coming in. >> that might be good for business for you as well >> the more they flourish, the more you will. good to see you. thanks so much >> thanks for having me. >> that does it for the exchange i'll join tyler for power lunch which begins now put on your running shoes and come on over we'll see you in a moment. here's what's new. wall street braces for trade talks this week in what could be make or break moment not just for the trade talks but market in your money. unicorns are floundsering. an early air b and b and lyft investor will tell us what's going wrong and why. the breakfast bear one top analyst said breakfast won't be the most important meal of the day for wendy's and the stock is feeling the griddle the man behind the call will be here as power lunch starts right

now. we are at session highs however modest they may be the dow wiping out early losses after white house economic advisers wraps up expectations don't look now, the russell 2000 has entered a death cross we'll have more on what that is, what it means later, kelly, this hour >> sounds scary. let's get more on today's big intraday turn around from bob who is watching the action at the new york stock exchange. >> china trade talk moving the market you heard about mr. kudlow speaking early one of the comments he made, delisting chinese economy not on the table. a bit lart on, this moved the

market more importantly here chinese is ready to do a deal on the parts of the negotiations both sides agree upon. this is part of that 80% deal that we have been talking about for many months. not only did u.s. stocks move, chinese stocks move to predictably u.s. cyclical groups moved into positive territory. serks mis were negative, materials, industrials, banks. yields moved up. this 80% deal we keep talk about, what's it look like probably wouldn't be much in the way of industrial reform which the trump administration has been pushing for

there probably would be some commitment to intellectual property the big question is what's the tariff situation will there be more or less will it be rolled back that's the x factor. that will influence how the market reacting overall to the negotiations back to you. >> bob, thank you very much. for more now on those comments from economic adviser larry kudlow that help boost the markets, let's check in with eamon at the white house. >> reporter: that's right. larry kudlow making se ining soe optimistic noises saying the mood music has improved between the united states and china. not offering any specifics he thinks will get done kudlow talking about this issue of the president raising the idea that he wants the chinese government to investigate the bidens a number of republican who is were on television over the weekend said they thought the

president wasn't serious about that he might have been joking. he was just needling the press i asked larry kudlow if the president was joking or was serious when he said he wanted the chinese to investigate the bidens here is what kudlow said >> i'll say no i would say as he's said, that's unrelated to the trade talks >> reporter: kudlow saying he doesn't honestly know whether the president was being serious or not as some republicans have suggested in term of the suggestion that the chinese should i vest gait his political rivals kudlow saying what the president told me last week in response to one of my questions which was that he doesn't see his request, to the chinese government or suggestion, as linked in any way to these trade negotiations. the president saying last week one thing is not related to the other and larry kudlow saying the same thing today >> thank you very much

mary is a professor of econom s economics. welcome. good to have you with us how narrow a deal might we set our sights on if you think this is where this is all leading >> i think we would be lucky to get away with a narrow deal. i think it would be great for u.s. businesses and consumers. how narrow is really the question i think we'll see purchases of u.s. agriculture products. we have so see something on intellectual property commitments for this to be a deal that the president can hold his head up above and lastly, the big question is on whether tariffs will be rolled back and how far. >> what do you think there >> i think the u.s. will find it hard to roll them back completely the president is going to get much less out of this than was advertised originally and he's going to have to say he's going to keep some powder dry in case

commitments are not made or in case we don't move forward >> then tariffs stay in place at some level and there will be some incremental progress made how important is it for the president's respectably of china and the u.s. to get a deal done? >> i think it's very important for president trump. clothing footwear, things that every day people will see and begin to realize this tariff war will have a cost for american consumers. it will be the majority of the new a tariffs will fall on u.s. computer or more than half will be on cell phones and laptops. those are devices that are iconically american. they are designed, marketed,

here in the united states the sure they are assembled in china but they have a large component of parts that are made by u.s. allies it could give advantage in the u.s. market to companies like samsung that don't assemble phones for the u.s. market in china. i think some kind of interim deal or mini deal with a plan to continue talking would be the best outcome that we can get here >> how much does hong kong complicate the situation not just the fact the protesters took aim at some of the chinese cops over the weekend but the fact you have this nba mail storm because a general manager tweeted in support of the pro-democracy protesters china's response was to shut down a lot of the business that the rockets were doing this that country. what message does that send to

the rest of the business community in. >> it's a strong message we've seen it before with marriott these political issues are ones that can be a mind field for american corporations. having said that, american corporations operating in china have over $300 billion worth of sales each year. companies are fienldsing a way to do it a very large multi-national said to me recently, they are one third consumers in the world they are where the growth is there's no way we're not going to be there. >> there's something to be said for calling a spades a spade and having the freedom of speech to say the hong kong protesters in some cases are singing the u.s. national anthem and unfurling the american flag.

they're saying how you can apologize and back down and give the chinese the upper hand does that reflect the upper hand they might have in trade talks too. it would be a complete game changer. the future of hong kong is something that should concern every one. it doesn't look like there's an easy resolution here i think if this, the chinese don't escalate, we will continue to see, i hate to say it, perhaps business as usual. >> thank you very much >> you're welcome. now is the trade deal

already priced into this market, let's explore that with chief investment strategist. with the tension now that the nba kind of sort of emblematic of, what do you think investors should do? >> we have seen we get some news and investors seem to extrapolate it and the news goes the other way. what we have tried to focus on is where the business cycle is going.

>> it began with the fed fightenifighte i -- tighteni ining cycle and ths playing through the economy and housing and it's hitting the services sector as well. >> you're more bullish in terms of the market here, are you bullish in terms of the economy and our ability to keep weather this trade uncertainty that looks like it will be with us for some time? >> i am, i guess >> i think we're just scratching the surface of economic fights there's so much capitalism an the world now. we've had a huge success in the last 30 years spreading capitalism and getting every one with skin in the game, if you will so much so they really can't use military options anymore

it's too costly. you're left with economic options. i think we're just going to get used to having economic battles like this going on as a regular deal the bigger impact is the tightening that went on last year not only in our federal reserve, not only by our bond market but by bond markets all over the globe that rose in yields with about a one year lax slows us down. i think we're entering the period now where the easing that took place since late last year across the globe is just now ending the period where it should start to get better we are seeing some of that in better economic surprise indices not only here in the united states but a lot of places around the globe >> do you think that monetary juice that jim refers to will play through in the economy? >> sure. we're seeing that.

we're starting to see housing strength stabilized. those are the early sign offense an easing cycle you want to see that will help grow your conviction towards whether the benefits will broaden out to the broader economy and we're seeing that >> you're still defensively posturing for the market you're bullish but defensively posturing. jim you're saying you'd buy financials and energy and tech and everything, is that right? >> i would i think it will be quite a rally in cyclical stocks that are very underrepresented and a little bit of bearish thinking moving

back in that direction could lead to big upside moves >> they are expensive and crowdcrowd ed when we do see that monetary stimulus help pick up leading indicators like pmis, that will be the time to get out of those groups with earning season coming we think there's some down side risks. >> thank you both. appreciate it. coming up, you thought president trump had a powerful twitter account. an nba manager has triggered an international incident with one tweet. what the league needs to do to get out of this jam. an nlist says breakfast isn't the most important meal of the day, at least not for

wendy's. power lunch will be right back see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

welcome back this may be "power lunch" but we're going the talk breakfast now. wendy's dreaming of its breakfast menu one analyst thinks it will be a nightmare. breakfast is not the most important meal of the day.

let's bring in the man behind the research welcome. good to have you with us why do you think this is not a lift for wendy's and what has breakfast meant to some of wendy's competitors like mcdonald's or burger king or bun ki -- dunkin >> it makes perfect sense. it's about 25% of mcdonald's sales. it's about 15 or so for burger king a big opportunity if they can figure this out. three things that don't make it concerned. it's a big entry i would say this doesn't represent a competitive edge for the brand. it's hard to argue behind

breakfast. we saw the jobs number ons friday that were at 3.5% unemployment the lowest rate in 50 years. that's a big number for not such a large field. we look at limited surface breakfast sales they were in we're relying on share ship sales. >> i kind of get it. mcdonald's has been in the breakfast game for a long time dunkin with its offerings. they have a first move advantage here starbucks is kind of no breakfast as to later in the day. would you have a hold on wendy's

at this price level? >> we have decided to downgrade it this morning to market perform. i think that's the appropriate rating this could work longer term. we think it's best to be on the sidelines in our future. >> you cover a bunch of them mcdonald's chipotle, jack and the box. what's your favorite -- give me your three faves we think that burger king will be enough here to power and deliver upside while tim is in the foreseeable future given the operationalcept and w growth potential of that brand

we like what mcdonald's is doing longer term. they are doing the right things to help grow sales >> thank you very much we appreciate it >> thank you 2019 was supposed to be a huge year for ipos but high profile unicorns like uber and lyft are down big. we'll hear what the problem is and who is to blame. we'll tell you what's scaring some people about this russell 2000 chart are the small caps in big 'lbeig boue. wel rhtack.

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welcome back the smallest players of the market could be sending a big warn the iwn etf which tracks small caps is this a canary in the coal mine for the broader market? first of all, do these death crosses have significance? what does itd mean f mean for s caps >> listen, death crosses don't

really factor much into our process. they do sound very scary but i don't know, kind of seems to me by the time we start talking about them, i think it's looking in the past of what's already happened i'm going to flip it around. it's not about small cap underperformance it's been about large cap out performance. when the s&p 500 out performs, it adviser to tends to be bulli s&p 500. the fact that small caps are lagging i don't think is a worry. they have to participate and stay afloat. over shot to the upside in the third quarter of last year over shot to the down side and in the fourth quarter really aside from that it's been in the same range for the last two years between 146 and 149.

at the lower end of that range and forget about death cross, mike, we got a new bullish inflection in that 200 day moving average for the first time in a year i see that as a positive >> just to that point, small caps have not broken down an absolute basis out right does that mean they're an opportunity or do you view it that large caps are the place to be >> small caps are maybe 13% off their all time high. if we were three years into a bull market in small caps are under performing like this, i'd be really concerned but we're almost 11 years in so i'm not as worried. this is what happens small caps tend to under we are fo -- perform. there's a few reasons. first and foremost all these small cap companies have a lot more debt than large caps and these highly leveraged companies get beaten up the worst when the

economy starts to slow when you look at the russell 2000, over 35% of the companies in there are making no money i think it's worth taking a look at the sector exposure of the russell 2000 as well financials and industrials make up 35% of that index and regional banks are a significant portion of the financials. they will take into account on the chin during a fed easing cycle when there's net interest margin small cap industrials that wouldn't be my favorite place to be if the economy is slowing beyond that all the best performers from the small caps have now reconstituted into mid caps so you're left with the laggers. this stage of the game, i'd much rather be in large cap over small. >> all right the trend continues. thank you very much. tyler, back over to you. ahead, unicorns under perform. this ipo market has been the

worse since 1995 our upcoming ipos at risk of falling flat we'll speak to an early investor in air b and b and lyft. farm machines under pressure the nba in hot water after a gm tweeted about hong kong coming out on the side of the protesters now the league is at risk of upsetting both china and the u.s. we'll explain all this when power lunch returns. wow, what a beautiful wedding! as your second cousin and number one broker... you're welcome.

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and like all doors, they're safer when locked. that's why you need xfinity xfi. with the xfi gateway, devices connected to your homes wifi are protected. which helps keep people outside from accessing your passwords, credit cards and cameras. and people inside from accidentally visiting sites that aren't secure. and if someone trys we'll let you know. xfi advanced security. if it's connected, it's protected. call, click, or visit a store today. welcome back here is your cnbc news update. at a news conference in boston,

dr. william kaelin says he was overwhelmed when he got the news early this morning >> at that point i think it was so surreal and i had this out of body experience of great appreciation i'm so thrilled to share this with all the people who have meant so much to me in my life >> protesters have doused new york city's famous charging bull statue with fake flood as part of a protest against climate change the group staged the protest near wall street as well as outside the new york stock exchange consumer products says it aims to cut its you of non-recycled plastics in half by the year 2025 you are up to date that's the news update this hour back to you.

thank you very much. it's been as so many have been lately, a volatile day on the street stocks wiping out early losses we're now off those highs of the day which we hit just at the beginning of the hour. now the dow industrial is down ever, ever so slightly the s&p 500 down about three points and nasdaq, a flat day right now. the nasdaq composite off >> gm shares are flat. they are down 10% in the past month as the company deals with strike over the weekend the uaw saying talks tooik a turn for the worse uber is up 2.5% after city upgraded the stock to a buy. gave it a 45 there are price target it's just over 30. the analyst believes uber's q3 results due out next month will turn investor sentiment and match rising on some positive

analyst comments deutscha analysts saying they over reacted the shares are up 4% 2019 was meant to be the year of the unicorn but some of the most highly anticipated ipos have been struggling out of the gate all this week we're look at the next crop of unicorns. some of the most valuable venture backed companies air b and b expected to be one of the largest debuts of 2020. gearing up for massive launch with its recent funding round valuing the company for more than $30 billion for more on this, let's head over to deidre in san francisco. >> there's plenty we won't know until we get the prospectus. the company has been giving us clues. one of the most interesting

things was this line in the community update a few week ago. says no single city accounts roughly guests arrives or listings it has been a profitable over the last two years another thing we know, it had $3.5 billion in cash as of the first quarter making it a strong candidate for a direct listing following in the fool sttsteps slack and spotify. it could encourage other start ups. air b and b i want to note not without challenges it's facing regulatory challenges around the world in new york city misbehaving tourists that are muddying the brim and part blamed on its rise and a hotel industry moving onto their home sharing territory all risks we're liking to see when we finally get it

>> back to you looking forward to that. appreciate it. air b and b would be entering a tough field. not only are other ipos under performing since going public, we have seen names like wework cancel their ipo all together. what's going wrong what's going wrong with the high profile ipos this year >>. >> not everything is broken. i think the hand off from the private to the public market is going through some disruption. these are good companies i'm not talking about all of them air b and b is our star company in there it checks every box.

it checks every box. lyft, we are still sticking to the thesis it's a big thing you have to wait it out. it's not a one quarter, two quarter story. it's a two or three year story they will be profitable in 2023. there's path to that let's see how they execute >> you have people saying the only way to make money in some of these start-ups is if you're in the first or second or third funding round. you come a little later in the process. who is bidding up these companies so when they do come public and have to kind of cross this valuation gap, is it the fault of people involved in the

earlier funding rounds the fault of the ipo process and the underwriters what's happening that's causing a large disconnect >> let's say lyft was the last round was $15 billion and i think it came out at 20, 25 billion. that's where the disconnect is happening. in the last round between the bankers andthe early investors from the public side i think the private -- most of them are pretty rational they haven't been very ir rational there i think that's where the disconnect is. we learn a lot from this whole episode here with wework and the other ones >> for my edification and viewers who may not be familiar with the distinction between al listening, compare and contrast the two and tell me why some

companies might choose that direct listing route and others going public in the traditional way. >> direct listing is not for every one. >> what is it? >> you don't raise any money they get some liquidity out there. that's good in some cases. they can go out and do the thing and later on do a secondary down the road they need brand name recognition. they need people to come in. the extra boost you get, the publicity, the marketing you get with the bankers, you will miss out on a direct listing >> it's a capital raising. >> capital raising you need that. most of the companies need that.

it's going to take a while to get there. you'll have a mix of both. not many companies can do direct listings >> you think it's worth about -- how much do you think it's worth? >> we think it's 50 billion dollar >> this is company that deidre was reporting around 31 billion. private market valuations have been around 35 billion >> don't forget, that 30 billion was in early 2017. after we factor all that in and so with all things considered by the time they come to market, there's a path to 50 billion that's what we think >> that would be the total valuation of the company. >> that's our concern. >> what would they come to market with as a percentage of that 50 billion? >> they'll be valued at 50 billion or more depending on --

>> just 100% of the shares would be out there >> not really. usually 10 to 15% it's not all a fit but later on and that's been a big problem with ipos. the supply has been less demand has been more and that's jacking up the prices too. there's a lot of that dynamic going on as well >> the next test will be how that one goes. >> that will be a big test and hopefully that will bring back people into the ipo. >> can you get me a nice place in paris for a week >> i will. 2019 has been a rough year for farmers on several fronts. frank is live with a lack at how some big public companies are being affected by that hi, frank. >> good afternoon. we're right outside of the factory are with john deere makes farm equipment sales are down in recent months. however, it's two big reasons. the trade war and wet weather on the quad cities and other farm

land areas farmers say there's something coming up in a few days that could give them more confidence to buy more equipment and spark those sales. we'll have the story coming up on power lunch ♪ [phone ringing] how are we doing? fabulous. ♪ i wonder how the firm's doing without its fearless leader. ♪ you sure you want to leave that all behind? yeah. stay restless, with the icon that does the same. the new rx crafted by lexus. lease the 2020 rx 350 all wheel drive for $439/month for 36 months.

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2019 has been a rough year on the farm. the double whammy of the trade war and wet weather hitting the harvest. what could that mean for deere and caterpillar? frank joins us from illinois >> reporter: farm machinery shipments are $22 billion year to date. big number but that's an 18% decline from a peak in 2014. big name manufacturers like john deere are feeling the impact the company says its agricultural division was down

6% last quarter. deere also laying off workers. caterpillar saying sales of tractors are down in first half of the year. rain and flooding in the midwest delaying the harvest and the ongoing trade war major factors. soybean farmer holding off on buying any new equipment. >> just trying to take a wait and see attitude maintain the old equipment and if times improve we'll roll into some newer tractors. >> we have backed off on any cap pal purcha -- capital purchases of anything high dollar we will postpone anything in the future for possibly a year or two years out and maintain the line that we now have. >> reporter: the it's fallen dramatically over the last three months coming up in a few days on

thursday we'll get another reading on farmer confidence when september numbers for farm machine sales are put out. the same day the u.s.-china trade talks resume another thing that could give them confidence. >> or not. thanks very much the nba is running away from a tweet from the houston rockets gm that sparked a mhuge reactio from china now could the league stance on the issue turn off fans at home. all this as the season is about to tipoff? stay with power lunch. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.

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welcome back one tweet about freedom for hong kong protesters from the houston rockets' general manager darryl morry has sent the nba and its relationship with china, its largest international market, reeling. the latest sign of just how tenuous it's become to be an american business doing business in china >> darryl morry tweeted an image called, fight for freedom, stand with hong kong that led to immense backlash from the chinese government and some of the nba's major chinese partners the nba issued its own press release, calling morry's tweet regrettable, while rockets' owner tilman fertitta distanced

itself from morry's message, saying that the rockets are not a political organization the nba has been politically vocal in its progressive stances, but with china the approach has been different. maybe it's because there's 300 million basketball players there, 500 million that watched an nba game last year, or the $1.5 million deal that was just renewed in july. it's worth more than $130 million per team chinese sponsors have cut ties to the rockets and its media partners say they will no longer air rockets games. that's curious, because the rockets are probably the most popular nba team in china because of yao ming joe tsai was out with his own statement against morey. so there is a lot going on >> and that didn't go over well. yeah

>> less you. >> stick around. so what can the nba do to calm the storm in china and rage here at home that they may have becomed down in the face of pressure from china. dean crutchfield, welcome. >> welcome thank you. >> the nba tried to distance itself specifically from darryl morey's comments in a tweet or statement that they put out, but they also simultaneously said that the nba has a tradition of encouraging its players and its executives to take part in public discourse let me read the words exactly here the values of the legal support individuals educating themselves and sharing their views on matters important to them, which is kind of a non-retreat/retreat. the nba is not the first nor will it be the last to tiptoe around china >> no, i think this is a case,

as you mentioned yourself, this is about following the money, not following your principles. and i think we have to say, you know, what makes america great it's not winning, it's leadership and i think that we failed to show leadership here and what they've responded with that, i call id beeched on a sludge bank of corporate pudge statement is a bit vacuous and lacks the intent and meaning that it should have. >> what should the nba do now? >> this is a crisis management situation, and what they've done so far is behaved in the wrong way of crisis, which is to deny, delay, deflect the situation so they've denied it's their point of view, they've deflected it on darryl in terms of making that statement really what they need to do now is respond boldly, but that's going to be very difficult, because they've come out of the gate rather shy. >> how can they respond boldly to the u.s. audience that is upset without further upsetting the chinese? >> well, this is going to be the dilemma. and i think this is a marketing dilemma. there are a lot of global brands out there that differentiate their message for different local markets.

can this be done here when it's on the global stage is very difficult to do. but marketing and advertising does play to local audiences is that going to work here i don't think so so how do they respond boldly? i agree, it's a problem. but i think at the end of the day, it's about your principles and standing by those principles -- >> and i come back to it, darryl mo morey has all but apologized here he said -- >> "i didn't mean to offend anybody, was merely basing one thought based on one interpretation of one complicated event. he posted a symbol with a slogan, i've always appreciated the significance -- so, so -- >> i think people are just annoyed that he even started this >> you bet your you know what that the nba is annoyed. >> maybe we have our political discourse here in the u.s. because we're all citizens of the u.s., but when we go to other countries, we're here to spread the games, not here to spread politics. that's what industry insiders close to team ownership, to the league office, to management types are like, you're just an

employee, you're not the commissioner, you're not someone who's that much in charge. but now it seems like you're the voice of the nba and putting us in a tricky spot >> we've mentioned that the rockets are china's home team because of yao ming, who's now in charge of the china basketball association can they kind of wait this out, knowing that the chinese will want to ultimately show this product to its home audience, or do you think that this is damage that now casts a pall over the entire season. >> think about how many times we come on set, talk about some crazy thing and a week later no one remembers it, usually here in the united states and -- >> china that has a long memory and the u.s. does not. by next wednesday, none of us are going to remember this, potentially. that's what they have to hope on that's going to have to be their strategy that cannot be the strategy in china. >> so you think that they can basically just kind of wait for people here to get distracted, but not -- >> sometimes a good strategy is to observe and say nothing take the lead from the chinese and i think that's the case for

the nba here i'm not knocking americans, but we do have a short-term memory we really do move on very quickly. and that's going to be to the nba's advantage in the local market >> this wasn't the nba speaking. this was not even the houston rockets speaking this was darryl morey speaking >> now it's america speaking >> let me thread this through here there are hundreds of u.s. companies doing business in china with serious, serious exposure and relationships here. whether it's general motors or ford or nike or apple. they're silent they have not talked about hong kong, like i'm aware of. so where's the outcry that says, we are all for our principles of supporting freedom here. where are these other ones they're being absolutely silent! >> if you said all of these things in america about american politicians, you would get a lot of support all the colin kaepernick stuff, all the anti-trump stuff in the nba. you can get away with a lot in america, but as soon as it becomes a chinese thing,

everyone's afraid. >> but hold on here. also america, we understand business this is the country of capitalism and we understand how markets move so we also can have patience and flexibility when it comes to certain positions we take in those markets. we understand how important china is to our economy. you know, we are sucking up to it in so many ways and we can't walk away from it. this is a massive franchise worth billions of dollars. the american understands the importance of business they understand the sensitivity. what you've just done, though, is you've basically apologized for being american that is the problem in the statement the nba has made you've apologized for us we don't want to be apologized >> i've got to leave it there. dean, eric, thank you. we'll be right back. >> check, please! is next. ned. with more than 85 years of experience over multiple market cycles. with portfolio managers who are encouraged to do what's right over what's popular. focused on helping me achieve my investors' unique goals. can i find an investment firm that gets long term the way i do?

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welcome pback >> thanks for watching "power lunch. "closing bell" starts right now. that it does welcome to the "closing bell," everyone live from the new york stock exchange floor, i'm wilfred frost. stocks all over the place today, following three consecutive weeks of losses. as we highway towards the close, though, we are down 55 points on the dow. 59 minutes left of trade >> i'm courtney reagan in today for sara eisen let's look at what's driving the action today we have tense negotiations beginning in washington as china and the u.s. launch a new round of trade talks the 13th, if you're taking count at home. with the outcome, of course, still very uncertain oil stabilizes as geopolitical issues in the middle eas