are buying september calls >> bullish bets continue to come come on china. >> also in cbs given where the stock is, it's amazing. but they're going out to march, the 55 calls buying those cost about 70 cents. and 10,000 followed by another 10,000 >> thank you "the exchange" begins now. thank you, scott hi, everybody. here's what's ahead. no recession for the u.s. consumer yet retail sales absolutely crushing it this morning. walmart with blowout earnings and yet bond yields keep sinking. we'll explain these wild moves and today in the span of just a few hours, the trade two-step between d.c. and beijing sent investors on a stomach-churning ride we'll look at how much of that is to blame for those recession fears that keep dogging these markets. and bombshell allegations about ge the man who blew the whistle on bernie madoff calling the company a bigger fraud than enron. we'll have the latest. we begin fiwith the market

swings dom chu with the information behind them. >> you saw a whole bunch of volatility but as things stand right now, perhaps a bit of a respite for the bulls out there after a terrible day yesterday the dow industrials after swinging between gains and losses up about 0.25%. the s&p 500, similar percentage gain and just about flat right now. if you take a look at the overall picture, some of the things we want to take a look at are the headlines driving things about 5:00 a.m. eastern when we first got the headlines china wanted to threaten countermeasures to the u.s. tariffs that go into effect september 1, we saw a steep drop-off in the overall futures. in fact, if you take a look at the next slide, at that low here, between here and here, that was a 400-point drop in dow futures. now we got a bit of a move higher after walmart came out with good earnings and a chinese

official was heard saying they want to meet the u.s. halfway in negotiations and that got you all the way back up here let's put that up here for perspective. now all of that being said, president trump then said a trade deal must be done on our terms and we saw a little more down side move to where we are just about 50 to 70 points higher on the dow industrials. so a very headline driven market but perhaps a little bit of an okay situation given the fact we came off the worst day for stocks in 2019 back over to you >> dodge >> dom, thank you. the u.s. data mainly strong today. retail sales and productivity are up but manufacturing did weaken last month a top ecb official says they have a very strong package of stimulus ready for their meeting next month and given all that, the 30-year u.s. treasury yield is back below 2% at this hour. let's drill down on these markets with bob pisani at the new york stock exchange.

>> it all boils down to confusion and makes it very difficult to form an opinion about stocks as we move into the last four months of the year look what they have to deal with will there be troops going into hong kong or not will there be progress on trade talks or will there not be will the fed aggressively cut rates or will it not and will the global economy be more or less stable by the end of the year? this is a lot of questions so many traders are just pulling back and hoping we remain range bound essentially going into the end of the year. and that's really what we're getting today. range bound. modest gains from consumer names like coca-cola and proctor and gamble flattish in industrials like caterpillar. and no help from exxon and chevron. bulls are seizing on the strong showing for two of the big consumer companies, walmart and alibaba. walmart raised yearly guidance including comp store sales alibaba posted revenue gains of 42%. ebitda gains of 34%.

this is a sign the consumer economy is doing better than the industrial economy we saw that today. retail sales up nice in the u.s. industrial production not so great. >> bob, thanks very much and a lot of trade chatter coming from the white house and beijing over the last 24 hours on top of that, the protests i hong kong further complicating matters with the president linking the two on twitter let's get you caught up. kayla tausche is live in washington brian sullivan is live in hong kong let's start with the headlines out of d.c >> in a series of tweets, president trump suggested president xi meet personally with protesters in order to quell the demonstrations and also suggested that the hong kong situation isn't helping trade negotiations with the expectation that china will try to hold a firmer line. chinese government then said the u.s. shouldn't offer advice. also said it plans to retaliate for those new tariffs on september 1st. but the market is looking for any glimmer of hope as dom mentioned. stocks rose this morning on that one comment from a foreign

ministry spokesperson about china wanting to meet the u.s. halfway. that's long been beijing's position vice premier liu he communicated that in a late june phone call according to people briefed on the conversation and even in private, lighthizer said that wouldn't be possible because of china's past transgressions president trump said the same today. senior administration officials don't see the president backing down now two told me this morning of the trade uncertainty and the resulting market volatility. it is what it is and when i asked whether they believe it's trade or the fed causing uncertainty, both said it's pretty much only president trump and his hawkish adviser peter navarro that are truly pointing the finger at the fed chair. everyone else largely believes it's because of trade. >> or in other words, pointing the finger at themselves or at the president. kayla, thank you the world is on edge over what's coming next in hong kong with photos of tanks and troops

stationed nearby making the rounds brian sullivan is there for us as kayla said, now president trump is saying that president xi should meet drcirectly with e protesters >> i might have a better chance of becoming the ceo of hong kong who knows. we'll see what happens at this point, anything is on the table. it has been a crazy 24 hours really whipsaw action in the markets and political headlines here as thursday turns into friday here in hong kong, here's a couple of things to look out for. number one, lost in all the headlines was that the city of hong kong effectively said we need economic stimulus cutting personal taxes, business regulations, offering free rent, free kindergarten. they'll have to digest what the government is offering and see if that placates some of the protesters to kayla's point, will she and trump come together? so much back and forth you feel like it's either the storm before the calm or the calm before the storm. time will tell and although the protests are relatively muted today, it's middle of the workweek

also 107 degrees with the heat humidity index there are protests planned not only for tomorrow night, one called power to the people, but also on the weekend. how beijing responds to those, kelly, will be key as bob pisani said, will sort of the army come in if it gets out of hand. the world is watching. one of beijing's moments on a global stage as well they want to not alienate some of their trading partners all while in a trade war with the u.s. the next 24, 36, 48 hours could be very interesting in hong kong we'll be back on the air for you in just a couple hours we'll see you then >> brian, we really, really appreciate it. i'll be watching very closely. brian sullivan is in hong kong tonight. with competing headlines from trade central banks and u.s. data hitting markets today, what's more important for the market right now let's ask lauren goodwin charlie is head of investment at ariel investments and it's great to have you all here charlie, i'll begin with you

which one is it for you? i know it doesn't have to be just one factor, obviously, but what's the most important cloud for the markets right now? >> well, what the market thinks is the most important is the possibility of a recession it was the market believes that the bond market is omnipotent and can see the future and the bond market is telling us we're going to have a recession. and i just don't believe that bond investors have that kind of foresight. we heard this in the fourth quarter about how we'll have an invert yield curve and bring us a recession. yet we've had solid economic growth since the market is very skittish about signs of a recession people remember 2008 as if it was yesterday. they don't want to be long stocks in we're going into a recession. >> everything feels like 2008 redux. that's the only possible game plan right now i know you've been bullish on financials, charlie. are you sticking with those calls? >> i am. i am

goldman sachs, i think it's at 0.9 times book one of the few almost absolute trading rules, if you can buy a high quality investment at less than book, it's going to work out for you and that's what we feel right now we've got a lot of high quality banks like bank of oklahoma trading at 11 times earnings those are cheap. what's not cheap right now are consumer staples the safety trades. the bond substitutes those are expensive trading at 23, 24 times earning >> but those probably look like a bargain compared with where bond yields are. what are investors who are looking for income supposed to do >> not get it because bond yields will continue to fall, although there has been a great captain gain on the bond market with negative gains in europe. some of those bonds up 50% or 60% this career. it's been spectacular. but i would say, though, what you -- pushing back on what charlie said, what the bond market sees is global slowing. it's traded off of global growth europe is such a basket case right now. you can almost say it's already in recession

just arguing how big a recession it is. japan, already negative quarters of gdp forecasted for q3, q4 china had the worst trael production numbers that means worse than the financial crisis that's what's dragging the world growth down and yields not only in the united states but around the world, all yields are somewhat related to each other they're going to keep falling. >> probably the most important question is can the u.s. avoid a recession with all of this and it means, are the bond yields and the yield curve telling us something different this time? with every passing year, the global economy is a bigger contribution to global gdp >> one thing about the yield curve, a bunch of stock guys decided that the two-year, 10-year yield curve was more important because it didn't invert the three-month ten-year curve, that inverted in may and it's deeply inverted right now. that's a big worrisome sign. can we avoid recession sure if the fed got aggressive, cut rates aggressively and

uninverted the yield curve you might have a chance at get something stimulus if they want to go 25, 25 in mumble midcycle they'll make this worse that's what they've done since july 31st. >> we have jackson hole coming up a chance for the fed to maybe get out there and explain what its message really is. one of our guests this week said it should be powell's -- whatever it takes moment like mario draghi had, gosh, seven years ago now, maybe what is your advice in terms of where people should be in the market now with all of this going on >> we're not calling for recession much like our other guests have said, but we do think it's time to move more defensively in portfolios. we're doing the same thing >> so when you say more defensively, you're talking about some of the most overvalued parts of the market >> when it comes to where to play defensively, it's where can you find -- add value in your portfolio without relying on price appreciation there are dividend yield traps, value traps. we're looking at in the equity

space, for example, are securities that provide low volatilit volatility, consistent revenues. two-thirds of companies beat and in the fixed income space, lots of room for diversification. they provide good diversification, low default probabilities and infrastructure, for example. >> i hear people talking up munis. any specific names in the stock market you can recommend or, you know, i don't want to put you on the spot if that's -- >> i can't talk in terms of specific names but we can in term of themes one of the things we see as the most prominent risk to valuations right now is policy risk that's not just trade wars but also where the fed is concerned. and so when it comes to really interesting ideas, what we actually think that the u.s. is where some of the best opportunities are. we're starting to move underweight international developed and emerging markets because of some of the valuation

risk we've seen. >> final question, jim, because the fed needs to move to uninvert the yield curve can we accept that explanation as the public, as the investing public if they got up and said the data is fine. manufacturing is weak. everything else is strong. we're doing this just to uninvert the yield curve could it be an appropriate explanation? >> it could be what's dragging it down is world growth the world is falling apart and that needs to be where the stimulus comes from. now i know the fed doesn't think that way >> i see charlie shaking his head >> i think it could be -- >> the world is not falling apart. where does this come from? china has 6% growth. u.s. had -- >> that's a 30-year low, charlie. that's a 30-year low >> record low unemployment the world is not falling apart we do not want to have a -- >> have you seen the numbers out of germany have you seen -- >> we do have -- since the fed has said that they would be more patient, we've had financial conditions in the u.s. ease by

50 to 100 basis points depending on the day the markets are justified in expecting this move. that's why we've seen some of the up tick. we had some of that easing if we don't get it, that's a huge risk for valuations >> draghi said he'd do anything when things were horrible, when france was borrowing at 10%. that is not the conditions we have right now this is not the time to have the fed take draconianly loose measures this is not that kind of situation. >> europe is buying bonds with -- >> could make it worse >> guys, thank you >> this is the discussion of the day. we could keep it going >> appreciate it very, very much here's what else is coming up on "the exchange. >> ahead -- retail sales beat. walmart did, too the american consumer is spending, but will it last plus -- bernie madoff's whistleblower calls ge a bigger fraud than enron a look at what he's alleging and how ge is responding

and getting shut out of china. cisco's ceo weighing in on the trade turmoil. this is hexcng ocn"t ehae"n bc pharmacist-recommended te memory support brand. you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

welcome back to "the exchange." walmart is having its best day of the year after posting

blockbuster earnings what's more, they raised their guidance and said e-commerce sales jumped 37% last quarter. doesn't sound like the consumer is tapped out. july retail sales backing up walmart's strength growing a surprisingly strong 0.7% overall for the month i'm joined by christine honeysicker, ceo of castle, and it's great to have you here. especially in a week where bloomingdale's just said they'll work with you guys to launch their own subscription service sticking with what we learned about strong retail sales, strong consumer, it depends on which part of the consumer you're looking at. >> yeah, i think the lower price point value-based offerings are posting really strong results. we've seen a couple of the companies in the middle tier and upper tier struggling over the past couple of weeks with their results. but i think if we end up dipping into a recession, having diversification, access models,

mental models to pair is going to be ever more important for the retailers. >> one data i heard recently that 40% of consumers have canceled a subscription service after trying it. what is the churn like, and is that still a risk if they're going into any kind of period of time where the consumer wants to pull back a little >> i think turn varies widely based on the price to value offering and the assortment and the type of consumer what's most important is that brands are looking at what's my lifetime value that i'm making on the consumer and not fixating on the retention as long as i'm making profit relative to the cost of acquisition. that's a very good position to be in. and i think that's an indication around why the fixation on revenue on the street and not on the health of that revenue it needs to move much more toward the quality of revenue and much more toward profitability. >> and what about value? one of the messages we're clearly getting is that walmart is doing very well up almost 20% this year.

target saying up about 25% this year the bargain basement types offerings also doing extremely well what is the value proposition for the rest of retail, or do you just have to get up scale enough where those companies don't have to worry so much about it >> what we're seeing and where we're playing is in that middle market space as brands you make great clothing a really strong brand and strong marketing. how can we bring your product to a consumer where you understand there's more value there that's where rental becomes more important. for a flat fee people get unlimited access if we dip into the recession area, that becomes an even more important lever to pull as a retailer >> one of the interesting things that definitely benefited the overall retail sales report maybe even helped walmart was amazon prime day single timing of that july event is having huge implications. do you guys even see the halo effect as people are just looking at e-commerce more during the month

>> rental tends to be anticyclical times where retail is strong, holiday season, amazon prime day is where people take a little bit off the gas on rental. which is why it's a great compliment so in the times where retail is a little bit weaker, whether it's q2, which we generally see weaker earnings. we see a lot of people coming into a rental model because it just makes more sense than continuing to consume ownership products >> so if you guys are doing too well, it's going to tell me, wait a minute. people are taking a pause. >> we want to help smooth the earnings in the profit cycles. >> wall street likes that, too christine, thanks very much. still ahead -- falling interest rates are giving home builder confidence a nice boost. but the data also showing some signs of a softening market. we'll dig in coming up first, while builder confidence climbs, small biz confidence has dropped to a new low. what's got them so worried that's on ck iden "rapid fire. we'll be right back.

welcome back here are some of the movers this hour shares of coach and kate spade parent company tapestry are falling after missing on fourth quarter revenue and issuing weaker than expected fourth quarter guidance their shares are down about 31% this week. meanwhile, shake shack is up nearly 6% to hit a new 52-week high on a bullish call at suntrust today new menu items will give that

burger chain a boost and shares of pivotal software are rising pivotal had fallen 66% over the past year as the company got hit from weakening demand for its cloud applications the shaures were back up to just about $14 today. now to sue herera for a news update >> here's what's happening at this hour. democratic presidential hopeful beto o'rourke says that he has no plans to abandon his presidential bid and run for the senate he told his supporters in el paso he will continue to run for president. >> there have even been some who have suggested that i stay in texas and run for senate but that would not be good enough for this community. that would not be good enough for el paso. that would not be good enough for this country the fda has approved a new medication to treat drug

resistant tuberculosis the drug will be part of a three-drug regimen that can be taken over six months. it was tested on more than 100 people in a clinical trial it was 90% effective and it should be available by the end of the year. fanduel and major league baseball announcing a multiyear partnership designating fanduel as an authorized gaming operator of mlb it marks the company's first partnership with major league baseball you're up to date. that's the news update this hour back to you, kelly here's what's still ahead on "the exchange. >> coming up -- the man who blew the whistle on madoff says ge is a bigger fraud than enron. cisco gets shut out of china. and bill ackman bets big on buffett. that's ahead in ap fe."ridir i saved hundreds when i switched

my car insurance to geico. this is how it made me feel. it was like that feeling when you pull your green sock out of the dryer and then the very next sock is the other green one. and then you pull out two blue ones. and you keep going till you've matched every single sock in perfect order. and the owner of the laundromat is so impressed, he hangs a picture of you next to the dryer. geico. fifteen minutes could save you fifteen percent or more on car insurance.

welcome back let's catch you up on stories on your radar today it's rapid fire. here are dom chu, mister rogers and cnbc contributor ron insana. >> there's a story behind it, by the way. out of context >> first up, is harry

marcopolis the madoff whistleblower is targeting ge he says the company has been hiding the extent of its financial problems for years and calls it a bigger fraud than enron and worldcom combined. >> put a lot of people in prison over the years i'm just continuing that trend and need to get paid i have a family to support anybody who signs those financials is culpable >> so you're coming after the current management team right now? >> on march 7th, they had an insurance teach-in they could have come clean and showed you the eight reinsurance deals and what the losses were in dollar and percent they didn't it would have been easy to do. worldcom and enron lasted about four months, once their accounting frauds were exposed we'll see how ge does. i think they are a bankruptcy waiting to happen. >> ge meanwhile saying we are extremely disappointed that an individual with no direct knowledge of ge would choose to make such serious and unsubstantiated claims ge stands by it.

and mr. markopolo is compensated by unnamed hedge funds if people -- if you department see the whole interview this morning, go to cnbc. it's well worth the watch. what do you think? >> so i've been covering it this morning since the report dropped. and i think the best way to put it is the feedback that i've seen about this particular story has been so visceral on both sides of things. because of the nature of what's happening. on the one hand you have people trying to stand up to a large corporation saying, hey, if these guys are perpetrating a fraud they new zealand to be held accountable there are others saying this is just a hit job on ge by a guy compensated by a hedge fund and he's making money on this hand over fist himself. this is going to be one of those talkers because everybody has a stake in not just the financial side of things but just what this speaks to about the corporate governance side and

everything else. >> ge remains one of the most searched tickers on cnbc's website every day. >> almost always >> almost always still a million people who rely on a pension in some form. >> i would be one of them, by the way. >> absolutely. what is going through your mind as you hear all of this. >> i read harry's work on bernie madoff which was exceptional an extraordinary piece of work no one paid attention to it. the s.e.c. never even bothered to follow up and not only was he right, he was right to the detail down on what bernie madoff was doing having read this morning's materials and comparing enron and worldcom to ge, the extent of the fraud at enron where they brought in phony employees to sit at phones and make it look like they had a live trading room and comparing that to whether or not ge is recognizing -- i'm not an apologist for ge >> but i take your point about the differences potentially between the two. >> the style of fraud he's alleging enron and worldcom were straight up frauds.

>> so as -- so people know the heart of his allegations, the long-term care business is terrible they're paying out $5 for every -- >> the liabilities are way more than -- >> they don't have the cash flow to pay for those that's why he's calling them bankrupt on the issue of baker hughes, sort of subsidiary, that's where it gets into some of the off balance sheets you raise some of the other parts of the business that have been profitable saying you can you get numbers this strong without doing some of those off-balance sheet activities there's several planks as to why ge is an empty suit right now. >> these are more traditional revenue recognition issues than outright fraud lent behavior where you're staffing nonexistent businesses pru dential having gotten out. i used to carry it until i found out what the details would look like if i ever needed it it's really not as good a piece of insurance as you might expect so there are clear questions as to how expensive long-term care

can be and how they're recognizing their liabilities. >> last thing on this. what do you think needs to happen next as people are going to spend the weekend digesting his claims and thinking about, what do i need to worry about if i have exposure to ge? >> ge needs to be as transparent as it can be and so does harry. who are the hedge funds he's working with he should have gone to the s.e.c. before he went to a newspaper. >> it sounds like he did they asked him this morning if he shared these findings with regulators he said yes and they seemed sympathetic or something to that effect but i would imagine and hope they're also asking him the same questions. he profits from their profits on the trade. >> from being a whistleblower, too. >> so on the one hand, i hope he's wrong because we received, if you are a ge pensioneer in the future, we've already gotten letters from the guarantee corporation, of what your future looks like >> the government guarantee. >> paying the pension of ge,

which is why we should all care. >> the one thing we'd add to that is the story for me that's not being told as much is he mentioned the sell side analysts who cover this stock have been wrong all along and bought ge's story hook, line and sinker. what i would like to know for those sell side analysts out there covering that stock, does he have a case did you guys really not see any of these things? and i'd be curious what those reports in the coming days are about acknowledging whether or not there's any kind of merit at all to what -- >> the tag line being that somebody is going to make money on this in one way or another. yeah, no kidding that's the whole idea. that analyst should be the one helping make that determination. >> want to quickly mention cisco. obviously, not as big a story as ge today those shares are on pace for their worst day in six years after reporting a drop in the china business and giving poor guidance for the first quarter of the fisca2020 year. ceo chuck robbins told "squawk on the street" the reason behind

the slowdown take a listen. >> we certainly saw an impact on our business in china this quarter. a lot of the state-owned enterprises, where they have optionality, they're choosing local manufacturers. and you know, we're just being told in some cases that they're going to favor local vendors that's just the way it is right now. >> that's why everybody should care about whether this is a bellwether for this bulkanization between the u.s. and china. >> we're seeing more ceos speak out. for me that's been the most interesting part of this it's not even necessarily a huge part of their business but such a steep fall that it needs to be called out we heard from jeff gwinnett at macy's we heard from walmart today. this quarter, i feel like everyone is getting more and more real about it than i've seen in the past because it's getting worse. >> no more happy talk. they're telling you what's really going on in the business. i like that trend about it moving along, bill ackman's new stake in berkshire hathaway. his pershing square hedge fund

is making a big bet on buffett buying about $3.5 billion class b shares as of yesterday's close. akman has had a great year chipotle, starbucks and howard hughes helping the fund. what does the berkshire move tell us? >> almost like buying into a fund of funds. if you can't do it yourself, have somebody else do it for you. >> everybody would say, it's because bill can't do it itself. coming this year -- >> up 45% according to published reports. you want to own berkshire class b is effectively a tracking stock of the real berkshire hathaway shares. obviously, it's a good buy maybe he's betting on future management at berkshire. maybe he's betting that they'll correct some of the errors in their portfolio. kraft heinz being one of them. >> that may have been -- >> you are looking micro when i first saw those headlines, i thought, is this a call on interest rates only because you have such a --

not stakes in wells fargo, large stakes in -- >> none of that is positive right now. >> if you're buying into it now, like a call on the overall macro environment for where markets overall head and financially services >> if you think they're trading at a big discount, knowing this is a company that does buybacks. the shares at a certain level, we'll see if he has anyt to say about it >> new information from cnbc shows a drop in confidence on main street tied with the survey's all-time low. more than half of small business owners say that a recession is likely in the next 12 months >> really interesting. we talked about this that 57 overall confidence number tied with the all-time low. a big reason for the decline this quarter was trade about one-third of business owners think that trade is going to have a negative impact on them in the next 12 months 25% china -- said that china has already hurt their business. our trade policy with china has hurt them in the past 12 months. 54% believe a recession is likely 44% say unlikely you look at republicans versus

democrats, 64% of republicans say it's unlikely. 81% of democrats, small business owners, say it's likely. big spread there, obviously, in the difference of opinion, but tied with the all-time low is important. >> also because small business, not usually a place, you pick up leading indicators of recession which makes this interesting to me is it telling us just that everybody is so negative and maybe unduly so, or are they seeing something on their front lines? >> i heard muhammad el aryan speak earlier today. recessions are never psychological event. negative headlines just become self-reinforcing -- >> so we don't talk ourselves into it? >> it's never happened that way. everyone is looking at the wrong yield curve. the one that inverted in april is the one the fed watches that's been inverted for 4 1/2 months now and the russell 2000 is down hard relative to the rest of the market you're getting the types of indicators that would suggest we're six months away from a recession. >> who is moreceptible to

the psychological -- >> consumers >> but is it small business owners or medium sized business owners or fortune 500 ceos or do they affect them the same? do fortune 500 ceos make decisions on their businesses based upon the same psychology a small business owner would >> i think they're probably more global to the extent they represent the global yield curve, you think that they would be the gloomier part small biz might be fine, but that's -- >> they're paying attention to who is walking into the store every day. it's a smaller look but it's more personal and you see it every day. for that to drop off like this, the last time it was this low is before the tax cuts were passed. so then they got a nice big bump from that and some of the shine from that is wearing off >> and longer term budget cycles for bigger companies we're going into budget season for major corporations right now. that's one year out planning smaller companies don't necessarily always have that luxury they have to cut faster to stay more viable. >> guys, thank you all

really appreciate it today dom, kate rogers and ron insana. >> ms. rogers. markets are volatile the trade war with china continues to shift on a daily and sometimes hourly basis what's next in america's ongoing spat with china? we'll look at potential fallout r veorcongp. n broken. and put back together. this is also hal's heart. and this is hal's relief, knowing he's covered. this is hal's heart. and it's beating better than ever. this is what medicare from blue cross blue shield does for hal. and with easy access to quality healthcare, imagine what we can do for you. this is the benefit of blue. what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely.

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welcome back to "the exchange." wall street is blaming washington for their recession worries saying trade tension is taking the juice out of the economy. what options does the white house have to shore up growth? joining me are greg ip for "the wall street journal" and cnbc editor at large john harwood it's great to have you both here john, what kind of measures should we expect in terms of response from the white house now? certainly they probably have seen the trade war reprieve this week a >> the best case for the

administration could sump lsimpy be to pull back on the trade war. china overnight, even though the president delayed these tariffs he said in tweets this was going to benefit china more and they're going to reciprocate instead of reciprocating they responded overnight by announcing they're going to retaliate to those tariffs that remain that are going to be implemented by pulling back from the trade war which the administration has not really clarified what its goals are exactly. that's the biggest thing it can do there's already a considerable amount of fiscal stimulus from the combination of tax cuts and spending increases there aren't a lot of proactive steps the administration can take other than jaw boning the fed for more rate cuts not even sure that that is going to be particularly useful at this point >> greg, that's what i'm wondering if we'll hear more of that next, although we've heard it along the way already what else could they pull out of the hat? >> well, i am kind novembof in s

camp we know the primary burden is the trade war. anything the administration can do to step back from the trade war would be helpful i don't see anybody thinking that the administration and china are about to turn this truce into a long-term peace deal any time soon so you have this like background level of uncertainty that's like welling up among businesses in china and germany, in western europe it's just not going away so you -- i don't know what the short-term fix for that is plus you have stuff going on in argentina. you've got stuff between japan and south korea. we're in a world of like heightened uncertainty about the -- what are the rules of global engagement going forward. that is a world where there aren't a lot of ready off the shelf solutions. >> do you think if it weren't for our trade dispute with china that the u.s. economy would be looking fine on all measures the main area of weakness as you well know is manufacturing, to

some extent the manufacturing surveys and everything else is basically held up fine could all of that be cured absent this back and forth >> first of all, let's get one thing straight the economy in the u.s. is not tanking. far from it. the latest numbers suggest it's growing around 2% which is roughly what it was growing before the tax cut which every economist expected to be temporary. so if you don't step back, you don't really see anything in the raw data that suggests there's anything unusual going on. what is worrisome is a very weak situation with manufacturing and business investment that does seem to reflect some of the shockwaves from the trade war. probably other stuff going on as well like weak oil prices which hits the oil patch so i don't think there's any reason to push the panic buttons here if you are the federal reserve, looking at the situation and saying, this kind of looks like a situation where you want to air on the side of being more supportive rather than more restraining on economic growth >> the irony is it's not clear

the fed can do that or the european central bank out there today saying they're ready for more extraordinary measures at their meeting next month whether that gets you any growth in the long run. >> the supply of bullets is much diminished it's also worth pointing out that even apart from the trade war, what economists see when they look at the effects of the tax cut which the administration had sold as a transformative kind of change, is that it has not had the effects that people hoped for either in paying for itself, in spurring business investment, in spurring manufacturing. manufacturing investment as jay powell said when he cut rates last month are both weak right now. and we simply haven't seen the delivery on those promises and then when you layer on the trade war and weakness abroad on top of that, it's a picture that, as greg said, we're not shrinking, although half of the corporate cfos surveyed by duke

university not long ago said they expect the economy to shrink by the second quarter of 2020 two-thirds said a recession by the end of 2020. we'll see if that happens. it's not a bullish picture it may not be crashing but we're in a situation where we've reverted to the growth that existed before the trump administration began >> all right we need some new green chutes from somewhere guys, thank you. appreciate it. john harwood and greg ip lower interest rates have boosted home builder sentiment but signs of weakness in the housing market are still creeping up. we'll dig into the latest data on that, next. - [woman] snhu was the best experience of my life. - [man] without snhu, i wouldn't be the leader i am today. - [woman] i graduated high school 19 years ago. i still finished. - [man] in the military, you feel that sense of accomplishment. that's what snhu is. - you will march from this arena and say to the world.. i did it. - [woman] you did it.

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welcome back breaking news on ge. morg morg morgan. >> this developing story on report from whistleblower and financial investigator, we got a response from ge today now wee we're getting a direct response from the ceo he says quote ge will always take an allegation of financial misconduct seriously, but this is market manipulation pure and simple

the report contains false statements of fact and these claps could have been correct if he checked them with ge before publishing the report. the fact he wrote a 170 paged paper but never talked to company officials shows he's not interested in k accurate analysis, but in generating volatility so he and his hedge fund partner can personally profit you may recall earlier, we had him on i actually asked him why he hadn't spoke company the point he made was relying on financial statements and that based on his eck appearance, talking to the company, he didn't want to put them in a position to be able to destroy any kind of evidence or financial documentation. this is the response from the ceo and we'll bring you the latest >> very sharply worded thank you so much. ge shares remain down about 13% this afternoon session low for all three major

averages the dow had been up, but now we're down by about a third of one percent and ten-year yield went to below 1.5% third one down 1.745% and a fresh record year low. below 1.92%. i don't have any superlatives. etf is climbing today. they've boosted homebuilder rates, out to dine in oana oleig through this >> yeah, kelly, homebuilder stocks took it hard yesterday but did get a boost this morning from the small gain in homebuilder sentiment. sentiment has held a narrow range. rates are down around a full percentage point since last fall and builders say that's bringing buyers back. we just saw a huge jump in mortgage applications to buy a

newly built home in july up 31% single family home starts have been weak this year partly because builders are worried about the broader economy. i spoke with the ceo of kb home. he said lower mortgage rates help, but consumer sentiment moves sales more than rates. sentiment in housing is strong now. but that's all on lower rates and doesn't figure the latest warnings of a possible recession. >> diana, how much more of a boost are we looking at if now that the, we're getting some headline numbers here for the ten-year yield below 1.5% this afternoon. is that a low you think and has spurred more interest? >> you have to remember though, the ten-year and 30-year fixed mortgages track loosely, but not exactly. mortgage rates are not falling nearly as fast that has to do with investors and mortgage-backed bonds. they don't love it when everybody starts refinancing

because they lose money so they're not as interested in buying those so we're seeing a widespread now between the drop in the ten-year treasury yield and mortgage rates. use d the track closely. now not so much. >> and a xwraet foint point. going to be a frustrating one for some, too. thank you. take a look at what's been going on in markets just in the last couple of minutes. let's begin with bonds yields where we're seeing the most movement and some major headlines. the ten-year yield going below 1.5% for the first time since 2016 the lowe was 1.318% so we're getting closer to those levels the 30-year bond which last night went below 2% for the first time ever is falling sharply below those levels down at 1.93% today. stock markets not responding well for more, steven stanley is here chief economist at amherst

securities you're the perfect person to break this down with at the moment first and foremost, today's action seems to be driven by a couple of headline frs the european central bank. they just told us, a couple of policymaker, they have major stimulus coming in september major bond buying. more rate cuts is is that dragging u.s. yields lower today? >> to some degree, yeah. you look around the world and as low as your eelds are historically, they're still high higher than the age alternatives that global investors would have >> it's amaze iing after the fi headlines crossed the this morning, the german ten-year bond hit 0.7%. how do you explain what that represents >> amazing that people would be willing to give away their money and get less in return it's amazing sxwl we have the french ten year spanish was about to turn negative the last time i checked, so for people who look at u.s. yields in a vacuum, is today's action telling us something about the likelihood

of recession, about the weakness of the economy or is is it being driven by global forces? >> financial markets seem glo gloomy they're looking around the globe and seeing weakness the other economies. the u.s. economic data has been good so the u.s. seems to be holding up but i think there's a real concern about whether the u.s. can continue to do okay when other countries are suffering. >> yes every time we get strong data, people said no, but just wait. well now august. we're getting the july numbers and they're most hi strong manufacturing is weak, but is that because it's been hit specifically by trade tensions or is it telling us about the business cycle itself? >> no i think it's the former. everything to do with trade uncertainty and the uphooefl in the global supply chain. manufacturing lagging. consumer seems to be good. i think the domestic u.s. economy is is still in good shape. >> you think manufacturing is s

lag iging and not leading it says one of the first places it will show up is in manufacturing then it will spread >> i think the manufacturing sec sector is important. what used to be b a leading indicator because typically, cycles came around inventory cycles boom and bust. we don't have that much anymore and i think now, it's more usually the last couple of cycles, it's been more financial market driven. >> so final final and most important question, yesterday, the -- three year has been inverted a couple of months. is this telling us we are going into recession within 14 to 18 months or is it going to be different this time? >> well, you hate to say it's going to be different this time. i think it tells you financial markets are worried about it, but i think the reality is that the economy should be in good shape and i personally just don't see it >> so how do you then explain and say okay i'm going to throw out this chart with all this history and say you know i know happened every time before this

way, but i don't care. t not going to happen this time. >> yeah i think a big part of it is what we started with. the force on the longer term part of the yield curve from global situation from negative yields in some of the other countries. so i think that's, that's an echo fact of all the qe we saw after the crisis and from the ecbec br ecb probably coming again. so i think this time is different in the sense that the forces for monetary policy are exerting on the markets and on the piece f o the yield curve we haven't seen >> so do you want the fed to cut rates more or no >> i don't think they should, but i think they certainly are at least in september. >> wow and that's where we're headed. thai going to cut rates. the european central bank pullingpull ing b rabbits out of its hat as i mentioned, dow is selling off as these bond yields continue to plunge new lows. right now, the two-year ten-year

remains slightly quote unquote normal territory there you have it again for the ten-year below 1.5 pesce. just a moment ago. that does it for the change. i'll go join tyler for "power lunch" which begins right now. >> kelly, thank you very much and welcome to "power lunch. here is is what is new at 2:00 for a thursday with wall street whiplash. stocks on a bumpy ride as the trade tensions with china remain on high alert. we've got the details for you. plus, the it's prime time for retail amazon's prime day create iing shopping frenzy for everyone even rival walmart so can a strong consumer send us back to record highs in the stock market plus, electric shock ge sink iing after a madoff whistleblower says the company is a bigger fraud than enron and world com combined we'll tell you why he says the company is heading for bankruptcy "power lunch" starts right now