is just about to turn because they have new products and hips and robotics >> u.p.s., which is a unique story. it marches toward a high at $135 >> good stuff. really good having you >> delighted to join the group >> mario grubelly. that does it for us. the exchange starts now. >> scott and the team, thank you very much. welcome, everybody here's what's ahead. a controversial cut with one day left until the fed makes its decision on thetrust rates, we'll debate whether a cut is warranted with markets at highs and the economic data holding at least steady and here comes apple the tech juggernaut set to report profits after the bell, and everybody will be watching services we've got the trade ahead of those numbers. and the cord cutting craze the stunning numbers on how quickly people are ditching traditional cable and the moves that companies are making to combat it. we begin with today's markets

and domchu with the numbers. >> mr. mathison, the markets are in the red, but not by that much at one point in the day, tyler, we were off by about 151 points in the dow jones industrial average, you can see, only down by about 60, so off the worst levels of the day. the s&p 500, still hanging just above that 3,000 level there the nasdaq composite down by about .3%. we're seeing particular strength in one part of the market. that's right now what's happening with regard to home builders, the housing segment, all of that right now is moving to the upside. the i-shares etf is up 2.25%, and the reason that's important is because right here, we'll put a star next to it, a new 52-week high better earnings from dr horton, also better pending home sales that's big as well then we'll end on what's happening right now with shares of grubhub, which you can see have been on a trend lower throughout the cores of the last year they're lower again today by about 9% after earnings come in

worse than expected even though sales are better but they're spending so much more in that hypercompetitive food delivery space to compete with doordash, uber eats, and everybody else the forecast gets trimmed, and tyler, that's the reason grubhub shares off about 8%, 9% in trading so far >> thank you very much, and welcome to the exchange. formally i'm tyler mathisen, in for kelly evans today. as the busiest week of earnings season continues, today is the precise halfway mark so did all the gloom and doom that was predicted happen? bob pisani has been following the story from the new york stock exchange and has the details. hi, bob. >> hello, tyler. it didn't happen but there's still worries. there's bad news and good news at the halfway mark, there's not a lot of surprises earnings are essentially flat compared to the second quarter of last year you see, that's flattish numbers. more good news guidance for the second half, q3 and q4, is not collapsing as many feared a couple months ago,

and overall, 2019 earnings i think best can be described as flattish, as you see here. while there's no earnings collapse, the trade war and slower global growth is having an impact on earnings. companies with significant revenue exposure overseas are seeing declines in earnings growth 13% for those with more than 50% of revenue overseas. companies with a more domestic focus, more revenues in the united states, they're seeing modest increases there's your trade wars and globe global effect. stocks are pricey, very little room for missteps in the second half second, clarity on global growth, including trade and tariffs is very elusive. that's a problem, and the markets have become dependent on dovish central banks to provide a break from slower global growth, but it's not clear that will materialize if not, earnings will come down quite dramatically back to you. >> bob, thank you very much. >> let's stick with earnings, which is the big story today

and all week apple is set to report after the bell today the stock has had a strong run this year. but the street is keeping expectations low this time around, and there may be good reason for that. new data from catalyst shows a softening smartphone market in china and iphone shipments have dropped 14% year over year on the other hand, huawei's shipments surged 31% so is apple's dominance waning, and where will the growth come from next? let's bring in cnbc's own josh lipton, plus dan ives, and nelie patel. josh, let me begin with you. what are the things people should be watching >> so tyler, here's what we expect when apple reports after the close today. you'll be looking for q3 eps of there 2.10 of revenue of $53.4 billion. that would be flat on the top line a few key metrics we'll be watching, one, the iphone franchise, the company's bread

and butter analysts not expecting much there. iphone revenue, they're looking for around $26 billion that's versus nearly $30 billion a year ago we know there's some big challenges for that iphone franchise. the replacement cycle is extending, meaning people are holding on to their iphones for longer and as you mentioned, some challenges in china, too remember, last quarter, they told us greater china revenue did drop more than 20% when i talked to cook at that point, he did tell me he saw some signs of improvement. we'll see what he has to tell the street this quarter. also, services of course, there, tyler, faster growing, higher margin some analysts think the services sector could face challenges of its own because they think there are certain segments of the services division like apple care that will have tougher comps. they estimate the overall installed base growth is slowing, meaning the total number of active devices in people's hands, and of course, services you know, in addition to the non-iphone hardware like the

wearables, that's a big reason they have that optimism about the stock which has driven it higher by about 30% so far this year >> josh, hang around as we turn the conversation first to you, dan, a lot of people are focused on china. you, too is the china story as worrisome as for apple as it has knin for trade? >> yeah, i think the bark is worse than the bite. >> the bark is worse than the bite >> in terms of iphone demand, we're starting to see what i believe is stable zaz, maybe even a slight uptick in the next cycle for iphone 20% of iphone up grades over the next 12 to 18 months are coming out of china where that continues to be the fuel in the engine our bull thesis is when you look at the upgrade cycle and what's happening in china, in our opinion, the negative news is a little overdone. that's the key tonight this thing is stabilization on some sort of iphone demand in china going to the next cycle, especially in going to 5g next year >> eli, let me get your poin on that

is china the tell about apple? >> you know, china has a much more competitive smartphone market than anywhere else. much more price sensitive. you can get great phones in china with flagship features for a lower cost and apple doesn't quite have the lock-in base there with i messenger and the services they do here. i think it's a tell. i think asp, particularly on the iphone 10-r, will be indicative. cook said we're going to fix china. what he meant is we're lowering prices we see that next with the 10r here it's really popular everywhere the real question for apple is can they convert all those iphone owners into services customers and can they do it without compromising the user experience or the phone and not turning it into basically a series of ads for other apple services you have to pay for >> do you think they can you asked the question give me your answer? >> that's a hard road for them right now, if you look at the apple ecosystem. you have an iphone, it's great,

ipods, that's great. it's likely you're going to buy another apple. but can they preserve that and not push you into apple music, not push you into apple tv, not have basically cut off experiences with that kind of premium model everywhere and annoy the customers into maybe looking elsewhere. i think it's really hard you're already seeing it a little bit can they manage that balance >> josh, let me get your thoughts on that the ecosystem,ilities allure once you're in, you're in. with respect to their devices. does that necessarily imply, though, that you're in with respect to their services, which is certainly one of the growth engines they're counting on? >> yeah, what's interesting, tyler, is remember last quarter, you did see iphone revenue under pressure it drops pretty hard, double digits you saw services still pop 16% that's one question we have on the street to your point, what's the

trajectory now as we know the iphone franchise continues to be under pressure what's interesting, you have some of the most well known and well respected analysts in sharp disagreement, tyler, about that trajectory morgan stanley has told her clients she sees services growth acceleration in part because she's looking at the app store, and remember the app store is about an estimated 30% of services revenue she sees easier comps in china bernstein's toni sacconaghi has taken an opposite side he thinks his colleagues are being too aggressive we'll see who has a better read in a few hours >> dan, the last word to you i see you nodding a little bit >> services is the linchpin of the valuation. in our opinion, it's $400 to $450 billion in terms of the services business. we continue that mid to high teen grower. that's really in my opinion why the stock is going to make new highs in the coming months today is a prove-me quarter. a step in the right direction. remember, you have 350 million iphones that are in a window of upgrade in the next 12 to 18

months that's why apple is our favorite fang name. >> thank you eat to see you here's what else is ahead on "the exchange. >> coming up, the controversial cut. economic data is strong. the market is at highs, and earnings aren't as bad asimented, so what's the case for lowering rates the president says china is eager to make a deal but he also says ultimately it's up to him. so what does he want, and will we see any progress this week? >> and health care is lagging the markets this year. will today's big pharma earnings help turn things around? your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

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i got your back brother. and me yours. [ laughing ] [ screaming ] welcome back to the exchange, everyone the fed is set to take what could be the most market moving and potentially most controversial step in years. steve liesman is over at the big wall to explain why. hi, steve. >> hey, tyler. thanks very much it's not a question over what the fed will do. it's a debate over what they should do. in our survey, 98% say a rate cut is coming tomorrow 95% say it's going to be a 25-basis point cut, and two is the medium number of rate cuts expected this year with september being the most likely month mentioned by the 41 respondents to the cnbc survey what should the fed do

here's where we have some disagreement 48% say the fed should not cut the economy is in pretty good shape. a cut is not needed. 50% say es, the fed should be cutting. of the total group, 37% say it should be 25 a group of people say the fed should do more, 13% now, why should the fed cut or why will the fed cut? we asked that question 34% said inflation is not hitting their 2% target. 30% say it's the weak any, then the inverted yield curve, chosing by a fifth of respondents. pressure from the stock market, and then pressure from the president. those equal to about a quarter of respondents so let's take a look at the fed fund rate expectations for how it's changed what you'll see, if you read this chart correctly, is 100 points of easing have come to the economy. how do i count that? back in november, our survey showed an expectation for the fed funds rate at the end of this year to be 3% that has come down, follow my

finger, down, down, down, down, down the expectation for the end of this year is 2%. so relative to what was expected back around thanksgiving of last year, we're 100 points lighter on the outlook for the funds rate >> year to year, it's exactly one point from july to july. >> exactly, yeah >> all right, steve, thank you very much. we appreciate it all right. president trump weighing in earlier today on what he thinks the fed should be doing. >> the fed move in my opinion, far too early and far too severely puts me at a somewhat of a disadvantage fortunately, i made the economy so strong that nothing is going to stop us but the fed could have made it a lot easier i would like to see a large cut and i would like to see immediately the quantitative tightening stopped >> there is the trumpian fed view joining us now, marianne

montane, portfolio manager at gradient investments, and randy frederick at charles schwab. welcome to both of you i assume you're in the camp that a rate cut is baked into stock prices, is going to happen, and maybe it will be even more rate cuts down the road what do you think? >> possibly down the road. i think we're just going to start with one small one at 25 basis points and i wouldn't have said this three months ago, but over the course of the last quarter, we have seen manufacturing, which is about a third of the economy, slide in that ihs market survey. so we have come down to the point where manufacturing is no longer growing it's not declining either. but i think we need to step in and do something for that before it turns into job losses and starts to hurt the consumer side, the other two thirds >> randy, is a cut warranted >> well, i don't know if it's

warranted, but we're going to get one. the reason is because what the markets are looking for is trade certainty, and that isn't going to happen anytime soon china has a pretty strong incentive really to continue to postpone this all the way out until the election of next year because there's still a possibility president trump won't gere-elected, in which case, i think they would see their negotiations being easier. if he gets elected, they'll have to come to a deal. there's no reason for them to hurry at all right now this is the only means by which we have to combat this issue >> your point is what i believe the president tweeted this morning about china and the possibility that they may indeed try and draw it out. so you see a rate cut as an insurance policy against continued trade uncertainty and the effect that would have on the global and american economies? >> yeah, and quite honestly, the biggest part of the weakness is not in the domestic economy. it's in the global economy, but surprisingly, you could tie all of those weaknesses, regardless ofwhere you look, either

directly or indirectly lack to the u.s./china dispute this is the only way they can really deal with it. quite frankly, president trump also has incentive to continue to talk about progress being made, even when a lot of progress is not being made with china, frank law because if too much progress gets made, maybe the fed decides they don't need to cut rates if a little progress is being made, the markets don't go off a cliff. in a sense, they both have an incentive to keep this going >> a rate cut, i spouppose, wou inoculate the u.s. economy against the troublings randy identifies there that traces back to the trade issues and general slowing in the global economy. nots going to fix the global economy. a rate cut isn't going to do a damn thing about the trade issues, but it might provide that insurance let's turn the conversation to what the heck i should do. let's assume that the fed does cut tomorrow, that maybe there's another cut before the end of the year where is my target of

opportunity in the markets right now? >> well, i just want to go back to one assumption there, and that is that nothing can be done with the trade talks this week i still think it's a jump ball i still think that when you see the declining rate of growth in china and the european union, the chinese may be interested right now in getting to some trade progress over there. so anyway, with that said, currently, i think the best opportunity isn't health care. i particularly like an invesco equally weighted health care etf. if you look at the earnings of the companies that are coming through in the health care sector, they're doing well and out of all the sectors in the s&p 500 right now, they're the only ones thereat are getting an increase in earnings estimates for the full year. and yet the valuation is at a discount to the market so i think that's the best -

>> and let the record show that randy's firm schwab has an out perform on health care as well, right, randy >> that's correct. it's based on the assumption that the economy continues to slow it's also been the worst performer year to date, which means it has a lot more upside opportunity and valuations haven't gotten out of hand >> randy, we see you on the schwab commercials all the time. good to see you. and mariann, good to see you too. >> coming up, corporate consolidation has hit st. louis particularly hard. and it's hit a nerve with 2020 presidential candidates. we will go live to st. louis for that story straight ahead. wonder how hot it is in st. louis today. plus, from china to vietnam to elsewhere a look at where companies are setting up shop to avoid tariffs. the exchange returns in two minutes. to extremely happy.

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♪ casey? yeah... so why do you stick with a bank that treats you like this? yeah, check the... uh...check uh... online reviews! we're pretty sure they'll send you over to us. because we're not just a bank, we're an ally. [phone ringing] ally, this is pamela how can i help you? welcome back to the exchange, everybody. forget about the stock market performance of health care companies but there's been a great quarter for those companies in terms of profits. many of them not just beating estimates but raising guidance as well, and meg tirrell joins me with the details. >> that's a really interesting dichotomy you bring up over the stock market performance verses the actual performance of the companies, that's something eli lilly mentioned this morning on "squawk box. if you look at the divergence of the companies for second quarter

results. they're beating and raising. this week, pfizer, and today, merck and lilly. pfizer did lower its guidance. merck and lilly out today with beats and raises some interesting stories if you dig down into the numbers and look at their drug performances. let's start with merck keytruda is their huge cancer drug, and they go from success to success in terms of where this drug works. contributed a lot to their beat in the quarter but check out proquad, this is the measles, mumps, rubella vaccine, combined with chickenpox they put all that into one vaccine. that contributed $there 21 billion to their beat, which speaks to the fact companies are stocks up in this time look at eli lilly. remember, bernie sanders referred to pharmaceutical executives as murderers. he was talking about insulin, companies who raise the price of

insulin over time. that missed estimates in the quarter. so did another older insulin from the company not all the insulin products missed estimates, but they're not printing money on these things as much as wall street expectations thought it was going to >> very interesting. not just little tiny hair's breath misses. that's $30 million right there meg tirrell, thank you very much bill griffeth has our cnbc news update and he'll be joining me in a minute over here >> double duty right now thank you very much, tyler air force general john hyten has denied sexual assault allegations against him. he did that before the senate confirmation hearing >> i'm intensely aware of the allegations made against me concerning one of the most serious problems in the military, sexual assault it's been a painful time for my and my family, but i want to state to you and to the american people in the strongest possible terms that these allegations are

false. >> meanwhile, two new jersey state troopers were taken to the hospital following a chain-reaction vehicle crash they were assisting with a wreck when a dump truck barrel into several vehicles a state police suv, an ambulance, and a fire engine appear to have been involved wow. more than 500 hot air balloons took to the air over northeast france in a dazzling display of that sport. the festival is now in its 30th year it's expected to attract hundreds of thousands of visitors it is the largest balloon festival in the world. a lot of hot air there >> a lot right here, too, baby >> see you shortly, speaking of which. >> see you in a couple minutes here's what else is coming up on "the exchange. >> ahead, beauty is in shaving is out is under armour's massive run this year coming to an end cord cutting picks up. >> and there's a new ploy being

used to tap financial aid for college. that's all coming up in rapid fire ings that are unnecessarily complicated. but you're not mad, because you're trading with e*trade, which isn't complicated. their app makes trading quick and simple so you can strike when the time is right. don't get mad, get e*trade and start trading today.

let's catch you up on a couple of stories that should be on your radar. it's time for what we call rapid fire here with their takes, kate rogers, bill griffeth, courtney reagan you mean that news read didn't exhaust you. you can do this? >> you did fine. >> we have a jar we're going to put out and see who has to make a donation to it in case anybody makes any missteps >> first topic is procter & gamble all-time high after a big earnings beat. why? skin care products a very strong performer with sales of brands like sk-ii, olay, i do know olay powering an 8% rise in p&g's beauty business. the company announcing it took an $8 billion right down on its gillette razor business. grooming was p&g's worst showing among its business segments citing foreign currency fluctuations and the fact that

men just are not shaving enough. >> i hope you're happy, ken. i hope you've got what you were after. thanks a lot >> ken has not been shaving much >> looks great, ken. >> looks very good have we -- >> i think he shaves his head, though >> i wonder if we reached peak beard in america or peak scruff >> i don't think so. i don't think we have reached peak beard or peak scruff. i think it's growing i think some men start with movember and they just keep on going. >> where's john? >> so much easier. >> jackson on your show said he started. >> we have chris has a little -- no >> i would wear a goatee if they would let me >> is that right >> you wore a beard. >> i wore scruff for a while >> they say men in developing countries shave less, so that's a growth market for p&g for other products >> but other companies have called their bluff and this dollar shave thing and the other clubs are coming in. they're like the warby parker of shaving. >> i think people who are

shaving and using these products are buying from harry's and dollar shave club and not from gillette or brawn or shaving as much because they have that >> i use their products, but i have to say that i think that their razor blades, it's the razor blade business, are too expensive. they ought to come down in ice. i think they actually have >> it's one of the items that is stolen the most, which is why they're often lobbed up. >> it's a hassle to go and ask somebody to open up the case >> totally >> let's move on to topic two, which is under armour. it's sweating today. >> it is what? >> sweating. sweating >> i thought you were going to have to -- >> a contribution in the jar >> nice. shares are down like 15% today after the retailer said it expects sales in north america to decline the remainder of the year under armour has been forced to use discounts to get rid of unsold merchandise in places like kohl's, dick's sporting

goods, which has cut into profits. the stock was up 45% earlier this year. until today. what's going on? >> they're going through this transformation they're like in the 30th month of this five-year transformation they're three years in they're doing a number of things, and one of the things they're doing is they're pulling back on promotions and that is painful. you have to retrain the customer that if you want under armour, you have to buy it at fuller price. >> coach learned that's. >> yes, that's a great example so did michael kors. they're also pulling back inventory from off-price channels off price is like a tj maxx or ross you're not able to get it there. you want to buy it, you have to pay fuller price on the fliep side, they also said that their stores, 90% of which are in north america, saw 90% of the north american stores are outlets, which i think is interesting. they're pulling back on off price, but they have this big store footprint and they saw lower traffic there north

america is an issue. they're saying it's a combination of pulling back in the off price channel and lower conversion online and lower traffic in the outlet stores >> to me, under armour had a hot moment where they were new and fresh and people were willing to try them that moment to me seems to have passed they don't seem to have ever gotten traction in foot wear >> that's interesting, though. footwear did gain. >> it did gain >> and i was saying to courtney, anecdotally, i see in workout classes so many people wearing the light, very flexible under armour sneakers. they said footwear was up 4.7% apparel down 1.7% because i guess they have more competition from nike. adidas has become increasingly popular, especially with younger generations. i'm seeing a lot of under armour shoes. we were saying for runners, they're not our preference, necessarily, but i think more people are buying them >> on the call, they actually said they're starting to gain traction in running. which did surprise me because as

a marathon runner, it wouldn't be my shoe of choice >> i'm not sure they have traction among youth my son, who is 13, he is a nike guy all the way. >> adidas too? >> no. nike, all the way. >> kids in the midwest wear under armour >> i think it is because my son is head over heels lebron fan. topic three, the cable companies report earnings including cnbc's parent comcast, and the story is becoming clearer than a 4k tv. consumers are tting the cord and switching to streaming services faster than ever before and jewel wulia boor steestin he details. this is worrisome for you, me, and the folks around the table >> certainly, tyler, these numbers are shocking the second quarter had its fastest rate of cord cutting yet. that's a 5.5% decline in pay tv subscribers according to

moffettnathanson at&t, charter, can compast, those three companies together lost 1.25 million video subscribers. it's worth noting, despite cord cutting, pay tv shares have soared at&t shares up 20s%. comcast up about 30% charter, nearly 40%, and dish also over 40%. that's because these companies are pivoting away from selling tv to selling all sorts of other faster growing services, including mobile, streaming video as well as broadband guys >> you can watch us online >> you can watch us online you'll find us >> yeah. >> we're out there >> then don't we get into the millions of subscriptions? how many different netflix, hulu, hbo go, showtime, how many are you going to have? that's what i want to know >> my family got me a smart tv for father's day and i'm too dumb to work it. >> they're smarter than i am >> thank you, julia. >> here's the thing, tyler, and

guys, is that there are so many different services, but all of these really paid tv providers want to be the base of your new bundle whether it's at&t, they want to tell you they want to be your mobile carriers and they also want to sell you hbo max comcast, they want to sell you high-speed broadband they understand you need to have a mobile phone carrier you also need broadband, no matter which of these streaming services you use >> let's move on to topic four thank you, julia looks nice out there in california >> always. >> no englewood cliffs >> that's right. topic four, if you're scrimping and saving to send your child to college, the department of investigation investigating a loophole in the college aid prauz. wealthy parents are transferring guardianship of their children to relatives or friends so that their kids can qualify for need-based financial aid in other words, parents who have a certain income that would

cause their children not to qualify for aid are transferring guardianship to the clerk at cvs or something >> they typically wouldn't qualify for some scholarships either >> right >> merit-based or whatever >> bad faith >> we should point out, this is legal. this is legal to do. it's not a good idea for a lot of people, but i would say this. this is a story about college costing too much >> yeah. >> this is what happens. this is the free market at work and college costs too much people look for ways to get around having to pay the whole tab. and that's what that's about >> exactly look at this business that has sprung out of the fact that college is too expensive the "wall street journal" article talks about destination college, as this college consultant company advising parents on this strategy, because hey, you make a little too much money, but you didn't quite save enough to get your kids in to school that way we have a strategy for you >> it should not be inevitable

that college costs go up every single year. and higher than the rate of inflation, which it typically has been >> the woman in the journal article had spent $600,000 on her older kids and hadn't budgeted for her youngest and they had a household income of over $250,000, but they couldn't afford it, and college is very expensive. so there you go. >> have to leave it there. >> the jar is empty. >> we did a good job >> behaved >> coming up, why st. louis is bearing the brunt of a decade long merger boom that story is straight ahead

welcome back to "the exchange." corporate consolidation is becoming a bigger talking point with the democratic candidates

in the latest debate >> we have a serious problem in our country with corporate consolidation. >> we're supposed to break up big corporations when they're not serving our democracy. >> i want to return government to the people, and that means calling out the names of the monopolists and saying i have the courage to go after them >> leslie picker is live in st. louis where a large number of hometown companies have been acquired in recent years leslie, we know a lot of these names. >> we certainly do, tyler. anheuser-busch, panera, scott trade, express scripts, monsanto, these are all st. lice-based companies that have been taking over in multibillion dollar deals in the last few years. since before the last presidential election, more than 3.5 times more money was spent acquiring st. louis-based companies than st. louis-based companies spent acquiring those companies outside of this metropolitan area. now, that trend hasn't

necessarily helped the local economy here the population growth rate is one quarter the national average, and income per capita is growing at a slower rate than bigger cities such as new york and there can be positives, however, as it relates to corporate consolidation. people we spoke to here pointed to the fact that people oftentimes cash out when these transactions occur and then they can reinvest those proceeds in other areas, including back into the community here and also, in recent mergers where people have been laid off, they have gone on to found other businesses there's a brewing craft brewery scene that's bubbling up here, tyler. so people are hoping that maybe some of those could be the next fortune 100 company. >> all right, leslie, thank you very much. leslie picker in st. louis one of my favorite towns coming up, stop me if you have heard this one before trade talks happening in china today. the president meantime shifting from hopeful to hedging that a deal wilgedol t ne we have the latest on that next.

breakthrough at snhu.edu.

welcome back to the exchange u.s./china trade talks resuming in china today, and the president has weighed in from the white house. eamon javers is live in d.c.

>> what's going on in shanghai right now? we don't have a lot of detailed information from negotiators on the ground the treasury secretary and u.s. trade representative have traveled to shanghai to be part of these talks the white house tells me they're just optimistic at this point that these talks have begun. the first time since talks broke down back in may today, the president talked to reporters on the south lawn about his skepticism of the chinese side but he said two things at the same time. literally within the same minute, the president said first this about his take on the chinese leadership's incentive here to make a deal. here's what he said. >> well, i think the biggest problem to a trade deal is china would love to wait and just hope, they hope, it's not going to happen, i hope, but they would just love if i got defeated so they could deal with somebody like elizabeth warren or sleepy joe biden. i will tell you this china is dying to make a deal

with me. but whether or not i'll do it, it's up to me. it's not up to them. >> so tyler, that's the president's assessment of china's motivations. both saying at the same time that china would love to wait out the trump administration and possibly deal with another administration after 2020. and also saying at the same time, that the chinese would love to cut a deal with him. so that gives you a sense of the kind of information we're getting here not a whole lot of clarity in terms of what the president thinks the chinese side is up to and nothing from the chinese yet. we'll wait to see if we get more specifics as the negotiations going on itser overnight now, so not expecting anything in the next couple hours >> my head kind of hurts as i try to process that. >> right >> all in one sentence there thank you, eamon javers. as the trade dispute drags on, more and more companies have shifted business out of china to avoid tariffs. they have rearranged their supply chains and vietnam has seen a big influx as a result, but it's not by any means the

only country seema mody is here with that story. >> as tariff costs continue to rise, that's accelerated the push by u.s. companies to move production from china in many cases to vietnam that was the story last quarter. this quarter, our analysis of earnings calls as well as conversations with executives shows companies are broadening their search across asia to other low-cost manufacturing hubs as they look to kind of diversify their supply chains. so companies like has bro saying they're looking at india harley davidson saying they're looking to thailand, and irobot is moving a line of products to malaysia we also spoke to pwca, a global consulting firm that helps companies with the supply chain shift. they say because there's a lot of uncertainty about the next country the u.s. administration could target, a lot of companies say they're trying to diversify their supply chain if they can, and that goes with remarks just today from the u.s. trade representative, robert lighthizer who says they're now looking at vietnam he warned vietnam has to bring down its trade surplus with the

u.s., which hit a record high last year to $40 billion >> so that's part of the reason why companies would be looking beyond vietnam to pakistan, india, and elsewhere, because they're afraid that the same kind of tariff dispute might be visited upon vietnam hang around as we broaden the conversation with companies shifting production out of china on tariff fears and president trump's tough talk this morning on twitter, should we expect muchrogress from this meeting? john rutledge is chief investment officer and cnbc contributor. john, do you see it the way the president sees it, in other words, that the chinese may indeed try to run out the clock on his administrationso that they can get what they think would ostensibly be a better deal from a democrat successor to mr. trump >> tyler, my head hurts, too, and i'm not sure the president knows what the president thinks about this issue but here's the fact.

the fact is that this is one of the two powerful political issues that he has to play with his political base he's not going to let this go. they're not going to be a trade agreement until the next election because it's just too valuable otherwise his people all know the truth about trade, and they understand the facts. it's just that he either won't learn or can't learn or refuses to learn about international trade and finance. >> it's too valuable a political chip for him to give up by making a deal? >> absolutely. i think the hardest job in the world right now would be these two gentlemen in shanghai today. mnuchin understands totally what's going on. bob lighthizer is really just the leg breaker in this, the deal maker but they both understand what's happening in trade fact is global gdp is down by

something like $1 trillion because of this trade war. the tariffs have raised cost in both places, but the trade war has driven the chinese currency down by forcing investors to leave china. that means u.s. products in china's prices are up 20% for their buyers and they're up zero percent for our buyers because the tariff is offset by the currency decline and if you count goods that are not included in the tariffs, their costs -- their prices are lower. that's why you have such a massive drop in chinese imports of u.s. goods. our goods going there. and hardly any drop in the chinese goods coming here. >> john brings up a good point you have to wonder whether the objective of the tariffs are being met. because the objective of the tariffs were to incentivize companies to move production from china back to the u.s while there are a number of companies who have opened manufacturing plants in the united states, the growing trend

seems to be more multinationals looking for other low cost manufacturing hubs across asia in order to keep their costs down and to consumers like you and i don't have to deal with higher prices. >> john, a good point. one of the things that i believe that the president cited today was that the chinese had agreed to buy a lot more agricultural product. to his sights, they have not what's the fact? >> the fact is they actually have bought more products in recent months. but total imports of goods from the u.s. have been down by a lot. because the prices in china have gone up so much. >> and that's the currency, the currency effect you were just describing >> the currency offsetting, completely offsetting the tariffs in the u.s. and doubling down the tariffs inside china. but here's another fact. and the trade team knows this, too. if i take a $1,000 product, export it from china to the u.s., and i ship that product to mexico and i paint it green,

then send it to the u.s., that will show up as a $1,000 export from mexico. the trade statistics show gross trade, not value-added trade they're grossry distorting, so goods are moving all over the place, trying to get in under these strange trade numbers. it makes no sense. >> john, thank you appreciate it. coming up, it is one of the largest ever data breaches involving a big bank how did it happen? where did all that information go what's the damage? we have the latest on the capital one hack next. ♪♪ ♪♪

shares of capital one on pace for their worst day in four years after the bank disclosed a data breach by a hacker who accesses the personal information of more than 100 million customers and then bragged about it online. the bank says the exposed data include 80,000 linked bank account numbers, 140,000 social security numbers, and the information on credit card applications from 2005 to early 2019 for more, i'm joined by kate fazzini, cnbc's technology reporter who covers cybersecurity. kate, welcome.

what happened here, and who done it >> so this is one of the more interesting breaches that we have seen in a long time because one person allegedly committed this a woman named paige thompson who apparently was able to access a web application in the cloud service provider used by capital one, amazon, and steal this information and take it to social media and many different social media accounts brag about what she had found she was arrested earlier this week >> and the breach apparently took place in march of this year why are we only finding out about it now >> it apparently started in march and went through july. so there's still some things that are a little unclear, but it looks like he only recently was able to get into the information she had stolen and started bragging about on social media. that's where the law enforcement authorities caught her >> was the vulnerability in the cloud at the cloud provider, in other words, amazon web

services, or was the vulnerability solely at capital one? >> capital one builds its web applications on an amazon cloud server so the vulnerability was in a firewall that was owned by capital one and managed by them. but that sat on an application on the cloud server. >> was this perpetrator working with anybody was she selling the data to russian hackers, to whatever >> this is what makes it so interesting. her motives are really unclear at this point, and she seemed to come across in a lot of her postings as being a little unhinged really excited she had found this data and wanted to give it to someone it really brings up the question of how these banks can protect themselves against these lone wolf attackers >> she posted the data on a website so potentially others who wanted to make ill gotten use of that information could? >> it appears that she was -- she posted some of it on get-hub. but -- >> i don't know what that is >> it's a service where you can

put technological information just online. but it appears she was just shopping it around and letting people know she had it >> all right very interesting i'm sure you'll be following it for us we appreciate it kate fazzini, we appreciate it that will do it for "the exchange." i'm going to join melissa on "power lunch." >> we'll see you soon. i'm melissa lee. here's what's new at 2:00 on "power lunch." we're officially 24 hours away from what could be the first rate cuck in more than a decade, but will fed chair jerome powell deliver? >> plus, apple earnings on deck. the tech giant getting ready toreport after the bell. we'll tell you the three most important things to watch for. and we're about halfway through the season with about 75% of the kamps beating the street "power lunch" starts right now >> taking a check of the markets. they are climbin