good thursday morning. i'm carl quintanilla with melissa lee. setting at again da today, citi's ed morris on his second half outlook on crude and bearishness on brent. >> why the lack of fundamentals is a bubble waiting to burst. >> later, ben silverman on whether the amazon cost cuts should take place. let's take a check of the markets. it's the yield curve that's the story in today's session the two-year yield hitting its highest levels since 2007. this is a fresh cycle high the ten-year also going up it's that spread that's of concern. it's a five-year offering another place for investors to

go as an alternative to stocks that's concerning here also, of course, that's a damper on valuations. that's exactly what we're seeing play out in the market today with s&p down by more than 1% at this point. >> premarket was already negative and then we got the labor data, claims about a two-week high. obviously, adp double expectations hasn't been too many firms changing their estimate for tomorrow, but adding that line, there is upside risk to our estimate. >> i think what's interesting about the market suggestion of the jobs data, it came in indicating a stronger jobs market and yet we've already priced fully a rate hike in july the move in november is hardly anything so, you know, it's what new did we know? the labor market is still strong yes, you want to see trends going in the right direction but this doesn't fundamentally change the landscape for the next month or so. >> and things like ism services prices paid going down, completely getting overlooked today as people look for some excuses to sell. as we said, major averages

firmly in the red. let's check in with dom chu. >> carl, melissa, to your point, it's a little out of context how far the markets have been so far today. it's been a long time since we've seen any kind of downside volatility to this degree in the markets. with the dow industrials down about 500 points just at the lows of the session, the s&p 500 down about 58 points and the nasdaq down 208. 1.5% declines roughly. for the dow industrials that would put today on pace for the worst day that we've seen on the downside since going back to march 22nd for the s&p 500 and for the nasdaq, it would be the worst day we've seen since april 25th. again, it's been months since we've seen this kind of downside volatility things have been stable in this slow march higher. to put more context around the level of volatility we've seen so far, you would have to take a look at the stock market volatility picture, according to the cbo vix index which measures the s&p 500 volatility

we don't talk about percentage basis moves. i will say the volatility in the s&p 500, as measured by the options market, is now spiking this is the biggest gain we've seen on a relative basis going back to march 9th. for the nasdaq overall, which is the real advancer, you can see we're roughly 5% above for the nasdaq composite its 50-day average price on a rolling basis and 16% above this orange line, the 200-day longer term trend line for the nasdaq composite. a big down day but still very much above the moving averages we've seen to put it all in a little more of that context, melissa, if you take a look at the picture overall for the two-year, ten-year spread you were talking about, the inversion between short and long-term rates. this is hovering near the lowest levels we've seen in a year. you would have to go back to the early 1980s for this kind of

inversion. interest rates a huge part of that story back over to you. >> dom chu, thanks. the ten-year in focus jumping above 4% following strong jobs data renaissance macro jeff de graaf warning with it could be a risk to the move to the s&p. >> if i take a step back and look at yields from a technical perspective, it looks like they're going higher, so i do have to be mindful and respectful of that is it a disaster is it 5% or 6% or some of the big numbers that are out there i don't think so i think it's probably around 425. but at that level, some of the work we've done with our yield impact model, et cetera, does start to push against the s&p. that would be some concern for us >> joining us now, rich around bernstein adviser, ceo richard bernstein. great to see you how much of an issue is the ten-year yield being above that level, 4%, and also the climb in the two-year, which makes it more difficult for the parts of

the market that bulls have been citing is it's good news, for instance, small caps are finally participating while a higher two-year yield makes it more difficult for smaller caps >> good morning, melissa your point and jeff's point in that previous clip is very important. when you're essentially investing on companies that have very long timers, whether we're talking ai or the metaverse, cryptocurrenci cryptocurrencies, anything that has a long time horizon, upward trend is not what you want to see. we're talking long duration events, far out in the future. you want higher interest rates, if that's your theme jeff is right. if long-term interest rates go up, that's a thorn in the side of the kind of tech, cryptocurrency rally. >> you've been a critic of that tech, particularly the ai runup we've seen, even calling it, i think these are your words, a bubble at this point is this what finally breaks that

bubble is that what finally breaks people of the notion that this is a defensive area that's spending in this area no matter what's going on in the economy >> well, i think, melissa, first we should rule out that, you know, bubbles pop. you know, it's always very dramatic to say a bubble is going to end in like a day it usually takes months if not quarters if not years to dispel the notion that whatever the theme of the bubble was is dead. i don't think we should think this is going to happen in a day or a week. but in terms of the other thing i would point out is ai may be, and i would argue, will be, a larger part of the economy that doesn't mean investing in ai stocks is a good investment if you go back to the internet bubble in '99 and 2000, certainly the internet became a monstrous part of the economy, but if you bought the internet stocks in december of '99, which was four months before the peak of the bubble, it took you 14 years to break even. so, i don't think this ai story right now, people are investing

saying, it's okay, i'll break even in 14 years no, that's not what people are thinking i think we have to separate out the story from the investment opportunity. >> that's interesting. i mean, that's a period, richard, you know extremely well does it mean you're also against buying the picks and shovels of the moment >> so, carl, i just think there are better long-term stories in other parts of the economy look, if we can all agree that globalization is starting to contract, then i think the story of the united states moves from the themes that i like to call q weiner dogs in the metaverse to real productive assets the united states is going to have to become more self-sufficient, we have to rebuild the capital stock in the united states. i personally think that's going to be the story for the next 10 to 15 years. not q weiner dogs in the metaverse, ai, all these other things >> i noticed, correct me if i'm wrong, lowest u.s. exposure in the history of the firm? what's making up the rest?

>> so, let me step back for a second on that comment, carl when we formed rba in 2009, one of the reasons we formed the firm is we thought we were entering one of the biggest bull markets of our careers we had so much in equities, in u.s. equities, that people would not invest with us that they were sure the united states -- it was a terrible place to invest. well, here we are 14 years later and everybody says, the only place to invest in the united states meanwhile, fundamentals outside the united states are getting better look, if you want earnings, if you want estimate revisions, the strongest estimate revisions in the world are in europe right now. if you want an inflation story that might take shape, jury's still out, it would be japan there's lots of things to think about. there was an article today about northern europe and their mineral deposits there are lots of stories going on around the world but people aren't even looking at what's going on around the world. >> how about the strength of the

dollar and how much does that play into this view? >> of course if the dollar is super strong, that hurts non-u.s. returns, of course i don't think we should expect the dollar to be super strong here i think we should expect it to be flat or maybe down. in two of the three outcomes, probably non-u.s. does reasonably well here obviously, if the dollar is weaker, that makes it a better story. as long as you don't see a screamingly strong dollar, non-u.s. is a viable alternative. >> richard, good to see you. richard bernstein. >> thanks, guys. let's lurn to the other story this morning, meta bucking the theme. julia boorstin has more on the advertising industry as we get more tweets from linda yaccarino. >> just pointing out the long-term established value of twitter. meanwhile, instagram chief said that right now they're not focused on monetizing threads until they get to scale.

but the business model will be ads over the long run. i've been talking to some senior advertising industry executives this morning one senior source in the industry told me that his contacts in the ad industry are salivating he told me that he sees pent-up demand for alternatives to twitter, especially after elon musk limited how many tweets and ads users would be able to see just this past weekend i also spoke to the president and coo of maa global, a marketing trade association. he told me while he expects threads to be a long-term threat to twitter, that it's not a short-term threat because threads is not accepting advertising in the near term he said this gives linda yaccarino time to get her house in order over at twitter and also to get her owner, elon musk, reined in. that was the term he used. also pointing out the use case for instagram and people's follower base on instagram is so

different than what it is on twitter. twitter is all about real-time and more about news and opinion. he said 2 will take time for threads users to cultivate an audience to talk about the same things they have been talking about on twitter right now threads seems to be well on its way to reaching scale. mark zuckerberg announcing 10 million signups in his first seven hours and keybanc increased price target on threads' launch saying it appears to address many of twitter's challenges and that it, quote, could represent several billions of dollars in ad revenue in a more bullish scenario, assuming meaningful u.s. and international adoption keepbanc also warns, we believe this will be immaterial contributor near term as meta likely focuses on adoption over monday tie sflags but they are raising earning estimates on core advertisers 37 ttwitter ha

been a lightning rod for controversy. so, we'll have to see what kind of environment threads cultivates, if it's a kinder, gentler, safer place, maybe it's more amenable to advertising carl >> it is amazing, you know, facebook used to be the poster child for everything bad in social media, and now, you know, twitter has taken that so, threads looks relatively better in terms of safety, in terms of regulatory scrutiny it's amazing how that flip-flopped do you think that helps people migrate to threads, maybe the cut of twitter and say, you know what, i'm done with that >> well, look, mark zuckerberg is very much sort of promoting threads as this kinder, gentler place. when they were announcing what threads was, they said we're going to give you all sorts of support to make sure you can restrict the types of people who are mentioning you in comments, saying they're going to have policies to try to support a positive environment on threads.

and i think they chose their language very carefully. this idea of positivity was very much trying to put -- position this as in contrast to the more free and open town square that twitter is and twitter sees itself in the early commentary, myself and many others spent time on threads seeing what the conversation was about people were asking, is this -- how long is it going to take before this place sees the negativity creep in? but i think it's early days. it will be interesting to see how people use it differently than twitter or trying to get your same twitter type audience and have those same conversations. >> definitely a big experiment in huge psychology we'll see how it developments. thanks. still to come, citi sees brent rising in q3 ee peculiar's chief says the

organization is actively trying to recruit some new members. we'll break down the energy trade next we continue to keep an eye on this selloff. we have the s&p 500 down by 1.4% the nasdaq down by 1%..6 "squawk on the street" continues in just a moment

let's get to energy. a lot to unpack. you have opec, the seminar in vienna wrapping up saudi arabia and russia, deepening oil cuts earlier this week and demand ramping up even

as we move deeper into summer. joining us at post 9 with his playbook for the rest of the year is citi's global head of commodities, ed morris it's such a treat to have you because you've kept people pretty honest in the wake of some bullish forecasts in and out during the course of the year how do you view the second half? >> well, we view the second half as starting out with more strength we haven't had the strength yet. the eia data came out very strong, indicating demand is up year on year, about 700,000 barrels a day in the u.s we thought that was going to be china, not the u.s china is showing enough weakness that the market hasn't responded to this data release i would say the summer driving season hasn't really started yet and it's past memorial day it's past july 4th we still think there's going to be a stock drop but there's a lot of moving parts. >> what kind of wild card is china in terms of stimulus and would you have expected china would have unveiled stimulus by this point already

given the weakness is that a surprise to? you what kind of upside could that give to your forecast >> we thought that the stimulus was not going to be very great to begin with. now, we've had data in the last week showing two things. one is that they're banking on growth and services and services didn't grow in the last month. they were banking on the property market staying stable and it's gotten a lot weaker the things we thought they were going to do is not going to inspire industrial demand. we thought they were going to get back to where they were before the lockdown. now that's very questionable anything they do now is unlikely to have an affect on the economy until the end of the year into next year. so, i'd say china is now turned into a wait and see view rather than it's going to be half of global oil demand growth this year. >> do you think the oil bulls, what they've missed the most in the first half, has been lack of discipline within the cartels, iranian or russian flow? i don't know if it's about

consumer psychology, ev adoption, something else >> i think the bullish case was made on the supply side rather than the demand side and supply has been more robust we noted the so-called fragile five countries, libya, iran, iraq, nigeria and venezuela, they were actually up 900,000 barrels a day in june of this year compared to last year that's a sleeper in the market iraq could actually be up 900,000 barrels a day by this time next year another sleeper in the market. we're not alone in thinking the bullish view overexaggerated the drop in supply growth. may happen a bit in the u.s. next year. i think we can say fairly confidently that u.s. is going to continue to grow production the latest final data show that the u.s. supplied more oil, final data for the month of april than any country in the

history of the world over the course of a month. that's oil, biofuels, natural gas, liquids, all the things that are liquid that you think of as oil. >> what's your target, ed, 82 on - >> well, we have it at 82. not a high conviction -- >> what's the risk/reward on that number? you sound more bearish, frankly, than bullish. >> our firm view is very range bound. we thought the range was going to get a little higher, not get to the $90 level it could get to the $90 level. let's say we have, you know, two category 3, 4, 5 hurricanes hitting the gulf coast hitting u.s. exports of natural gas, exports of petroleum products, exports of crude the thing about the u.s. at the moment, the u.s. happens to be the largest exporter of lng and the largest exporter combined on a gross basis of crude oil and petroleum products that's the vulnerability for the summer. >> finally, on metals, are you

watching some export control conversations coming out of china regarding at least a couple of specific metals? >> we're looking at the tit for tat going on. >> the semi -- the chip companies don't think it's material i don't know if they hope it's not or they believe it. >> i think the china export market has been more a disappointing function of the global market. exports are down, imports are down, demand is down for the things they are strongly in the export business of or there are some -- like the case of aluminum where most of the smelters are in an area where the electricity -- the power base is hydro and hydro has been down. aluminum has been down copper demand is, you know, well down and i think once we see a revival in china, we'll see the demand going up. it's going to be battery power related and it will be global.

>> the doctor is in on copper, that's for sure. ed, great conversation please hurry back. ed morse of citi. up next, treasury secretary yellen begins her trip in china. tensions high for both countries. plus, morgan stanley raising their target on microsoft to $415 they were $335 pretty bullish on the ai story and the morgan stanley top cap software pick barely hanging onto gains only five stocks positive on the index right now.

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welcome back the story this morning, secretary yellen arriving in beijing. emily joins us. >> yellen has a packed agenda as she helps to strengthen u.s./china ties. she'll be meeting with a number of officials in beijing on friday the goal for the trip is 20 deepen communications between the two countries and seek

healthy economic competition that benefits u.s. firms and workers. yellen tweeted she would take action to protect u.s. national security interests when needed, saying the trip presents an opportunity to communicate and avoid miscommunication and misunderstanding yellen is expected to discuss china limiting exports of two rare earth minerals, germane yum and gallium used in computer chips. officials said the limit is concerning and something yellen would like to better understand. yellen will meet with vice premier liu he, have dinner with premier li qiang and meet with leading economists and meet with a dwrup of u.s. representatives from businesses. yellen is slated to have additional meetings on saturday before returning to the u.s. on sunday >> important meeting we'll see what happens over the next few days. thanks so much. let's get a news update.

>> carl, british police say a child died this morning when an suv rammed into an elementary school in wimbledon. according to british media reports, the girl who died in the crash was just 8 years old first responders treated 16 other patients on the scene. police say they're not investigating the crash as a terror incident and the driver of the vehicle has been arrested. nato secretary-general says there could be a decision on whether sweden will be granted membership next week finland and sweden both applied for membership last year after russia invaded ukraine finland was granted membership but several nato members have objected to the application. the tourist caught on camera carving a message into the wall of 2,000-year-old coliseum issued an apology letter his attorney shares with nbc news the 27-year-old wrote to the mayor of rome and other city officials to say he didn't

realize the world heritage site was ancient. the ap reports vandalizing the coliseum carries a fine up to $15,000 and five years in prison, carl he didn't know >> that's a little suspect i wonder - >> he didn't know? >> i wonder how that's going to go. more selloff coverage after this paul hickey is with us after the break. is this the start of a bigger downturn or selling on the back of today's data. don't miss andy jassy on "closing bell. is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade

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we're about two hours into trading. let's go post to post with bob pisani with what's moving. we're seeing some deep declines across the board except for microsoft. >> microsoft the only one. meta is also up. more than 20 to 1 declining to advancing stocks that's a very unusual metric what's happening is while the services part of the economy are holding up well, travel stocks, et cetera, the cyclical parts are not looking very good at all. i'll show you a couple of them here banks depend on two things -- loan growth and interest rate spreads. neither one are looking good for the banks. the regional banks are moving back to the -- keycorp is not

far from the 52-week low, the middle of may. it's 920 now that's not far from 52-week lows the other global cyclical part you want to look at, of course, are materials and industrials here my favorite global material name to watch, mosaic and freeport macraman 70% of their exports are outside of the united states close on monday was 41 so it's $37. this is a big decline in the last several days. and it's down. you think global market improving would be a big story it's actually down 2% so far this year. a lot is on the china growth story being a bit of a disappointment same situation in that china growth story is also playing on oil stocks let me -- conocophillips another good example essentially conocophillips is down about 15% this year this is one of those stocks that is very closely tied to the

price of oil oil down 12% or 13%. conocophillips is down 12% or 13%. they move in tandem. the story here, carl, is a very large part of the equities market, particularly the cyclical part, are acting like there's some kind of global slowdown that's occurring. some of this is, of course, due to the china story there's a little bigger story than that and it's sort of pulling against the other narrative of the soft landing. the question is which one of these narratives are right you see the cyclicals are acting like it's not going to be a great second half of 2023. back to you. >> thanks, bob pisani. adp private payrolls did jump in june, between that and rising rates, investors finally seem a bit spooked. all major indices down by 1% joining us bespoke investor co-founder paul hickey a few days ago paul, we talked about overbought conditions is this a nice little reversion

to that or something more? >> carl, i think you're exactly right. when we talked last week, we brought up the fact that the s&p was trading at -- short term overbought levels for five weeks. nasdaq for over eight weeks. couple that with the fact we've seen sentiment really improve, this week american association of individual investors hit a 52-week high it's still under 50%, but hit a 52-week high this is a little bit of keeping investors honest here. when you take a step back and as we talked last week, you don't get these extended streaks of overbought conditions during bear markets they tend to occur during bull markets. right now we're less than 2% from the high in the s&p 500 and the nasdaq it's definitely a weak day today. up followed by weakness yesterday. but overall, i mean, i think

it's -- you do see pullbacks even during bull markets >> does the yield curve or does the ten-year yield specifically, does that make this look like maybe it's not just a pullback that maybe going above 4%, maybe the two-year yield going to levels not seen since '07, maybe those things are weighing on stocks and will make it more than just a pullback short term? >> well, i think in the short term there's a little bit of shock value. the ten-year yield is above 4% and the two-year yield is above 5%, as you noted, for the first time since early march you know, that was concerning in early march, too we did see a little bit of a pullback but we ended up going on to make new highs in that respect, i think short-term psychologically it's a period of concern when you see these ground levels get reached. again, we'll have to see where this plays out from here

overall, i wouldn't put -- i wouldn't say today's move marks the end of the move we've seen in equities for the last three months >> remind me, paul, you guys -- you had a piece out a few days ago looking at streaks without a 3% drawdown. how long has it been do things get a lot more interesting if we, in fact, get it >> i think -- i don't -- forgive me, i don't have that at the top of my head right now i would say, but these -- going back -- couple that with the point about -- what i was just bringing up, overbought conditions you tend to see these periods where you don't have an extended pullback that happens during good market environments, not bear market environments i think that's something to take a step back and look at in perspective. just going to the adp, that seemed to raise a lot of concerns this morning.

you go back to june 2021 and january 2022, adp beat estimates by 300,000 both of those months. the following payroll report for that same month missed expectations by 100,000 both each a sample size of two i wouldn't put too much weight in it. we all know the record of adp and how it rcorrelates to nonfar payrolls and it's not very well correlated. >> going back to, paul, you mentioned we're seeing rates back to pre-svb levels what is different about the markets is our absolute level and also the valuations on stocks we're at a much more vulnerable position, i would say, because we're so much higher i don't know if we've seen earnings growth with multiple expansion. what do you think about where we are right now plus the rate shock? >> that's a great point. you couple that with the fact that sentiment has turned more bullish. you need a little bit of a reality check on the part of

investors here coming into earnings season. the expectations for earnings this quarter are -- we've seen more negative revisions than positive revisions not nearly as many negative revisions this time around as we saw heading into the prior two earnings season. so the bar may not be essentially set low but it's not necessarily a high bar to expectations, you know, heading into earnings season as well i think, you know, i think a little bit of uncertainty in the markets heading into earnings season is, you know, reset expectations would help things longer term into earnings season and the market going forward from there >> yeah. you're right i mean, we always get complaints about getting into bank earnings with the market running too hot. i will say, though, paul, as interesting as the calendar changed into july, we did hear a lot about how great july is seasonally, at least until the 17th or so the last two days, action kind

of flies in the face of that, doesn't it >> yeah, you know, i think the market tries to inflict maximum frustration on the most investors. so, when you see these widely, you know, widely cited trends and everybody's talking about them, they have a way of not coming to fruition so, you know, it's -- you know, june was supposed to be on the weak side. you know, look how june did. you come to today, you look at just for -- again, for perspective sake, you look at breadth today, in the s&p, it's the weakest since march 23rd -- or march 22nd of this year most people probably don't even remember what happened on march 22nd remember, it was my friend danny's birthday, but other than that, i don't really know what happened in the market until i looked at it the fed had a decision that day. and the market sold off. my point is what worried people on that day was quickly forgotten about and the market,

you know, continued moving you know, i think looking forward, we would -- it wouldn't surprise me if we look back at the end of the summer and say, what happened on july 6th? >> yeah. there's been a lot of -- i think it was jpmorgan this morning compared so far this year to '99 where you had a great first half, a couple of interesting downdowns, finished the year okay, rates were a little higher than they were now we'll see how the second half developments paul, good to check in with you. paul hickey. >> good to see you. after the break the chips aren't immune from selling is it time to get selective when picking semis? watching the airlines closely today as jetblue terminates its partnership with american following that judge's ruling the company says it will now focus on its $3.8 billion deal to acquire sripit. dow down 478 back after this. on, we destroy the world. we're in a race against the nazis. i have no choice.

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it's a tough tape. watch affirm, down 16% after getting this bearish wall street call piper goes to underweight, $11 target, 30% below yesterday's close. of concern, high interest rates and intense competition could lead to margin pressure for the buy now, pay later worst in five months as we pay close attention to the consumer. one reason tech has been outperforming, ai driving chips higher up 40% over the last six months. will the momentum continue into the second half?

our next guest calls nvidia his top play saying intel's worst days might be behind is following a volatile stretch over the last year joining us, bernstein analyst stacy raskin >> good to be here. >> you get you may believe and do believe nvidia is the way to go, it's the leader in the ai space and picks and shovels, but if rates are above 4% on the ten-year yield, does that change your opinion -- if we know it will stay above 4% or below 4% >> the ten-year, not that i'm an interest rate guy, but the ten-year has been there and certainly hasn't slowed anything down i don't know the expects looking to invest in ai right now are necessarily thinking about the right discount rate to put on them maybe that comes later but for now, i think the spending is happening. >> the forecast given by nvidia was a real reset, it seems, for

the company and for investors and how they perceive nvidia, particularly when after the china export controls came out, after we understood the limitations, nvidia still stuck to the forecast. nothing is going to change that implies there's so much business elsewhere that they weren't even accounting for when they gave the original $11 billion forecast is that the way we should think about it, there are pockets of demand they're not even accounting for right now and how interest rate sensitive could that demand be >> to be clear, the -- there's already export controls in china that lets them not ship some of their product so they made new products that are legal to ship. there's been some chatter those new products may at some point may no longer be legal to ship i don't think that's been instituted yet, but that's the chatter. they've kind of talked about there's no real impact if that happens. and i think to your point, that is the reason. there's so much demand right

now, if they need to pivot those somewhere else, they'll pivot somewhere else china is interesting, though it's not anything about right now. longer term i think that china you have to think about is it going to be there or not frankly, i think that's a risk whether or not the thresholds or lowered or not they'll never get raised even if they can ship stuff into china now, over time the gap between what is legal to ship in china and elsewhere is going to get bigger and bigger and bigger what they're shipping to china is going to be less and less competitive. i think over the longer term, you have to think about that china camp potentially being at risk i think the overall tam is big enough right now it's not a problem there's tons of demand everywhere else. >> give us a check on semicap and how you're thinking about that in how we're trying to fold up the dutch and put up a united front regard the chinese. >> the semicap guys, with the

export controls, the only ones that have seen direct impact was nvidia, although they were able to backstop it and semicap it was mostly memory but -- it was mostly memory. and so that's where -- so the impact of that stuff has already been taken into account for the semicap guys if there are more sanctions now it looks like asml and others won't be able to ship stuff for some more of the -- like more of the trailing node. that's potentially an impact, at least for -- again, i don't cover asml a colleague of mine. if you think about lagging starting to get impacted in china, it might get out of the realm of strategic most of the current sanctions have been strategic to stop china from developing a local leading edge semiconductor ecosystem. you start to move into lagging edge and it becomes a problem. you have to think about this the next logical step would be

what they call 28 nanometers, the next step down in terms of process technology for logic china right now has something like over 50% of the world's installed 28-nanometer capacity. if all of a sudden -- and this isn't the case right now, but if all of a sudden you weren't able to ship anything at all, no spare parts, no anything, i mean, that causes massive disruption to the rest of the industry you think you've seen semiconductor shortages now, imagine a case where like the 28-nanometer capacity in china becomes scrap metal. i don't know that's a broad area that the governments want to go down, but certainly they're doing their best to try to constrain china's ability to sort of move down the technology curve as much as possible. >> it's great to get your thoughts thank you. stacy raskin >> you bet. meantime, doordash, grubhub and uber are down further than most this morning. we'll talk about why after this short break. we earn your trust. maintain our financial strength and stability.

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some breaking news sending food delivery names like uber and doordash lower deirdre bosa has more. >> reporter: those gig economy stocks are hitting lows after they say they are suing new york city over a new minimum wage law. even though they're going on the offensive fighting a law that would significantly raise their costs this is reminding

investors of their complicated relationship with drivers who are independent contractors not as employees reminding them of the other regulatory battles these companies are fighting in a number of states and countries this law in new york city goes into effect next week, july 12, it requires the gig delivery players to pay its drivers a minimum $70.96 an hour, up $7 an hour so that amounts to a near tripling of base pay for the more than 60,000 food delivery workers in new york just as some are finding their footing. last quarter generating positive cash flow. both, as i always note, remain below ipo question are these good disuptive businesses, or are they

essentially utilities? still a question that plagues them >> has there been any analysis, d-bo, what that would do if they have to pay almost $18 an hour it sounds like it will be passed on to the consumer carl will have to pay a $20 surcharge for his pizza. >> reporter: carl will have to pay a lot more >> blame it on me. >> reporter: it typically does get passed on to the customer. when they were fighting this battle over ride sharing in california, which involved lyft as well, but all the gig companies, uber got to the point where they said we're going to exit california if this goes into effect because it was going to -- they were required to turn those independent contractors into employees and that raised their costs so much the business model no longer made sense they haven't been that harsh on the new york law but it raises the cost you wonder how much carl will pay for the pizza.

>> the positive stories built around uber in particular regarding potential investment grade, gap earnings, those have all made the rounds the last couple of weeks. >> reporter: the ceo has done a good job giving investors what they want, talking about gap profitable not just ebitda if they're going to have to pay so much more in a major market like new york city can it reach that pure profitability on the same time line it's happening in minnesota as well again, that's why i think you're seeing the stocks move lower it's a bad day for the broader markets. it's real and sometimes investors maybe overlook it because the financials are getting better but it's very much there >> d-bo, thanks, deirdre bosa.

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ryan cohen rumor mill making a buzz this morning. shares of the theoretically worthless bed bath & beyond have been trading higher despite the company filing for bankruptcy protection the culprit is chatter about teddy, a holding company, the address the same as teddy publishing which cohen has written a number of children's books. he cashed out of his stake last year angering a lot of investors who followed him in. and felt they were left holding the bag. >> you know this environment pretty well, the whole meme cohen universe >> the notion he would get back in after it's filed bankruptcy, i see how they can sort of devise the narrative around that

but is unlikely. ryan cohen doesn't see that his money is going to make him a return there he's made the return and will walk away and do something else. i would be sort of surprised if he went back to bed bath & beyond which is what the thinking is. >> we had the discussion last hour, a weak alternative which in prior cycles troubles retailers find some private equity leverage, and they can rescue, try to rebuild the brand. not happening this time. >> no, not at all. overstock becoming bedbathandbeyond.com now >> the market has settled into this range south of 4400 on the s&p. pisani mentioned the weakened breadth. >> it is very concerning that the ten-year yield is above 4% and the two-year yield fresh cycle highs. those are some key points for the market in this session at least. preparing losses on the s&p at

least. >> obviously this week, although we did cram in quite a bit of labor data, earnings have been pretty sparse. that will change a week from tomorrow >> as paul hickey of bespoke pointed out perhaps a good flush ahead of earnings season good to go in with dry powder in the markets instead of running up into. >> a little bit of cushion we'll see what happens today and in the morning let's get to post 9 and "the half." all right, thank you very much, carl welcome to "the halftime report." i am frank holland in for the judge scott wapner front and center this hour, a rate shock hit stocks. the market is under a lot of pressure as yields rally and stronger than expected jobs data and hawkish fed speak. is this a major moment of truth for investors, and will rising rates wreck this rally our investment committee is standing by. joining us for this hour downtown josh brown, joe terranova, amy raskin and sarat sethi. first a check on the markets right now a down day on wall street all three indices down at least 1% the nasdaq and the dow both down about