pete najarian just tweeted this stuff, stuff on gold so i want to push you there. as we cover the worst sell-off in the united states stock market of the year kelly evans and "the exchange" picks up that story right now. thank you, scott hi, everybody. welcome to the "the exchange." here's what's ahead, we have a ssive sell-off across the globe with u.s. indexes hitting their lows right now the trade war seems to be turning into a currency war with china letting its yuan fall to a 10-year low. now it's the worst day of the major averages this year the 10-year yield is not only above 1.75%, it's now 9.63%, back at 20-year lows there and we will see if it can do even

lower from here. dom chu is standing by with numbers to watch bob pisani following all of the action at nyc, and steve liesman has a look at how a currency war can play out dom, kick things off for us. >> kelly, as you mentioned we're down 6675 in the dow about two, three minutes ago. this is down by almost 3%. the worst day for the u.s. stock market so far in 2019. obviously trade a big part of that story the outside losses are coming, where there is more exposure to some of the technology names in the marketplace. mainly nasdaq composite is up as you can see 3 1/2 percent overall. let's cycle through to the macropicture to check out some of the notable moves there we are seeing copper and gold prices move in distinctly different directions as you can see over the course of the past year, there's been

more of a bid for gold prices. the safety trade continues it used to be an expectation of easing from central banks and now it's parts of the safety trade. meanwhile copper prices continue to go lower. the die vurjance signaling what is happened there. and if you're looking for where the rubber meets the road, apple, 3m, intel, nike, down 5% for apple, 3 1/2 for intel, nike almost 3%, all four of these stocks are tied towards china trade in some, way, shape or form because of their businesses and, kelly, they're all four on the dow jones industrial average and that is one of the reason you're seeing the heavy weight for the dow, some of these companies and others chinese firms have suspended purchasing u.s. agriculture products according to state

media. it does not rule out the possibility of slapping tariffs on agriculture purchased after the three quarter. your feeling about this? >> this may be a little different. remember may, started out where we're seeing now, trade talks broke down hike to tariffs 10% to 25%, china retaliated at that point the s&p in the month of may was down 6% and we saw very big drops in oils and very big drops in bond yields. the bond yields lowere seftlowe 2017 but this time there's no meeting on the horizon and china is not being seen as a sign by some it's preparing for a protracted

trade battle today's declines are very broad based. everything except essentially gold and utilities are down 1% to 3%. you see here tech, banks, consumer discretionary, energy industrials, even consumer staples are not faring well. look at kroger, they get 100% of the revenues inside the united states this tells you something it tells you that some investors are simply taking down exposure to the market overall, not sector just taking down exposure. the vix is back over 20. guess what that's exactly what happened in early may. it too was over 20 at the time bulls say we're one tweet away from a big rally maybe. but the problem is the positions are a lot firmer right now also some technical damage being done russell 2000 transports now below their 200-day moving averages kelly, back to you >> bob pisani, thank you let's get more with kayla

now. >> yes, the tit for tat as china did not only stop fentanyl coming in as they agreed in december but china is not purchasing more agriculture products which president trump believed china committed to back at the g20 in japan. but now china is saying we're not going to be purchasing any u.s. agriculture products. so it could potentially stop those purchases all together, according to a report in the state news agency. in this report it calls it a serious violation of agreement between president xi and president trump for president trump to be introducing this new round of tariffs, 10% round on the remaining $300 billion in goods that the u.s. imports from china. we will see what happens from here certainly that will be a major blow to the farming and ak a

agriculture community that has borne the cost of the trade war. and a key issue for president trump going into the 2020 election and a few weeks ago the department of agriculture rolled out the $16 billion aid program. the agriculture secretary produced that at the time. there were no plans for additional aid of that but if china closes this market to u.s. producers all together, it could be a different story. >> incredible. thank you very much. we were at session lows a moment ago, dow nearly 770 points and 10-year, 1.74% rick santelli, we were over 2% four, five days ago? >> yeah, 2.07 was in the cards officer 30 basis points of a drop in a matter of days as you look at the chart from early july, you can see what kelly is referring to. we popped up to 174.

173 yield is close to the three-year low and that represented down an even dozen basis points but let's look at the epicenter. the cumulative catchall, it's skyrocketing up almost 14 ticks if you look since early july, can you see what i'm talking about. the higher that goes, the bigger the percentage the market is apriling and the market seems to get what it anticipates and finally, our yield compared to other yields, it's now narrowed 25 basis points, narrowist it's been since april of 2018. it really underscores how the long end of the markets are getting a life of its own. even though trade is the trigger, it seems like the suitcase trade what mine by that is a lot of carrying trades, maybe a lot denominated in yen, as necessity unravel, unpack and just fly out

of the suitcase, you're seeing quick pricing in the marketplace. kelly, back to you. >> the suitcase trade. rick, stay there if you would. we want to bring steve liesman in to talk bigger picture. why when people start saying karnsy war in response to china's latest moves, when the president is putting pressure on the fed, maybe that's the wrong channel. if he really wants to do something to weaken the dollar, what are we talking about? >> first i want to comment on the character we're talking about. bob asked the question are we one tweet away from a rally? our fed survey shows the market has twice been burned by this. they had a 70 plus chance they would have an agreement with china. i wonder now if the leak against the presidential adviser, even the comment from the president that trades are going well, i

think at some point you lose the ability to turn this around. maybe i will be proven wrong where the tweet launches a rally, but -- >> you're saying we just in a good chat, we're constructive, everything is fine what happens then? >> you get to a point where you some you sell the rally and you really sell the rally as opposed to you sell it and wait and put it back in when it dips like this maybe this is another one of those opportunities. i can tell you twice now they had the market convinced there would be peace and that's not been the case. on the intervention question, the fed can't help intervene by lowering rates. >> but they lowered rates last week and the dollar rallied. >> rallied and came back and rick is all over that. let me say quickly, it is the president's obligation to manage the currency, not the fed's. the treasury has a fund called the exchange stabilization fund,

that is for the express intent of managing currency if the president wants a weaker currency, he can go out and use that fund and the fed apparently will them help them. i'm trying to figure it out but they have in the past done it to sell dollars and buy other currencies if that's what they want to do. >> before you go on, rick, i want to bounce this off of you what steve is saying we have the tools the president can use if he really wants to would there be a reason why he doesn't really want to or why he seems to be jawboning this through the fed? is it really about the dollar or just want lower rates? i'm curious about your thought on all of this playing out here. >> we have nuclear weapons but we don't hit those buttons i don't think you will see dollar intervention by the president outside of verbal context. he talks maybe hints at it or uses it as a stick but implementation, at lowest in my opinion, is as close to zero as it could get

and it would be a horrible strategy anyway. like it's a horrible strategy thinking our central bank could do anything to get ahead of this you look at the quarter point, the negativity, three-month intent on its version. long-end precipitous drop. it just gets lost. there's no way you're going to get in front of that from the peck speculative of the u.s. the best you can hope for is good policy and with regard to trade, listen, trade is the catalyst no doubt it affects export economies like germany we seen japan and south korea have issues. taiwan are issues from china but tend of the day, a lot of this is like an onion. hope against hopes trade gets fixed, right themselves and global economics pick up but we're peeling back the onion. they all trigger the voltility like the vix it's almost a rote process. >> and another thing is the

markets and economists are not sure that we can intervene on a weak dollar. >> that it would work. >> that it would actually work or the u.s. acting alone, as a g7 or g20, a lot of countries could get together and weaken the dollar that has effectiveness to it but others may want a lower currency for their own reasons, but they may not allow us to weaken you think about the race to the bottom, you pivot, they pivot, you pivot. >> it's the swiss prank. >> why holiday charges less than the hilton if hilton goes down, holiday comes down the race to the bottom one thing that's worth mention egg, as rick said, the fed fund future market came down. increased anticipation for more fed action and yet the stock market continues to go down. the idea being that we wonder, skepticism out there, can the fed fix the fallout from the

trade problem? and i think there's except -- good reason for that skepticism. >> rick, what will the fallout look like? ironically the one thing that happened china's weaker currency takes it out for the u.s they let their currency slip, they let it devalue a little, we're not going to feel it much for something that wasn't that big in the first for u.s. damage to point to a stk down 700 points seems like it's pointing in the wrong direction, right >> let's believe our eyes on this one i couldn't agree more. if you do the math on tariffs, this isn't really about tariffs. we can argue over who pays the white house has their own opinion, scott the judge his opinion. but the numbers are not big enough this is about a slowing global getting slower because of big trade issues, especially expert economies like germany, japan, like china and south korea globally we're all paying the price. certain markets like the u.s. shined out better than the rest and the volatility trigger by

the tariff tweet is now unpeeling some of the leverage that was put in. nobody has excess margin nix their fully loaded in positions. this is what happened when that starts to go a little sour i think we will reach a level that's lower and find u.s. support. >> sure. final word on this, which is to say -- listen, i don't know how we can go from each country wanting its lower currency if up believe them to everybody coming together to cooperate on a new global surncurrency system but t are the possible ways out of this, do you think >> i don't know a way other than the cooperation that has served the world reasonably well, not perfectly. there have been problems there's problems with china. i do want to pick very quickly up on something rick pointed out, as you're closer to the edge, as you have these global economies weaker, and the potential for it to knock on to the u.s., it doesn't take as much wind to knock you over the edge as it did before. so as we come down, we have 3%,

as the president said playing with house money athe 2% growth we're a little closer to playing with what's in our pockets than we were before. and that's why i think there's reason to worry about playing with tariffs that rick correctly says may not in and of themselves has a huge impact but people out there say you go high enough, you have the potential for a global recession. >> guys, thank you rick and steeve, appreciate it very, very much. want to show you where we are. lows so far 769 lower on the dow. that was just about 15 minutes ago. we're down 704 2.6% on the dow, similar magnitude on the s&p and nasdaq down 3.17. with more on the escalating trade war and how the fed may respond, i'm joined by larry lindsey, ceo of the lindsey group. he was director of the active

economic council under larry george bush. we have been doing this since sunday what's the tail and whats the dog here >> i think there's a lot going on and something that hasn't been mentioned is hong kong and i think that's an important place to start if you look at everything the president did on thursday, yes, he put on the so% tariff, but he also had a very interesting exchange which should have been music to gene's ears he said the conflict going on in hong kong is for china and hong kong to resolve. the u.s. wasn't going to get involved he also used the term riots rather than protest to describe what's going on. to me that was trump taking hong kong offer the table as a roadblock to further negotiations i think it had been maj record block until now. and. >> dan: >> but larry --

>> i actually think net, net, it's a plus. >> you're saying trump is acting sort of dovish in the hong kong issue saying we will not intervene, it's in china's hands. if that's true why are we seeing so much of this come to a head this afternoon we saw trump with the 10% tariff on thursday, and now saying they may put so% on u.s. a august 31. if he doesn't stop them, it doesn't sound like he's doing anything but throwing it back in our face. >> there are two things going on first is long-term geo trade struggle the trade is part of that. let me address the currency issue. when you put a tariff on someone else, the natural response is for that other country's currency to go down. if you look at what's hands since oh, the second quarter of

2018, when we first started this tariff process, we had a 12% drop in the yuan relative to the dollar if you include the 10% tariffs that just went on, we now have a 16% effective terror freight on what's going on in china -- tariff rate on what's going on in china. three quarters almost of the entire tariff has been absorbed with a lower yuan. when they cut their currency, they're making themselves poor they're picking up the cost of the tariff if i were the president, i would actually not mind so much. i wouldn't make such a big stinch of this it's a simple, that's the chinese who are paying his tariffs and that's something i think he wants toll the public. >> do you take him seriously then when he says federal reserve are you paying attention, and talks about wanting the u.s. dollar weaker

in response. so, in other words, do you think -- you're saying it's his fault the dollar's gone up because it's just reacting to these tariffs. so do you take him at his word he wants an equal dollar if so, how would that happen what would that look like? >> presidents always want, as do we all, mutually contradictory things but there's no question that the effective of a tariff is going to cause the other countries currency to depreciate and that's what's been going on here in doing so, you end up not really shrinking the trade deficit much at all. it's all absorbed in the currency rather than in actual trade. as far as the fed goes, i was actually thinking when the fed cuts, that more than responding to the demands of the market the market was out there saying we have to have a cut. we're at record levels if you don't cut -- okay.

that is what the fed is worried about. they're worried about a market crash. i think that was the reason for it i think the fed knows they made a mistake. back in december they effectively reversed that mistake. but i don't think they're really paying that much attention to the president. politicians have been yelling at the fed since i was on the fed for god's sake and before then, yelling we used -- the '80s, used to have tractors driving around and around the fed building you can't give in this stuff like that. i think it's part of the background noise of course the fed cares about the president's thinking, the fed cares about every senator's thinking, congressman's thinking, but they will do what they want to do anyway. >> so final word, does the fed cut a couple of more times in response and what happens to market >> i think the fed should be data dependent

and right now i don't think we have the kind of data coming in that justifies a cut we have very, very low unemployment we have an economy in the first half averaged about 2 1/2 percent, 2.6 actually. it looks like it's going to be around that range in the second half of as well. those are not the conditions in which are a central bank would normally cut their justification was a hypothesis that the trade situation will come back and bite us. the hypothesis in december was a high market would cause inflation. they were wrong then may be wrong now would i rather wait for the data if i were the fed. >> we will see if they do. they might have made up their minds already. larry, thank you very much good to get your spec speculative, especially mentioning the hong kong issue as well. we will have more on that in a little bit >> massive sell-off on wall

street has the s&p having its worst day and dow on pace for its worst since january too. what should we do? billy snead is here, and first of all, bill, what are your thoughts do you have to worry about the level of the u.s. dollar now, does it hurt consumer staples or not? just give me your reaction as sort of a longtime market participant, all of these headlines with hina. >> mr. lindsey kind of hit a nail on the head, which was the fed thought they were giving the markets what they wanted the markets would like to go on having this unbelievable love affair with the gross stocks and with the s&p 500 forever because it's gone on longer than the love affair with grease stocks and love affair with the index has gone on. so what you've got here is the beginning forces -- if you go

one one year ago and you track the four main fang stocks we consider facebook, alphabet, or amazon amazon, netflix and google, they're all lower than a year ago, even before the sell-off every single one has gone 12 months without making any money. yet if you go back and look at the transcripts of your shows the past 6 to 12 months, 80% is what he's talking about and the other 20% has been beyond meat and beyond believe, money losing ipos that are literally a train wreck because think think of micro economics. i'm not a big fan of macroeconomics, i apologize. but on a micro basis, if you substantially increase the number of stocks available and don't change the demand for

growth stocks, what happens to the price of growth stocks they go down on the opposite side, allergan gets bought out, anadarko kets bought out the value is decreasing but no demand. >> i know you're sensitive to the big tech names in particular ironically you guys have overlap, agreement on the names you do think are attractive here i think amgen might be one area. >> hi, kelly and bill. listen, i think as i have for quite some time, now is the time you want to be focused on businesses with a dividend paying culture upon paying above market dividend yield, much above the ten-year levels. you get data as a growing economic streak from the dividend increase.

some are some of the large tech names but many of the sort of usual suspects in health care, consumer discretionary, even energy i do think when you worries wh you worry whether we get these kind of corrections, which we do every yee, you want to wait until the teams talk about them. >> yes, microsoft, verizon, apple, even tiffany's. so you think the close is clear to binames amgen, target. they had their hands handed to them. >> it's not as high as it ever gets and the spread between growth stocks and value stocks is the adviser from court

recently hey, time joit, court is twice as expensive as it normally ever gets against growth so what we tell people is if you're not already tacking your portfolio towards value, you should start hurrying this this market has had momentum, momentum, momentum if you break that momentum, there isn't much to stand under some of these names. >> french thinks value is expensive? >> no, value is the cheapest its been relative to growth and you're talking about a sector that historically averaged 3% better than the other. the one that averages better over 90 years is the cheapest relative to the other and it's been there almost 90 years. >> if you wonder who's selling fang, you let your man, over the last year or so. especially good to hear your point of view on a day like this take a look where we stand dow down 670 s&p is off 77. that nasdaq we were just talking

about, it's down more than 3% to date some of popular tech names are getting hit hard in the session. how about the casino stocks? they're getting hammered with wynn resorts down 6% because of all of the uncertain around china tensions flaring up in east china in particular after they allowed the yu juan to fall to its lowest level in ten years. and this happened while the trade war between japan and south korea continues to escalate here to connect the dots for all of us is cnbc's michelle kruch ka brerrio thank you for being here. >> pleasure. >> what do you think is the issue of this timing and latest rounds as it regards the currency in china and this sell-off today >> you guys highlighted throughout your show and the

day, their force will weaken under the weight of the tariffs. but i would argue part of the weakening, i don't know how much, maybe because with the yuan, but it does matter you have fares about instability and that could lead to capital flight chinese people want to get their money out as a level of protection and that equals currency you sell your chinese yu juan to buy something else what's happening in hong kong, kelly, is extraordinary. >> lindsey's point as well was the president basically signaled he's not going to do anything to stop china from dealing with that issue as it sees fit. unfortunately if you're living in hong kong, you're not hearing the u.s. say we will stand up and defend their interests we are hearing it's china's

problem. they have to deal with it. >> which begs the question, what will china do to deal with it? they have been tolerant but how long will they let this go on? general strikes, that's what happened in hong kong. the whole place shut down. we're used to that happening in france or greece that never happens in hong kong. it's extraordinary the streets are filled with violence civil service workers joining in this is a huge challenge for the chinese regime historically, what have they done, unfortunately? what would you do if you were a chinese individual right now wouldn't you trying to get some of your money out. >> and we will talk in a limit later about bitcoin. if the currency had gone to 2016, china would have lost a ton of space. >> losing control. >> losing control, yes.

>> this time around it does not feel like that why do you think the u.s. market reaction has been so severe to something that is not real shrine as muchf a risk now as it was three years ago >> i think because of the initial wording that came out of the central bank of china when the ft chatted with them and they specially spoke we saw that happened what would have been late last night, they blamed the trade war, they blamed president trump and a lot of people listened to that and said are they weaponizing the currency and doing something they said they wouldn't do? they came out later and said no, we're not weaponizing the currency but you have to wonder why did they let it begin like it did did they have to because the freely traded chinese currency was already weakening so she had to bow to that in order to look like they're not losing control? there are a lot of things at play here. they have to be relieved about president trump not adding to the pressure on hong kong.

>> maybe it comes down to the chinese economy if it weakens, steel, all of the worries we would had in the past, now come back to the floor. >> concerns would happen even without a trade war. the way they're going backwards on economic form, you wonder if you would not be seeing this already because they have not been doing enough to keep pace on things that would make their economy grow at a fast race. >> and does the u.s. take advantage of that and per belong its dispute. thank you very much. let's get back to steve liesman or breaking news. >> the fed announced it would launch a realtime payment estimate called fednow the service they believe will be able by 2023 or 2024 it operates in the background, they know it as a fed wire instead of waiting a few days for checks to clear, it will be

done instantaneously they say it will improve efficiency and reduce costs for individuals and businesses, kelly. this is interesting. competes with the banks. banks have been opposed to the fed getting in on this this is a very interesting moment we will be covering this much more closely if not for a 700-point drop in the dow jeans. >> that as well. apple is on pace for its worst since may '13. how much worse can it get? we will explore. same question for oil. still under pressure as the trade war fears slowing economic growth, bitcoin as mentioned was back to the ghhiest level in about a month. we will talk about all of it on the other side of this break or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials

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welcome back to "the exchange." stocks are selling off sharply at fears the trade war with escalating and currency war is next this after the u.s. nonemergency index skidded to a three-year low. the dow down 705 with me is dom chu --

>> used to be don ho. >> i can play the ukulele. >> and senior analyst and adviser. thank you all for being here we will begin with apple the tech giant falling 5% because of business is exposed under several fronts this could lead to a price hike on iphones and other apple products would you be a buyer or seller of apple given the news flow over the past week >> unless they're giving you a 4g update for free, i think i would probably by gifts on apple. the 5g rollout will be you huge across the spectrum for chips, obviously apple. people will want the technology, latest streaming technology. >> this is not an ex-expensal -- >> it's a correction so we're down 5% taking all stocks down, not just apple

but i would be a buyer. >> if it's not existential then is apple at a 5% discount? >> you can still be bullish on apple but the stock can go down further if things get worse with regard to the trade front. we've seen it before all it takes is a phone call or tweet from president trump to make it all turn around. apple is an interesting story only because the corporate fundamentals here should be argued are really good despite the headwinds from china and there could be a situation where they have enough pricing power to pass some of the cost off to consumers or have the demand lengthening there. >> and this is a question for starbucks and a few mega con u.s. consumer names. do investors worry this run becomes reputational risk for them because it seems to have turned nasty. the chinese came out an hour ago, not even, saying they're suspending purchases of u.s. ag

products. >> which they have not bought since september. >> but certainly it's a target. >> and i would not go that far. whether it's apple or global market kirnz, when you have 4 trillion in negative debt -- >> and probable floiy another tn after today. >> trillion after today. this president, yes, can put out a positive tweet and he could also put out a negative tweet. >> just remember -- >> and something about the yuan, this is the first time we have seen a break below 7 it shows china is willing to use an alternative measure to pushback against the escalated

tariffs that president trump warned of last thursday. >> by the way, this isn't even deliberate on china's front. what i'm saying is they're not actively intervening they're just allowing it to float the way it should have and arguably you can say with the chinese economy doing the way it is, the currency should be weaker. >> or perhaps using the u.s. as a scapegoat for capital flight issues. >> remember september 1 is when the tariffs go into effect between now and september 1, there's a lot of tweets that are going to happen and also a g7 at the end of august. you have central bankers pushing one direction and political forces tugging in a different direction. so that's the tug of war we see now. on the yuan, it broke seven which is no surprise to anybody watching it was only a matter of time but what the united states should do is say, like robert rubin would say, a strong dollar is in our best interest and we will issue 50 year and 100-year

funds to fund an infrastructure package. >> you have been pushing this for a while. >> why not >> awe industustria, it was wat >> it makes little to no sense why we're not. >> bitcoin has been surging on this today look, cap slides, look to digital coin, it's up. not a huge pop but highest levels in about a month. >> what's interesting back in aust 2015 when china had a larger devaluation that came into focus you saw a larger exodus of capital out of china into london real estate, gold, capital in general i think this time around the idea is that if the chinese continue to weaken their currency or allow it to fall, depending on how you look at it, that will trigger more capital outflow. this could be one mechanism. >> they each tried to shut down the other avenues, haven't they? >> not tried, they have. >> the investment into the u.s.

is basically cratered for foreign investment, the money has come out of other asset classes. what are the other channels left to go? >> i look at bitcoin as a faux flight to safety yes, it's a mechanism when you're in a country like venezuela or with capital controls, you can start leaking money out that way but at the end of the day it's not proving itself as a true storehouse of values. >> if you have a smartphone in any of these countries, you can just go on and buy bitcoin. >> john, i totally get that. but for the fact china, as has shown, they can clamp down on any access that has a tie to a computer >> they can shut down -- >> they shut down exchanges. >> we're not just talking about china, right you want to hold sterling going into exit? do you want to hold euro -- >> silver in. >> you could what's performing better, bitcoin or gold or silver?

>> i don't think you want to look at it that way. >> oh, yeah, our investors want to know we're looking at it that way actually. >> he's beating the chest on the bitcoin play year to date if you can't catch that >> it's not just us. mike came out last night and said this could be really what propels it back above 20,000 we will see. >> i love mike he's a good guy. know him well. listen, you're riding from 1 to 20,000 to 30,000. >> but performing asset -- >> it could crackdown even on ham. >> they will crackdown on it. >> the social media store in china. we have competitive currency evaluation across the globe and $15 trillion in negative interest rates what is going to fix that problem? only thing if you go back to the '30s and look at what fdr did

when he confiscated all of the gold, basically they have no choice but to devalue the currency if you trace back what happened, since 1998 the euro experiment is a failure, right? you can't have many different interest rates and one currency that does not adjust same thing with china. you can't have a fixed currency and not have things adjust that's what throws the whole global world out of balance and why we have $50 trillion in debt. >> and for bitcoin, fortuitous timing gets to prove it's stripes or not right now. i also want to mention what's going on with oil last week absolutely plunged when the president put 10% additional tariff on chinese goods. it's fallen again today, mitigated declines somewhat on better supply news how much of crude, wtf under 55. is this tells us the main worry for our stock market is global growth

demand for china, some extent demand from the u.s. will erode. >> even with cutbacks and sanctions against iran, we're seeing u.s. production go up that's barring oil going to $30. >> if you have been energy investing the past couple of years. >> it's been rolling. >> natural gas is 2 and change. >> is oil heading that way are we going to get to the point where the price keeps falling through? >> one will have to assume. >> the rise in geopolitics and foreign policy becoming a larger focus for all of these countries, every country whether they did produce oil or not, are trying to do the same. india net oil importer or trying to figure out how to produce oil. >> wow >> if you look at it as a gage or jury if you will on what's going on with markets in the economy globally, it tells you even despite the fact iran foreign seized another tanker in

the persian gulf, there's all of this going on and we're awash in supplies and slowdown in china, slowdown in the u.s., contagion slowdown globally far outweighing anything geopolitically that can happen in iran. >> and a day the dollar weakened. >> and financial conditions are plummeting because the fed matched expectations instead of exceeding them so they took the quarter point back that they raised in december and bill was asked for a good piece over the weekend that thauked about that. you have the whole curve trading. >> or don't tell people you're going to do the quarter. so if you do the quarter, at least that's not an issue. >> i think james bollard walked back 50 to 25. so that matched expectations so if you're holding long and the s&p is over 3000, let's hit it

and go away until september. >> if we weren't having the trade war, we wouldn't need the fed to do anything. >> i really don't think that's true >> it's politics >> really? our numbers -- we are doing fine we're a service-oriented economy. the tariffs, i'm not paying more for anything, are you? my starbucks didn't go up. maybe in bitcoin we're paying more for it. other than that -- >> the world is weak europe is on the cusp of a serious recession, china may be in one they have contagion effects. a large part is due to a number of policies that are i think weakening the world. >> they're also our biggest enemy as well. >> we're not friends with china. >> you have to reason why trump is doing what he is doing, you can say he's a buffoon or whatever but there are things behind what he's doing

in his mind he doesn't want to help china out they steal our intellectual property they don't let our companies sell to them meanwhile, buy soybeans from us. >> final question, retail, which has really caught up in the latest round of tariffs, it's only 10%. do we exceed price hikes for the consumer or not? what do people do with the stocks are we talking margin pressure or no? that feels like where the rubber meets the road sector is down about 3% today. >> here's where it is. the problem with the retail industry specifically is you are on an immense margin pressure because of the likes of amazon and other online retailers if those margins are not there because of amazon or other online retail, there's nothing to absorb. the margin is gone if you take the pricing issues, it may just fall to increasing prices. >> that's why bill is saying i'm a buyer of amazon today. >> tomorrow. >> we got to go.

what would you be a buyer of as we leave or nothing? >> gold and silver. >> bitcoin >> yeah, bitcoin my personal favorite asset no, i think i would wait it out a couple of days. >> twitter, by twitter so you could tweet. >> thank you very much for joining us, guys the market is sinking on the latest trade war between the u.s. and china we have former u.s. ambassador to china max baucus weighing in on whether a trade deal can ever get done when we come right back and put back together. this is also hal's heart. and this is hal's relief, knowing he's covered. this is hal's heart. and it's beating better than ever. this is what medicare from blue cross blue shield does for hal. and with easy access to quality healthcare, imagine what we can do for you. this is the benefit of blue.

what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ welcome back to the exchange let's get a check on the markets. the dow having its worst day since january. the s&p having its worst day since december and the nasdaq is the worse performing today 769 were the lows at the top of the hour the two-year yield hitting it

lowest level since 2017. the ten-year keeps sinking 1.729% that session low is also a three-year low look at the dollar, a little softer today amid all this news with china letting its currency weaken against the u.s. dollar index at the bottom of the screen china's trade index, which we track here at cnbc quite closely, of course, falling. no surprise. nearly 4%. that's where a lot of damage is centered today it's not all red shares of northrop grumman and jacobs are winners today contessa brewer is looking at the casinos, and phil, boeing in particular, but big pain for casinos. >> we're looking at the casinos that have exposures in mccoy let me show you what wynn is doing, down 7% on the day. las vegas sands is off as well

mgm, which relies less heavily on the revenues from macao are down, and then, if we look at these casinos since the president made the announcement about those 10% tariffs, since last thursday, you can see they're down in the double digits at this point it's not just the trade tensions, although that overshadows everything else. they're also dealing with political turmoil in hong kong that's preventing some visitors from coming in they have dealt with the chinese crackdown on one of the biggest junket operators and just last week, a typhoon as well. but as you can see, this is a real problem for those casinos that have such big exposure in macao. >> i didn't even realize there were a couple other issues hitting them there in terms of the defense industry, where are we seeing the biggest hit? >> if you look at the ita, it's down about 2%, a little more than that. basically trading in line with the broader market right now but not all names are created

equal. so first of all, year to date, the ita has been outperforming the s&p, but if you look at the more pure play defense names, you mentioned northrop grummant, also raytheon, lockheed martin if you're looking for an area not exposed to china, it's names like this. we see china as a strategic competitor, a peer to peer threat you also have that two-year budget deal that just passed the president just signed into law. defense spending once again poised to increase this year and into next. and so if you're looking for areas where there's cash, where there's certainty in the coming years with revenue and order books, then you're looking at defense stocks >> that explains northrop in particular also, boeing is one of the most prominent names mentioned in the cross hairs when it's a china trade issue. what do you see playing out there today? >> boeing is down, really down at their lowest level in seven

months but let's first look at the airline stocks all of them are down right now you look at the big international names, whether it's delta, united, american, that have exposure with routes to china, they're lower, not just because of what's going on with china specifically but concerns about travel to asia pacific being down but also, those airlines that primarily are here in the united states, whether it's southwest, whether it's jet blue, alaska, spirit, all of them are down as well today you mentioned boeing boeing at its lowest point in seven months by the way, ceo speaking at a travel conference in just a few minutes. here in chicago. we'll listen to see if he says anything about the situation with the 737 max and i want to quickly show you airbus versus boeing, and we're showing you this chart to show you that these two typically move in tandem that has not been the case over the last several months. as the max issues have weighed on boeing. airbus is outperforming them today, airbus beginning

production, first a-220 being built in the united states they begin production in alabama. >> 40 percentage point swing holy cow thanks stocks are selling off at near session lows as i speak right now, after china retaliated against u.s. tariffs by weakening its currency or allowing it to weaken to fall to the lowest level against the dollar in more than a decade joining me on the news line is max baucus, the u.s. ambassador to china under president obama senator, it's great to have you here welcome, and thanks for your time >> thank you >> so what's the significance to you of this currency front now in the trade war >> i think china is bringing out the big guns china is not going to be bullied by the united states we're unfortunately entering a new chapter here, which is not good by breaking the dollar, the dam has been breached. who knows how far it's going to

go or how far china is going to allow the currency to weaken seven has been there for a long time there's a phrase in chinese that means crack seven. seven has just been cracked. who knows how far the valuation is going to continue it's discouraging. it's concerning, and it's discouraging >> do you think it's possible as some have speculated that china is suffering currency outflows, maybe related to hong kong, and it's using the u.s. as a scapegoat here does its weakness tell us about it fighting the u.s. or about it being in a very vulnerable position right now >> i think frankly, china is more confident now than it was several years ago when it was evaluated several years ago, the markets were very unsteady because there's some thought that china was not as much control of its financial system as it should have been but now china is more confident. china has capital controls that

are much tighter now than they were back then china has learned a lot. they may not be perfect. nobody is perfect, but they're good so it's using currency now as another weapon in the trade war, and it's showing frankly that the trade wars cannot be won we may pull another 10% tariff on chinese imports in the u.s., but china is going to retaliate. they're going to weaken the currency the key here, frankly, is for us to get more stability, more predictability, and the way to do that, frankly, is to be a little more patient. when i was ambassador in china, i learned after about a year, here's how you deal with the chinese. it's kind of corny but i came up with my three ps patient, positive, and persistent you stick with it. issues with respects to china. be positive, not negative. over and over again, be patient. after a while, you prevail patient, positive, persistent. that's the way to deal with china on trade >> that may be the max baucus

way, but given this administration in charge now, what do you think are the likely ways the u.s. might respond? what else could china do here, if you say they're doing this from a position of strength and they have learned quite a lot? >> well, unfortunately, americans tend to be a bit impatient compared with the chinese. and add to that, our president is more impatient than the average american i worry he's going to be angry with the evaluation and retaliate in some way, maybe up the percentage tariff. it's very, very dangerous. this is accelerating the gulf, the chasm between our two countries, and we need adults, frankly, on both sides of the pacific that can stop this nonsense let cooler heads prevail swallow a bit of pride moe people don't want a trade war. most people want, frankly, trade. there are other ways to deal with china's unfairness, but this is not the way to do it >> china has also responded by

saying it's going to suspend purchases of ag products it's unclear what the significance of that might be, but do you think they'll resort to other measures of which are not monetary they could boycott u.s. goods and so forth >> true, and i hope to report china is stopping agriculture purchases is not actual, but it might be accurate. the point here is president xi and china have many, many more tools at their disposal than president trump does there's gulf here, and president trump has yet to understand that, and once he does, then i hope it calms down a little bit here okay, let's start talking. you know, it's really a slap in the face for president trump to knock those tariffs just after the shanghai talks they were talking over there, but now he puts the tariff on

after the shanghai talks, and china thinks what trump is doing in bad faith, so we're going to slap this currency evaluation on him. >> great to get your perspective today. thank you so much. max baucus joining me there. that does it for exchange. thank you for joining me i'll go join tyler for "power lunch," which begins right now >> kelly, thank you very much. we will see you on "power lunch" in just a few seconds time i'm tyler mathisen, and welcome, everybody. we start today with the major market sell-off. the first few hours have been something. the next two are going to be really, a, important, and b, very, very interesting right now, the dow has just flirted with its session lows of the day. just second ago, as the trade tensions with china heat up. the dow down 773 points at the lows of the day, and we will tell you how much more pain may be ahead not just today but in the weeks and months ahead at the