>> not like this, though i don't know either one of it had it this way. look, this was the -- this was the deal if you want to have a trade war with an emerging superpower as china is, you have to be prepared, i think sara would agree with me, for all of the fallout, the good, the bad and the ugly and what was a trade war, which now may be in sara's wheel house, a currency warn, this is the fear >> did your dinner go into the 9:00 p.m. hour that's when things really took a turn because that's when china does its currency fix and that was the fix heard around the world. >> we were having a saucy little roset, a nice rose at 9:00, as i remember at any rate to your point, scott, when you start something, you have to be ready that virtually all weapons can be brought to the table and here

the currency weapon has been. >> yeah. it was a big surprise last week when the president dropped that tweet about september 1st tariffs. and some people that i talked to, tyler, and kel, it changed the game for them. that what they thought they had was a figured out market for the most part. they felt that way because of the fed and the rate cut and they felt like they had their hands around where the market could go in the months ahead we're still throwing out of whack by that. >> going into that, this was a market that was up almost 20%, so far this year, trading near record highs coming off of good earnings, fed rate cut, felt it was all working for the markets. >> as you heard barry banister say, sure, we get more of an odds of a fed rate cut, trump did something good on the trade front and markets will be fine on that note, we'll hand it over to you guys. >> you're always one tweet away. thank you. we'll see you later. welcome to the "closing bell." i'm scott wapner

stocks plummeting, names like apple, visa, bank of america, and so many more are all getting crushed today. we're going to tell you why, tell you everything you need to know before this market closes >> we are near session lows now, the dow is down almost 900 points i'm sara eisen let's look at what is driving the action at this hour. trade war front and center, looking more like a currency war, china is also reportedly telling state firms to stop buying u.s. agricultural products, adding to tensions treasury yields are sinking, one of the hallmarks of this entire market sell-off. we have the voices you need to hear to help make sense of all of it. jim cramer will join us. kyle bass, big time china bear, will be phoning in, schwab's liz ann saunders, steven roach and dan nathan joining us for the final hour of trade, principle at risk reversal advisers. what are you doing on a day like

today? >> i think you hit the nail on the head coming into last week, s&p 500 up 20% on the year expectations were very low heading into earnings. a certain sense of certainty about what the fed was going to do at that meeting i think it is interesting when you consider the fact that the dollar rallied right after the fed had its first 25 basis point rate cut in ten years, rallied you didn't think that was going to happen. what is going on, what was going on into midlast week was a flight to quality, like you said in u.s. treasuries, s&p 500, megacap stocks, the dollar for the time being the fact that the dollar has remained big tells you that you're going to continue to see money going into these large cap u.s. based risk assets. >> you feel like the playbook changed in the span of, you know, i don't know, a handful of days one week, we're having conversations that are entirely different than the ones we thought we would be having. >> it is interesting i think there was some tells going on the fact that the russell 2000, small cap stocks unable to actually break out of a

multimonth range, the fact we have a few charts here, this is the etf that tracks megacap u.s. banks, it had never confirmed any of those new highs in the s&p 500 since january 2018 the kre. this is the small cap bank index, also in a massive downtrend, and this is the most important to me, look at the ssx 70, euro stocks bank index this is down 42% from its 2018 high if we had the economy that the trump administration was trying to tell us we would have, the banks are the life blood of that economy. bank stocks were the tell because investors were not buying them at all throughout any of these new highs in the s&p 500. >> well, china's yuan hitting an 11 year low breaking a key level. who else but sara has more on that, a topic you think about and talk about a lot today, couldn't be more relevant. >> 7 was the level we thought about and talked about a lot and that is what is so scary about it it is the symbolic level that marks a serious weakening of the

chinese currency china manages its currency tightly. the thought was, they wouldn't let it get past 7 because that would trigger all sorts of alarm bells about the state of the economy. also anger the u.s. and others who say china manipulates their currency to keep it weak and get an export edge why did they do it according to the officials in china, it was the market forces that took them there pboc, the central bank governor, it is not a tool to fight the trade war. here's what the pros are saying. the fact they didn't stop it from happening sparks a few serious concerns number one, the currency is being used as a weapon in this trade war to fight the impact of tariffs, it does help the chinese. it also prolonged the trade war and promote more painful growth killing tariffs from the u.s. administration it also could be a level that reflects some serious concerns and pressures on the chinese economy, potentially worse than even the market feared that weakness could also beget more weakness, which could trigger wealthy chinese to yank

money out of china as investments decrease in value. capital flight, another concern. it could also drive up the cost for borrowing. turkey last year on a much larger and more dangerous scale. look, all of these fears are in play now that china made this very significant move. the consensus though, don't want to be too scary is that china is in control of the currency won't let the yuan weaken to those seriously dangerous levels and they are responding to the new tariff threats that we got from trump last week and the fact it hurt s their economy and their industry. >> that's what tariff does, it will weaken the currency of those that you're affecting them on i just make a point about this if you go back the last time we hit a real growth scare in china, summer of 2015, there has been a lot of comparisons about that let me tell you what's what. the ten year treasury yield the same spot it was in mid-august of 2015.

the dollar about the same spot the shanghai composite the same spot you know what is not the s&p 500 up 50% from the levels you think about what are inflated assets and what are the sorts of things that could get off the hook, if we start seeing this stuff start to snowball a little bit, you will see ultimately profit selling in stuff like the s&p 500 that has been a crowded trade for the reasons that we are talking about before i want to make one other point, you talk about this 10% tariff on the remaining 300 billion, right. we know what is going to happen. jim cramer said this morning, he thinks they're going to go to 25%. what happens next? what happens if the chinese puts through massive fiscal stimulus. they have a lot of levers that our congress, they're gone, they're on the beach, in august. president xi has a lot of levers to pull now. >> we're looking at dow jones industrial average that right now is down 926 points and fading somewhat fast with less than an hour -- >> everybody is down all 30 dow stocks. visa and apple at the bottom. >> worst day of the year across

the board for each of the three major averages let's dive more into this, kayla tausche on trade, bob by saniu t the new york stock exchange. kayla, we begin with you. >> an ally of the president outside the white house text me that he thinks trump made a real miscalculation by daring china to make concessions during a politically sensitive period and this person worries even if trump dialed back his threat, it might be too late to put the ge genie back in the bottle signaled it could let it move further and china plans to stop purchasing u.s. agricultural goods according to state media even though those same reports this morning called it groundless that beijing backed out of previous pledges that it had made with the white house. president trump firing off a series of tweets on china's currency manipulation, trade practices. chinese party leadership are all at an annual gathering in a resort town to try to chart a

path forward on all the various policy challenges facing china the officials are supposed to come to washington in early september. there is still an open question as to whether that round happens or whether china throws in the towel and says this is just too much, we can't go there. >> kayla, thank you. bob pisani on the floor with the market impact. 51 minutes to the close, bob, getting uglier by the minute. >> a slow but steady downward move since at the open no real attempt to rally this tells you the buying interest even at these lower levels is just not there too much uncertainty the sectors here, everything, except gold and utilities, essentially, is down 2 to 4% that's a very wide dispersion there. not just technology stocks or industrial stocks. you look at financial stocks energy stocks. industrials, you look at even healthcare, also down essentially 2% right now it is very broad based

investors aren't so much interested as picking losers, that one group i've been putting up all day is food stock. campbell soup down 2%. kellogg down 2%. stocks not normally associated with trade kroger 100% of the revenues inside the united states and yet it also is trading down, just a little less than 2%. the vix at 23, a lot of people point out the similarities with may, the vix went up to 23 in may, same concerns, china trade war, retaliations, this may not be the same thing, though. this is more complicated now that we have currency issues involved very heavy volume in the plain vanilla etfs, spiders, russell 2000 this makes a lot of sense. traders reach for protection, they go buy puts the marketmakers who sell them, they have to go out and short the market as well and they use etfs. a lot of this is internal activity from traders reaching for protection and you see the

secondary knock on effects in the heavy volume in the plain vanilla etfs like s&p 500. >> bob, thank you. back to you. that's bob pisani on the floor nasdaq down for its sixth straight day uptown to bertha coombs. >> bob is talking about plain vanilla, more like rocky road here the nasdaq on pace for the fifth worst ever point decline it is rare to see a day when you're seeing more than 300 points to the downside off more than 4% the nasdaq composite breaking below the 50 day moving average and biggest drag is apple, very strong volume for apple, more than 150% already. the iphonemaker is not exempt from this next round of tariffs. that weaker yuan is going to make its phones that much more expensive. china, stock is down more than 17% below the 52 week high that's putting it near bear market territory the chip sector is not far behind the semiconductor index is seeing its worst day since

january 30 that's when apple warned that sales in china would hit its profits. on semiconductor today, off more than 10%. that's the biggest loser after reporting disappointing revenues and disappointing guidance it is being -- its biggest decline in five years. really no place to hide in tech today. >> thank you. no shortage of carnage out there, one place that is getting hard hit industrials, seema mody back at headquarters with more on those names. >> the impact on industrials is two fold specifically when it pertains to the weaker juan, on it makes it harder for u.s. exporters to compete with chinese goods and third party markets. markets like southeast asia and broader europe this earnings season, a number of major industrial names like caterpillar, 3m, general electric, they all touched on the competitive pressures they're experiencing inside china on the pricing front and

from local players the concern is that a weaker yuan and escalated u.s./china trade fight will accelerate the push for the chinese-branded engines and tractors and other devices over american ones that's why you're seeing a number of these names move to the downside sara >> thank you for more on this sell-off and what the chinese currency weakness actually means for investors around the world, let's get to kyle bass on the phone, the founder and chief investment officer at hayman capital management we spoke to you recently, we know you're bearish on china, betting against the hong kong dollar what is the significance of what happened overnight >> i think it is important to realize that the chinese have only been at this capital market thing for the last 15 years. and while they're smart, they -- i equate it to -- they have one of those -- like the circus spinning 20 plates, have to have all plates spinning all at once. if one falls, they all fall. in this case, what is happening in china is they have to have

dollars to sell to buy their own currency to hold it up if they were to ever free float their currency, i think it would drop 30 or 40% and the reason being is they claim to be 15% of global gdp in dollar terms they prop their currencyup everyone calling them a currency manipulator, they're trying to hold this whole thing together if they were to let it go, and allow the -- all the wealthy chinese to get their money out, and buy more houses in vancouver and london and the u.s. and send more kids to school in the u.s., you would see their currency collapse in the end, they have to have dollars to support it. they're running out of dollars what they did is they stopped supporting it. they didn't intentionally weaken it they just stopped supporting it at a certain level. >> well, part of the reason, kyle, you have to believe, is retaliation against what they got last week, where whether

they were surprised, somewhat embarrassed, if you want to put it as strongly as that, by the way that that tweet came out and they were surprised and they were going to do something in return do you think there is something to it? >> yeah, i think -- what is more important is what really happened behind the scenes so back to -- back a month ago, negotiating with the chinese, we had 150 page document that they had said they were going to sign and the night before they took 50 pages out of the agreement and anything that was measurable and enforceable got taken out and they said, we'll sign this agreement. and so they negotiated with us in bad faith and that's why the talks broke down last time now with lighthizer and mnuchin going to china to meet with them, what happened here is china said we need you to drop all tariffs on all of our goods, we need you to stop disallowing huawei and the u.s. and release the huawei cfo before we even engage in talks. we say that's not going to

happen the chinese negotiators stood up and walked out of the room so somehow we're the ones that are negotiating in bad faith or we're the ones where the president is tweeting something and it is all his fault but the chinese are negotiating in bad faith all along. >> what happens next in your view >> if the chinese run out of dollars, you have to remember they need dollars to buy everything that they import. they are desperately short energy they're desperately short basic materials, desperately short food and they have to pay dollars with that. they can't pay monopoly money with it. they have to use real currency and so if they're running out of real currency and running a current account deficit and fiscal deficit, what happens next is they start to lose control of their currency. i think that's what you're seeing today you can say it is retaliation -- >> why do you think they're losing dollars they have trillions of dollars in ammunition what makes you

think they're having a shortage of dollars why not take their word for it, which is they're guiding the currency where the market is pressuring the currency because the chinese economy is slowing because the administration keeps putting tariffs on it. >> did you say why don't i take china's word for it. pretty funny it is important to think about back to -- sorry, south korea, 1998, they supposedly had the largest pile of fx reserves during the security -- the financial crisis in '97, '98 they called summers at the time and said, mr. summers, we need more dollars he said, what do you mean, you have the largest reported stack of dollars in asia they said, well, we kind of already allowed our banks to borrow them from us and they sold them, but we still hold them as an asset on our balance sheet. look at the chinese bank balance sheets in last 12 months they inverted from being massively u.s. d heavy to

massively u.s. d short at some point in time that stops. >> if they're allowing their currency to fall, maybe they will further, do you feel like the trade war now has epp ternta new phase? >> yeah, i think the trade war entered a new phase when the u.s. started pushing back. we never pushed back on their policies before. they have been able to buy everybody. in this case they haven't been able to buy everyone in this administration i'm not a trump voter and i'm barely a trump fan what's going on here this is a clash of cultures. you're seeing it between someone who negotiates in good faith and someone that just refuses to negotiate in good faith. >> sure, but there is -- you can be a negotiator but the reporting is that the president sent that tweet out, it caught some of his own people by

surprise, and some of his advisers had urged him not to do it and he did it anyway. >> so what i heard happen is mnuchin and lighthizer got back from their trip in china and went to seat president in the oval office and they explained what the chinese did and demanded and the fact that they stood up and walked out of the room and trump said, okay, well, if they don't want to negotiate, we're going to have to go to the next level should he wait until the market closes should he negotiate with someone else in the u.s. administration? i don't know all i know is the chinese are not negotiating in good faith. they never lived up to one thing they said they would do as they incented in the wto in 2001 and we're trying to get them to sign an agreement that is measurable and enforceable. and they won't do it >> doesn't look like they're any closer to doing it now, now that

they're facing more tariffs, more pressure on their economy and starting to fight back with their currency, with ages. >> well, what is important -- what is important to realize is the u.s. holds all the cards the chinese need dollars to operate. and so we hold all of the cards in this negotiation. so what if some shoes we buy, nike shoes we buy at walmart cost a little more we lost 4.5 million jobs in the first five years of wto ascension. they hollowed out all of our industry and we can buy things from vietnam, we can buy -- >> i don't know they hold all -- kyle, how many 800 to 1,000 point declines do you think this president is willing to tolerate going into an election year? >> do you think we should trade the u.s. national security in the long run for a stock market decline? i don't care and truthfully i think we're comparing economics with the long-term viability of our

country. i think that's the disconnect that i think commentators have today. >> let me ask you this, last year president trump was willing to trade the financial security, the technology security going forward with concessions with zte. just told us huawei is in play to me, i think he's only focused on bilateral trade agreement and getting a win, which is commensurate with campaign promises from 2016 he's already made those trades he's already put those in place. he already yanked us out of tpp. when you talk about trading our financial security, our economic security, our technology security, he's already undermined that whole argument, hasn't he? >> no. look at all of the aspects of this agreement that they're trying to put in place they're trying to get them to stop stealing intellectual property from us, trying to stop subsidizing industries in china and dumping things here. they're trying to get the people to stop stealing things from our national labs and we're trying to get them to agree to

pacifically reset the entire relationship with us this isn't about some tariff and trade. think about this we put 10% tariffs on $300 billion worth of goods, that's $30 billion. you're talking about an economy of china 13 trillion and u.s. economy of 20 trillion do you really think $30 billion means anything it doesn't mean anything we're trying to reset our relationship what trump's team is doing is systematically negotiating all of those points into a new dreemt th agreement that china has to sign and they might have to live up to it. >> we didn't even get to hong kong and the situation there. if that blows up, gets far worse, the impact on the currency will be much more negative than it already is, correct? >> yeah. you look in hong kong today, for the first time, in many decades, the hong kong currency and the one year forward market is

trading through the 36 year hague that the hong kong dollars had to the dollar. so it is trading on a credit perspective and not on an interest rate perspective. currencies normally trade on the differentials between the interest rate. you're seeing a disconnect in hong kong. think about this, if you're a business owner in hong kong or investor investing in businesses in hong kong, would you be committing more capex today and investing more in that business? would you be moving more of your family into hong kong or out the people of hong kong lost complete faith in their leadership and carrie lamb and also lost trust in their own police force it is such an ominous thing for them to lose faith and trust in their leadership, and just think about what happens when that happens. think about argentina and thailand in '97, mexico in '95, that's what happens when resets and currency come about. and i think you're seeing it

right in front of our very eyes in hong kong and just begun. >> kyle, always get a lot of reaction when you phone in half the people agree with you, half of them think you're a fearmonger we appreciate you expressing youropinions >> i appreciate you listening to whatever i've got to say good luck with the rest of today. >> thank you we're 40 minutes away. down 800 off session lows. >> we have 35 minutes to go. let's look at some of the losers in the dow there are many today we're going to put them up on our virtual wall apple is leading the way, down 5%, with visa and ibm. send it over to mike santoli for the market dashboard. >> going to go to school on this sell-off a little bit. grade on a curve look at stocks, valuations, relative to bonds with yields so low here

needing extra credit, see if the financial stress popping up, retaking the test. the s&p 500 level is reaching levels from the trading range from 18 months ago, all the way back there look at the rush grading on a curve, one thing this capricious of the t this compression has done is brought it below the s&p 500 dividend yield again this has been relatively decisive, hasn't lasted very long you see the s&p 500 dividend yield, a little over 2% now. there is that plunge in the treasury yield you'll see in 2016, this persisted for a long time. this is not a catalyst or a trigger. it is just a context that says essentially people don't really want stocks relative to bonds at this moment. on a long-termer term basis, that 2% area for dividend yield has been relatively steady shows stocks valued on this basis, neutral to themselves and their own history, little cheap

at least on a yield, current yield basis and s&p 500 dividend yield grows. this can get more extreme before it gets to be to a point where you say can't last any longer. >> it is a good point. mike, thank you. we'll see you in a bit does that factor into your decision when picking stocks now, the fact that there are so many to choose from, with higher dividend yields than treasury. >> it is important to remember this investors and bonds think about yield, investors in equities think about potential earnings growth optimism about future earnings growth for the s&p 500 what was the ten year treasury yield telling us when it broke two and on its way down to 176 telling us very different story about growth i think that we know the bond market is much bigger than the stock market and i think what we're seeing today is really that crisscross we saw last week and then you take in all of the uncertainty about trade policy, the uncertainty about the fed's

message, no doubt in my mind based on the last 18 months that stocks probably have a little more to go, we know what we bottomed out at 2700 back in late may we're not so far off, i think if you're an industrial looking to add to names you were happy about their earnings they just reported a few weeks ago, you want to see a market a little lower and buy things on the cheap. >> people were saying we were due for a correction 6% off the record highs. >> january 2018, we had tailwind of the tax cut from the prior couple of months here, what did we do? we basically have gone sideways, but we had some -- all the downward volatility, all the volatility to the downside we had that sell-off earlier in the year, about 7% here we are 6.5% to me, i think it is the run of the mill the thing we have to worry about is the longer some of these issues about trade, about fed policy go on, the greater there is for a mistake and we saw what happened in q 4, things

snowballed and we were down 20% in a panic. >> maybe it all sort of started with the so-called muddled message from powell last week where, you know, there was selling on the news of the rate cut, maybe the market didn't get fully what it wanted and then that -- the trump tweet was the match that sort of combusted this latest blow of volatility >> not exactly what the market wanted >> but wouldn't you say it was ripe for something after that because of that message? >> like shot chaser. so what did powell say he said we'll keep a close eye on trade, 24 hours later we get a comment about trade that actually put that whole -- the whole thesis about the midcycle thing, we're in a rate cutting cycle now. and i don't think equity investors think it is for the right reasons. that's what they're telling us today. >> pharma is onesector that is holding up pretty well let's get to meg terrell for a check on that. >> drug stocks are down. it is the larger more defensive

names holding up the best. johnson & johnson, abbvie, bristol-myers, merck one exception is pfizer. it is a similar story in biotechs the larger names are down less than the smaller ones. ibb biotech etf there, more heavily weighted to larger cap, amgen and gilead >> meg, thank you. let's look at how defense stocks are performing today. morgan brennan has that story for us >> the ita aerospace and defense etf trading down 3% now. many of the defense names are actually outperforming northrop grumman trading higher now. lockheed martin, raytheon, harris holding up right now. why are we seeing this defense stocks are defensive little to no exposure. strong cash flow big order backlogs that provide

some longer term sales guidance and for many names, valuations look reasonable if not even cheap relative to the s&p now. the exceptions, contractors with other businesses that are exposed to trade, also the global economy, like united technologies, boeing, dealing with the own company specific issues as well, even general dynam dynamics, half the revenue coming from the it services is and business jets is seen as more cyclical. i think the trend here looking at defense more broadly, sara, is that the dollars are continuing to increase for now and the next several years that's a secular story not tied to economic growth. >> morgan, thank you baidu and kohl's, two stocks part of cnbc's china trade index. both with exposure to china. baidu on pace for the worst day since may year to date down 35% kohl's down 27% year to date they get a lot of wholesale. they have a lot of apparel

product made in china. if those september 1st tariffs go through on consumer goods, they're one of the ones in the cross hairs in particular. >> yeah. the day of the tweet, the retail stocks and the reaction we saw almost immediately, and big, larger than we have seen in an awfully long time in a direct reaction to the threat of additional tariffs, one targeted more at the consumer those names sold -- >> 40% made in china, way more than that for footwear and sneakers this was the group that has been spared in all of the other rounds of tariffs. so many companies been to the white house and did the u.s. trade rep testifying, please do not put these next round of tariffs through and, guess what, we got the 10% announcement. >> another sfok witock with expe to chin kwla a is apple

you're fielding a lot of calls what should they be doing? >> i think the biggest thing to do is keep it in perspective sta still a pretty good year so far. i think the primary thing is let it play out a bit. we don't know the answer there is a large macro picture weighing on everything the market hates uncertainty all we're seeing is how the sausage is being made. negotiation process plays out in front of your eyes through twitter, through messages from china, we're not used to it. may not be pretty, but at the end of the day, we talked about being a bit range bound until china -- i believe we are going to stay range bound until this is settled one way or the othe , >> we have seen tariffs before usually how much does that spook retail investors

>> i think that overall i don't think they're completely spooked by it. what is interesting is over the last couple of months, you mentioned apple having a lot of exposure there our clients have been sellers of apple, still the number one held stock the last two months i think our clients overall have been looking at this and saying, you know, maybe it is too good to be true given the backdrop of what is going on with china being the number one story, and get brexit coming down the line in about a month and a half. >> i wonder if retail was caught, you know, on the same surprising foot as some professionals and thinking last week coming in was going to be a decent setup for stocks into the late summer before you get seasonal and historical turbulence into the fall, and now i wonder what they're thinking about whether they think that game has somewhat changed or their idea of where stocks could go is now derailed by this uncertainty and new surprise that we're all

dealing with. >> it is surprising to most people chairman powell was speaking the other day, his message may have been a little convoluted at the time he was speaking most people walked out saying it is going to be fine. on thursday, we get the punch that nobody sees coming, knocking things out. that is the point i was making, imx came out today what we have seen the last two months is our clients have sold -- they stayed engaged with the market, by selling equities and buying fixed income, the interesting part to me, to your question, the fixed income they have been buying has been primarily shorter term almost all six months and in, so i think people are anxious to put that money back to work in stocks just weren't sure the levels we were at is the level they should be doing something. >> maybe get an opportunity even lower from here. who knows. that's something to consider >> i think you started the conversation off about apple retail loves apple they love the products, but stothe stock is a great stock that stock ran into better than

expected results with low expectations gapd up. and it went down 20% in the straight line in may then the g-20 and went back up, ran into earnings again, trading 220 on a gap last week after earnin earnings what has it done now 12% or so. so we're actually getting a redo i think retail is probably smart. if this say name you're playing for, 2020, the new 5g phone and recovery in china, youare not selling the stock here at $193. >> one thunging i would add, wh the stock hit 200, we saw selling. the faang stocks so in vogue for so long, i lock at tok at our tl in the last two weeks. with apple being the july period, the five weeks in there, apple the top seller four of those five weeks, only time it wasn't was when amazon --

>> earnings specific or take your profits off >>i it is tathink they are nervs about china situation, about amazon -- about apple switching their business model overall >> you're telling them to hang in for the long run. >> i'm never telling people not to take profits when they can. in cutting back exposure, it is a fine thing to do dump everything. they have been all in or all out. most professionals are partial in, partial out. i think that's the better way to do things. >> thanks. >> dow lower by 78 4 points. we were down more than more than 900 points under half an hour now until the close. liz ann saunders, senior vp at charles schwab joins us now by phone. what are you telling your clients today?

>> we got a bit more cautious about two years ago, went to what we with call a neutral tactical recommendation on u.s. equities which means don't get out over your skis and go above long-term allocations. we haven't changed anything tactically with regard to this trade has been one of the bigger factors in why we have been a bit more cautious feeling that it is the most important needle mover in particular to define the length of runway between now and the next recession and i think the escalation is being felt i also think that the peek of the market, the recent peek of the market not coincidentally came the same day we got the gdp report as well as the annual benchmark revision this has not gotten enough attention. we really have been it a flat trend for five yar years now on corporate profit

i think that's been another factor that has caused weakness in the market that has been sort of overshadowed by all of this tariff stuff >> what would turn you more positive >> i would like to see a sentiment turn consistent with december sentiment subdued for much of the bull market until the end of 17, beginning of 2018, that was a setup for the construction we got in 2018 and then the bullishness came roaring back in the time frame, perfectly setting up the near bear market we got into the cripple ehristme lows i think that was one of the things that set up the subsequent rally that we got so i would like to see it in sentiment and also to see companies start to put some more meat on the bones in terms of not only what the current tariffs are doing in terms of

impact on their profit margins, whether they're passing it on to consumers, but more telling what companies start to say now with regard to the next round of tariffs which as you've been reporting have a much greater hit toward consumer everything from laptops and iphones and tvs and apparel and footwear so i think the hit from a confidence perspective through to consumer confidence has been resilient, the most important thing to watch >> toys and baby products really high up on the list. so within your overall perspective here of caution, what parts of the market would you be in? would you be in the safety plays? would you be adding to your treasury exposure? how do you put money to work in that environment >> we have been -- kathyjones, my colleague, is -- my counterpart on the fixed income side, they had a bias toward the more quality end of the spectrum within the fixed income universe we do consistently espouse the benefits of diversification in

things like treasuries on the equity side, we had an overweight to large cap at the expense of underweight to small cap. that's been the right spread to play from a cap perspective. i think that will probably persist. i think small caps are in a world of hurt for a number of reasons, higher debt levels, greater percentage of companies that don't have profitability. i think that makes sense from a sector perspective, we're fairly neutral we don't think you want to try to trade around this and make excess bets. we have one outperform rating now, the healthcare sector, that interestingly tends to do well when you're in a period of consistent declines in global pmis, which we have seen a record-breaking string of decline in the global pmi. that's our one outperform. only underperform is communication services we think now is the time to not try to make excess bets and be very mindful of not chasing the real defensive high yield areas.

>> we appreciate it. always good to talk to you >> thank you very much >> liz ann sounders. the trade war is looking more like a currency war now. china devalues the yuan and china is telling state firms to stop buying u.s. agricultural products and treasury yields are sinking. back to bob pisani on the floor. ugly all day. >> ugly all day. the least likely thing has happened which is we're getting a modest rally into the close you see the slow decline all day, no real attempt to rally, no real buying interest on a day like that, normally you close at or near the lows maybe we still will.

we were down 960 points. look here at the dow defensive names. mcdonald's doing better. 209. now 210 and change we're not talking about big moves here off the lows energy stocks just ugly. retail stocks also a bunch of new lows back to you. >> bob, thank you. we're looking at the dow down 753 as bob said, a modest rally here into the close off the minus 900 levels we were seeing >> i think bob nailed it it has been an orderly sell-off. not pretty but orderly throughout the day in the last week and a half, up about 100% if you go back and look at the vix, over the last five years, you have short-term spikes like that, you sometimes start to get a little bit of a bottom too much has happened too fast

investors stay a step back. >> it feels bad on days like this but the risk as well for investors regardless of how much money you have in the mark oat is getting too negative. stocks went down, then back up dare i say without the privilege of a crystal ball or monday morning quarterback, this, that and the other, had the tweet not come out from trump about the tariffs, we may be on a little string of gains here that the market was feeling better about the fact that the fed was it at your back. it takes one tweet we learned it positively and negatively, that's all it takes. this whole sentiment can be reversed in an instant >> let's go back and look. the s&p 500 three new highs since january 2018 they have been by that much each time we had a sell-off. so where investors had opportunities is after the sell-offs over the last 18

months to buy stocks when they're down there is not been the sort of consensus as far as market participants are concerned to break the market out to a meaningful high. larry fink, the ceo of black rock, about a month ago on the network said we might see a meltup said that twice over the last couple of months we have broken out a little bit, but flushed lower. i don't think the conditions are in place given the global uncertainty right now for a m n meaningful breakout to new highs. >> we have seen this idea of the powell put and the trump put, both at play neither wants the market to go down both have a lot of tools >> when you think about a president trying to trade the market, that's what they're trying to do now, they're looking through who is winning this trade floor through the lens of the stock market that's the entirely wrong lens so as they continue to p perpetuate this, risks of a

mistake get increasingly high. i'm not certain they really know what they're doing as they persist by trying to weaponize tariffs and do it by tweet. >> bertha coombs from the nasdaq with more. >> i wanted to take a look at our heat map of the nasdaq 100 there is not one stock there that is trading to the upside. excel energy earlier today, the utility had been in the green fractionally it is still the leader on a relative basis the worst performers in the nasdaq 100 now are sea trip, jd.com, baidu, all chinese companies. the biggest impact from the five horse men, those are the big guns here. they are combining to about nearly half of the decline that we are seeing today in the nasdaq back over to you. >> that's for darn sure what is

happening in tech across the board and it is the semi damage, don't know how you reverse the damage done in semis. >> we saw taiwan semiconductor, one of the largest out there, call a bottom in the cycle the stock traded well. now it reversed. the smh is down about 13% from the highs. it was a massive outperformer as investor were saying if there is resolution on the trade thing, based on some of the guidance they're seeing for the second half, this is an area that would just rocket. so to me also texas instruments called that they're closer to the end of the down turn than they are to the beginning. those are the sorts of encouraging things that if you are to get some sort of trade resolution, investors come back to semis >> now to the cme. rick santelli is there

>> treasuries are basically hanging on the lows. october 2017, last time two year note yields down here, now at 160, down 11 basis points. look at october of 2016, one year earlier, last time tens were down here, tens now are down 11 basis points put that in perspective, bund yields are historic at minus 52, only down a couple of basis points the difference is narrowing. that's not a good thing. let's look at the dollar index for may of 2017. last time it was down here yes, we're at 9766 we hardly have given up anything dollars are in need around the globe and that's been one of the big reasons they keep solid. i don't look for that to change in a significant way anytime soon scott, sara, back to you. >> rick, thank you back to mike for his second dashboard of the session 13 minutes until the close. >> big sell-off, risk off move around the globe like this

look at pockets of potential financial stress elsewhere look at the credit market indicators high yield bond etf. the hyg, that's in white here. the orange is the 7 to 10 year treasury, roughly similar maturity structure to the high yield etf. the prices of treasuries shooting higher, almost vertical look how they hung in here, high yield very well until just recently, kind of softening up a little bit nothing necessarily magic about this big gap you have to monitor this for signs of tightening financial conditions in general. the absolute yield levels on high yield debt, extremely low they closed friday under 6%. in december, above 8%. >> we appreciate it, thank you hiding to the close, 10 minutes to go. dow down 750 shaved 200 points off the lowest

levels of the day. for more on this sell-off, david rosenberg, chief economist and strategist at bluffkin chef. thank you for joining us. >> thank you trade wars escalating. no doubt about that. where does it leave us >> in uncertainty and very difficult to justify valuations of the stock market that are above historical norms in the context of the trade war economic war with china. that's the story now rerating of risk. >> how big of a risk do you think that is. a trade war becomes with a currency cocktail mixed in >> i think you got a bunch of things we went into the year with a lot of hope, we thought there would be a trade deal with china, that's not happening we thought we would get a smooth brexit that's not happening sara mentioned earlier about the powell pivot that was seven months ago.

if anything this sell-off started early last week and continue nad wednesday and thursday that was what you call a hawkish cut last week of the fed meeting. the fed bungled the communication skills yet again this conflunence of factors, the trade war between japan and south korea, you get the sense now for the first time the stock market is seeing what i've been seeing, a global economy, that is really starting to splinter apart. >> we're also starting to see the data turn. today's ism nonmanufacturing was lower than expected. pockets in the jobs report you've been talking about this for a while. you see the ten year at 174, how much weakness is reflected there and how low could we be going. negative rates in this country >> the charts don't lie. dead air between where we are now and the ten year nodte, down

to 135, back where we were after brexit in 2016 we look at u.s. bond yields in conjunction with where they are globally, the u.s. treasury market is the tall man standing. looking at three other things. the u.s., germany and japan back to inversion with negative rates. those are three of the four biggest economies in the planet. and it is telling you that the risks of the global recession and that's being embedded in the place to not just what happened between trump and the unexpected 10% tariff on china, but nobody really expected that china was going to retaliate this quickly. >> david, thank you for phoning in. >> thank you >> nine minutes to the close tech, the worst performing sector by far today, down 4% on escalating u.s. china trade

tensions how do you see this tech sell-off is it just vulnerable because it was up so much going in or are there specific china risks here now getting valued into the stocks >> part of it, everyone got fairly complacent with the china risk over there. the second part is the 300 billion of tariffs, nearly 40% of them are tech products, smartphones, apple, pcs. there is a heavy tech element in the neck 10% that comes on which i think is getting reflective in what you're seeing now >> apple is in your coverage universe advise people what to do right now with one of the most popular and biggest stocks on planet earth. >> seems far away from last week, they had a really good print and bull case was getting solidified look at the headline numbers

it is a manageable risk. i think that's manageable. the question will be two things, does this go to 25% down the road or retaliation in china against apple? we think the core of apple's narrative -- there is a foundation for super cycle happening next year that should give the stock a higher high as we go forward. but cheeri lclearly a lot of con over here. >> are you worried, we started the year, apple traded 142 on a warning about china and the forward outlook is as clear as mud. they have less than 10% market share in china and still negative year over year. how do you grow meaningfully, the services sector

>> so the units are not growing, install base continues to grow that means the second hand market for apple phones is alive and -- struggled mightily for the last three or four quarters, partially because prices have gone up so much. and so apple decides to pass on these increases to customers, you almost accelerate, and if you do that long enough, you will start to put a hole into the whole services of america as well. >> we'll see how it all shakes out. apple down more than 5.25% nasdaq down sharply. the weakest of the three major averages we have five minutes to go last chance trade? >> i think if we want a theme here on a day like today, you want to start thinking about good names that have good prospects going forward.

cisco is a name. they report q4 earnings on august 14th. stock is down 7% in the last couple of weeks or so. this stock found good support this year at 50. here is the most important thing. on their last call, in may, the ceo said they already have done the proper things for their supply chain that they think they're set up if this trade war continues to go and the last point i'll make is that this company should benefit from any bans on huawei it is a cheap stock, really well managed company, positioning themselves for the right technology trends here i think you start nibbling on the stock and earnings >> the risk is, maybe part of the reason it has been such a weak performer, if we are heading into a period of lower capital spending, we got a taste of it in the netapp earnings

last week, company like cisco, all of them could be vulnerable. >> want to find cheap well managed stocks, a great balance sheet and have a great deal of government exposure. we know governments around the world are spending, will continue to spend because of the tech trends we're seeing emerge over the next two years. >> both points, you have to be selective in tech. some stocks may work, some stocks won't >> we had a few hundred billion dollars worth of tech ipos come in the last six months do you want to be buying the names that don't have profits, unproven, we know have lockups coming in the fall or want to buy a company that is stewarded by a buy like chuck robbins that could turn on a dime and has a good valuation? that's why you want to put your money on days like this. >> every single stock in the information technology and part of the s&p sector now is lower as we go to the close. four minutes left. mike santoli

>> looking at retaking the test today we maybe passed last year, the past 18 months two year chart of the s&p 500. i'll highlight a couple of areas of interest. we're trotting on pretty familiar ground here we cracked through the highs today. we were lower just two months ago in early june. we were around mid2700s. and where we did bounce today around 2822, it is above what used to be a significant part of the range. hard time getting above 2800 it just shows you, very jagged range, almost nowhere with an 18 months, here you have the makings of an uptrend now tested 200 day average people talked about, stale couple about, still a couple of percent below. rick santelli has another look at the bonds >> it has been a wild okday.

the choice du jour 172 plus is the low. we have come off a little bit at 174. we're now down a dozen basis points a year to date of 10s minus bunds. look how that collapsed to 225 bunds down 2, which means investors are just lining up to come into the treasury market as the trade war, of course, creates lots of uncertainty. let's look at the dollar index, much ire over that on july 31st, they traded the best level since the spring of 2017 we're down less than a penny from that level. now to bertha. >> not much more demand for tech on the outside apple looked like set to rally a little bit slightly off the lows. just didn't really get there still going to be down better than 5% here on the day. down at two month low. look at the chips. they are also following suit

today. really bad miss on revenues and guidance, biggest decliner there. and the china stocks, now have a much weaker currency they can't buy those american goods. and they may also may not want to be traveling. look at ctrip, down 8% >> the market has done the least expected thing, that's how you confound the most number of traders. modest rally to the close. down as much as 960 points 3:00 eastern time started to move to the upside. only 200 point move, 760 point decline. noticeable overall, entire market down 2% to 4%. there was no place to hide really i noted all day stocks that have nothing to do with trade like

food stocks, for example, were all down about 2%, even kroger, that gets 100% of its revenues down about 1.3%. and there is the closing bell, the dow jones industrial average closes down 763 points rough day, but still 200 points below -- above its lows for the day. welcome back to closing bell on this worst day of the year for stocks >> ugly day on wall street the dow closing down around 766 points at its lowest level the dow down by more than 950 points the worst day of 2019 for the s&p and the nasdaq the s&p 500 closing lower by 3%.

the nasdaq by 3.5%. >> all sectors within the s&p 500 closing lower, led by technology, information tech down 4%, financials, communications services, industrials all hit hard as well full team coverage, our team of reporters standing by to break down how we got here and wrap up today's biggest stock movers. >> plus, jim cramer's first take on today's close that is coming up in a moment. >> we start off with dom chu and the volatile day we had for stocks dom? >> as we talk about what is going on overall, this idea of how we got here is a huge move because over the course of the past week we have gone from being at record highs down to where we are, 6%, 7% if you look at the dow overall, we got to go all the way back to last week on wednesday, the day

it started, the catalysts started rolling in on wednesday, it didn't seem like much, we got a 25 basis point fed interest rate cut. that in and of itself didn't do much to the markets. during the press conference afterwards, we saw the dow drop 490 points at the lows of the day after fed chair jay powell hinted at some of the idea that this may not be the beginning of a rate cut cycle in just a one and done, all of those headlines making the dow drop. now you fast-forward to thursday, everything seemed to be moving along and all of a sudden, about 1:26 p.m. eastern time, a series of tweets from president trump talking about the idea that he didn't believe that the chinese were negotiating well for trade and then said he was going to slap another 10% tariff on $300 billion worth of chinese goods and then we saw the dow drop massively there. 540 points, to close near the lows of the day.

today fast-forward here, 767 points to the dow, given the idea that the chinese are not necessarily manipulating their currency and intervening, but saying they're not going to do anything to stop the depreciation of the yuan, that intervention from the chinese, for right now, it led to a 760 some point drop on the dow, down 960 at the lows of the day so, sara, scott, not a direct line but a series of catalysts that really propelled the market over the course of the last couple of weeks when the record highs are now down 6%, 7%. >> joining us to talk about the market today, dan nathan, also jill carrie hall at bank of america, merrill lynch mike, to you, what was

noticeable, a broad-based steady decline. >> going to start there, it was pretty indiscriminate, the selling. that is painful and unsettling in the short-term. probably not the worst thing in the long-term if you look for a little bit of a panic moment, some kind of evidence that this was mostly just across the board step back from risk. look at microsoft down 4.8%, these are innocent victims, people had a lot of profits in they're skimming that off the top. a 90% down day, that is more likely to be seen near a low or some kind of a bottoming process, perhaps -- it is getting there. it is too quick. if you look at six down days, yes, exactly, looking for the signs. all that gets wiped away other kinds of financial stress popping up big players trapped, if you see

the currency in the credit markets start to act up, and look like that there is something that is systemic going on, not seeing anything like that now, i think you worry. >> i wonder how many people are so off sides you come off the fed, the market goes down and you have a really nice rohrabach and it feels like maybe you have something to build on then you get a shock and surprise of the trade tariff tweet, how many people could you imagine are just on the wrong side of that got to be so many. >> it goes back to the notion there is some fed put or there is a trump put or any put in the market, especially when you start talking like that at new all time highs, that makes me a little bit nervous, goes back to what we were talking about, about complacency.

i know there has been a lot of conflicting data, but the fed message, which was clear as mud wednesday afternoon, was that things are going pretty okay here if the trade situation that could really muddle things here, and so that's really where we are right now. don't see a g-20 meeting anytime soon where trump and xi can rekindle their beautiful relationship >> i went to the website today to see when the next one was scheduled for japan. i couldn't find it >> wrong part of the cycle. >> jill carrie hall, what do you think we're in for here in terms of how long and how deep this could last >> stepping back we have -- this has been a year where we had one 5% correction, go bagging usual three times a year on average. going into the year, you want a position for higher volatility

the flattening yield curve has been a good predictor of what the vix does over the next couple of years. we have been neutral we reiterated our target on the s&p 500. at this point we think there is opportunities to pick your spots within equities, trade has been a key variable where the recent trade truce didn't really signal an all clear so i think that's been a key component to the volatility that we're seeing we look at positioning, it is still supportive for equities at this point, we look at sell side consensus, recommended allocations to equities, strategists are not all in equity at this point but on the other hand, if you look at earnings expectations, we're still seeing those get ratcheted down and trade brings in some incremental risk both from the 10% tariffs on the additional chinese goods as well as the hits to confidence and capex that all of the uncertainty causes

>> one tweet away from people feeling a little better from sentiment changing i know that sounds ridiculous. >> why wouldn't they go 10% to -- >> maybe so. maybe so because we're so negative, the market hs had such a negative reaction, one of the things that the market is reacting to here, there isn't really a process we can handicap and track and kind of know what the reaction algorithm looks like to all the news what china did with the currency last night, we don't know if there is a commensurate response or not, or if there will be conciliation because escalation of the trade war was like risk factor one, on everybody's bullish case, i see it as less surprising. so people were -- >> you have to admit that. >> it points to me more that it was a relatively delicate

balance that got us to the highs. dovish fed, not because things were scary flat earnings, they would come back in two quarters and you needed yields to be low to support valuations. you got all that you got a little bit of a disturbance in that picture with the trade stuff. >> what are you watching into tonight and tomorrow's session to see what to do next. >> the bad news we didn't close on the lows. didn't feel really horrible about today. today doesn't feel great you almost like to see a headline, dow down a thousand points and then have cooler heads prevail tomorrow morning i would have liked to see the futures lower so we can set up for a reversal >> everyone is looking at the currency fixing. >> 9:00 p.m. >> dan, thank you. good having dan nathan here.

catch him on the five. jill carrie hall, thanks to you. dan mentioned "mad money's" jim cram cramer, let's bring him in nobody does this better than you. nobody is able to get their arms around all this stuff at once an make sense of it for people. do it now for us. >> thank you, guys dan's right, i wish dan hadn't said that. he has my playbook i jumped i feel that's -- i wish it were down, went to the low. wish we had a big down opening tomorrow what i'm counting on tomorrow, big downgrades we need to see downgrades. see analysts come out of their foxholes maybe traffic was bad. come out and say we're cutting numbers, cutting numbers this, cutting numbers that we have to see that take place people are too stunned to make any good decisions. >> interesting i saw a tweet earlier, maybe it

pertains to a lot of these name brand stocks if you will the damage looks so severe too much so. you have a tendency to want to jump in. you say you got to have a cool head, step back, wait for a downgrade, if we're talking about apple specifically these stocks can go down more. >> how many people got positioned to love apple and how many were bulled up. when people break prank ranks a consensus doesn't hold, some stocks are down so much, i'll mention a stock so hated now, it is scary given how much love let's look at facebook i said it. i'm sorry i said it. that stock has come down so much it is getting kind of interesting. had a great quarter. alphabet had a great quarter someone was talking about how

faang, last week, i'm actually intrigued by this market i need a down opening tomorrow i'll be there at 9:00. get a down opening, some opportunity. we need to see people analysts come out and say, wow, i'm cutting my price target to 135 we need to hear the quiver in their voices >> the only group that didn't do as bad, banks. financials hammered down 3.25% this yield move keeps getting so extreme. what do you do and the inversion worsened >> i think that the programs, they just knock down the xlf let's take citi. we were with mike corbat he would say, thank you. thank you. under 66, below tangible book

value, i'll buy back 10% we may have an image they are quaking. he's saying put me up. it is very different mind set from the algos who say sell banks. tomorrow they'll come out and say buy fin tech stupidity does rule in times like this. >> you feel like the game changed? from last week to today? last monday to this monday are we talking about an entirely different game, one we thought was boosted by the fed and now have an escalating trade war which some say could now become a full blown currency war? >> it is a full blown currency war. this is when you take on the chinese. that is pretty much the wrap i thought kyle bass had a good wrap he wasn't a defeatist. we had many defeatists and fifth

columnists on today who made me feel like, wow, i guess we lost the trade war. how many people said trump came to the gunfight with a knife i don't think they have a clue what that guy is going to do i think they're probably -- we make them seem more invincible if they're walking around, like we got hong kong falling apart, this crazy man in the white house, behind him elizabeth warren, she's for trying to make it so we do no business and socialist, i don't think they can figure it out. on air, we have got it all figured out. sell everything. i want the other side of the trade. >> i think that's a good point what we saw today, they can fight back too i'm not saying they have the leverage but both -- >> they buy all their soy from brazil that's a statement whatever we don't -- whatever we don't sell, we write checks to one thing we're unbelievably good at is writing checks to

farmers. that started with fdr. he had a great check writing program. the primaries are coming the election is coming so, if this is all they can throw at us, we make it sound like it is the end of the world, i wish we did more business in china, i wish we had this kind of relationship. a lot of our companies pulled back we got the credit card tomorrow and i think after all the downgrades for apple, might be interesting. the credit card revenue has to be start building in 2021. i am not -- i think the market can go down. i'm looking for big analysts to come out and say it is the end of the world then we have a real opportunity. >> beyond meat down 6% today relative safe haven. >> at&t, beyond meat

>> bitcoin had a good day. >> there you go. >> gold had a good day i'm saying, scott, i hear you, you say everything changed i was telling carl last week, they'll slap on a tariff that's their game plan and how people could be offsides when you knew they would slap on the tariff, i'll give you another one, september 2nd, we're going to put 25% up on everything that's the game plan i think people should understand the game plan. the president doesn't think like the people on tv he doesn't he's got record dow. that's what he moves. >> that's not a ringing endorsement to buy stocks. >> no. tomorrow buy stocks on capitulati capitulation 10 to 1 was good this was an extraordinary day. the analysts were not ready with their downgrades that's tomorrow's business i wish they were working harder. this must be this casual monday

stuff they have. remember the discipline they used to have >> like to come back on mondays. >> the cba they don't hit they don't put pads on they don't hit they don't come to work on monday goldman sachs nfl policy >> you have a lot more to say, i know >> i sure do >> thankfully for that, we'll see you tonight. >> all right >> catch "mad money" tonight 6:00 p.m. eastern time right there. irwin simon on, robert locascio, great show >> aphria's post earnings move. >> jim will help you get to the bottom of what happens next. major sell-off on wall street sparked by china's retaliation in the trade war bob pisani, bertha coombs. bob, let's start with you. >> it was an ugly day and the key is it was a broad sell-off it didn't matter what sector we

were in, gold and utilities. everything was down 2% to 4% yes, tech was the worst of it. energy is down, industrial is down, healthcare was down. i've been emphasizing consumer staples, many of which are considered defensive this tells you the market is taking down exposure, not sectors, exposure to the overall stock market that's what was going on today tough day for banks. yields, scariest thing, the yields drop on the ten year. we saw 5% declines at many of the regional banks like key and regions financial. back to you. >> nasdaq the biggest loser among the major averages today bertha coombs has the details. >> apple was ground zero remember back on january 3rd, apple warned about lower sales in china, making for lower sales

overall. worst day since that day for apple today. the chips followed suit. worst day since january 3rd. big losers there as well and among the big losers today, we had 276 new lows compared to 50 new highs among them, a lot of retailers, retailers were also going to be impacted by these new tariffs coming in. people are thinking about the holidays back over to you. >> bertha, thank you let's bring in steven roach at yale university former chairman of morgan stanley asia author of "unbalanced, the co-dependency of america and china. new frontier in the trade fight, steven one problem it hard to figure out what the chinese are doing and why. how do you read the move overnight?

>> china is actually pretty good at strategy. and they have a lot of tools at their disposal monetary infrastructure spending, orifice cal policy actions. the currency, the demand for u.s. treasuries, not been deployed yet, and they're pretty methodical in assessing their own sense of risks and i think they wanted to send a very quick response to the tweeter in chief and they did that. and i think you can expect a lot more to come in terms of broad-based chinese strategic response to u.s. pressures. >> you're saying you're ending sort of the discussion as to whether this is market forces at play or manipulation, you think

undoubtedly that it is the latter >> well, look, i think, scott, there has been good reason to expect market driven downward pressure on the chinese currency they resisted that now they let it go a little bit. and i think the important thing to note is that in managing their currency, as they have done for a long time, in a market driven context, the bulk of the decline is against the dollar against major foreign currencie unchanged to slightly up during this period. it is basically a surgical strike directed at the u.s there has been a lot of talk today that the u.s. is going to lead a big multicountry coalition of the willing to

intervene against the chinese currency other countries are not interested in that -- they don't have -- they're not feeling the type of pressure that we are. >> as far as the pressure china is feeling on the economy, how severe do you think it is, especially with the new round of tariffs announced last week. >> i don't think it is severe. the economy turned in a weak second quarter it is only down about half a point from the average growth rate of the proceeding eight quarters so the economy i think is not deteriorating nearly as swiftly as it did say during the depths of the financial crisis when they really had more genuine concern for a precipitous collapse. >> are you saying that you think that chinese can quote/unquote wait trump out and take it as far as they need to take to get

the deal they want to get? they're not going to make a bet on 2020. they have no idea as do any of us who is going to win i think there is a view in beijing that even if trump loses and the other party comes in, and is -- and still antagonistic toward china, they're more convinced i think that a new president would have more discipline to the policy process, operate more of a multilateralist, work within long-standing alliances and the chinese, like many of us, are distressed at lack of discipline, you talked earlier

about we're only a tweet away from this or that. that's not a way to run the largest economy in the world they would prefer to have more discipline >> so you think we can reach a deal, xi and trump, before the election or are we moving further and further away >> we're moving further and further away anything is possible, especially if you buy scott's point that we're only a tweet away from this or that but if we get a deal, it will be a superficial deal focus mainly on narrowing the bilateral trade deficit. the structural issues on technology, intellectual property, and technology

transfer, we're not going to correct them on those before november 2020 in my opinion. >> appreciate your insights. that's steven roach. over to mike santoli for his final dashboard of the day >> a lot of folks applying to safety school, sending money in to have it be kept safe in long-term treasuries the chart of the tlt, 20 years and above. the bottom frame is the inflows. this is the price. pretty dramatic little acceleration higher in the price. we have been watching this drop in treasury yields for some sign it is getting overdon't, overstretched, willing to snap back here is one sign this is the six month rolling flows into the tlt here you see this big bulge in the last couple of months. people stampeding in and levels not seen really before in this

cycle. you had other peaks here, and what happened then, it didn't come at the very top, you were eventually topping out in price. yields were bottoming around that period. no guarantees. they're overwhelmed when the sentiment that yields globally are doing nothing but doing well. >> we have been hearing that the bond bull market is dead. >> there you go. that's one line, the 40 year market was dead. the other line you hear, which i'm skeptical of, there is say bond bubble. i don't think this is say bubble the bubble means people are buying an asset, thinking it will go up by double in price. this is almost an intense clinging for safety. you'll be somewhere between the two, between a bubble and the end of the bull market. >> you have central banks buying en masse >> mechanical reasons.

>> it is distortion more than bubble. >> and as i was saying earlier, thescarcity of safe yield in the world is only getting more extreme. >> entire jigerman bond curve. it makes it harder for central bankers to figure out what to do and how to navigate. it is hard to figure out how to target trade policy. >> yeah. your instruments have stopped working if that's where the curve is. >> no reason to think this is dynamic going to change anytime soon. >> any reason to think in 2016 it would change? we have been here before everyone is talking, quoting the amount of value. i think you can have just a pendulum swing everyone is too positioned in one direction. >> all right mike, good stuff cnbc news update with sue herera. >> two more people have died from a weekend mass shooting at a walmart in el paso, texas.

raising the death toll to 22 more than two dozen people were wounded in that attack the suspected gunman patrick crusius booked on capital murder charges. minnesota authorities charging r. kelly with two counts of prostitution and solicitation involving a girl under the age of 18 in 2001. he's accused of soliciting the girl after meeting her at a concern in minneapolis kelly was not performing at the time but was doing promotional work. an indefinite security lockdown is still in place in the indian controlled portion of kashmir. stranding millions of people in their homes. this after india moved to revoke the special status of kashmir, cutting off communications and deploying thousands of troops in the region and family and friends gathered to pay their respects to saoirse kennedy hill. the 22-year-old granddaughter of the late robert kennedy. she died thursday at the kennedy

compound an autopsy found no signs of trauma and officials are now awaiting the toxicology report. you are up to date that's the news update this hour back down to you, sara >> sue, thank you. dow finishing lower, 700 points worst day of the year. for the dow, the s&p and the nasdaq there were a few bright spots in the market >> a few, but not many remember gold, it used to be considered a hedge against inflation, now a huge against uncertainty. we had a six year high all the gold stocks which sbrn rallying for the last month or so, all the gold stocks moved to the upside today most of the big names were all up, newmont up 2%, 3%, 4%. core up. not a lot of movement in a clear direction there for them

finally, elsewhere, bond etfs, all of them up half a point to 1% 20 year, barclays, 1 to 3. corporate bonds, all of them all up today back to you. >> energy sector suffering amid all of today's turbulence. seema mody has a check on that for us. >> oil prices falling in tandem with stocks, prospect of a pro tracted trade war. analysts say higher tariffs will depress economic growth in parts of the world that are already dealing with a slowdown. the oil and gas sector closing down by 4% at a nearly 3 year low and the worst performing sector of the year almost 91% of the oil and gas etf in bear market territory another wild card, iran, bank of america, merrill lynch warns it could slip sharply if china undermines the stance by ignoring u.s. sanctions placed on iran.

sara >> another risk to think about there. thank you. a check on retail stocks, eric chemmy. >> selling off as clothing and shoes and toys will be getting tariffs. it is now down more than 24% from recent highs in late august many retailers forecast upside of the holiday quarter, but that was before the new tariffs wells fargo estimates the median negative earnings hit from the upcoming 10% tariff on the list four goods after mitigating strategies is about 5% it ranges from 1% to 55% depending on the company j. jill, the biggest rick, steve madden followed by sketchers >> action in the retailers, continue follow through from the negative tweet. >> there was >> and it is -- it is already a

weak group not like this came -- more an exacerbating factor there. this has been a rule for the tariffs in general it is mostly been in industries that have been under pressure anyway steel or something else. manufactures that don't have that much scale. >> well, after a wild day for stocks, worst of the year, we have much more coming up on "closing bell. the china trade war takes a turn >> china letting its currency move like it did today, that's a sign they may be stealing themselves for a longer conflict. >> stocks plummet. >> investors worrying about the u.s./china trade war. >> what should investors do now? top ragystteiveists give us ther

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worst day of the year for stocks, escalating trade tens n tensions with china continue to rattle the market. apple down 5% with visa and ibm. >> our next guest says if these tariffs do continue, we could see a global recession in the

next nine months so your call got a lot of attention, tell us exactly what you mean in terms of tariffs and the economic forecast. >> so what we're seeing is that if tariffs go up for the 25% on the balance, 300 billion from china and stay there for four to six months time and china does take countermeasures somewhat similar to what we see overnight, we will see global economy entering into recession in three quarters time the most important transmission mechanism that we are conscious about is what happens to corporate confidence when you look at the global pmis now, the new orders which we think is the leading value is already down to 7 year low and these additional rounds of escalation will take that corporate confidence down further. we're also conscious that at some point in time this will

become nonlinear, corporates will give up and start doing job cuts at the same time that the financial markets could be nonlinear. that's a basis for our call. >> what happens if tariffs go up by 10%, not 25 >> if it go up by 10%, our best case, we think it will be 2.8% global growth, close to the 2.5%, a recession. and this is coming up from -- coming down from 4% in first quarter last year, so we would have see 420 basis point decline because of trade tensions from second quarter of 2018 in this scenario, does the u.s. look like the best house in the neighborhood and u.s. stock market the best bet? >> no, in the last round of escalation, we see more pain compared to the rest of the

world. the rest of the world was slowing from second quarter of last year, but the u.s. was positioned in a much better position because of the fiscal stimulus and we are seeing that in the last four or five months, the u.s. is seeing a lot more downside, so if you look at pmi, you plot that for the rest of the world, the u.s. is very quickly joining the rest of the world in underperforming from a growth perspective, we think the u.s. is where there will be probably more downside and the way that downside comes in through is the u.s. capex everybody talks about the fact that the trade and manufacturing and the u.s. is a smaller proportional gdp, but the capex numbers for the overall economy and those are declining very significantly. the second quarter as you know, u.s. corporate capex declined by .6% and in the way the global economy is going, our viewers will decline further, it will impact the job market and retail

consumption. the u.s. sees bigger downside of the margin now >> it is not typical though that we would import a recession, but you say this time is different because the trade -- the trade war dynamic is so severe >> yes what is different is that u.s. over the last few years has become more integrated with the rest of the economy, the global economy, there are greater linkages through financial markets as well and the most important is that the corporations are thinking global the corporate capex decisions will be impabsted significantly and that's what then filters into the rest of the economy and then the other aspect of the u.s. economy at this point of time in the cycle that we need to keep in mind that there is that risk in the corporate credit segment we know the triple b segment, weaker corporate have levered a lot more and at some point in time, corporate credit problem could become painful that thatspread

widening in markets for -- to some extent will result into some large company which comes up to refinance, getting stopped out. and that could -- also filter through the larger overall economy. >> thank you for joining us. >> my pleasure >> with your call. and the only thing i would note, morgan stanley has been more bearish i would say than other big wall street firms on the equity, economic side. he was one of the few calling for 50 basis point cut last week from the fed they have been seeing a lot more weakness where others haven't in the u.s. economy and in the markets. >> and mike wilson, talking about as well there, was more right than most in the pullback. missed a good chunk of that upside now said stocks were due, worn out.

i think the word they used was exhausted. >> remains to be seen. not wrong yet for sure. >> rebecca patterson, chief investment officer to discuss how investors should position themselves there is the question. what do you do >> if you're already invested, i don't think we're done with the sell-off it was a big day in terms of points, but we have seen now last october, last december, a couple of times the change in market structure with more trading means that the sell-offs can be very fast and very violent. i don't think we're out off eth woods. i wouldn't advocate buying a dip today. at the same time, i think you need to take a step back we have seen sell-offs like this before over the last few years we have to remember it is a

mixed bag, not all bad you have a strong labor market globally you have generally strong consumers. you have central banks cutting rates, probably a couple more rate cuts this week around the world. it is a mixed picture in terms of the economy but i think right now what is driving us is not the economic fundamentals, it is the uncertainty around policy that could affect the economy going forward. we took risk off the table in mid-july on behalf of our clients. >> so glad we have you today i remember when you just talked currency, you and i talk currencies, you can -- >> the old money in motion days. >> yeah. life before cnbc, believe it or not. how big of a deal is this what the chaedz did overnight and why does it have such strong ripple effects across markets from oil to emerging markets to the s&p 500? >> i appreciate you bringing that up. you can answer this question yourself as well as i can.

i think the move today is symbolic the actual move in dollar is less than 2% that 7.0 psychological level was broken on the exchange rate. you have to remember as the chinese economy and the chinese markets have gotten more interconnected with the rest of the world, before it was what happened in the u.s. drove china. now that relationship goes both ways if you have something in china, it can afebt tfect the rest of e world also other asian countries, other countries vying for that trade for those exports are going to be inclined to weaken their currencies as well this isn't just about the -- this is potentially the beginning of a broader reduction in exchange rates to all the countries that are competing for that trade so mainly in asia, and that pushes up the dollar and if the dollar goes up, people worry how that affects profitability of u.s. multinationals which affects our

broader stock market >> i understand what you told us and what i'm looking at, you did reduce your equity exposure. why dismissive if you will, rebecca, of the fed? and the power of a power put it seems silly to ask this now, in the midst of a six-day sell-off, there is the fed and they were going to be there and they may be there again. why dismiss of what they could possibly do? >> i think the fed has a lot of power here i do think what had gotten priced into the market as we got into july this summer seemed extreme versus the economic fundamentals so if the fed were to meet financial market expectations, it would probably only do so if the economy was getting significantly worse, which would also imply lower earnings. if the market continued to move along okay, we were near all

time highs in july and the economy was good or improving, there is no reason the fed would even come close to meeting expectations which could put pressure on equity multiples so it is not that we became bearish on equities, but we thought the upside for equities was getting more limited, based on this kind of scenario analysis and the downside risk was not immaterial not only the trade war, but things from unrest in hong kong, the japan, korea trade war, brexit, the middle east, iran, and so with all of these known unknowns, not to mention the stuff we can't see, and the valuati valuations, we thought it was smart to take a little bit of money off the table. we took 3% off it is an incremental move. it is the first time we have been underweight equities in this cycle >> you're comfortable remaining that way. >> absolutely. if i look at the next six months, 12 months, you have to

think that we'll get some sort of resolution even if it is more superficial than real in trade because it is in both leaders' interests, especially the u.s. going into an election does that mean the tech cold war goes away? i doubt it does that mean we don't still have a slow in europe and slow in china those things are still there despite the latest budget agreement in the u.s., the fiscal stimulus that benefited the u.s. will moderate into next year so all those tailwinds are going away central banks can help will they be able to do enough given the starting point interest rates already so low. i was in japan last week and what i heard from policymakers there, they're kind of praying inflation doesn't come back too much they can't raise interest rates because their debt levels are so high they're in a box more and more central banks around the world are getting themselves in a bit of a box where they don't have a lot of ammunition if growth slows

further. that's not a great longer term outlook for equities >> thank you for weighing in today. >> thank you up next, major sell-off on wall street today, what will tomorrow bring a pair of earnings reports could have a big market impact. look at today's s&p sector laggards show them to you right now as we head to break. there they are tech, financials, energy, weakest three. we're back after this. ♪ you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.

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we have a big hour coming your way. black stone chief investment strategist is here to break down what you should be doing with your money we did find a few rare green arrows in today's sea of red see how the traders are trading those bright trading those brigh spots. the one defense name by the way is holding off in the sell-off that's one of those green arrows and we should talk about bitcoin as well that's breaking out big-time and we'll hear from tom lee, the big bitcoin investor big bitcoin bull who says the crypto currency is headed back to new all-time highs. all that and much more all the ways to trade this sell-off. today's movements as with the as looking ahead to tomorrow's open so we'll see you then. >> yeah. music to bitcoin bulls' ears currency wars and devaluation. melissa, thanks. looking forward to it. let's bring in clay lowry from the institute of international finance and former assistant treasury secretary for international affairs. clay, at the aif you represent all the banks. the banks had a really tough day again today and are now off 8% from the highs, more than the

overall market what does that reflect to you? >> well, it reflects uncertainty. you mean, you have a -- you had what -- president trump and the administration did last week coming on top of the performance by the fed and then obviously the chinese over the weekend decided that they were going to move their currency in a way that surprised a variety of people and suggested that what some people thought maybe our trade war was heating back up again it certainly appears that it definitely is so you have uncertainty now as to what exactly is going to happen going forward and uncertainty is not good for markets or for economies >> what do you make, clay, of what the chinese are doing to their currency >> well, in some respects there's an economic story behind this or a market story. which is that it's not surprising to see a currency

depreciate somewhat when you have a trade shock so if you put tariffs onto a fairly significant amount of exports, which obviously the administration did, or at least is saying it will do as of september 1, then you could see a currency move based on that. but then at the same time there's a political element to it, which is very different. which is that we saw tariffs go on earlier the currency did not move that much and this was an action by the people's bank of china and so it kind of suggested that it's not just an economic force here of a depreciation but instead it is a depreciation that is going to be as a bit of a retaliation to the administration putting tariffs onto china it's a little bit of economics but it's also some politics. >> if you were still at the treasury in the international affairs department, what would you be doing how does the u.s. -- can the u.s. treasury fight back >> so it depends on how you

would look at it there's a few things that you could do i mean, the first thing is probably recommend do we need to stand down here? and i don't mean -- the administration doesn't have to reverse itself but do we need to stand down so we can get back to the negotiating table and try to get to the objectives that the administration has stated that it wants and by the way that the chinese government has stated that it wants, which is let's end the trade war, which is not good for almost anybody, and basically try to find a path forward. that said, that doesn't appear right now to be the trajectory we're on so there are tools that you could see that the trump administration could try to utilize to try to retaliate, counterretalia counterretaliate, counterretaliate it's kind of hard to keep track because this is exactly what people have been predicting. a trade war is hard to predict because escalation continues onward so there are some tools that could be used but i think the best tool would be to let's

deescalate the situation and get back to the negotiating table. >> it seems like we're going the opposite way but we'll see. clay, thank you. >> i agree with you, by the way. >> clay lowery joining us there. appreciate your time very much from d.c up next, your wall street look ahead. the key things every investor needs to watch as we head into a new trading day. and we'll do that when "the closing bell" comes right back ♪ keeping the night interesting, is all about setting the right tone. ♪ lower carbs. lower calories. higher expectations. ♪ the light beer you've been waiting for has arrived. corona premier. you mighyour joints...ng for your heart... or your digestion...

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worst day of the year for stocks quick look at what happened today in the dow jones industrial average all 30 stocks closed lower it was rocky from the very beginning. a few hundred-point decline and just a steady decline. session lows were more than 900 points lower we did close about 200 points off of that, down 767. still sharp declines in names like apple and visa. anything that touches china, has china exposure, has chinese currency exposure because that really was the name of the game today. that worry along with how that would escalate the trade tension. >> or stocks that were up a lot. i keep saying that visa was just like everybody owns it, it's been a wonderful stock and you're back off 4% because you had profits there.

>> china's going to play into their earnings story tomorrow as well let's do our wall street look ahead now. already there are some big earnings to watch out for tomorrow both wynn resorts, that's what i'm talking about, and disney as well set to report results after the bell let's start with what to watch in wynn's results. contessa brewer has that for us. >> analysts are going to look for wynn to provide some key updates about the macau market tomorrow when it releases its second quarter earnings. a crackdown in china the growing implications of the ongoing trade war. then there's the political turmoil in hong kong they're all weighing on casinos with exposure in china and wynn has the greatest. we should get some insight into the downward pressure of the v.i.p. segment that's the upper echelon of gamblers and we've seen that lagging. wynn resorts had a tough day today, down more than 7% as you can see. >> contessa, thank you let's go to julia boorstin with what we can watch for disney results. >> sara, analysts expect disney

to grow its revenue over 40% that would be on the strength of its theme parks with its shift to demand-based pricing as well as its studio division which has been dominating the box office investors will be looking for more details in the coming launch of disney plus and how streaming will compensate for cord-cutting losses. we can also hear some questions about disney's investments in china. it was four years ago that ceo bob iger warned that espn is facing big cord cutting challenges the stock dropped by 26% after that warning before rallying over 50% and now the stock is trading closer to an all-time high guys, though, it was down over 2% today back over to you >> julia, thank you. talk about one of the of the dow this year. top three is disney. >> and down 2.4% today is also outperforming. yeah it's obviously not where the real damage was done today >> what are you going to watch tomorrow >> i think everybody becomes a little best a tactician when it comes to these things sow want to see if there's going to be any kind of a purge. first of all, we're all watching

the currency fixing tonight to see if this is going to be an ongoing theme or if it was a one and done a little bit of a salvo by the chinese authorities >> call me crazy but i'm going to watch twitter tonight and tomorrow >> and that's part of the story too. >> for the president >> sure. down 6% in six days in the s&p 500. if all this market needed was a shakeout we got it >> that does it for us on "the closing bell." >> "fast money" begins right now. fearing gripping wall street today as trade tensions slam stocks the dow plunging more than 750 points for one of its worst days of the year. today's brutal sell-off leaving investors on edge. so what should you be doing with your money following a day like today? we have the smartest minds in business here to break it all down a special edition of "fast money" starts right now. >> we're live from the nasdaq marketsite i'm melissa lee. tim seymour, brian kelly, karen finerman and guy adami