and squawk box begins right now. live from new york where business never slopeeeps, this squawk box. >> good morning, welcome to squawk box here on cnbc. we are live from the nasdaq market site. i'm becky quick. futures are making a dramatic move higher. after 3:00 a.m. today we heard newco new comments from the chinese commerce industry. china hopes the u.s. will show sincerity and concrete action. both teams have been in touch and are working to create conditions for successful negotiations as a result, take a look at what's happening with the u.s. equity futures at this hour. right now, we're looking at the

futures up by 253 points this comes after the dow was up yesterday by 230 points. the s&p up by 27 points and then the nasdaq up by 92. the gains we saw yesterday were happening even though you continued to see pressure on yields in the treasury market. see how your energy prices and that did move stocks in the energy sector higher yesterday but again the idea that china is now basically confirming what president trump was saying, things seem to sound better than they did last week for sure. hearing both sides come out and make the arguments have been helping the futures this morning. >> they kind of said we're not going to immediately match the new additional tariffs that he was -- >> right. >> so actually we would like existing tariffs to be going down. >> but both sides are willing to compromise and negotiate and that's a pretty significant deal. >> but it was their initial matching of the ones that he did. >> yeah.

>> even though they really can't -- unless they raise the number they can't really match it anymore. >> they're running out of goods. >> they're running out of goods so it kind of makes sense but they said we're not going to do -- >> but there's all kinds of other things they can do but what's important i think is that both sides seem to be trying to make some sort of effort to say we will try to negotiate. >> they can do other things. >> that's different than what we heard a week ago. >> we can do other things too. there's an internet cable layed down we never said no to one of these things but suddenly security concerns. >> it's already down it's already down. it's 8,000 miles and it's almost like complete. they got it all the way down to faster internet service to hong kong and everything else the financial center and now they're saying we're not so sure i was already thinking that it's supposedly a national security

concern but i could see it being part of the overall -- >> completely. >> and then it's either a security thing or it's a trade thing. it's always together >> i understand it's all together and i understand why you would use them all it's hard to stand on your principles if people can very obviously see you have been mixing them where it can make sense. >> nobody lives in this world where things aren't done that way. >> i always thought of us as being above the fray we do things differently because we're the world leaders. >> but everything is probably on the table when you're trying to. you would put some enforcement language in there too to make it look like you alayed the national security concerns. >> i understand the national security concerns.

>> they're both part of the overall. that's part of what we're trying to accomplish with china anyway is to try to lesson the national security race which are economics. >> yesterday from the obama administration, it is ramping up with good reason and you're going to see more concerns about intellectual property theft, both what's happening internally and what's happening from other countries. >> when we try to separate the economy or markets from national security and then you realize how if we lose ground economically, that's a national security threat as well. it's all wrapped into one, isn't it >> real issues with china because they're not capitalists because they can wake up one morning and say we want to dominate x industry. so there are real issues that have to be overcome and certainly, this latest piece of rhetoric out of china is quite calming to markets and it should

be. >> he's the head of investment strategy and he's going to be with us for awhile too let's tell you what happened overnight in asia. take a quick look at the charts and you'll see the nikkei ended flat and hang seng is up by a third of a percent and then in europe you see active trading already taking place at this hour and you'll see green arrows across the board a lot of the same sort of sentiment. these markets trading after the asian markets closed on the idea that the trade war could be moving toward a point where we're trying to work things out for this week. things can change on a dime. that's good news if that were to happen and also the rest of the globe. an extended trade war between the united states and china. >> treasury yields continue to ceeloer yields yesterday the 10 year at 1.496%.

it fell to 1.905 >> these comments from china came less than a day after the trump administration made the next two rounds of the tariffs we were talking about official a election of 15% tariffs will begin at 12:01:00 a.m. they'll be slapped on. a portion of goods did we decide it was slapped >> yes because you actually slap them on the cargo as it came in. >> that's covering $125 billion of chinese products. that includes smart watches and bluetooth head phones and it will take effect for the remainder of the list and in this case it includes cell phones, laptops, clothes and it's spoken out against the tariffs and including the official from that group later this hour.

>> treasury secretary says that the administration is considering ultra long u.s. bonds. he said the united states would consider taking advantage of long-term borrowing if they were right. the idea of a 50 year or 100 year bond has been considered a treasury for a decade. it was seriously studying that proposal he also said there's no plan to intervene in the currency market to weaken the u.s. dollar at least for now. >> yields, the equity markets and all things investing here on set, head of investment strategy and he's already had some comments. so i'll start with you, the rebound we have seen from the sell offs last week once again has it within striking distance of new highs again if you're an investor, do you

keep what you have and add to it or do you use this opportunity maybe to lighten up some people are derisking because of escalations in the trade front what would you do? >> we're staying put with our allocations. we acknowledge there's quite a bit of risk out there. you mention trade, the yield curve, but as long as the consumer can stay steady that the u.s. economy will stay strong it will be a supportive environment for stocks. >> do you -- >> i was reading about boris johnson and the queen and everything else and this makes it less likely that there's any type of deal maybe there will still be one. maybe it's a way to force the issue but what if there's a no deal brexit on october 31st? do you add in that to what could potentially cause some derisking? >> there's a lot of uncertainty

out there and the tweets are moving the market. the bigger concern adds to the uncertainty. it could be a drag for the u.k. because we're more concerned about what's going on with the tariffs. you saw today how the market moved with just some rhetoric out there that things are improving with the tariffs coming online this sunday the consumer could be effected and you see what's happening on the manufacturing side when the tariffs started back, we seed 15 straight months of declines in the global pmi that's the longest streak in history. now you're seeing economies that have a heavier manufacturing tilt actually have negative gdp numbers. we saw that in germany and so the concern is that the manufacturing sector has been decimated. you have seen the first time that the manufacturing pmi went negative here. and so if this starts up on the

consumer side, the consumer has been the lynch pin for holding up the market. and even though the direct numbers aren't big in terms of our effect on the economy, it's more about how the sentiment is effecting the consumer and are they going to stop spending and are we going to see companies do less hiring and then that translates into less spending for the consumer so that's a concern. that's been out there a long time >> dr. evil. >> okay. i'll take that this morning. >> people dismiss the good retail sales numbers because they said they were kind of before the trade wars really heightened up and tensions really ramped up but we have very, very strong consumer

confidence and that was already for august which reflected some of this so there's a lot of strength out there i think the on tupty is frankly to dial risk up a little bit number one, since the beginning of may when these started up, the s&p is only off one and those are the two pieces that have been the best beneficiary of fed easing cycles so i'd put a little bit more risk on the table. >> you're in charge, aren't you? >> well, we follow indices but i'm in charge of communicating how they all function. >> that's right. people need to do what you say so you're saying, for -- what should i do? am i adding? am i buying? >> you're adding a little bit to the risky side of the equity markets. >> that's not derisking. >> no, i wouldn't derisk in this environment. where would you derisk to?

in the bond markets we have an inverted yield curve which i don't think says that much about the economy because of the qe but you're not being rewarded for risk in the treasury market. even on the bond side i would tilt away from treasuries and toward corporates. the corporate curves are not inverted at all. there's almost 250 basis points. >> do you take advantage of the yield in the s&p now or growth lea leads, if we're setting new highs they're leading the way. >> the yield thing is funny. everybody forgets that 15 years ago we cut the tax rate on dividends. so that sort of long run picture of yields is a little clouded but specifically to your point, i would stay center of the style box. kind of quality plus growth kind of strategies that don't tilt too far away into either corner because value could be a value

trap particularly europe as an example. not only do we have the brexit issues but very weak data out of germany but the extreme growth side could be acceptable if there's any disappointment. >> both sides. >> write down everything that's positive and everything that is negative. >> a lot are negative but there's so many things >> we actually had a payroll tax cut. it could happen. >> but there is no alternative and at this point, we can't see any -- >> interest rates are so slow. where do you put your money. unemployment. >> do you see that the middle class is doing so much better -- supposedly than the top 1%: strong middle class.

>> thank you >> when we return, we have news out of hong kong overnight china bringing new troops and blocking a weekend protest march. plus federal officials rating the home of the president of the united auto workers union. more details next. right now a look at the biggest premarket winners and losers in the dow. devices are like doorways

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just days before protestors had called or planned a march ca calling, a protest calling for democracy, police will ban that march citing safety concerns. >> federal agents from the fbi and irs raided the home of gary jones. he's the president of the united auto workers union agents began searching the property yesterday around 8:30 a.m. and continued throughout the day it's part of a multiyear corruption probe of the top ranks that already lead to convictions of five people affiliated with the uaw and three executives from christler. the search warrants weren't necessary and it has cooperated and will continue to cooperate with the investigation tesla says it's launching insurance for its cars in california

the company says the service is designed to give drivers lower rates because of safety features on its electric cars tesla said it's rates were as much as 20% lower than rivals but it did not provide comparisons. ceo elon musk said insurance rates should plummet but tesla's cars typically rank among the most expensive vehicles to ensure because of the high repair costs for components and equipment tesla plans to extend the insurance offering to other states in the future they come in and really undercut their rivals talking about solarcity. >> exactly. >> look, i would just say they have findings behind them. if they charge you higher rates -- >> geico is pretty good at figuring out. >> a lot of these companies.

there's not usually a cheaper place you can get a 20% insurance one. if you offer much lower rates as an insurance company, big catastrophe comes and other things happen you can get washed out. i don't know that -- >> right. >> they do so much at that company in terms of what they're trying to get their arms around. this is another incredibly complex industry. >> thinking back on the story i just heard about china they say we're going to cancel this because of safety concerns because many of you might get hurt rnlt th aren't they sayingthis we're cancelling this -- >> if you see the peaceful nature of the protest. in one case they were peacefully moved out of the way and came through. >> we're worried that you might get hurt bad if you -- isn't

that >> yeah. >> that's the way it works over there. that's the whole point. coming up, big changes in the retail world there are some we'll talk to the ceo behind the move next.

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try new febreze one. the latest deal shaking things up between hudson's bay, lord and taylor and le tote. they agreed to buy the iconic

department store for $100 million. joining us to talk about it is the co founder and ceo of l le tote. >> thanks for having me. >> you're making a bold move moving into an area where most people are trying to figure out a way to get out what do you see in terms of value and why do you think you can make it work >> we're going where the customers are going. we're going where the customers are asking us to go. our customers have been asking us for pop up locations for stores where they could come, touch, feel. people are tactile they're not single channel shoppers they want to go out into the real world and touch and feel and make the decision to purchase potentially online. >> who are your customers that have asking for a mall based retailer. >> i wouldn't call it a mall based retailer what they're saying is we want to be able to do more things than just rent from you online we want to be able to touch-feel these products and that's why we wanted to do more stores part of why we made this deal

with lord and taylor was because we said this gives us ability to get to scale fast. there's a big overlap with our customer base and their customer base it gives our customers access to a lot more brands and a lot more variety than we would be able to get otherwise. >> that's why i ask though if there's a lot of overlap between their customer and yours who is your customer? >> our customer 28 to 50-year-old professional females living in major metros or suburban areas close to major metros a big portion of our customer base is in the northeast and new york state is our single largest concentration of customers which is where, you know, lord and taylor has a really strong foothold so this gives our customers specifically in the northeast access to stores and being able to do things beyond just renting online.

>> i keep coming back to the mall and i understand your need to get stores out there and have your customers touch and feel things but then i look at somebody like forever 21 which was a pretty hot retailer and is now looking at bankruptcy because mall traffic dropped so significantly. how do you fight that trend and make sure that people do show up at your stores in the mall >> we're thinking about the retailer of the future and saying what does that look like? that doesn't look like 150,000 square feet stores across the us they're going to be much more focused with a much more focused footprint. today we're going to have about 120,000 square feet stores on average. >> 38. >> 38. and going forward the plan is to roll out 100 stores across the u.s. but not to exceed 25,000 square feet. so they're going to be much more focused in the selections, much more personalized to each

location. >> why not just start new and put your stores in the premiere locations and premiere malls because lord and taylor, i have been to the stores, i find things that i like in there but it's not in the top level malls always some of the ones i think of are not the malls that are thriving now. you have to be the very top tier malls to be able to draw in the traffic and get people coming through. >> we talked about doing this ourselves and the time it would take for us to get to the scale, to get the learnings would take longer we like the brand. we think it's really iconic so what we are trying to do is merge tradition with technology. it's the oldest mall chain retailer chain in the u.s. it has a lot of brand awareness that we think will help our traditional rental business and

we think marrying tradition with technology -- >> why is hudson's bay willing to let this go they haven't been there for all that long and they have put resources into it too. >> their focus has always been on saks and off fifth and continues to be on luxury as a segment. so this was i would say the stepchild of that hudson bay company. we're going to say we're going to revitalize it and inject technology a lot of the pools that we built for our business. >> does low debt financing, does low interest rates have anything to do with your decision to make some of these things >> absolutely. the market is great for debt and rates are affordable and we thought it made a ton of sense to finance with this debt. >> thank you for coming in we appreciate your time today. we hope you'll come back and give us updates on how it's going. >> thanks for having me.

>> appreciate it. >> retail companies make up today's biggest movers stocks to watch is next. and later quarterly results from best buy here's a look at yesterday's s&p 500 winners and losers ♪ as a principal i can tell you this. when one student gets left behind, we all get left behind. this is a problem that affects each and every one of us. together with ibm, we created a whole new kind of school called p-tech. within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. you know what's going up today? my poster. today, there are more than a hundred thousand p-tech students around the world. it's a game changer.

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welcome back, you're watching squawk box live from the nasdaq market site in times square. >> good morning, everybody the futures making a pretty dramatic move higher around 3:00 a.m. eastern time today this came just after we heard newcomb menl newco new comments from the chinese commerce ministry. china will hold off on trade retaliation as beijing is rap rapidly running out of u.s. imports that could be taxed. this is a sign that you are seeing the two sides coming back together and trying to hash out a deal we'll see if that actually

happens but now you had both president trump and chinese official making comments that it sounds like they'll come back to the table and maybe deescalating things at least a little bit s&p futures up by 29 and the nasdaq up by 101. >> we are tracking this storm, dorian as it gains strength in the caribbean. the virgin islands were the hardest hit as dorian largely passed puerto rico it's expected to strengthen to a category 3 or higher by the time it makes landfall in florida florida's governor declared a state of emergency and urged residents on the east coast to monitor the storm closely. we have at least 7 days of supplies to have that ready. dorian is expected to make landfall late sunday or early monday. >> right now it's time for the executive edge and a few stocks to watch shares are sharply higher. they reported a smaller than expected loss for the fourth

quarter. they also picked up big customers and that helped them with things too. that stock is up by 18% this morning. better than expected second quarter revenue but shares are down as investors were disappointed after the company reiterated it's earnings outlook for the year that stock is now off by 8%. >> williams-sonoma with strong second quarter earnings. stocks down a day as same store sales fell more than 1% and guess is up sharply this morning. the retailer, second quarter results beat estimates and raised it's profit forecast for the entire year. the company expects minimal impacts for further tariffs between the u.s. and china and it's been able to mitigate the risks in talks with it's vendors. and shares of ollie's bargain

outlet i haven't been to an ollie's. >> i've never seen one around here. >> retailers earnings missed estimates and ceo said it was a tough quarter citing the rapid opening of new stores. they opened twice as many stores including taking over 13 former toys "r" us locations. sources are telling cnbc that apparel retailer forever 21 is considering filing for bankruptcy it's efforts to restructure it's debt have run dry. it has a particularly large and expensive real estate footprint with 815 stores globally. >> a lot of them are big stores too. inside malls >> not a big shopper. >> i would hope not. it's for teen girls. i'd be a little concerned if you told me you were spending a lot

of time in there. >> not advisable. >> no. >> coming up, luxury travel, robert frank joins us with a new subscription service that allows members to go around the world for a flat rate. that story, next you're watching squawk box on cnbc

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welcome back u.s. equity futures at this hour up over 250 points now 280 points nasdaq has a triple digit gain and the s&p is indicated up almost 30 points the subscription economy is changing everything from shaving

to movies. now it's checking in at the hotel. robert frank joins us with that story. good morning. >> good morning, it's being billed as endless travel for $2,500 a month the denver based high end travel company has launched a product that allows users to book hotels, resorts and luxury homes for a one time monthly subscription the base price is $2,500 a month. you can stay in luxury hotels around the world it will peninsula in paris or the ritz in london now you just pay $2,500 a month and you get no nightly rates, no fees, no taxes that you have to pay on top of that the only catch is that you have to wait one week after checking out from one hotel to book the next one but for 5,000 a month you can hold two reservations at a time. you can stay in hotels the entire month every single night, you can add another person on

your pass so friends and family can also book. so how do they make money? well, they said they have special technology that allows them to get empty rooms at these top four and five star hotels for a low cost no matter how much a member pays for their pass, they say they're still profitable. >> they figured out a mechanism to be able to communicate with the hotels, purchase inventory at rates that are substantially below what you'd be able to get on your own. >> so far they have 500 pass holders that signed up since they launched a few weeks ago. the core business is renting luxury homes and estates they have 15,000 members on that business so it's a question of how often this gets used will somebody use it enough that it still makes sense for the company?

but they have usually 70% occupancy. they never want to discount them publicly. >> right >> so this is as you're getting a very small number of them but if that were to pick up steam the hotels might get concerned. >> this is allowing them to discount the rooms because you never see a discount price for the rooms. you're getting it as part of the pass price and therefore the rooms, they can sell these rooms and get some money for them but they never have to publish that discounted price >> if it got bigger and bigger and bigger they might be more concerned. >> and there might not be availability right now you go on the site and type in new york there's lots available but if a lot of people come in and do this. >> it could be a victim of its own success. >> exactly we'll see if it works.

>> his properties are everywhere right? >> yeah. they have 350 luxury ski resorts, mediterranean resorts and the average value of their home is $4 million that's the average they have some places that are $20 million. >> there's a castle in france i think. >> that's expensive. that's like 20 grand to join but they realize there's this other market where you have all of these empty rooms and empty estates. you can rent their houses through this too they're the first people to do it so it's an experiment. >> we need someone to try it let me guess it would be you. >> i haven't thought of it but yeah a month on the road in luxury residences i'll sign up for that. >> i know that you would i know you >> it's bizarre but i saw somewhere about the most expensive house in the country >> i was reading about it and i said i'm sure frank has been there.

i think about you. it's very strange that i associate you with unbelievable wealth now. >> it's not contagious it doesn't rub off on anyone. >> not necessarily. >> thank you. >> thank you guys. >> when we come back, more than 160 companies signed a letter yesterday urging the president to postpone the september 1st tariffs saying action is needed to protect the holiday season. we'll talk to the group's vice president next as we head to a break, let's take a quick check of what's happening in the european markets. they're up across the board as well again probably on the m comenset of the chinese minister talking about how maybe we come back to the table and maybe they hold off on the tariff there is that would be good news for the rest of the world if a trade war, an extended trade war could be put off right now the biggest gainer is the cac in france. it's up 1.5% ♪

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welcome back, everyone the trump administration making the next two rounds of china tariffs official with the first part kicking in this weekend the escalation meeting with resistant from business groups kayla joins us with more on that front. >> good morning. in a letter sent yesterday 161 industry associations ranging from the blue chip u.s. china business counsel to those representing more niche exports like arbys and lobster criticize the white house's lack of warning on these tariffs they say leaving china is unrealistic and there will still be an economic impact even with the delay of some of the tariffs. the coalition is called americans for free trade and it notes the $112 million in goods that are going to be hit with new tariffs this weekend include 90% of apparel and half of all footwear u.s. trade representative has submitted a filing with the federal register to make this

15% tariff effective for goods that leave china on september 1st. that is really the type of document you need in place to ensure they'll be able to be rolled out in a matter of days business groups are hoping that the white house reverses course on reverses course on this. they are not showing backing down, even as the ministry in commerce says talks of these communications behind the scenes continues. >> kayla, that's what i have been wondering, this commentary we got this morning, if that would leave the white house to ratchet down some of these tariffs coming in. any expectation surface anything you've heard on that front >> we know there has always been communications happening behind the scenes, what i'm focused on is this call between president trump and president xi happens, president trump was on the tarmac and he referenced bedminster weeks ago we haven't heard anything about this, whether it could or took place.

i know the free traders in the house were worried about if the call would take place, that would be something to cause the president to change his mind here legally, you need about 48 hours to put one of these documents in place in the federal register that actually tells companies, what will happen on that effective date it appears because the fdr has put that in the register for this week. as they are going forward with this first crunch on september 1st. business groups, we should note, also raised concerns back in may. tariffs went into effect they were raised rather on june 1st. so they want to put themselves on the record here, it's unclear whether this, in fact, would have any impact. >> all right, kayla, thank you very much. for more on u.s.-china trade tensions, welcome jake parker. he is vice president of china operations with the u.s. business council he is one of the 161 associations or this is one of the 161 associations asking the president to postpone the tariffs. jay, thanks for bigger hook,

what does this mean if these tariffs go into effect in two days time? >> so the biggest impact will be on the american consumer much of this cost will be passed on our companies are concerned about the retailiatary tariffs >> that makes them more competitive and makes upputs from the united states more costly these are the types of concerns we are looking at now. >> it sounded as if there was a little bit of outreach from the chinese ministry today potentially calming the waters that's why we were looking at the futures up about 280 points right now. do you put any faith in that do you think that this is something that could be an end treaty >> i think there is no alternative to returning to the negotiating table and the chinese government certainly sees that, so as we look forward to september and the potential for a new meeting, i think our

expectation is that the chinese will come, talks will happen and that hopefully, we get these things back on a more constructive and positive trajectory. >> so, jay, you i don't know whether you view it this way, but do you think the president gets emboldened that every time we get an initial sell-off in the stockmarket from the new announcement of tariffs, it seems like within a couple of weeks, we're back to challenging the old highs in the stockmarkets, so the worst case scenario that's constantly being put forth by lobbying organizations for retailers, or your group or womanever, within it doesn't come to pass, the worst case scenario, do you think that's because there is always the hope that the tariffs aren't implemented and that the markets thinking they're going to be pulled back or do you think the mark rallies in the face of this, because maybe long term it's a good thing i can't, would you prefer the market was going down so it emboldens your case?

>> we certainly would not prefer the markets to be going down however, i would note the tariffs implemented to date have been on b-to-b products. the products we are looking at both in september and december, they will have a more direct impact on american consumer. so we'll have to see what effect that has on tear pocketbooks and how that impacts their views of the president and the administration's trade policy. but our expectation is that they will begin to feel those costs going forward. >> read between the lines with trump. there was a time when he actually called it the amount of the market, the market had gone up he thought he had some breathing room to deal with some of these other issues. >> it doesn't feel quite as much. >> i'm thinking he gets emboldened, last week, we went with the 600 point day, right? >>f 00 points down on friday >> it reopened on monday morning. >> now we're back up from there. until he hasn't said the tariffs aren't going to go in.

so i think that might embolden him. we keep going back to new highs. even people at this network, every time we go down a thousand they tell you the market cap loss and then they slowly see it go back too even >> but the president is watching, measures like what he sees in the markets. he's also watching the economy jacob, what do you hear from your members when will they actually raise prices on consumers? when will this have a boomerang effect next week, next month, the owned of this year >> it's very complicated to say. first of all, our companies have had a significant amount of inventory that's brought into the united states, in expectation of these tariffs that's certainly going to offset the costs. they're going to offset the costs with their suppliers, they'll take a percent am of that they're taking a hit on their margins. the companies don't want to pass it on to consumers, to the extent they can, they ought not

to the reality is some of that cost is probably going to need to be passed on. whether that happens after christmas or before, much is going to depend on how these tariffs are implemented and how our companies are able to manage those costs. >> we heard walmart is one of the companies on the board as one of your members. we heard from walmart. they think they will be able to navigate the better than others. other big companies said the same, like target can be a little more nimble and nobody wants to raise prices and suffer if they lose customers to competitors. >> so i'm not going to talk a specific company i will note there is a difference between a multi-category retailer and a single category retailer i heard from some in the single category space, it's hard to shift the costs and absorb them. as a result this is an extinction level event for some retailers. it's true on the multi-category side there will be more flexible we should be worried about those retail verse who have

potentially go out of business or pass it onto the consumers. >> maybe the bond market is the canary in the coal mine. maybe we should look about them sniffing out the tariffs. >> slow down. >> we know how quickly equity markets can catch up with things i don't know if i'd be feeling too emboldened about the stockmarket. the bond market seems like it's sniffing something >> yesterday we brushed off lower yields. >> something weird. >> we don't care until we do jacob, thank you for your time good to see you. >> thank you coming up, see futures junk on positive trade talk comments. -- futures jumping on positive trade talk comments. we will be talking to an all around good guy, a handsome man as well, steve gssrao. stay tuned you are watching "squawk box" on cnbc [ music playing what about him?

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stock futures surging after the chinese commerce minister said that china opposes the escalation of a trade war and hopes the u.s. will show sincerity and concrete action. we will break down the latest comments what they mean and what you should be doing with your money straight ahead best buy, with ebreak down the quarterly results. and the fed in focus will it be a september to remember what to expect from the next meeting in the odds of a

recession. we will report the second hour of "squawk box" begins right now. ♪ >> announcer: live from the beating heart of business, new york this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc i'm becky quick along with joe kerr none. sharing his marks much more is steve grasso, the director of institutional sales and a "fast money" trader. good to see you. >> good to see you guys. >> you ready to go >> always a pleasure i got to sleep in while you guys work now i'm ready. >> not fair. not fair jealous. >> thursday, thursday, i'm happy it's thursday, but it's been four straight days it takes a little of a toll. it does. i have to go without a date. i have to. >> that sounds sorry horrible best buy, i have to $1.08 best

buy the adjusted number and 99 cents is where the crete was i think that would be a positive data point but maybe there is some other stuff in here that's not -- domestic comp stores online sales up 17% so they're getting it done there. third quarter revenue forecast 9.65 to 9.75 that's a fairly important quarter. 9.-- that's a revenue number it makes no sense. >> 9.789 is where the treat is right now. >> butty a why are they saying ? this is the third quarter. fiscal second quarter. >> second quarter. >> raises the year view to 560 to 575 >> street is 569. >> so that's not really above where we were. narrows the fiscal year revenue

view to 43.1 to 43.6 and it's at 43.6 is where the street is right now. narrows the comp sales growth view to.7 to 1.3 from .5 to 2.5. so a lot of these things, they're not really raising anything >> you know what, probably not surprising >> caution they don't know. >> massive impact on a company like this. >> what, they're 9 cents above this quarter right? but and the next quarter is not -- okay, here's what are you supposed to do a 1.02 in the first quarter. 94 in the third quarter. 280 in the fourth quarter. so the christmas quarter out of the 5.69 only half is in one quarter. >> that updated giants, the cfo says factors in the forming. first of all, the recent announcements on tariffs and goods from china including the

20% for list three and 15% for list 4 items number two, they're better-than-expected first half earning, then number 3, general uncertainty related to overall customer buying behavior in the back half of the year. they don't know what's going to happen, the tariffs could have a significant impact on prices they have to charge their commerce or if they don't raise the prices, they're looking at potentially hurting the margins. so a lot of unknowns here. i can understand why a best buy would say this or the street would react this way it's good numbers. the guidance, they can't see anything, the streets, okay. we'll wait and see, just like they will. >> good deal, you also go with companies that can figure it out. >> walmart, target costco, tjx, roth stores. >> all do sourcing from one place. >> and the ones that benefit from the full forward of all of the warehousing that everyone's done >> you know, this is a particularly important point when you talk about a target or a walmart and the huge

electronics offering they that have if they are hit with higher targets, they may be able to put off some of the price increases by diversifying, keeping prices higher at another place or getting other sourcing so that it offsets some of that if you are alone, electronics retailer, you will be a little more. >> susceptible and more centralized to that you don't have a time where you can spread it out a little bit more exactly. >> so i can understand good numbers from best buy i can understand the street's reaction they will wait and see too. >> who is left for dead a couple times. >> an incredible term. >> all the way back in the high 60s. >> remember they used to say, we show rooming for amazon. we put it on, you went there you bought you are not going to buy those big thing or electronic purchases from amazon. you want to get in, see it, once you are there, you actually buy it from them. >> the geek squad, too. >> yes, exactly. >> i agree with you. >> not everyone is ready to just

take all this stuff and put it together and hook up all the roku and wifi. i need help. i need so much. >> it's a lot easier than the way it used to be. but i totally understand that. >> what kind of wifi do you got if your house? >> what do you mean? there is different kind of wifi? >> a pal. >> i need a geek skwauk squad. i have the wifi defender >> it's not weak in center areas? it goes out to the pool house? >> out to the poll house not out to the carriage house, which is two different things. >> that's why you need what i'm talking about. >> i need a geek squad. >> you need help, i won't argue with that. >> investor sentiment is getting a boost they will hold off a spokesman was quoted saying the escalation of the trade war won't benefit anyone the two sides are planning to meet in september. that's why we seen the futures up so significantly.

you seen a big jump in futures as soon as that news was announced. we have been up for a better than 250 points since. dollar general earned $1.74 a share beating the consensus estimate comp store sales rose 4%, better than the 2.4% analysts had been predicting in that stock also, 43% of u.s. households surveyed by ubs say they plan to describe to the disney plus streaming service. disney, itself, was only projecting 20 to 30% by 2024 good news for disney, bad news, a lot of those people say they plan to cut another pay tv service. >> how do you know when the wifi goes out does the alarm go off? >> google. >> how many kids you got >> four. >> you got four. >> instant notification. >> my wifi goes out. >> that's the alarm. they have no idea what to do >> i need air. it's like the oxygen in the

room, it's like they look at me like the way wifi and it's my, my fault the way sfie not working let me just check. they panic >> what do you have for a cell phone? so whoever you have for your cell phone plan should cover now everything is unlimited. so there is not a lot of they do slow you don't a bit >> you can turn it off >> you either go with, you don't really feed the wifi all the time anymore the way you used to you had to pay for all the information that was coming down >> in the house -- >> so if the kid are on the cell phone or streaming >> they're not on the cell phone. >> you have different things, a laptop. >> i don't know. >> they could have a plan. if they don't know no. >> if it's fought cellular, it's a problem. >> i need things everywhere and one button to turn it back on because there are storms constantly in new jersey you get pulse, and it turns off. >> humidity. >> i know instantaneously when

the wifi is down i do it's fought a full minute. anyway futures are up, higher on positive comments on coin. monica dicenzo, we will find out if her wifi will go and a senior portfolio morgan stanley management our guest host steve grasso is with us. we had mike wilson on earlier this week at the same firm with different viewpoints to some extent, although, you are a little bit i think hesitant about the near term but above 3,000 by the tend of the year which is in stark contrast to where he is. >> give the guy credit, you know, it's, the market's been unfulfilling to the bulls and the bears. that's been right. but the inevitable outcome for a market that's gone no were in a year-and-a-half. number one is no one made money

if stocks for a year-and-a-half. we had $250 billion come out of etfs the percentage of bulls are very low. inevitably the market breaks to the upside in the last seven years the market has been within 5% of an all time high and hasn't been anywhere every time it breaks to the upside it's the version of the means. the markets go up. unfortunately, people are looking backwards, i think inevitably the mark will break to the upside. >> you said by the end of -- >> the mark rewards rated change right. we had flat earnings this year well, next year, we're going to have positiveings, year over year the market anticipates that i think it will anticipate in the fourth quarter always it rallies before a presidential election. >> not always. >> in the last couple years, we had the yield curve pretty

negative but the dividend yield on the stockmarket is now higher than the 30 year. pretty higher. the last time that happened was march of '09 how much discussion the about the yield curve? >> bernie sanders has a depe ten-point lead would you believe bernie has a ten-point lead i wouldn't buy it. if he has a ten-point lead, it looked solid, the market is not going to rally >> keep in mind, keep in mind, the number you have to fix it a on is the -- fix8th 8th -- fixe on, the numbers, that's the number >> let's have a big trade war leading into it. >> i think you will have a trade using at some point. >> what do you think >> it will be very boring for you, i agree i don't think you worry about bernie's ten-point lead until next year. i think there is a lot of momentum, central banks will be accommodative. earnings look okay

>> that brings us higher into your end next year, we worry about whether bernie is leading or not. >> we keep talk object about tina, there is no alternative when you look at this low yield. maybe that's the party before an actual recession that could be signaled by these things, inverted yield curves, it's usually 18, 20, 22 >> it's a risk because it pushes people into things they wouldn't normally buy they're searching for yields if you are buying equities at a reasonable valuation i'm actually okay with that. the yielding is a big question everyone asks is what do you do with your cash the u.s. looks so much more attractive than any other places. >> what would be a valuation that concerns you, what is okay what is stretched? >> modest growth north of 19 times. at this level, we're right about average on 16 or 17. so go on >> you know what's interesting, if the fed were to cut rates they don't want to cut rates, you have a president that wants the economy to run high.

if they were to cut rates next year or this year and it helps next year, the economy gets hot next year, you have a china trade war, then you have a recession 2021 and the stockmarket, the yield curve normally predicts two-and-a-half, two years. >> that would be right in line with why the yield curve is inverting right now. if we're going to have a recession tomorrow, the yield curve should have inverted a couple years ago >> this will be something to behold over the next year. i think it matters maybe not yet. maybe are you right. early on, i think president obama he was down ten points, too. some generic - >> it's still very early to make a call where we'll end up. >> it's fraught. this guy in the white house he obviously is a bit of a gambler. because we're not that far from the election to be taking on china and some of the other, don't you think? >> well, he's been the first person to ever do this on both sides, the republicans and the

democratic side. he's the first person to try to pull these levers. we have been complaining about how unfair it has been for years, for decades and no one has had the ability to do anything and he's actually trying something so that's the tail wind for trump. all those he's gotten a lot of pushback, no one else has done anything or made progress. >> how long does it take to do something that in a four-year term it seems like a long time, it's going quickly and -- >> you know what i'm tired of hearing is china can wait him out. chain with wait him out. well, apple is pulling out or looking at pulling out 20% have you now google looking at pulling out. have you all the other retailers looking at pulling out or sourcing somewhere else. do you think china wants to lose that do you think that's ever coming back to 100% china it's not china doesn't want to lose you know what's off the board? 202005, coin, 202005 they have a demographic problem. now they have a trump problem. now they don't want to lose. they are more desperate than the

united states to have a deal done so i'm so tired of hearing that false statement that they can wait trump out they want to win and they're losing >> the other day, i looked upper cap that income in china because it's, you saw bernie i think yesterday said that no one's done more to alleviate poverty than china anyway, $16,000 is the average per capita. >> crazy. >> that's not horrible compared to a lot of parts of the world but we're 50 or 60 whatever it is here. so i mean, if they want to keep it going, they've got a dog in this fight, too. >> look at the second tier and third tier cities in china the numbers that you are talking about aren't even there. >> right >> these are -- exactly, they're catastrophically low >> they got to keep it moving or people will want more. don't get defensive about mike wilson >> he's a friend of mine.

>> he is we're cubs fans, the reds are killing us >> i saw the cubs took it to the, who'd they take it to yesterday, the mets. >> 10-1 gave up six straight runs >> they kept it going. mets lost five straight. did i not say they will get you where you are optimistic. >> get you excited >> gets you excited and right. >> chop the right. >> he's got 2400 worst case. 27, you don't want to hear, 330 if earnings hold up. >> like i said i think the market is going to break above 3,000. >> just not now. okay that's fair. monica, thank you. andrew, thank you. steven's with us for the rest of the hour i like having you here. >> i like being here it's nice. >> why don't you stay for an hour >> i got trade >> money never sleeps, pal. >> no, it doesn't. >> money doesn't sleep >> it's not everything

>> when we come back, we will break down best buy's results, later, the fed in focus. we will speak with fed president dennis lockhart and the yield curve. quk x"ilbeig bk. w?w?uhi?só'ñó devices are like doorways

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aflac trivia question. how many viewers tuned into the marriage of prince charles and lady diana in 1981 the answer nearly 1 billion. >> 500 million, i was off by a factor of 500 million. the wires beating on the bottom line, raising the full year outlook forecast in terms of what it was giving street. the street was already there but it did miss on the top line, seeing comp store sales fall short of estimates >> that stock is down by over 4% joining us, a retail analyst research and this is a really interesting case scenario, because they had strong nubs for the quarter. they're not entirely sure what they will be seeing for the full year, largely because of tariffs

and what that could potentially mean for consumers what do you do with the stock? >> i think the challenges with best buy are many of the same challenges that are overall facing the retail industry there are certainly the issues related to tariffs, but you can't overlook all of the other challenges that the company has as well. there is commoditification of many of their core products, so when you see the strength in numbers from retailers like walmart and target, their consumer electronic sections are absolutely bolstering that and that is going to naturally adversely affect best buy. have you the continued growth of amazon, where electronics are a significant part of what consumers buy on that site so there are a lot of pressures that are affecting best buy and the competitive landscape is not the least of the issues in addition to these governmental issues as well >> let's talk about that the competitive landscape, what we've seen from walmart, target and others, really ramping up

their electronics department, that's nothing new and that seems to be something that best buy with its new management, this team and the previous team, they really got near arms around that and found ways to contend by doing things like have the geek squad how much of that is because walmart and target will offset potential tariffs because they offer more than electronics. >> definitely, walmart and target are multi--category, multi--brand so that's a huge factor that affects them they can have a much more diverse basket of goods. and even when they do offer these commodities, they can offset the margins and sectors like soft goods that helps preserve their business. whereas, you are absolutely right. what best buy has leaned into and where their strength was even in this past quarter were in categories like appliances, which are not really well suited to the ecommerce landscape

have you services, have you accessories, which are high margin, things like head phones. so those are definitely things that have helped and supported best buy but the question is, you know, how much more can they lean into things like services and installations and is there more head room there? and i would argue that, that, those are sectors that can be somewhat challenged. they've also had lots of stores within stores. so they've really changed a lot of landscape how they're owning inventory. that's definitely a big deal other than apple and samsung, there is not a huge universe of these brands that are able to even afford a very lucrative store within a store just set up >> so, what does the end game look like, though, now with trade, it's massed a lot of the other issues that we used to be talking about. what is best buy going to look like what's the square footage going to look like

do they shrink the stores completely what does it look like two, three years from now >> to the degree that they can shrink, they're already shrinking. they're releasing space, they're altering the footprint so that maybe more of it is about warehousing or storing goods so to the degree that that is possible, they're doing that, but the challenge is that the company is in decades long leases so that is somewhat limited. so where your levers are is in making headcount more efficient. it's in, changing your inventory mix and trying to integrate as much square footage that store within store or allocating more square footage to things like services or conference rooms, where you can do education or other types of business opportunities. it is leveraging more of the real estate that you have towards media and making money off of what they have now through their media network. so there are these alternative

ways that they will continue to try to lean into the challenge is that i mean this is, this is a company woes revenue peaked in 2012 i think it's really important to recognize that they still haven't got back to the 2012 figure so it is about making the most of what you have >> so thank you for your time. >> thanks. all right, coming up, the new ceo of professional services from ey joins us to discuss the global economy and as we head to break, take a look at u.s. equity futures which are solidly higher today it's not quite the highs, 266 on the dow. we'll be right back.

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welcome to "squawk box." how are the nation's ceos feeling about the chance of a recession? we will speak to a new ceo of ey what he is hearing from clients around the globe plus the great rate debate what should the fed do in

september? we will ask atlanta president dennis lockhart, a little more heated, just what we heard in the last couple days on the political perspective, too. in the next hour, tariffs expected to go into effect september 1st. one big tech name could be affected apple. "squawk box" will be right back.

welcome back, everybody. economic warning signs could if indicating a global slow down. executives across industries don't seem to be alarmed within the last week-and-a-half, cnbc has asked multiple ceos whether they're concerned about a recession. >> we have not seen signs of you know in the u.s. of anything related to a slowdown, but we do know these things go in cycles but right now, we're firing on all cylinders, consumers seem to be going well. >> overall, our marks are faring pretty well. overseas we are seeing, i don't see this major recession coming. so i'm not i guess i'm not pessimistic about 2020. >> the under lying consumer is doing well and making more money. they're employed, more importantly, they're spending more money. >> our next guest has a pulse on

the finger of execs around the globe. we are joined by ey global chairman and ceo carmine, you probably have a better idea than just about anybody we talk to because you talk to so million ceos, what do you think whether we're facing a recession here in the united states? >> actually, i agrees with ceos you had on camera. we had a lot of conversation with our clients, cfos, really the united states economy is doing very well. it continues to do well. consumer driven. you know, obviously, geopolitical events are slowing some things down, but there is a lot of confidence and there is a lot of capital you know, companies are looking to see what they need to do for the future a lot of this surrounds technology a lot is around mna activity, our capital confidence barometer, 60% still say today that they're going to do mna

transaction in the next 12 months >> how come we haven't seen more in terms of capital expend showe cures -- expenditures? >> what is going on in the world is causing some uncertainty, but for our business, for example, everything that we're dock, sometimes when a recession is coming, you start hearing, well, that project's on hold we're going to put things on hold we are not hearing that. there is a lot of transformation going on a lot of technology. >> that continues. >> how far in advance would you start to hear things like that is that an indicator six months ahead of time, 12 months -- >> i would say six months. >> you haven't heard any of those issues today >> no. >> when you talk about things around the globe potentially slowing down, are you talking trade war? >> trade war, brexit a lot of uncertainty, trade war is number one. >> uncertainty around the world, a slow down around the globe we may be feeling pretty good

here around the united states, what do you think that happens and if that gets imported? >> when we look asia-pac except for the trade war, hong kong, china, so forth, things are moving i mean our business if asia pac is going 14, 15% >> really. >> absolutely. a lot going on the transactions. a lot going on with technology a lot going on in terms of companies really getting themselves ready for the future. >> why do you think you hear from ceos and cfos when it comes to capital, they have plans but it's for mna instead of capital expenditures >> i think right now there is pressure for everyone to grow. you either grow or granically, you have to invest in technology so you know i think most cfos and ceos would say they're looking to invest in technology. right now most company is going to the cloud you know, it's a big business for us we're in partnerships with

people like microsoft and so forth in terms of getting companies to the cloud we're going to be 80 percent of our business going forward is going to be in the cloud we go audits around the world. our audit tool canvass, that's being migrated for the cloud you might say, does that make it more efficient and so forth? it enables us to do innovation around that technology to put ai into things and so forth. other companies are exactly the same way. >> what will you do with ai? what kind of data processing do you need what will you learn from it? >> for us, what we're doing with ai even today is we're supplementing what our people do and what we want to do is really take a lot of the lower level work outside, you know, and have it being done by technology and not by people. >> what do you mean lower level, data entry type stuff? >> data entry,checking thinking, so forth, reading things, for example, we're using ai to look at lease contracts, so when we audit something, we

do projects and so forth, a lease contract is this big and many large companies have hundreds, thousands of them. we're using ai to read through the document to look at particular parameters and that will tell you how to account for a lease, a capital lease and operating lease by certain parameters >> ai is good at that right now? it can read through a document and pick it snout. >> yes >> how much do you really see, you touched on it before, as a percentage of clients you speak with that are starting to look around china and question you and say, okay, look, we want other alternatives >> that's a great question >> that is happening companies are looking around china today and they have been looking at it, even before all this started it's project cam risk management you know, they're looking at supply chains. there is no doubt supply chains have been moving out of china, vietnam is what everyone talks

about. but if you really look at it and you are looking at long term and long-term risks for a company, you can't have all your supply chain in china and you know it took this maybe to spur companies to look at this, but they're doing it absolutely seeing it. >> what's the new, the next vietnam, if vietnam is the next china and everybody is trying to get there. we hear how difficult it can be there, first movers have already filled up a lot of factories so what's next >> i this allot of southeast asia, there is still room in southeast asia, philippines, there is places like that, eastern europe we're doing a lot in eastern europe and poland, for example, it's got great labor very smart people that are really good. so there are pockets in the world, maybe latin america, where more of this can be done >> in terms of the tariffs, very immediately, we are looking at tariffs potentially being put on more goods and higher tariffs starting if two days

what will that mean? what have your clients kind of laid out as contingency plans? >> so our clients, they all want this to go away, obviously, but they do have plans, supply chains is one piece of it. they are looking in terms of, you know, their consumer, what they need to sell to but the short-term, the short-term reaction, you know, they're not as concerned about they are concerned about long term >> carmine, this is kind of a weird question, you say moving, looking down the road, you will be 80% in the cloud in terms of your own business, how much are you in the cloud right now what is it 60%? >> no, no, probably 30, 40%. >> okay. so the ramp-up we have seen in cloud is only with a lot of companies still having a relatively small portion of their business in the cloud. you expect that ramp up to continue quite some time to come >> absolutely, absolutely. that's why the cloud providers and the big three, but there are others that are kind of coming in, i mean, you know, that's

going to just continue it's really where everyone needs to go. and i know their concerns, you get the question about security and security around the cloud, but you know, technologies that are being built today, cloud technologies are mar secure than old technologies, where you have to build a fence around it and so forth when when talk to clients about security and cyber security right now, one of the biggest is an attack from within. because that's really right now one of the dangers >> from an employee from a vendor, from someone who is inside your parameters today so that's something that a lot of companies are worried about, a lot of companies are working on this gets into training employees. this gets into you know making sure are you looking at your employees, who they are, and so forth. >> carmine, thank you for coming in it's so great to get a thorough overview with companies around the globe. will you do us a favor if you start to see companies saying, hey, we will hold off,

not invest in these things, you see six months ahead of a recession, will you come back and tell us? >> thank you for having many e it's great. coming up, the fed under fire all over the place, after the symposium at jackson hole, now a yield curve that's signaling a recession. what's next for that body? it could be a september to remember former atlanta fed president dennis lockhart will join us and check out the futures strong this morning the dow up more than 265ois, pnt nasdaq up almost 100 we'll be right back. tv just keeps getting better.

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welcome back to "squawk box. the computers are coming for all of us, at least that's according to elon musk the tesla ceo sat down with ali baba chairman overnight at the world artificial conference in shanghai they stayed clear of some hot button issues like the trade war but dug deep into their vision for ai >> the first thing you should see we are very down and we can definitely make things smarter than ourselves there didn't used to be humans, right. so then our earliest civilization was very primitive. we didn't have any technology, really we were like running around trying not to get eaten, or trying to survive a winter now we have like heating and food, this is all if you stuff so, you know, things obviously

have gotten a way more smarter than the past. way smarter. so that's going to continue. we are not the last step in evolution. >> musk emphasized the computers will surpass us, much more quickly than we actually realize at this point. the federal reserve often finds itself in an economic box. it now finds itself in a political one. our senior economics reporter steve liesman is back. he has more on this by the way, a great lineup from jackson hole. >> thanks very much. we have some great guests. they talked a lot about what was going on the fed faces two historic dilemmas, how to respond to president trump's criticism of the policy and personnel and how to respond to the trade war. there are no play books for either as jay powell said out there, the public decided not to respond. when i asked him out in jackson hole if he had a personal reaction to president trump calling powell an enemy. >> i wasn't looking at tweets this morning

i was in there listening to the conference >> obviously, that was the tweet. >> okay. i was talking about what it is that we are doing right now. >> no personal reaction to that? >> no. >> your jaw didn't drop. you don't think that's inappropriate. >> well, what i'm saying i didn't see the tweet i'm here focusing on the conference >> on the trade war, powell has tried to and a half guite a middle ground. he suggests it will affect the tariffs in the data. but rejected the president's urging to reduce interest rates to weaken the dollar and help u.s. exports now, former u.s. president bill dudley in a bloomberg op-ed said the fates should go further so as not enable further tariffs and drew criticism by suggesting the feds should consider the prospects of president trump's re-election in setting rate policy evercore said setting policy to influence a political outcome is quote category kale beyond the pale of legitimate technocratic

central basking regardless of the risks posed by a given political outcome. it is exogenist a term they use but as an outside factor to put into the whole mix of the form louisiana it's not easy, definitely fought easy >> fought getting easier. >> whatever they think personally they don't want to say it publicly. they go go on and say maximum employment, how do you feel? snacks mum employment. >> was dudley shocking that had to be an extreme. >> my first reaction was there were people who criticized the fed during the obama years for keeping rates low and enabling deficit. >> dudley was there then >> dudley was there then there were those that said the feds shouldn't do that the feds said, no, that's not something we factor in i think that makes sense put the trade thing aside, but

having it influence, trying to influence an election. >> i'm going no quote it with dennis. >> it's crazy. >> what scares seems to me that he's gone, but is it possible that their people left on the fed that have that same viewpoint and would act accordingly? >> i really don't think so, joe. >> i know, this guy was there. anyway, thanks, steve, for more on the fed under fire, let's welcome dennis lockhart, former atlanta fed president. now a professor at georgia tech. thank you for joining us here's the quote, dennis there is even an argument that the election falls within the fed's purview, trumps re-election arguably presents a threat to the u.s. and global economy so that is purely, i mean, i don't know, they owe owe okay and its ability to achieve employment if the gel to mon tore policy is to achieve the best performing long-term economic output, the

fed officials should consider how their decisions affect the political outcome in 2020? i mean, this reads to me almost like a kubrick or orwell, this is the most frightening thing i think i've ever read about, delusion of grandeur and this guy was a full on fed member i'm wondering, is there people on the fed that decide that's the role of the fed if determining if their view who should be elected president? >> well, bill dudley is a private citizen now. he can say whatever he wishes. you noticed, of course, that the fed disassociated itself very quickly from those comments and i think richard claret's reaction to steve out in jackson hole represents kind of the message discipline that you should expect and i fully expect from the fed going forward, that is they're not going to comment.

they're not going to be political and get involved in you know a political back and forth and just stay on the message of their mandated objectives, blah blah blah >> i mean, maybe the president has damaged the fed to some extent, i guess, if terms of its objectivity and independence, but i mean this is the same kind -- kwoeng i don't think we should have quid pro quo i think this totally damages people's viewpoint of what might be going on behind people's doors in there there is no reason to think there is anyone past bill dudley having one, shoung he -- how lo is he on the fed before that -- >> he ran the open market operation there the fork fed >> it's whether to put it into context, right trump called powell an enemy >> i know. >> he called himself the chosen

one, too who is worse, she or - >> you know what's weird, joe, not everybody has your zen with the president. >> i'm not talking zen, i'm talking taking him seriously, not literally. >> i will tell you there were jaws dropped in the hallways at jackson hole there were people who were visibly shaken when the president -- and sometimes, joe, i think, all right, i'm going to say this, i'm going to think of the president like my little brother whose job was to get me so excited and angry he would get me punished by my parents. sometimes i think that's what the president is trying to do, instigate the reaction >> he controls the media >> and dudley took the bait. >> it's very dangerous >> he's sitting in andrew's seat do you -- didn't you understand -- who's worse >> i mean, we've grown accustomed to the way president trump speaks so for me as a trader, i look at that i see it,

i know he didn't mean it literally. >> what if i called you a traitor, not a trader? >> houmonts is your side called trumpettrator? not your side, the other side, steve you want to finish >> you have to look at these things in perspective and the market versus to look at them in perspective. he wasn't -- he speaks in such exaggerated terms sometimes at a certain point. >> look -- >> >> that's fine, steve. then let's have the grace on both sides giving one guy a long leash to say what he wants. >> hang on a second. no grace is coming, i can tell you that >> i'm sorry >> the tweet that came out last week where he said everyone, everyone out of china, he said everyone should look for alternatives, media ran are it everyone out of china. >> the enemy

steve. >> dennis, you are the chosen one to speak now do we still have you >> are you still here, dennis? >> yeah, i have been listening to your back and forth i think it's, you know, it's an expected confusion about how, what to make about all this and what to think about fed independence going forward do i fear the situation could escalate further and then we're talking about not just sort of back and forth jabber, but we're really talking about something that could harl an institution, that's really important to the country and the world. so, you know, yeah, i'm watching it carefully i think there is a little bit of a dilemma that the policy makers are facing and i think bill dudley was in a way getting at this dilemma. and that is that to the extent that the fed policy is an offset

for the uncertainty that's risen because of the trade conflict, by adding more accommodation, a cut in september or whatever, you are in effect supporting the more aggressive trade action so, they're caught sort of in a vicious loop there and i think that's a problem >> the spectre of, i mean, you could take it to a crazy extreme, steve dudley kept rates low during the obama administration to get him reelected. >> i agree >> now when the tax cuts, they nullified the tax cuts, they raised rates this time around. there is crazy stuff you can come up with >> i agree it's tough, i think dennis was getting at the heart of the policy the fed is in which is, the issue of enabling the president on tariffs and the issue of, do you preemptively do something? >> ten hard.

we got to go thank you, there is two steves and you are leaving. you are both leaving >> we'll be right back >> thank you, guys 'lta autppwel lkbo ale at fidelity, we believe your money should always be working harder. that's why, your cash automatically goes into a money market fund when you open a new account. and fidelity's rate is higher than e-trade's, td ameritrade's, even 10 times more than schwab's. plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. just another reminder of the value you'll only find at fidelity. open an account today.

market rally, futures pointing to a triple digit gain at the open after chinese officials says beijing hopes to avoid an escalation in the trade war. the tariff clock is still taking major tiff tariffs about to get hit as we close in on a deadline. this hour, breaking data, on u.s. economic growth a critical read is minutes away, the final hour of "squawk box" begins right now ♪ noups noun. >> announcer: live from the most notorious city in the word, new york this is "squawk box." good morning, welcome back to "squawk box." live from the nasdaq market site in time's square i'm joe kernon along with beck question quick also with us is steve grasso,

he's with international sales. >> it's thursday >> we pulled you in. >> i can't get enough of you guys >> institutional sales at stewart franklin those can wait the futures are right now indicated up gee, you don't need to sell anything yet, i don't think. up 280 s&p indicated up 30. nasdaq up about 97 is the ten year back above >> 1.4 knife. >> not quite it's so weird. things go well the stockmarket goes up when rates go up. >> except for that, there has been a little of a separation between being concerned every time rates go down, just in the last week or so. >> if you seen those correlations leave, you seen the oil up, the dollar up, yields can go up, the market can go up. that's what we saw a couple days ago. you have to remember at the end of the month we have that rebalance, when the market gets hit, a lot of tension funds have to rebalance their money and put

them pack into equities. we've seen that not only happen on the last day of the month, the last trading day the leadup into it that's part of what you are seeing now obviously, the trade headlines, that was the premier headline of the day. let's get you caught up on other stories, second quarter results from best buy out this morning. electronics retailer posted adjusted quarterly profit and the company raised its full year earnings forecast to something at the higher end of wall street expectations however, revenue and comp store sales fell below estimates for the most recent quarter, perhaps more importantly, in terms of its outlook, the company is saying it depends on a lot of different things it's giving you what it knows right now about the potential for increased tariffs on goods from china, also, they're not sure how their customers will react to these things. they pointed this out. disney's projections may have been too modest, according to a new survey 43% of new households said they

intend to subscribe to the service. disney's own projections pointed to a 20-to-30% gain, percent of households they suspect to have subscribeing by the year 2024. we are watching the price of bitcoin today, the crypto currency dropped 5% in a 40-minute span on what had been a relatively calm session. bitcoin falk back below $10,000. you see $9,400 it's not clear what triggered the sell-off >> last minute pullback. we are two days away from a new set of tariffs in the u.s. china trade war. in this time, popular apple products are in the line of fire josh lipton joins us now with more hey, josh. >> so, joe, apple's watch and airpods could face 15% tariffs beginning september 1st. now, these products are bright spots for the company. loop ventures estimates apple has sold 80 million watches and

15 million air pods, so they could absorb them entirely analysts commitment they can cost them $500 million or apple can pass on price increases to consumers. >> that risks denting demand, evercore is actually more worried, he tells me, about levies hitting the iphone possibly coming december 15th. if apple is hit with all these potential tariffs, he says the company could take a hit of at least $5 billion to its bottom line but there is another possibility here >> that the u.s. government decides to except apple from these tariffs. in fact, president trump, remember, recently said tim cook did make a persuasive case when he argued that tariffs on his smartphones put his company at a competitive disadvantage >> tim was talking to me about tariffs. and you know one of the things, he made a good case, that sumle zasomesung is the number one competitor and samsung is not paying tariffs because they're

based in south korea and it's tough for apple to pay tariffs if they're competing with a very good company >> at the end of the day, some analysts don't think apple will get hit with tariffs on its finished products. neither wearables or iphones munster tells me the u.s. government, he doesn't think, will ultimately want to penalize pot in their products from an iconic american company. guys, back to you. >> josh, thank you very much for more on apple and the tariffs, let's turn to jonathan geller, founder and editor-in-chief. jonathan, what do you think? what's the potential for apple here with the tariffs? you think they skate by this or you think they will get hit hard >> yeah, i think it's a bit overthought. i think long term, i don't see much of an issue i think apple is one of the most uniquely positioned companies in that fight quote/unquote i don't see it long term as a major, major hit to their bottom line >> what do you see playing out is there a way that apple could

get exempted and, if so, would that include helping other companies as well? or does apple actually get a singular exemption on its own finished products? >> i think we don't know, you know, in regards to what this administration will do i think you know, tim cook having the president's ear and the president seemingly having the relationship with tim cook speaks volumes i don't believe there is many of those that exist right now as far as the relationships there you know, with companies of that size so i'm not sure if it would be sipping larry apple that skates by but i do think tim cook has the ability and i think has shown that he can really influence some of this policy and he is uniquely positioned in between the china and u.s. trade war as someone who you know is almost somewhat neutral on both sides as viewed. >> you know, i'm glad you bring that up. because he's been walking such a fine line trying not to offend

the chinese while also trying to stay close to president trump. is there a point where you think that could backfire if things get more heated? is he going to have to choose sides? and if so, what does that look like >> that's a great point. i think tim cook in general just always comes across as pretty neutral, right he's steering this incredibly large ship and doesn't want to make waves it's a possibility he doesn't want to choose sides at some point. his interests are probably more closely aligned with the u.s., right? but carolina is a really big part of that equation. so i'm really not sure what the outcome there would be if he had to >> i just wonder, because i know apple does have some flexible and would be able to move some of its sourcing out of china how much of the manufacturing is there now, where could they move how quickly could they do that and if they did do that would it impact the amount of revenue, the amount of sales that they're doing in china at this point,

which is pretty significant amount of companies that have revenue? >> yeah, absolutely. i'd say most of apple's you know manufacturing, probably all of the larger hardware products are in china some of the accessories, i believe, are maybe outside of china a little bit vietnam could come online, india could come online soon i think in most reports i've seen it's 15 to 20% of manufacturing, maybe more can be moved quickly. amortized their costs there i'm not sure how much that would really save them i do think there is obviously contingency plans in place i don't see that happening i feel for some reason this is going to get worked out, whatever form or fashion i just don't see much of an issue with apple here long term for some reason. >> so, do you see, jonathan, a lot of the other companies, where tim cook was the first one, you had said it before, the first one to come to trump and

sort of have that dialogue do you see that as a tipping point where you would have to think the other ceos from the majors would have to step up and meeting as well as shareholders. do you see that coming to pass >> i think independent reports i've heard and even direct, just people telling me directly, you know, there are those conversations happening, they're just not public. you know, whether those become public and that's you know to your point, something that can kind of move the needle in the future, i'm not sure there is obviously that risk there of aligning yourself closely with some of the policies that some people are not in favor of. so i'm not sure what form that takes, but i do think that in this administration, you know, that itself the best case, you need to advocate your position or else no one is going to care about your position. i think that's really important that tim cook took that first step way back you know after trump was elected. >> okay. jonathan, i want to thank you

for your time. it's good to see you >> thank you so much >> all right, coming up, what is it that's working if retail? is earnings season coming to a close? we will get insight from top analysts, who is falling behind. who is still poised for growth in the constantly shifting field. sad. only nine minutes of grasso left ayuned you are watching "squawk box" on cnbc when it comes to your customers' expectations, there's one thing you can be sure of.

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welcome back, "squawk box," everybody, a number of stocks on the move after reporting quarterly numbers. dollar general also reported better-than-expected comp store sales and raised its full year forecast, check it out, they're up 7.8%. another chain dollar tree is seeing gains they reported lower than expect earnings going in the other direction, you got abercrombie and fitch,

the clothing retailer reported a stronger than expected loss. revenue and comp store sales were lower than expected and they cut the increased tariffs on chinese imports the next round is scheduled to go in, it supposedly will impact 90% of apparel and 50% of shoes with see here in the united states >> more people looked at best buy, boy, they didn't like it. it's down about four points now. >> yeah. >> you think it's conservative >> i thought, i don't know that it's conservative. i think they really have no idea what's going to be happening they don't have the same sort of flexibility. >> right >> that a walmart or a target. >> i think positioning means a lot. it's up 30% year-to-date so you have a lot of people already in the name that now are sitting on the fence, where do i put the money? so you have dollar gen and $tree. dollar gen was up 30% as well,

dollar tree is up 10%. so they went to these lower tier places already best buy they were already in and abercrombie has just been plagued for such a long time. >> you seen this with forever xxi. abercrombie and fitch. traffic has been hit so hard so you don't get the same number coming through there is all online option, they used to be hard core inside the mall stores. they're not this year. >> so think about why names roth stars or tj max have been performing well, because they got ahead of the tariffs all the other companies, all the other retail apparel companies got ahead and they pre ordered so they've left with a whole lot of invent otherwise, what happens to that? it goes to roth stores and tj max. they benefit they have the leverage over their inventory. so that's why they have been performing in an environment with nothing but head winds on a trade front. >> joe, back to best buy

the idea that an electronics retailer will be facing much stiffer head winds and has much less room to maneuver in terms of where they get their sources or keeping up other places they're not as flexible as a walmart or a target. so many different places they source and products. >> sales outlet misses estimates. that's the high end, i guess it used to be they thought the high was 43.9. the street came down to 43.6 does that make the difference? >> let me read the statement from the cfo the cfo said >> 43.1 to 43.6. >> narrows our top line, raises the bottom line, but factors in the following. one, our best estimate of the impact on tariffs from goods from china, better than expected earnings, three, general uncertainly related to overall customer buying in the back half. >> the high end is where the street is. i don't know the way that these

people that are writing these, stock is down, so we're parsing words, for whatever reason they're slightly below on the current quarter. let's stick with the retail them lord and taylor, barneys and now forever xxi are filing for bankruptcy and a mixed results continue joining us with what's working susan anderson, season analyst and senior vice president at v. reilly, fr, we went through the entire earnings season like the best of times, worst of times. we get one and go, woe, we get another and go, wow, it's bifurcated no doubt what works, what doesn't >> yes we're definitely seeing winners and losers out there i think there is some buying opportunity because of that we seen a lot of these stocks sell off so badly related to the china tariffs, fears around the consumer that even the winners i think are trading at pretty

cheap valuations relative to historic am. the ones we like a the children's players, which are value oriented, carters, primarily akmal and children's place and akmal. those are benefiting from the disruption in the industry the department stores is closing, gymboree bankruptcy toys 'r' us bankruptcy last year we see those winners in back-to-school holiday season. >> in addition to those picks, is it a dollar tree, dollar general, walmart environment versus a tiffany and needless neiman marcus, is that the way you go this time or a sach's or a ford strom >> it's definitely value off mall is winning with walmart, target. consumers don't want to waste the time going to the mall anymore. those are convenient and also they can pick up food while there. it's more acceptable to buy

apparel and target obviously rolling out a bunch of private label is catering to that. they're offering differentiation. >> you got to think. where is the tariff effect where is the mall effect is one. the amazon versus everybody and brick and mortars are trying to transition to digital. it seems like there is a lot of this i think so to try and figure out with retail it seems very daunting right now. i might just stay away, susan. >> exactly we like the kids players, they're benefiting from the disruption they easily transition online, carter and children's place on amazon we see those as the two most attractive in trading apps and lower levels and given the fact that retail has been very disruptive >> so susan, tell me where i'm wrong on this, have you macy's, i get all the head winds, i understand why the stock is down 50%. in what world or how should i put this can you buy this stock down 50%,

knowing that the brand is worth more than that at face value i know we've talked about real estate when it's concerning with macy's but it's got to be worth more than where it is right now it's a perception problem. is this something that is going to be around two years from now? >> yes so, i don't cover macy's, but in general, you know, i think the department stores are having some structural challenges right now, which is probably going to take several years to work out, so we would stick with the more of the special diretailers in the mall which have their own brands and they control their destinies. they can easily transition those online or sell to amazon if they want to do that. >> got it. all right. we will end it there, susan, we appreciate it. thank you, we finally got you. i got you in the chair and we'll hopefully see you again soon it's time, really? parting is such sweet senior row. >> that's it >> time to say good-bye. >> i will work on the wifi

i will put me feelers out. >> you will solve this problem for him? >> no, but it sounded good in the last parting words >> it was good having you here. >> i love being here >> we'll leave it at that. i was going to make some kind of joke -- i'm not going to. >> finish strong. >> no, no, no you know what, she, i have learned over the years. >> learned what? >> oh, just, i was going to make -- >> never mind. >> i was going to call you michaelal from the godfather, the good one my nickname used to be sonny >> that definitely. >> it was definitely never the other one. definitely never the other one >> that's what i would -- then you dragged, once again, you dragged me back in to sticking your neck out. >> it's so hard to do. >> thanks, guys. enjoy the weekend. >> when we come back, breakic economic data, a critical

revision, a second gdp is due at the bottom of the hour later a window through the trade war of the electronics retailer, best buy beating this morning. now new tariffs are looming. we will bring you all the details when "squawk box" returns. ♪ here i go again on my own ♪ goin' down the only road i've ever known ♪ if you ride, you get it. a geico motorcycle. 15 minutes could save you 15% or more.

. welcome back to "squawk box," everyone the futures have been on fire, right now the dow is applied to open 200 points. this comes as a gain for the dow. the s&p looking at 31 points the nasdaq is up over 100 points in terms of the futures, where we would open this morning this is all coming after the chinese ministry, so spokesperson there made some comments that sounded like we could see a little bit of a hold off in some of the retaliatory measures they have been threatening. maybe that gets us closer to the trade talks resuming coming up, breaking data on u.s. economic growth an update to the second quarter gdp is due out in minutes. we'll be back with the number after a quick break. you are watching "squawk box" on

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on cnbc live from the nasdaq market site if time's square we're just seconds away from an updated look at second quarter gdp. also the latest jobless claims numbers. the futures are strong this morning on maybe some positive signs on the trade war front let's get to rick santelli standing by at the cme in chicago. rick, the numbers, please. >> all right a second walk around the block on gdp i lost a tenth as expected, actually, honing 2% originally first look 2.1 we have one more complims,ing -- glimpse, of course, the numbers moved substantially 4.7 versus 4.3. the price index holding steady at 2.4 the core personal consumption expenditure quarter over quarter dropped a 10th to 2.47

a rise of 4,000 is from 211 originally released at 209 let's go back to the trade balance expecting the number around 74.5 billion. 72.5 billion a bit lighter than expected. if we look at retails inventories month over month, judgment, they were up .8. >> that is more than expected. >> that will boost gdp numbers with regard to the rise, of course, widgets. if you look at wholesale inventories, this is a preliminary number, it came out as expected up .2. so there is a lot of data points there. alls i can say is that in the end, i like seeing these july invento inventorys move up a bit we know we were keeping track of q3 first quarter is always supposed to be the weakest. we actually didn't see that we've seen a little moderation, of course, in second quarter numbers.

it looks like third quarter could outpace it everybody, of course, is completely paying attention to all the trade issues, all the cottage industries and supply carolinas involved in that maybe we should also look at the macro-economic data as the world slows, our curve is more of an international signal, because all the influence on the long end from an international perspective. but the u.s. economy isn't doing badly. could it do better it is doing okay maybe okay plus. becky, back to you. >> rick, stay with us. we have more to talk about steve liesman has been digging through those numbers as well. >> can i say a minute how great rick is at that. i tried to do that they don't let me do it. i'm terrible at it he sits there, keeps his cool. all these numbers, he does a great job. >> he's looking off screens. >> right. >> way off over here, gives me a little time to talk about it rick, i am going to say

something, you say higher, because you say it so great. the consumer, consumer spending. rick >> higher. >> let's see what else, durable goods, inside that rick. >> yeah, these are all very, ver healthy. >> we don't have the lower here, because business investment is still down 06. intellectual property was 3.7. our rapid update was housing investment also a little bit more negative minus 2.9 and government purchases about same. trade took away about three-quarters of a point with most of that from the export side that could be linked to the strong dollar which brings us right around to president trump and his call for lower interest rates to reduce the dollar rick, what do you think about that give me your take on whether or not this is the question of our age, should the federal reserve be lowering rates in order to

weaken the dollar an help u.s. export,? >> i think that would be a horrible idea. a horrible idea. i this i the firm dollar is a testament to our economy i think many of the economies that have weakened their currency by managing it and fibbing a bit and saying ah, it's monetary policy offshoots, their economy around accelerating you lower your currency, the export rises maybe there is a counter-factual there. their commission wouldn't look as naughty as they look to now in the end i think when the president referred to giddiness over the g7 leaders underscores how much drinking must have been going on in france. >> i agree, i don't think they're giddy about that as i said, rick, if you want germany's interest rates, you can have germany's economy, which printed a negative print in the second quarter and you can also have the uk's economy,

which was flat to negative in the second quarter we have 2% growth. and the question is whether between me and joe, where becky sits, the twain can meet where joe would argue, i believe, i'm not putting words in your mouth, you think the right run rate of the economy is 3%. i'd argue that there is a lot of good evidence it's more like a 2% economy and we're dock as good as we can or should be doing. >> all i know is the third mantate is that the fed gets to elect whichever president they want every four years and they should dictate the policy that will get them designated >> that they want, rick. don't you think that they can get together with comey and brennan and clapper. and they can all decide, here's the guy. here's our guy, in case there is a mistake. >> they may not always be getting together if orange jumpsuits. you never know. >> in case there was a mistake, you need to have some insurance.

>> the fed put out a statement on this. >> joe, joe, joe, i'm going to have to side with you on this. to me, we throw everything we have, let's face it. much of the media doesn't like the president. what suffers sometimes he he describes the economy, trade, becomes a half empty issue. i'm not talking me, i'm talking in global media terms. at the end of the day taking all that incoming, we're still 2% plus with all issues going on, i think we can easily be a 3% economy when we start to get some of these open-ended issues resolved and they will get resolved >> i'm going to bring you, steve, to the idea that innovation and not a singularity, but things are happening more quickly, good things in terms of the human experience and existence so our productivity can make up for the boomers in the population, so the 3% is possible >> i'm on your side on this. >> you like 2-and-a-half. >> i want 3.

i love productivity. i think we need to be realistic about the possibilities and the horizon on productivity gains. >> don't you this i the apple and the iphone is worth a point? just the iphone? i have the encyclopedia britannica in my pocket. >> you want to talk what you are really doing with your phone you are saving time on the road. >> with google maps. >> can i read you -- >> i have to spare you that computer that took up four floors in my pocket. >> if your pocket. no, look, but what we don't know is how to really capture -- their two issues one is are we capturing the gains that they're providing in the economic data? >> that's one small example. look at what it will do for monitoring your bodily rate -- there are so many things. >> bodily what >> not function. those can never be regulated i take it. i've tried >> i guess what i have to say is i agree we some of these comments there is this guy robert gordon

from northwestern. asks the question. >> oh, that guy the a floozy and a loser. >> no, he isn't. >> yes, he is. >> he asked the question, is the iphone and all this other stuff as important as running water, electricity, airplanes, the washing opinion, the dishwasher, all of that stuff? >> yes >> we have those things. >> when or lose. >> we have those things. >> we have electricity, lights >> and the quantum productivity gains that were created? >> did you see what amazon did for productivity did you see what the internet does globally for productivity everything rick we can, at what, you are great >> he's not getting the answer from me, he turns to you go ahead >> steve, you said you are good at looking at figures. >> how do you suffer from global delusion i think many of the metrics that we measure the same way we have historically for a while become much less -- inline with the

u.s. and more inline with global drainage i think water is seeking its own level. >> that mentality now is a productivity issue i think there are many parts of the globe, like europe, where productivity is not high on their priority list and many other developing economies. >> right >> i think work against productivity and i think there is a distortion there. >> just real quick, joe, you got the half point you are getting from the population. unless we open up the flood gates there for immigration. >> right. >> which means you need two-and-a-half you have been doing one-and-a-half you need a full extra percentage points. >> you are good with numbers how do you get there >> we have done a couple good quarters recently. >> we were able do almost two of the head winds of the last administration in terms of taxes, regulation, you know, just, as you said the boot on the throat of the private sector we can do close to 2

you lift that off, you ought to be able get to 3 in your sleep >> yeah, no, i'm in your camp on this, joe. i just think that many of the inefficiencies not only from an international perspective. >> global. >> from the government side are getting less and less. i do think over time some of the deregulation, even though it gets vilified in the press for the most part will show up in better productivity. none of this happens overnight >> i just have one comment >> hold your thoughts. >> all right >> we will add another voice, someone waiting patiently. kevin cummings >> he's a smart guy. >> senatewe natwest markets whose camp are you in. >> i'm happy with the productivity boom in the last couple of quarters i'm not sure it can sustain forward. if you see a tick i pickup in capex like you did in the wake of the presidential election, eventually productivity should follow the last couple of quarters have

been pretty weak from to perspective. so i don't think really the dial has changed very much in the last couple quarters >> i was just going to say, kevin, if we could have had a year or two of the tax cuts without the trade war, we would know if we would get the capital spending response that is going to be required in order to boost the productivity that will change the potential trend rate of the economy and create a possibility? i thought a change of the speed limit to 2-and-a-half was possible within reach. i don't know if it's global economic weakness and the trade war that have us down to 2% rather than what could be 2-and-a-half and an ambitious 3. >> that's a great point. i think the big thing here, so far the economy down shifted relative to last year when we did get 3% growth. the first quarter was 3.1.

the latest reinvestigation of gdp puts it at 2 in the second quarter. but i am very concerned about the outlook. i think their kind of a dark shadow here on the outlook with regard to the lingering uncertainty about trade policy going forward. and i think, you know, eventually, there is no doubt about it the consumer still seems to be in pretty good shape, you know, today's jobless claims data suggests the labor market is signaling a healthy labor mark still. >> kevin, what if we removie all tariffs, suddenly you hear the music. ahhhh. the things open up tariffs are removed. they open up their markets to the united states, come, we will play fair. we will not steal anymore. let's say that happens next month, just dreaming something like that and everything works and what people think is a crazy trade or what if it actually changes behavior and makes the

world a better place for free trade, then do we get to 3% now all this has been lifted >> i think so if that is the case >> do you? >> -- where everything is resolved it's the best case scenario i think that's certainly possible. >> that's what we're trying to do i think >> some are holding in there i worry that this divergence between business investment and the consumer finally catches up with the consumer. not so much this year, but in to next year, i'm concerned about the underlying fundamentals of the economy. don't forget, you are heading into an election year. there could be business decision-makers in a kind of wait and see approach to the outlook, in addition to uncertainty about trade policy i think that that alone probably holds back business investment next year. i mean, business investment typically leads the consumer spending so, yes, the consumer is in better shape than we shot, employment growth is still

solid. you have had some moderation moment growth. the bls came out recently with their benchmark preliminary estimate to payroll growth and the mark down payroll growth noticeably they are expected to market down we don't e won't get those data until early 2020 it does suggest there has been a down shift as well, claims are at a low level i wouldn't get too excited i think the economy is downshifting here. we probably won't see that dramatic of a slowing until next year when you are growing below trend, trend growth is probably 1.8 or so. >> this is a up series story -- a super story. it's critical for the investor outlook. to keep the conversation going not today. we have to move on. >> we will steve, thank you rick thank you. kevin, good to see you >> thanks for having me. many of the auto nation work

verse two weeks before the current contract expires but wright before negotiations start to pick up, we have a few monkey wrenches including a raid from the home of the president of the uaw phil lebeau joins us hey,phil >> this is the latest ongoing investigation that stretches back over the last three or four years, involves a number of former uaew executives confused and some some convicted of kickbacks. this is video from our dallas or our detroit, excuse me, affiliate of fbi agents raiding the home-o of uaw home leadersh and whether or not there were vendors paying them ultimately kickbacks and that's at the heart of this investigation. uaw releasing a statement saying, it will continue to cooperate with the government in its investigation, as we have been doing throughout. why does this matter for

investors if it's simply the uaw is not involving actual auto executives well, there is a contract that comes up in a couple of weeks. here are the three key issues at the heart of these contracts time needed by new hires to reach full pay, hiring temporary workers, how many the auto makers do hire and how much the union wants that to be reduced and the question of healthcare costs, how much should uaw members pay? as you look at gm, ford, fiat, chrysler, we're showing you these stocks over the last four years, the question for the auto makers is, and for you as an investor, how much do these contracts, if they have a strike that comes up on september 15th, how much will this impact the auto makers and ultimately their stock? these stocks haven't done anything, guys, over the last four years, they cover just over 160,000 workers. again they expire on september 15th the uaw leading up to this has been saber rattling saying we want a bigger chunk of the pie

we want more as the auto makers are much healthier now than they were four years ago or eight years ago. but this corruption investigation has to have you asking if you are a rank and file member, are you going to be as enthusiastic about potentially a work stoppage or being tough on the auto makers as you were maybe 10, 15 years ago. >> yeah, phil. thank you. shocked. shocked. so is there some corruption in the union, phil, anyway in union management coming up, inside the second quarter for best buy, a company with significant trade war exposure shares are falling after the retailer reported mixed q2 results. ay will have much more st tuned you are watching "squawk box" on cnbc

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welcome back, everybody, best buy shares are lowered after mixed quarterly results.

courtney reagan joins us are you listening in >> you are listening to the call, it's ongoing, this is the first quarter for best buy under a new ceo. the consumer retailer beating on profit with this continued expense management its revenues estimates. comparable sales up 1.6% that marks the tenth straight quarter of positive growth, but it was less than forecasted. international comps negative that was the big drag. canada especially there. best buy also raising its full-year earnings guidance range but lowering the high end of the revenue forecast. the guidance includes the estimate of tariffs, list one through three going to 30% analysts at 15%. u.s. online sales grew more than 17% to 1.42 billion, which the company says is its biggest nonholiday quarter remember, prime day fell in this quarter. it also makes the stable margins

fairly impressive to some analysts during the period appliances, tablets, headphones, services, those are the strongest categories gaming and home theater the weakest. gaming is expected to continue to weaken. the ceo said a bit of art and science to estimating this with regards to the impact of tariffs and pricing changes. quote, there's a lot of moving parts there. we think many vendors will be moving business out of china and she said due to mitigation strategy, quote, the piece that's impacted is actually substantially smaller than the overall number of items impacted so they really wouldn't narrow in on what they're going to do with pricing and what categories, on what item, at what time because there's still a lot of things that are changing >> i get it. if you don't have any sort of visibility yourself, how can you tell the street what you're seeing how aggressive were the questions coming from analysts on this? >> a lot of questions from tariffs in the beginning the call is still ongoing. they were just discussing it as we popped off quickly. so i think there's still a lot that everyone is trying to

figure out i think the street is being relatively forgiving for these companies. like you said, what can we do here >> if they were being really clear, saying here's what we think is happening, i don't know that i'd believe them. >> exactly and they're dealing with vendors. so in some cases, they're one step removed from the tariffs. so they've got see what the vendors are going to do. >> thanks, courtney. >> got to see if the tariffs are still on tomorrow. later today. in fact, let me check right now. it's 8:52. anyway, thank you, courtney. look at the futures right now. they're strong, up about 270 points on the dow, 28 on the s&p. nasdaq indicated up about 92 points treasury yields at this point, the ten year is about 1.49 still, the two year, there's an inversion, 1.51. joining us to talk more about stocks and the impact yields are having on the market, chief market strategist at ameritrade.

and here with us on set, a u.s. investment strategist. who's wagging who? which tail is wagging which dog? i would think the size of the bond market and how important it is, we should definitely not just say, oh, that doesn't matter let's just focus on stocks something is going on. >> yeah, you know, clearly our yield is falling from about 3.25% from last year to about 1.5% it's sending a message the long bond tends to be driven by two things. one is the outlook for the economy. two is what's happening with rates globally on that second part, we know what's happening with rates globally we have over $16 trillion of negative yielding debt out there. that's anchoring our long bond down somewhat. but on the first part, which is the economic outlook, that's really where the question marks start to come up we just saw this morning, you know, a pretty decent gdp report what stood out, continued strength of the consumer, business investment pretty strong we have this ongoing uncertainty. we've been talking about it for a while, but it's trade, really that, comes down to where the

uncertainty lies for businesses and potentially the consumer going forward. >> and it's not either/or. it's either global rates or a slowdown we could be 50/50, it could be 70/30. fec even if you go down to 90/10, there's still a 10% overhang on just growth fears globally >> yeah, i mean, it really is what's happening globally and whether or not that will come to the u.s. shores. >> that's global too >> the u.s. has done a pretty good job of decoupling thus far. part of the reason you're seeing our equity market hold up so well is it has become a flight to safety asset class. there's that term out there, there is no alternative. yields are so low globally, when elsewhere looks a little softer, really you have u.s. equities, maybe the u.s. ig market, gold, and even the u.s. dollar that are holding up pretty nicely >> joe, earlier i said ignore the bond market at your own peril. we were saying stocks have held up pretty well not that far from an all-time

high in the middle of a trade war. that proves things aren't being impacted if you look at the bond market, the stocks could vol date what the bond market is saying very quickly. we've seen that happen before. is that possible >> oh, it is, joe, but i think until we have some resolution on tariffs, i don't foresee that happening, actually. only because it's kind of the, you know, we're stuck in this range, in my opinion, between about 3,000 on the s&p 500 and 2750 because when we get to the higher level, we've seen it happen before. people are like, wow, over 3,000 seems expensive. you get down to 2750, and it's almost the fear of missing out oh, my god, if tariffs get settled tomorrow, i don't want to sell everything i look at our clients' behavior right now. they've actually the last two months been net sellers of equities >> you get negative if we settle the issue? because then people would say, well, i'm not going to buy on the dips >> i think that you get the initial pop, joe from there, it may be, hold on,

what have we really gained here? companies still have to do well. becky just said in the last segment that companies are getting a little bit of a break, perhaps, right now because of what's going on. i actually agree because it's just too hard to predict what scares me the most is nobody's talking about investing in infrastructure because if you're a ceo, it's really difficult to make that commitment in such an unknown situation. >> they do get to -- you might get a little bit of a pass on missing your numbers too if your forecast includes tariffs or if your comp store sales includes tariffs. you can say, well, if it wasn't for the tariffs. i haven't looked at it that way. >> well, i think it's a little bit of what's going on because it's hard to hold people in these unknown situations and again, you look -- i think we're going to feel some of the ramifications of this a lot more three years down the line when they haven't invested in ways

they should have right now >> mona, do you ever disagree with mohammed? >> we like mohammed's thoughts he's pretty well thought out what he talks about more than anything is globally you need not only monetary reform, fiscal reform, you need that structural reform >> are you able to look around corners like he is >> everyone. >> he teaches people to look around corners in a multispeed universe anyway, thank you. >> thank you so much >> tell him we said hi j.j., thank you. >> thank you when we come back, we'll get you caught up on all this morning's market action. stay tuned ry single day. ry single day. with technology that helps you offer shoppers a better experience. take your company's app. we can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. and now, applying for credit can happen in a flash. that way, more people can start shopping with you on the spot,

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make sure you join us tomorrow thank you for being here >> you're welcome. >> thanks to us. have a great weekend, everybody. >> "squawk on the street" is next ♪ good morning welcome to "squawk on the street." i'm david faber with sarah eisen and mike santoli we're live from the new york stock exchange jim and carl have the morning off. let's give you a look at futures for this thursday as we head into that labor day weekend. you can see we are set up for a far higher open, at least at this point investor sentiment, well, it may be getting a boost from indications that china will hold off on immediate retaliation for those planned u.s. tarif