the dow jones has paired its losses, it's down 80 or down 50 now. the nasdaq indicated down 12 or so the s&p indicated down now about 6. a couple of tough sessions we'll see how things play out today. all important service i had coming in, in about an hour. make sure you join us tomorrow "squawk on the street" is next [ music playing good thursday morning, it's "squawk on the street" futures just south of the flat line after the first back-to-back 1% declines of the year for the s&p everyone's on watch as joe says for some services in an hour which did fall into contraction in the uk. ten year yield on a one-year

low. our roadmap begins with red october. stocks off to the worst since the crisis futures have a new open. >> after the worst manufacturing in a decade, sources work on that this morning. >> shares of pep ki so fueled by sales growth and a nice earnings beat ceo will join us first on cnpc in a few minutes market versus a rough time in an economic slow down a second sell-off resulted in the dow falling more than 800 points s&p lost its gains from queue and q3 combined. investors will be paying close attention to services data in less than an hour from now jim, they say of the two times that ism manufacturers contracted, we haven't had a recession because services held in >> last night i had marty mucci on from paychecks.

my old colleague larry kudlow chief economic adviser to the president says that's where it comes from it's not like gm creates jobs. he says this was the best time they've had and september was a strong month in the country and was constrained by not being able to find more employees. it's kind of like there is two worlds here. like marty is talking about acceleration in the economy and that we would have tremendous job growth if there were more people then we got the other part of the economy, which is the rails and the air transports and manufacturing, which is just not good and the warmer the marty mucci paychecks is who spends, who is buying houses lennar was one of the best quarters i've seen lennar have and they're the largest home builder. so there are things happening in the xi that are incredibly strong and there are things that are happening that are

incredibly weak. i don't want to just focus on the part that's weak marty was saying everybody is way do you gloom why i. >> yesterday they called it fears of a semi recession because so much of the industrial economy is weak as you said the rest is not this is what the paycheck ceo told jim last night on mod money. >> my -- "mad money" >> my feeling is businesses are concerned, the demand for their products is there, they're out trying to hire the biggest challenges is hiring people to fill the demand that they have, that's good news. >> that's unbelievable i mean, it's funny, sometimes you talk with executives after the camera is over marty i'd like to check my bull here, i know it's important to be reasoned. he says, look, the issue in this country is we need more workers. now, that's typically not the recession narrative. the recession narrative is we have a surplus of workers. that's not the case. so i felt very sanguine after speaking to marty and also of,

for background, the people at len far, they can't build the homes fast enough. so you've got that part of the economy, 10% of economy is housing. it does punch above its way. you find yourself thinking, before i get too bearish, remember these are the people who buy things that's why watching walmart, amazon, target, costco and home depot remains strong when our cart is a chart of the u.s. economy, when you speak to the president's people, yes, i do they're like in disbelief that we don't think it's great that they put 7.5 being in tariffs on europe because that like marty mucci will say the tariffs are impacting only 25% of the businesses that we have of which 75% of the 25% say there is no issue. >> going into the crisis, our viewers will remember being told that housing, a small part of the economy. don't worry too much now we are being told, oh, it's reflective of the entire economy. >> i think that's a great point. i think the difference is when i

remember when bob k toll came o talking about flips and there were way too many areas that are hot. here it's kind of opposite it's, yes, there is some home buying for rental. >> that is a johnathan gray issue in terms of real estate allocation. >> the black sun, yeah >> but i do think that when i say -- >> futures had it. >> single family, there is a demographic movement out of the parents' home. it's probably happening in two waves. i know it's nobody's term, they are finally getting off the couch. i was sick of being at home as frankly as it is, you have to make deals for them that don't really work hard they snack that's why pepsi added a quarter. they snack >> got to go to trailer joes >> you got to get this new red hot doritos. when we told you, not you, i'm from philadelphia, you is different. >> it's a fair point that are you making about the economy

but during the course of the day when you and i are talking to people, or are you here or there, the trade work comes up every single time. >> yesterday we were having lunch, i passed somebody who is a director on, actual lay director on three or four major boards when we were talking about it >> that uncertainty, that inability to want to actually allocate more capital than would be typically the case. because you simply don't know. >> that's going on, that's having a real impact it has an impact far beyond the manufacturing sector >> i will tell you, why do you think the stockmarkets will get clobbered? because of that? >> right >> so it's getting reset, recognition that some companies are getting hurt now the directors that are on the boards of some of the companies i deal with, they're saying like what's the problem we're domestic we've built in our tariff, dollar tree. the dollar trees >> all right why is the russell down 12% from the last high? why is it no higher down than it

was in september of 2017 >> i think there is a lot of money coming out of the market because a lot of people feel it has to roll over i think there is a very big fear factor the fear factor again overdone, i think, with elizabeth warren bernie sanders does have health issues elizabeth warren jumps to the floor and there are people out there who believe elizabeth warren is quite frankly a redistribution i think she's, she is i think she can be tempered. >> cashman said 200 points of the selling yesterday he thought was a sanders sell-off >> i couldn't agree more >> do you remember a year out from the election the markets reacting in any way the expectation of either trump or obviously it was not expected at that point to win? it seems a bit far out to be discounting back the probability of a warren victory before the first primary has even begun

>> i have agreed with you, but there -- when i read the second to the right of the "new york times" yesterday about how elizabeth warren basically wants to redistribute how wealth is in this country as is bernie sanders, i hear, you know, your directors, you talk about tariffs, my directors talk about warren >> no, we've talked about this already many times >> you think it's wrong to keep talking about it >> she'll take the segment and tweet it out, see, they're afraid of me it comes up almost every top. >> top marginal tax rates, wealth tax, raising capital gains tax, dividend tax, i mean, we all know what you are talking and, jim >> yeah. maybe it's child care and healthcare and other universal things >> i don't know. >> i have tried to talk executives off the ledge because i think that senator warren in my belief can be less of a fear

factor so to speak. >> she can be tempered she seems to view corporate america as just bad. >> she if you look at her, i'm not going to disagree. >> that's where i wonder >> i disagree. >> you didn't go in feeling that way. >> i think she's emboldened. i was hoping if bernie sanders drops out, she doesn't have as to worry about that flack anymore. >> but i think most observers suggest don't fault way ahead of widen in at least iowa and new hampshire. >> you are hoping she does the politically right think in terms of bolsters her candidacy in the general election should she be the nominee by moving more to the center more to the center >> my hope means nothing i hope for the eagles to beat the jets >> i think that hope can be real >> it can be a trap game i'm saying the people, the wall street people who live in fear and shake because of elizabeth warren, what >> let's get back to the trade war. >> you want the trade wars

all right. do you see this? do we have a camera? you know what this is, this is an irmes tie they gave this an exception. this tie is more than the apartment you live in. it needs an exemption. >> we have a president he put 7.5 billion >> i know. 245i exempt it irmez. by the way my italian wine and olive oil, exempted. it's about me, david, it's auto about me >> impressive. >> when we come back, pepsico shares are aiming for a fresh record high, better-than-expected results we will talk about strategy and advertising budgets. first on cnbc interview in a moment as we suggest, futures suggest a third day, but that most

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pepsico chairman and ceo hugh johnston thank you for coming on "squawk on the street" >> great to see you as well, jim, good morning. >> let's get right to it there are a lot of people that say basically you did not raise forecast i see that you pivoted towards a higher growth rate than wall street expected and to me, that means it's a very tough quarter. >> that you are being rosier than wall street thought >> yeah, jim, i would agree with that as you noted, earlier this the year we really made a move to pivot towards higher growth, investing back in business in a much more significant way than we've had previously we're doing it across the board, advertising, selling campaignability, manufacturing capability all of that money is going back into the business with the goal of accelerating our growth for both us and our customers. frankly, it's working really well right now we've seen it over the course of

multiple quarters at this point. we're seeing it across a broad base of businesses so we really feel good about the third quarter and how the year has gone so far. that's why we raised our revenue guidance for the full year because as we look at things, we do see apositive picture >> all right so you know i walk the aisles in the supermarket, to me it seems like the aisle that is carbonated, you picked up share against coca-cola. the aisle that is frito lay, you took a couple yards of share with some of these new hot products is my square footage right >> yeah, we're certainly doing better in terms of space in the market both in terms of the aisles as well as the perimeter of the store as well where a lot of sales happen because our products are so impulse. i think what's happening more than anything is the increased advertising we have is causing consumers to shop us more aggressively and our customers are rewarding us with that space because they know that we can

help them grow and that's a big challenge for them so the snack food business as well as the beverage business really has good momentum right now, competitively as well as supporting our customers. >> i hate to say this, you and i are old timers you remember when we used to focus on gator aid and the growth and how important that is could that be happening ago en i see big numbers gator ade? >> i think we have good momentum in that gator ade business right now. it's a combination of a couple of things. number one, just the increased advertising level and the quality of the advertising i think it's picked up quite nicely as well in addition to that, gator ade zero is a terrific new product it's the biggest zero calorie isotonic in the marketplace so far. even though the market is a little over a year old in addition to that, we 'bolted launch, for atmosphere tleets they can meet their hydration

needs all day long >> that product is off to a great start. i'm bullish on the gator ade business right now i think we got terrific momentum there. >> hugh, speaking of advertising and marketing, do i have this trigger right tracking up 12 for the year how long can you sustain that? >> that's correct. yeah we've seen a nice pickup listen, as we see ourselves accelerate, i think you will see us continue to pour money into advertising and marketing. it's having a desired effect and importantly, we're getting good returns on that advertising. obviously as the cfo, i what up that pretty losely we are seeing good positive financial results out of the increase in advertising. not just in sales. 12% is correct i think we will continued to increase as a good, healthy clip. >> and your investor base seems to get it. would you agree? you obviously had the increase in sg & a. they're not concerned about it because it does seem to be driving that organic sales that you are talking about.

>> that's exactly right. the increase in sg & a is purely driven in selling capabilities to go along with our advertising and marketing increases as well. so the investor base understands, putting money into these areas results in a stronger more sustainable franchise. to put it in financial terms, it extends the duration of strong perform performance. combine that with the fact that we got a billion dollar productivity program going on this year. so we're reducing non-value added costs and investing in costs that drive the success of a business i think investors appreciate that, particularly in today's choppy and challenging environment for them >> hugh, you got about 15 seconds, eb tells me the economy is slow and look out how bad is it for pepsico? >> you know, jim, ki speak for our business what we see as a consumer that really likes our products and is buying them at an increasing rate as far as we can tell, the consumer is doing just fine right now. >> there you go. i know we are supposed to be

hanging ourselves. it looks like we are hanging ourselves, we are drinking pepsico and having a couple snacks hugh johnson, thank you so much. a great quarter from pepsico >> thank you. >> i struggle to be as negative when these millennial's like it hot. some like it hot, david. >> i was waiting for it. we have a mad dash countdown to the opening bell take a look at the free market on this busy thursday. ism services in 40 minutes don't go away.

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take a look at fang performance over the last two days netflix actually higher, b of a says it will be a make or break quarter for netflix as they have not missed on the subguidance for two consecutive quarters eng ll in just about 8 minutes.

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[ music playing all right. we're about five minutes from the opening bell let's get a mad dash we're going to sit down today. >> right david, but it won't matter are you still going to deliver what do you got? >> david, you know what? it's really interesting. clorox yesterday had an analyst meeting. it wasn't talked about other than this morning j.p. morgan lowered the price market here's what it was, this was a reset. now we saw the same thing with mccormick. they reset, that's, of course, the spice company franks, mustard, after they reset, they beat iically clorox is doing the same

thing. i think they go forward and they beat they've got something new. a lot of companies come up to me these days, we got cbd do i want to use no name cbd david, better's bees is going to have cbd i think that's a good house keeping seal of approval that's going to take share been the likes of the walgreens aisles. so i like color rooks here to the reset. it's been weak lately, they think playing back frankly is very easily mimicked, but if they can do better's bees cbd, it's going to be the buzz that, oh, i didn't mean that, but the buzz that people need because all, right now lord jones is the established brand which is kronos but everyone wants to be cbd yet, most people don't trust the brands they see the name. >> obviously >> 99.9%. >> some things that you would

put on. >> topical right. i know that larry merlot, by the way, manyer low included in the tariffs. >> cvs ceo >> wants to have a lot of cbd in his stores which would he choose? mr. you know joe blow cbd or owould they choose better's bees i think this is going to be a major issue even though they teased it. >> wouldn't it be nice if we had some true studies of the effectiveness of cbd in terms of what it does best, what it really treats well what it doesn't treat well >> there is a lack of scientific study. in part, because a lot of these scientists aren't able to work on this stuff. >> they don't know how to dose it i think it's important it will start coming out it's not necessarily going to be juul i think it will come out some things it does work for. >> right. >> now i am the chief spokesman for the american - >> yes, you told me that.

>> and it does help topically. a lot of people feel that way. my job is just awareness that migraine is a real actual illness, not like when i was in my hedge fund, someone says migraine, take two buff rin and get out of here. it's real. cbd is one of the many things people are trying. there is some success, all anecdotal. dr. gottlieb who i have been tough on when it comes to juul has been very circumspect about cbd doesn't want it regarded as a cure all >> you have to get funding for these studies. people are coming around as far as clorox between that and delta and gopro to some degree, pre announce season has not been a barn burner >> no, gopro is interesting. there is a funny piece which says it's not a downgradable offense they miss so badly five years ago, today, gopro had

an unlocking, unusual unlocking of insiders. they sold 5.8 million shares and that was the exact top i was in hawaii that day and i was, look, i went to a surf store. i stepped so much in surf. and there i was. there i was. a goat with a gopro. >> you tell everyone whenever this ticker comes up >> and it was the absolute even the moment that i saw it, david, just in the time zone, adjusting the time zone. it was the moment the stock was behind it never recovered. it's going lower see the chart. that was when i saw the goat >> i told them i saw a goat. >> i said it time to sell. it was time to sell. >> never really it's been a time to buy since there was obviously a decent rebound. not really. >> you are right it's been, let's say, suboptimal performer for the company. it added an ecosystem not.

remember the hero ecosystem? >> yeah. >> i'd rather have a philadelphia hero. >> articles on youtube where you can watch people play golf >> they had it all >> that is the opening bell. that's the cnbc exchange at the big board at the nasdaq. biotech focused on treatments for autoimmune and severe and flamtory diseases. >> everybody is negative you got to absorb the selling. what i'm looking for is when do we start getting bifurcated. we buy the pepsis and the progressor and realize everything is not going down but both you guys are right. you can't be an octave about tariffs. he is so happy about putting tariffs on europe, he's joyous he reviews it as a win >> today the scottish government

comes out and says, see, we can't rely on a u.s. trade deal with the you can touk offset a brexit fallout because now we have tariffs on scottish single malt it's weird to have a trump argument in the remain camp, but this is going to have all kind of consequences. >> diagio has really fabulous, they've been hurt. it hasn't been a gait stock because of the weakness, i may have to go to will for that, scotch could be a lagar. >> a lagar >> you never, you don't watch this show? >> i don't know what you are talking about. >> it says laggard >> oh, a laggard >> oh. >> laggard, queens he thought it was like sarah eisen, congratulations to sarah eisen, you thought it was pristine laggard. >> i didn't have any -- then again i actually do know i try and translate. >> because of the podcast, you try to stump people.

you say, what is he doing? does he have his arms akim bo? >> by the way, yeah, peeking of, i don't know what, tesla shares down over 4% this morning. >> they delivered 97,000 vehicles in the third quarter, that was slightly below management guided tour let's sort of say it was inline. they will have to deliver about 105,000 in this current quarter to hit the lower end of their estimate for what they will deliver overall. there was this downgrade from jmt to a market perform. they had been outperformed i love the most interesting part of it is, they, yesterday's announcement was the first time since covering the stock, we found ourselves wondering whether demand crest for tesla's cars might be leveling off >> look, we don't have any tweets so what do we have to base it on >> deliveries. >> i'm saying he doesn't tweet anymore. >> most of the deliveries were

the model 3. >> seriously, he would tweet demand is going to pick up really big in the first quarter. i mean, he used to give us some piz as, now we are stuck with the facts. the facts. >> yes >> this analyst amazing 15 time ebitda multiple on 220 estimates. now that i are wonder if, in fact, that should be the case if demand is leveling off we talked about prospects of competition for the model three and for some of the other models as well. from some other makers who are moving aggressively into bmw area of bmw. right? the tax credits. >> yes. >> going away. >> look. i think it's a once wonder stock that has really just become, well, it's not like gm is bored. people just don't talk about it as a 2,000 dollar anymore. >> money from five years >> yeah. but remember when it was like, people had such high hopes that

it was going to be the next like you know ford. >> based on automobiles, of course let's not forget, they do own solar city that's a part of this company that has slowed that business to a center e certain extent. have you this idea of batteries becoming a huge potential market for them the ability to take in energy, store it. >> right he's not bragging. there is from ug to hang your hat on. >> so you think though that his no longer using twitter to promote is having a real impact on the stock >> absolutely. i think one of the reasons why i said the law, the case would be so important is because this guy didn't play by the rules i happen to like him very much he got excited about his product. there was enthusiasm i don't think that's wrong there was enthusiasm created by him, now, eh, he was able to get you excited about the battery, get you excited about china. there is no cheerleader in chief anymore.

i think it hurts and i got to tell you, you want to know who doesn't have cheer leader in chief but was done today by deutsche bank is google, alphabet >> a crazy price target increase. >> wasn't that >> 1475 to 1,600 >> and listen, senator warren, they're talking about some of the parts. it's almost as if it's kind of, i think it's like giving up a president, warren president. they say that listen if you take a look at the cloud business, it's worth a huge amount of money away from the rest of the company because of le upon james. that's what they call thomas kur iad. it's a positive piece. it's really positive. >> speaking of positive, jim, your semis are going to help lead today. >> where is micron that's all that matters. i say if micron bottoms, they sell of course seven times

earnings micron destroyed the semis the stock was 51 a lot of the analysts got very, very excited i was not one of those on twitter that keep accusing me you remember when sanjay was on our show, the ceo, this is where he implied the buy back would be i know people don't think buy backs matter they're wrong. he's got about 7 billion in buying power i think he's standing there. >> koa, micron, western digital all helping out today. >> yes. >> we are able to watch that. >> jim you want to mention a name you know way. >> constellation brands? >> no, zoettas >> i thought that was so sad >> zoeti ze. he is being by kristen peck. >> we should have kristen peck on. >> she is married to bob peck. >> she will be sensational >> a long time, obviously, she's been executive vice president. group president of u.s.

operations, business of development strategy, a member of the executive leadership team since it was formed 2012 >> a great cho is. >> and there will be a transition at the end of the year this stock has done very well. >> juan ramone alaix has taken huge advantage of the humanization of pets they are the best scientists to whatever flu is out there. i'm excited. when i spoke with him today i was a little bull marketed juan ramone is just such a great guest. he says those of us who had to suffer through dogs and wear the elizabe elizabethan hat. you don't have to put that on the dogs, they're bouncing off walls and stuff like this. now, it's just like hey, i feel better at least you get the sense they they that. by the way, cannabis, nvidia could not jump on the bet. we put cannabis.

>> arthritis. >> on the knees, jumping all over the place right on the bet right next to me there you go there is some fda approved >> works for dogs. >> see what i thought you were going to talk about is bed and bath >> yes. >> looks like it reported a bad incident but when you go underneath. >> you thought that's what i was going to talk about? >> i was trying to transition. >> when you look underneath. there was a lot of good. including a strong end to the quarter. they will name a ceo my sources indicate we will be excited and say, you know what, they got someone big now, they laughed when i said, wells fargo can get a good ceo now you got charlie sharp. what would happen -- >> you said that, you were saying for the long effort time they can't get anybody >> all right yeah, you are right, kinda yeah, you're right. >> we got some wicked price target cuts on schwab, e-trade, td america wells. they go from the 50s, jim, in

td's case from 58 to 30 and they do take that to under perform. ask would be and e-trade they cut to market perform. >> that's devastating that piece. devastating, you started thinking it really is robinhood, robinhood is playing with venture capital money like airbnb just say no like what's what happened with door dash and grub hub. look at dominos versus yum during this period dominos own delivery suddenly third party deliveries are helping all these other guys so everything that is when you are up against a ven venture capitalist, it's disruptive. robinhood is disruptive like just ripped it into shreds >> speaking of machete, the media stocks, the old ones cannot get upset cvs, viacom. discovery. netflix, not a media company at

all. fox is, none of them are really. >> what is happening >> some of the multiples have come way down for some of these names they are trading at historically low multiples >> we are still waiting for the proxy there to take a closer looking. >> pateing for bedough on that one. when is that one going down? >> that's a good one a lot of people say they stop at zero my travel trust owns viacom. this may be the most painful position since valet i don't mean the guy that takes care of this beautiful suit. >> it's approaching 9 billion. >> i love lucy is worth $9 being. >> it is amazing there is a lot of concern, pe i pepsico is back to the big issues we have been talking about so long. >> everyone says it's the golden nature. >> the fact that it will

continue to increase, do you, how do you compete with the streaming services out there if you are aa network and b you have all these other -- >> we mentioned that call on netflix. here's the quote, while netflix never missed its own guidance two quarters in a row. we flagged the cfo transition as a risk at this point spends newman forecasting abilities remain unproven. >> they're only off about a gazillion. i don't know netflix has become a real bad stock like tesla i may have to pull it from fang. i've come one a new one. >> what are you the do you jo en snoens -- jones? >> -- the dow jones? >> i have every right to be as capricious as i need to be >> i got to get microsoft in team pham. team pham. >> you got to get microsoft in you should have thought of that

when you came one fang >> phamg >> we didn't know how great pre satya will be. the faaang -- faang >> that could be a bottom. >> that happens. >> do you remember what i did the night i picked fang what i said >> what did you say? >> ugggg white fang. like white claw. which is so hot. >> you can say you want to do constellation really quick >> here i see him a little slow down especially the hottest sphere in the country. the main thing is it's the canopy, you know again it's cbd, whatever cbd strikes, it crushes. i think the market the can pip, look, i'll speak to bill newlands tonight, the fastest beer growing company combine i wine is just okay. canopy spent so much money

what did they get? >> it's not clear. >> especially if better's bees comes in >> i thought you liked the canopy deal. >> i looked it until bruce litton spent a lot of money. they bought that acreage i didn't think that was a big deal >> right >> the only problem cannabis company is afria which is run by - >> our friend simon. >> so i mean the problem irwin simon. the problem is no one's been able to monetize it because it's still illegal in a lot of states i have as to move on, someone in my ear said let's move on. what is difficult is to try to build a model when you don't notice we state. can you still it here? >> massachusetts, that's a real problem. >> local towns >> the concern is frankly that you are banning and that the cannabis seems to be hurting people is black market and you are pushing more people into the black market by bank overall including the ones that are

state certified. >> unlike when i say things, you could not be more right. >> he says so few things. >> dow is down 32, s&p is basically flat let's get to bob mibob pisani >> let's take a look at the sector, nvidia is doing well fang's the yields drifted lower. banks have been drifting lower oil is moving do you mean. even retail a month ago, it's also tending to drip lower so the thing we're watching out for is what's the consumer and what is the state of the consumer we want to see obviously the ism non-manufacturing at 10:00 we will see the jobs report, roll up for some idea about what's been going on here? you will notice, of course, the

drill end has been weaker and the stockmarket is reflecting that, auto has been weak, steel has been terrible. manufacturers very weak a while. the congrom rats, the 3ms and honeywells, ipger sol rands, doverers, the industrial side of thef stockmarket is really weak. but the consumer side is really doing much better. that's why people are pretty happy because the consumer is 70% of the economy so home building stocks have been strong. food retailer es have been strong consumer electronics are up, personal products. the consumer side is holding up very well, the stockmarket is reflecting that strength also, the consumer staples have been really strong we have been noting how much procter & gamble is up 30% for the year walmart. double digit gains for kimberly-clark pepsico, great numbers overall

very good organic revenue growth there. i hope you heard hugh johnson, coke is pa little under warming, you get the point, the consumer staples are holding up the market you want to watch the big guys, costco, home depot, nike, ross stores all up 20-to-30%. they have been holding up very well you want to watch for any signs of weakness there, today indeterminate. starbucks a little weakness in the last month down 10 or 12% that's only one showing signs of cracking here. other things to watch, the 200 moving day average, that's 2839 right now. here you can see we're way way above that with 2890 so we got a good 50 points to go finally, you want to watch the earnings commentary. we want to get very fast, beginning october 15th, johnson

& johnson, they report the ones i love, honeywells and textron two days after that in a one him weeks we'll have fourth quarter guidance which is what everybody is caring about right now. that was just up, dow is down, 19 points down >> carl, back to you >> thank you very much market pmi not too bad at 51 ish holding tight. let's go to rick santelli. rick >> yeah, there is pa lot of different metrics traders like to use the cop contend we are waiting for. the ism number i can see it moving markets a bit we are seeing buying and treasuries at the end of the range. a couple things should jump out at you first of all at 145, open the chart up to september of 2017, that was the cycle low comp. in other words, on the 5th of september, we traded a close 143

which took us back to september 2018, very significant with the data points coming out over the next 24 hours. if you look at the july 20, 316, 10s around 136 you see on the far right, early september. we had a 146 cycle low close we were hovering 11 basis points above that there is your steep inner. we have steepened out to 12 basis points we are under performing a little bit today on the long end, short end down one or two. we want to monitor that dynamic and finally there has been so much talk with regard to securities markets, yields moving lower, how that reenforces the weakness next wickties, but barclays high yield index spread is still tame even though it definitely has been rising as you see

now you see the spike on the far left of that cart, of course, that was the fourth quarter of last year to give you some kind of perspective, we all know that when interest rates now move lower in the world we live in, it definitely starts to flash a little bit amber and you are starting to see bits of that in the high yield sector. jim, back to you >> see you in a few minutes. when we come back, goldman's chiefic with i think strategist david kostin is here we move into q4. dow is down 23 we are back in a moment. so servicenow put your workflows in the cloud, huh? mm-hm. your employees must love you. thank you. ah, you could say that. so how are things with you guys? great. thank you.

thank you, sir. lunch next week? terrific. say hi to the team. will do. call my office, i will. -sounds good. alrighty. servicenow. works for you.

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s&p gainers since the beginning of the month, obviously mccormick with the outstanding day the other day. lennar has a slew of ireesncas this morning we'll get stop trading in a moment dow is down 26 to introducing products faster...

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time for jim and stop trading. >> when the economy gets weak, we tend to look at supermarkets which walmart is the biggest and things like kroger, but kroger has been under pressure whether it be from amazon, whole foods or target which has a big supermarket with grocery my sources indicate they cut

1,600 people district coordinator level to try to get the table employment better and the stock is still down. it just shows you that no matter what you do, if you're a big unionized national chain and you're going up against walmart, it just doesn't matter. >> it's already a tough margin business. >> it is a very tough margins about. it's a dicey day we're four minute away from a number that could make me sound foolish, but i do have bill newlands on tonight. let's fine out what they're up to. >> i look forward to that. >> do you? >> absolutely. last night you were spraying mustard. >> yes, french's mustard i had to stab him with it because it was colonel mustard with the knife. >> yes. >> you don't have a clue, do you? >> jim, we'll see you tonight. 6:00 p.m. eastern. ism services just moments away and goldman's david kostin

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street." i'm carl qui-- david of the new york stock exchange. sara does have the morning off markets obviously tight range because we're about to get a very important number. ism services in the wake of the manufacturing number a couple of days ago let's get to rick santelli rick. >> all right everybody hold your breath well, it's a disappointment. 52.6 52.6 we were expecting a number around 55. sequentially follows 56.4. but where does this take us back to actually much farther than i would have thought 52.6 is going to take us back to august of 2016 when it was 51.8. this series has held up so remarkably well that prior to this data 53.7 for july was the low. granted it's over 50 it's still in expansion territory, but nonetheless yields have dropped, stock

market has dropped, so you can sense what's going on. there's so much more data. let's go through it. factory orders, and these are august numbers, factory orders down .1, about as expected if you take out transportation it improves to unchanged durable good orders, these are final reads. the reason it's important is we take away the mid month read the mid month read was up .2 the final read is also up .2 if we look at transportation, similar dynamic, it was .5 it's .5 on the final if you look at capital goods orders, nondefense aircraft, forget all those words, it's a proxy for business spending, capital investment and it is not looking good it is down .4. it was down .2 on our mid month look, so it's deteriorated and if we look at shipments versus orders, that's up .3 that's a tenth of our mid month expectations the data here is not

spectacular, but it's pretty much a push on durableins and factory orders and a weakening number on the service sector, but still in expansion mode. morgan, back to you. >> rick santelli, thanks for breaking that down for us right now. big move lower in the dow. we're down about 237 points after hovering near the flat line on the heels of those readings let's bring in steve for reaction to today's data steve. >> this is not what was expected there was some concern among some of the economists i was reading, if this would be a weaker number. it could be that trade is really playing a role here. some of the people who answered these questions, i think there was a third or fourth largest waiting in the index are retail. you had those tariffs commonplace. that could be part of it it could be an overall sentiment among business it's hard to know what's pushing it it's a raeason for caution. it's not in contraction territory. we look for that to be below 50

and it's not a level that would indicate recession it's part of a slowing in the economy. it's a disappointment. i think the risk today was to the down side. i don't think anybody was going to get very happy or optimistic with an upside number here, but the risk to the down side shows that perhaps some of the manufacturing weakness that's been out there is going over and affecting the services sector. now the question becomes does it affect the consumer. as you know, we've been reporting and i'll be back at 10:30 to talk about really a growing pessimism among average americans in our all america survey. >> steve, thank you for that steve leishman joining us with his take david kostin is with us as well as we continue to look through some of the internals. the employment component does hang in, 50.4 versus a prior 53.1 so what happens to the argument that the consumer is strong? >> well, it would suggest on the

services side the consumer is slowing in terms of the latest data we saw the manufacturing index drop at 47 earlier this week on the first of the month that's certainly on average the third quarter was below 50 manufacturing side of the economy clearly reflecting my view and my colleagues -- probably a trade issue and some of the slowing growth in europe and elsewhere. but the services ism has been notably pretty solid, mid 50s for a while. this certainly would be disappointing. the outlook for the market would be modestly higher around 3,100 at the end of this year >> you're sticking with that. >> we're sitting here today and starting next week we'll be having third quarter earnings releases, so for the next three to four weeks that will be the primary focus. it will be reflective of the business activity in july,

august, and september and so really we'll be also looking at what is the indication suggests for fourth quarter to next year. right now the expectations are for year over year decline in earnings it will be the first decline in earnings in several years, since 2016 which is notable because that was the last time you saw the indication of some of the services at that time oil prices were down and it was driven by the energy sector. >> would that still be happening if buybacks were pacing at last year's pace? >> that's a fair point to look at right now the expectation is that buybacks were pretty muted. you did have authorizations, strong expect indications after second quarter is that buybacks would probably be at a more muted base that reflects the corporate uncertainty from business outlook in terms of tariffs. tariffs and trade become the number one topic in my conversations with portfolio managers there would be concern about

what's likely to happen. pr it has certainly been winning on decisions about capital spending and probably uses of cash for buybacks. >> which i think makes maybe viewers wonder how much faith do we have in any kind of corporate rat guidance that we get either preannounced or prints for 2020? >> it's a cloudy outlook you have politics, trade, egt. what do you have you can look at the dividends. this is uses of cash in terms of giving the money back. that's a strategy that we're focusing on in this environment where there is urn certainncerty what do you see in terms of dividend growth. if you look at groups of stocks that have high dividend yields and growth, thaez a those are outperforming. they've got better growth, 9% dividend growth. the pay out ratios for the

overall market, 32, 34%. there's still plenty of cash companies can use to direct it back to shareholders that's a strategy in this environment. >> david, we're showing a board right now of the dow it's down 283 points we've just broken back below 26,000, but the banner on the bottom, the three-day loose is over 1,000 points for the douw. what do you tell people who don't check their poert folrtfo- >> you focus on the s&p 500, so i respect that >> we've seen big moves in the sapp as well. >> it's only the optics. the market has gone higher and higher over the years. the point number in the dow becomes more dramatic. but what do we tell people is we look at the fundamentals you need a framework to think about what's happening and how you direct a portfolio

you have the economy you've got earnings. you have valuation you have money flow. what is the economy telling us it's week or it's weakening i should say based on let's look at some of the ism and manufacturing. on the other hand, the consumer balance sheets have been deleveraged and consumer is pretty strong in terms of a starting point, but that's an area of concern. you have earnings. what are earnings telling us this quarter we're expecting for the first time negative earnings growth on a year over year basis for the first time in basically three years. that's also an area of concern on the other hand, people are expecting negative earnings growth in the first quarter and second quarter and it came in positive tax rates were lower than expected and then valuation of the market trading around 16 times forward earnings that's basically high but not extraordinarily high that's telling you that -- telling us on average the market is likely to move modestly higher and carl made conference to the fact that the buybacks have been more muted in this environment

it's not a terrific story. on the other hand, bond yields are extremely low. >> that's actually what i wanted to point out we take a look at the tenure as we watch the dow the s&p is down 1.08%. thank you for affirming its importance which i try to do here as well but you've got a tenure approaching 1.5 again what does that do to your overall investors as they look to diversify or not. >> what are the alternatives in terms of the landscape equity would look somewhat more attractive than bond yields buying treasury at 1.5%. corporate bonds are pretty narrow it is a more challenging type of environment. we think out, although there's relatively less clarity on what the outlook is for 2020, there is a likelihood that if we have deceleration, it could actually pick up over time and as we look

towards next year in terms of economic activity. so the economy right now is growing on a run rate basis somewhere around between 1.5%. which is slow. >> you mentioned something earlier. i think it's always interesting. when you talk to clients, when you talk to the institution ap investors that you go around and market to and tell them what you think, what is the main concern that they have what are you hearing most often? >> trade, number one the second would be on basically bond yields, growth, broadly speaking growth. the ipo market, what does that suggest? anti-trust what are some of the postures with respect to, you know, the policy and the administration and different areas? the department of justice and federal trade commission and things like that those are some of the things that basically get discussed what are some strategies in those areas? one of the areas on the economic slow down would be services companies, services providing as opposed to goods producing we talked about that in the

past that's a way to, if you will -- relatively 70% of the economy is basically someone. that's one strategy. the idea about trade, owning companies with domestic facing end markets and the third is basically in a low bond yield environment, what are some companies, what are the strategies involving, income based strategies earlier today pepsi would be a company that would fall into a basket of companies like that. paychecks. you have a variety of companies, different industries that have a combination of yield plus the growth in the dividend yield and we would view those as attractive in this environment. >> earlier in the year you came on and you screened out margin growth is that still even are there five companies on that list >> expect taegz ation is you're to have margin contraction it's an interesting dynamic between the market and the median stock the market is skewed by some of the larger companies is going to have year over year earnings growth down around 3%, but the

median company will be up around 3% it's an important distinction if you're a stock picker and you're the audience to which you're referring and individual companies will actually have modest growth in their profits some of the bigger companies, semiconductors having a difficult time this quarter, year over year basis a lot of technology will be hard pressed on some of the hardware companies. that's helping to unfortunately drag down the earnings growth overall. >> finally, david, are you doing any reallocation u.s. versus europe >> well, europe is having a lot of difficulty. the attraction there would be on the income front where dividend yields are much higher than here in the united states. >> is it tempting you? >> one of the issues on europe is a lot of their business activity involves exports. to the extent that they're exporting, the issue on tariffs, that would be tempering enthusiasm for that at the present time >> a lot to handle too much to get into five or six minutes, but thank you, david.

>> thank you >> interesting to watch that plunge in bond yields right now. we look at tesla right there when we come back, we're going to talk about that stock which is down 32% for the year is moving lower plus pepsi popping or at least it was on earnings the stock is near an all-time high you can see it right there we're going to dig touhrgh the numbers next when "squawk on the street" comes back devices are like doorways

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markets. we've seen big moves in the last couple of moments. lower with the dow down 275 points right now breaking below 26 k the s&p, the broader market is also down .8 the nasdaq similar move lower as well of course, this coming on the heels of the much weaker than expected september ism nonmanufacturing number. read of 52.6 which is the worst reading since october. every sector is in the red except for real estate and treasury yields have also been moving lower on this report as well let's talk about tesla the company did deliver a record amount of vehicles it still fell short of the target of $100,000 a little bit short phil has a lot more for us this morning. >> the question that a lot of people are asking this morning and clearly you see that the bears are having their way just a little bit with tesla shares is whether or not demand is leveling off for tesla vehicles. that's because there are some who are saying they probably could have delivered more

vehicles if there was greater demand there was nothing indicating that they were falling short or having problems when it comes to delivering vehicles. here are the total numbers 97,000 delivered in the third quarter. the consensus was 99,000 elon musk said they had a shot at 100,000. model x making up $17,000 and change what does that mean for the full year guidance? so far they have delivered about 255,000 vehicles that's the red line you see in the far right there. they mead to come up with another 105,000 vehicles in order to make the guidance they set earlier this year. they have not changed their guidance we should also point out, jmp securities out today moving the stock to market underperformed basically a sell rating. has demand leveled off could they have delivered more vehicles if there was greater demand they are arguing yes, they could have that's why you're looking at a

stock right now, one reason you're looking at a stock down greater than 6%. >> phil, we noted that downgrade earlier about this demand question because the analyst did seem to sort of sense, almost give up or at least questioning his 15 times he put down multiple for 2020 estimates. what's your take on the landscape, other vehicles now offered by major manufacturers >> i don't think that's a big -- the tax break i do not think is a major factor at this point it's being cut from, what was it, down 3,750 down to maybe 1,800. at this point when you're buying a $60,000, the tax break is not a big incentive at this point. i don't think that's a big factor i also think the competitive landscape, while it is increase, that you're seeing more people, whether it's porsche, other automakers coming out with electric vehicles, they're not at a level yet where it's

seriously cutting in to the sales at tesla so it all comes back to what jmp bring us which is should there have been greater demand now, the bulls will counter look, they are smoothing out their delivery cadence and you're going to have china coming online theoretically, at least that's the hope of tesla later this year. and if they can get that up and it's a smooth launch of that factory, you've got the world largest market they are going to be directly manufacturing in and that should be a huge boost. >> what's the capacity that? have they said >> they haven't said officially. when it's all said and done, ultimately in a couple of years, theoretically i believe the capacity could be anywhere between 300,000 to 400,000 and that's a back of the envelope projection initially the deliveries and the production are going to be very limited, but then they hope to ramp up, especially as the model y comes online starting late next year. if it's on schedule.

>> phil, thank you when we come back, we are all over this selloff. take a look at the dow right now. we're down 240 points. the s&p is down 20 67 is the level there. strong in terms of selling here. the only sector that is in the green is real estate contract for b lsefoaligoss r l the major averages for end of the week more "squawk on the street" after this break american senior, or worse, that it was some way to take your home. learn how homeowners are strategically using a reverse mortgage loan to cover expenses, pay for healthcare, preserve your portfolio and so much more. a reverse mortgage loan isn't some kind of trick to take your home. it's a loan, like any other. big difference is how you pay it back. find out how reverse mortgages really work with aag's free, no-obligation reverse mortgage guide.

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it is now time for our etf spotlight. make santelli is taking a look at the significant evaluation split between value and growth. >> exactly if you look at the etf for the russell 1,000 growth index and the russell 1000 value index, year to date, growth obviously is still strongly outperforming. here you have the pe ratio, though of the value index. iwd is the russell 1000 value index. it's below 14 right now, so that's well below what the overall market is trading for, which is around 17 arguably this suggests the

market isn't particularly surprised about the slowdown the growth fund iwf, it's trading at about a 21, 22 times forward pe, so obviously that's where -- that's supporting the overall market valuation and it shows you that basically without confidence in overall economic growth they're cueing to these large growth companies to me it suggests that yes, we're talking about are we going into a recession, is the economy going to slow down much. it's obviously a relevant debate i'm not saying the market is priced for a recession, but the story has been running its way through the stock market for quite a long time right now. if you look at the value etf, it's at a cheaper version, cheaper valuation than it has been for a long time. >> people yesterday argued bond market's been forecasting the ism collapse for a year november then look at what yields did today. where does that argument stand >> you have to keep chasing them down i mean, bond market is dictating

exactly how we view all this stuff, whether it's fleeting, whether this is a trend we have to worry about i think the ten year at 1.5, we're again back in that zone of saying that the bond market is in a defensive crouch and stocks have to, you know, have to reckon with that. >> dow is down about 300 points the lows of the session. we've taken about 100 of that back off the table we're now around 200 points lower right now. the fact that we seem to be starting to scale closer towards the flat line tells you what >> it tells me that after two days of pretty heavy selling, people were already leaning in the negative direction, and the ism nonmanufacturing number has never really know much of a market move. if it plunged below 50 -- you have a jobs number tomorrow so you're withholding evidence about what the weight of the evidence is telling us about exactly where the economy is headed we went up 100 in a few minutes

and it can go down in a few minutes. >> we're going to get clarida, so the odds of another cut for october go to the 80s, we'll see if the fed -- >> exactly and then we're talking about two cuts in terms of the market maneuvering. if you look at where the two year note has gone to, it's kind of pricing something like that the problem with the stock market is it was hoping to get the cut without the pain i think that we lost that. key things to look for in the jobs report tomorrow, i imagine the ante has just been upped now. >> it has. obviously, you want to keep it into six digits, i think that's kind of the headline number you want to see growth somewhere in the zone of where the adp came in for private sector this is week. i think manufacturing employment week is probably a given to some degree right now, so that might not come as a big shock. >> all right

mike san totoli. >> diana has more this morning. >> good morning, carl. fall home bayers are getting a bonus to sell off. the stock market is causing an unexpected turn around in mortgage the average 30 year fix fell through the summer but made a jump back up in september. now rates are headed back down again. we're down more than 10 basis points just since last friday, so you're already talking about a savings of about $25 on a monthly payment of a $300,000 lo loan we're down about 1.25. that's about $225 less on a monthly payment for that same $300,000 morning that is real money for today's cash strapped buyers, especially those first time buyers, all those numbers thanks to mortgage news daily lower rates are clearly boosting the builders we saw a nice beat on new orders

from lennar. he also said that despite all the talk of recession, lower rates for now are outweighing those concerns among buyers. home prices are still gaining, but the gains are much smaller than they were a year ago. the only thing standing in the way of an even stronger housing market right now is still very low supply of affordable homes for sale back to you guys >> any thoughts as to when that will change or if it's going to change in terms of supply side of this? >> not really. actually, it's getting worse than it was earlier this year. we were seeing gains in inventory, but now we're seeing lower inventory than a year ago. the builders are just not at that entry level price point yet and again you have so many investors at the entry level that for regular buyers it is tough competition. >> okay. thank you, diana let's send it over to sue herera and for a news update. >> good morning, everyone.

a 20-year-old police employee armed with a knife attacked officers inside paris police headquarters killing at least four before he was fatally shot. the attack appears to have begun in an office and continued elsewhere in the large police compound which is located across the street from the notre dame cathedral. secretary of state mike pompeo meeting with pope francis at the vatican where they exchanged gifts. pompeo is on a three-day visit to italy where he has found himself at the center of the news over his role in the phone conversation between president trump and ukraine's president. a powerful typhoon battering southern south korea leaving nine dead and five others missing. more than 100 homes and other private structures were flooded while more than 1,500 people were evacuated ahead of the storm. a trio of astronauts left the international space station and entered a space craft for their journey back to earth. the soviet and american astronauts completed 202 days at the space station while the

first arab in space spent eight days there you are up to date that's the news update at this hour carl, i will send it back downtown to you. when you come back, we will continue to watch the recovery from the initial selloff dow is down 116. we're going to hide from the volatility we'll talk aboutow t ho protect your portfolio when "squawk on the street" comes back - at southern new hampshire university, we believe in education built for all people.

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cnbc is out with the all america economic survey with views on the economy taking a significant turn downward. steve leishman joins us. he's got all the results steve. >> david, good morning americans attitude towards the economy taking a sharp turn downward in the third quarter. 41% pessimistic about the current state of the economy and about the future the poll registered the highest level of pessimism since october, 2016. it represents a stark change

from the heady days. this time last year when the index was hitting new records, we couldn't say enough about how people felt about the economy. the good news, attitudes about the comment state of the economy this quarter, little change. the big change came from a 7-point drop in the outlook for the future that is the biggest drop since 2011 the decline in optimism registered across political parties, but the impeachment may have the biggest drop. this poll conducted last week and more than half the republicans said they were concerned impeachment could hurt the economy and the stock market but there was maybe more work than just politics other key economic indicators in the poll, they were down as well the percentage saying that wages will rise 32%. the lowest since march, 2016 the percentage saying it's a good time to invest at 35% also the lowest in three years. just 23% are saying the economy will improve, so that surge in optimism that came with the election of president trump, it grew

sustained over two years, now wiped out entirely it's the first time in 11 polls we've conducted during the president trump presidency that pessimists now outnumber optimists. >> question for you. how big is the risk that all of the talk about recession and recession fears is spooking consumers right now? >> i mean, i think it's a piece of it. they hear enough of what's going on it is interesting, morgan, a lot of the decline in pessimism, again, like i said, it's across parties, but it's also at the top among the wealthier people in the survey, among those with the most in the market we saw a decline in pessimism. things like the stock market, we've known for quite a while the impact of volatility in the stock market has a negative impact on sentiment. also by the way on the wealth effect but the headlines right now are not that great that come from washington there's maybe some indication in the poll that tariffs are a problem as well. that consumers are grabbing on

to none of that stuff is saying you know what? there's reason for increased confidence in the future although what is good is that the current state of the economy, 37% believe the economy will stay the same and there's only a very small decline of people's assessment of the current state of the economy >> just a few seconds here, steve, until we hear from the president, but rate cut odds on october and december >> yeah. they just kind of spiked up. i was just looking here. they're near -- i think they're even above 90% according to my old -- for october, it's quite a bit higher than the old ism number and higher than it was earlier this week. what's more interesting is they're now starting to bake in another cut. >> steve, forgive me, here's the president. >> we've been doing a lot of work on health care. we were very successful at it so we're going to be speaking to the great people of florida and i think they're very happy with the job we're doing.

[inaudible >> what? [inaudible >> if you look at the whistle-blower's complaint, it's inaccurate because the conversation i had was absolutely perfect and most people that have read it say the same thing. the whistle-blower never saw the conversation he got his information i guess second to thirdhand. he wrote something that was total fiction and now when people see that, they're not happy. >> we're looking at a lot of different things china is coming in next week we'll have a meeting with them we're doing very well. some of the numbers i think are being affected, it's all of the politics going on by the

democrats. i call them the do nothings. they do nothing for this country. they don't care about this country. but the numbers really are looking very good going into the future so we'll see i have a lot of options on china. but if they don't do what we want, we have tremendous power >> what exactly did you hope zelenskiy would do >> well, i would think that if they were honest about it, they'd start a major investigation into the bidens. it's a very simple answer. they should investigate the bidens likewise, china should start an investigation into the bidens. because what happened in china is just about as bad as what happened with ukraine. so sailed that president swr

zelenskiy, if it were me, i would recommend they start an investigation into the bidens, because nobody has any doubt that they weren't crooked. that was a crooked deal 100% he had no knowledge of energy, didn't know the first thing about it all of a sudden he's getting $50,000 a month plus a lot of other things nobody has any doubt and they got rid of a prosecutor who is a very tough prosecutor they got rid of him. now they're trying to make it the opposite way so if i were the president, i would certainly recommend that of ukraine [inaudible >> i haven't but it's something we can start thinking about because i'm sure that president xi does not like being under that kind of scrutiny where billions of dollars is taken out of his country by a guy that just got kicked out of the navy. he got kicked out of the navy. all of a sudden he's getting billions of dollars. you know what they call that

they call that a payoff. [inaudible >> well, i leave that to the lawyers. i can say that schiff has been proven to be a liar. we've known it for three years they've been trying to impeach for three years. he's a stone cold liar, soy leave that to the lawyers. that's up to them to decide, but the whole investigation is crumbling. [inaudible >> i can, yeah i can. i can. [inaudible >> well, we have a real problem. we've been hitting the taliban very, very hard. and as far as i'm concerned, they still haven't recovered

from killing 12 people, one that happened to be a great american soldier from puerto rico they still have not recovered and they probably never will [inaudible >> no, but i read mitch mcconnell's statement yesterday and he read my phone call and as you know, he put out a statement that said that was the most innocent phone call he's read and i spoke to him about it too. he read my phone call with the president of ukraine mitch mcconnell. he said that was the most innocent phone call that i've read i mean, give me a break. anybody that reads it says the same thing and the only people that don't understand it is when they look at the false fabricated fraudulent statement made by shifty schiff.

[inaudible >> well, i think biden is going down and i think his whole situation, because now you may very well find that there are many other countries that they scam just like they scammed china and ukraine and basically who are they really scamming the usa and it's not good. and that's probably why china for so many years has had a sweetheart deal where china rips off the usa because they deal like people with biden where they give the son $1.5 billion and that's why china has such a sweetheart deal that for so many years they've been ripping off our country. [ inaudible question ] >> we're looking at it we're looking at it very closely. it's under study. >> we'll see they want to talk and we'll be talking to them soon

we'll see. i'm going to -- yes? >> why did yourecall the u.s. ambassador to the ukraine? >> i heard very bad things about her and i don't know if i recalled her or somebody recalled her, but i heard very, very bad things about her for a long period of time. not good thank you. i'll see you in florida. i'll see you all in florida. >> that is the president talking to the pool this morning on his way to florida to talk some health care. obviously the main headline that the markets seem to react to, guys, was that china and the delegation will arrive for trade talks next week. still on schedule. says the u.s. has a lot of options when it comes to china before speaking about interestingly asking the chinese to investigate hunter and joe biden. but session low was down 335 vix is actually down, so market heard something that it liked. >> we've recovered almost all the losses that we saw after

that ism nonmanufacturing number came in below estimates, carl. we're still down a third of a percent on the s&p not sure if the bounce was due to some of those comments on china. we knew they were coming next week, so it wasn't clear what exactly might have been added there, but nonetheless, we are coming back. >> just to put the week we've had in context, even as we're hearing some of these losses, despite that comeback, it's still the worst week of 2019 for the dow right now. in the meantime, we're going to go to ahmen for more on those comments. >> a significant expansion of the president's request from foreign leaders. the president there suggesting that he wants xi jinping of china to investigate joe biden, the president's political opponent, and joe biden's son hunter biden that raises a host of interesting questions. one is has the president conveyed to president to xi jinping? we don't know the answer to

that the other question, is the biden issue now playing a role in the trade negotiations between the united states and china? if xi jinping see this is request on television, could he get a deal with the president by throwing in a biden investigation and does that complicate the overall negotiation on china trade between china and the united states we don't know the answer to those questions yet, but a significant expansion here for the president to now say publicly in a format that xi jinping can see that he would like xi jinping to open an investigation of his political rival joe biden. that's something we're going to have to get a little bit more detail on here, guys. >> that would definitely open up the framework of talks we'll see if that's in the realm of the possible. that comes a day after navarro suggested hong kong could be included in the framework of talks. it does seem like the band width for next week is getting larger. >> absolutely. the question is if you're xi jinping and you see president trump say i'd like an

investigation of the bidens, what do you do with that do you say you know what, we can open something on paper real quick. and does that get you to a deal or does that get you involved in this impeachment investigation up on capitol hill if democrats say that's an improper use of the president's authority to bring in that question even into his conversations with the chinese publicly or privately. >> isn't that improper i mean, he has a history of asking a country that you're involved in, obviously negotiations on behalf of the united states trying to get a good deal to investigate your political opponent >> the president is involved in an extremely high stakes global negotiation is xi jinping and he just asked him for an additional favor. publicly said he wants something else he wants an investigation of joe biden. whether that's improper or not is really a constitutional question for congress to decide. but that's something we're in unprecedented territory here

we've never seen a president do this before. so this is something that i think investors as they look at this need to sort of get their arms around the fact that we just saw an additional complication, anyway, to the u.s./china relationship and it's unclear where that's going to go from here. >> thanks for bringing us the latest taking a look at the major averages recovering from early losses, the dow is only down 122 points right now the s&p is down 7 or about a quarter of a percent here to give their thoughts are greg battle, and nancy tangler chief investment strategist. good morning to you both greg, i'll start with you. your take on that ism nonmanufacturing number today? the drop we saw and now the climb back from those lows for the markets. does that make sense to you? >> yeah. i'm not so sure what's drifb ve

the bounce back, you can't get carried away by one number if we see the weakness we've seen in the manufacturing side start to show itself more on the service side of the economy, that's going to be problematic for u.s. equities. >> do you think this is just a pull back or correction we're going through right now or do you think it's the start of something deeper and long sner. >> it's hard to know, morgan i think we have to kind of pay attention to what the ism says on the manufacturing number, they're kind of fish or cut bait is 42.9 and we're in 47.8. on the nonmanufacturing we're still expansionary yes, we're slowing we've seen many indications of that through the summer. the question now is with an easier fed and some of the offset to really strong earnings growth in 2018 kind of calendaring, can we continue to muddle along in the single digits for equities and that's

what we expect we have done that for the last 30 years that's a great place to be invested in an environment of uncertainty like this. >> nancy, when you talk about an easier fed, given some of the data we've gotten, what are your expectations in terms of cuts and fed policy through the rest of the now and how is that factoring into your take on the market right now >> my disclaimer is i'm rarely right about the fed. earlier this year we thought that they would probably hike in the summer and then of course we've seen the easings as the economy slowed so i will say this as a portfolio manager, when you can't find attractive names to buy, that's an indication that the market is overvalued we are still finding attractive names in the cyclical space. we've been heavy into consumer discretionary. those stocks have become expensive. so if the fed does ease and we do expect an ease at the next meeting, we think some of the cyclical names have washed out and are ready to have a fresh

look at earnings and growth. that's where we're focused. >> greg, are you looking at this market the same way? given the selloff we've seen this week, where do you see buying opportunities, if any >> i think we're much more cautious i wouldn't look for the fed to bail out u.s. equities the last two cutting cycles were 2001 and 2007. the direction of the data is more more important and the data we've seen this week has surprised aggressively on the down side. we have earnings season in the u.s. that kicks off in a couple weeks time and we think the risks to earnings looking forward are much also to the down side. we'd be very cautious about stepping into cyclicals here now given the outlook of the data regardless of what the fed does. >> all right two different takes. thank you both for sharing them with us, greg and nancy. >> thank you what an hour of news we've had in just the past 50 minutes or so. let's get to the cme and get the santelli exchange. rick. >> thanks, carl.

the head of fx strategy, my guest mark mccormick we're short on time. let's get right into the dollar is epicenter for much of what's going on in the world. central bank policies, wish it was stronger outside the u.s. and funding issues that have arisen, a lot of it is dollars, all about getting dollars. your thoughts? >> yeah. this is clearly i think the strength of the dollar coming from the rest of the world, china slowing, eurozone slowing. the u.s. is slowing with a lag, given the manufacturing recession we're in i think you're seeing defense is the best offense along with the u.s. dollar, the swiss and yen are -- as the global economy cools, as big participants are cooling, this is driving demand for u.s. dollars. >> now, the demand for dollars signal issued like funding, would the dollar coming off its

highs and moderating be the signal there's an all clear on some of the negatives in the marketplace? zblt liquidity reinforces the risk appetite. tighter liquidity conditions, equity sells off, but the setup here is about a bigger picture, about trade wars, about impact of trade on the global economy i think to see full reversal and risk sentiment where the dollar starts to weaken again, what you're going to need is reversal of the tariffs, not just a pause. you also need the fed to cut rates. if the fed introduces permanent overmarket operations, that will satisfy market conditions, cause a bit of a short squeeze in risk assets but won't reverse the trend in the dollar until the global economy stabilizes which we believe is still three to six months off. >> mark, it is surprising to hear you say the dollar is going to benefit by easing, having the

fed lower rates. i understand that's what the stock market wants, i'm looking at fed fund futures. at the end of the day, doesn't that make us another character in the manipulation theater? >> i think it is part of it. i think what's important to think about is to rate differential, look at the u.s. versus g 9, the dollar is doing theopposite. even if rates are rallying, the dollar is strengthening. that reinforces the biggest driver for currency markets, the state of the u.s. economy versus the rest of the world. think of why the fed is asing. it is easing from external risk. that's a principal driver along the slowing. when you combine those, this is an environment, yes, it is slowing, the big concern is china and europe >> we have to leave it there i will get you back at the end of the month thank you for your thoughts. david faber, back to you >> thank you, rick. let's is is send it to jon

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good morning it is 8:00 a.m. at tesla headquarters in palo alto, california, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ ♪ good thursday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt quite a session already as we fell about 300 points on