final check on the markets we were flirting with the dow being down 200 points. now about 185 points nasdaq off 50 points the s&p 500 off about 20 points. we'll see what jay powell has to say later today. join us tomorrow "squawk on the street" begins right now. ♪ ♪ what you trying to do ♪ >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. doubts creep in ahead of the u.s. china trade talks boeing down more than a percent on a couple of negative headline, will not help the index at the open eerither. wholesale inflation runs much cooler than expected road map begins with fading optimism for a china trade breakthrough more companies black listed ahead of those talks this week stocks are set to open lower. >> plus, nba backlash,

broadcasts of preseason games are suspended in china while the nba commissioner says profit can come before principles. >> and as we said, boeing under pressure, the company sued by the union representing pilots at southwest over the now grounded 737 max. so tensions between the u.s. and china ahead of trade talks expen scheduled for thursday in washington targets include ai startups, a spokesperson for the chinese foreign ministry quoted as saying stay tuned for retaliation. and then there is additional reports out of the chinese press they're going to cut their visit short by a day not carrying the official title of envoy, they haven't been given official instructions from xi. >> you couldn't have a worse way to start these talks let's go back, run the tape back to friday. larry kudlow was optimistic

something would happen and there were other members of the administration saying what the heck no they haven't agreed to any of the seven deadly sins to roll back the intellectual property, something on fentanyl. the one thing, this is new, the commerce department, it is wilbur ross, and he's talking directly about human rights violations, the only other person that really talked about that was senator warren. and human rights violations, that's something that there was a general manager, i don't know if he's still a general manager of anything, still there. >> he still is >> you know what i'm talking about. >> of course, i do we'll talk about the china and the nba thing. it is interesting how it plays into the larger -- the larger conversation in the financial markets about the relationship between the u.s. and china. >> you didn't use the word craven billionaires are worried about viewership and they're worried about the

idea that perhaps -- >> let's come back to china and u.s. -- >> but i'm saying this you can't get -- you can't go into trade talks with someone where you're saying, listen, you persecuted this minority. no, let's talk about soybeans? where do you put the chinese >> they did start to increase their purchase of soybeans on the other side, china morning post also has this story saying they're going to leave early or plans may be to actually negotiators to leave earlier than anticipated a day early. >> not a montana situation. >> no. no so you got a lot of things here that don't seem to -- >> one thing is certain is that if -- >> to a great deal of success being expected at the upcoming talks. >> there were people who were buying stocks, betting the things that were going to go okay and i'll tell you, i don't know if you look at that little item about capital restrictions -- >> yes >> i know that there were people in the white house, i did a

piece last week about how america would be saved mightily by the end of the chinesism pos because they have done so poorly the white house was interested >> the story was the other way, wasn't it? it is restricting flows of capital from the u.s. into china. >> yes china stocks within u.s. government pension funds. >> chinese -- the government -- our government is not keen on any more ipos from china >> well, kudlow is on the tape yesterday saying delisting at least is no -- not on the able >> in. but more ipos, not encouraged is my understanding as it is, there is a lot of -- index funds can't buy these. deirdre bosa just talking about stripe, $35 billion valuation. i'm thinking, are they kidding me it processes millions and millions of transactions, blah, blah, blah, blah but they're unrealistic out

there. you know what they got to do they got to smile directly did you see how many -- i know you're going to say, jim, you're far afield of everything i have to be like marshall st. gerard, i don't care we're in a pivotal moment. we have too many ipos and they won't stop we have china talks that will flop suddenly say, you know what, we have to stop putting muslims in concentration camps. you're right is that how the talks start? you're right >> the timing was interesting for us to make a stand on behalf of the uighurs, yeah. >> at the same time -- do you know how much money is involved with china and the nba >> quite a few billions. almost half a -- half a billion fans in china. >> this is about freedom of speech in china. you know where else there hasn't been that much freedom of

speech hong kong. is that next >> i thought you were going to say u.s. congress when it comes to trump appointees being able to speak. >> or not showing up >> that's another issue. some not showing up to testify because the state department has requested -- >> let's say you're a chinese negotiator and xi wakes up and says, are you kidding me, they just put 28 companies on the black list including some of our most important technology companies? what do they have to do -- some are -- this is not what -- this is how -- not how you start talks. >> and it does coincide with this out of nowhere controversy regarding basketball, more fallout for the nba today as david says cctv announced it is suspended broadcasts of the log's preseason games. ten cent will stop streaming nba is feel heat in the u.s. for

calling that tweet regrettable in tokyo, commissioner silver defended morey's right to free speech. >> the long held values of the nba are to support freedom of expression and certainly freedom of expression by members of the nba community. and in this case, darryl morey as the general manager of the houston rockets enjoys that right as one of our employees. what i also try to suggest is i understand that there are consequences from that exercise of inessence his freedom of speech and, you know, we will have to live with those consequences it is my hope that for our chinese fans and our partners in china they will see those remarks in the context of now a three decade if not longer relationship >> silver will go to shanghai later in the week. he did say, quote, we're not

willing to compromise. >> a lot of people were saying the nba had this shadow release saying we don't condone, we favor -- we have a relationship with china adam silver revealing himself as a man of incredible principle. he's going to cost the owners a lot of money because he thinks there is something more important in life. have you ever met this guy guy is like a total hitter he's not owned by anyone he's -- you know what he's got he's got a conscience. >> rick wells, the general manager of the golden state warriors, when he joined us yesterday, seemed to be on that same track, carl rick. >> yes, ceo. >> conscience too? >> he was saying, we're not going to stop talking about it and/or at least restrict in any way the speech from the players or general managers. >> remember when stalin used to white out people, i think they

whited out the houston rockets you can't even -- you can't google houston rockets nothing comes up i'm not kidding! you think i'm kidding? >> i'm sure you're not i'm sure you're not. >> they wiped out the use -- yao ming this is the biggest business story right now because i think that you have to watch nike, which had fabulous numbers, who is going to be on the black list if they said at 3:30 last night, they came out and said, listen, we're ready, we're reviewing, who is on the black list so obviously they take apple down doesn't apple ever get tired being taken? mellanox, nike, starbucks, the usual suspects >> back to that conversation they never have gone there >> no, they haven't, but if we ever talk -- >> you see it within this dispute with the nba you got a lot of chinese nationals who are only seeing state media and have a view of hong kong protests that is decidedly one way.

but there is a lot of nationalism, but never gone to that, and the government has never proposed or moved anyone toward any sort of boycotts that we have been talk about now as a possibility for now over a year. >> it all began -- >> it began with ping-pong diplomacy and secretary kissinger, is it going to end with nba diplomacy and houston rockets, gm? >> great game. people love the game. >> it is a huge story. that's what everything was geared toward. nba2k. >> you can forgive viewers for being confused human rights has not been framed as the main motivation for these trade talk and now it is? >> well, look, i always noticed and i'm sure a lot of other people, doesn't the president care about what is happening in hong kong? yesterday senator elizabeth warren, david, still i think

punitive front-runner, came out very much in favor of free speech in hong kong and what the general manager -- kim out came favor of what the general manager of the houston rockets said she's remarkable i keep telling everyone, including president xi if he watches the show, i don't know, that they think that they have got -- they can wait out trump, well, they better hope biden gets elected because nobody is tougher than senator warren nobody she actually cares about religious freedom, she cares about hong kong. and, by the way, she says no talks until they stop polluting. can you imagine, remember the president, i think he's pro pollution, that's presented wrong. he doesn't think pollution causes as much problems as say senator warren does, right >> okay. >> this is the most important story in business right now. >> the nba story or the china and u.s. -- >> they linked it to religious freedom. now, the october speech at the

hudson institute, by vice president pence, the container, the -- >> always come back to that very hard, hawkish speech. >> that was a speech that they are the soviet union they are the new -- remember, the whole point of pence is the term we used to use in this country, state department, after they lost china for us, godless. talk about a godless administration >> the chinese economy of today has far eclipsed anything the russian economy or the soviet economy could have ever dreamed about, right >> but godless is godless. that sounds soporific. pence is talking about the regime being godless i know that russia was small, but when the pope turned against russia in the early '70s, good luck i know that china is not going to be turned on religious freedom. >> well -- >> this is important

>> vioxx has a nice piece today arguing the reason a lot of u.s. interests were swarming into china was the hopes that free markets and business and capitalism would change their view >> that's why they put them in the -- that's when they put them in the wto they thought that there would be a relaxation. >> but indoctrination, welcome to the party, this is how we all do it. >> i don't know. >> not happening >> not happening at all. i think that the trade talks, market went up very -- nasdaq went up big last week. the hope of trade talks that larry kudlow talked about. look, larry likes to talk about the talks, because that's how you get things going you sit in a room, you don't get the talks going by saying there are a list of 28 chinese organi organization on an empty list. they were added. but this is the most important story out there. unless you want me to talk -- you want me to talk about

domino's pizza >> we're going to get to domino's, actually. >> how sharp that suit looks on carl. >> david, you continue to -- to try to get away from the core issues >> we will get cramer's mad dash >> nba diplomacy is the most important. i wish we had strauss -- nba2k >> we'll get the opening bell, obviously. domino's, down in the premarket on a miss. and some disappointing comps inflation soft we'll talk about the turkish lira, who knows. futures are down back in a minute ♪ [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.

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♪ ♪ welcome back to "squawk on the street." let's get to a mad dash. as we get you ready for an opening bell, 13 minutes from now. snap. >> david, i don't know if you're coded for the talks at goldman sachs, they're rather remarkable they bring in ceos. >> yes >> you are coded. >> i have listened. >> you might have seen when the snap ceo evan spiegel who i've come around and think you're a great guy, come on "mad money" anytime you want, what do you think are the number of snaps that are created on snapchat every day? your son and my kids, my

daughter, used to, that's the way they communicate it is a camera company how many do you think are created each day >> i have no idea. tens of millions. >> 3.5 billion >> a day >> a day that's what i found out from goldman. now, what does that mean it means why you need the apple 11 have you seen the difference between the apple 11 and the apple 8? david, one is cinematography and the other is coda chrome okay you need the apple 11 in order to have really good snaps. not just because of instagram, okay so now you know why that phone is selling so well that's -- this is a read through of evan spiegel, gave a nice talk, terrific when it comes to your really close friends and the people you care a lot about, you want to convey an emotion, videos and

photos alou y s s allow you to emotion the way you can't do in text i think i'm going to have to start snapping. >> are you really? i'm not on snap. >> you're not? >> no. >> i thought -- that's how insider trader things used to do things before preet barea. i urge people to see photos on the 11 versus others >> it is more a story about apple than snap. is not a story more of a discussion. >> yeah. who cares about -- i like evan spiegel very much. but in a morning where it comes down to the general manager, the houston rockets, creating our foreign policy, i like it talk about how evan spiegel is driving apple. >> okay. all right. >> back to general manager >> no. >> here's what i have to say trust the process. >> that's the -- >> nba, trust the process.

>> that would be sixers. >> that guy was a disciple by the way, the most important gm in the league people seem to forget about that he's the godfather he's the godfather >> all right we are going to talk more about the nba. and china. i'm sure of it we'll also get to some -- i like to focus on bsg >> what stock is that? >> i'm going to tell you when we come back on "squawk on the street." who says our bank isn't tech enough? everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market.

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the financial capital of the world. the opening bell in over four minutes. busy tuesday morning, we await u.s. china trade talks ppi september, jim, down .3, core down .3 year on year, though, we barely managed 2%. >> i think it gives you room if you have a slowdown for powell to make a move, talked about an october cut. how bad is the economy i continue to get the same read. which is that domestic strong, international -- i have david farr on for merson representative what happens when you try to do business overseas. did any of you read over the carnival cruise? there is still some number cuts coming europe, europe is so weak, even in cruises people forget thomas cook hurt travel from britain. we do not talk about how bad europe really is i think there is a slowdown of -- a step down function in

europe that we just do not seem to address enough. >> there are reports as well this morning that the brexit talks are not going well at all between the uk and the eu at this point talks between johnson and chancellor merkel. >> johnson doesn't come off as wild first in his class he's very smart. very smart guy and the meantime, what do we have, we have companies like ge. universally panned that pension program. it is a sign of desperation. ge being part of -- ge, boeing, these are -- gm. when are we going to talk about how bad that is? 45,000 versus hundreds of thousands. you can't -- this is a shutdown. >> yeah. i think the number of layoffs now is 10,000 in north america, right, if you include mexico and canada supply chain collapses on day

23. >> do you in the see a pickup in unemployment which would be the choice here we want the fed, the bulls want the fed to cut they want the earnings to hold up and so far, yeah, pepsi numbers were good and costco's numbers were good. i think that we're going to see -- look at nike. nike just reported it was fabulous in china nike has a deal with the sports ministry to keep chinese people in shape do they boycott nike isn't that the logical one now, i don't think they do they're in league with the -- with the administration, starbucks is going straight down from 99 to 85. is this a possible one i don't think so they hired hundreds of thousands of people. which leaves kfc, that's yum china. i don't know i don't know how they retaliate in a visible way

they can retaliate on apple. but apple is a gigantic employer. >> for what? >> what are they retaliating for in. >> the 28 companies we added to the -- >> i would say so. adam silver, they got billions -- look, half a billion people watch the nba in china. they can shut that down. eunice yoon gets shut down for saying some stuff. >> they want to keep social unrest to a minimum. they might get upset >> why do you make a joke of this when this is so important. >> say again >> why do you make a joke of this. >> i'm not >> they say we believe any speech that challenges social stability is not within the scope of free speech that's their response. >> they said adam silver is on the wrong side of history. adam silver's insistence of free

speech, but then there is other people who say let's sacrifice free speech on the altar of dollars. that, again, is what is going to get senator warren elected >> open ing bell here on the s&p 500, the cnbc real time exchange, big board, it is dick's sporting goods, ceo edward stack celebrating a new book on "squawk" earlier this morning. >> he did pull guns after parkland stock has gone up since then. >> at the nasdaq, metro city bank shares, a georgia corporation of bank holding company. you mentioned all the consumer names. want to handle domino's? misses by two cents. >> domino's on tonight this is the rell drop that we have been waiting for, recognition that things have changed. i think there are a lot of people who felt that what would actually happen is that one day, and ritch said this on "mad money," they can't keep play

they have to -- their numbers will be too horrible, doesn't matter they haven't said that. this is a -- yum is a good buy off of this. >> yum >> no china, they have delivery. very good. domino's, principle thing they had going was great delivery. >> sure. >> everybody has delivery what is so great about domino's i happen to like the taste of it this is a clen -- we find the t change as the company defended the range for september 6th. that wasn't that long ago, september 6th. >> comps up 24 is the lowest in seven years. >> amazing. >> it is the 34th quarter of positive comps. >> they should get credit for that they should get credit and there is still head of restaurant brands, which is positive but the stock -- i know last week there was a piece, web bush, put out a piece about the

future of domino's post this meeting. i don't want to give up on domino's i'll speak to them tonight i like it when companies get realistic and guide down, so they can beat. mccormick. mccormick guided down. then they beat it. and that stock is on fire. maybe what is -- a recognition that there is a bit of a change in the delivery business will new allow ritch to say things that i think will boost the stock. this market is ugly. >> only one dow stock in the green, coke and that barely, nike is the worst performer. >> mark parker does not address issues not going to hear mark parker come out >> wouldn't that be something if mark parker if they -- kaepernick >> remember when kobe was on we had kobe on thor day, you were delivering alpha and you asked aboutkaepernick, such hard lines on social issues they say it is about the

athlete. do you see nike saying anything but a full throated defense of the athlete? >> good time to be in quiet period nike is a company that has a conscience too the company with conscience, remember esg, it is about conscience. >> it is -- it does put the companies in an interesting position where it is clear what the chinese government is going to ask of them, which is don't say anything about our -- what we view as our business, so to speak, and their -- the expectations of their shareholders and their employees and potentially their customers and their endorsers in terms of another area it puts you in a tough position. i don't know what you do right now. if you feel like you're pressured to say something or if you're just stay quiet. >> i think you stick a microphone in his face and say what do you think, i think you have to say we're studying

that's it. study. >> studying the issue? >> side with adam silver i side with the houston rockets. >> corporations are taking the role that typically has been held by government in speaking about these things more forcefully and i'm not just talking about freedom of speech. a range of issues. >> are you talking about the pepsico bond or the new book by marc benioff how business is the greatest platform of social change >> i'm talking about both, but specifically this morning, i'm glad you mentioned the pepsico bond, billion dollar bond from a company, part of our -- we talk so often about this esg and environmental social governance movement, the issue of billion dollar bond what they call a green bond, guys, that is going to fund a series of key initiatives to advance sustainability agenda at pepsi, talking about things like sustainable plastics and packaging being recipient of

funds from the billion dollars decarbonization of operations in the supply chain and water sustainability those among other things that are also hiring effective immediately a chief sustainability officer that goes to their customer base, and to their employees, but it is exactly what we have been talking about, the rising importance of this focus beyond just simple shareholder value. >> i was surprised how little they emphasized sodastream sodastream is incredibly environmental. and it just doesn't get talked about. and i think that's something they can really talk about in a positive way maybe they will do it. just to go back to domino's for a second, i want to go back again, everyone has been waiting for them to -- to put new floor on their numbers when it happened -- i don't want to confuse people at home. when it happens, it is viewed as positive by people who have been waiting for realistic assessment by allison about how domino's lowered their growth rate.

that is something that i think is going to be part of the theme of this quarter. not as bad as feared, nabath is part of what is happening with domino's pepsico, i don't know. they had a great quarter and the stock has been soggy of late they have been the leader. remember andrew nooyi. i went to an aberdeen proving ground plant for sun chips david, because of -- what? >> nothing. >> with potatoes they were able to have a weather neutral plant. water out of potatoes. it was a long time ago she was so forward thinking. and they remain at the forefront. sustainability what is sustainability and stuff that is longevity? sustainability, to me, let's say you're involved with clothes. >> they want to replenish 100% of the water they consume from

the manufacturer. >> they are. i'm saying that's the way they do things. >> 2025. >> they'll do it ahead of time. >> same that unilever pledged this week to cut their plastics use. maybe deode raorant comes in a cardboard tube >> when i met with church and dwight recently, they were the original of the cardboard box. >> what happens to our recycling, they were a huge recipient of much of our recycling. it is not clear. new york city, they pick it all up, i'm not sure where it is all going. >> the new plastic is so much cheaper, we built so many plants, hard for the recycle plastic to compete with new plastic. >> how do you do that? figure that out too? >> i don't know. you can't do it by making ever lane shoes 40% plastic, right? there is ten rivers responsible for all that -- all the plastic

in the oceans. they're starting with the ganges doing a great job. >> yeah. >> what? >> how does it all impact the stock of dow, this conversation about palace it tickplastics >> i don't know. yield 2.6% >> no, 6.62%. >> we have a couple of good notes today. >> i wasn't correcting you. >> you were. you were trying to make fun mef. >> i was trying to say how right you were >> target, strong buy. one of the best earnings upside stories. >> part of watch, which is walmart, amazon, target, costco and home depot. >> thank you >> positive piece about -- >> i like the colors, very pretty when they put that together where is my watch graphic? can we have the watch video, please let's move on. >> might take a little to build

that. >> there is so much opportunity right now in the nonchina stocks and in companies that -- if you go over to the costco quarter, rich galanty, genius cfo, he says, look, we'll switch, we can find places, they have 3800 skewed, but they're able to find -- they can switch, they can -- china -- >> there it is. >> look at that. >> i love those pretty colors. >> china can be marginalized that's the point of it china can be marginalized much more easily than we thin >> as a supplier, for example, into these -- >> yes it is true you go and you look at -- my wife had a really nice jacket, leather jacket, cowboy jacket, made in china. made in china. people are going to look down on that eventually. >> the larger issue that some will bring up is we're going to have two separate systems in terms of the global economy. that's not necessarily good for anybody for efficiency. >> maybe the chinese --

>> china led system, the u.s.-led system. >> maybe the chinese cave. >> maybe the chinese cave. agree to not steal intellectual property anymore the micron lawsuit, no less than the new york times which is often referred to as fake news by the president of the united states had an unbelievable piece last year about how micron -- micron had all the majors -- major plans stolen, things they had. >> apple was up briefly a moment ago. no doubt stealing interelect wall property is part of the systematic -- >> how about fentanyl? what are you hearing fentanyl? >> nothing really, really bad. >> you think the administration isn't conscious of the fact there have been no high profile arrests for fentanyl in china even though they made it a controlled substance in may. we have high profile arrests for drugs. >> why do you think the chinese are going to back down >> because the chinese in the end have a lot to lose

>> as do we all. yes. when the elephants fight, the grass gets trampled. been saying this for two years >> when do the germans come out and say we favor the peaceful protests in hong kong? when they realize that 25% of their bmws going there is not enough is that what it was? when the italians recognize that when a huge percentage of their lamborghinis go to china, when are they going to stop being like the nba, ex-adam silver, the owners what the nba caved. except for adam silver. >> there are plenty of countries around the world where there is not freedom of a lot of kinds and we don't say anything about it we do business there firms in this country do business in countries, i can think of one in particular that has a lot of oil that does things that we find somewhat distasteful but we don't care. >> what happens on thursday?

>> well, we're not -- he's going to work on that thinking, processing, rendering. >> live long and repress live long and repress. >> the best we can hope for is no more -- the tariffs don't go up they come away from -- with that, that's maybe a win >> how do they -- does he look a wealth tax we have a candidate who like a wealth tax i wonder if he likes a wealth tax. >> several several candidates with wealth taxes. >> yes >> how about joe tsai, did he come out yet on this issue brooklyn nets owner. >> he was encouraged to a certain extent to speak by the nba. >> the original was -- he was saying that what this is >> i think that was sort of -- if you're joe tsai, you don't want to raise your hand either why would you want to? >> no, you don't. >> you can't win. >> how about michael rubin how about -- >> alibaba, one of the

wealthiest men in -- >> if you look at the owners of the nba, are they not indeed the wealthiest people in our country? oligarchs. they're oligarchs. i th i think they have to come out soon most of them and say that's right. they should back the gm. >> back to 2907. levels we last saw on thursday let's get to bob pisani. >> trade and tariffs, moving the markets. that's just the story now. you can see this right in the sectors and what has been going on here. i want to show you the futures before we go you can see the weakness here, this is the preopen. this is when the headlines came out the u.s. is placing several chinese technology companies on a black list we took another leg down here, around 7:00 or so. you see that move to the downside some big headlines about possibly seeking again to limit investment in china by the u.s. -- from the u.s. government pension fund two legs down here and you see the weak opening here.

cyclical groups, predictable list of companies that move on trade headlines. banks down, yields move down, transports, industrials, which is a larger part of the transports retailers all lower. all these predictable moves here when trade becomes dominant. look at exposure by china, we put the charts up, screens up so many times, about companies that have excessive exposure to china by revenue the chipmakers that always have the biggest exposure qualcomm, broadcom, intel, very, very large percentage of the revenue coming from mainland china or china and hong kong others -- different, apple, 15%. tiffany, nike, boeing, all in the midteens significant, but not as significant as some of the predictably, stocks down today the movers here, down 1% to 2%, all of them in the same category very predictable reaction in terms of what has been moving

here the white house, again, bringing up this idea of -- headlines bringing up the idea of limiting investments in china by u.s. government pension funds mr. kudlow seemed to take off the list of possibly forcing delisting of chinese companies, listing here they aren't drhaven't dropped t. two basic arguments here being made, number one, china provides way too much support to its industries over there. and number two, they don't follow u.s. accounting standards. this is all true but, remember, to a large extent many countries around the world provide support to their local companies. and also u.s. accounting standards not used around the world. even french companies use french accounting standards so could the accounting standards around the world stand improvement, darn right they could. i'm in favor of that but, remember, nobody is using u.s. listing accounting standards generally. you have to be accredited to a global accounting organization,

as long as you do that, you meet the listing standards here this is an assault on the whole methodology about doing global listings the u.s. is about 56% of the market capitalization of the world. japan, 7 hong kong about 4. france, uk, also smaller numbers. you notice mainland china not on here that's because the listing is very, very small and companies like msci are increasing the waiting in china, mainland china as time goes by. that's what's been happening for several years. whether or not this continues depends on the course of a lot of these negotiations. guys, back to you. >> bob, see you in a little bit. to the bond pits as well, having got than inflation data this morning. rick santelli at the cme, hey, rick. >> good morning, carl. seeing very intuitive to say that interest rates, which are down about 4 to 5 basis points across the entire curve are down because we had such soft ppi that really isn't accurate long before our time zone, we were much higher in yields and only a basis point or so drifted

after the number look at a two-day of two-year. around midnight this was around 149. here we are at 142, manybe a basis point or lower where it was. same for ten-year. oom sta i'm starting the charts last thursday 10s came close but did not if you look at bund yields since the same time, you can see that they started to drift as well, but much earlier than any of our inflation data points. and keep in mind, right now, you're around 59 basis points negative in a bund we're around 152 in a ten. we're hovering 210, 211 basis points of separation which happens to be the tightest distance between the two ten-year yields in about 20 months the important feature of this is that bunds keep it roughly the same patpattern, but aren't goi

down in the same speed matching ten year notes or faster as it was when they were widening. this is important because it is most likely giving us clues about our growth the dollar index, only up a couple of ticks today. but it is still very close to its highs and early september as you see on this third week start of august for the dollar index carl, jim, david, back to you. >> all right, rick rick santelli. so we're down about 250 on the dow now. s&p down 30. be sure to check out our podcast. listen to the opening bell hour of "squawk on the street" at cnbc.com/podcasts or wherever you listen to them

. weak once again as the s&p is down 33 points. the dow is down 260, only unh in the green of the dow components. we'll get stop trading with jim in a moment. ess to every platfo.

mhm, yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. now offering zero commissions on online trades. we charge you less so you have more to invest. ♪

jerome powel

♪ time for jim and stop trading. >> always companies that are in direct cross hairs with

something like this, the list that the commerce department put out. this is umbrella stifel has the best numbers, that's 15% of the total revenue of amberela, could represent both of them, 25% of the security revenues. this is the one that is directly in the cross hairs it was doing well before this. there's probably a place for their -- to put those cameras, but you can only imagine, is this the way that the government keeps track of the people who are being repressed? so this is all about what i feared the most, if you wanted to have a trade deal, which is we begin getting -- talking about retraining, traugalking at free speech and the chinese does to the have that complete a record. >> did you not think it was

going to be complete agnostic. >> the nba has been on a roll and no gm more significant than from the houston rockets very big repercussions of this should not be lost on people adam silver came out today for free speech, and that means to the chinese government, that he has become a public -- >> certainly some of the press coverage we're seeing of silver is ridiculous. what's on mad? >> emmerson, david farr, a ton of business in china and ritch allison, the most important guest today because of dominos in the re-set. and i think the reset is most welcome. you need to be able to recognize that these companies that are backed by venture capital, they're not going away and they made it so there's an equality of delivery that's quite different from the way it's been >> jim, a lot to handle tonight. >> wow what a moment. >> "mad money" at 6:00 p.m.

eastern time don't miss it. when we come back more coverage of this significant, but moderate sell-off. the s&p 2905 you should be mad that this is your daily commute. you should be mad at people who forget they're in public. and you should be mad at simple things that are unnecessarily complicated. but you're not mad, because you're trading with e*trade, which isn't complicated. their app makes trading quick and simple so you can strike when the time is right. don't get mad, get e*trade and start trading today.

♪ ♪

good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla and morgan brennan and david faber at post nine of the new york stock exchange sara eisen has the markets off markets throwing shade here at the trade talks in line for this week dow down 270, back to 2904 >> our road map starts with those stocks sliding on trade concerns how investors should be preparing ahead of those talks and powell's speech later today. >> more backlash from the nba with broadcasts of preseason games suspended in china. >> a warren presidency, okay for stocks what her potential election would mean for wall street >> getting a news alert on global growth from the imf the new managing director who took over for christine lagarde says global growth is in a synchronized slow down next week we will release our

world economic outlook which will show down revisions for 2019 and 2020 andcontinues, trade is at the heart of the slow down. quote, global trade growth has come to a near standstill in part because of the trade tensions worldwide manufacturing activity and investment have weakened substantially there's a serious risk that services and consumption could soon be effective. we will watch that >> we will the dow sliding as optimism dims ahead of u.s./china trade talks on thursday. down about 260 points. joining us is charles schwab chief global investment strategist jeffrey and washington crossing advisors senior portfolio manager kevin good morning to you both jeffrey, i'll start with you the fact that stocks are selling off right now on increased pessimism that a china/u.s. trade deal could actually happen this week, i thought the expectations were low going into this week. what was priced in here? >> yeah. i'm not sure i think maybe some type of halt to any further escalation, maybe

as they work out more of the contentious issues and push those out to next year we've already started to see a spillover. it was one thing when this was just affecting manufacturing a relative small portion of the global economy, but the spillovers that the new imf chair has started to see has started to occur we've seen it show up in employment and retailers i note that container ship bookings of products from china to the u.s. or china to europe have really slowed they're not showing the usual surge they get around this time of year leading into the holiday shopping season. that means we're seeing the trade concern bleed through manufacturing profits into service sectors like retailers it could be a blue christmas. >> yeah. freight data is one of those forward leading indicators ahead of other types of daughters points, kevin. how closely are you watching freight numbers right now and is that factoring into your take on

the markets through the rest of this year? >> yeah. as you see global growth is clearly taking a hit and it could be a mixture of things business confidence is very important and having a lot of uncertainty over trade is going to weigh on things like capital spending which feeds back into profits. the good thing has been profitability has held up and business profits have been strong that's been a very big positive. the tick down in interest rates throughout the year has helped give a lift to valuations. but unless we get some clarity in terms of where we're going on global growth and it looks like things at least begin to start to firm up, there is going to be potential for some chop here and every time we have headlines on trade the market is going to move up and down based upon those headlines. so unless there's a new impulse into the economy that lifts earnings, lifts stocks, unfortunately the market is going to be really jostled about based upon what kind of headlines are coming and lately it's been a lot about trade.

>> jeffrey, what's the fed to do we're going to be getting comments from the fed chairman powell later today there does seem to be an increased expectation from a market standpoint we're going to get a cut at the end of the month. do you fall in that camp and if so, is it enough to help stave off slowing economic growth and help propel the markets? >> it's possible we get a rate -- we'll certainly see at least one by the end of the year, we'll have to see. i don't think that's the issue it suspect tight financial conditions or high interest rates, as it is often late in the economic cycle is that the problem, that's not it look at germany on the cusp of a recession yet interest rates are below zero i think it's fiscal policy around the globe there are increasing signs we're starting to see that in south korea and france and the netherlands and elsewhere. we need to see germany endorse that and other major countries come on board with that. that would be a more powerful tool than merely further lowering interest rates from here

>> kevin fiscal policy here in the u.s., how likely would that scenario be given the fact that there does seem to be so much political turmoil and then these elections next year as well, what's factored into the market here >> you've already got -- you already have a hefty amount of fiscal policy working its way through the system remember, we had fairly significant tax cuts a couple years ago and that is showing up in terms of higher deficits. i think we're running something like a trillion dollar per year kind of deficit at this point. the united states has relatively high debt levels versus where it was ten years ago. we've got relatively accommodated fiscal policy, monetary policy has been -- has done a lot of the work for the last ten years so really, what you need is just some good, old-fashioned confidence, business investment, that can really go a long way in terms of energizing profits. until we get some clarity on trade, it's reasonable to think

that businesses are going to hold back somewhat and that's going to create a little bit of a damper here. >> kevin, i mean if the calculus going into the week is as long as things don't get worse, right, if there's no additional escalation relative to what we already know, what does the market do with that? is that worth anything to the upside >> that sounds to me like a recipe for a market just sort of churning because what you're talking about is a market that has priced in a certain amount of expectations and nothing really changes to the extent that you don't really get changes, don't get real big movements in the market what has been stuck here for a while now have been aggregate earnings for the s&p if we were to see those expectations begin to break out to the positive side, that would be the best thing for the bullish case for stocks. we just haven't seen that yet and i think a lot of that has to do with business confidence and momentum in the global economy which is still sluggish. >> jeffrey, how do investors need to be positioned right now given all of these

uncertainties? >> i think one of the exciting things happening right now for investors to focus on is this rotation from growth to value. i think this one may have legs in the past the yield curve has often, yes, maybe signaled recessions, but more importantly signaled a shift in style from growth to value or value to growth we saw it in 2006 and 2007, in 1990 and 2000. going back for 50 years. i think this is significant. new leadership in the market is what we need, and i think you can see from value oriented sectors like financials as opposed to where the leadership has been in let's say the tech sector >> interesting all right. jeffrey and kevin, thanks for joining us today >> thank you. you're welcome cnbc's out with its all america economic survey focusing on whether the fed should remain independent. steve liesman joins us with the results. i'm all ears. >> david, nobody has asked this question as far as we can tell in a nationwide poll and our results show 50% of the public,

800 americans polled nationwide, believe the president should not be trying to influence interest rates. 22%, they have no opinion or unsure just quickly on this, what's really interesting about this is, the republican numbers they support the president's immigration policies, his policies with china and trade policies by 80%. and here you can see it's only 43% or something like that for the republicans around there basically his base does not support him on this issue. that said, the president's tweeting a lot, but the next slide shows the public's not reading a lot. if you take a look, we asked over time, cnbc, nbc, and "the wall street journal" asked this question over time you can see this is the lowest percentage of the public saying they have seen, heard or read a lot about an issue or something about an issue. just 40% compared to, for example, 77% were focused on the debt ceiling debate. 66% knew that the dow was at an

all-time high in 2013. these comments, these repeated tweets by the president about the fed, not really resonating in the public. however, they do have an opinion on the fed and 24% say they are confident in the federal reserve, 25% you can't see it here say they are not confident in the federal reserve, 19% in the financial industry, 9% in congress, and 28% in the supreme court. take a look at how that has changed over the last decade quite a bit. up changed for the fed, up a lot for the financial industry why? that was in the depths of the financial crisis congress sinking to new lows, the supreme court even coming down a lot as confidence, america's confidence in its institutions continues to go down the last screen we want to show you, powell who. they don't know who the fed chairman is very much. we talk about it every day 66% say they just really don't know, not sure about whether they approval of the job fed chair jerome powell is doing those who do break evenly, 18%

approve, 18% disapprove, about in line with yellen. bernanke more had an opinion because he was in the news back in the financial crisis, but they had more of a negative opinion than they did a positive one. so it's not resonating throughout, carl, in the base when it comes to all these tweets by the president about the federal reserve. but to the extent that the americans are paying attention, they are supporting the fed independence and not presidential influence on monetary policy. carl >> steve, you might have seen goldman's piece out today, analyzing whether the president's tweets affect a fed funds future expectations and say only weak evidence when he actually bashes the fed, but when he talks about trade, specifically, that's when the impact comes on fed funds. >> yeah. i mean that's -- it's trade that leads the market which leads the bond market and the fed funds futures markets.

i don't know we can figure out in any paper the extent to which the consistent barrage of tweets on the federal reserve gets inside a policy maker's head they try to keep politics out of it, but i think it's got to be very hard. >> steve, good stuff steve leasemans, thanks, back at hq. pulitzer prize winner jim stewart will talk about his new book focusing on the impeachment inquiry. as we go to break the worst performing names on the dow as we've broken 2900 and the dow is down 309

president trump has long leveled accusations of a so-called deep state, is seeking to undermine his presidency. that's the focus of the book "deep state, trump, the fbi and the rule of law. joining us is the book's author, "new york times" columnist jim stewart. congratulations on the book. >> thank you it feels good to get it out. >> what do you want viewers to know about it? >> let's start with the concept of the deep state. trump has weaponized that and using it as a pejorative as you will see in the pages, you can say there is a deep state and i say thank goodness analyst, the entrenched bureaucracy, all the civil servants who work for the american people, pledge to uphold the constitution. they do not work for the president of the united states for the white house. that is the essence of the rule of law

we have always had an independent judiciary, independent justice department and an independent arm of the fbi. trump has attacked that full scale. what does this have to do with the markets? this is the point i want to make today, healthy markets and free markets rest on the rule of law. why is hong kong the financial center of asia ors has been? because it had the british tradition of the rule of law there. you could argue that the s.e.c. is part of the deep state. the s.e.c. is a quasi independent agency that enforces fair markets and that's partly why investors have so much confidence i think it's very important for people to step away from the day-to-die gyrations of the market and look longer term and say, the reason we have a stock market, the reason that it works so efficiently, is that we have a long tradition of chief executives who honor the rule of law. in the pages of deep state i have to say, look, i'm not a

partisan at all, a long line of republicans, i'm from a county in the midwest that went 70% for trump, but i don't think he knows what the rule of law is. >> are you characterizing whether there's been an erosion to rule of law in this country >> yes look around. look what whistleblower is saying look who we now have running the justice department one of the stories that i find so fascinating in my book is the transformation of rod rosenstein from a highly respected independent prosecutor into someone essentially who did the bidding of the white house rushing to judgment with barr to say there is no obstruction. mischaracterizing the mueller report now barr, he gets the whistleblower complaint and he doesn't even ask the fbi to look into the facts before knowing the facts, there's no crime or nothing to investigate. this is a dangerous sign to me that the independent of those agencies has been eroded >> barr is on plane going around the world right now investigating the 16 election of the fbi's role in it, isn't he

>> he is he's spending an enormous amount of time and taxpayer money, i wish he would just read my book. it has the whole story there there is no mystery about how the russian investigation began. let me remind people, which a lot of people seem to have forgotten, trump was not the subject of the russian investigation. comey told him three times, he put it in the letter he was not a subject. he became a subject when number one, he fired comey and two, especially, he then lied about it, and started acting like someone who was covering up a crime. >> i want to go back to the point about the rule of law because i think it's a crucial one and what makes going back to this idea rule of law in the u.s. is there's no one person that's the end all, be all, including the president. current president or any other president. >> absolutely. >> and so the counter i think to the point you just made, or maybe it reinforces it, is the fact that when you do see a potential abuse of power, whether it exists or whether it doesn't, you do see these other mechanisms kick into place like

impeachment inquiries. >> that's correct. people say these people are traitors, no impeachment is part of the constitution there are important checks and balances here. i think another important thing -- i talked to some people and they say, well, i don't really care whether trump spoke to ukraine or not. you can't cherry pick the laws you want someone to enforce and then assume they're not going to honor the other ones it's you either obey the law or you don't. all laws apply to everyone with equal force. one day you say i don't care about ukraine but you care if the chief executive starts whennizing the anti-trust laws to pick out favorites to destroy healthy industries because they have crossed them. history is filled with examples of leaders who abandoned the rule of law, got rid of the independent judiciary, suppressed the press and went on to wreak havoc with the economies and in some cases to destroy the economies. >> are there checks on the deep

state? we can talk about it on elected officials, but what about the deep state >> there are many checks on the deep state trump has made it into something where these are people trying to guard their own power, expand their own power, at the expense of elected officials that's what the deep state started out doing in places like turkey and egypt that is not what has been happening here both constitutionally and legally, we've signed, defined responsibilities to career bureaucrats who can be of either party, like i said, they pledge allegiance to the country and constitution and to the people of the united states and constrained by those duties. we have many administrative courts, a justice department, lawsuits that can challenge them when they exceed their authority. >> whistleblowers and people who leak to the media, are going to reinforce some people's view that the deep state is dangerous, right what is a whistleblower to do or a potential whistleblower? >> why do we have whistleblowers right now? because whistleblowers have legal protection

they're becoming whistleblowers because they're afraid to just go through the regular channels. look what you'll see the characters in my book, look what's happened to them. mccabe, comey, haij, strzok, whatever they did or didn't do they have been branded as traitors because they dared to bring forward information that didn't fit the narrative that trump wanted what they did was the essence of patriotism and that is you must stand up for the truth and you must hold people accountable to the law. now we have people they feel they have to be whistleblowers because everyone is terrified. >> and jim, finally, i always read your book with great enthusiasm and look forward to reading this one, i don't want to give it away, was the fbi biased against trump or clinton? >> you know, look, there are tens of thousands of people in the fbi and i think what trump has tried to foster they were hostile to him and supported clinton, but you see in here a very different narrative there was a hard core group of fbi agents who detested hillary clinton and were determined to

undo her at every turn that's really why comey had to go public with a lot of this, why he had to publicize the fact that it was being reopened they were going to leak it they were leaking like crazy to rudy giuliani and people like that >> rudy finds himself in a lot of different places. >> oh, my god. i've been watching him for like decades now. >> sounds like an important read. >> thank you very much. >> congratulations on the book called "deep state, trump, the fbi and the rule of law" and it is available starting today. >> definitely. >> when we come back, the nba's china controversy. china suspending broadcasts of the league's games, but the nba isn't the only one facing backlash we've got those details. just getting another look at the major averages right now it is a sea of red the dow is down 264. the s&p hanging on to that 2900 mark 2904 "squawk on the street" will be back right after this. i knew about the tremors.

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this in reaction to houston rockets gm daryl morey tweeting support for protesters in hong kong in tokyo adam silver defending morey's right to free speech >> the long-held values of the nba are to support freedom of expression and certainly freedom of expression by members of the nba community and in this case daryl morey as the general manager of the houston rockets enjoys that right as one of our employees. what i also tried to suggest, i understand there are consequences from that exercise of, in essence, his freedom of speech, and, you know, we will have to live with those consequences it's my hope that for our chinese fans and our partners in china they will see those remarks in the context of now a three decade if not longer relationship. >> the nba not the only one

feeling the heat u.s. jeweler tiffany under fire after tweeting an image of a chinese model covering one eye with people believing it was done in solidarity with the hong kong protests. other names, van's, activision blizzard coming out and suspending an e-gamer for a hong kong comment this is in the last 24 to 48 hours. i think we've been sort of growing to a crescendo with some of this. we've seen some of these tensions and it really kind of gets to the crux for many of these american brands, american companies, making money in a key market like china, versus a look at what is very much american principles, democratic principles and a part of those companies' american brands >> speaking of which, one american brand, south park, the creators of that show, issuing a mock apology to china after reportedly being krecensored

beijing scrubbed the cartoon from the chinese internet including clips, discussions on-line. at issue the episode called banned in china which poked fun at china's strict censorship laws. >> i can't sell my soul like this i want to get away from that farm more than anything, but it's not worth living in a world where china controls my country's art. i don't care how many people you have i have something that won't let me be a part of all this. >> yeah. whatever it is i've got it too. >> yeah. i want to be proud of who we are, guys, and anybody who would betray their ideals just to make money in china isn't worth a lick of it >> "south park" creator jokingly apologized on twitter saying like the nba we welcome the chinese censors into our home and hearts and long live the great communist party of china and we good now, china the sarcasm delivered beautifully out of parker and stone. as usual >> as usual. but again, it gets back to this

point, right caught between making money and values that have made american brands, you know, big blockbuster hits in many parts of the world all right. well, i don't know i don't think we're done talking about this i do think the timing is quite interesting, though, givens the fact that we have these trade talks going on a bit later this week certainly adding to the tension there and the cold water being thrown on markets right now ahead of these talks commencing with the dow down 275 points. >> yeah. we're going to continue to watch the sell-off here. 2902 time for our etf spotlight mike santoli looking at in of the big names in technology pulling the sector higher. >> the two biggest, apple and microsoft, hanging in today, outperforming the market and within tech it's kind of the story of the overall market which is the biggest and perceived most predictable names the ones working the best. here is apple and microsoft which together, of course, are now worth more than 2 trillion dollars compared to the xlk, the

etf, and the ryt the same stocks but equally weighted not giving more weight to the largest companies, and you see the equal weight is under performing the tech sector by 4 percentage points and microsoft and apple vastly outperforming together those two stocks make up more than 35% of the tech sector right now yes, semiconductors have done pretty well, seen other names in software out perform the market as well, but really it's the story of the biggest and heftiest stocks working the best right now. >> sort of brings to mind the upgrade of microsoft today. >> exactly. >> which they're looking at double digit revenue growth for the foreseeable future >> pretty unthinkable for a company of that size to actually be able to confidently predict that i mean i think it's fair to also question, you know, microsoft has had this amazing run and now you kind of upgrade on a rationale that the reason it got to that place it's going to continue, i get that, but it seems like the most indispensable perhaps stock right now in terms of core

portfolios >> still the largest market cap over a trillion. >> yeah. >> barely. >> $600 billion is where it was nominal dollars at the end of 1999. >> right >> actually, i believe had a slightly bigger weight in the overall market at that point. >> yeah. >> it's not as if, you know, on an adjusted basis it's unprecedented for it to be this powerful. >> that's true thank you, mike. >> all right >> powerful without an antitrust scrutiny just going to note that. >> that's right. >> send it over to sue herera, back to hq for a news update. >> thank you so much, david. good morning, everyone here's what's happening at this hour the state department has barred gordon sondland, the u.s./european union ambassador from a house panel his lawyers saying sondland was disappointed he would not be able to testify. no reason was given. >> the failure to produce this witness, the failure to produce

these documents, we consider yet additional strong evidence of obstruction of the constitutional functions of congress, a co-equal branch of government >> turkey's military gearing up for a perspective military strike in syria, a day after president trump said u.s. forces will be withdrawn from the area. the white house confirming that president has invited turkish president erdogan to the u.s. on november 13th. and the nobel prize for physics was awarded to three scientists for their contribution to the understanding of the evolution of the universe. the award went to james peebles and jointly to michel morrow and dibe for the discovery of an exoplanet orbiting a solar type star just your every day stuff. that's the news this hour. it's amazing back to you guys, david. >> thank you, sue. when we come back right here, why our next guest says a warren presidency wouldn't be so

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but the most important thing... ...is the ability to connect to people and she had it. and i knew... ...she was the one. post a job today at linkedin.com/grow presidential candidate elizabeth warren proposing numerous new taxes one on wealth, corporate profits, social security and lobbying to name a few robert frank is keeping track of all of those figures and joins us with more. >> the list keeps getting longer she's proposed five major new tax increases so far that if you add them all up are larger than the gdp of switzerland the wealth tax which is by far the best known a tax of wealth over $50 million, that would raise about $2 trillion over ten years or about $200 billion a year next up you have your social security tax that one is even bigger than the wealth tax a tax on investment income for high earners and coupled with a payroll tax split between employers and employees,

that would raise an estimated $4.2 trillion over ten years or $400 billion a year, and then you have the corporate profit tax. that's like an amt for companies designed to make sure those companies like amazon pay taxes no matter what their profits are and would raise about $100 billion a year a lobbying tax, the smallest only about a billion a year and roll back the tax cuts and job act, that's another $100 billion a year so add it all together, the taxes would total about $800 billion a year that would increase federal tax revenues by more than 20% in total and by the way, that's larger than the gdps of switzerland, saudi arabia, or the netherlands. back to you. >> all right robert, thank you. joining us to discuss this further on the hills of her recent note titled "eye on the election how the 2020 race for the white house affects u.s. equities" we have rbc capital markets head of u.s. equity strategy laurie.

i highlighted your note yesterday. we had a discussion, carl, jim and i, about it as well. i would assume you wrote it in part because of the demand from your clients are you hearing what we hear when we sit down and talk to sources they all want to talk about a possibility of a warren presidency. >> the analysis we did this report are what our clients have been doing particularly among hedge funds. once the impeachment story exploded on the scene we found clients weren't thinking about that issue but how does this affect 2020 and game that out. >> is it fair to say, wouldn't be quite as bad as everybody thinks you went into great detail about particular areas that would see significant potential hits and others that might not? >> yeah. i wouldn't use that phrase to be honest we think it could be quite a problem for the market in the first half of the year and the message that we tried to send with our report. we sort of said two things number one, if you look at the timing we just wanted to remind our investors how the primary season plays out

it is going to be in the spotlight in the first quarter of the yearand that's also whe people consider the year ahead outlooks typically on wall street we also know that investors from our investor survey work have expressed a clear preference trump is clearly viewed as the positive outcome for stocks, biden as a neutral and a democrat other than biden as a negative and then we sort of dug in with our analysts and we found that when we asked them to think about specific industries and specific issues, and how they would interact under a warren presidency and asked them to consider a democratic sweep, when we mapped it out to the sectors almost all had some adverse impact some were mixed, some had positive offsets, some clear negatives. nine or ten of the sectors had an issue and 64% of the industries that we cover at rbc our analysts put in the bearish or very bearish camp >> some have looked at the change in short interest since her poll numbers started to rise, it's not clear, tech

hasn't seen the increase in short interest as say health care which sector is most vulnerable? >> what's interesting there's clearly a difference in valuations and the level of policy risk. what's interesting to me areas like energy, financials, health care, that is what we sort of labeled those as very high risk. really our analysts were mostly in the very bearish category on those. the valuations do look very cheap relative to the broad market an area like technology which we would consider high risk, so not quite in that upper echelon, that's where we do see more elevated valuations. there's some, you know, some conflicting factors there. >> it's funny because your note got described by a couple hedge fund managers as being less negative and i guess that really, given how negative it is, goes to show how negative wall street may be or is right now in terms of any anticipation of this as a possibility >> right i think what we really tried to focus on is when we think this risk is going to be priced in the market and we think that's more of a first half event next year i think --

>> ahead of the election >> ahead of the election we feel like investors have been doing work on this now we know investors have been starting to price this into health care stocks directly. the same september investor survey we asked investors what do you think is most at risk under a warren presidency and democratic sweep and health care was the thing they highlighted from my conversations that is already getting priced in. our biotech team has been hearing that as well. >> if a moderate were to -- it is early we haven't had any primaries yet. always the possibility there will be an unexpected surge from some candidate, potentially even a moderate in the democratic ranks, do you think that would have a beneficiary effect on some of these equities >> we actually asked our analysts to consider different possibilities and we said, you know, what happens if the senate stays in republican hands, what happens if joe biden comes in and there were differing views by differing industries but generally as a group those were viewed as less negative outcomes i have been telling investors it's too early to be certain

about anything we are still over a year away. but i do think you need to keep all possibilities on the table and now is the time to be doing the work. >> we're going to get flooded with poll information for the next 12 months, obviously. chae what's your favorite >> the one that we track very closely is the real clear politics data that's looking at the primaries and we think that's been capturing the momentum you've seen on the warren side and shown some of the breakdowns and some of the other candidates that's the one that we think is probably if you were just going to pick one to keep an eye on, the poll of polls. i like to look at a lot of data, not just one data point. >> sounds like this is a first half of 2020 event in terms of what gets priced into the market how does an investor stay position the right now in the final quarter of 2019? >> so, you know, we are factoring in the election as a risk factor. it's not the only thing that we look at. we do like things like financials and industrials those arecyclical favorites at the moment we said on both of those sectors

valuations are deeply discounted if you look at industrials in particular, financial crisis lows relative to the s&p a lot is the trade war which is one of the issues that our analysts are actually highlighting as a potential threat under the warren presidency. >> she will be more hawkish than this current white house >> i think they don't necessarily talking to our multiindustry team and machinery team they are assuming there would be some continuation of tariff angst they don't really expect any improvement. >> we discussed this yesterday to end on a bright know the s&p historically has done best with a democratic president when at least one house of congress is controlled by republicans. >> yeah. look that's the historical playbook we threw that into the report because whenever we're in an election year we get flooded for that data. if you look across all the different scenarios, stocks tend to go up over time and regardless of who is controlling congress and who is controlling the white house. >> lori, thank you we will be checking in with you as we move into the beginnings

of the primaries as well. later on "squawk alley," don't miss an exclusive with senator marco rubio who will weigh in on the trade talks, china censorship and more, we're back after a quick break as we hover close to session lows, n'gowa29 dot ay.

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welcome back to "squawk on the street." dow down 271 let's get over to the committee cme group and rick santelli. >> good morning and thank you. i would like to welcome my guest jim bianco we had a very weird pairing for ppi with regard to both headline and core, both going very negative your interpretations, especially from the notion of long-term charts now showing core rates?

behaving historically different. >> yeah. first of all in a short term we were told that the tariffs were supposed to be inflationary. this is supposed to show up in ppi. it's not core ppi actually turned negative for the first time in a couple of years. good ppi is down and you're right on a bigger picture this is following the bigger picture. all inflation has been down, it's been down for about a decade, maybe a decade and a half and showing no signs of picking up, especially at the core level even tariffs can't get inflation moving right now. >> it's going to be almost impossible to try to separate out the impact from global trade in reverse first it's just general trends of inflation but off camera we are talking, you think the calibration of global inflation is just inaccurate, trade or no trade infraction. >> that's right. i think we're not appreciating the role that technology has played in squashing inflation, reducing inefficiencies in

markets. think how easy it is to find a job and efficient to fill a job because of the web it has changed the way inflation is it's not coming back, especially at the core level. >> if we take a couple of hundred year view of inflation, maybe the anomaly was the '70s and '80s but the scary part of that statement means monetary policy globally, every central bank is calibrated to the wrong input. >> i agree i think the fed likes to use the phrase whether or not inflation is well anchored it's not in japan. it's unanchored in japan and europe and almost unanchored here in the united states. it is coming down. it is not going anywhere any time soon. that's showing up in interest rates. if you look at the 20 largest economies, their bond markets there's only one interest rate left in the developed world that has a be two handle or higher. >> 30 year. >> at 201. >> it's been below not like this is in stone. >> it's 201 and you better grab

it because otherwise that's the last one in fact, american investors need to understand, you need to jump over the table to grab a high yield. you want to know what a high yield is today 2% that's what a high yield is. if you're pining for 4 or 5 you're working in a previous cycle. we are in a new cycle. >> we always hear about demographics during job reports and the labor participation. we're almost out of time something to be said as we create more older people and we are every minute of every day, we're creating new markets for the fixed income for the securities side, for buying these interest rates, your final thought? >> real rate, interest rates are below the inflation rates. rates are low as we talk they're below that to levels we haven't seen in some measures hundreds of years we haven't seen that. negative everywhere in the planet interest rates get used to these low rates. they're not going back up unless we have something terrible happen. >> i think we need a major pow wow by all the heads of the major central banks to discuss

this david faber, back to you. >> thank you, rick let's send it over to jon fortt so we can get a look at what's coming up on "squawk alley.." >> we're going to keep our eyes on the markets, of course, and also going to talk to the owner and co-owner of a couple teams sacramento kings with the nba in the news, and the sacramento shock. that's an e-sports league that recently -- e-sports team that won overwatch league lots to talk about the future of e-sports in business that's coming up on "squawk alley.

welcome back to "squawk on the street." red across the board with every sector in the s&p trading in negative territory, amid fading optimism over u.s./china trade talks. that's draining the tech sector and chip makers. on pace for the worst day. now back downtown to you guys.

>> thank you very much. competition from lower cost natural gas and renewable energy rocked the coal industry coal companies are looking for new markets overseas, sparking a new war between the states scott cohn is in powder river basin. good morning >> reporter: good morning, carl. behind me, sort of an endangered species, coal fired electric power plant. utilities are taking them off line or converting to natural gas at a huge pace, equivalent of 25 power plants last year alone. here in wyoming that is a problem. this is the largest coal producing state. two big mining companies, cloud peak, black jewel declared bankruptcy this year that has taken two black jewel mines out of commission. output was already down 30% in the past five years, mining employment down 13% this year alone, bonuses that the state

collects for mining on federal lands have basically dried up. one of the ways they want to deal with this in wyoming is to find new markets for the coal, including exporting them overseas, through west coast ports. state of washington in particular has blocked that, citing environmental concerns. >> i think it is important that the country realize that if our coastal areas are holding hostage the middle of the country, probably the middle of the country is going to react in some way >> reporter: right now that reaction is happening in court wyoming is backing a lawsuit by the privately held company that is suing washington state to try to open up that port eight landlocked states joining that friend of the court brief, but this is going to take time, the court battle that's time that here in coal country they do not have guys >> scott, this is incredible to me that you have coastal states

blocking the transportation of coal out of the country from other states is there any kind of precedent for this coal largely moves by railroad, and governed by common carrier laws i'm wondering what's actually allowed here >> reporter: well, it is an environmental pruning process in washington state, and the clean water act and things like that that washington state uses as grounds to block the coal terminal they want to build in longview, washington the other state is not allowing it on environmental grounds. this is playing out in court there's a potential that wyoming sues washington state directly that would escalate things so far they resisted doing that because it is an uphill battle, but it brings in constitutional concerns and the commerce clause for now, they're at a standstill, and really there's no other economical way to export coal from here, other than through domestic ports.

>> and obviously we have been watching and discussing change in usage of natural gas which is cheaper as an alternative to fire these electric power plants is that expected to continue into the future as far as we can see? >> reporter: well, it seems to be the case. fracking has made natural gas considerably cheaper, some cases half as expensive as it is to use coal to power an electric power plant. what they're saying here in wyoming is that you cannot count on that forever, that there could be a situation whether it is a carbon tax or global tensions that make natural gas more expensive again that's why they feel they need to keep the coal resource going and keep it viable, but it is really tough based on the economics right now. >> fascinating piece, scott. looking at the states and the industry as a whole. scott cohn in wyoming on coal

today. thanks when we come back, we're going to continue to follow the selloff. holding 2900 by about seven points "squawk alley" is up next. the lexus es... ♪ ...every curve, every innovation,

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