>> i don't even have to state any more i'm glad doc. >> snap, snap, like the way it is acting right here in the 14s. i am buying it. >> good stuff. thanks, everyone. >> i'm going with boeing thanks. >> thank you i figured. the exchange begins now. ♪ thank you, scott hi, everybody. welcome to "the exchange." stocks are selling off for the second day in a row and the losses are deepening as worries grow about the economy investors also keeping a close eye on the campaign trail today where more health issues surfaced for bernie sanders and it has speculation about an elizabeth warren presidency growing. the dow is down almost 600 points, in fact we touched that level a moment ago, a 2.2% decline. the dow and s&p are down for the fourth time in five days now let's get the latest from seema mody with the top line numbers seema. >> hey, kelly. a picture of a broader weak economy is driving all major entities down by about 2% on the

day. the s&p 500 is sitting at the lowest level since late august, and with today's losses down about 5% from the all-time high, currently trading at 2876 though at the lows of the day taking a step back the rotation into popular safety trades is notable today. the 10-year yield down again at 1.58%. gold is higher around 1.25%. the dollar is slightly weaker but still hovering around the two-year high. that, of course, will be a big challenge for some of the multi-nationals getting set to report in the next week. some of the multi-nationals are in the industrial sector which is currently the worst performing sector, down about 2.5% big names like deer, caterpillar, 3m. you can see arconic down almost 3% uncertainty also around the upcoming trade talks kelly. >> thank you very much

let's drill down deeper with bob pisani at the new york stock exchange bob, it is coming down to the recession game and which side you are on. >> that's right. which side of the recession debate are you on, that's the question even a slowdown, not a recession, and a slowdown is the consensus, not a recession, might change the way you look at things weak manufacturing is not going to send the economy down, but a weak consumer could but there's no sign of that yet. so for an early warning sign i have been watching the big consumer stocks that have all done really well this year, the costcos, the home depots, the starbucks, the nike, mcdonald's. all of these numbers are still strong there are cracks emerging a little bit starbucks in particular has been weaker in the last month, down a little more than 10%, but given how big it is in china maybe it is understandable. here you see the names today, all down about 2% in line with the market you can argue to go to defensive stocks like consumer staples if you think there's going to be a consumer slowdown, but remember they've had a big run up and

they're expensive. the coca-cola, walmart, pepsi and koka cacoke coca-cola and al moving up but down today. >> which side are you on apparently a pete sieger song, bob. that's our theme of the day. we will take it and run with it. thank you, sir appreciate it. >> okay. concerns about an economic slowdown hitting markets and currencies, the dollar falling against the euro let's bring in managing director of fx strategy at bk management. cnbc senior economics reporter steve liesman is here so everybody can talk this one. >> 1931 actually performed by pete seager but written by a woman named florence reese. >> but it is funny -- >> pete seager sang it. >> i don't want any comparisons to 1931 on a day when we're down. >> good point. >> what intensified a selling

pressure on a payroll report that is not terrible. >> it is not terrible. it is slowing down look, people don't have a sense of the bottom here there was a bit of a debate in thelast hour whether or not is manufacturing was bottoming. one economist said it is most economists i talked to say it is not. there's no indication of bottoming. you have had the two months in a row of contraction you have a decline in confidence among ceos and a decline in confidence among consumers and those are reasons for concern. all of that said, the current track of the economy in our cnbc wrap-it update which gets immediate tracking of the forecast on the street, 1.9% not too far off for the third quarter. the outlook for the fourth quarter we printed yesterday, 1.9%. >> where are we on the rate cuts now? have we fully priced in october yet? >> we have just about fully. >> have we >> when you consider to be fully, 71% or 72%, i consider that to be darn near fully priced in, and that was a big change from yesterday.

>> yep. >> before that ism number, it was down below 40. >> eric, a lot changed since yesterday morning which should remain us we are only talking about two days worth of data, but still a poor start to the month. we haven't had a 3.5% back-to-back sell-off since the christmas eve flushout lows of last year. are people -- does it mean we have already jumped ahead to the conclusion of this bout of selling pressure is this only just starting >> we think a lot of negativity has been priced in we don't think anything on trade resolution, for instance, is priced into the market at this point. >> well, should we expect trade resolution i mean it makes sense for people to stay skeptical. >> probably not. but we spend a lot of time talking to ceos and cfos of companies at the hodges funds. what we've heard is a lot of uncertainty related to supply chain disruption. >> of course. >> within certain segments not all small caps are affected by this. but we have also heard things are relatively tight in the

labor markets and companies are still hiring, but it is getting harder and harder to find skilled workers. >> this is what is so fascinating, is you can argue it in multiple ways you can say the labor market is so good it can only get worse from here. you can say the labor market is tight and it is slowing the whole economy, but it is clear that is not what is happening from the manufacturing and trade momentum piece of it cathie, what do you think is going on here? is the u.s. -- is the data catching up to the manufacturing story, to the trade issues, or is there something deeper in terms of the business cycle going on here? >> i think for most of december that's just operating on a decoupling theory, where they think the u.s. economy is going to accelerator recover or gain momentum in the second half of the year as the world's continues to slow. i think what this week's data has shown us is that the deceleration is going global, and the u.s. is certainly not immune to it there's a very good chance that in the coming months we are going to see even further weakness i think that's really finally hitting home, becausfor most

of the month the market had anticipated the fed to pretty much be done, especially after the voting record for the last fomc as steve just pointed out, it is a rush in expectation. so, yes, i do think that there's more trouble ahead and that's what's reflected in the u.s. dollar as well as u.s. markets. >> kathy, the currency piece is interesting and it is frustrating to the president who wants a weaker dollar and blaming the fed for it and so forth. if you think we are seaing further weakness for the u.s. economy, what does it mean for the dollar does it get stronger >> i think politics aside, we will continue to see a u.s. dollar weakness because a lot of the other currencies have been deeply over sold and there needs to be sentiment adjustment for the outlook for the u.s. economy. at the end of the day i think it will be a safe haven bid, an attractiveness that draws investors into the dollar. >> yes. >> while the u.s. may be feeling the pain, the rest of the world is going to sink harder. i think, you know, that's really the long-term trajectory in the near term though, i think

just from positioning perspective as well as ahead of nfps we should see a reversal. >> that's super interesting if the highs are in for the year in terms of the dollar. steve, i don't want to gloss over what happened in terms of the bernie sanders news today. we will have more on this later, but if you look at someone like cashin who says the last couple of points of the sell-off might be because of the health care he had with getting stints inserted and so forth, warren becomes a stronger front-runner and markets knee jerk don't like the prospect do you think there's something to that here >> perhaps i can't play that game i have no data on that i am always afraid when the market gets a vote, i think that's disruptive to our democracy. when people come forward -- and let's be clear, the experts in academia and the market were wrong about donald trump there was a very academically researched piece about how the market would price in a trump

victory. it ended up being dead right for two hours. >> when we had the -- >> dead wrong for the last two years. >> exactly. >> i'm always afraid of -- the market takes the politics as they are i wouldn't -- i would not argue with art cashin. he is smarter than i am and has more experience by several light years. i would just say to be very careful with that. i woulsay this about recession, which is i don't think we're on the express train to recession i think there are some stops along the way. i think that kathy was talking about the idea of slower growth. you could run for a while at least below trend, that's a possibility. you could also have, because some of the problems that are out there -- and john williams talked about this today, the new york fed president -- we're in uncharted territory when it comes to monetary policy and trade. this trade problem could potentially go away and it would lift a huge veil over the market. >> it is up to the president though, what he means by that. >> for 18 months under the trade war the market has gone side

ways and every time we've been near an all-time high it steps back and you don't know if lifting the trade veil would create a certain clarity allowing for investment into the future. >> absolutely. eric, one of the ways people try to hide from this is going to the s&p, low volatility, etf tends to outperform, which is true today to an extent. what should investors do in the environment steve is describing? it is 1.5% to growth. >> we wouldn't be surprised if we didn't see a slowdown similar to the early 2000s where you have kind of a manufacturing, industrial recession but the consumer does relatively well. we still see consumption trends looking pretty good. there's favorable demographics and lower mortgage rates we think will be good for things like housing so we think there are some pockets where you could find opportunities in this sell-off that are more -- >> and you think it is okay to stick with that? >> absolutely. >> the lennar ceo had bullish comments on his earnings call. he said conditions are strong

for us and they're impving for people that say, wait a minute, i n't want to go someplace where things are about to get worse, you say the strong parts of the economy can stay strong >> yes, and within our universe of small caps stocks we are finding opportunities in some of those like homebuilders, especially in the entry-level side, some material companies. there are pockets of beaten-down consumer stocks we are actually finding opportunities that are less impacted by what is going on with trade right now. >> all right kathy, just going back to the question about more fed rate cuts, so what do you think is priced in now? as steve mentioned, it looks like the market is kind of pushing us towards almost certain expectations of a rate cut in a couple of more weeks, and then what? >> it is highly unlikely, because while the market is pricing 70% chance, even if we get an ugly nfp number, the fact we had so many dissenters at the last meeting and the dot plot showed they're not convinced, i don't think one nfp number will be enough. i think there's a good chance we

could see the dollar recover after non-foreign payrolls i'm not a buyer into the fed rate cut in october story. >> wow all right. >> there's no way for the dollar to adjust here correctly, because more economic weakness probably pushes more people into the dollar, which in turn would hurt exports and the manufacturing sector i think we need to get together globally and solve this dollar problem because it is a problem. >> well, everybody stay right there and we will come back to this even social media names taking big falls. it has been one of the stronger parts of the market. julia bornstein has a check of that for us. >> kelly, that's right snap shares are only 4%, now down 13% or so over the past five trading sessions. this follows reports that whatsapp is testing messages that self-destruct similar to snapchat let's look at the other shares in the social sector twitter shares are down 2%, but

facebook shares are down over just about .5% this despite reports that libra currency is losing the support of some of its backers and the fact that two senate intelligence committee members called on facebook and other tech companies to crack down on deep fakes, which could be a big problem for facebook going forward. but it is worth noting though that facebook is actually outperforming its tech peers and it is the best performing faang stock today. you see facebook down 6.4% back to you. >> thanks very much. eric, you mentioned there are some parts of the market -- i don't know if it plays into your universe of where you would have investors position right now what kind of places would those be >> well, we think right now you could look at -- like i mentioned, the homebuilders earlier. >> right >> feel free to get specific. >> we also think within technology, we like semi conductors right now there's the build-out of 5g is only in the second inning right now. we like companies like sky works, which makes rf analog

semi conductors. they traded 12 times earnings, and we see a very nice growth trajectory in their business going out over the next couple of years, where they're taking market share as well as seeing the secular trend driving the demand for new hand sets. >> sure. >> as well as more infrastructure for 5g. >> all right sticking with the stronger parts of the market on a day like this fresh it eric thanks very much. u.s. automakers are trading lower after reporting auto shares for the third quarter ford is seeing weak demand for the f series pickups, gm missing all together and fee at cruiseler falling 1% versus last year i'm joined by andrew hawkins and our own phil lebeau. welcome to you both. phil, first of all, how much of a miss are we seeing for auto sales here >> for the third quarter even though you saw the negative numbers from ford, keep in mind

they had a huge third quarter last year. so you are doing a comparison there. overall for the industry, the third quarter was slightly higher than compared to last year, and the pace of sales this year, kelly, it used to be at about 16.8 million vehicles in the first and second quarter now it looks at about 17 million. that's the pace of sales year-to-date so that's a little bit better than people were expecting, but a couple of caveats in there one, the percentage of the sales that are fleet sales, that are either going to rental car companies, government agencies, large corporations, that percentage continues to increase while retail sales pulls back a little bit the other thing to keep in mind is we still have the last three months of the year, so we could see sales pull back. but at this point, kelly, we are looking at industry on pace for a fifth straight year of vehicle sales of at least 17 million, something we have never seen before. >> yes, and it is an issue, phil, you hit a lot, but the journal highlights today the seven-year auto loans, saying

that america's middle class can't afford its cars. andrew, i wanted to ask you about that what does it tell us about the health of the auto market and the economy? >> i think it means that there's potentially some storm clouds in the future i think especially in light of this report from the journal, but this is -- you know, this is sort of piggy backing on a long list of investigations into the loan industry. there's a host of predatory loans that i think are causing some concern, but, yes, the fact that the loan cycle has been stretched out seven years is a figure that we really haven't seen too much of in recent history. it is unclear that the middle class can really afford the vehicles that they're buying into, and whether or not the rates that they're paying are necessarily going to be something that they can afford as well. people are rolling loans into previous debts they have as well. >> wow. >> so it seems clear there are some potentially troubling sights ahead when it comes to how people are purchasing their vehicles. >> sure. phil, play this out for us one of the things we learned

from the last downturn was people kept making car payments largely. >> right. >> i'm sure it is feeding into why they're eager to extend credit this time around, but it doesn't mean prices can go up forever or credit can be extended like that forever. >> well, yes, at some point there's a breaking point, kelly. look, right now the average monthly payment -- that's what you have to look at. you don't focus as much on these reports of, well, people can't make their payments because those reports right now, we're below the industry average, kelly. you captain go out then't go ou are losing their cars, they're being repossessed. it is not happening yet. are there warning signs it could happen you bet. the average monthly payment is $550 will it go up to $600? i don't think so, but we track it every quarter and it is inching higher. >> it remind me of the housing bubble last time around because the loans and terms were able to keep the carrying costs quite low. prices went high, but ultimately when the whole thing unravelled

people got under water and, you know, the music sort of stopped playing there. again, i don't think autos pose any kind of systemic threat necessarily, but who is most exposed here once that cycle turns? >> i think it is the people especially who are taking the loans with the worst deals and the worst sort of -- kind of outlook there. i think, you know, in the journal report it showed that a very small fraction of the american population can afford to pay cash for their vehicles it is clear that loans are sort of the primary way in which people are acquiring new cars. i think, as you know, there needs to be some consumer education that goes into a lot of this. i think people walk into a dealership and they don't really sort of realize a lot of the points that can get tacked on at the end of the deal. i think people get very enticed by a very attractive looking monthly payments that they would have to put up, and i think they need to look at the entire deal as a whole, not necessarily

those monthly payments. >> yes, for sure phil, also one quick thing to mention, and this is something michael ward highlighted on "squawk box" this week, but the performance of the dealers, group one, lithium motors, they've done extremely well this year their stocks are up more than 60%. >> yes. >> we talk a lot about what is going on with new car purchases, but there's clearly strength that's, i guess, we're starting to see that wave only just crest in terms of demand for autos generally speaking here. >> it is the used car market, kelly. the used car market, we will see a record number of used vehicle sales in this country this year, probably 41, 41.5 million vehicles the importance here, kelly, is that it is more profitable for the auto dealers you look at that brings in the return business on the service side of the equation when you look at a dealership that's where they make their money. they don't make their money selling new vehicles we report that because the automakers and their importance to the economy, but for a dealer, the main place where they make their money is on the

service side of the equation. >> andrew, before i let you go, for gm right now in particular with the strike they're facing and, frankly, mounting concern about what that means for the michigan economy, especially with 2020 looming, how much longer do you think this strike can play out how much damage is it doing to gm >> you know, i'm not sure as to how much longer. i think people at gm would probably be better to ask that question than myself, but it is clear that there's a lot of back-and-forths going on between the union and the automaker. look, you know, gm, ford, fiat chrysler, these companies are under enormous pressure right now, both on the labor side and sort of on the capital side. they're pumping tons of money into new technology, whether it is autonomous -- development of autonomous vehicles, election trelection -- electrification in their fleet. they're sinking tons of cash

that don't have a return in terms of the roi they won't see a lot of revenue in the near term they're under a lot of pressure, the unions are certainly under pressure from their memberships memberships. hopefully they can work out a deal in the near term because the nation's economy really depend on it. >> phil, anything to add on that before we go >> i don't think they're close, kelly. we talked about this for a week. there are reports last week that said there was a deal imminent it wasn't imminent then, it is not imminent now when you talk to people at general motors, when you talk to people at uaw, when they go public saying that proposal didn't meet our expectations, it is an indication of how far apart they are. >> good to know. guys, thank you both andrew hawkins from the verge and our own phil lebeau. let's check in on biotech that is down 1% today but outperforming the broader market meg tirrell joins us today it is a reversal of fortune. >> yes, you are seeing health care in general perform better than the rest of the market right now, and typically on days like that it is not surprising because it is the bigger, safer companies that hold things up.

today it is kind of weird. biotech is actually doing fairly well relatively speaking if you look at the two atfs, you see the xbi, which is weighted towards mid cap names, still in the green. what i'm told by jared holtz over at jeffries is essentially it is a bounce because the names have been doing so poorly this year so far. they seem to be reverting back to the mean right now. so if you look at this comparison, this is the ibb, driven by bigger biotechs versus the s&p, you can see how poorly biotech has done year-to-date, and particularly in the last few weeks over concerns about drug pricing and things like that one name bucking the trend is johnson & johnson, the only dow stock in the green after that company reached a settlement in a federal opioid trial that will keep it out of that trial, which is scheduled to start later this month. kelly, back to you. >> meg, appreciate it. thanks very much, meg tirrell. the dow is down about 535 points still ahead, junk bonds are on pace for the longest losing streak of the user financials are fading but housing has bright spots today, and a big win for the u.s. on

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welcome back to "the exchange" on this market sell-off day bob situa with the dow down 530 point, bob, here is your spooky stat of the day. the only other time we started the fourth quarter with a two-day, 2 percent-plus drop, 1935 and 1945, 2018 and 2009. >> that's a fabulous lead-in i'm not sure a two-day declines necessarily mean the rest of the quarter will be bad. if you check that, i think you will find probably october we will do better if we have two-day declines i don't want to argue the point with you i think the key is we're confused about what is going on. is the consumer slowing down or not, that's the issue. what kind of -- what side of the recession debate are you on will be determined whether you think the consumer is slowing down or not. there's not a lot of signs of that other than consumer sentiment numbers a little weaker, but we do see all of the

big consumer names with big run-ups this year, your mcdonalds, your walmarts are weaker today i'm not sure how far i'm willing to go to say the consumer is definitely slowing down, and i think that's what the market's confusion is reflecting in the way the market is behaving. >> sure. matt, earlier we heard people not just talking about the weak data, some of the fundamentals, obviously the overseas markets were pretty poor cashin was saying, look, the dow broke below 26,100 what are some of the levels and kind of flows and signs you guys are watching to get a sense of what is going on down there? >> well, as usual arthur is probably right you see some of these huge psychological numbers, 26,000 on the dow will be a big number 2900 on the s&p was a big number once it broke through, you see some follow-through to the down side as bob was mentioning, the consumer really -- is it a one-time event, are we going to see it tick up again, revisions to the number we saw yesterday in the ism number that caught

everyone by surprise that's what we will be looking at more than maybe technical moves. we will look to see what does the data say and what does the fed respond with to this data. >> what are people saying down there about the fed and politics and the extent to which all of this news flow and speculation about who the democratic front-runner will be now is it elizabeth warren how does it all play in here today do you think >> well, you know, obviously it is a major talking point almost every single day until we get clarity, you know, we saw bernie sanders have medical issues what does it mean? does it mean some of his constituents are going to elizabeth warren that may be the case we have to wait and see how this impeachment proceedings play out. that's going to be a focal point, and someone is going to take the lead on this if, in fact, it does happen someone is going to benefit from it but right now there's just really no clarity on that either as bob mentioned, without clarity this market is going to find a direction and right now the direction is lower, not on a lot of volume, mind you. you are starting to see classic

cases of, you know, gold rallying, treasuries rallying. these are safety-type plays in this environment as we start the forth quarter. >> matt, what do you make of a market where you -- where the market leaders this year are utilities and semiconductors, completely different sectors, one defensive, one a very aggressive growth sector what is an investor to make of that i would saky confusion right no. they're not sure what is going on obviously we need to clear that up part of the problem is that the market is expensive. you can say let's be conservative going into staples. we've been doing it all year all of those are being bid up heavily in the last couple of months so not a lot of room to rotate into defensive unless you are paying extremely high prices for these stocks. >> least word, mr. chesslock? >> last week we had the semis on the mike ron side when consumer

goods like nike rallied so sharply. easy trade is to sell off a little bit, lock in profits for end of the year. >> gentlemen, thanks appreciate it, guys. matt cheloslock and our own bob pisani rick santelli is tracking the moves in the junk bond for us wilfred frost looking at what could be ahead for the financials diana olick is covering also for us a big trade decision from the wto today. rick, junk bonds on pace for the longest losing strk of the year what can you tell us about that? >> yes, it is a losing streak, but historically it doesn't look like we have to really worry at this point in time about the credit market specifically i will tell you what i mean. let's look at the barkley's high-yield spread.

i will run them in a series of charts and i want you to watch the way it appears, especially when you get to the last chart so we have a one-month chart, hovering at about 413 basis points spread to treasuries. okay it was 380 at its best levels. you look at a six-month, the one year i like in particular, we all remember how nervous we were in the fourth quarter of last year look at the difference it was up at 560 last year on the barclays high-yield spread right now it is significantly below that now, i'm not saying that it can't heat up a bit, and we can also shadow box this sector by looking at the etf, the hyg, the high-yield etf when that moves lower, of course that signals you need to worry a little bit more. here is a year-to-date chart it is definitely turned down but it should turn down. you have yields on treasuries at one-month low closing yields and, of course, they keep melting as the day wears on. >> rick, i don't know if you recall kathy at the top of the

hour, i don't want to put words in her mouth, but the dollar positioning and setup looked like we could see weakness from here, that maybe the highs were in. >> i tell you what, everybody i deal with in my day-to-day life thinks i am too friendly to the dollar, and i understand there's a lot of longs, a lot of speculation as well. but at the end of the day, the global funding issue is tied to the dollar's strength issue and i really think it is going to last longer than many think. >> all right again, this all plays into politics for the president obviously he has been harping on this issue on the political front, anything that you add that you're kind of thinking over, rick, as we speculate about the future of bernie sanders on the campaign trail? >> you know, there used to be a day where we would be able to talk politics in a market because you could kind of sense it to me the long view in the markets now days of stocks is a couple of weeks. i think everybody is talking about the issue, but i really can't say that i've seen any evidence that it is impacting current prices i think yesterday's ism is the

culprit along with some issues in europe and japan, and i think that makes nonmanufacturing tomorrow -- i will be bringing out on thursday at 10:00 eastern, you've got to tune in, kelly. it is going to be a big read with rafrd to t with regard to the economy. >> so true appreciate it, rick santelli let's talk about the banks, the impact it is having with the financials which are starting the fourth quarter on thwrong foot they're on pace for the worst day since august a big turn of events considering financials were the best performing last quarter. wilfie we bring in to shed light on all of this. >> yes, indeed banks are very closely tracked yields since the start of august, falling that month, rising for most of september, and then falling again in the last few days as growths have pulled yields lower. the route that the likes of charles schwab and td ameritrade

faced as they engaged in pricing war this week also infected the banks. unsurprisingly the likes of morgan stanley down more than jp morgan due to a higher portion of revenue coming from wealth management it is important to note discretionary wealth management is not retail investors trading with a broker. it is different than the likes of jp morgan, bank of america, have offered free trading for a while already. it is just a tiny part of their business nonetheless, there's a l legitimate question of broad price wars across the management space. banks are down close to 5% for the week, kelly. >> wil, you know the businesses better than anybody. when we are talking about a rate cut maybe in october, maybe more in the months to come, is that something that you think kind of hangs over their ability to perform in their earnings now, more so than we thought, or is it one of these -- everybody keeps saying, look, it is not what you think, they can keep making money, it is not all about nim? >> one thing it certainly hangs

over clearly is investor ntiment toward the banks as we clearly see with the share price sell-off at even the slightest hint of recession fears or interest rates falling further does it hangover to quite the same manage agnitude of their earnings no, because there's income as opposed to fees as related to interest rates when we heard from them about two-and-a-half weeks ago at the barclays financial conference, they updated and it was slightly better that said, yields have slipped once again in the last couple of days once again, there's an inability to split the difference between the clear negative sentiment toward stock prices and how much it impacts earnings, but certainly sentiment going into the quarter will be softer, though the quarter has ended and yields are falling as it relates to the next. >> we will see you for the

close, wilfred frost >> see you then. let's talk about homebuilders, if you are looking for a bright spot lennar is in the green. in fact, it hit i.t. highest level since april of 2018, all of this after better than expected profits in its third quarter. already low mortgage rates are poised to head lower after all of the discussion we were just having let's get more from diana olick now. diana, they're bucking the trend here today. >> absolutely kelly. lennar posted solid earnings, a big beat on the order and it has it in the green, up over 2% for the day, although not able to pull most of the other builders up it is said that there may be concerns about the economy, but stuart miller said it is not hitting his buyers. >> i know there's discussion about upcoming potential recession and things like that, but customers don't seem to be viewing it that way. i think the housing market in general seems solid and strong and continuing to improve. >> the builders today should be benefitting from a turnaround in

mortgage rates they rose through much of last month but are now falling again as investors flee the stock market for the relative safety of bonds pulte homes is down on the day but hit new hypotheticals all summer, likely on the lower rates. >> one thing that has been said one of the things keeping them bullish is that the housing data has started to turn higher and perform better should we expect it to continue through the autumn is that all intact or do you think that the macro weakness filters through into people deciding maybe now is not the time that i want to be making a big ticket purchase like this? >> no, kelly i think demand is certainly there. we were at an open house in atlanta over the weekend, talked to people about the fears in the economy, potential recession they said, no, look, mortgage rates are low. you haveo jump in now. one of the people actually said, no fear, you got to get in because it is a good time to buy. the problem, of course, continues to be a lack of supply and high prices, but if they can

get in on the affordable price point and at the close to record low mortgage rates, then they're going to get in. they simply are. >> i showed that house you showed that went to 215 grand to the out-of-state investor. it was crazy people can read your stuff and know what we are talking about appreciate it, diana olick finally a victory on the trade front today. the world trade organization giving the green light for the u.s. to place tariffs on more than $7 billion worth of european imports why? as part of its airbus dispute. let's get to kayla tausche with the details on this and the reaction in washington >> it has been a verdict 18 years in the making. the world trade organization, which is the cop on the global trade beat, said the u.s. is right, that the european government has been subsidizing french company airbus to help it unfairly have an advantage ov ovover u.s.'s boeing. wto found that the subsidies were essentially worth about $7.5 billion as a result the u.s. can put

tariffs on that much worth of goods from tariff. the u.s. trade representative will be choosing the goods from a list of about $25 billion in products that it has already put together we don't know the level of tariffs and we don't know exactly how they will be structured, whether the u.s. wants to be changing around the items that it is going to be putting these levies on. brussels we should note is planning to fight back in addition to its own retaliation, airbus is arguing that boeing gets its own unfair tax benefits from its home state of washington, and a decision on that, kelly, is due early next year. >> so this is interesting because 7.5 billion is a small amount but it is still significant because it is the largest award, and much bigger even than that is whether it opens a new front in the u.s./european trade skirmish that could develop here. how should we expect it to play out? >> we have had intensifying relations between the u.s. and eu you have an incoming european commission presidentwho spared no word in talking about the trump administration and its

actions against europe on trade. you have them looking at vario ways to hit u.s. tech companies. have seen antitrust investigations, we have seen digital services taxes, and then you have the white house's potential decision to put auto tariffs on europe. there's a november 13th deadline to make that decision. so there is a laundry list of things, kelly, that each side is considering, and we'll see whether some of these weak economic data leads the u.s. to back down or whether they still go full throttle. >> it is though interesting to see, you know, a big trade body basically vindicate washington's strategy here. i mean we know the issues with airbus, but still to have them decide in america's favor and say, yes, you know, this was unfair, i imagine the white house is very pleased with that outcome. >> yes, and it doesn't happen often if at all, kelly of all of the tariffs that the administration has put on since president trump has taken office, nearly all of them have resulted in lawsuits from the counter party at the world trade organization this one, the wto has the u.s.'s

back and we'll see what the u.s. decide to do in response. >> absolutely. kayla, thanks very much. kayla tausche in washington for us turning now to apple, those shares are down about 2.5% today. josh lip ton is drilling down on what is dragging them lower with the rest of the market here. joshua. >> yes, kelly, taking a step back, obviously tech has been a winner for investors this year, best performing sector in the s&p 500 by a nice margin, a surge of more than 25%, but today that sector in the red, one of the worst performers. check out apple, losing steam despite the bullish note from the team at web bush we saw this morning, kelly they're telling their clients dema demand for the new iphone 11 line-up seeing a modest up tick from asia suppliers. in other words they're increasing production for those new models remember to put today's move in context, apple surged 40% this year, more than 50% from the low in early january some notable laggards in today's trade, western digital one of the worst performers in the

sector it surged more than 50% in 2019. cisco and intel among the biggest laggards so far today. back to you. >> josh, thanks very much. we appreciate it josh lipton there. the weak manufacturing data this week was the worst since 2009 it brings new atentention to america's industrial economy and you can't talk about that without talking about the effect on energy. stocks in that sector have been slammed year-to-date, but the manufacturing data has been pretty terrible. brian sullivan has a look at what it might mean moving forward. >> yes, thanks, guys energy listen, it has been playing havoc with the national numbers as of late thanks to my good friend steve liesman for this data. here is a look at shipments by manufacturers to the oil and gas industry year over year. you can see not only have shipments, which is the yellow line, come down from a year ago, new orders -- future orders, the white line -- have fallen as well total shipments are down 2.5% from last year

i gets, 2.5% may not sound like a lot, but when you are talking about hundreds of millions or billions of dollars in big heavy equipment orders and manufacturing it does matter the slide has been going on for a while. as of august, manufacturing data to the industry is down nine of the last twelve mont a part of the slow down is a drop in drilling activity. last year at this time 863 oil rigs were drilling for oil in the united states according to baker hughes last week, just 713. much of that drop is coming from texas. in fact, according to baker hughes, drilling rigs in texas have fallen by 111 from a year ago. remember, each drilling rig is a big, heavy pipe-filled piece of machinery. they use many vendors on the drilling sites from rig companies, generating companies, to truckers, sand haulers, you name it. here is the thing to remember. in 2008 oil and gas nearly single handedly kept the american economy to falling into a worse recession or depression. for about two years energy was

the only industry adding jobs, and each drilling rig represents maybe 75 to 100 workers directly and indirectly if we see a slowdown in drilling, we may start to see a big slowdown on the big daddy of all economic numbers, and that is the monthly jobs report just something to think about with manufacturing data, oil and gas, the stocks are down, but that drilling activity could be tweaking the national numbers lower as well. >> and, again, we will get that jobs number in a couple of days. brian, thanks. let's get more on oil with ira epstein with the division of linden associates. what are people saying agency we watch the price action in crude, ira? >> well, you know, today's psychology, you are looking at a stock market let-go that doesn't bode well for emergency markets. while the two may not have that much to do with each other, and we are looking at the rig counts as brian said that have come down, we also have to understand there is a certain interest elasticity for energy. we are seeing mergers,

acquisitions in the oil field, people are not drilling as much as they were why not buy a going concern rather than one you have to drill for? i think the trade is looking right now and saying, okay, we are down, but are we getting toward the $50 range where the market should find some support. >> do you think lower oil prices hurt the u.s. economy more than help them right now? >> i'm sorry i didn't hear that. >> do you think lower oil prices hurt the u.s. economy more than help it right now? >> well, lower oil prices -- let's define lower a year ago we were about $7 lower at the beginning of the year, so we've come back quite a bit in the oilprices so the answer is not -- it doesn't hurt it because it puts money in a consumer's pocket at the end of the day, as much as we're concerned in america about construction, about manufacturing, that's about 10% of the economy what really makes up our economy is the consumer, and if the consumer has more gasoline money left at the end of the day, the theory is they'll spend more so, no, i don't think low gasoline prices are really hurting the economy.

>> all right so if we have wti below $53 a barrel today, what are the significant levels to watch from here >> well, if this market and the stock market can get down -- i will key it off the stock market so far the 200-day moving average of closes in s&p, the dow and the nasdaq have been able to hold the brakes since august if the market goes down and finds support there, maybe in this area $2 lower is where the market will find support, should you get an acceleration through that and it doesn't hold, why not go back that other $6? that's what i'm looking at right now i don't want to be a hero, but if i were on the short side of the market, i would be concerned and certainly using very tight stops trailing the market down. >> all right great stuff, ira one last thing because the major headline for crude the last couple of weeks were these attacks on saudi arabia, and we quickly shrugged that off. it is remarkable what does that tell you? >> remarkable is an understatement if you had told anybody that you

are going to lose 5% of the world's production potentially and the market has a one-day rally and gives back everything, i don't think anybody would believe that what it tells me is the cartel is not as strong as it used to be we are seeing ecuador leave it, indonesia has left it. the question is trying to get russia and the saudis together to cut back enough production, and the problem is everybody needs money. they're not cutting back as much as they could. >> all right again, like you said, at least it is a win for the u.s. consumer and we will take it on a day like this. ira, appreciate it very much thank you, sir. >> thank you for having me. >> ira epstein let's get a check where we are on this sell-off day the dow is down 560 points it is a 2% decline for the dow and s&p and the nasdaq is slightly less than that. the dow is just 16 point above the 26,000 mark right now. the nasdaq at 7760 with about 150 point drop today energy, tech and materials, also

industrials, all of the sectors are the biggest laggards right now. we have been talking about it all hour, but presidential candidate bernie sanders cancelling event until further notice after undergoing a procedure for an artery blockage let's get to john harwood. with the latest on what his health situation is right now, and what is the ripple effect of this on the campaign >> kelly, we don't have any more detail on bernie sanders' condition. we don't know if it is a minor blip that will keep him off the campaign trail for a few days and then he will be back to normal or whether it is a more serious health setback, but bernie sanders is somebody who has had a fairly fixed position in the race. he's held a significant base of support that he had from 2016, but he has not been moving in the race the way, say, somebody like elizabeth warren has. he did report a very impressive $25 million fundraising haul in the third quarter. we'll just wait to see whether or not he's going to spend that money any time soon.

he has pulled down some of his ads that were already up in iowa. >> john, is it too soon to speculate he is leaving the campaign trail, and if so, given what has happened with joe biden the last few weeks on the ukraine issue, that elizabeth warren becomes the front-runner? >> well, i think elizabeth warren had been moving, kelly, towards becoming the front-runner already there was a national poll that showed her at 28, joe biden at 25 she has been the one who has shown consistent progress through the course of the year bernie hasn't mofd muved much ad biden has been going do. so, yes, i think she is in a strong position. the more people see bernie sanders has not being able to compete for the long haul in this case, his supporters and hers overlap, so it is logical she would gain support from that. >> right and as cnbc has reported, you have democratic donors in silicon valley looking to back her despite the big tech calls for a breakup and so forth what is interesting to me, and you spoke with andrew yang about this, and he criticizes some of her proposals including the

wealth tax what is higumentgainst that that he thinks resonates with the voting base they're both vying for right now >> well, he is supporting a value-added tax to pay for his so-called freedom dividend he's not against in principle wealth tax >> i think the wealth tax is an idea in spirit that makes sense given the wealth distribution. in practice, it would have massive implementation problems. there would be capital flight, wealthy people would renounce their citizenship, and the bigger problem isn't the money, it's the annual inventorying of their assets the truly wealthy in this country have zero interest in submitting to an annual audit of all of their assets, would you have massive compliance problems and to me, there are better ways to make this economy fair. though i understand the spirit of it, and the intent of it, i agree it would be somewhere

between problematic and a disaster in practice >> that critique from andrew yang applies to bernie sanders andrew yang is unlikely to become the democratic nominee, he's been a resilient figure in the race, he'll be on that debate stage in october, i think that the practicality of that wealth tax is going to be an increasing point of differentiation between elizabeth warren, bernie sanders and other candidates in the field. >> real quickly, what do you think accounts for yang's durability here. >> andrew yang is a plain spoken normal seeming guy that makes intelligent arguments about what is wrong with contemporary capitalism, namely that it serves people better than capital. do big business success, does it depend on large numbers of employees. you can have successful businesses with very few people and that the 21st century capitalism has to adapt to a

situation that -- in which vast segments of the american population are not benefiting, try to preserve what's good about capitalism, fix what isn't working right. our takeaway from all of today's events in terms of that is that elizabeth warren has solidified her position as a front-runner and it's up tos withes with to speculate on what they think that means >> absolutely, i think if you look at the trajectory of her race, the fact that she's gaining strength, she's in a good position in the race. joe biden has significant assets and he will be heard from more over the next several weeks, certainly on the debate stage in october. you have to look at elizabeth warren now and say, this is not an urn likely event, the idea that she could become the nominee, and so what that means for wall street, for business,

for average people, everybody should take into account of all that >> the nasdaq slipping nearly 2% as i mentioned a moment ago. let's go to courtney reagan. >> when you look at the broader screen the biggest losers here today, at the nasdaq, the composite is down about 2%. we are holding on to this 200 day moving average that's at 7708 we're still sort of above that at the very least. the semiconductor space, those appear to be getting weaker throughout the session, if you look at the etf 245 tracks that, the smh. if you look at the nasdaq biotech, which is another big group of stocks that we look at often. that's holding up better than the broader nasdaq composite only about six names are holding

on to positive territory in the nasdaq 100 this is a widespread change. we have apple and microsoft responsible for about 21 points to the down side on the nasdaq 100 and amazon as of now, it's only october 2nd, we have lost the september gains for the nasdaq >> back over to you. >> no pressure on the u.s. consumer here. don't screw it up. >> we're holding on to you guys, that's the hope. >> thanks very much. >> courtney reagan at the nasdaq for us the 2019 ipo rush has raised cash since the dot com bubble, but it doesn't seem to be paying off, as valuations fall, and many ipo's have significantly formed if the market intensifies and we get a slower economy, will capital dry up in silicon

valley what does that mean? you've been writing about some of these start-up companies. if we're talking about a slower economy, that argument gets cut in half. >> yeah, i mean, i think there's a difference in silicon valley between what people say and do i askedfrequently, if the economy slows down, would you do as many deals. they kept doing deals and kept making money i don't think that there's going to be a significant cut back on a deal by deal basis among the ec's if the company starts tanking, they may say they will, but i'll believe it when i see it >> is there going to be a cut

back even if the economy's fine? >> look, obviously, there's a little bit of a tragedy of the comments here. each individual might say, my individual portfolio is doing pretty well. ultimately we talk about what vc's are going to do ultimately, you know, there's a collective illusion here every individual person thinks that, nothing really changes >> has there been a bubble in terms of the number of venture capitalists? is this rationalization where we see this transition from, maybe telling us how even more out of whack things have gotten >> i think teddy said it well

for years and years we've been talking about this bubble. and soft bank comes up with another couple hundred dollars you're seeing the double standard emerge. you have the consumer facing companies, very high profile like uber, lift, wework, that are doing poorly in private markets. uber was valued at $72 billion right now the market cap is 49 billion. for lyft last valued at 15 million, now trading at 11 billion. you are seeing these come down to earth some that i talk to would point to the enterprise names. even though they have come off their peeks in recent weeks, they're still holding on to impressive gains, it's like zing they're still doubled since the time they've been published. >> i think if that was rational,

again, there's always a believer out there, as long as there's one believer out there, it doesn't matter if they're a heretic or everyone disagrees with them, there's going to be someone whose fundaments have not changed at all there's a rush to get into the next deal. the fundamentals are the same wework or no we work >> it's not like cycles don't exist in the silicon valley. we probably had the worst one going back 20 years now. these things can come down to earth. >> they can. we've seen a long ball run one thing i would say, silicon valley is going to take ownership of wework, this company doesn't have the same venture capital money that some of the other names have they're not based in san francisco they grew in new york.

i think a lot of them would say it's not indicative. >> go ahead, teddy >> it's very easy to pass the buck, if you don't want to draw a lesson from it you don't have to >> they're not being forced to draw one yet if the rest of the ipo's can get out the door into next year, thank you both good discussion today. let's get a check on where we are. the dow is down 5. points, that's a 2% drop s&p is down. we want to let you know, amidst the selloff, we'll be hearing from the president at the white house. he'll be giving a news conference along with the president of finland, that's expected to begin in a couple moments time we'll see if he weighs in on anything related to trade, the economy or the campaign trail. that does it for the exchange

today. thank you so much for joining me power lunch starts right now >> welcome, everybody. we start with today's major market selloff on power lunch. stocks are getting slammed for the second day in a row. recession fears are on the rise. thedow down nearly 600 points. 541 right now, 600 at the lows or there abouts. we're heading back toward those august lows by the way one strategy, do not get too scared, new highs. yeah, new highs are just around the corner, and he will explain why he's seeing that outcome we do await president trump who will be speaking any moment as the impeachment inquiry in the house heats up he'll do a joint press conference with the leader of finland. power lunch starts right now