loans they are making. the non-bank lenders are largely backed by fannie, freddie, hsa they are not any more risky loans. the vast majority of these loans are 30 year fixed and they currently have the lowest delinquency rates we've seen in years. so yes, if there's a turn in the economy, that could hurt some borrowers but not like these loans are any more risky than the loans that are being offered by the big banks or were offered. i think everyone says this is the shadow banking system. there is nothing nefarious about

a non-bank lender. but they're getting a lot of business and they still act the way they do for fannie and freddie guidelines. >> respond and address the questions of what happens with these loans. aren't they sold pretty promptly by these non-bank lenders? they're not on their books. >> two things happen number one, they're sold they'rr not on their books but often they can operate as mortgage serviceors and that has a real impact if they're wiped out and the ability to service those loans if there are defaults but also they're landing on the balance sheet of institutions that are ultimately backstopped by the federal government and we've always been very wary of them and we've seen the story before what happens when the government and ultimately taxpayers have to pay the bill for loans that are ultimately being subsidized by these in this particular case explicit government guarantees >> all right we're going to have to leave it there. >> is it the same for the banks as the non-banks >> no, actually, it's not actually true that the loans that are extended via the --

particularly as pertained to your fha loans that are ultimately purchased by the freddie mae and fannie mae, or that the same rules are necessarily going to be able to apply because they can assume and purchase debt that has a higher debt to income ratio as would ordinarily be the case for other ultimate purchasers of those loans and the non-banks are able to arbitrage some of these rules. and are able to escape the capital requirements while at the same time enjoying a kind of subsidy by off-loading those loans onto these government-backed entities and that's the problem that's why there are red flags being raised >> all right we're going to leave it there. thank you so much. chris bremer and diana olick scl thank you. >> after the break it's time for today's tasting menu amazon's footprint, puic health versus religious freedom, and a wounded warrior. "power lunch" returns in two ♪

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amazon has come under fire over an analysis that showed it paid zero federal income taxes last year despite earning nearly $11 billion. the company is pushing back against those numbers tweeting that it paid 2.6 billion in corporate taxes since 2016 amazon said, "we pay every penny we owe congress designs the laws. assuming biden's complaint is with the tax code, not amazon. here's the reality there is no way to tell for sure amazon has paid in taxes, much less federal income tax. but it is true that corporate tax cuts have brought down corporate tax revenue much faster than anyone had expected. $11 billion so far this year other presidential candidates have taken shots at amazon as well elizabeth warren and bernie sanders, for example guys, the president has no love for this company so it's going to be a rocky road to 2020. back to you. >> for amazon. >> yes maybe for the candidates too

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is this ride safe? i assembled it myself last night. i think i did an ok job. just ok? what if something bad happens? we just move to the next town. just ok is not ok. especially when it comes to your network. at&t is america's best wireless network according to america's biggest test. now with 5g evolution. the first step to 5g. more for your thing. that's our thing. welcome back here's a taste of other stories we're watching today e-marketers reducing its estimate of amazon's market share for 2019 online sales in the u.s. to just 38% from 47%. there could be a bright side because hey, tech is under fire

for being too big. amazon's point here is especially with third-party sales maybe they're not as big as we thought. >> or the delivery wars. we just heard yesterday that target is amping up its delivery offering so that's becoming a lot more competitive in terms of a -- >> a percentage of all retail is quite small, right well under 5%. maybe even 2%. new york state is set to pass legislation to end religious exemptions for vaccines as it faces a measles outbreak there have been 588 confirmed cases in new york city alone since september. this raises the question should we put public health above religious freedom? >> but it rarely comes up one versus the other it's going to be a question of enforcement. and so far the other strategies weren't working. >> i don't think they can solve this one in 12 seconds so i'm not going to say anything >> okay. >> okay? >> yeah. >> the toronto raptors won their first nba title and of course they beat the golden state warriors but their victory overshadowed by another devastating injury, this one to klay thompson. he tore his acl ligament and

could miss next season earlier in the series kevin durant ruptured his achilles and is also expected to be out next year both players were headed for lucrative paydays in free agency, and it really scrambles that >> so sad. >> so sad for both of those guys >> and they have the new stadium opening next year. now they're both going to be out. >> thanks for watching "power. >> "closing" starts now. welcome to "closing bell." i'm sara eisen down here at the chewy post another hot ipo day at the new york stock exchange. the stock is surging up only 55% right now. 59 minutes till the close. we'll tell you everything an investor needs to know >> and i'm wilfred frost d good afternoon to you let's get to what's driving the action broadcom driving down tech stocks bond yields sitting near recent lows, and investors are awaiting next week's fed decision at the moment markets down by about five points on the dow

that's ner the highs of the