♪ live from new york where business never sleeps, this is "squawk box. >> good morning. welcome to "squawk box," we're live at the nasdaq market site in times square. i'm melissa lee with andrew ross sorkin our guest host for the full show, tom farley, former nyse president and current chairman and ceo of farpoint. after yesterday's bounce, we had a 1.2% gain on the s&p 500 a bounce on the dow. it looks like we will extend those gains today. s&p 500 higher by 5 points dow looking at 37 at the open. nasdaq up by 34. in asia, the hang seng eking out a slight gain but not enough to break a ten-day losing streak, the longest down stretch since 1984 shanghai comp down a third of a percent.

in europe, the dax up 1.5% the cac up 1.4%. ibex up by more than 1%. looking at the treasury yields the ten-year yield cracking 1.7. went out on the day at about 1.71 the ten-year yield now at 1.675% tom and i were chatting about a blog post from pimco saying u.s. nominal yields could go negative don't blame the central banks, there are also secular forces at play that could bring down u.s. rates. >> i think that's what happened overnight. it caught a bid because of that blog post. that's a big story with pimco, the largest bond fund manager in the world saying rates could go negative, rates could go negative. >> 1.67 on the ten-year yield. disney shares are under pressure this morning. the company reporting earnings of 1.35 a share, missing analyst

estimates by 40 cents. revenue coming in short of forecast disney blaming costs related to the creation of its new streaming service, which we knew would cost something and the integration of fox's entertainment assets which it bought for $71 billion in march the company broke box office records with "avengers: endgame" that was offset by "x-men" dark phoenix which flopped at the box office bob iger addressing the poor performance at fox in an exclusive interview with julia >> it's not more challenging or costly the only thing i have to say there is clearly the results of some of their businesses, notably the studio were disappointing to us. i don't know if you would say more costly, but i guess that's the way to put it.

but we knew in buying these assets which are global in nature and large, significant in nature, it would be complex in terms of integration we were undaunted by it. >> as we were watching this conference call go on, we saw the stock come off the afterhours lows, after we saw the pricing for the bundle, 12.99 for hulu, disney plus and espn >> i think that's a win. a huge crazy win i don't know if they can keep the price there for too long you will get into margin problems >> then what happened is then they started talking about it being an investment year they already suspended share repurchases. which will continue suspending share repurchases because they plan on spending on this servic service. >> i'm interested in the "x-men" flop that's a big reason why they did the fox deal is the "x-men" library he may say he's sanguine about it, i'm not so sure. >> you're view is it was not

what they thought it was worth >> i don't get box office numbers, we talk about box office numbers all the time. why was it a surprise that the studio would fall short with the flop of "x-men" if we had a read into how ticket sales were doing? >> that's a good question. i want to go back to your ip issue. the larger issue i think of do you spend all this money on that, i think that was an execution issue on that film i think he would tell you that >> but investors will look at it and say there's more execution risk here than we thought. >> there's always execution risk then the question is do the disney managers know how to fix it do they know how to execute in a way that the folks at fox don't? >> you can argue they can. and they have. >> but now there's more pressure for the next big huge "deadpool" or wolverine with wolverine, wolverine is now

dead there's challenges >> 12.99, which is a deal. it's a steal if you're a family in america, you -- you would be irresponsible not to buy this package. >> hbo's package, which is more expensive -- >> hbo on your own doesn't make sense. you now officially have boxed in warner media in terms of what that price on hbo max could be you almost have to lower the price of hbo now >> i could buy for my family a subscription for a year basically the cost of what i could send one of my children to disney kingdom for a day >> 12 months out, 18 months out, what's the real price? >> you think this is a promo price? >> there's no way, even if you get 90 million homes, there's no

way to make the math work at 12.99. doesn't add up you need to get that price closer to 20 bucks, probably closer to 24 bucks only analysts ripped apart this analysis if it stays at this price, even if every family in the globe buys the thing, i'm not sure it works at that price tag for real >> if they're able to leverage their content and not spend too much above and beyond what they're spending for the u.s. service to gain international subscribers, maybe they can leverage that. >> but the other piece of this is they're no longer selling their own content to platforms they have to keep it here. all the double dipping going on goes away. now -- the math doesn't work on a long-term basis. does it work for a year or two to capture 60 million homes and then go from 12.99 to 18.99 or 16.99? i think the question is how gradual you can step that up >> i don't know.

in my house i would pay 25 bucks. the content is amazing for the entire family, but especially my three daughters. >> you're willing to go double the price? >> i am, but how do you get to 100 million homes with that price? people start watching their bills when it's above 20 bucks a month. >> if people cut the cord and let's say you get the bundle, you no longer subscribe to espn, how much is an espn on cable, how much is that worth versus -- >> 7 bucks a month >> they pay disney 7 bucks a month? >> i think cable operators, it's been 5, $7 -- maybe more those are families and homes -- a huge percentage of those homes don't ever watch it. >> right how do you make up for that cord cutting when you buy the package? >> this is why the numbers have to go up. the disney ceo weighing in on the escalation of the u.s.

trade war with china >> right now, i'm obviously not going to take trade war lightly. we're fortunate we've not seen a direct impact on our shanghai business, the theme park nor have we seen an impact on our movies in the marketplace. what happens in terms of movie access long-term i don't know i'm hopeful that there will not be a change so far we've not seen an impact in china from the trade war that seems to be going on >> this is what we were talking about yesterday or the day before when we were talking about currency war and there are tools that the chinese government could use that we have not seen but could still see. >> it would impact them if there was a devaluation in the yuan, they would have to convert those admission fees back into dollars

ultimately >> we'll talk more about disney's quarter later this hour including the pricing details of that streaming service back to news out of china, the central bank taking steps overnight to steady the currency while still trying to keep away from key 7-1 level eunice yoon joins us it continues to be a wild ride what have you got? >> absolutely. bay sing is sending the signal that if there is a currency car, it's not going to be because of china. today the authorities were intervening and guiding the markets in order to hold the value of the currency up first thing this morning in the mainland chinese markets the central bank set what it calls the mid point at 6.9996 to the u.s. dollar. just stronger than 7 and the way the system works here is that the central bank every day sets the value at

which traders can buy and sell the currency this is a way in which the authorities here can continue to influence the trading. a lot of currency trader wrs wee talking about reports that chinese state banks were intervening in the markets not only onshore but offshore in order to support the yuan. this is a typical way in which the government cantry to manag the value of the currency. all of this comes after statements out of the central bank including one from the vice governor yesterday who said china believes it's responsible to keep the yuan stable. there's been debate about what motivated china to allow the yuan to weaken past 7 in the first place. i think it's becoming clearer and clearer as each day goes by that the authorities here do not want to see dramatic moves they want to make sure they keep

a lid on the currency. >> what is the sense of president xi right now when you read the local papers, when you talk to people on the ground, do they think strong man, he's doing very well with this plitt ply where does he stand. especially with the protests that continue to be ongoing in hong kong? >> yeah. when you look at the state papers, the line is always the same president xi is the strong man he has everything under control, china is -- china is the leader, he's one of the leaders in the global economy when you talk to people more privately -- talking privately to people on the street, there is a mixed bag of opinions some people are wondering whether or not he's doing the right thing when it comes to the trade war. they are worried about what they're seeing in the relationship between the u.s. and china, even though there is the strain of nationalism that

has been growing what i think is interesting, too, some of the conversations i have privately with some of the academics, a lot of them who end up advising policymakers, including some people on the negotiating people for the chinese. they're much more doubtful about what he is doing they are aware -- a lot of them are aware about what's happening in hong kong, despite the censorship that goes on here they're not so convinced that his policies are actually the best or that it's good to have all the power concentrated in one place? but in terms of what they'll do about it, pretty much no one is going to do anything because they also understand that he has a lot of control and a lot of people disappear here if you end up going against the government. >> okay. >> and i just got blacked out when i said that >> wow >> we were just censored >> are you back? are you back now

>> no. no >> are you looking at a monitor off to the left? >> yeah. it's black there's a monitor over here which i can watch so that i can see kind of what's going on. we just went black it's a sensitive point these days >> that comment date sit well. >> it was a fairly moderate position >> yeah. but, you know, the government here is sensitive about discussion about president xi. so especially if you talk about him staying in power for life. what i thought was interesting is that more recently, all of the coverage about hong kong has been blacked out until two days ago. and we're seeing more and more of the violence being shown in the mainland china i think there might have been -- just based on that, it looks like there's a change in approach to allowing some people here to see the more violent parts of hong kong because the

line out of beijing has been that hong kong has riots, it's unruly, and, you know, this is something that the chinese people need to make sure they keep a lid on. >> okay. eunice yoon, you never are blacked out for us appreciate it. we hope you stay well. we don't want any disappearing acts thank you. coming up, in times of market turmoil we look to big market thinkers for advice, there's none bigger than ray dalio. he is out with a new investment call related to the trade war with china we'll show you what he said next. as we head to break, a look at the biggest premarket winners and losers in the dow. hey! i'm bill slowsky jr.,

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welcome back bridgewater associates founder ray dalio out with new comments on the china trade war on a video he posted online yesterday. he said investors still have an historic opportunity to buy into china as it opens its markets to foreign investors. he compares to investing in china to investing in the british empire in the industrial revolution

>> i believe that china is a competitor of the united states or chinese businesses will be competitors of american businesses and other businesses around the world and that you're going to therefore -- you want to be, if you're diversified, you want to have bets on both horses in the race >> he's had some long debates with us about the role of china the u.s. and what he thinks of as a potential long-term conflict between both countries. to me it's interesting that he wants or is encouraging people to invest in china i believe they have a fund in china. they do some work in china already. >> he has 1$125 billion he's got to diversify. he has to be invested in china the question i would ask him, for the viewers, how do they invest in china? you can't buy the "a" shares is he suggesting that your viewers go buy the "h" shares? and how invested is he really? china clearly over the long-term, incomes will go up. i wouldn't bet against it the

next 10, 20 years, in the short-term there will be a lot of messiness >> for more let's bring in the cio of pence capital management and simien himan >> whso how much cash are you a this point >> cash and cash equivalent we increased to 10%, 15%. the market goes through these cycles this recent issue has become a catalyst for a battle rhythm that we see of a 5% selloff, it goes down a 20-day period of time, 30-day period of time, then it recovers we may be in one of those cycles so all of this -- the headline

risk is a catalyst for something that was building up, needing to make an adjustment any way we do cash in front of that. we believe we ought to take advantage of volatility instead of being a victim. now we look at putting that to work >> give us the context of what 10% to 15% cash means for you. what will get you to spend that cash >> well, certainly the current market adjustment we had will put some of it to work normally we get to that level about once every two years we hit an all-time high. as we get to there, we pull some off the table. we use it as dry powder, if you will, as an opportunity to buy things that go on sale i hate it when something goes on sale and we don't have the cash to buy it. that's when we put that money to work >> a lot of people say there is an alternative, but that

alternative is cash. how do you feel the valuation is now and the selloff we saw followed by that bounce yesterday? >> we had about a 5% pullback and then interest rates coming down, which puts another 5% buffer in the market you have about 10% breathing room versus what we had a couple weeks ago. you have to take the trade war seriously. not so much because it's a rizk in and of itself but because you should have been worried about the market in any event. we only had 1% earnings growth this season. that's enough reason to be defensive. it's not a bad time to look for companies doing more with less companies that are generating good returns on assets and equity with thinner margins. >> i get seeing yields go down giving you more breathing room on the valuation to the upside, at what point do yields reach a level and you say it's signaling something bad a slowdown in the united states, when you couple that with, for instance, the whole entire yield curve in germany going negative last

week some people say those are signals of global slowdowns and -- >> the risk of recession has ticked up a bit. there's no question about that but if you're in it for the long run, you have to -- there is no alternative. when rates are approaching 1%, you have to be long something. another alternative is high yields spreads widened a bit that corporate curve is not inverted. so the opportunity to get a little yield there is not a terrible idea. we still have high consumer confidence ism is in expansionary mode. >> now that the trade war escalated, the down side escalated, the problemibiliabila down side escalated but also hasn't the upside escalated? >> that's right. if you stay invested in more conservative equities and high yield and there is a benign resolution to trade wars, you have some upside

>> one of your top holdings is disney it's a stock we've been talking about. are you inclined to add to your position highway do you feel about the acquisition of fox and how it panned out in earnings >> when you go through acquisitions, sometimes you get some prizes. it costs more than you expected. the problems they had is a legacy issue we are excited about disney going forward. probably these things are opportunity for entry. long-term disney owns the imagination of everybody >> what do you think the price hag to be on the service >> i think it has go up. >> how quickly and what number to get to? >> i think they'll try to stay competitive. maybe they'll eventually get to 17, but i think it will take a while to get there they'll find the moment when people make a change we'll gradually ratchet it up to the point where we see demand pull back and they'll try to price for perfection it will take a while they certainly had the ability

to time this out until they get there. they're not under pressure it's a long game for them. they'll find the moment and go from there >> thank you both. >> thanks. coming up, we have a full rundown of the individual stock names that are making big moves ahead of the opening bell. we'll talk dating, dieting and drugs. we'll do that after the break.

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time for the executive edge this morning we have stock movers to tell you about in the dating and drug world. are we combining those things? i don't know we'll start with dieting is that related to dating? >> it's all intertwined in some way. >> shares of waite watchers, they are surging shares are up 22.5% this morning. the company's second quarter earnings topping forecasts, the stock is still down more than 60% since last september, that's when the company announced it was rebranding to ww and shifting focus from dieting to promoting wellness and healthy lifestyles

and we go from dieting to dating some diet to date. shares of match group are soaring this morning they reported better-than-expected second quarte numbers and forecasting third quarter sales above estimates as its popular tinder dating app attracted more users. there were 5.2 million average tinder subscribers in the quarter, that's 1.5 million more than last year i'm surprised there's not a partnership between match and weight watchers. >> that's terrible >> it is >> people should love you for who you are. >> i agree i'm saying i'm trying to connect these stories that seem -- >> connect walgreens now that's our next stock. >> wie talki we're talking abou. drugstores >> well, i'm not going there >> i think you'll get in trouble. >> can i just move back to business for a second? >> please.

>> ic, the parent of match, what an amazing story that company is think of all the businesses that have spun out of there, how we'll they've done barry dillard, joey levin, they keep doing it over and over again. the stock sup five time is up f three years. good business. >> i don't disagree. not only will i not disagree, but i grow they've been underappreciated >> the way joey carries himself, not a lot of self-promotion. they take crown jewel assets that make sense not under their umbrella and spin them out on their own. so many executives don't like to do that. they like to go to the country club and say i run a $50 billio business and not chop it down to

25 billion >> it's an interesting model they're taking stuff in, fixing it, spitting it out. >> they're good at the marketing side of it they're great. they're the best >> let's move on to walgreens. the drugstore chain plans to close about 200 u.s. stores in a move expected to generate cost savings of more than 1$1.5 billion by 2022. that's about 3% of its u.s. footprint that stock down a half perce percent. coming up, summer volatility, it's been a wild five sessions in the market. we'll show you how far we've come and talk about potential catalysts still on the calendar. as we head to break, look at yesterday's s&p 500 winners and losers ♪

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk box. the last few days of trading have been wild ones. here's how we got here it all started last wednesday with the fed chair's now infamous comment about a mid cycle adjustment that sent the dow down 300 points the dow taking another hit on thursday when president trump said a new round of tariffs will kick in on september 1st and that stole another 280 points from the dow the next day, china retaliated with some strong words but no hard action, at least not then that was enough to shave another 100 points off the index then came monday china's curry president trump

calling china a currency manipulator an china did manipulate its currency, but it manipulated by trying to lock it in higher than the market wanted to price it. that helped stocks we regained about half of what we lost on monday. so a little bit of an explanation if you're in a dark tunnel >> it's been a crazy few days. >> dow looks like it would open up now about 42 1/2 points higher nasdaq opening up about 34 high. the zs&p 500 up 6 points. we'll be watching shares of hertz today. second quarter earnings higher than expected. revenue beating estimates. the company's ceo says the results come from top line growth and improved fleet management. and shares of tesla this morning, u.s. regulators sent a cease and desist letter to tesla last year over claims it made about its model 3.

the national highway transportation safety administration is citing a blog post saying the model 3 had the lowest probability of injury of any vehicle tested by the agency those were the words of tesla. they say that's inconsistent with guidelines and subpoenaed tesla for more information on several crashes. i don't know if you're an investor -- >> this blog toapost was in october, at the time they this were false and misleading claims >> how do you determine which claims are false and misleading? >> the gloves come off at 6:35 in the morning >> how do you know what to

believe and not to believe >> don't you look at the financial statements >> yeah, but i rely on a ceo and a company to put out only accurate statements. >> do you believe the financial statements putting aside the marketing comments -- >> they're audited and filed >> this is why i'm asking the questio question >> yes certainly because they're audited, i have confidence in them but the turnover they had in their company and in the management team, it gives you some more concern than you would for similarly situated company >> when you were running the exchange, if there were companies that were on the exchange that people had these questions about, would the exchange ever call a company >> oh, yeah. absolutely the 420 comment, that set me

off. >> elon musk would take private at 420 >> it's all done the deal is done at 420. it ticked me off i got to meet investors who were making decisions based on what the ceo said i would have called our head of regulatory and said did you see this statement they said holy smokes, we'll call immediately and forced them to put out what happened >> i like this >> behind the scenes on what happened >> if you didn't get the right answer -- >> we would halt the stock i guarantee something like that transpi transpired >> would you ever kick off a company of that profile if you were -- if the response was not to your liking >> that never happened, but, yes, we did kick off companies where the ceo was not -- it went

beyond serial embellishment. >> it was fraud. >> yes >> that's very different than tesla. >> okay. sfwlo co coming up, president trump taking on google we will show you google's response next.

welcome back president trump's latest attack on big tech came via twitter yesterday. he said that the ceo of google was in the oval office working very hard to explain how much he liked me, what a great job the administration is doing, tha google was not involved with china's military, that they didn't help crook ted hillary oe me in the 2016 election and they're not planning to illegally subvert the 2020 election despite all that has been said to the contrary. it all sounded good until i watched a google engineer say terrible things about what they did in 2016 and they want to make sure trump loses in 2020. the president concluded by saying all very illegal. we are watching google very closely. google coming out in response

saying the statements made by this disgruntled former employee are absolutely false joining us now to break all of this down and what it means for google and the tech complex, the senior tech reporter at buzzfeed he covered a lot of this, and natasha is senior writer at "wired." we had the peter thiel comments in the past couple weeks about china and its relationship with google then we had steve mnuchin come on and say, no, there's not a problem there. it seemed the president was with google what's happening here, alex? >> there's an election in 2020 i think the president is aware these platforms are powerful they are a place people come to to look for news and i don't think that there's a bunch of people sitting in a room saying this candidate should win this candidate should lose but if trump can get into the back of peoples heads at google

and when they think about taking down a video or how they want to figure out google news works, if they can think how trump will respond to this in a tweet, that's a victory itrump's interes to be freewheeling i think he's trying to get into the back of heads of people inside google and the rest of the companies to say treat this content more tentatively >> natasha, is this a pressure company or is this the beginning of real effort at regulation >> i -- as far as trump's tweet, i think it's just the latest sigh ka cal of putting pressure on tech companies, rather than this resulting in legislative change, it shifts the balance of power the next time google is asked to take down right wing

content on youtube what do you think goes on inside google on a day like yesterday when these tweets come out do you think it does change their behavior >> i think that this is a reflection of google's unique internal company culture they have these mailing lists, they encourage employees to discuss politically sensitive issues internally, that allows for a dynamic where a single google engineer can result in a tweet from donald trump and then having to answer for these allegations. >> do you think there's a left-leaning bias at google in particular that could result in the product actually yielding left ward leaning views, whether it's at youtube or search results or what have you is there somebody hands on the keyboard that is pushing a leftward agenda?

>> i think that this allegation fails to make a distinction between the personal politics of google's work force and the shrewd politics of an 8$800 billion corporation. i think that the lack of clarity about how exactly google functions who makes those decisions, and why they make those decisions is part of the reason why these critiques are able to get traction but i don't think that google makes decisions based on the politics of its workers. i think they look for engagement and they look for avoiding bad press. i would say those are much more overriding concerns. >> alex, aside from the personal opinions of individuals, there's the google algorithm there's some argument made that google should be more transparent with that algorithm and how that is constructed and whether the algorithm itself has bias how would google -- could google do that in any way

>> i think they could. there's more that all tech companies can tell us. there's a saying in politics when you're explaining that you're losing, you can reverse that for tech, you explain it when you're winning. the more they explain how things work, the less exposed they are to criticism if we understand the systems better these allegations from x ex-employees won't carry as much weight we'll have a better idea of how think work instead of somebody saying there's a black box and it functions this way. let us know how the platforms work and the companies will be in better situations >> thanks. coming up, is disney's latest role as an earnings villain a big miss yesterday despite a big box office blowout? we'll break down the saoiinnuernext ♪

for months we have known

about disney's upcoming streaming service, disney plus and we know much more and how much it will cost. subscribers can play $6.99 a month and there's a new bundled option that will bring disney plus, hulu and espn plus for $12.99 a month that's in line with the price of a netflix subscription disney plus launches on november 12th here to talk is the telecom analyst and a senior u.s. media and entertainment analyst. $12.99 sounds great, but doesn't sound sustainable. i mean, if they held that price for a long time and they said already this is going to be an investment year, when do you start getting concerned about the impact to disney >> well, i don't think it's changing the longer term guidance in terms of the ddc unit i think it will drive substantial growth at this point we're in the land grab phase of this ddc movement and i think it will drive a lot

of subscribers. >> as you say this bundle is $12.99, netflix is $12.99 and you look at the other offerings out there, how does this position disney and what does it to do the competition? are they going to lose out, are they at a disadvantage >> disney is clearly at an advantage. look at all of their ip, their brands, marketing power. their packaging. they are clearly -- they're in a strong position. they haven't rolled out yet, but we are extremely positive on the potential of the streaming services >> in terms of making this a profitable enterprise the ott business especially because you -- you're not going to be able to double dip in terms of selling off platform, all of that, what price do you think is just even a break even because $12.99 cannot be it. >> well, we'll see what they do over time.

but this certainly will get consumers' attention it's affordable. and it's really attractive to a very wide group of consumers this will be a worldwide product. and we'll see -- we'll see. >> has anyone done the breakdown math of okay, we get the 60 million consumers at $12.99, that works or doesn't work it has to be at $16.99 how quickly can you move that number >> you have 60 million subscribers and they cut the cord so they're not bringing in the revenue -- >> maybe they're go to the movies less because they'll wait for the movie to show up -- the problem is over time the prices will go up and then the amount of content that goes into the package goes up. both on the disney plus side, hulu and on the espn side as more and more sort of higher quality sports shift from the linear channel to the espn plus. >> is it possible they just paid

too much for fox did comcast drive up the price so high a year ago that they had pollyannaish projections about what the fox assets -- that they just missed? >> look, that's a possible takeaway from the results of this quarter where you saw some real weakness in the studio and at star, their indian property. >> but this is really unusual. >> content is king especially as we move to the d to c world. they found a way to increase the content in a creative way. >> why is it unusual, jessica? >> we knew this quarter would be super noisy. you know, the company management stuck with the guidance of accretive by fiscal '21. we'll see, but fox assets are strong assets. we have followed this for dedid as they have got strong management, strong properties. star had a very unusual loss and, you know, based on fewer games, rained out games, lower advertising. but it doesn't change the growth trajectory of disney in any way,

shape or form. these star assets, the fox assets are really strong on a global basis there are some temporary set backs. look, even disney's theme parks had a setback and this quarter was an unusually noisy quarter for disney. >> thank you, both. two big hours ahead on "squawk box. if global populism is here to stay, we'll tell you what you need to knee first, kevin rudd, our china expert he has been skeptical in the past about a trade deal with china and he'll join us in a moment you have to hear what's on his mind we're back in just a moment. -driverless cars... -all ground personnel...

...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. stocks searching for a direction amid a wild ride on wall street and china's central bank is keeping investors on edge we'll talk markets, a possible currency war and much more huawei responds. senator marsha blackburn urging the u.s. not to do business with the tell com giant the chief technology officer of huawei is here to respond. plus, the rise of global populism how hong kong is trying to embrace democracy as the second hour of "squawk box" begins right now.

>> live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin and with melissa lee and with us is tom farley, a former big shot at the stock exchange is that your title >> no. i never felt that way, at least. >> take a look at the futures after what's been a wild ride. we just showed it to you in the last hour. but right now, dow looks like it would open up about 15 points higher nasdaq up 22 points and s&p little over two points higher at this moment. here's what's making headlines at this hour while president trump calls on the fed to cut rates further, three more companies have done that

newly rate countries from new zealand, india and thailand and it was the fourth straight meeting that india cut the rates more aggressively than expected. walgreens is expected to close about 200 of the u.s. stores the move will save more than $1.5 billion annually by 2022. earlier this year, walgreens had announced the closing of about 200 locations in the united kingdom. beyond meat has a new partnership with subway. that partnership will begin with a beyond meat marinara sub sandwich it will be available in september. that follows the similar deals they made with the likes of dunkin' donuts, del taco and tim horton's. let's talk disney shares they reported earnings of $1.35 a share. missed analyst estimates by 40 cents and revenue came in short of forecast. they blamed the costs related to the creation of the new streaming service and the integration of fox's entertainment assets which it bought for $71 billion in march. we were having a debate about whether that was too much and what the costs of the service

will be. >> we know this will be an investment year for disney and into the new service that it's suspended the share repurchases. >> that was always going to be the case i'm surprised that the analysts - >> well, the operating costs is deeper than what had been expected so we're seeing the stock right now at premarket session lows down 4%. shares of match group is soaring. they reported better than expected results the popular tinder dating app attracted more users there were 5.2 million average subscribers in the quarter 1.5 million more than last year. do you hear this music they started to play - >> swipe left or right. >> i don't know. investors are hanging -- kill the music. >> you like, right. >> news you can use. >> people need to know these things. >> okay.

beijing with both sides dug deep into the positions in the trade war what can a win look like gem aamon javers has more. >> look, after everything that happened this week, this is the team that you need to take stock and figure out where we are headed and what would a win look like here, a lot of folks are speculating that neither side is really in a position to get a deal done before 2020. and that presidential election one of the near term things to look for, is that september meeting with the chinese delegation here in washington, d.c., remember, the president said on september 1st that 10% group of tariffs on $300 billion worth of chinese imports is going to kick into effect. so that meeting takes on a lot of importance. does the chinese delegation show up for the meeting, that's one thing to keep an eye on. if that falls apart investors will have a good sense of where

this deal or no deal is headed and i asked the president about it, he said he could raise it up to 25% or higher even if he so chooses. he doesn't say that's likely but that's one possibly. does the president change anything in terms of his outlook for that 10% figure, does he lower it, does he pull it way altogether and say let's have a successful meeting and revisit the tariffs afterward? all of those things are the dynamics going in to place the more that this deal becomes a battle of egos between two men, donald trump and xi jinping going in to 2020, the less chance for success there is. the more the other phases involved, delegation members are taking a prominent place in this and then the negotiations continue you have to believe that markets will continue to view that as at least as a win if they can get to september and continue to kick the can down the road without anything disastrous happening. the worst case scenario would be this spilling out beyond just the economic conflict between the two countries and spilling into a foreign policy venue whether it's through north korea

or something else around the world possibly iran. that vector could represent a significant worsening of the relations between the two countries. so a lot at stake here, guys. >> okay. for more on the trade front -- thank you for that, eamon. we are joined by former australian prime minister kevin rudd, now president of the asia society policy institute and mike santoli is here cnbc seniors economic reporter, steve liesman is here. i want to know what you think what the chinesehas been thinking the last week >> not happy thoughts. >> what are they going to do >> the bottom line, things were manageable when we had the trade negotiations break down in early may. i was in beijing at the time, i was there for a couple of weeks and it looked like there was a lot of to and froing and there was about a 50% that we could

land this thing. but the two big factors in the last true days the 10% decision on tariffs by the president. plus his statement about currency manipulation which is just frankly empirically wrong and in a tactical negotiating sense dumb, dumb, dumb and that's pushed the politics to the extent in beijing that it makes the possibility of reaching a trade deal before the end of this year now sub 50 in my view. >> okay. but what is the chance that president trump didn't want to make a deal this year and what is the chance that the chinese didn't want to make a deal either they're playing the election cycle in some way that hasn't been fundamentally articulated to the public but is behind the scenes. >> i'll let your analysis of what goes on in the president's mind to yourself i'm not sure. but if i see global economic data beginning to head south, looking at how weak germany is, look at what the three central

banks have done, the australian central bank took off 25 basis points last month, on temporary hold now, frankly the global economy is starting to look in a difficult situation. why the president therefore is going into the re-election next year in 2020 would like to throw fuel on to the fire defies my imagination. bottom line in beijing, they'd like to land it. they'd like to land it the domestic softening in china, quite apart from what the trade war has done has been in place for about two years now through a set of i think poor domestic - >> but what about the argument that "a," he likes a boogie man and "b" it's a real boogie man in that he's not getting what he wants. he's asked for it on the agricultural side, they have broken the deal. that on the ip theft issue and everything else that there are really no restraints around it and that he effectively is using his leverage properly and you'd make that argument, no

>> yes, i would make that argument essentially i would add that president trump needs a strong economy to increase the probability of being elected and this dragging into next year could be problematic. in particular in tariffs go from 10% to 25% i think the thing we don't know, kevin, maybe you have a view is how painful will the tariffs be on the chinese economy and is it possible he has to pull up on the stick because the tariffs are painful and we could get a 2019 resolution? >> we are crossing a pain threshold in china in the real economy. if you speak to people in beijing about what's happening in terms of real activity it is getting softer and softer. add the fuel from the trade war and it's getting more and more difficult. xi jinping's bottom line is he wants to see this trade war end. he can play the politics of the american boogie man as well as

anybody else and doing it through the central party. the problem on the american side if you want to create the boogie man for the 2020 election be careful what you create. because if you head in that direction, and it really begins to blow back not just in the trade war but in the technology and the currency war which we haven't touched on yet this morning and china needs to do damage here is real. if i were the president and xi jinping i would be trying to land this thing this year. it's still doable. but the president's just added a whole but in degree of political difficulty. >> at the same time here in the u.s., mike, the stock market reaction gives the president a little bit of cover. i mean, we have been fairly resilient even in the face of the trade war and yesterday at 9:00 when the fixing was done in china, it was weaker than expected i thought for sure that u.s. futures would be down this morning and here we are and granted they're up only marginally, but still, very muted. >> yeah. you don't want to extrapolate

because we're in a whippy period after the short sell-off and plus you have three central banks easing overnight after the chinese fix. i think that's a dynamic win the pattern has been when we get the escalation of trade aggression and friction the market adjusts, it punishes the company in the line. but it doesn't necessarily fall apart entirely but i do think it requires that it not be escalated further. it doesn't turn the screw on the global economy to a point where that's what we're worrying about. the market only cares in the context. it's not the substance of the eventually agreement it is about making things worse for the outlook globally and for the corporate profits at this moment. >> that's what we saw in the tech sector and then the strong bounce in semis, we saw the strong bounce in apple retailers took it on the chin on friday on the announcement of

those tariffs and they sort of came back. >> exactly yeah. >> steve, is the stock market being irrational relative to the numbers you have been talking about? you were in a debate yesterday with a different kevin right over here about -- >> true, another kevin. >> about the impact of this war. >> right so it's like saying, you know, we had tariffs and yada yada yada everything was fine what you missed in the yada yada yada there was the powerful downdraft in yields. put up the ten year. you're under 170 the bund every time we talk is at a new record low. i'm sorry, my data only goes back to 1958 on the bund but a negative 0.59 yield. another trillion dollars of debt globally has now -- now has a negative interest rate yield just in the past two days. another trillion. >> $15 trillion. >> now it's 15 -- right. good counting there, melissa

larry kudlow says you can be sure the chinese are hurting worse than we are. what he doesn't say is how much we'll be hurting from this it's always struck me as incredibly bizarre that the purpose of the policy is one where they hurt more than we do. but we all hurt. rather than a policy where everybody does well, and benefits which was much closer to the old regime here so - >> but we weren't getting anywhere with that when you asked the chinese, hey, will you please improve things for us and for you, the answer is we'll improve things for us but not for you. >> i'm going to let kevin talk about whether or not the current way -- well, first of all, there is a complete myth that's been proffered by many people it hasn't worked for 17 years that's a lie okay because only 17 years ago, china entered the wto.

upon entering the wto tariffs in china came way down. u.s. companies went in as i documented yesterday u.s. companies do $340 billion as of 2016 of business every year over there. it's one of the most profitable businesses they do you heard, by the way, iger say china hasn't meshed with what's going on over there. so it's a big deal but let me just throw this to kevin because he knows more about it kevin, is this a better way to get china to the table than what we did before and what we did before not totally work? >> look, i have said many times, the president's pressure on this, even though i hate tariffs, focused china's attention. but the landing point to get a really reasonable deal including on intellectual property, including on false technology transfer with us in may. my deep base line fear is that the politics of this when i look at it from the beijing angle is

now sliding out of our control and when politics takes on politics, then i begin to fear that the economic rationality goes out the door. so - >> you think that's where we are. when goldman sachs says no deal can happen until 2020 if not beyond, does that seem more realistic to you >> it's -- i'll still in the camp, just, that sense will prevail to land something before the end of this year but i'm only there just. we're now at a kind of a level of nine on the richter scale chinese in august go to the beach, it's the beach just east of beijing it's not the prettiest ways to swim, i have been there but they go there for a month's worth of meetings and the question will be what do we do about the guys in washington? do we double down on the politics because it will work for us as well despite the

softening of the economy we are in august - >> they have terrible options. at that meeting at the beach, they don't have any good options. they're in more of a pickle than we are here. >> the only thing that i think that they have to play is currency. >> what does that mean devalue the currency they're trying to move to the consumer led economy strengthen the currency -- >> it's when the currency politic is dictated by policy rather than into the domestic demand driven economy when you need the import sector to be working well all i'm saying i'm sure it's never happened in the united states, when the politics triumphs economics you get crazy decisions. >> we always get crazy decisions because politics always trumps economics. >> thank you for being here. i appreciate it. it's a cruel summer for those working in wall street, a drop in hiring making it harder than ever to get the job

what it can mean for the financials later, taking a stand against huawei marsha blackburn says they should not be behind the push for 5g in u.s. now they're responding stay tuned you're watching "squawk box" on cnbc this cnbc program is sponsored by land rover, above and beyond it's show time.

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welcome back to "squawk box. a wave of layoffs from some of the biggest banks it harder to get a job on wall street and head hunters are being flooded with resumes leslie pickering has that story. what's going on? >> it's nothing short of a tough summer and layoff gls the u.s. financial services industry tripled in july to more than 2,000 when compared to the same month last year. more than 15,000 have been lost so far this year globally, tens of thousands more layoffs have been announced. deutsche bank said it would cut 18,000 jobs, hsbc plans to lay off 4,000 after the ceo was fired. barclay's said it cut 3,000 jobs in the second quarter and citi and ubs are downsizing hundreds of jobs. big banks areturning to the

layoffs to cut costs, revenue from trading units has suffered and other factors like steeper competition, automation, have caused banks to trim jobs as well and compensation is expected to be flat or lower this year that's according to a new johnson's associate report, guys. >> no surprise, really given the results, trading has been a weak spot for quarters and quarters and quarters on wall street then you have the closures of deutsche bank and citigroup doing all the layoffs. >> is there somebody else that picks up the slack >> well, the machines because of the automation. >> but no, is there some other place where all these people will land? >> in terms of -- oh, that's a key question i think, you know, if you read and speak with people who do head hunting for wall street, they'll tell you that a lot of people are turning to other areas like cryptocurrency. maybe some of -- you know, the marijuana funds that are being started in order to trade that so they're looking for kind of new avenues to get into.

a lot of the people who are being laid off, because there's so much competition, you know, thousands of people who are looking for jobs right now, not all of them are going to get the few positions available on wall street. >> but i'm assuming the money available on wall street is so different from the movie available in crypto and cbd and everything else. >> not everybody lands well. i with tell you anecdotally what's happening in my neighborhood, there's less banks and more tech. so the parents at my kids' school are no longer the bankers but they're the googlers leslie, i wanted to ask you. there seems to be a twin phenomenon trading revenue is being pressured but it continues to move digital what i'm hearing is that the big trades that were being done two or three years ago, a mutual fund would pick up the phone, they'd call the relationship banker and work out a block price or come out with a strategy and now that call is never even

made and instead, they're just cutting that big trade up into hundreds of tiny trades. and a single machine can process what it used to take a thousand people is that phenomenon still going strong is that what we're seeing? >> i think that's part of it and the big hedge fund clients making the big trades aren't doing as much anymore. they're experiencing outflows. some of them are shutting down and a lot of them as we talked about yesterday on "squawk box" are kind of sitting out a lot of what's going on with the trade war. with what's going on with the fed interest rate policy and they're saying, you know what, i'm not going to trade as much as i used to. so that obviously affects the banks. now, the layoffs, what that says to me is this the banks don't think that phenomenon is going away any time soon it's more of a permanent phenomenon a secular phenomenon. >> okay. thank you. appreciate it. we have a lot more when we come back, i don't know if you saw this yesterday. you were here so you saw it. hopefully every viewer saw it.

senator blackburn sounding off on huawei on this very program she said the company shouldn't be allowed to do business in the u.s. and now huawei is responding chief technology officer of huawei usa will be our guest right here, we'll talk about it as we head to a break thousand, here is today's aflac trivia question 1981 president reagan nominated this arizona judge to become the first female justice on the united states supreme cot. itor it. fur we'll tell you after the break but not when to use it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover. get to know us at aflac.com

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welcome back to "squawk box. before the break question give you the aflac trivia question. in 1981 president reagan nominated in arizona judge to be the first female justice on the united states supreme court. who is she the answer, sandra day o'connor. well, yesterday tennessee senator marsha blackburn spoke out huawei right here on "squawk box." >> so the issue is huawei embeds that spyware into these networks these chips are so small, you cannot detect them until they begin to transmit to an outside receptor and at that point they are into your network and they are spying on you and they're manipulating the data within

your networks. >> joining us now to respond is a representative from huawei, the chief security officer of huawei andy, thanks so much for joining us >> you're welcome. >> first of all, what is your response to the senator? >> well, i think she's appropriately focusing on the national security implications of our communication networks. hopefully we as a nation can have a clear eyed focus on what really matters as a senior qualcomm executive said the other way you can talk about huawei but we have to make sure it's safe they can put in hardware and software from anywhere in the world and as mr. sorkin said yesterday, the senator's comments were the first person who ever said said what she said when you hear about the classified briefing that the united kingdom and germany were given, the u.s. gave no allegations that huawei has committed any such conduct that the senator talked about.

>> andy, i have to say i agree with 100%. we didn't show the full clip again this morning no, the whole thing was shocking to hear her say that but the question is whether there is some kind of classified information or other information that you think has been shared inside the u.s. government and may differ from what's been made public >> i think when the prime minister of the uk and the chancellor of germany came out and said that they'd been briefed by the u.s. and that there were no allegations of significant cyber security wrongdoing against huawei, they intended to use risk mitigation that the u.s. government has that allows ericsson and nokia to do business in the united states, despite their deep ties to china. >> are you saying that huawei does not implant or imbuild anything in their networks that would pose a national security risk to the united states? >> absolutely, but most

importantly, the u.s. has to recognize that something that blackburn said is important. the national security threats to communications are very real and she talked about a report in the bloomberg story not involving huawei some months back, they can implant a small amount of code and we have to make sure that we have tested the products of all vendors to international standards so that there's trust through verification but right now on your earlier segments, the trade talks and the problem with jobs, tens of thousands of american jobs are at risk now that huawei is in the crosshairs of these trade talks. >> andy, one thing that kind of breeds some -- i don't know, suspicions perhaps too strong of a word about huawei it's unclear about who owns huawei. can you shed some light on to that in particular to cut to the chase s the chinese government the majority owner or a large owner of huawei? >> there are companies in china as you know that are government owned. there are publicly traded

companies in china that are majority government owned. there are companies that are private. huawei is the largest privately owned company in china we have about 80 or 90,000 shareholders in china who vote to elect the governing board but clearly our founder, mr. ren, who has less than 2%, he controls the company just as some of the founders and owners of other companies control the minority interest but we are completely privately owned. we have to look at the national security, the economic impact. tens of thousands of jobs of those who supply huawei, $11 billion last year, 40 to 50,000 jobs are estimated. u.s. jobs that could go away if those companies can't sell to huawei there's no national security threat there. >> here's how i see it i'm going to put aside what the senator said yesterday for a second i think the issue -- we have heard it from secretary of state pompeo and others is really the -- i think what they are worried about is the potential for the misuse of the network in a national security environment

and so the question i think is sure, huawei can be a privately held company in china, but by law it seems that if the government in china, president xi says look, we want to use your network to spy on people that they can make that call and that by law the government -- that huawei has to proceed to help the government in a way that may very well be different. i don't want -- be different than what happens in the united states that's not to say that the u.s. government not call qualcomm or cisco or whomever, but at least from a legal perspective cisco and intel and qualcomm if they wanted to could say no is there a distinction in your mind >> our outside legal experts have said and the chinese government has confirmed but they have confirmed that there is no such law, no such law that has that effect. but the fact that the u.s.

government does not believe the law has any relevance whatsoever the u.s. government believes that china is not a rule of law nation so that the government will do whatever they want but that's why there need to be programs like the risk mitigation programs overseen by the u.s. government. that allow ericsson and nokia to do business in the united states without limitation we're not talking about without limitation for huawei. but we're talking try to serve rural america and the thousands of jobs that are at risk there. >> well, there are legal experts that may back up what you say, but they need to cooperate with the chinese government and military intelligence agencies and that is in fact a concern. and going back what you're saying in terms of the supply chain and the bad guys so to speak the fact that you're manufacturing in china i mean, can you ensure that that's supply chain -- because supply chains have been a concern in

cyber security the vulnerabilities at any one point in the supply chain is always a concern in china perhaps those concerns are height upped shouldn't that be a worry in and of itself? >> absolutely it should be a worry and the fact is when you look at the operations of nokia for example in china with the joint venture with shanghai bell, the deep research and development of manufacturing and assembly that takes place by nokia despite that they're allowed to do business in the united states without limitation because it's a government monitored collection of agencies that monitor and test the products at this point the u.s. government won't even talk with us about those kind of risk mitigation mechanisms that had been proven to be satisfactory to the u.s. government despite those deep ties with china. >> so your defense is that you're as vulnerable as any other vendor that might be supplying 5g parts to the u.s. that's huawei's defense? >> no. what i'm saying is there are proven risk mitigation

mechanisms that are done we do it in the uk, we do it in germany, in brussels we have a center where government and companies can come in and evaluate our products nokia and ericsson products are evaluated in the u.s they need to be tested because there are five or six nation states that can implant in the products so we can as a nation can't be worried about huawei. we have to be worried about all of the equipment and we believe that mechanisms are in place we want to be able to show them that we can do that. >> andy, we'll leave it there. we appreciate your time. thank you. andy purdy of huawei coming up, it's been a wild few days on wall street and what ray dalio is saying about china and where we should be putting our money to work. the dow is now in the red off about 18 points. insdaq though still up about 12

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still to come on "squawk box" the latest on the trade war. currency, what investors should expect as the summer months wind down and the rise of global populism. hong kong has protesters looking for greater democracy. what it can mean for the markets around the globe in a bit. later, disney's quarterly results are ssmiing analysts' estimates. that's coming up "squawk box" will be right back. 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.

welcome back to "squawk box. we want to get you up to speed on what's happening with some of the macro parts of of the market because there are some noteworthy moves and all of these are kind of setting the stage for what we're dealing with in terms of the overall picture for china and the u.s. 1.65%, we got below at one point this morning we go back to october of 2016 that's how far back you have to get there on ten year note yields that means we talk about the yield curve. at least in one segment of the yield curve we look at the difference between ten year treasury notes and two year treasury note yields yes, you can look at it in three month to ten year, but in this case it tells you the story. we have seen this precipitous decline in the yield curve what does that mean and are investors going to worry bank stocks will be a focus with this

as the yield curve continues to flatten? again, only nine basis points wide between two years and ten years. and specifically gold prices, they surged today by 1.5%. now above that 1500 mark means that we are at the highest level in gold prices in just about six years so watching all of those, melissa, big moves in the macro markets. back over to you. >> thanks so much, dom chu part of the push lower in yields across the curve is a blog post out of asset manager giant pimco, it said it's no longer absurd to think it can go negative blaming the trade tensions and behavior from the central banks. joining us is the senior vice president at the ubs private wealth management and the vice president of the trading and derivatives at the schwab center and our guest host, tom farley, is still here. randy, i'll start off with you

it's kind of mind blowing to think it could go to zero. what would be the implications for equities >> it wouldn't be good we have never seen rates that low. one of the reasons that yields have been low as they have, they're so slow in europe and that can spread can only so wide we have seen the commodity prices rising. why you have seen the interest in gold and people going to other perceived safe haven assets like cryptocurrencies so we will see the commodity prices go up. we would see that flight to safety as well then you also are probably going to see an interest in the dividend paying stocks so in some cases, things like communication services or staples or utilities, the valuations on those sectors have gone way up. i think we'll see them get priced even higher so you'll create even more asset bubbles where you would go to get the definitive yield. >> atrina, there's an argument the lower the yield goes the more cushion you have in terms of equity valuations

is there a line in the sand for you that you think at this yield on the ten year, things look bad? it's not that valuations can go higher it's signaling something else. >> i see your point and i agree that the possibility of negative yields is not a good thing but we're not quite there yet. we have to keep an eye on the price. and kind of just take a big picture into consideration our view is that recession at this point is not on the horizon. i were -- we see overall economic slowdown of course here in the u.s. as well as globally. but we have to consider the fact that earnings have been pretty good 85% of s&p companies already reported and so far, so good so we believe that while the market is slowing down, we're still in the midst of this bull market and there's still opportunity here. >> tom, we were discussing this blog earlier and how interesting it would be, because there's -- it's not just because as randy had mentioned what's going on

with central banks around the world, but also secular behaviors. people are living longer they need to save longer for longer periods of time and technology is cost cutting it's savings for us. >> well, you're taking money from savers and you're giving it to borrowers i think andy hit it right. zero percent rates in this country is possible and it's bullish for equities overall but it gives rise to the concern that the companies will become so levered, capital is so cheap we're seeing 7, 8, 9 times ebitda and if the rates came whipping back we'd have a problem. >> it does alleviate one issue and that's corporate debt. people are concerned about the massive amount of corporate debt that's there but they can roll that debt over at lower and lower rates and at least in the near term it solves that issue

if the rates do go back up, that pushes the problem down the road i think. >> you would think that, katrina, we are seeing rates come down significantly. i mean, right now we're at 167 or so on the ten year yield. and you would think this in this environment small caps would do well, but small caps i think for the second day in a row closed below the 200 day moving average. really underperforming the broader markets. is that a sign to be concerned about? >> we have to keep an eye on it, but once again when we're looking at indicators like this it's important to keep -- to take the big picture into consideration. and while we tell our clients that at this time -- for example, the trading on monday that was -- obviously really disturbing it's not really something that should tell us that we need to change our entire portfolio and our entire asset allocation so when we look at small caps, definitely play a role in the portfolio. as this changes the allocation piece of the portfolio this is a good time to rebalance. >> all right we'll leave it there

thank you so much for joining us, katrina and randy. tom of course is with us for the rest of the show coming up, when we return, pro democracy protests in hong kong putting investors in the world markets on edge. we'll discuss that and the implications for the markets, the currency and everything e.

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learn more. do more. share more. at home, with internet essentials. welcome back to "squawk box. hong kong, the latest global hot spot, anti-government demonstrations have turned violent there.

for more on this and whether the investors should be worried, michelle caruso-cabrera is here and frank luntz has been doing some polling on why this is happening. so we're thrilled to have you here as well give us the latest sort of state of play and what you think this is doing in terms of the internal machinations inside china though to me that's sort of the effect in the larger trade war. >> so beijing obviously extremely concerned and trying to figure out what to do and how to play this out and how much patience do they demonstrate with the protesters. i think one of the checks on beijing is that if they were to send in the pla and crush the people it could very well hurt a trade deal and just end any chance of a trade deal with the united states. so that's a constraint on that why would that president trump gave xi jinping a pass last week saying he wasn't really concerned about the situation in hong kong but if they were to do something that was extremely aggressive, i think you'd have congress coming

down, you'd have both sides of the party. it would be nearly impossible to make a trade deal at that point with china because they would have exhibited so clearly their authoritarianism. >> frank, what do you know about sort of how -- i mean, there's an issue which is leadership in china doesn't need everybody to be on side, but they kind of do. how do they do that? >> it's happening across the globe, in eastern european countries and the public has access to social media they have a greater hostility because their expectations are higher and here's the deal if you think your life is going to stink you won't protest because you assume this is the way that things will be. if you see others living better you'll want to live better and what the corporate leadership of the countries haven't figured out when expect aces go up you have to deliver.

they're not delivering, political failure, corporate business failure, it's leading -- >> but you're almost telling an inequality story here. >> i'm telling a frustration story, a story of people who are ignored or forgotten it started in the states the british government is incapable of doing anything right now because you can't get a consennous on anything the german government is coming aport. the french government elected someone who had no political experience whatsoever and then they take to the streets because they're frustrated this is only going to expand over the next 15 months and you will see greater unrest, greater frustration. >> you are saying this is global. >> it's global and it scares the hell out of me because i don't believe the leadership is ready for. this i don't think they know what to do. >> we are seeing it playing out in the democratic candidates and what they're putting forth, but you can say that president trump

was elected on the rise of populism and the republican party doesn't stand for limiting what the companies can do and what they pay their ceos. >> right the whole world is - >> upside down. >> i don't put hong kong in the category of populists. wanting to deny the -- we as americans we understand that very intuitively i think what frank is talking about has to do with i think monetary policy that hasn't delivered the promises that were originally put forth right? i mean who has benefited by extremely low rates? the rich because asset classes like stock markets -- they keep rising and rising and when you see negative yields -- by the way, you can invest in bonds or stocks over the last couple of years and you're making a ton of money i mean, negative yields but if you hold the assets, wow, they have appreciated you know so what hasn't happened is the manufacturing base hasn't come back or hasn't delivered

manufacturing jobs like it used to even if manufacturing is on the rise. >> and what frank is talking about -- >> what we are polling on this, i want to make sure that the public hears this. amazon should be nervous today because a majority of americans would say this a's certain level you shouldn't go beyond and every ceo should be nervous because two-thirds of the country now say they should not be able to make unlimited salaries or bonuses. rule number one, do not give yourself a bonus if your shareholders or employees are being hurt number two, if you want to be a good corporate social citizen treat your employees well. make sure they benefit financially. number three it's all about job training, job talent don't call it human capital because you should not put a price tag -- >> this goes against the conversation i made the argument, i thought it was very hard for the democrats to effectively run on the economy against president trump given

where we are now, look, i think there are - >> this is not the economy. >> there's lots of questions about the economy and the debt, if it's sugar high. >> but labor is getting a piece of this. wages have finally started to rise. >> but that's the point. >> sure. >> but if you're telling me that two-thirds of america now say that corporations should have a limit on their profits, you would think that actually that would go into the democrat's favor and i'm not sure that's the case. >> because expectations are now higher year after year of corporate profits going up, year after year of unemployment coming down, people want more they want to benefit more. and they're not listening to - >> frank, are you saying that if we have president elizabeth warren and she comes in and says more government intervention, medicare for all, ceo's can only make tens time the median pay of the rest of the employees, top 1% gets taxed much, much more, are you saying that the majority of americans say bravo to the

policies >> if you have more than $50 million you should have to give 2% of that. over 70% of americans now believe that there should be the highest income tax rate should be up to 70%. >> so we'll end up just like europe with -- >> it's awful. >> basically zero gdp. >> he's not saying he likes it. >> i hate it but you have 15 months this is why i wanted to do this segment. you have 15 months to fix this by figuring out a better policy anust clinth jdearg yourself a dividend. >> thank you much more "squawk box" is coming up stay tuned so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.

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two steps back, then one step forward stocks making up some ground from a painful start to the week but is volatility still lurking? could u.s. interest rates really go negative a major bond player poses the provocative question. a glimpse into disney's future the mouse house misses big on earnings but fills in key details of the streaming service. is netflix in deep trouble the final hour of "squawk box" begins right now >> live from the most powerful city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site this morning. i'm andrew ross sorkin with melissa lee. joe and becky are off today. our guest host though we have

been lucky, we had him in for three days, tom farley, former nyse group president and also a cnbc contributor and it's thrilling to have you here. >> a good week fun week. >> been a little crazy. >> yeah. supposed to be a boring august week, everyone on vacation best laid plans. >> in the middle of the storm -- >> the madness. >> we'll show you that storm right now, because the futures were -- well, now they have turned red turned red we're now down about 91 points on the dow nasdaq will be off by 12 points and s&p off by 12 points >> this is why, we're watching the ten year note. when we started the show we were at 167 so we had an extraordinary move, down to 164.7% so we're watching this along with a bit higher in gold. we're at six year high there, so we're seeing a definite flight to safety as we are preparing for the open in an hour and a

halftime let's start this big hour with the big market story of the morning, interest rates. falling sharply not only here in the united states, but around the world. major economies across the globe now seeing bonds with negative yields steve liesman has more we had those surprise rate cuts. >> that's right, melissa powerful global downdraft sending it to the lowest yield in three years and the german bund hitting the lowest level which is deeply negative now there's increased speculation u.s. yields themselves could go sub-zero more on that in a second let's look around the world here the ten year, well, that was like 177 some time yesterday the bund now down by five or six basis points that's increasingly negative the uk along with for with the lead with the japanese ten year. the declines come as several banks cut interest rates and some surprisingly so, new

zealand cutting by 50 basis points central banks are easing all of this putting pressure on the fed to act i don't think thereb will any intervening thing. let's look at the probabilities for what the fed is going to do. we have a 66% chance of a rate cut in september 73% chance of another one coming in december. and 49% chance in january. so not quite at the 50% rate for that third hike, but it's there. now stocks we're not concerned early this morning but there's the argument that lower yields make stocks increasingly attractive unless of course the bonds are reacting to growing concerns about the economic outlook brought on by the escalating trade war between china and the u.s. the drop in the yields is getting scary. the already epic global bond bubble continues to inflate further. now, negative rates. pimco tweeted last night, quotes

it's no longer absurd to think that the treasury yields can go negative hold on a second, because pimco sees this as a result of an aging global demographic and technological developments that have increased savings and decreased the demand for capital. both of which would naturally yield -- bring yields lower. whatever the reason is it natural market forces, is it central banks? some $15 trillion of debt worldwide now has a negative yield handle on it and that's up $1 trillion in just the past two days >> i thought what's interesting in particular out of the pimco blog was that they mentioned the secular -- >> secular forces. >> even aside from what is going on with central banks we would see a push lower on yields anyhow and central banks is adding fuel to the race -- >> it's something to think about, melissa i can't get my brain there i have a really hard time

imagining the bench mark global united states ten year yield being negative i can imagine a lot of things. >> you're very creative. >> i'm a very creative person. i write songs, i play the music of the grateful dead i have a hard time. >> what would the implications -- where would the german bund be if we were negative >> that's a clever global comment. what it says is what you know is that if you have the bench mark everybody pivots around the bench mark so you can try to bring the u.s. ten year yield closer to the bund but that doesn't say that the bund has to fall further that the gap between the two is something that the market wants. that that is an appropriate gap so you could imagine if the u.s. were to fall, that other yields would fall as well. >> take a look at this 163.7 on the ten year so we're dropping precipitously and hand

in hand with this drop in the yields we are watching the yields go down as well down 159 at this point and the s&p has moved lower as well. steve, stay right here we want to add another voice to what conversation, bring in nathan sheets, he formerly served on the international finance division and undersecretary for international affairs. nathan, great to seeyou. what do you make of the giant move in yields i mean just within a couple of hours we have gone from 17 to 1635. >> i think the trade war heating up poses a first order risk for the u.s. economy and the global economy. and as a result of that, it also increases the probability of a vigorous easing move by the federal reserve. and i think that this debate about u.s. long rates going to zero, you know, you need the fed

at zero first. i can imagine if the trade war escalates and president trump goes all the way and he's only threatened ten so far on the remaining $300 billion but if he goes to 25% tariffs that's going to have a big effect and a big enough shock for the fed to take it to the zero at the short end. you need to be more aggressive and that can do it. >> so you think it's not absurd to think that u.s. trades could go sub-zero? you agree with pimco >> as i was listening to the discussion, i was conflicted on the one hand, the economy has been stronger. on the other hand, we have got a trade war which could take rates to zero. and, you know, we very much share the view the demographics and piles of debt globally could keep long term rates very low for a very long time so it's hard to see how it all

balances out but it's a risk. >> nathan, i wanted to ask you about currency manipulation because of your services of undersecretary of treasury does china manipulate the currency >> over the last few years the answer to that is categorically no china's current accounts surplus has essentially evaporated china's been in the market, but to the extent that it's intervened it's been to prop up the currency which is exactly the opposite of what you think of when you see currency manipulator if we roll back the clock a decade, was china manipulating then, i would say there's a strong case to be made that it was an fx manipulator at some point but not in recent years. >> why would your colleagues at treasury -- i know many of them

are new, since you were there, why would your colleagues at treasury have designated china a currency manipulator 48 hours ago? >> so the reality is that, you know, how china was managing its exchange rate a decade ago, people still remember. and i think in the u.s. u.s. political -- in the u.s. political debate this sense of -- that may have -- it's still very strong. so i think it's ultimately more of a political decision. than an economic one. >> we're watching the rates fall. >> i want to just compliment andrew who last hour asked me why is it that stocks seem to be ignoring this and i think that was a good question. i didn't suspect they would. they may ultimately decide this is good, but the trouble becomes if the feeling is that the bond market is sniffing out something worse here than the stock market

there's a lot of questions about -- there's two ways that the trade war is analyzed. one is direct effects that seem de minimus or small and you're telling people you're idling productive capacity, it is the phrase idling of productive capacity that leads to recess n recessions and the fear of global recession that i think is out there and in part what is behind the decline in yields you do not create the kind of wedge that's created right now between the two largest trading partners in the world without having a global knock -- >> can you meaning -- can someone try to explain to me for real because this is now taking place over literally an hour now how the futures moved so meaningfully >> this has happened in the last half hour, where we saw the ten year yield -- i can't remember the last time you saw a ten year yield like this.

>> i can the financial crisis. >> okay. >> those were the kind of movements we saw i'm not saying this is an analogy. >> like 171 or so? >> now it's 162. >> well, a giant move. >> but that's not what moved it. >> that's my question. my question the pimco notes are one thing. what do you think really happened >> let's look at gold also, folks. >> gold is at highs right now. >> you have this movement -- >> a fresh six year high it's premarket highs here. what do you suspect? >> another angle on this, i don't think it's sufficient explanation but i think it's part of it is this morning we also got weak industrial production data from germany. >> yeah. >> another aspect of what we're struggling with right now is a global manufacturing recession that's focused in europe and i think that that also is being priced in. i mean, the global outlook right now, there's a lot of

uncertainty. a lot of ways that things could go wrong i think that's what you're seeing in the bond market. >> you know, when we got that german number i thought that we'd see the reaction in the dax but we had up to this point the last check the dax was higher by more than a percent so i ruled that out i guess we're looking past that and taking the lead from the u.s. but maybe they're thinking twice about it here we have the dax -- oh, they paired the gains now up 0.7% but dow right now looking to open down 200 points s&p looking to be down 20 points at the open. >> there's also -- i think mike santoli in the last hour talked about the idea of how much of yesterday's rally was just sort of a standard kind of bounce-back. what did you call it >> head fake. >> head fake or just a mechanical kind of comeback from the huge decline on monday. that the general tenor here is one that's negative for stocks because what -- the number keeps

increasing, melissa, that the percentage of s&p profits that come from overseas we used to use 40. but i have heard numbers as high as 60. so i don't know which is the right number but it's a substantial number so if you have global economic weakness along with the tariff war you can imagine that some s&p profits would not be what they're currently expected to be. >> and in terms of the bounce in 98 prior sell-offs in the past six decades the stocks rose the next day 60% of the time according to citigroup so we're expecting to see that bounce in yesterday's session. which we did see but right now if we opened where we are right now in just about an hour and 15 minutes time we'll see a lower open here breaking this -- >> nathan, just how bad is the world right now? forget the u.s. which is holding in there with 2% growth, we'll take it home that's an okay number. how bad is the rest of the world and how much would you

worry that what's happening over there will drag down the u.s.? >> at the moment if we take a snapshot we have global growth below trend. we have a manufacturing recession but the services sector globally is still solid but i think that the real discussion is what are the downside risks and i think that given where we are with the trade war and the fact that the situation in europe doesn't seem like it's improving, it feels to me like all of those risks are aglom rated on the downside and substantially on the downside. i think that the markets are nervous about that especially in an environment where central banks and governments don't have a lot of ammo to respond to the weakness. you know, the acb wants to do something. but it's created committees to try to figure out what it can do that, you know, there are things that central banks can do but they're not easy

they're not direct or straightforward. and they're probably not as powerful as, you know, if they had several hundred basis points of rate cuts >> may be worth pointing out, bullard sent something of a hawkish signal yeah, rates should be lower but we're not going to be cutting rates every time the president raises tariffs i think he's trying to break a cycle here where the president puts tariffs on or there's a global development and the market immediately begins to overexpect if that's even a word rate cuts from the federal reserve. i think what the fed would like to do is say these tariffs are hurting the economy and we're lowering the rates because of the economy, not because of the political developments at 1600 pennsylvania avenue. >> i'm trying to make sense of what happened in terms -- clearly, sentiment changed. >> 6:20 a.m., i don't have any particular news on that other than the way that the bond

yields take another leg lower at that moment. >> okay. >> in terms of the levels on the s&p 500 down 20 would imply an open of 2860 and watching 2791 which is the 200 day moving average. little farther down from here, but 2860 is where we'd open on the s&p, down 20 at the open. >> okay. nathan, thank you. steve, thank you we have a lot more coming up but we'll keep monitoring what looks like the plunging ten year yield, futures and yields falling sharply. we have some more analysis coming up straight ahead after this break plus more on the top corporate story of the moment as well. disney's earnings miss we'll talk about that one too. you're watching "squawk" right here on cnbc hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. welcome back to "squawk box. we have been watching the futures very closely because we have seen a leg lower in the past 40 minutes' time or so. the s&p looking to be down about 17 at the open nasdaq looking to be off 35. we should note a move lower anywhere from 17 to 20 points on the s&p is down 0.7% so we're

not yet looking at a full percentage move lower at the open but we're watching this closely because of what's going on in the treasury market. take a look at the yields and how far we have come in just the past couple of hours the ten year now has broken or it has broken 163. we are at 162, just a couple of seconds ago. we started the morning at 171 or so so this is a big move here of course when you think of yields, you think of banks and we are seeing some pretty big movements across the board when it comes to some of the u.s. banks here feeling that impact of not just the lower -- >> goldman and citi getting hi the most. >> and the - >> goldman up almost 2%. i don't want to say this is an explanation about what's going on, but 25 minutes ago you had the chinese central bank denying an dismissing as a rumor that had been circulating on line a decision to cut the bench mark deposit and lending interest rates. so there mine an expectation in terms of why you saw the futures

up or holding steady on the thoughts they could cut and now they're denying it that could have set the people sideways >> contributory but doesn't -- >> i'm just saying it's one of many things that happened over the last half hour or hour here. >> i think the idea what we have is this global downdraft in yields not just in the u.s. it really seemed to have started overseas the german bund losing another five or six basis points hitting the lowest yield ever. i went back to 1958 to forever which is as far as i can go. >> i think the entire yield curve in germany is negative at this point. >> i'm sure that's true. >> then we had a surprise rate cuts and deeper rate cuts than expected in new zealand as well as india. >> right. >> and so that sort of put fuel on this fire. >> on this fire. and i think the thing that andrew is reacting to is for much of the morning while these

yields were falling, stocks were either ignoring it or feeling good about it. how much were we up earlier? >> not much -- >> we were up 50 points on the dow, maybe more. >> maybe a hundred. >> i thought it was in the triple digits, somewhere in the low area there but stocks sort of turned around and said, wait a second. maybe looked at the bottom and said, i'm not really standing on very firm ground and this is just, you know, one explanation that maybe they said if bonds are this worried maybe we ought to be this worry today. >> okay. we'll continue to monitor the markets and there's a big corporate story to talk about this, that's disney. their shares are dropping after reporting than lower than expected earnings in revenue and julia boorstin sat down with bob iger in an exclusive interview. >> good morning. well, with the disney results dragged down in part by the fox assets, i asked bob iger if

integrating the $81 billion fox deal was harder than he had anticipated. >> no, it's not more challenging, more costly i think the only thing i have to say there is clearly the results of some of the businesses, notably the studio were disappointing to us. i don't know if you consider that more costly i guess that would be the right way to put it. but no, we knew that in buying the assets which are global in nature and large, significant in nature, that it would be complex in terms of integration. more so than any of the acquisitions that we've made but we were -- we were undaunted by it. >> and another area where iger appears undaunted is the streaming wars he announced a bundle of hulu with adds, espn plus and disney plus will cost $12.99. he said that discount will help all three achieve scale. >> first of all, in the hulu front, the bundle will include the ad supported hulu.

that's an important part of the hulu business so if this bundle serves to grow hulu subscribers more aggressively that's more valuable on the revenue side so there's another revenue stream coming in. i don't think that's been appreciated. if we grow hulu subs quicker which we believe this bundle will do. >> another big issue that iger is watching is china 2 1/2 years ago in an interview, iger told me an all out trade war would be damaging. i asked him what he's seeing now. >> right now, i'm obviously not going to take a trade war lightly. right now we're fortunate that we have not seen a direct impact on our shanghai business, nor the movies in the marketplace. what happens in terms of movie access, long term. i don't know i'm hopeful that it will not be a change, but so far we have not seen an impact in china from the

trade war that's -- that seems to be going on right now. >> as for the impact of a china trade war on the u.s. economy, iger says he's not yet concerned but it is too soon to tell we'll have more from my exclusive interview coming up on "squawk on the street." >> don't go anywhere we're continuing to monitor the markets and the dow is moving a little bit better, but not much. joining us right now to talk more about disney's quarter, tom rodgers is here. former ceo of tivo and former nbc cable president, cnbc contributor and all around bright and smart guy on all things media is. so on the ott product, at $12.99, "a" is it a success and can it be a success at that price? >> great question.

i thought julia did a great job with the interview with bob iger and particularly bringing up the trade. disney should be a model for how companies have access to chinese markets. disney has about 10% of the chinese film market. obviously the theme parks over there have done very well. as iger said who knows what the impact on them will be but as a model for access it's really something for everybody to study to your question, andrew, look, i think hat's off to kevin maher, getting a bundling program together they need to do that, that's very smart but it does raise some important questions if you buy those services individually, they cost 18 bucks. now they're going to cost 13 bucks. that $5 discount is a big deal i'm not sure in the break even numbers that they put together that's fully factored in equally important on the economics there is that the deal

that allowed that bundling to happen which was the deal they did with the parent company here, comcast, that allowed then to have full control over hulu opened up the ability for them to take hulu international we didn't hear much about hulu international other than it sounded like they were going to go slower in terms of how many markets they were going to open up a year. maybe a few a year but hulu international is going to be a very expensive proposition if they're really going to go at it the way that netflix has. netflix is in 187 markets, in every place from ethiopia and greenland. if they're going to chase that, that's a big additional dilution that probably hasn't been factored into the break even. >> tom, did they just pay too much for the fox assets and hulu the stock is off 12, $13 billion today. this is a pretty big whiff. >> but that's after a nice run, remember. >> after a nice run. down 7, 8% from the high a month

ago. >> both great points when you put in the media context how much of a run they have had, the $40 billion in market cap added to disney since they announced streaming is more than the value of cbs and viacom combined if they in fact do combine. so it's been a big, big run. on your question on fox, i do think ultimately the price of the fox transaction is going to be questioned. when you strip away the fact that they sold off their sky interest and the regional sports channels it's still a $50 billion price tag, but a $50 billion price tag got them national geographic channel and fx and it will struggle like all the others and tv and film library. well, a today groe we see what's happening with the studio and people are going to question the fox studio value. the library certainly has value particularly as they need content to go internationally.

but it's $50 billion the right number there particularly with the investment in originals they have to make, that's a big question. >> tom, thank you. julia, awesome interview with mr. iger thank you. coming up, take a check on futures. they have been trading pretty much in tandem with yields and we saw the yields up premarket session lows of 162% on the ten year we did have the dow futures down at the lowest point of the session and we have recouped some of the losses as we see the 4. bk t yieldacupo 168% we'll continue to follow this action straight ahead.

welcome back to "squawk box. this is a picture we have been watching very, very closely for you. that is the u.s. equity futures, s&p 500 is looking to be down 18 pounds a 0.7% of a decline the dow is looking to be down 190 and nasdaq lower by 40 points we have been moving pretty much in tandem with the ten year yield and it's breaching 1.63% in the past hour we're back up to 164.5, a precipitous move considering we started this move at around 171% so we're watching this relationship very closely as we head out to the open in just an

hour's time. mike santoli is joining us on the "squawk" news line sam stovall of cfr research. michael, some pretty interesting moves, some precipitous moves for the bond market. we haven't seen it play out so far in the equities market >> no. and i didn't -- it didn't seem right after 8:00 it didn't seem if it was headline or data driven but across the assets markets you saw the spasm of quick changes. not only did the ten year yield move to ten year or three year lows and the 30 years following it but the stock futures sold off so it seemed to have been kind of a trigger point for some kind of reallocation strategy or perhaps some thresholds hit in some of the markets that did create that trade. now you see they have relaxed since then so it seemed at least for you to be a quick adjustment and we'll see if there's any follow on beyond that. what it does point out is that

the relationships between these markets, among all of these markets is getting pretty stretched. i mean, stock futures rallying an hour and a half ago when you did this have this compression in yields around the world it did seem out of joint. i think that's -- when you see the acceleration in the treasury and other government bond prices and yields the way we have seen, i think that's just a little bit destabilizing in the short term anyway. >> add the bid for treasuries, the bid for the yen in terms of safe havens but the bid in gold we saw at just around the same time sam, i'm wondering when you're looking at that action, what were you thinking? >> well, i was thinking what is really causing all of this is it an assumption we'll have a 50 basis point cut at the fomc meeting because going back over the last 40 years what i have found is that very narrow yield curves to inverted yield curves while they don't always lead to

recession they lead to rate reduction cycles. >> mike, you were sitting to my left an hour ago and the markets are down over a percent since you left the financials have whipsawed 3% what are the traders expecting during the day today >> you're going to pin that on me somehow, coming downtown? >> the 2 train. >> exactly. >> some traders on the train down there. >> i think the back drop for what we're expecting is not necessarily a change in the last hour which is that you have one of the moments that you're highly stressed. you have a 6% down move, it's not a big distance from the all-time high but it happened in the hurry and it did crack through certain levels it would have preferable to hold i think it checked off the boxes you'd like to see for at least a decent bounce. it responded to the volatility

index that retreated from 25 down below 20 yesterday. it seems like the stocks that are not very exposed to china or trade did get a better rebound like the big growth and nasdaq stocks i think yesterday was a bounce but just a bounce. that action is going to look exactly the same whether it's a reflex, a rebound higher or if it's the start of sustainable move and real buyers come in to grab stocks at a bit of a discount. >> sam, i know you watched the levels closely if we opened here on the s&p 500 down 20, would that be 2860 or so what are you looking at for support as we prepare for the open >> i'm looking for 2800 on the s&p 500 that would bring us down to about a 7.5% pullback in a sense, retesting what we saw in may and then the real concern is whether we break through that level, then we're starting to look at downward ticks into the 2700 area. >> okay.

sam, thanks so much for phoning in sam stovall. let's get over -- we know you're in the car on the way to the airport so if we lose you we get it your take on the falling rates and what they mean and why now >> a couple of things. one is the minute that the fed eased it opened the way if not forced other central banks to do even more. and we have started a major global easing cycle. secondly, people are starting to realize that the trade tensions aren't going to go any time soon and they're starting to worry about the global economy and the growth prospects so put the two things together, you move the yield curve all over the place le >> mohammed, i think we should remind people what happened this morning. india, larger than expected 35 basis point cut.

and new zealand a basis point cut. add to that, horrific german industrial production data it was just a -- a fell out of bed report how low can we go here what is the bottom we hit 163 this morning on the u.s. ten year. we're now as melissa said i put this in quotes up to 164 where's the bottom on the ten year yield >> i mean, we can go lower the question is does it do anything to the economic growth and my answer is it does very little then the even tougher question, do the investors bet again on liquidity that's worked really well or are we getting to the point that liquidity cannot off set a broad based weakening in fundamentals that i think is the hardest question for investors do you play the same game over and over again or do you realize that there's a use by date to

that game and we're getting very close to it. >> i guess that's the question we have been asking all morning and that is, you know, the argument is that rates come down and that gives you some cushion to the upside. equity valuations that's been the argument that's the argument that's put forth every day on this network by the bulls but are you saying at this point we have reached a point where you call that into question >> i do because at some point you need fundamentals to validate valuations. it can't just be feeding a low discount rate and everything works great. it has to be a bridge to better fundamentals and what we are seeing is an across the board deterioration in fundamentals. so i worry we're getting to the end of the trade now, if you see a better policy mix, if you see fiscal expansion in germany and the netherlands, if you see progrowth reforms in china and europe you'll hear a different tune from me but i worry we're getting to the

end of a profitable liquidity trade. >> this is a political question to some degree as president trump watches what's happening in the markets right now, if they continue to stumble, what can he do given this trade -- because investors can get caught off sides we never know where he stands. >> sure if he's -- if he's purely targeting the markets, he would look to ease tensions with china. but he also has to worry about national security issues and that's -- you know what? let's make a stand here against china. and then the argument, if you don't do it now when will you do it so it's a really tricky balance to strike. even i think -- even if he does

ease tensions it will be a cease-fire it will not be -- because there are some real underlying national security as well as economic issues. >> i want to ask you whether or not -- i know that u.s. rates cannot ignore what's happening overseas, but can the u.s. economy -- we have been chugging along amid this economic weakness i'm wondering if we can keep doing the 2% despite what's happening overseas or is it time to start bracing for say a wave of weakness to hit american shores >> so undoubtedably the head winds with increasing. we are a relatively agile economy and the only way to get below 2% is if household and corporate expectations get hit hard you know, the direct economic channels are not that strong we are too domestically oriented so you would need a hit to

expectations >> and what about the federal reserve here, how does it react? we had that comment from bullard yesterday we can't -- we being the fed can't respond to every tit for tat, every give and take in the trade negotiations and he sees another rate cut. we do have another more or less another two or maybe three rate cuts built in here. >> i think the market is forcing them - >> mohammed -- >> hold on, i think -- are you still there? >> he than -- he has been on the phone on the way to the airport. we are at premarket sessions lows so we're approaching that 1% down level on the s&p 500 the dow looking to open lower by 265 points we're reminded by "squawk box" friend mark grant that the lowest yield on the ten year note since 2008 financial

crisis, 137%. >> do you know the date on that? >> august -- >> july 2016 i believe. >> no no. >> we're talking about the lowest yield since august 2008. >> okay. we have got a senator that we want to bring into this conversation right now the trade war of course, this very big component of what's driving this sell-off in stocks this morning and the drop in bond yields as well. joining us right now is senator tom cotton of arkansas, a member of the banking intelligence and armed services committee we appreciate you joining us i'll ask you the same question i asked mohammed, the president has laid out a strategy to be very tough on china. seems to have been emboldened really even in the last several days given the way that things have moved and yet the stock market and now we're watching the bond market move in other directions on him. how do you feel about that and what do you think the president can or will do >> i heard mohammed's comments and i think he's right he has to look at this not only

in the context of the immediate market moves but the broader and longer term economic picture as well as national security and i believe that's how the president views it as well and if not now, when we have for too long, decades really allowed china to get away with waging a trade war against us, against our farmers and ranchers and manufacturers without standing up for them that's what the president is trying to do right now he's trying to get a better deal for the american worker and if we're all in this together, i think in the long term we'll be able to get that better deal and at the same time, we protect the security of americans as well. >> at what cost given the questions that we do have about what it means for farmers in the united states and others >> and i hear those concerns in farm country as well, although our farmers in arkansas know for instance that our products have been discriminated against by china for a long time. we're the largest rice producer

in the country and china has had barriers against us. i think it's a short time frame, weeks not months, months not years. but we have a strong, resilient economy that china has many problems of its own, it has massive debt and a real estate value and they let the yuan devalue and they put the brakes on it because they realize how bad it is for their own consumers and raises problems for capital controls they had to introduce a few years back because china is an authoritarian nation without elections doesn't mean they don't face their own political pressures. >> we both spend time with the president, he cares about the level of the s&p, the level of the dow. he tweets about it looking at prices this morning, and the whipsawing action, we are back to where we were in january of 2018. below the january highs. do you not think it will put pressure on the president to resolve the trade dispute in

some form or fashion seeing the levels we're at right now? >> well, i think we have to look beyond the day to day or even hour to hour movements in the market i know that's important to many americans who are investors but the arkansans with whom i visit, the farmers and the ranchers and the foresters and the manufacturers they know for too long we have gotten a raw deal from china and they support the efforts to stand up to them. they hope the disputes are resolved sooner rather than later but if not now, when >> okay. senator, we appreciate your time this morning thank you for joining us on what has turned out to be a news driven morning here. we are -- we are still under an hour away from the opening bell on wall street and let's go over to dom chu to look at the big swings this morning. >> so we have spoken about the moves in rates, the moves in gold and silver prices the moves all over the macro market, it's a macro morning so

far. but because of those moves we will be keeping a close eye on certain parts of the equity markets and elsewhere to see if those sell-off pressures reverberate. one place we are watching right now is the surging gold and silver prices and as a result, the move higher by 3% in this gold miner's etf ticker gdx and by the way, this move higher now says if we go back here on a year to date basis, we're talking about a gain of about 41% if these premarket gains for gold miners holds into the opening bell checking out the bank stocks the yield curve at least parts of it continue to be a focus we have been focusing a lot on the two-ten spread and again, watching what's happening with bank prices off by about one-third of 1%. this will be an etf that tracks the banks. we have seen over the course of the last week and a half, a move

lower. and yes, cryptocurrency, it has been a focal point some people looking towards it as a possible place to find some kind of return in an environment where risk is coming up in other parts of the market. bitcoin prices right now, 11737 when it comes to the coinbase exchange and right now that one year gain stands at 75%. we are seeing another move higher premarket today so we'll watch those guys, andrew, back over to you. >> thank you for that. joining us right now to continue this conversation is the harris associate's partner and the manager of $32 billion hope mark international funds and mike santoli is at the new york stock exchange what do you think happened in the change in psychology or a meaningful shift here? >> you never know what triggers the things but we as investors we have to expect them in the short and medium term we get all kinds of shocks.

some derive themselves from political events, et cetera, et cetera who knows what really triggers it, but what we have to do is really try to distill how these changes impact the companies in which we're investing in the ability to generate cash and earnings over the short, medium and long term. that's what's important for equity investors is to see how these things actually impact the companies' ability to generate cash for the owners over the long term. >> the european financials, one can make the argument that all of the things going on right now, whether it's negative yields around the world, compression of yield spreads, a deepening trade war with china, that would hurt the european financials in particular is that a concern yet in your investment thesis? >> they have existed in this negative rate environment for some time now.

the bank has had a low to negative rate policy for a while now and the fact that the banks have been able to supplement ot cost cuts or marketing investment products or other types of fee-based income. as a result, despite the low interest rates, we have seen acceptable levels of earnings and, to me, this has meant that these banks are yielding anywhere from 8, 9, 10%. >> hang on for one second. president trump is tweeting and, steve, he may have been watching, some of your comments here. >> uh-oh. >> the president saying three more central bank rate cuts, our problem is not china, we're stronger than ever, he says, money is pouring into the u.s. while china is losing companies by the thousands to other countries and currency is under siege. our problem is a federal reserve that is too proud to admit their mistake of acting too fast and tightening too much

and that i was right, exclamation point, he says, they must cut rates bigger and faster and stop the ridiculous quantitative tightening now. he writes now in all upper case letters, yield curve is at too wide a margin and no inflation, exclamation point, incompetence is a terrible thing to watch, especially when things could have taken -- could be taken care of so easily. we will win anyway but would be much easier if the fed understood, which they don't, that we he aare competin against other countries, all of which want to do well at our expense. >> the day after the fed penned an op-ed -- >> i don't think the president read the op-ed. >> let me correct a mistake here the federal reserve did already end quantitative tightening. he calls for it to happen now. other issues interesting here, which is the president calling for the federal reserve to lower

rates. the fed lowered rates last week. what happens subsequently? other central banks lowered rates more we have this discussion earlier. can the fed ever get in front of other countries who insist upon being in front of us and such that all we would do is precipitate more and greater moves to the downside. >> can i ask you, fed funds future on the 50 basis -- we saw that rise a lot from friday to yesterday and i'm wondering if it has moved from yesterday to today -- >> i have not seen that back in the -- in the spectrum there >> that will be something interesting to watch. >> 64% probable by of the quarter point cut coming up in september. i have a slight probability of a 50 in october and december

but not in september >> is that data real time? >> it is real time. >> i imagine it has gone up quite a bit. >> there are differences in how these are recalculated this is reuters icon, the cme tool people have differences. let me point out that right now it is trading with a 64% probability of a cut in september. but no 50 built in there. >> okay. >> all right >> we have tothank david separately and get down to the new york stock exchange with jim cramer, he's awaiting. jim, what do you think of all of the action >> well, i think we have to dial back the rhetoric. i know that there are, like, they said the lower rates don't matter they're very positive. we are a consumption economy about whether the federal reserve cuts or not, let's get away from that at the moment they did as steve said, they did cut, they're not going to cut again. but this was october 8th of 1998

when the fed reversed direction from october 3rd i don't think that's the case. i think i'm looking at stocks that with really fine yields that i think are just as good as credit as the u.s. government. so i say we rein is in and we try to explain to people that there are capital flows, but there is great opportunity when we look at the companies that have reported in the last two weeks, try to match them against what would happen with lower rates. it is true there is currency adjustment, that can be fixed. street doesn't buy currency adjustment they buy what is organic we can sit here and create fire and put one out. i'm going to opt for the latter. >> are you excluding the financials in that narrative >> if you look at the japanese financials, versus ours, tom, you'll see our revenue, recurring revenue is greater than people realize. so when you match what jpmorgan is doing, and what bank of america is doing, with the way that they used to do it, i think

you would find these are very recurring revenue companies. who take a -- citi, within their broad rubric, and their book value has been scrubbed clean. why wouldn't you buy their stock like that at $64 knowing he's buying back 10% of the company, michael corbat i want to come back to the temper and the moment in time. are wegoing into recession i look at a economy that is strong from the point of view of housing. retail is amazingly strong even the farmers, why is yohn deere not down to where it was before president was elected there are many, many things that are going on that are being -- that are signaling -- let's say, let's go to -- let's go to shakespeare. full of sound and fury, signifying nothing >> jim, can i -- >> i was going to ask you that question, i know you're not a

guy that looks over your shoulder all that much, do you worry there is a signal in the bond market here you had that really bad german industrial production this morning. you've got the german bund going down you don't worry there is a signal there >> germany has been hurt by the trade war because that is a bmw, volkswagen, mercedes economy they're complete their export and their government is reluctant to take down debt to be able to expand because that reminds them of the wiemer republic. i think they're interested in history, far less interested in how to be able to get their economy moving if i were worried about the countries going down, i would say, you know what get out of 3m sell emerson in the end, it is the s&p 500, not some abstract miss that is a big block and -- it is not soybeans it is not soybeans that we're trading. it is individual companies and the largest companies in the s&p 500 with the exception of apple have little or no exposure to what is going on right now

if you look at the top companies in the various industries around the globe, they're directly affected by this. >> not our country. >> great to speak with you thank you. we'll let you get ready for the show. >> there are companies in the s&p 500. there are companies. >> by the way, s&p 500 looking to be open lower by more than 1% right now. let's get to gila. rick santelli joins us as well what did you make of the move here this morning? >> when the ten year note yield hovered around 2%, i would like to show a chart from early 2012, we had a massive double bottom in ten year note yields, right above 135, in july 2012, july of 2016, and the violation, what, a week ago of 195, resulted in 30 basis points the day of central bank, july 31st, our fed lowered rates by a quarter of a point our ten year note was still touching 205, 206.

the point is that we can't blame the federal reserve for what's go on. but the fact that they lowered rates and talking about potentially more not challenging the market, really in part has led this race to the bottom. new zealand doing more than expected but ultimately i think that we have to look at the flight to quality, i know there is good stocks as jim pointed out. but it is all about the printing presses right now, melissa lee >> what levels are you watching on the ten year yield, going into the start of the equity session today? >> sure, good morning, melissa so long end yields very, very rarely bottom around the time of first rate cut and the markets and powell telegraphed there are likely more to come in that vein, lower end and short-term for the rally and long end of the yield curve could be as low as 155

that's not a target, that's a short-term downside level for yields where it could move to. but a lot of it depends on as rick mentioned whether policymakers confirm or reject this pricing of as much as 40% chance of a 50 basis point rate cut coming up in a mere four weeks from now >> do we hit 137, the prior low on the ten year yield? >> if this is the start of a federal reserve cutting cycle, at a point in which economic growth may be slowing, in 2020, then, yes, we could see that and breakthrough it. >> okay. thank you for your quick take. we appreciate it we're watching this very closely. >> quick point from a trader friend of mine, rick, who tells me -- not that rick, but the other rick, who says it may be worth noting that the central banks closest to china are the ones who are cutting and it may tell us more about what is going on inside of china than we thought. >> okay. >> steve liesman, tom farley,

melissa, thank you it has been a fascinatingikely fascinating day. join us tomorrow "squawk on the street" begins right now. good morning and welcome to "squawk on the street. i'm david faber with jim cramer. live from the new york stock exchange carl quintanilla has the morning off. we begin with the markets, of course, this morning futures, they lost ground as you watched over the last hour, if you've just been watching "squawk box," global yields all over the place mostly down, though the ten year had been as low as 16, 26. president trump by the way also tweeting moments ago, here is that quote it is central to sort of the debate go on right now our problems is not china, we're stronger than ever, money pouring into the u.s. while china is losing companies by the thousands to