we take you washington, d.c. a few moments ago. the treasury secretary and the chinese delegation arriving at u the tr as this video rolls as we have endured a wild overnight session in futures as we got a bunch of conflicting headlines about the u.s. trade what we do know is the delegation arrives for u.s.-china trade talks of course, we have complete coverage keep an eye on europe as well, ten year is back on as september cti runs up cool up 1, 7 greer on year. we -- year on year. jim, we know what we went through last night in some of these taped bombs about travel schedules and currency plans the "time's" with the piece about limiting access to american capital now. >> we have become hostage to events that are not totally out of our hand, i think totally out of the president's hands, in the

sense that there are different things that come out we had the futures down, the equivalent the s&p down 1.2% and came out with a statement with hauwei >> we didn't come out. "new york times" cited sources saying there might be non-essential equipment. >> you understand what i mean, meaning that there is a story floated, let me be more accurate >> that made it so that the bear market of last night ended no stocks trading. it's kind of amazing when people started the futures in 1984. did they ever envision a world, this is our gamble if there is no stock trades, it's a gamble. i feel the momentum behind these talks. i can't believe they're having talks after what's gone through this week. >> i don't know. well, you can't listen to lighthizer, you know, the contradictory nature of this sometimes that we see from the administration, whether it's navarro contradicting kudlow,

lighthizer, mnuchin and the president's tweets, it makes it very difficult one would think for an investor to try to figure anything out except that you can go in with some expectation for example maybe tariffs will not be increased to 40% and maybe the new ones on the 156 billion won't going to affect a 15% in december >> the october 15th tax, that's what took place. and i think that the market goes up if that's held off. that was the tariff done bump in peak remember that was in peak, where the president was very angry the problem is, can we go back to this market and accept the fact that it is just impossible. i mean, apple. okay you so you sell apple on the news that the trade talks are going badly and then apple removes an app, which is in keeping with all of apple's ethos, don't endanger people, endangering policemen, police people then do you buy apple off that way? you upgrade apple because apple

is doing better with the 11, you think if the trade talks go badly, i am describing an just an unfathomable market where if you have conviction, are you out of your mind. >> well, we're in a bit of a bottleneck, where fundaments are subject to one binary outcome. right, as to whether these talks go well or not. >> i was working with bed bath this morning and the change there, a heavy weight by the way comes from target, ceo at target, he's going to be the ceo of bed bath. i'm doing my work. i thought, wait a second, how much is from china am i kidding myself? i know that target has a lot of brands, maybe he knows how to source like target target has tremendous power to be able to jawbone prices. i forgot to ask t china. i realize then i don't know a missing piece of the puzzle. >> it's a missile piece of the puzzle at all times certainly for companies like that, for apple which had 52 billion

reasons as in the dollars they bring in from china every year to make sure that things continue to be good for them over the years >> right but washington i want people to own facebook. okay zuckerberg in front of congress. do you sell facebook because zuckerberg is in front of congress washington, i asked. i had hormel on today, so you would think, is there anything more simple than hormel? this is the pumpkin spice, smam is sold out in seven hours, david. spam, it should out in seven hours, david i mentioned, you know what matters to them? china and swine flu because the china has a hogg shortage. >> 176 to 180 to prior 175 still above the street. >> i know, just how can you not be beleaguered by the idea that there isn't anything -- i'll give you a if you one, do you know tanker rates are up huge to

sill, it's spam, budgies and spam, monty python oh, so it has some ingredients beside spam. >> it's actually not bad >> the hormel's new burger has the least of any of these. >> it does have a lot of saturated fat. okay >> we should go to kala, doping don't you think? >> kayla, a full morning. >> reporter: good morning, charm. we just saw the reception outside the u.s. trade representative's office of the vice premier of china. he was received by the u.s. trade representative and the treasury secretary they all put on a good face. it was a congenial treating, smiles, backpacks, posing for a photo op for the media that is assembled for the most disspenceful moment in this protracted trade dispute on u.s. soil that i can remember you had in bounces airs and osaka, japan but this is really a critical moment here in this dispute.

because have you this spector of tariffs going up next tuesday, tariffs on a wide variety of goods, many principles on the u.s. side believe would be incredibly damaging to the economy. then you have both side essentially throwing a whole bunch of options against the wall via the press and show the other side maybe what they're willing to do and not willing to do, to telegraph their position ahead of these talks what we do know, the president hasn't made up his mind. a senior administration official told me that last night despite all of what we have learned about china's position but the u.s. position in repeat days david, you mentioned that it's become confusing for investors to follow this back and forth. it's become confusing to reporters as well. last night when chinese media was reporting the delegation could cut its trip early administration officials were saying it would go through friday there would be a fancy dinner

tonight, expecting talks to go well >> that changed tune in an hour, a principle saying the situation is fluid whether they extend to tomorrow is an open question. we know the chinese have played this game before they have used the idea that they could cut talks early if they're not going well or extend them if they feel they're productive as a way to entice the u.s. side to put more on the table. we'll see what happens today of course, we wish we could be a fly on the wall in the negotiating room, but we'll rely on our reporting and what information we can get in the meantime guys >> kayla, you know, you mentioned of course the difficulty in trying to understand what might transpire. you bring up the president as well he's clearly a wild card here. because he can make a decision that perhaps at odds even with the negotiators in the room. isn't that right >> reporter: that is exactly right. and it's unclear exactly where his mindset is right now three weeks ago, he said he would not do a partial deal.

he would not seek agricultural purchases as part of an interim deal he didn't want a mini deal a few days later, he asked his treasury secretary, why didn't they buy agricultural? a lot of people say maybe the devil is in the marketing, how you build this to president trump, maybe not a mini deal or interim deal if that is on the table. but as a mile marker, as a point of progress, as a way to temporary pause the dispute and make sure that there are dates in the future where china can be held accountable and ways that the u.s. can retain leverage over china in that way so, yes, the marketing, i think to the president has been a challenge from officials up until this point and we're not sure at this point exactly where the president is on this, except that he has not made up his mind as of last night. >> kayla, jim. one of the things that i'm confounded by is that there is a hard core list from peter

navarro, seven things that have to happen before their gentleman to be any progress with the talks. we know a lot las to deal with intellectual properties, phentanols, state subsidized institutions doesn't the president subscribe to the seven deadly sins as a reason if you don't check off on one of them there will not be a big deal >> reporter: he certainly has in the past, jim. the question is whether the landscape for the president has changed, whether the impeachment inquiry, whether the looming election and caucuses in iowa a few months away. whether hearing from his agriculture secretary out on the road in the mid-west, where farmers are incredibly angry about their dire financial situation, whether those messages are overpowering navarro's seven deadly sins. >> that is the question for the president at this point what he feels the calculus is that he needs to make at this exact moment in time given the election, given the state of the

american economy and the fact that some of his officials, including larry kudlow just last week said, we're concerned about manufacturing. we don't see a recession if sight. we're concerned about some of the data. >> kayla, even as we are speaking to you, we saw a rival south china morning post, of course, one of the media outlets that we watched in relation to these trade talks has dim prospects for deals as china resumes talks. we have to take all of this into consideration as well as your reporting, kayla, which has been exemplary. of course, the fallout between china and the nba continues, the nets are playing, they are fought airing that pre-season game a part of the backlash from the houston rockets gm, showing support for protesters in hong kong nba has planned to hold a post-game briefing the players would not be made available to the media china daily had a graphic of the nba logo with a bomb in the

player's hand rather than a basketball so that's not going well either. >> no, i think there is a lot of people on this spot here i have been very sympathetic to the idea of say coach atkinson who is a terrific guy. the net's coach. then the owner of the nets so i mean if you are in the nfl, we would say, hey, no problem. you can't say anything >> joe tsai. >> remember, the nfl had no freedom of speech. it's regulated very tightly. adam silver has rebelled against that i almost feel like the nba either has to go toward an nfl model or has to say, you know what, we have way too much -- too many people that feel that free speech is core value. >> i think that's what he said that's kind of what he said. >> we will not compromise. >> but the owners don't feel that way a lot of the owners are willing to compromise.

>> well, this is a different league than the nfl, jim you know that. the players have a lot more power here they've had a lot more partnership if you can with ownership, that i think is the case in the nfl, is that fair to say? >> disdifficult to switch. >> they have more powers >> that's very true. the players have historically had tremendous things to say and i just wonder whether it just means, did the chinese not think it would come? or are the chinese panicking over hong kong >> panicking, how? >> does it really matter if the general manager of the houston rockets thinks there should be free speech in hong kong are they they short sided and that temperamental i don't think anyone is talking about the notion is the regime threatened by adam silver? are they threatened by a thoughtful nba is that what that society has become i mean, think about it even the russians, at their

absolute worst would never be threatened by an nba commissioner i just find this to be a farce that this great country which has done so much for its people is scared, is scared of a player can you imagine if lebron talks? >> i don't see the repression and free of speech in china as bag new thing at all it's a part of a pattern that's been elevated because of the tensions >> to endorse hong kong has always been an issue but i just think had you ever asked any nba player about the repression in china, maybe they would have said something. were they all just whistling past this graveyard of repression that's what i want to know i mean, on the altar of sleeper deals? >> i think there was an expectation that we would sort of export our values along with our sports >> well, yes that's the wto theory, which by

the way peter navarro thought. wait a second, wasn't there supposed to be when china joined the council of nations that they were going to loosen their, any restriction? they've gotten tighter i mean, let's understand this regime is far given from the previous regime. this regime is hard line in a way that now was hard line, maybe nor hoard line than -- >> maybe you do have a leader for life now. >> who has consolidated. >> isn't that maoist >> perhaps >> i thinkthis is the biggest story out there. i'm not kidding. i think the hong kong story is kind of the under played in our country. you can't every weekend have a p protest. >> it's very important i can think of any other geopolitical issues, something going on in syria that potential

toly could become -- >> it's not in our marketplace we don't do business with the kurds. they were our greatest alliess within 48 hours of a phone call. >> it's things that will take up a lot more of our attention. hopefully not. >> i'm saying that hong kong, the chinese communists have not been able to figure out how to do a non-tiananmen square shutdown of the protesters and they must be losing face every minute over there. in the south, china, payment, they can do everything they want they can't seem to stop the protesters if i were the chinese government, i'd be saying, we got to shut the protesters down, before we just got new stricttures on muslims being pers indicaecute persecuted what happens if somebody shuts down the talks >> navarro suggested hohong kona

legitimate framework >> the kurds is more i beg to mention the kurds. >> it's not more i'm saying it's another issue that people have to start thinking about because there are ramifications far beyond syria that have to go to iran, israel, saudi arabia >> europe. >> we just think, no response towards the iranian attack on the saudi oil facilities nothing. >> guys, we're going to try to stick to the markets now there is a ton of research to get on apple as jim said, netflix, unh, sis core kroger. we'll get to that when "squawk on the street" comes back. the dow is down 34 in the pre-market >>

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they have been in search of a ceo. even when they just reported, saying where is the ceo? david, i think they got the number one ceo, mark trittton, i know him he is the chief merchandisosis for target everyone sees his work in all the brands, ios said earlier i'm missing a piece of the puzzle, how badly will bed bath be hurt by china they're the least impacted of retailers. trittton is a guy that can hammer the vendors the most expensive sourceer. there is so much money that can be taken out of the supply chain. they've offloaded a lot of the bad territory. what they never do is ruin the balance sheet. david this stock is not up enough. >> really? so you think there is a future here there are certainly those that believe it's another name that

goes into the dust pan of history. >> they can get rid of the ancillary sales and most importantly, david, they wouldn't get trittton. i agree with you, i was very concerned. but they wouldn't get a guy that's that high quality tri tritton wants to be paid in oodles of stock. he wants stock he wants to be the man who turned around a dinosaur, by the way, target will always tell you this is the principal share owner. watch this situation, david, this is where the activists i think have done something constructive and brought in people who can change it i hear what you say. i have mickey drexler on tonight. yes, he's back with a new brand. we're going to talk about mall being dead this is a strip place, the mall is so dead it's scary. >> it actually is scary. go into a mall, it can be scary. >> you were in one

>> they're abandoned >> their integration >> spiders, snakes >> you have to go in, david, it's like indiana jones now, money is in that pit just like that it's like, wow, that's a wall for you. bed bath is a strip mall david, i this i that this is a guy. and i think it can go back to at least where it was even just a year ago this was a brilliant move and i wish him well. >> all right evaluated info from jim there, particularly about the stock and yet to be failed iled ak. lowh wco back right after this

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partner with pgim, the global investment management businesses of prudential. you are watching cnbc "squawk on the street", the opening bell in two minutes on this very important thursday as trade talks begin. two sides trying to end a five-month standoff, xinhua, one of the services say china is willing to preach agreements both side care about and to prevent friction from further escalation all of these things have been probably in the works of the rollout. >> but does this say if you play tough with the chinese and black list enough companies, do they really come to the table is it something the hard-liners have been saying i have been watching shipping rates soar ever since we put costco not the right costco, the wrong

costco on a restriction list out of nowhere we black list a shipping company these out of nowheres, but i think to some degree really are shocking china, which is so used to compliance and instead we just do freedom one day, shipping another day then we do hauwei another day. >> it's a list >> i this i the chinese are kind of baffled i don't blame them to be baffled. i think they need the trade people at the white house fight every day. they fight every day about what's right. >> amongst themselves. >> amongst themselves. the president is old arbiter i think the president thinks that the american people, his read of it they can be tough and the only people that "squawk"ed about it, are some of the partners but the walmart amazon target costco, the prices have not.

>> cti unchanged for the month >> they fell >> they might be later in the fall no sign of them. >> a tremendous battle they came from failed retailers and then you go back and think, well, what business should have a skyrocketed price, steel, steel falls through the floor. a lot of the economist model itself completely gone awry. anybody that said these are inflationary, is proven to be wrong. >> i have a big board, multi-national bank head quartered at the biotech focused on therapies to treat cancer >> a ton of calls on big names here, gold cutting cisco >> travel opens it

it's the last quarter was disappointing. they're talking exactly what i have been talking about why you need to cut rates, which is you have slower enterprise spending, telco spending what happens in that world is you think cisco will miss again or a guy down. cluck robinson says watch the stock go from 58 to 45 now at 3%. a big buy back only 2% to china i don't know is this an early call with the stock at 13 times earnings do you want to play that rope-a-dope game i don't want to buy cisco at 45 and buy back at 43 >> the thesis is enterprise spendings continue to weaken morgan stanley had it almost the same peace yesterday. >> it's true. >> you think it's the cost of capital is too high? that's what these -- >> no, i just think there the a

general on way, people are withholding orders because of the trade situation. also the spending for telcos world wide, david and i talk about it to date if you don't continue, you are not out there opening your czechbook buying a lot of equipment. >> capex is where they planned they haven't rolled it back. you are not expanding it >> there is always a belief when at&t, when teemo where is the teemo springfields? >> actually now you mention it, you might as well talk about it. mississippi has gone to the other side in so to speak. florida also switched side you do have a potential job planned for new york in december for the states opposed to t-mobile and sprint. you do have a date for example at the end of this month

>> that is expected to be the case even though there have been rumor out there. there are some states that join. it's clear that is enough to stop the procession of states that are opposed to the government's agreement to allow the deal to move ahead and it is taking a long time as you point out. it is a good possibility companies choose to close the deal >> prior to. >> in the meantime, t-mobile has done so well. >> it depends on who you talk to how many have an opportunity to stop the deal on any trust grounds, it's highly unique seeing the doj come to an agreement on the deal and get the various things that wants from the parties involved to possibly allow

fostered and have states oppose it we're at a time politically in this country. >> the old conservative role is pro states rights. that was done i think a lot of it because of bias of prejudice. >> yeah. >> the states are playing a hole, where i think they're so out of the loop. but how many state are investigating facebook >> a lot >> what do they know >> there is puerto rico, though. >> but the state attorney general, they should stick to regulating charities honest to god, damon, we have a justice department that like it or not is the ultimate arbor and we don't know states attorney -- >> that lead back to larger questions about people questioning the justice department overall and whether it's doing the bidding of the president and attacking his enemies. that's why we talk so often how when you go after the rule of

law you really do go after so many things. >> you have a stake in it? >> i have season this is pulitzer prize winning jim stewart, i got the book last night. it's the concept of the federal government is -- is a swamp. >> on tuesday. >> and then if you are going to discredit the justice department in the vacuum, states doing it i remember when eliot spitzer, there you go. >> you end up with a unique situation. >> when he was an attorney, he did it he wanted to regulate federal. >> it makes it more difficult for investors to figure out the outcome. in this case, t-mobile and sprint have been waiting a long time to get their deal together. >> how about federal courts and state court about that johnson & johnson risperdol. >> it's worth re-visiting the old pj pj saga i have been trying to explain to people what's going on there which i'll try to do right now

we'll do it in a report. the stock is down 28%. you will take a look at that you may say, well, why is that happening? well, it has to do with a decision by the judge presiding over the bankruptcy right now to open the door to basically a competition in terms of plans to take the company out of bankruptcy, originally, the company's plan was the one that was being focused on solely. but the judges now allowed the u.s. bankruptcy court in san francisco to a rival plan, to allow a rival plan backed by elliot manage. which is in, man, is there ever something they're not involved with >> no. >> essentially to put this as simply as possible one plan would have given the equity holders a lot more at the end of bankruptcy. the other proposed by elliot not so much. this all goes back to the judge's desire to return as much

money as possible to the claimants here in the case and those claimants were people who obviously suffered as a result of the various fires that pj pj is blamed for. owe pg & e is blamed for those claimants have until the 21st to put in their claims. ludlow had been anticipated you might see 100,000 claims october 31st is the bar on that. it's running closer to 30. that's the deadline essentially. regardless, the judge wants as much money as possible to go to those claimants. you'd have as much as 13.5 billion left for the claimants the current proposal by the company, which would leave more for the equity holders is about 8.5 billion or so to the claimants. so this is going to go on for a while. there is a lot to come between now and then in terms of even assessing the damages from the

fires and figuring that out. but to the extent the judge wants more money for the claimants, well, certainly, even if he does eventually decide that the company's plan is the better one, it would seem this decision to put more pressure on theme return more or take more out of the equity. so that's where we stand right now. >> why would a judge not do this why wouldn't a judge say listen you completely run this utility to the ground. you have every right to make your next plan >> you do want to make sure the company is on good financial footing when it emerges from bankruptcy they had planned essentially would cause a change in control, which brings up a lot of other issues as well and so forces certain things that are not necessarily in the best you know, you are talking about the largest utility. right now they're cutting power to 800,000 different homes

>> store, flower shops, can't keep their flowers fresh hospitals going to back up generators i mean the public backlash from the rolling brownout, blackouts. yeah. >> this all goes back to this very issue where you have the state's largest utility in bankruptcy again trying to figure out what the damages ultimately will be u. how many claimants will be there, how large the pool that is available to those claimants. we will watch it, again, resulting in a 38% drop in the market value we believe it to be fairly high given this judge's decision to give equal footing almost to the elliot plan. >> that is resulting in a significantly lowered expectation of recovery time. >> so, venezuela, iraq, california, the three states that have power -- problem, big companies, argentina, too. however, california to argentina. >> not from a power production -- >> well, there are other states

it's all political. >> this is not political they're cutting the power because they don't want -- >> they don't have resources in venezuela? >> what was the number to trim all the trees, 100 -- some crazy number, to eliminate all the risk of fire around their transformers. >> did you ever see what the trees look like after they're finished i mean, it's a travesty. california wanted nice looking trees. on our properties, they come in it's like they're salami slicers. like machetes. >> it's hard to get at all those trees. it's an enormous risk. the last thing you want is a devastating fire paradise, talk to people in paradise, california. >> one-fifth of the country is california, california is on the firing line from the president and firing line of ewillic tristy people don't leave, they stay. >> they are running a surplus thanks, to incredible taxes. >> they have a surplus

>> by the way -- when the book comes out, trail blazers, there are people that bought the homeless tax, i guess rich people that didn't want the homeless tax, they didn't want a tax on the homeless, imagine how much money, a homes will tax on the homeless, rich people. >> they wanted to tax the homeless >> rich people >> now, the rich people thought. >> the famous showdown >> i don't know whether dorsey regrets that i think that still they have been bottling up that money. it hasn't been able to do that much it's freight to be having this, the book is hotter than you think, bomost of these packs tht come out. >> it's rare to see 100% increase as a result of the deal, it's usually in biotech, exactly. roth pharmaceuticals is getting bought for 48 bucks a share.

all cash by ucb. >> isn't that something? >> it is something >> how is your index fund doing mr. index brain washers? >> this does happen sometimes. it is a 93% premium to the 30-day weighted average of the stock. as you can see, it's 100% premium or more to where it was trading yesterday. they are, they have a proprietary peptide chemistry that has novel therapeutics caused by recesssive or uncontrolled compliment system it's a component of the innate immune system so it's a synthetic macrocyclic peptides all said and done they have something in phase 3 for myosthenia gravis. >> novartis, same thing, this is where all the of the r&d is

really done. i was thinking, carl, it's like these companies, they are the older dice folks but when they pay off, it is unbelievable i keep believing i look at regeneron how stalled it is, bia marine -- biomarine amgen has been a terrible performer. the big biotechs have been -- celgene, remember bristol-myers keeps going up i think bristol meyers is a stock to be owned. they are doing good things by the way, the cheapest drug stock alg. allergan there is a pill they have migraine sufferers as the folks

for the american migraine foundation they have a pill for you a kite migraine there has never been a pill. you get a mieg dpran, boom you take the -- migraine, boom, you take a pill, the pain goes away. that's what they need to replace one of the biggest drugs ever. it's huge. >> one of the components of healthcare that did see some increases in inflation this month. >> yes >> obviously >> the democrats have never really been against biotech making the big money >> it was yellen >> yellen, she didn't like playing the biotechs again, elizabeth warren, there was a good piece today about senator warren in the journal about what our life would be like with her. it would be different is the way i can describe it, but they, she's not dropping single payer. she loves single payer >> that would change a lot of our lives. a lot of consumer names, kroger, jefferies goes to hold,

jim talked to hormel ceo before the show and talked about plant-based foods in their global outlook take a listen everybody knows what's happening with plant-based proteins it was a trend that we saw coming >> right. >> we had actually partnered with another company then when the ipo market hit, that partner said, you know what, we want to try to go it alone. so instead of buying, we had to build. we put our team in motion. we got it from ideation to market in 8 to 10 weeks. absolutely incredible. >> you regenerist crowd, buried in your company of happy little plants, really the best of the organic protein base versus the company's ability has you would say a loaded with chemicals, burger i mean, how can the wall street, how can the people at home

justify what hormel's price is versus beyond. >> yeah. it's hard, right it's all about the consumer. so there is no arguing that the consumer is more curious about plants than they ever have so when it comes to valuation of the company, all we can worry about is ourselves it's about how do with egrow our business organically, how do we innovate and make disciplined acquisitions >> now, it would seem to me you got more runway to beat global than almost all of the multi-billion dollar food companies i follow is this your chance that to do it >> yeah. we have been doing it. it hasn't accelerated as quickly as we like we got a good business in china focused on the china market. two years ago, we made a small investment in brazil to learn about that market. the business is doing well we're getting the learnings to have a platform approach to the business but their going to be other opportunities for us to become even more noble over time.

>> have you had the new pumpkin spice? it's sold out. there you go it sold out in seven hours the whole thing. you can't get it $25 bucks on ebay. i've got one you know what, it's darn good. what what what are you looking at? >> close to it, you eating it. it could be a woo i'd shot >> nice suit anyway. >> is that how you eat spam, by the way. >> i usually have it with a fork. >> is it called a tub? >> a cannister >> get some spam juice it's always under rated. >> it's great in the coffee. >> cheers! boom aha. >> mix it in with your starbucks pumpkin spice. >> why not one is better than the other happy little plants is a new line they have i think they have fewer chemicals in their plant-based burger by the way, they don't want to

be like a burger they want their own thing. they think a lot of us are more into it. why do i want a faux burger? how about a delicious tasting thing in the shape of a burger or david, this by the way, you don't have to wait for a report. >> this is like the food channel over here. eating spam with a pen >> put martha stewart art on i think i can make burgers can this, spaghetti, meatballs >> you can catch jim tonight on "mad money" 6:00 p.m. eastern time let's go to rich santelli at the cme group. ten-year yields, close to the high of the month. >> reporter: yes, they are they may be surprising, i know they're surprising to me look at a 24 hour chart of 10s, carl was right here we are, above 160 what is the catalyst i know there are positives on china's trade. one thing i can tell you, none

of the experts, none of the previous ambassadors, none of the previous negotiators have no idea how this is going to turn out. the maurkt grapples with every -- the market grapples with every headline look at a 24-hour chart of the ten-year boom over there okay you see how much more aggress they've chart looks? all right, let's go back to r 10s, let's start in early july we had a lot of things in early july things turn around look at our 10s, we're starting to distance ours from the cycle low close around 146 now look at boones their cycle closed in that chart, bunds now we're on the north side, minus 50 they're aboutthree-and-a-half week high yield. really it looks as they are leading. how can we prove they are leading? let's look at tens minus bunds

you see that spread narrows, roughly a 21-month low i have been talking about this what's going on in europe? we all thought when le guard was going to come in, that it would be different but still easy policy there is a lot of things she's saying that don't necessarily represent being in love with draghi's policy fiscal good for you, christine. and the market realizes it carl, david, jim, back to. >> we'll see you in a bit. meantime, still to come, the nfl, china, and a new media venture. we'll discuss all of that with the jacksonville jaguars owner and former congress j.c. watts getting headlines from the chinese delegation telling wires they come with true sincerity. dow is up 100 points we're going to watch all these head lie headlines all day long we're back in a minute

president tweets he'll meet with the chinese vice premier

tomorrow kayla is wapitching all the trae news in d.c. >> that news confirms the fact that the leaks about china leaving early were in fact a threat from the chinese negotiators trying to up the ante for the u.s. as the two sides meet behind closed doors today. president trump has met with the vice premier in the oval office on three of the four previous rounds here in washington. on each of those occasions there was a big agricultural purchase announced. don't know what is on tap for that meeting tomorrow, but the president is confirming he will meet with the vice premier tomorrow at the white house. >> kayla, thanks jim, he says he thinks the chinese want a deal, but do i in his tweet? >> he was a shakespeare fan, the president. to be or not to be that is the question >> yeah. no doubt. >> i don't know. >> we still believe delaying the october 15 tariffs is the key.

>> that's a big win for the president if he can get that and big win for the chinese. big win for the president because what it says is look, we found a level. they know we're going to go higher, but we don't have to take them down remember what he said, he said if i take them off at 25, that's when we can start negotiating. the threat to 30 may have made them have second thoughts. they don't want 30 they have to devalue their currency again if they do. >> well, that may be the one explanation for why these tariffs are not showing up in final -- >> that's a very big one that and the rapid switch away from where stuff is sourced is really happening and working. >> a stickier process. >> as things go on, people can move i caution companies, be careful when you move to vietnam if it's just a sham and it's just the chinese again, it's not going to work. it has to be independent >> a lot of raw source material that is still sourced in china. >> they want indonesia. >> so you got hormel tonight.

>> you want this pen it's got some of the pumpkin spice. >> i really don't. >> you're missing out on all the action dairy queen pumpkin. mickey drexler with a new clothes line quality clothes, not just the usual landfill stuff i can't wait to speak to maicke. he's still the godfather of the industry. >> he'll work it off at soul cycle. jim, we'll see you tonight "mad money," 6:00 p.m. earn time dow is up 152 on that presidential tweet about trade talks. long day ahead don't go anywhere.

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whether your beauty routine in cis 3or 57,...kyo. make nature's bounty hair skin and nails step one. it's the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. nature's bounty, because you're better off healthy. good thursday morning. welcome back to "squawk on the street." i'm carl with morgan brennan and david faber. stocks are up, yields are up hop hopes are up for china trade talks as we're beginning to get news with the and a meeting at

the white house tomorrow as we said earlier, a long day ahead. >> that is where our road map starts trade volatility the trade talks stalled, stocks rallying as he says that he will meet with china's top negotiator at the white house tomorrow. talks are under way right now in washington as we speak. >> the owner of the jacksonville jaguars will join us we'll talk about china, whether it remains a priority market for the nfl in the wake of the nba controversy as well as his new media venture. bed bath and beyond surging under a new ceo, pg&e tumbling. investors around the world paying close attention to developments in washington where the u.s. and china are resuming high level trade talks for the first time in five months pep we have full team coverage in beijing with the reaction from china. we'll begin with kayla who is in our nation's capital kayla. >> reporter: carl, this story developing significantly in recent moments as president

trump tweeted this he says big day of negotiations with china they want to make a deal, but do i? i meet at the white house with the vice premier tomorrow. that's what we call in television parlance a tease. certainly the president who has a background in reality television programming has created a scenario this time around that is more filled with spence than at any other point in recent rounds of trade talks. certainly both sides are throwing all of their options against the wall much of this playing out in the press over the course of this week the u.s. has banned eight tech giants from doing business with u.s. suppliers it's restricted visas for certainly chinese officials on human rights ground and also considering limiting investments that u.s. parties could make in certain chinese stocks china in response says it will restrict visas too it threatens other retaliation and with situations like the nba and the broadcast help there china is trying to exhibit the

hauer it with wield over an american organization. trying to hash out any potentialpotentia contours of what we've learned could be an interim deal of sorts. china has been willing to purchase u.s. agricultural products and willing to make limited concessions on opening certain markets, but it hasn't so far been willing to make the big promises that were needed to sell president trump on this president question as the president raises himself, carl, has that changed we'll learn in the next couple of days. >> all right, kayla. thank you. we'll be coming back to you many times i have a feeling during the course of the day. now let's get the view from china. for that we go to eunice who joins us from beijing. >> thanks much, david. the state news agency is quoting the vice premier as saying that china is willing to reach an agreement on matters that both

sides care about that optimistic tone contrasts with the message out of the chinese press all day today which is to not expect a whole lot out of the trade talks in washington the communist party paper "the global times" penned an editorial that said there was little hope for, quote, pleasant surprises out of the trade talks. this comes as hong kong's south china morning post had quoted sources as saying that the level officials had made no progress in their preparations. as kayla was saying, there were several reports that have come out around these talks and they seem to suggest in summary that the chinese are hoping to direct these conversations to a very narrowly defined deal. one in which you would see a relief to tariffs in exchange for greater purchases of agricultural products. this has seemed to be where the chinese have been hoping to move

the conversation for quite some time so that they don't have to necessarily make any structural changes. the trade talks are starting at a very challenging time right now for the u.s./china business relationship the standoff between the nba and its chinese critics continues. today several products of houston rockets nike products have disappeared and been pulled from store shelves here in china. and today the nba chief adam silver who's in shanghai for the exhibition game between the l.a. lakers and the brooklyn nets was supposed to or at least expected to make a statement at the pre-game press briefing. that briefing was canceled now, the criticism, of course, of the nba has been that 1.4 billion people here have been hurt by the pro-hong kong

democracy tweet that the houston rockets general manager did a couple of days ago that now might be in question because based on the level of -- number of fans who are packing the stands today and how much people are talking about this game, which is a nail biter, i think that is an indication that the nba still retains quite a bit of its fan base in china guys >> thank you china -- stocks, excuse me, are at session highs the dow is up 161 points on news of president trump's trade meeting tomorrow joining us with more is fidelity investment director urian timer and jeff moon. good morning to you both i'll start with you. the fact that we just jumped to session highs in markets right now on little more than the possibility this could be moving

in an optimistic direction right now, what does that tell you about what the expectations are that are baked into this market? >> i mean, how many times have we seen this movie before, right? >> exactly. >> expectations go up and they get dashed my base assumption is that the two sides are so far apart on the really big issues relating to ip, basically china's industrial policy, that yes, we may see a true co. we hold back on terrorists in exchange for some agriculture purchases that is certainly in everyone's interest to do that beyond that i think this is essentially a very long gain with little up side potential and in the meantime, the market's been in this holding pattern for almost two years the s&p is up 5% from where it was two years ago more or less but normally it goes up 10% per year and so i think the market will remain in this sort of late cycle purgatory while we wait for the resolution and earnings growth is decelerating

margins are coming down. valuation you would imagine would get some pressure based on this longstanding cold war, if you will so it doesn't paint a picture for me that tells me the market's about to break out in some huge new way, but on the other hand, with markets down 20% to 30%, whether it's price valuation around the world over the last two years, the longer the markets do nothing, the more likely it is that eventually it will resume in the per veiling direction which is higher. long term i'm still bullish, but i don't think we're ready to break out of this holding pattern quite yet. >> jeff, in terms of these talks between the u.s. and china, it's always been about the bigger more fundamental longer term policies, right? if it had just been about simply the trade deficit and this idea of buying more commodities, we probably would have seen a deal 18 months ago when this started. i think it begs the question how realistic is it to think we get some sort of deal this week even

an interim deal. and if you do think it's possible, what's changed in the calculus >> well, i think that's right. both sides have signaled we are not going to get a comprehensive deal, so if we're talking about a small or a skinny deal, i think we need to look past the psychology and the posturing around the talks and look at the core interests of the two countries. as a matter of fact, there are a number of things that both of the countries want to do and would do were it not for the fact that they want to spite each other it is entirely in china's self interest, without regard to the united states, to purchase food. it needs soybeans. they need pork pork is increasing at a rate of 60% a year in terms of inflation. they also have a number of companies, huawei and others that are sufficiently innovative, but they want to protect their ip so they're willing to tinker with their ip system and protection of ip for reasons solely of their own. on the u.s. side, trump really does not have an interest in

increasing prices on consumers and the runup to christmas that particularly relates to the october and the december tariffs that he's threatened, so i think he might be looking for an excuse to delay or cancel those tariffs to a certain degree. so i think -- >> i was going to say he has said that he wanted to save christmas. that was in part the reason for the initial delay but more important for investors is what environment is necessary to restore some confidence to capex and keep hiring hanging in there? >> i think companies need to have some sense of what the rules of the game are. >> the rules is changed but they're not going to change again? >> the rules of the game have changed but they're not going to change further we are in third quarter earning season so far it's okay, but we're in that window during the fourth quarter of this year where the numbers for next year start to kind of resemble some reality and right now expectations are for 10%, 11% growth next year.

that should probably be more like 5% to 7%. it is a matter of adjusting expect tae expectations i continue to use the brexit analog as an example brexit has been going on for three years. the stock market has done okay, earnings are up, but the pe went from 16 to 12 because nobody knows exactly what's going to happen i think the risk for our market is not that earnings are going to implode margins are 12%. they were 6% in '09. there is a large buffer there. the risk is that investors are going to be less willing to pay a 17 multiple and maybe more like a 15 multiple. >> jeff, back for the talks themselves, to what extent is the inclusion of the protests in hong kong, the persecution of the uigers, even the public ask of the chinese to investigate joe biden and his son, to what extent does that, if any, complicate the current talks

>> these plucomplications are a unhelpful. all of those issues are important, they should be addressed, but they should not be lumped together with the trade issues which are difficult enough to solve. basically what's happened is the stumbling block here in the trade dispute is china's refusal to address industrial policy and since china has been in transit since may, the hard-liners in the administration have started adding new issues to the discussion, including fentanyl and other things so these are all coming from people who in reality both want to gain leverage but also want to try to decouple from china. this is extremely unhelpful. if we ever want to get to a resolution of the trade dispute, we need to focus on the trade issue solely and break out the other issues separately. >> lastly, quickly, the other big geopolitical news of the day, turkish military coming into syria fighting against the kurds. how closely should investors be watching in? it's helped propel oil markets

this week. could this become a bigger issue, especially if you're focused on emerging market >> certainly for emerging markets f you're -- if you're in index of some sort it is going to matter. overall for the average u.s. investor, i don't think it really changes the dial from just a market perspective. >> all right thank you for joining us today >> thank you when we come back, the nfl commissioner calling china a priority market for them we're going to talk with the jacksonville shack wa jacksonville jaguars owner and with j.c. watts who played several seonass of pro dow close to session highs, up 133. ins by being privately owned. 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.

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get customized security with 24/7 monitoring from xfinity home. awarded the best professionally installed system by cnet. simple. easy. awesome. call, click or visit a store today. welcome back to "squawk on the street." jacksonville jaguars owner announcing his investment in the country's first 24-hour news network aimed at african-american viewers it comes ahead of the launch next month to an estimated 33 million households and top african-american tv markets. joining us this morning to talk about that, the nfl and more is mr. khan along with the chairman of the black news channel and j.c. watts good to have you this is a big toe in the water here what do you see as the market

opportunity? >> well, what i see i think it's market opportunity but more importantly really a great cause. it's been an unmapped market with about 33, you know -- with a bunch of the whole african-american market, so unmet need and this is a vehicle to be able to address that >> where do you think you're going to take shares from? where are they getting their news now as a demographic? >> i think they're getting them from a number of places, but it's not specifically oriented towards them so maybe, j.c., you want to -- >> i think when you look at where the community is today, they're all over the board there's no one place that they go to get their news we will be culturally specific to the african-american community. you don't hear networks talking about sickle cell, that's in terms of wellness for us

it's a huge marketplace for us in terms of talent, news, analyticals, so culturally specific means that we're talking about issues that are of concern to the african-american community. >> there's actually a lot of discussion that twitter is a big source of information for african-americans. maybe that's a comment on how they're looking for places on television to get their news. >> when you look at the millennial crowd, 98% of african-american millennials have cell phones 68% get their video from that phone. and so we have to be where they are. we'll be on cell phones, we'll be linear, you know, streaming services but there is a need for that community as he alluded to, there's a need for that community to be served and right now the community says we don't have a location, a venue that we can go toto get things culturally specific to us. >> i think you just touched on this a little bit, but the idea of launching a 24/7 cable news

channel, the timing is -- it's an interesting time in the industry right now obviously a lot of cord cutting, a lot of streaming services getting ready to launch right now. how does all of that factor in to your decision to launch this now? >> i think in spite of the fact that the community says we are underserved, our strategy is we have to be wherever the african-american community is getting their news and in cord cutting, hey, we have to be on those platforms, on the digital platforms, so i think when you've got content that says wellness, current affairs, education, inspiration, when you've got content that will cover those spectrums, that will give a broad view of who the community is, not just entertainment or athletics, which i came from an athletic background, shad can relate to that, but regardless, there's a

broad spectrum of perspectives in the african-american community and right now we will fill that need. >> speaking of athletics, can we talk sports in china what's your take on what the nba has faced this week? >> well, you know, i've been -- i've had businesses in nine countries outside the u.s. for 20 years obviously, sports in london, but auto parts and, you know, whether you're a sports or auto parts factory, you want to make money, but you want to do good. i mean, i want to talk about my experience, which has been, you know, you engage there's so many opportunities that are nondivisive or none controversial that one can engage in. for us in most of the countries, we're doing things like if you're in sports club, youth

health, exercise, underprivileged helping that, or factories, placing them in areas where there's high unemployment. you can do a lot of good without really broaching any sensitive issues. >> was maury wrong to voice any support of any kind? >> well, i think -- let me just say this let me give you some examples. okay for example, in spain we've got factories in catalan, barcelona. we've got factories outside. i get -- you know, i've had a number of times people say you need to have a public position on that. and my approach is well, you know, i'm an american owner investor i don't think it's appropriate for me to really be talking about issues that are, you know, that really relate to that country. similarly, you know, fulham

football club, west london before brexit i had many people say fulham, we're supporter, tickets, bankers, you guys need to have a position i said that's not the purpose of a football club. and it turned out 41% of our fan base voted against brexit. i felt it was the right thing for us to do. >> i know you're a chairman of the nfl business venture committee as well and certainly a lot of focus is on the nfl given the fact that roger goodell has said china would be a top priority given everything we're seeing play out and the troubles at the nba, whether that makes the league rethink and owners like yourself rethink that expansion into that market >> well, i think right now, you know, our focus is london, west europe, and mexico and you know, nfl jaguars, we have full-time presence in london issues of sovereignty, whether it's brexit or whatever, i think we have opportunities to really

participate and do good in many other areas. and affect people's life in a good way. >> congressman, athletes, it goes back to ali and before, they're going to voice opinions about social issues even if the managers and owners may not want to join them, radio it >> it's happened -- i'll be 62 years old next month and in my mother's room i heard athletes taking positions on, you know, social issues, controversial issues, african-americans who came along in the '60s and '70s and athletics, bill russell, muhammad ali, they were very, very outspoken i'm not so sure that, you know, you can quash that or hush that, but at the same time, i think we all have different perspectives. i have to make sure that i'm not making my burden your obligation and so, you know, it's going to happen regardless of where we

are, what continent we're on >> yeah. and social position, i'm a u.s. citizen. i have a civic responsibility to address those in this country. do i have a responsibility to be talking about it for another country? that's the critical issue and whether it's athletes ore entite should have opinions and participate, but we have to respect the sovereign rights of other countries. >> sure. earlier back to the network, you said good cause, your first answer does that mean the viewership, are losses, operating losses, you won't pay as much attention to >> no. i think the good cause, good product that the investment, the commitment has to be open ended, but for anything to be sustainable, it's got to be able to make money long term or you can't sustain it j.c. and some of the founders have been at it when they approached me and when i got involved my emphasis was i want to look at not only get the

funding, but have the business structure. i have a huge amount of confidence in the leadership but launch right, meet the needs really of the viewers, and then they do become sustainable. >> we're talking about all kinds of things above and beyond this network here today one more question for you. because whether it is china, whether it is brexit, whether it is some of the bigger, broader trade talks, policies, tariff situations that are playing out around the globe right now, the fact that you do own one of the biggest privately held companies in the company, auto parts manufacturer, what is your take on the global economy and how are you thinking about supply chains >> well, i've been in auto parts factory for 50 years times in the u.s. have never been better. okay it's what we've gone through here over the last few years, i think the current administration on investment and interest rates, i'm super pumped and

excited. obviously we've got the gm strike and some issues that are part of our collective bargaining culture and how things go, but hundreds of contracts have settled without those issues, so this thing is going to get resolved. but this is i think we're entering the prime manufacturing golden era for american manufacturing right now. >> really? >> absolutely. i think -- and the world is changing in a lot of good ways you should be doing this show from a factory floor, maybe one of ours. please come. come to inner city detroit see what new factories look like who are the employees? 60% of the people are women. they're the eligible workers we've got to have work spaces that connect, more brains, less brawn and a huge amount of flexibility on the product line and quality. so i think it's just starting in a great way. i'm pumped >> we'll be seeing you in detroit i think. >> absolutely. you should come to the -- come

to the south side of chicago we're talking about doing good i have a factory in the worst part of town where you can change people's lives. okay >> thank you so much, guys good to see you both. >> thank you. keep our eye on the tape obviously, keep our eyes peeled for any tape bombs, but dow up 161. back to 932,7. 10 year above 16. don't go away.

welcome back it is time now for our etf spotlight. today we are keeping an eye on the semiconductors the stocks in the etfs are on the rise this morning. you can see right there each up about 1.5% yesterday the smh broke a two-day losing streak with a gain of 1.8% it's now up more than 37 ps f% the year among the top holdings, intel, nvidia and qualcomm. like it or not, it's become a lightning rod for trade. still to come, the financial sector has been underperforming the s&p 500 so far this year

will upcoming bank earnings turn the tide we're going to talk to the ceo of kbw when extracurricular "sqe street" returns. ♪ ♪ ♪ ♪ ♪ ♪

hope you like this music as much as i am today welcome back to "squawk on the street." let's get a check on where the major averages stand trading around session highs dow is up 145 points the s&p is up 16 or about half a percent. let's get over to sue herera for a cnbc news update. >> turkish backed forces from the free syrian army joined the turkish incursion against forces in northern syria as a series of

explosions rocked a border town today. at least seven civilians were killed according to kurdish activists and a syrian war monitor. ukrainian war president zelenskiy says there was no blackmail in the phone call with president trump which helped spark an impeachment inquiry zelenskiy said he only learned after their july 25th phone call the u.s. had blocked millions of dollars in military aid to ukraine. here at home an october storm bringing snow and power outages to washington state. up to 4 inches of snow fell in spokane. at one point more than 32,000 customers were without power. the 28 nobel prize in literature has been awarded to a polish author while the 2019 prize went to austrianauthor peter handke she received the award after the

event in 2018 was canceled following sex abuse allegations at the academy you are up to date carl, i'll send it back down to you where the nobel peace prize awards are done, i won't be stumbling overall of those names. we're almost at the end of the long nightmare back to you. >> better you than me. sue herera if anyone can handle it, it's. dow is up 145. the president will meet with china's vice premier at the white house tomorrow pretty interesting day so far. >> i'm going home at 6:00 and i see futures down 35 points what trade talks not going well and then we see the u-shape back i haven't changed my opinion in the last 24 hours. the risk is very much to the down side. a truce, the market seems happy with a truce for a while, but long term, and i'm talking about getting through christmas, a

truce is not going to make it. a truce can be broken at any time the market knows that. so what i'm concerned is the rhetoric, we keep getting more and more extreme territory in terms of the rhetoric and the action, so remember how this all started out. we were talking about intellectual property reform it somehow morphed into now we're talking about capital flow limitations. then it went into black listing chinese companies, then it went into visa restrictions for chinese officials. we go down this road a lot more creative things can happen we can talk about blacklists u.s. companies working over there. this could get a lot worse i'm concerned how this keeps escalating, the tone of what's going on if you look at the market narrative, the market's come to believe that even if you're not in the 2020 recession camp that growth is going to be lower. there's a lot of people, 1 to 2% for 2020 rates are flat defense are going to be the leader still and earnings guidance for the fourth quarter is going lower. what's going to reverse this

market narrative i don't think a truce will do that and that's my concern. >> is the fed going to do it >> well, i thought powell did a fine job the other day i thought he held up well. i think there's going to be another rate cut everybody believes that. i'm with the consensus on that they're trying to figure out over in europe how far they have limits, they've reached the limits of how much they can cut. i am pleased to see there is a pushback against zero interest rate policy. i think it's fantastic i think it makes no sense. you explain to a 4-year-old that makes no sense to lend somebody money for 10 years and lose money on that proposition. a 4-year-old can understand that that's a losing idea and i think the world should push back against zero interest rate policies. >> what happens if tariffs are delayed with this new increase and we pivot to european tariffs? we've got big decisions coming up on autos. we know what the wto has said. >> the world trade organization was created for the specific

acknowledgement that tariffs create enormous friction in the global economy and create problems in history. we know this it was created as a mechanism to settle disputes. the united states won a significant dispute as the president pointed out with what's going on in the aerospace industry they sided with the united states we went and made a case and won in the -- i think that's very significant. i think that they can make a case, too, with china, with enough allies on our side, you make a case with china about various things i think that's the big issue a lot of people agree with the attitude toward chinese, but not the approach towards the chinese. >> finally, some people have pointed out we don't have a lot of earnings to go on, but if you take delta and pepsi and lvmh, not bad. that's only three. >> they're good. lvmh was very good, surprisingly very good. in general, though, if you look at it, we've probably got 25 countries -- excuse me, companies in the third quarter

that have reported generally they're beating expectations, but if you look at the guidance immediately after the fourth quarter, the analysts are dropping the numbers more, because they're concerned about what they're seeing. so even though there have been beats for mosts, 90% of the 25 or so have beaten, their numbers are coming down for the fourth quarter because exactly what i talked about, the market narrative. >> it's interesting, the names for the most part have reported have been consumer facing and i wonder if there's any sort of bifurcation in terms of analyst estimates for where the industrial, business to business is. >> october 17th, we're going to get general electric, the 17th i think. >> 30th i think. >> okay. tech strong is the 17th maybe right after that c caterpillar, you're right, that's the 17th and tech tron is the 17th those are the first two big global industrials to watch. i think there's going to be an

issue there. >> bob, thanks stay close. still to come this morning, financials underperforming the s&p. jp morgan with some underwhelming price targets. dow is up 161. what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. 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. ♪ but shouldn't somebody this is be listening?pression. so. let's talk. we're built for hearing what's important to you, one to one. edward jones. it's time for investing to feel individual.

one top economist says we should be weary of counting on the almighty consumer to save the markets. find out why on trading nation more "squawk on the street" is coming up. hmmm? because schwab makes planning for things like this easier. yeah, with schwab we get automated investing and integrated planning help. for a low monthly subscription price. why would schwab do that? they help you plan for the things that matter. subscription pricing... ...schwab! introducing subscription pricing with one-on-one guidance. schwab intelligent portfolios premium, a modern approach to wealth management. - [spokesman] if you've tried colleg(group cheering)shed,

snhu lets you transfer up to 90 credits toward you bachelor's degree. - [woman] it doesn't matter how old you are, you can do it, you can finish. - [spokesman] finish your degree at snhu.edu time for the santelli exchange let's get to rick in chicago >> thanks, carl. remember, if it's earnings season, it's rebecca corbin. rebecca, you know, i find it so fascinating that all these global issues going on, everybody trying to decide what's going to happen with global trade, what's going to happen with tariffs. about 40% of your respondents are outside the u.s.

they're equity investors. >> we surveyed 76 institutional investors. they're looking for continued deceleration earning season is priced in for sequential deceleration in line to worse than consensus estimates. they're bracing for deterioration in cash flow and margins. expectations are for a pretty bad quarter. >> if i had to summarize what i saw was that for u.s. they're still thinking 2.5% gdp was the highest percentage pick in terms of number, but yet recession in the next 20 months also was a high probability and then through all of that the biggest concern, of course, is trade so they are optimistic about some issues regarding the u.s., but not necessarily multinationals. >> yeah. they're coming in to understanding that we are in a new normal this is the new normal and they've wrapped their heads around that. it's all about expectations management so they've come to terms with the fact that global growth is slowing and for multinationals,

what i think there is a disconnect with regard to investors and what corporations are announcing with the cost cutting. last quarter we identified over 3,600 companies globally that announced cost cutting actions, 18% higher quarter over quarter and 20% of those announced head count reduction playoffs that will cycle through and that's going to trickle through other sectors and to the consumer eventually. >> if all the concerns start to moderate, nothing is going to be binary when it comes to trade. if things improve, it will be a slow improvement how will that affect some of the ultimate decisions of strategic money in the equity markets based on your survey >> if you think about what corporations have done, they have basic realigned their financial positioning to this new norm so cost cutting, we've seen a lot of capex reductions happening, demand, et cetera that's all related they do have the alt to contibi

continue to reinvest we're talking about lower growth, decelerated pace. >> it certainly seems as though one thing isfor sure, the last couple surveys, this one especially, they put so much strength in current management under the strained conditions. the time we have left, explain why that keeps showing up. >> sure. i think management teams have gotten a lot smarter, at least the ones we follow and work with they are ahead of the curve in terms of understanding what the ramifications are with tariffs and they of addressed that through initiatives, cost cutting, et cetera i think they're going to be looking for investors, strong balance sheets dead level sensitivity is at an all hi ti all-time most investors are comfortable with less than two times daeebt. management teams have reconciled their balance sheets they're stronger they're getting ahead of us. if we do see any type of catalyst that will change, they'll shift gears accordingly. >> rebecca, thank you so much

for the insights of your respondents. back to you. >> rick santelli, thank you. now let's send it over to mr. ft. knox himself, john ford. >> as we continue to projectile some of the most valuable startups in the world, we'll take a closer look at a rival of uber and lyft based in china but with a network around the world. that is coming up on "squawk alley" sometimes, the pressures of today's world can make it tough to take care of yourself. but nature's bounty has innovative ways to help you maintain balance and help keep you active and well-rested. because hey, tomorrow's coming up fast. nature's bounty. because you're better off healthy.

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♪ the fed is expected to be a big buyer of treasuries for a long time to come, but is its latest balance sheet move the same as qe steve leishman hopefully can finally answer that question for us. >> yeah, i don't know about that the fed is going to reserve growing its balance sheet, but it's really concerned the markets not see this as a round of easing during the financial crisis you remember the fed bought large quantities or "q" of mostly long term bonds to ease,

that is "e" monetary policy in an attempt to drive down long-term rates. the fed says this is not that. they'll be buying short-term bills in limited amounts to ease the crunch in the overnight funding markets. part one of the plan is to replace recent temporary operations and the fed's balance sheet has. and fed balance sheet is growing from temporary operations, orange line. the fed needs to make it permanent with outright purchases, not temporary repurchases. $200 billion of work the fed has to do with no particular time line on it part two of the plan, fed will resume growth of the balance sheet in line with nominal economic growth, plus or minus 15 billion a month part one is getting the market the supply it needs to end the liquidity crunch and get the funds rate into the range it wants it at. second part, monthly growth, is returning to pre-crisis era when the balance sheet grew

not everyone is buying the spin. pantheon says any permanent increase in reserves beyond the rate of nominal growth is easing of policy. that might be true much less q compared to other qe efforts, so less e as in easing. >> talk about what you think the effects might be of new purchases or marginal purchases? >> i hate to contradict everything i just said, could have potential easing effects if you think about one thing it mielt do is steepen the yield curve, if they do purchases on the short end and otherwise ease their balance sheet to make it either neutral or towards the shorter end. you can have steepness in the yield curve. that could spark banks to lend more that could be an easing effect to it. >> all right, steve. that's exactly where we're going to jump off from, talking about yield curve. major banks set to report third quarter earnings next week

joining us in a cnbc exclusive, ceo of kbw thomas, good to have you >> good morning. >> you mentioned possibility of a steepening yield curve, but we haven't seen it, banks earnings seem to be suffering or focus of investors as to why stocks aren't going to go up. >> really, the whole bank stock market has been driven around this rate change what's interesting is go back, look at where we were, june 8th last year, regional banks hit an all-time high, bigger banks in february at that time we looked for 11% earnings per share growth going into 2020. today, we sit here, we're looking for negative 2% earnings per share change going into 2020 so what changed? the entire rate outlook changed. back then, thinking higher rates, good for banks, strong economy. today we have a flat yield curve that's low rates it has changed the operating environment which has become more challenging for banks

and i think really for the third quarter earnings which start in earnest tuesday, where we are in that story is really the big issue because we think that earnings estimates are probably still too high. >> you do have a lot of profitability at banks but it is lack of growth you think that's going to weigh on investor perception >> that's what's been weighing on the stocks. september 5th, we cut estimates for 221 bank companies that we follow at the time we were 10% below the rest of the street today i think we're 5% less based on 2020 earnings what i hope would happen is there would be a more clearer view as to what the earnings outlook is, and i think that would help the stocks possibly find a floor. >> reuters says a memo out of wells that they're building larger loan full fullment teams to be get ready for next year. is steve right can we get more? >> mortgage lending, absolutely.

capacity is there to make the loans. we're looking for 27% year over year growth third quarter in the mortgage business. that will be one of the bright spots of the quarter that we'll start hearing. the refi boom will gin up. >> fidelity cut trading commissions, has been a big story for awhile now the fact we're seeing the digitization in finance, what is it doing to the cost for investment and what does that mean for banks and also the financials more broadly? >> i think there are a lot of interesting things two stories here the first one is that it is actually, when i was younger, banks would give away things to bring deposits in, you would get a toaster. it is cheaper to give a free trade than to make a toaster what it is all about is gathering customers. these companies are going to make money doing something else. i thought it was interesting

today, in my morning paper there are three full-page ads from td, fidelity, schwab going at it that's number one. that's about customer acquisition, how technology lowered the cost of that second thing is you're absolutely right, if you're not investing in digital technologies to serve customers, you're falling behind. the whole scale argument is building in the banking industry, the reason sun trust is coming together with bbt and why i think there will be more consolidation. >> i know valuations are at lowe's lows we haven't seen in some time >> you're right. we've gone back 15 years we are at historically low pe ratio, relative multiple to the market and dividend yield is at historical high. this spring is koild and ready to go for bank stocks to outperform until the operating environment

becomes more clear in my opinion, it is probably unlikely to happen. >> we could be looking at a flat yield curve or we could be talking negative rates that they have in europe as a possibility. >> that is bad for the banking industry you go to europe, i mean, it is not an experiment. it is happening in europe. those companies can't earn double digit returns on yiequity and traded a big discount to book what i would call on for policy makers, before you go to negative rates, think about what it does to the banking industry. our banking industry is the leading banking industry in the world. i would be careful i think it would be negative. >> is underriding behavior going to change after what we've seen in the past month for ipos >> i have a different take on this i think it is not a function about the ipo market, i think it is a function of the private market before the ipo market because some of the valuations that were struck in private

market deals were really high and one of the benefits of doing a public market is you've got full price discovery, the world watching you do a private capital raise, be careful it is a thinner market i don't think it is a problem with the ipo market, but with the private market it is hard for the ipo market to speak for a price that was set in another market so my view is, it is all about what the investors paid you have to pay attention to what you're paying in the private market before you get to the public market. >> thomas, thank you appreciate it. >> david, thank you. "squawk alley" starts in a few moments. - [spokesman] if you've tried college but never finished, (group cheering) snhu lets you transfer up to 90 credits toward you bachelor's degree. - [woman] it doesn't matter how old you are, you can do it, you can finish.

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