points or so not a whole lot of movement. we moved from 210 on the ten year 210 to below 2.05. quick look at the dollar maybe trade deficit today, it did fall off a level make sure you join us tomorrow, same crew will be here "squawk on the street" is next it is what investors around the globe have been waiting for, fed chair jay powell set to testify on the hill today. the watch is on for more hints about future rate moves. that begins in about an hour good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. futures got a bounce and yields did drop, seems to affirm expectations of a cut. in his prepared remarks, he says, quote, it appears uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the u.s. economic outlook

since may, cross currents have re-emerged it was almost a year ago today, july 18th, 2018, that the president first levied his criticism against the chair in an interview on cnbc >> i'm not thrilled because, you know, we go up and every time you go up, they want to raise rates again. i don't really -- i am not happy about it but at the same time, i'm letting them do what they feel is best. but i don't like all of this work that goes into doing what we're doing. >> since then, dozens of tweets and quotes going back to the fall obviously things like are you listening, fed, they don't have a clue, we would be thousands of points higher on the dow like a stubborn child blew it is this going to be enough >> i do, i thought the statement was written by larry kudlow had i first read it. it was written by fed chairman powell the key thing is he does blame the tariffs because he says domestic is good he lays it on trade tensions,

which is therefore saying listen president trump, the fault isn't in trump, it is the stars. the futures went up huge i'm trying to tell people, please don't react to the futures like this. we're about to have earnings and if a company doesn't report a good quarter, it doesn't matter it is in the futures. go by pepsi, like pepsi's quarter, i use that as an example of, wait, you any what, i now like micron. powell has nothing to do with micron has to do with trade tension what do you think of that? >> we're moving into reality of earnings season, a lot easier to probably ascertain than is which way things are are going to go with the u.s. and china at this point. so we're going to be focused on earnings, obviously, we'll continue to focus on chair powell today and testimony, see if we get anything else, particularly in light of the year's worth of criticism he

received what is the response >> gray hair >> yeah, has much more gray hair. >> he had gray hair when he started. >> that's why trump picked him >> he needs that hair from -- >> stay in the game? stay in the game >> yeah, he looks worried. >> i don't think he's reacting to trump he's reacting to trump's trade war. >> he also mentioned brexit and the debt ceiling. >> yes you know what i loved about this thing, for the first time, he talks about the idea there is people blowing out of the workforce. and they're blown out, i think, by technology. now, he also talks about productivity not being -- i think productivity is pretty good what matters is that when you see all these companies, z scaler, pager duty, zendesk, whether they be octa, crowd strike, these are things that allow you to fire people they allow you to fire people. the people that they are firing are not people who just got out of stanford. they're people really going to struggle and powell acknowledges that,

thank heavens. minorities still don't have the right employment number. i thought -- i like this i like this statement. >> you're raising some larger questions and issues for the u.s. economy overall in terms of how you retrain workers, create the jobs of the future so to speak as more and more people are displaced in terms of automation, ai, robotics, everything we talk about there is the other side that says regardless of these advances, they always end up creating more jobs eventually. >> that's the fairy tale >> it may be a 30 year gap. >> the steam engine, we got more jobs after the steam engine. >> i agree where people are getting -- i thought this was a considered statement that there is a part that is being left behind, look, i think you can get a job anywhere you may not be able to get a job equal to the skills, maybe that's the way it is i did like the fact, you recognize that the economy slowed noticeably, what is interesting is it had started slowing noticeably when he raised the rate in december.

is that -- he refused to admit that that's wrong. i think that would have made trump really happy. >> raises concerns about the level of federal debt. don't hear that too often. >> no, used to be an issue >> record deficits >> kudlow, apparently, not concerned at all in what he told kelly yesterday. >> king dollar king dollar. i do like -- look, this is what the market really wants. it wants -- if it continues to get weak, we're going to cut rates and people love that and remember how many people sold stocks? because the yield curve got inverted that was another stupid parlor game people come in and they buy the stock market, thousands of points higher. always wanted to say that. >> there is morgan stanley too today. calling -- reiterating a call for a 50 basis point cut this month. >> they want to set you up. >> they say a nonlinear impact to growth could materialize if financial conditions tighten and bringing corporate credit risks to the floor. >> didn't they say the other day, they're putting their money where their mouth is, sell

stocks their mouth is eating a lot of stock today. and i think you have to recognize that they're setting you up you don't get 50 basis points. that would be reckless of powell he's got to roll back the first and then take it again and the second one we get a trade deal, remember, mnuchin, yesterday, spoke to someone in china did you know that? talked to a vice guy. >> was it the guy in the street that he met? >> some of the headlines suggest the two sides aren't close. >> they're not and this huawei statement that they're going to sell nonessential, but huawei is basically an arm of the military, i mean, there is no give no give. >> what? what are you saying? >> the huawei statement, doesn't clarify anything. >> it is going to remain on the entity's list. >> remain on the black list. >> yes >> so is fedex -- >> fed -- you think my comments are full of -- signifying

nothing? >> i don't know what to make of them >> that's not faulkner that's shakespeare, chief. >> that is shakespeare, right. we can't figure out what is your point, i think you're making where huawei really stands >> you can't >> what do you do now? >> i don't know. >> do you move into that breach conceivably because you can, because you think you're not selling nonessential components or completely black list. >> people are spying micron and analog devices they don't -- >> you're saying they didn't. >> what is this? the huawei hand set, you can smash it and what comes out? >> how are you supposed to know? nobody knows >> have you smashed it >> no. >> i'm joking i think they gave you nothing. i think the trade talks are going badly. if they suddenly had a break, you know, we had it mar-a-lago thing, you know, unlike some other people kicked out of

mar-a-lago, what happened is you would then find that chairman powell cannot cut rates. so i just say please, look at individual companies, don't use this as a green light to buy levi's, which is not in the s&p. what a quarter did you read that conference call >> i did not >> t-mo replacing red hat. >> how do you like t-mo. everything goes ledger's way i want to be john ledger. >> i'm not sure it is all going his way. >> yes, it is. >> macon delrahim may have something to say about that. >> i'm jealous of -- >> and/or the germans, who he's trying to navigate around right now. >> he's probably right now on his peloton. >> holed up in the trump hotel in d.c. again for the 700th time trying to figure something out here close by a lot of meetings there. >> the stock is up 2 1/2 on the addition i thought it might be an upgrade. >> we got a few of those as well jim mentions levi's, it is down in the premarket maker of jeans says it expects sales growth to slow in the

second half due to weakness in the wholesale business that news overshadows better than expected results overall. stock up 28% since the march ipo. bigger promotional expenses, jim? >> yeah. >> higher ad spend. >> i think that the idea that this was a surprise positive is just dead wrong. i think it was really close to being about a uboptimal as you can get. they talk about the stores closing. they talk about the direct to consumer speak, but the fact is the customers are going out of business in record time. and the doors are closing. yes, on their own they're doing okay this is about jcpenney, about the mall doing badly my favorite line was chip berg saying we do have a strategy reassuring >> is that like focusing on clients again? >> again, yes. precision railroading. again, i just keep wondering, what were they all doing before precision railroading?

>> i don't know. did levi's not have a strategy now they have one, which is to sell -- they, look, chip berg is a great executive. the fact is that this country is having a -- we're overwhelmed with denim, we're choking on denim. this is -- we are really in a retail bind if it is not target, if it is not costco, if it is not walmart, if it is not amazon, and if it is not lululemon. how they pronounce it in france, i think. >> no, we have discussed many times the tale two of cities, the -- >> our dickens. >> mercedes is fabulous. can i tell you, i was in the target yesterday, one in brooklyn, near me, flat bush, 1598 flat bush, target has an inner city strategy. >> brilliant opened one on the east side. >> yeah, yeah, very excited upper east siders. >> bright, clean, cool they can do small format

shipping is good i think target is the most undervalued major retailer, but levi's, you want some levi's, go to costco. look at that target chart, will you? >> how about -- >> walmart record high yesterday. costco record high yesterday >> these companies are just killing it and they're killing the other guys costco is doing so well. optco says something positive. i'll say something positive. >> this other retailer, online, amazon, i think. >> 2,000 this morning. >> just a sec, i'm working on it, walmart, amazon, target -- >> horseshoe loves amazon. >> trying to come up with a new acronym. >> i'm going to work on it during the break walmart, amazon, costco, target. that -- taqua?

the stock has this instagram thing. >> not at the social media summit at the white house today. you have a social media summit without twitter and facebook. >> i don't know. i got a million followers. i'm offended more on instagram. it is a lot of fun. >> when we come back, speaking of some of the names, setback for netflix in the streaming wars to sun valley with an important week for the media business. live coverage of fed chair powell's testimony as jim messenger mentions facebook above 200 futures are up we're back in a moment it all started under this buttonwood tree. twenty-four people came together to sign an agreement that created the stock exchange.

just the right elements coming together. it started when scores more people came together, just down the street and traded bonds that helped pay for the revolution, and the nation it created. it started in an office on the corner where the right people witnessed the telegraph and brought information and humanity together forever. it started with the markets, bringing together steel and buildings and silicon and medicine and rockets. we believe the possibilities of life and investing are greater when we come together. it's why for eighty years we've connected ideas with technology, data with inspiration, investors with solutions. so that every day together, it all starts again. ♪

every year since 2007, cnbc ranked america's top states for business this morning we're revealing which ones top the list for 2019 and for that, we go, of course, to scott cohn in the state that came in at number one. good morning, scott. >> good morning, carl. the top state for business this year is virginia and we have been honored to have with us the u.s. army old guard five and drum corps.

they date back to 1784 we always have done it the same way, ten categories of competitiveness, weighted on how much the states push them in marketing. this yore's cear's category win education, a tie between massachusetts and virginia, technology and innovation is california, business friendliness is new hampshire, access to capital is california, and the lowest cost of living is mississippi. later today, on cnbc, we'll have an exclusive inside look into how virginia won amazon's hq-2 watch that and see how your state's stacks up at top states.cnbc.com. >> what a morning, scott did you see him zip lining only scott can pull that off. >> fantastic job i was wondering whether it would be indiana, they have that zero

unemployment, but you're right, virginia snagged the most important piece of business. they're not anti-big box and not anti-big internet down there, are they >> no, in fact, 70% of the internet traffic goes through the state, and the other thing is the big tailwind for virginia is the defense spending, which is growing and it counts for 12% of the state's gdp when the defense industry does well, this state does well >> scott, can't wait for more as always, a lot of people look forward to this. scott cohn with top states for business netflix is the other big story, losing another high profile tv property next year "friends" will move to hbo max. the second big blow to netflix in the past month. a few weeks ago, our parent comcast announced the "the office" is moving to its upcoming streaming service hbo max will offer exclusive original programming and warner's library the journal says they're paying nearly half a billion dollars

for five years of "friends". >> yeah, a big number. and netflix obviously has been paying them 100 million bucks a year or so, 80 million a year, i think. it is so -- the journal also goes on to talk about just how much is going to be spent per episode on the enormous new franchises, disney plus, $15 million an episode potentially as they create a new world, lord of the rings very expensive for amazon what it points to from my perspective is the proliferation of all of these streaming services, what is it going to mean for the leader netflix in terms of its ability to continue to attract new subscribers growth overseas, many people don't see that abating anytime soon you got warner's hbo max out there trying to get, what, 70 million subs, disney plus, which many people also say, 70 million, that's the key number

our own ad supported, free if you have cable, nbcu streaming service. you go on and on there will be such a been an amount of choice for the consumer out there and the question is whether there is any fallout from the services that already exist. will hulu suffer while disney plus succeeds? >> in 1853, i would have bought levi's, i don't want to buy levi's now picks and pans and pants you use if you're a gold miner you have to buy roku roku defied the analyst. everyone thought amazon would destroy them they're de facto i'm trying to come up with one -- >> i hear it. >> content providers in a positive spot. much harder to play the stock market since these are typically individuals in many cases. >> by the way, goldman takes our parent to conviction buy today target 54. part of the thesis is that we're

nearing the point where cord cutting is offset by the pricing power of broadband >> yes sky. >> they say that comcast is the most attractively valued megacap in the s&p 500 with positive eps now. the people are looking for as much as 375 a share. i do want to point out, no offense to the team at goldman, but, you know, they had barry kaplan, rich rosenstein, they had stronger people there in the past, this is not an ax in the stock. this guy >> oh. that's harsh. >> just not. he's not. >> brett -- >> yeah, he's not a big name no offense to him. stock will be up goldman still goldman. this is not a team that -- >> the most -- >> a lot of co-managers listen to closely. >> like you spent -- you were -- goldman is still goldman. >> a keen sense for the obvious. >> yes >> cramer as mad dash coming

next opening bell and we're close to powell on the hill futures still getting a bounce from the techs to that statement, released almost an hour ago back in a moment

♪ we got about six and a half or so minutes until we get started with trading what jim and i like to call hump day, the middle of the week.

fedex has gotten your attention for the mad dash. >> david, in honor of your profound statement that goldman is still goldman, i want to point out that they upgraded fedex today. it is initiating coverage. it is not just a buy like comcast, parent company of this network, it is conviction so that means i guess if it is a buy, it might lack conviction. no this is a conviction if you look at the chart of this thing, i think you see -- this is one of the worst stocks out there, one of the best companies out there. this is considered to be a casualty in the trade talks. if you listen to mr. smith, he's a very smart man the company is run by an economist. he's friends are larry, larry cudd l kudlow if you think they can integrate tnt in europe, buy it. those are very tall orders and if goldman is goldman, though, so maybe this is the time to buy it through the valley. maybe they'll do precision

packaging. >> precision packaging we should talk about goldman around the bell. it is not really goldman in terms of the way it performs >> credit card goldman you don't like that? capital one goldman in. >> i don't mind cap pital one goldman. >> what's in your wallet >> i don't have a wallet anymore. we have opening bell in a few minutes. stay with us on "squawk on the street."

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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell set to ring in just a couple of minutes if you're just joining us, jay powell's statement to house financial services is live essential essentially affirms expectations are a rate cut, that's the argument going into the hearing, jim. and we're going to be watching to see if we have a crack at s&p 3k. >> well, i don't want this to be the way the market works, which is that we only go up when things are bad because that's no way to run a railroad, so to speak. what i really want is to have good growth, with low inflation,

not subpar growth with low inflation. i think he takes -- i guess he's going to take back the ill advised rate hike, but i don't want to -- if you read through the statement, you're going to be very worried about buying an illinois tool works. very worried about buying a parker hannafin, two downgraded today. basf, the company was down, the world's largest chemical company, basf, you don't know what they make but they make everything nodding. you can't see you're in agreement with me. >> to jim's point, earnings next week, everything from citi to goldman to csx to ebay to microsoft to sun trust you name it. >> take microsoft, there is a stock that has just run and run and run. is that pepsico? it ran too much? pepsico upgraded, i think having

a great quarter. azure is terrific. does it deserve to be this high if the economy is slowing? that's the question. >> to the opening bell here. s&p 500 at the cnbc worldwide exchange, big board. at the nasdaq, horizon pharma focused on developing medicines for rare diseases. we should mention parade parades getting under way outside for the women's soccer team. >> they captured the hearts and i know that those of us who coached women's soccer, girls soccer, are proud that it turns out that it was worth it because that's where they learn. when girls had, you know, dads who are out there and have spare time, larry kudlow, we arranged so i could have a week day practice, wednesday, i could take off, so i could practice our kids, so we could go all the way, and, you know what, i took our kids and i had them run around, do laps, i had them work

out, i kept them until 8:00, we were about winning >> did you >> you bet we went all the way! we had a girl who broke her arm, in the finals. and i told her to tough it out i didn't know she broke her arm. sometimes you have to say tough her arm. >> she didn't break her leg. she can still play >> exactly that's how we won. dads who coached women coached too. >> you were talking earlier about fedex, which is going to be one of the s&p leaders, nice call on the sell side today. >> i do say, well, this is a good call in terms of what the fed is talking about do you think that fred smith can manage this downturn because when he was on mad money and i just revere the man. he did say, look, there couldn't be a worse situation basically with trade in china, remember, he's a very free market economist, but he recognized, look, we got to -- china is too

big to ignore. you can't walk away from china sometimes i think the white house thinks china isn't that too big to ignore. i think china matters. >> the second largest economy in the world, on its way to potentially eclipsing ours in the next, what, ten years. >> this reuters poll, jim, and david, economic growth expected to go to 6.2 in china. which would be a 30-year low 30-year low. >> we're responsible for a lot of that. yesterday, the autos basf and they are in a lot of the -- it is china china, china that was really the growth market for autos and that ended the chinese consumption of almost everything slowed down. except for lvmh and estee lauder the only two i have up. >> it is interesting it is the largest automobile market in the world by far at this point, but they are moving aggressively towards electronic

vehicles, you know, obviously given their huge pollution problems, which changing the mix over there >> i do when i was talking to fred, talking to the ceo of fedex, i was conscious of the fact that this can be a longgoln e-commerce this is the kind of thing if you buy it right here, you're buying it and you will accept the consequences of another quarter. and i don't know how many people in this hair trigger market are willing to accept the consequences of another bad quarter. they sure didn't last time i think people consider people who want to go through a hump are able to buy that stock understand that jay powell ain't going to save it. >> speaking of transports, really quick, journal has a big piece on the nightmare summer for american airlines. they do cancel more max flights through september 3rd. boeing is on the front of the journal as airbus is on track to overtake them as the world's biggest planemaker for the first time in eight years. >> yeah. >> got no max orders last --

>> they got how many of them sitting up that they haven't sold that were already completed. not to mention the ones that are idle, but already in service from the airlines. >> american airlines seemed to react to that article. remember they said that the numbers are improving. but, yeah, boeing, look, you speak -- i speak with ceos offline, they don't want to talk about jay powell they want to talk about boeing did boeing handle it right is boeing -- is this the way you go about it? is boeing adjusted correctly they're all worried, anybody could be boeing. a restaurant could be boeing department store could be -- anybody could be boeing in the sense that something people think was not handled right and then you adjust, i think that boeing is now handling it right, but look what happened handling it right, not no orders to speak of for that one particular plane a great american company it is going to go through it just never really came down.

it never really has come down. i don't really understand that maybe people feel that one day we're going to wake up, china will want a lot of planes. the stock is up 10% for the year how is that possible how? >> i don't know. >> i don't either. i find these buyers -- >> the crisis will pass. and -- >> i think that's -- >> it has a duopoly. even if they're eclipsed by airbus to some extent, they will once again reign supreme i don't know. >> i need to hear trade data that says the chinese are committed to buying boeing planes that would make me feel terrific because china is the most important market some people say a quarter of the planes go there. i want to hear from someone who talks about trade. >> bloomberg story that the president is asking his aides to look into ways to weaken the dollar out today something that reportedly mnuchin and kudlow are opposed to. >> larry loves king dollar can you imagine the man who made his bones on king dollar is now

asking to have night dollar, bishop dollar. what do you think? >> i think it is odd >> we have some breaking news this morning on u.s. mca to kayla tausche in washington for that >> the fed chair says trade worries may start to show in data two sources tell me the white house is planning to send the u.s., mexico, canada deal to the hill after september 1st, which would set up a vote on the new nafta by the end of the year the white house could send the bill up to congress as soon as this week to start that 90 day clock even as a working group of house democrats meets to work on a handful of issues th s they l have with the dell but a senior gop aid tells me there is a debate between the white house and the office of the u.s. trade representative over how aggressive a strategy to pursue here president trump's acting chief of staff mick mulvaney and vice president's chief of staff mark short are favoring pressuring democrats with a deadline so

they can't run out the clock to an election year robert lighthizer said that strategy could back fire sources acknowledge there is some breathing room with regard to the timeline here with congress now expected to be in session in september to work out some of the lingering budget issues before many lawmakers were expected to be out on the campaign trail if they reach this budget deal before recess, we'll wait and see whether they get that and that that means for the fall legislative calendar. >> kayla, quick, has pelosi told the white house that the house is ready to receive this >> so far as i know, not yet white house officials have been beating their chest for weeks now saying that if pelosi were to put this deal on the floor, that it would pass with overwhelming support she has not communicated that is in fact the case within her conference or they're ready to take it up. >> that's going to be key.

no wonder powell -- thank you, kayla, no wonder powell puts it in context here. >> sure. this is so important if you talk to a u.p.s. or fedex, you got to get this there is good agents the number of cars coming from mexico, and this is something that if you're going to mix sticking point, a democrat, you argue that but this is good for -- this is a -- it is a good thing for everybody. it has got to get passed if someone relates it to the wall, there is always -- it is more complicated than just good for america. >> yeah. jim, i wanted to come back to you. we had ginni rometty and you had her and jim whitehurst yesterday and on "mad money. anything that we learned further from our conversation to then your conversation with them separately on "mad"? >> they're talking about being

collaborative. this would sound like with most companies, why not be collaborative? but ibm historically is thought, now, it is true, it is thought to be not collaborative, you got jim whitehurst saying we're going to work with everybody, ecumenical, that would be fabulous for them. i believe in this. the analysts don't the analysts almost to a person think, come on, this just doesn't matter i think that is shortsighted the last quarter, not perfect. but they are doing a lot of stuff that is going to make it so that they're not just you do business with ibm. ginni would say it never has been as as cloistered as you think. whitehurst stands for we'll work with everybody vm ware, they said it is not a vicious opponent i disagree to that i think it will try to carve them up. terrific relationship with amazon but i -- >> owned by dell. >> yes i think this is a good move. i'm not backing away from that i think the stock is a buy. >> a little bit of an update on

the broadcom semantic talks which continue now there has been a lot of reporting from other outlets on this they do seem to be lining up for a potentially an announcement of a deal early next week could be as soon as monday they continue to move ahead, i'm told, by people familiar with this you're 28, i don't -- i don't know, jim. from what i'm hearing prices still a conversation right now and 28 may be what the company wants, but it may not be what is being offered. >> okay. that's fair. >> so we'll see where it ends up but you still got due diligence getting done you got the capital structure that they're trying to figure out at broadcom, rating agencies you have to talk to. a fairly large deal. broadcom stock has been getting hit on it. >> i know. >> they have been able to be out there as typical as talking about the benefits including what i've confirmed as well and others reported 1.5 million potential costs. >> i think hawk tan was

underestimated when he purchased ca he'll be underestimated again had he purchases -- >> you pointed out when the stock was at a low on the ca deal, and then it came roaring back. >> i think you have to buy broadcom i think rick hill is doing a great job in terms of very quickly getting things -- the house in order aided by his friends at starboard. which you know mr. -- a ton of stock, 1920. >> yeah. yeah and a private equity bid out there, seems hard to imagine any level over 25 that they could sort of really right that kind of an equity check i don't believe that -- that's a very difficult effort to undertake on their part. >> i do know that the cybersecurity stocks, because of crowd strike, are going crazy. the market is going crazy. we got record highs everywhere i still find the same subdued nature, like morgan stanley, again, i bring that up, put their money where their mouth is and said you are to sell stocks.

i love costa he put out a piece about labor costs. made me feel like we're kind of done. >> year end target is 3k, has been for a long time and that suggests we're going to hover in a five point -- within five points of here for the next four or five months. >> i think people are too negative i think there is a lot of good things happening. >> netflix with all of this going on is up almost 2% today. >> stranger things, people watch. i've seen "stranger things" in netflix stock be up. i did not get a chance netflix is doing a lot do you go -- >> chaos. >> yes the number of shows we don't talk about that they're putting out. i urge people to go to netflix to say, they're in your head yesterday, my daughter and i were saying, what are you watching she is watching everything put in her head. i'm the manchurian netflix

candidate. you pull the wire out, it doesn't matter. >> the queen of hearts and see what happens >> go jump in a lake. >> you got record highs on the s&p and the nasdaq and the dow is up 128. let's get to bob pisani. >> hello, carl can jay powell move the markets? heck yeah. look at the s&p futures. we were down 3, 4 points earlier on here is mr. powell and all of a sudden we're up 12, 13 points. add another 8 points, suddenly up 20 points on the s&p. in positive territory, record territory in fact. in terms of mr. powell and the markets, the key phrase here, certainties have increase eincr. that's why we rose the street, everybody expecting an insurance cut in july i think there is a lot of debate about whether we're starting some kind of meaningful easing cycle. that's not clear at all. some people think there is morgan stanley thinks we should be getting into one. they're the most bearish group on the street.

this morning they called their chief economist, came out and said we think there should be 50 basis points cut in july that's a minority position there are global growth has slowed over the past year. trade tensions lingering strong policy response is necessary to sort of make sure that things don't get worse. this is a minority position. but a very vocal minority position look at the sectors, cyclical stuff that is moving so you see semis, you see metals and mining energy, oil has been rallying the last couple of days. global macro issues going on moving them. banks down, yields down. look at this, transports are finally rallying all 20 transports on the upside today. we have been noting all week, that transports hit their highs back in september. they're 10% below the old highs. they have been getting clobbered because all of thosegistics come been clobbered on the global slow down in trade issues. fedex, jb hunt, u.p.s., this is

all since september when the transports hit their highs down 37, 28, 15, 15%. fedex has individual issues associated with it as well not just the global macro issue. you see what's going on here they have to figure out a way to deal with the global slowdown and trade, which both very much related. levi strauss interested me i wanted to hear what they had to say i thought the sales were very good, up 9%. hit by bankruptcies and closures softer wholesale, that's the department stores. it was down 2% doesn't know that. the department stores are in trouble. that's not where the growth is for levi strauss what the most think of -- they complain about the ipo cost, 29 million. they paid 29 million, that means they paid 5% of what they raised for ipos that's about average and people have been complaining about the high costs for many years. you had direct listings happening. but very rarely do you see a company say, you know, our revenues were down, numbers were

down, our profits were down partly because of the ipo issue. that's unusual to see that here is levi strauss they went public at $17. down today, but public at $17, very, very small float, still a winner this year in the ipo contest. a lot of winners carl, back to you. >> bob, thank you. bob pisani bond pits, cme group in chicago and rick santelli. good morning, rick. >> good morning, carl. to challenge or not to challenge? you know, i'll let the markets speak for itself regarding whether jay powell is ignoring what the markets seem to have heard and cemented from the last meeting or is this just a new styled fed chair look at a two day of two year. see that drop from 192 to 183 that's about more easing you go to the ten-year, even though it is a drop, it is not a huge drop, matter of fact, right now, 30 year bonds are actually up a basis point on the day. let's look at that 10s to 2s you see it is steep in the bid

to 1920 and isn't about the amount of steepening this is validation as to what the market thinks. and if you need more validation, take all the static pictures of the back months of fed funds futures, september, october, november, december, big rallies. forget percentages it is a static snapshot of all of the inputs, right now, that's what it's pricing, right now you can assume things about four months down the road that maybe a perilous adventure, but just the notion that he didn't seem yet before q&e in his pretext to challenge what markets are building in seems to be game, set, match for investors. finally, here is a bit of a depressing chart this is a two-day of our ten-year, minus european ten-year bunds it is narrowing. that means we are now jumping into the same policy, our growth dividend represented that spread is shrinking and the dollar

index was first, european german rate yields didn't move as much as u.s carl, jim, david, back to you. >> all right, rick, thank you very much. rick santelli. we're going to keep our eye on spx here, $29.98 has set a record high this morning, but 3k would be a big testimony. >> you pointed out the retallers are coming down. they had a big run there are some people who say, you know what, if powell says the economy is weaker, we ought to sell these. i would point out that they're all -- the big ones as we were joking about under the watch, which is what walmart and amazon and target and costco, home depot, are winners. >> i like whacked. they're whacking the competition. >> but i don't want to dwell on the negatives. what matters is there are many people looking through the bottom this piece, jeffries, is having a big impact, called analog

renaissance, 2.0 semis you can own through the next four cycles four cycles? >> look at that. >> that's crazy. >> how about seven cycles. >> i think we'll get it here 2999. >> the hats. >> they're -- some traders do have s&p 3k hats. >> relevant index. >> is the president going to comment about the -- >> all the people that manage money. yes, this is an important moment >> by the way, s&p first closed above 2k on august 26th of 2014. you got to go back almost five years to get the past 1,000 points >> wow. >> since that time, top components, a biomed, nvidia, amd, amazon's in there and so is netflix. >> figure this out nvidia, a handheld nintendo, looks like they may be in it, released today, that's fantastic. lisa su turned around amd in a

remarkable fashion these will get them. these will get them. and as long as lisa su is there, there was a piece this morning saying go to the 90s, the print. there is some good ones. >> a lot of people, you know, the sin six would say, well, that's done by the fed. >> people who don't like to make money or people who are really rich. >> 666 in march of '09, i guess it was, our low. >> right, the devil's number yes, if you are really rich and you want to keep people in their chains, as marx would say -- not carl marks, stay away from the marngt people have been wrong they are not early they're wrong. and i found this incredible. maybe because i bank at jpmorgan when you put money in there,

they never once tell me it's the fed. >> s&p 3,000 for the first 1,000 point marker in almost five years. >> a lot of rejoicing on the floor. just kidding. >> oh, my, you're so right. >> the president follows the s&p, he would be thrilled. >> that's true somebody should wake him up to that. >> mueller likes the s&p. >> yes vote for the s&p. >> maybe powell is >> redacting powell. >> you're redacting powell >> up 0.7 of 1%. >> the president should be saying, listen, all is forgiven. olive branch maybe dove peace tree. >> we have to start moving the s&p for the year a lot of people will take that if you came not year and said we will be up 20%. >> all the people who are negative, and they stay negative. >> there are a lot of unresolved issues as the powell statement makes clear this morning. >> okay.

>> but the point being -- >> you want me to say it's a bubble >> the markets had a hiccup in december. >> when powell decided to wreck the market want me to get a mylar balloon at dollar tree and you can pop it >> sure. >> you get a smiley face mylar balloon. >> you know, it's called reality. >> it's the hindenberg and we are heading to alan hurst. how is that? a lot of room -- >> how about this. about this time last year looking at 26% s&p earnings growth we will be lucky to get positive this quarter. >> i think there is -- we are going to see a lot of companies that have -- where management has done a lot of good things. this is a futures led -- >> none of it matters. you know that. it's about the fed that's all -- >> at least assume work with jay powell to take share away from intel? >> sure. certainly there are individual names which you always focus on,

as you should, that benefit in their own secular way. >> that's what we can do -- >> apart from what's going on, broadly speaki, in the economy. >> but the s&p reflects the overall economy perhaps is reflective of the fat that low rates are going low. >> >> is there a problem that goes up on day of -- i think that the market is -- it has these days where it marches to the tune of the feds and much the dog -- i mean the employment report is the most important number then the earnings. i believe that earnings are going to be better or asterisked, not like the money i give jpmorgan. you've got to buy text instruments -- these these are china plays. >> you get no return anywhere else period. certainly in t certainly

certainly not in your savings account. >> boy, did morgan stanley hate that i think they used the acronym the only game in -- that's another stupid acronym but there is, without a doubt, we can do all we want, all we want about saying it's above old. but, boy, what a great bubble. it's a bubble of a lifetime. >> as bubbles go, it's a good one? >> we should get bublicious gum. it's real money. >> they were talking this morning about the wealth effect. the wealth effect is very important. go buy rh. look at apple. wasn't apple supposed to be cratering? weren't the best days behind it? isn't tim cook just a technocrat how about facebook weren't they supposed to be are ip up our instagram? none of these things happened. >> 12 trillion in negative yielding debt around the world hard brexit potentially happening. is it just that money is coming

to the u.s.? it is the ultimate best house in a bad neighborhood story >> i think if you are prudent in your money manager in europe, you have no choice you've got to buy the s&p. you've got to buy our bonds. we know inverted yield curve that caused so many people to sell could be uninverted what do they do? they have a thing in their drawer that says inverted yield curve sell, and then it says non-inverted yield curve buy you may think it's all the fed. >> i am not saying that it is, but certainly there seems to be a correlation. strong correlation. >> you're painful. i'm seeing major semiconductor -- major technology stocks do well. that's innovation. it's innovation. >> that's not top-line growth. >> are you - >> the margin -- >> are you talking about zscaler and octa >> no, those are fast growing

companies with enormous multiples. >> you are going to have your hands full tonight >> i am going to crush it. i am on a rampage. i have to figure out who i am rampaging against. >> how about david >> that's not a problem. >> he has had a good hour with me. >> chief in one show. >> even the viewers caught that. see you tonight. "mad money" 6:00 p.m when we come back fed chair powell on the hill powell on the hill don't go anywhere. tell him we're flexible. don't worry. my dutch is ok. just ok? (in dutch) tell him we need this merger. (in dutch) it's happening..! 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.

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we never stop taking care of you. the s&p hits 3,000 for the first time ever as we get record highs across the board and federal reserve chairman jay powell moments away from testifying before house financial services good wednesday morning welcome back to "squawk on the street." i'm carl quintanilla with sara eisen. david faber at the stock exchange pretty historic day in the markets as we get the text of powell's statement earlier today. first, though, getting economic data crossing the tape we will get to rick santelli in a moment as we watch the chairman take

his chair here, it's going to be an interesting couple of hours in front of the house. >> the market is celebrating he cemented the case for cutting interest rates he did not have to do that, but he says there is uncertainty about the outlook. he played down the good data like the jobs report, played up the risks like brexit and global uncertainty. >> chair maxine waters there getting the meeting ready. let's get wholesale trade with rick. >> on the inventories, we are looking at a final may, which means the 0.4 listed is a mid month. we replaced with 0.4 it basically remains the tame. 0.4 isn't so bad actually, 0.4 is one of the top three best numbers of the year i know there are only a handful. it is holding. inventories are a big part of the equation with regard to trade and the streets dealia sts dealing with trade on the sales side, there is no mid-month number we are expecting up 0.3 on sales

to weed down the inventories, but we are disappointed. it was up 0.10 down 0.4 for april if you look at the marketplace outside of the data point i just described, we are seeing a real move back in treasuries to much closer levels before the chairman read his statement. now, as he goes into qe, many are wondering was it a dollar dynamic with the al dwor rit undocument algorithms carl and the gang, back to you. >> stay with us, if you would. we definitely want your take on the fed in just a moment first, to elon moy in washington with powell's testimony to set the table here elon. >> powell kept his written testimony short. i don't want this hearing abowil be very short. i am told it will last three hours. this is a very big committee there are 60 members

each one of them is going to want to have their time with the fed chairman there has been a lot of attention already to the line in his written testimony that said that uncertainties over trade tensions and concerns over the slowdown in global growth continue to weigh on the outlook. i expect lawmakers will try to get him to unpack that statement. they are also going to ask him as well about the criticism that he has faced from the white house, from president trump, the politics of the fed. guys, powell has done a lot of legwork to sort of build goodwill on capitol hill he has made sure that he has friends and allies in washington, even if he doesn't have a friend in the white house right now. back to you. >> i want to bring rick back in and ask you what you thought of powell's comments. and does 3k strictly from an optics standpoint make the argument for a cutmore difficult this morning >> it would normally the problem i see, carl, is you talk to many traders, not only domestically but around the

globe, is how much of the equity rally of late isfueled strictl by the hopes that the fed is going to ride in on its white horse? and that really is a tough issue to answer. now, as i look at how the yield curve and various maturities have moved, the two-year and three-year saw the sharpest price rises dropping yields. we see many of the months in fed fund futures all bid if go out to november, december, they are up 5.5. that's a sizable amount of additional easing being priced in in a static fashion so if i had to ask the honest question here, it's is powell playing these secret fed code game like many much his predecessors going back to greenspan by not totally challenging what's built into the market that's really what's going on here and i believe fueling some. investment on the equities side. one fly in the ointment, many traders around the globe, their initial reaction and many of

their models were programmed to react on the dollar movement how much is the dollar wag the rest of the marketplace? we need to watch the dynamics of the yield curve. boon yields didn't drop as much as ten year yields in the u.s., all know the long end has recovered. that's what i alluded to on the data points t the curve as steep as it's been all day. it started out steep by a big drop in short rates. now short rates have held a bit and long rates are ticking up adding to the steepness. >> rick, thank you rick santelli, of course, from the group. let's bring in steve liesman, get his thoughts the statement that we are going to hear from the chair, he says it appears uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the u.s. economic outlook while noting inflation precious remain muted. giving the market what it

seemingly wanted, isn't he >> yeah. maybe a little bit more about looking through the current front month on fed fund futures and what happens next, a 69% probability of another cut that came down to 65%, around 67% now. that other cut still remains baked in, david. that's interesting powell had a choice. he could have pushed against the market or affirmed and then some, right? i think he really focused on the negatives and he nodded to the positives, but didn't really emphasize them very much and he chose not, also not to really lean on the future outlook for fed rate cuts. so there is really two baked in and a sort of strong debate about whether we get a third this year. obviously, the data will speak gdp before that july meeting i think the bar is high for the

data, has to disappoint a lot for the fed to be not cutting rates at least this month. >> based on the reading of the statement, steve, do you think that the fed chair is emphasizing the economic risks to the outlook, i.e. recession or a bigger slowdown in the u.s. economy, or the low inflation risks to the outlook as an ex clu cu cues to cut rates? >> i don't think they have a base case of a recession and i don't think that's the primary risk concern here. you ask an interesting question, sara the answer leads to a question as to whether or not we are going to have a single cut, an insurance cut, or are we embarking upon an easing cycle and that's really going to be -- i think as of 8:31 this morning, that's the question for investors to ponder here, right, because now that we have got july baked in, what do i think for the rest of the year and how do i figure out or otherwise write in what i think

the fed is going to do in the next couple months so, yes, that is a question in terms of i know that their base case is for continued growth the whole purpose of what they are doing, they say, is not really to ward off a recession, but to sustain the expansion at least that's the way he is presenting it. >> a cycle of rate cuts with unemployment at 50-year lows, wages up 3% at least, markets at all-time highs, steve? >> i'm sensing some skepticism in your voice. >> no, i'm just wondering, yeah -- >> cynicism, david where are you? >> skepticism. >> i agree with you. i think the thing that sara mentioned earlier, the low inflation, the trade tensions along with global economic weakness, i think that's why an easing cycle, it's a little bit early to bake that in and why we -- you can look at this as more of an insurance cut i think the other thing we want to -- what rick was saying

earlier, if you guys have a chart of the child curve, -- yield curve, i think the federal reserve might be moving here this could be a new animating factor here. we will see if powell is asked about it, whether or not getting that yield curve steeper in order to spur additional lending from the banks might be a reason that that would underpin a rate cut here. >> i do think that this statement answers one of the big questions, steve, that you had after the last meeting and wall street had, which is can wall street get a fed cut even with a trade truce. we got the trade truce at g20. >> right. >> and he still is highlighting trade tensions as a negative for the economy. >> right you have to understand that has some economic rationale in it. he is talking about his concern about capital spending and sk capital spending declining here and related to trade tensions here

a political aspect to that, as you might imagine. he is throwing it a little bit back at the president. >> right we have talked about the slowdown in capital spending, how hard it is to be a decision maker at a large corporation when you have a lot of international revenues, steve, in terms of at least making those kinds of commitments in the face of this great uncertainty given you by trade that doesn't seem any time, at least, to be abating. >> i don't think it is and i think that you continue to be a ceo that has to worry about a flare-up in trade because while you called a truce, you didn't end the war we are still at lager heads, and i guess traders can keep trading the upside of a "wall street journal" or a cnbc headline that mnuchin is talking to so and so in china so i think that's a key difference here. we can rally in the stock market based on a headline. you can't build a plant based on

one. >> steve, don't go anywhere. let's bring in art wearing his s&p 3k hat art, good morning. good to see you. >> good morning. >> what does this mean what does the overall number mean to you? >> the 3,000, it's more an optical. it is not so much a technical breakout, although it does get the right kind of headlines, not necessarily on the business page, and that gets everybody thinking a little better, feeling a little better. i would like to point out to steve that, in addition to having a gdp predicted from the atlanta fed and from the new york fed, the new york fed also has a recession probability infection. and several people have pointed out for the first time in a long, long time that has popped above 30% likelihood of a recession in 2020. now, whenever it gets up to 30%,

it's had a pretty good history of calling it. we have had recessions without it getting there, but whenever it's gotten there, we've come pretty close to a recession. now, part of that indicator has to do with the yield curve so powell could take care of that if he cut rates the right way. i would suggest to you that powell is not only under the influence of the market, which he clearly was i mean, he backed up immediately. and the other thing to note is how fearful the fed is usually that statement would come out at 10:00 when he began testifying they put it out at 8:30 in the morning, an hour before the market opened. they wanted to be sure that everybody read it, everybody discussed it, and everybody discounted it. >> art, one of the things that i think is interesting here, and i know the indicator you are talking about. we have talked about that. obviously, we follow all the gdp prints, which is, you know,

between 1.5 and 2% on our cnbc rapid update i think it's curious that the market doesn't seem to be internalizing these recession fears. it seems like the market feels like it's getting a freebie here it's not going to get all that much weaker growth trade tensions are out there but they are not going to slow the economy. it's trading as if, hey, we are going to have a decent okay economy and a quarter point rate cut on top of that. >> i think the market is looking at the fact that that indicator, as well as other things, what's going on at the ecb, what's going on elsewhere globally, have put powell in a situation where he has got to pretty much react. very clearly, by putting out that statement and what it said in the statement, they basically conceded that there is a very high likelihood for a june rate cut, probably 25 basis points. they don't want to call it an

insurance cut. but the market is relaxed in the fact that it says with these warning signs, the fed has got to keep the wheel moving. >> i mean, your hat, art, contradicts the words you are saying how could we be at 3,000 on the hat and talking about recession with the words >> no, no, no. i'm not talking about necessarily an immediate recession. what i'm saying is with the warning signs moving, powell has got to move along. and that's exactly what he is doing. and that's why i have got the hat and will have to get a higher hat soon, too, because the fed is handcuffed on this so far, between what's going on with the central banks around the world and what the market interprets from that, they don't want to walk away. they fully remember when they, as i believe, overreacted in december and raised rates, what the market did and the market panicked and we

had -- i don't think powell wants to see that again. i don't think he is fully intimidated by the president i don't think he wants to see that flare up at all i think the mrarket can comfortable because they feel for now they have the fed and mr. powell under its control. >> he has become the market's best friend. joining the conversation jack ablin. good morning to you both how do you expect chair powell to characterize, i mean, what comes next he is cementing the case for cutting rates, but then what are we about to embark on an easing cycle or is it kind of a one and done >> our view is we are not about to embark on an easing cycle if you look at his testimony, he deliberately picked and chose the weak parts of the economy and seemed to be completely ignoring the strength. capital goods data that look like, boy, equipment investment is coming up

consumer spending is strong. our view is he is clearly inclined to cut and looks like he reinforced that message with his testimony. if they cut the end of the month, the data that come in after that are going to be good enough, realize it probably wasn't necessary they won't regret it because what's the cost inflation? precious are muted we don't think they will go again after the end of july. >> jack, what is an equity investor to do >> well, the good news is i suppose we hit my 3,000 target the weird news is we did it in july and not december 31st i think that clearly the fed has changed its course it's become market friendly, and so the question is what is the new rationale? i think the new rationale is twofold. one, i think chairman powell is now the central banker to the world largely because just about

every central bank has, you know, expended all of their ammunition to try to get things going and the fed is really the only entity with a fair amount of dry powder left that's one the other is that the fed has beaten this inflation beehive with a stick for the last ten years with low rates and quantitative easing and piled everything on, and the bees have not come out and so perhaps the rationale is let's just keep going and hope that eventually we will see some inflation >> yeah. just to keep everybody infield, chair powell waiting to present his testimony. just hearing from some of the ranking members ahead of that testimony, some of them saying they are going to ask about libra, the new facebook corrupt owe currency a hot button political topic on the hill and then this issue, seth, of fed independence and whether this new stance, which is very market friendly, is going to be good enough for a president who wants a weaker dollar and wants

an easier fed. what do you think? >> i suspect this will not be good enough for the president, but i am far from being in the best position to gauge what's in this current president's mind. i think that ultimately any president would want ro have as lo strong as an economy as you could have especially coming into an election year. i would be surprised a cut at the end of the month, even if it's 50 basis points, would be enough to satisfy things i think there will be the desire to stimulate the economy more. >> art, what do you think? >> i think that's overly optimistic to look at a 50 basis point cut. i think 25 is probably baked in the cake and there might be another 25 down the line but i think they will do the 25, they'll do we'll wait and see routine and see. but the problem is, with so many other central banks at negative rates, which kind of screws up your banking system, it is difficult. as was pointed out, the other

central banks have become somewhat ineffective by, if you would, overusing lower rates. >> do you think -- how much of it is the relative delta between rates around the world and overall market -- or economic evolution through technology, through demographics bostick and george tried to address this in some way today. >> yeah, no. i think that's a bit of a factor but the one i am going to be interested in hearing hopefully when powell finishes at 1:30, we are going to hear from bullard from the st. louis fed. >> we are going to get minutes and bullard at 1:30. let's get to the chair. >> and i believe he does not need any further introduction. without objection, your written statement will be made a part of the record mr. powell, you are now recognized to present your oral testimony. >> thank you, and good morning chairwoman waters, ranking member mchenry and other members

of the committee, i am pleased to present the federal reserve's semi-annual monetary report to congress my colleagues and i strongly support the goals of maximum employment and price stability that congress has set for us for monetary policy. we are committed to providing clear explanations about our policies and activities. congress has given us an important agree of independence so we can effectively pursue our statutory goals based on objective analysis and date a we appreciate our independence brings with it an obligation for transparency so you and the public can hold us accountable today i will review the current economic situation and outlook before turning to monetary policy also an update on our ongoing public review of our framework for setting monetary policy. the economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11th year however, inflation has been

running below the fomc's symmetric 2% objective and cross currents such as trade tensions and concerns about global growth have been weighing on economic activity in the outlook. the labor market remains health. job gains averaged 172,000 per month from january through june. this number is lower than the average of 223,000 jobs per month last year, but above the pace needed to provide jobs for new workers entering the labor force. consequently, the unemployment rate moved from 3.9% in december to 3.7% in june, close to its lowers lev low-to-mid exist level in 50 years. employers are increasingly willing to hire workers with fewer skills and train them. as a result, the benefits of a strong job market have been more widely shared in recent years. indeed, wage gains have been higher for lower skilled workers. that said, individuals in some

demographic groups and certain parts of the country continue to face challenges. for example, unemployment rates for african-americans and hispanics are well above the rates for whites and asians. likewise, the share of the population with a job is higher in urban areas than in rural communities and this gap has widened over the past decade a box in the july monetary policy report provides a comparison of employment and wage gains over the current expansion for individuals with different levels of education. gdp increased at an annual rate of 3.1% in the first quarter of 2019, similar to last year's pace this strong reading was drink largely by net exports and inventories. components that are not generally reliable indicators of ongoing momentum the more reliable drivers of growth in the economy are consumer spending and business investment while growth in consumer spend was weak in the first quarter, it has bounced back and is now

running at a solid pace. growth in business investment has slowed and overall growth in the second quarter appears to have moderated the slowdown in business fixed investment may reflect concerns about trade tensions and slower growth in the global economy in addition, housing investment and manufacturing output declined in the first quarter and appeared to have decreased again in the second quarter. after running close to our 2% objective over much of last year, overall consumer price inflation measured by the 12-month change in the price index for personal consumption expenditures declined this year and stood at 1.5% in may the 12-month change in core pce inflation, which excludes food and energy prices and tends to be a better indicator of future inflation, has also come down this year and was 1.6% in may. our baseline outlook is for economic growth to remain solid.

labor markets to stay strong and inflation to move back up over time to the committee's 2% objective. however, uncertainties about the outlook have increased in recent months in particular, economic momentum appears appears to have slowed in major foreign economies and that weakness could affect the u.s. economy. moreover, a number of government policy issues have yet to be resolved, including trade developments, fed debt ceiling and brexit and there is a risk that weak inflation will be more persistent than we currently anticipate we are carefully monitoring these developments and will continue to assess their implications for the u.s. economic outlook and inflations. the nation also continues to confront important longer run challenges labor force participation by those in their prime working years is now lower in the united states than in most other nations with comparable economies. as i mentioned, there are troubling labor market disparities across demographic

groups in different parts of the country. the relative stagnation of middle and lower incomes and low levels of upward mobility for lower income families are also ongoing concerns in addition, finding ways to boost productivity growth which leads to rising wages and living standards over the longer term should remain a high national priority and i remain concerned about the longer term effects of high and rising federal debt which can restrain private investment and reduce pr reduce productivity. the longer run vitality of the u.s. economy would benefit from efforts to address these issues. against this backdrop the fomc maintained the target range for the federal funds rate at 2.25 to 2.5% in the first half of this year. at our january, mark, and may meetings we stated we would be patient as we determined what future adjustments to the federal funds rate height be appropriate to support our goals

of maximum employment and price stability. at the time of our may meeting we were mindful of the ongoing cross currents from global growth and trade but there was tentative evidence that they were modlating the data from china and europe-encouraging our continued patient stance seemed appropriate and the committee say no strong case for adjusting our policy rate. since our may meeting, however, these cross currents have re-emerged creating greater uncertainty. apparent progress on trade turned to greater uncertainty and our context in business and agriculture report heightened concerns over trade developments growth indicators from around the world have disappointed on net raising concerns that weakness in the global economy will continue to affect the u.s. economy. these concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data.

at our june meeting we indicated that in light of increased uncertainties about the economic outlook and muted inflation precious we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion. many fomc participants saw that the case for a somewhat more accommodative monetary policy stance had strengthened. since then based on incoming data and other developments it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the u.s. economic outlook. inflation precious remain muted. the fomc has made a number of important decisions this year about our framework for implementing monetary policy and our plans for completing the reduction of the fed securities holdings at our january meeting we decided to continue to implement monetary policy using our current policy regime with ample reserves and emphasized that we are prepared to adjust any of

the details for completing balance sheet normalization in light of economic and financial developments at our march meeting we communicated our intention to slow starting in may the decline in the fed's aggregate securities holdings and it end the reduction in these holdings in september the july monetary policy report provides details on these decisions. the report also includes an update on monetary policy rules, the fomc routinely look at that recommend a level for the federal funds rate based on inflie inflation and unemployment rates. i continue to find these rules helpful although it requires careful judgment we are conducting a public review of our monetary strategy, policy review and modifications. our moatcation is to consider ways to improve the committee's current policy framework and to best position the fed for

maximum stability. they started with outreach to and consultation with a broad range of people and groups through a series of fed listens events the fomc will consider questions related to the review at upcoming meetings and we will publicly report the outcome of our discussions. thank you, and i'll be happy to respond to your questions. >> thank you very much, chairman powell i now recognize myself for five minutes for questions. on june 18th facebook announced plans to launch libra, new global cryptocurrency as well as a new payment system which will facilitate libra transactions. on june 24th, the federal reserve's vice chairman of supervision, randal quarles wrote a letter in his capacity as chairman of the financial stability board to the g20 leaders noting a wider use of new types of cryptocurrency, cryptoassets for tree tail

payment purposes would warrant close scrutiny by authorities to ensure that they are subject to high standards of regulation end quote. signaling that global regulatory regulation of facebook will be a priority did the federal reserve speak with facebook about their libra currency and if so, were any concerns raised does the federal reserve have any authority to supervise and regulate what could be the world's largest payment system does the federal reserve have any concerns about monetary policy with regard to libra? >> thank you, madam chair. we did actually have a meeting with representatives of facebook a couple of months before the announcement i think they made fairly broad set of visits to authorities around the world but getting to your questions, let me start by saying that we

do support responsible innovation in the financial services industry as long as the associated risks are appropriately identified and managed. and as we'll discuss, while the project sponsored hold out the possibility of public agabenefi lg libra raises serious concerns regarding privacy. these are concerns that should be thoroughly and publicly addressed for proceeding and that's why at the fed we have set up a working group to focus on this set of issues. we are coordinating with our colleagues in the government in the united states, the regulatory agencies and treasury we are coordinating with central banks and governments around the world to look into this. i'll just add that the process of addressing these concerns, we think, should be a patient and careful one and not a sprint to implementation >> so are you speaking of a working group within fsoc?

>> we have our own working group. i believe fsoc has already got a working group at the staff level. >> well, fsoc has a cryptocurrency working group is fsoc, are they reviewing the extensive policy questions and potential impact that they have? do you know what they are doing? >> i do believe they are i know there was a staff-level meeting just last week to focus on libra at fsoc all the agencies were there. i think the answer to the question would be yes. >> do you think that fsoc will designate or are they considering designating the libra association as systemic market utilities or non-bank -- and to enhanced regulatory oversight? are you aware of that? >> there hasn't been a meeting since the libra announcement

while there have been conversations, i think it's highhig highly likely. that is in the hands of the treasury secretary if you g >> if you got a call from the president today or tomorrow and he said i'm firing you, pack up, it's time to go, what would you do >> well, of course i would not do that. >> i can't hear you. >> my answer would be no. >> and you would not pack up and you would not leave? >> no, ma'am. >> because you think the president doesn't have the authority? is that why you would not leave? >> i have kind of said what i intend today say on the subject and what i have said is that the law clearly gives me a four-year term and i fully intend to serve it. >> okay. i hope everybody heard that. with that i will yield to the gentleman from north carolina, the ranking member, mr. mchenry.

>> chairman powell, in your testimony you said you will use macroeconomic data to inform your decision whether lower interest rates are required at the end of the month or not. what specific data would likely lead to your recommended ago change in rates? >> between now and the end of the month there is data coming in on almost everything. you will have labor market data. you will have second quarter gdp. you will have retail sales you will have a broad range of data coming over the next three weeks and we will be looking at all of that. i wouldn't point to one data point or even any, you know, period we try to look over longer periods of time and assess what's really going on at a more fundamental level. that's what we'll do as we evaluate the incoming data. >> and there is also an

understanding of the market assumption of what the federal reserve open markets committee will do as well, is there not? >> there is. so we look at a broad range of financial conditions we don't focus on any one thing. but our policy works through financial conditions so we'll look at a broad range of things in the financial markets. >> so a broad range of things. macroeconomic data emotion? >> emotion not on our part. we'll try to be very rational and analytical and transparent about how we are thinking about these things. >> so along the lines of the transparency, the velocity of the economy you speak to, and the larger global macroeconomic issues that are at play here as well so along those lines is the federal reserve, does the federal reserve have the

capacity to make independent monetary policy decisions under law? >> yes, we do. >> is that impeded by people saying negative things about you? >> we will -- >> is that enhanced or diminished based off people saying positive or negative things about you >> neither we will always focus on the job you have assigned us and we will do it to the best of our ability and based on objective analysis. >> along those lines, we have a significant change to libor spolsy i wrote to vice-chair quarrels the fed has spoken flickly abpuy about this, there has been major progress made in terms of the swaps and derivative contracts i remain concerned about legacy contracts as well. has the fed undertaken analysis along those lines about legacy

retail contracts and the use of libor? >> indeed, we have that's a very important part of the project going forward. we have reached out to representatives of retails f users of libor for some time now in our meeting with them regularly and developing plans to deal with that. as you know, as you pointed out in your letter, a significant quantity of libor contracts are in fact mortgages and the like that's a really important area we did the derivative things first because they were close to hand and quite large we are working hard on the retail side now. >> is there any estimate on the number of loans that have to be renegotiated because of this poli policy change? >> i don't have a number for you. >> so i also want to touch on % project libra. you mentioned and answered a number of those questions. it looked like you were quite prepared for you you mentioned financial stability as a concern why? why is project libra a question of financial stability in your view >> well, really due to the

possibility of quite broad adoption facebook has a couple of billion plus users you have, i think, for the trfis time the possibility of a very broad adoption if there were problems there associated with money laundering, any of the things that we are focused on, including the company, they would immediately, you know, they would arise to sis stemically important levels because of the mere size of the facebook network and the company has said so explicitly. >> is it a problem we don't have a regulatory regime to be developed here in the united states >> i don't know that that's a problem. that's a question of whether we're impeding blockchain. i don't believe so but i don't know the answer to that. >> but there is an opportunity here for financial inclusion benefits and innovation benefits if this worked well, is there not? >> there is that possibility as i mentioned, that is the main benefit the company is holding

out. i also mentioned that we are open to financial innovation we just want it to take place in a safe and sound way. >> thank you >> the gentle woman from new york, miss maloney, is now recognized for five minutes. >> thank you, madam chair and ranking member thank you for your service, chairman chairman, in june the fed decided not to cut interest rates and to take a wait-and-see approach instead in your press conference you said this approach was justified because, and i quote, we will see a lot more on all of these issues in the very near term , end quote. last week we got the job numbers for june and they were very strong with the employers adding 224,000 jobs so my question is, did the june jobs report change your outlook for whether a reduction in

interest rates is appropriate in the near term? >> well, a straight answer to your question is no. but i will give you the context. we look at a broad range of data so let's start abroad. since the june meeting and for a period of before that the data have continued to disappoint that's very broad across europe and around asia and that continues to weigh by the way, manufacturing trade and investment are weak all around the world we have a box that talks about that in the monetary policy report in the united states we did get a jobs report that was positive, and that's great news. we had some other reasonably good news. the u.s. data came in about as expected and i would also say that lets go to trade. we have agreed to begin discussions about again with china and while that's a constructive step, it doesn't remove the uncertainty that we see as overall weighing on the

outlook. so i would say that the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook in addition, inflation continues to be muted. those things are still in place. >> mr. chairman, some economists and many market participants believe that the fed should cut interest rates by a full 50 basis points in july rather than a normal cut of 25 basis points personally, i don't see the case for cutting rates by 50 basis points because the economy is quite strong right now what economic factors do you believe would justify taking the unusual step of cutting rates by a full 50 basis points >> at our meeting, which is in three weeks, we will be looking at a full range of data, and i would just take you through the story i just told you. that will be what we are thinking about, is the extent to

which trade developments and concerns over global growth are weighing on the outlook and also the performance of inflation those rlt factors that we have identified and all of that will go into our decision-making. >> also, you have repeatedly stressed that uncertainty about trade policy is a major economic headwind and is one of the factors that could lead the fed to cut rates this month. but as we have seen under the president's very unlikely that we will ever get much certainly on trade policy. he keeps changing every day. my question is what kind of progress in trade negotiations do you need to see in order to put your mind at ease about trade developments not being a headwind, to use your term, to economic growth? >> i guess i ought to start by saying no one should interpret what i'm saying about trade headwinds as in any way a criticism of trade policy. we do not play a role in

assessing or criticizing trade policy it's not something assigned to us we react to anything in principle, anything that can affect our dual mandate goals you assigned us is that something that could in principle call for a policy response right now that is global head -- global weakness and trade developments are things that are widely thought to have that effect that's all so i wouldn't want to be -- i wouldn't want to try to prescribe a specific answer. again, it wouldn't be ours to do in the first place. >> well, hopefully we'll have some answers on trade soon thank you for your service, and i yield back >> the gentlewoman from missouri, miss wagner, is now recognized for five minutes. >> thank you, madam chairwoman, and thank you chairman powell for being here to testify. chairman powell, vice chairman

quarrels indicated the federal reserve would revise its buffer proposal in the near future. vice chairman quarrels indicated one option is an average of stress test results over a number of years. are you in agreement with vice chairman quarrels this is something that needs to be considered and what factors might necessitate this change, sir? >> we are in the process of evaluating i think in the late stages of evaluating how to put into effect the stress capital buffer, which merges the results of the stress test with the underlying overall capital framework. it's a complicated exercise. there are many moving pieces that's one of them i wouldn't want to single any single one out as important for our consideration, but that's -- >> so the average -- taking the average stress test results over a number of years is something that's under consideration but

is -- it may be a change that you are not necessitating just yet? >> we're very much in the process of evaluating all of those ideas, and i wouldn't want to single that one out as in or out. there are many pieces. but, yes, that is one of the pieces. >> mr. chairman, you said you are in the late stages what is your timeframe, do you believe, for coming up with an option in terms of the stress capital buffer proposal? >> i would have to come back with a date. but it would be, you know, within -- soon in the near future. >> thank you chairman powell, at your january press conference you were asked whether a $4 trillion balance sheet gave you sufficient firepower to handle a future recession, and you answered yes. however, the fed's balance sheet as a share of gdp is about where the bank of japan's balance sheet was prior to the financial crisis today the bank of japan has ended up with a balance sheet as

large as a japanese economy with mixed results on inflation and limited room to handle another downturn has japan's experience, sir, affected your thinkingon the appropriate size of the fed's balance sheet? >> i think there are a lot of lessons to be learned from the experience of japan really over the last quarter century and all of us have looked very carefully at that. >> and to that point, if i may, you know, why should we feel certain that the u.s. could avoid a similar fate perhaps you could elaborate. >> what japan has found itself in a situation where inflation has gotten down close to zero for a very long time and they have tried many, many things, including, as you mentioned, extensive asset purchases and all sorts of forward guidance to move inflation back up, and have

not met with much success, although they continue to struggle to do that. my main takeaway from that, and by the way the european central bank is fighting that battle as well. >> yes. >> my main takeaway from that, honestly, is that the fed needs to stand here and try to keep inflation symmetrically at 2%. we don't want to get on that road of declining it to the extent inflation continues to decline in expectations decline, that will show up in olower interest rates which give the stab less firepower to react we see that road is hard to get off of i think it's quite important that we fight at 2% to keep inflation up to 2% and use our tools to achieve that, and we are strongly committed to doing that. >> the most recent monetary policy report stated, and i quote, consumer spending in the first quarter was lackluster, but appears to have picked up, and you talked a little bit

about this in your opening statement. can you please explain the possible variables behind lackluster consumer spending and why the recent turnaround? >> well, i think the consumer part of the economy is 70% of the economy and it's healthy it's strong. it's good job creation it's rising wages. worker saur vase show they think jobs are presentleful. business surveys show that workers are scarce this is a good place for the consumer part of the economy and you see that in surveys, consumer spending -- >> the concerns about workforce development and having enough able work force is very key. you're right. >> they are. but i think a tight labor force is lifting all sorts of communities into the labor force and it's good. the issue really is more now on the business side where we see business confidence in business investment weakening a bit. >> i thank you i have run out of time

i yield back to the chair. thank you, sir. >> mr. clay, the gentleman from missouri, is now recognized for five minutes. >> thank you, madam chair. thank you, chairman powell, for your visit today in its blog published just yesterday, the st. louis federal reserve noted that a rise in uncertainty is widely believed to have had detrimental affects on macroeconomic, micro economic, and financial market outcomes and induce responses from monetary fiscal and regulatory policymakers. theoretical models suggest that rising uncertainty can affect economic activity and decision-making in various ways. they explain in particular they noted firms may delay investment a in hiring, households may reduce

spending by increasing their savings rate if they anticipate possible changes in their income or wealth. financing costs may rise if risk premiums increase, and even in your own testimony submitted to this committee you noted that consumer spending has bounced back from a sluggish first quarter and is chugging along. and this uncertainty is exacerbated for consumers in missouri when the president is gloating about how great the economy is, yet the federal reserve is considering a rate cut. how do you account for these mixed messages >> well, i haven't seen that blog post. i would strongly agree with the sense of it. we do think that uncertainty can cause businesses to hold back on

investment and hiring. in fact w ef been hearing that in our fomc-based discussions with businesses around the country. household confidence has remained high, but over time uncertainty can cause households to hold back as well: i think that's a pretty standard finding. >> what about the factor of savings? i mean how does that play into >> safvings? >> yeah. >> is that good or bad >> sorry is that good or bad for families to save? >> the savings rate has actually been fairly high lately. it's good for people to save what they think they need to save i think as a general thought, as a general fact, americans need to save more for retirement than they have. they're not over saving. they're under saving in the aggregate, so it's a good thing. >> could they also be saving in anticipation of a calamity, a economic calamity occurring?

>> well, yes, i was going to say there's also -- there's -- it's good to save, but at the same time if there's a shock to confidence, you can see people pulling back from their regular consumption patterns, and that will show up in demand and the economy will weaken. >> okay. as far as the decision-making on the part of the fed, are you relying on conventional economic data or being swayed by job owning of the president? >> we see the economy as being in a good place, and we're committed to using our tools to keep it there. as we've discussed, the overall economy is performing reasonably well, but we see what we called cross currents, principally trade developments and concerns over global growth, and we see those, many fomc participants at

the last meeting saw those as weighing on the outlook and calling for possibly more accommodative policy >> thank you for that response despite data proving that diverse companies perform more successfully, we still find that financial services industry is largely white and male at its highest level. what more can you do as chair to incentivize diversity and equity within the federal reserve system >> thank you for that question we put a very high value on diversity. i strongly believe that having diverse perspectives around the table leads you to better decisions, and i believe in having a culture where people are free to speak and will be heard, and that goes to all different dimensions of diversity, so we've made, i think, a lot of progress at that -- at the fed

i think i would never say there isn't more to do there's a lot more we can do, and i think we're very focused on that as an organization i would say in my -- most of my careers in the private sector, i saw that really successful companies, one of the things they do well is they do diversity well because that's how you get -- you get better results with diverse perspectives so we're strongly committed to that. >> thank you my time's up >> the gentleman from ohio is now recognized for five minutes. >> thank you, madame chair, and chair powell i really appreciate you being here i want to thank you for your transparency and accessibility as fed chair and you've been available to all of us in our offices and your office, and i appreciate that. this committee hearing's about monetary policy and the state of the economy, and i'll stay focused on those issues and leave the regulatory issues to when vice chair quales is here

i appreciate you keeping the -- as you answered to the question on japan, once inflation starts rolling, it's really hard to get control of as the venezuelans have found, and so the fact that you guys have a stable price target and are sticking to it, i think makes a huge difference. i know that there's a lot of potential shocks including tariffs and other things that can impact that, but so far you guys have done a great job on monetary policy, and in your question -- in another question about unemployment, you know, and the tight labor markets, i think you talked about the fact that wages are starting to go up and starting to actually benefit people who have actually not benefitted from this economic expansion over the last ten years, which is a good thing, and i know some observers have been calling for a so-called hot

monetary policy on the premise that further tightening of the labor market will benefit those democrats that have missed out on the expansion and drive up wages and make labor markets tight and help those folks can you comment on whether the members of the fomc have talked about those views and what the potential risks and benefits associated with a hot monetary policy might be. >> you know, i guess i would start by saying that we don't have any basis -- pardon me -- or any evidence for calling this a hot labor market. >> pardon me we have wages moving up at a little above 3%, and that's good that's -- it's good because it was more like 2% five years ago, but 3% barely covers product f productivity -- it doesn't even really cover productivity increases and inflation. and we haven't seen, as this long cycle has gone on, we

haven't seen wages moving up as sharply as they have in the past i do think it's very gratifying that for the last two years, the greater part of wage gains have gone to people at the lower end of the wage spectrum and education spectrum that's a very positive thing but i -- you know, 3.7% is a low unemployment rate, but to call something hot, you need to see some heat, and while we hear lots of reports of labor -- of companies having a hard time finding qualified labor, nonetheless, we don't see wages really responding. i don't really see that as a current issue. >> great and you know, if we want to see wages continue to grow, we're going to need economic growth, and one of the things that this congress has in front of it is the usmca. i know a lot of the questions you're going to get are going to be about a trade war with china, but can you comment about the importance of the u.s. mca and the north american investment that a lot of companies have

made in a north american supply chain? >> so i -- pardon me i wouldn't take a position on the details of the usmca, but i will say that having it pass would remove a real bit of the uncertainty that is weighing on the outlook, and i think it would be quite a positive thing from that standpoint. >> and i think that's what we all need to focus on is fighting the uncertainty, and there are things we can do with that, and i think as policymakers we need to come together and do that the last question, because i've only got a minute left, is on libra and facebook if facebook can't sufficiently answer your questions about anti-money laundering, know your customer what would your message be to the banks that provide banking to facebook and what would your advice to facebook be? >> well, i don't think that the project can go forward, and i

don't think -- i just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering all of those things. the the number of concerns i listed at the beginning, data protection, consumer privacy, all of those things will need to be addressed very thoroughly and carefully, and again, in a deliberate process that will not be a sprint to implementation. >> i want to echo your comments that we all want innovation, but we want innovation that protects data security and know your customer, anti-money laundering laws that are so important to our economy. thank you, i yield back the balance of my time >> mr. scott, the gentleman from georgia is now recognized for five minutes. >> thank you very much welcome chairman powell. good to see you again. first thing i want to say to you is i want you to stay strong, be courageous it is important for this nation

and the economy of the world that the fed, federal reserve remain strongly independent. the other thing i want to say to you is have no fear. the president can't fire you, and we in congress, both democrats and republicans got your back. now, i want to go to what i think is -- and it's been mentioned a couple of times. this libra business is really disturbing, and it's a serious problem, and let me tell you why. first of all, i think we all know libra is the london inter bank offered rate. very critical. it has and is the standard for the base rate for hundreds of trillions of dollars, both

overnight and term loans, debt derivatives, and it is the standard that has been used internationally and extensively in the united states affecting individual small businesses, large corporations so we got a big issue here, but of pervasive manipulation now, it is apparent that libra is going to leave us or be removed within the next year or so, so this creates a big problem, and so i want to ask you because the most critical part of this is that parties to both sides of the financial contracts should be and must be concerned in the short-term about the potential ramifications of the end of libra, specifically in contracts