that's why you should value and treasure every day that you have. >> you know what? i have -- there's been things that have happened recently. that's so true, melissa. thank you for being here. hug your kids. i guess you can hug your husband too. i like your kids, though. i like your husband. i'm kidding. make sure you join us next week. "squawk on the street" coming up right now. ♪ good friday morning, welcome to "squawk on the street," i'm carl quintanilla with sara eisen, mike santoli at the new york stock exchange. bulls may look forward to putting this tough week to bed. futures down, s&p set for three weeks lower, longest streak since february, even with this slight bid in bonds. got some options expiration today. our road map begins with the markets, extending this week's losses after major indexes closing closing below their 50-day

moving averages. this month's worst performer on the dow. plus activism in the restaurant sector. outback steakhouse's parent company down sharply. let's begin with the markets extending this week's losses, not a lot going right, and today, mike, a lot of it surrounds china and worries about not just growth but the debt burden as well. >> you wouldn't say it's a new factor bit's been on the list o worries. you have one of these situations where once you have this pretty sharp break in momentum to the upside, several weeks ago, some breakdowns in the longer term trend, some concerns about, you know, valuation that were always there that are being exacerbated and why has the yield become unanchored, treasury yields, and even global yields? all that stuff in the mix and then you have the related concern of, oh, what might -- what stress points might we see emerge out of that? all that's in the mix. i do think, also, yesterday,

with the yields making those new kind of 15-year highs, you started to see the impact on consumer cyclical areas. so, housing stocks had been very strong, took a break. other consumer discretionary as well, which says, you know, the people are worrying that it's going to be a little bit too much for the economy if yields continue on that path. what does that mean? it means higher yields can take care of themselves by creating buyers and bonds, which now have good 2% real inflation-adjusted yields to capture at the long end if they dare. >> the story of the week was the rise in bond yields and the fact that that spooked equity investors and had ripple effects all over the world. what's interesting about this back-up in yields that we saw is it hasn't been accompanied by rising inflation expectations, at least if you look at some of the market rates. it hasn't been accompanied by rising expectations that the federal reserve will raise rates. at least if you look at the fed funds futures market, september still priced under 20% chance that they go, and november's a

little bit higher than that, and the 30% range, but it's not like we've seen a spike in expectations. i just point it out because it's interesting. a lot of the narrative is, well, people are expecting inflation to rear its ugly head. people are expecting the fed to continue to raise rates. instead, the commentary is around a stronger economy. and that's really been the story this week. retail sales, backed up by housing starts and industrial production. the minutes confirm that the federal reserve sort of might see this strong data as a sign that inflation is going to pick back up and they're going to remain hawkish, so i would offer that the explanation here is strong economy. that's a good thing. and that rates will have to stay higher. in other words, that rate cut that everybody's trying to pencil in and goldman thinks is coming in the first half of next year and so does the market, will be pushed farther, and i think that, leading up to jackson hole next week, where the federal reserve chair gives his big speech could be what to watch. how he portrays the strong data

we've seen so far since the minutes. because the minutes frp a few weeks old, and since then, the data's come in strong. >> that's absolutely the current snapshot of thinking and what the numbers are telling us. that's why real yields at 2%, that's what's been going up. >> yep. >> now, in theory, i mean, there's one way of looking at it, which is if the fed's going to stay around here, certainly in september, maybe beyond that, it's almost like the long end of the market has to restrain this economy or ration demand or do something in response to the strong growth. but also, treasury supply is not insignificant here. if the explanation partly is, you know, we have to offer bondholders on the long end a better return to absorb all the supply coming with deficits where they are and not looking like they're going to come down much, that's a piece of it that's a little bit less optimistic than it's just economic growth, although i do agree that's the main factor here. basically, pricing out a recession and pushing off the ultimate onset of rate cuts. >> the fiscal situation in focus. also the global situation in

focus with the change in japan and the yield curve. we've seen treasurys move since then too. >> jpmorgan this morning, the move in yields is less driven by the official shedding of treasurys and more due to positioning technicals. we'll see. i mean, we complain about august being a vacuum of catalysts, and certainly it's going to be jackson hole friday and others today. look at nvidia and say, if they break nvidia, that could give you a short-term bottom. >> exactly. the idea that there's not anywhere to hide, even in the most acknowledged consensus great long-term secular growth play like nvidia, that's sometimes part of it. you are seeing, after yesterday in particular, the market starting to accumulate some of those signals of getting stretched to the downside. some oversold. lights were flashing, such as put-call ratios. usually this happens in clusters. usually it's just a precondition. it doesn't mean we've seen enough selling but between the seasonal effects, which are just working perfectly to script.

i mean, this year is kind of ridiculous if you set it up against the long-term pattern of seasonals or third year of a presidential cycle, whatever it is. it's almost to the point where you want to be suspicious of it. but yeah, august is a vacuum of risk-taking capacity. that's one of the things that's out there that usually comes to bear. >> i think the other question on yields and the chatter is whether we should get used to this. there's a lot of talk now that we're not going to return to those rock-bottom yields that we were so used to, you know, post-financial crisis. the asset managers, pimco and blackrock, talking about higher yields for longer. larry summers talking about higher yields for longer. get used to 5%, says bank of america, merrill lynch, and that, i think, is going to be a question that will dominate certainly the fall into next year if we are getting used to these yields at higher levels, can equities stomach that? can the economy stomach that? so far, it hasn't crushed the economy, but we've seen a big

rise again, and last time we saw a big rise, things can break. we saw svb when we were at these levels. >> and after svb, the conclusion was, the fed might have to cut. the fed should be done. we're going to see a credit crunch. the economy's going to teeter, and i only bring that up because it shows you how much the numbers and sentiment can change in the span of five months. so, five months from now is january. >> or five weeks. >> let's not be too confident about what we say january is going to look like. >> exactly. as for this recent spike in yields, it has helped to send mega cap tech into correction territory, as you know. apple is the worst performer on the dow so far, now with a year over year decline. microsoft, nvidia, meta, down more than 10% from their respective highs. b of a today says microsoft is probably the yul brenner of the magnificent seven and says if it can't maintain new highs, the equity narrative overall could flip from buy the dip to sell the rip. >> have enough people seen that

movie to know? >> jim's done his best to create awareness among the new generations. >> subscribers to the criterion channel trying to figure this all out. i think that's pretty fair. it's a good experiment in showing the diversity even within this group. you have some -- i mean, tesla' been for sale every single day. nvidia has been a relative outperformer, holding on to huge gains. microsoft, you know, i think it's -- if you look at it on a two-year chart, it seems to fail at the same level it did a couple years ago so you're having a genuine retrenchment. i think it's the area of the market that had the most air under it. it seemed as if it was most considered to be one-decision stocks. rates seem to give people a reason to rethink what they're paying for equity and for earnings in the future. on the other hand, these are all massive net cash balance sheets that earn a lot of money on their cash holdings. they're not net debtors. it's not about unprofitable tech where you have to hope for the day when discounted future cash

flows are added back. so, i see it as, you know, also, by the way, if we're talking about a reaccelerating economy, these aren't the things you want to own, necessarily, when it's all about an economy running hotter. these are predictable growth stories. >> it's slow growth, low yields. apple, i think, is worth talking about too because that has broken down lately, and now is in a technical correction, right? >> sure. >> more than 10% off the highs. is that china? that's been the other dominant story this week is weak china and are they doing enough to stimulate, and are they facing some sort of credit event as they see these falling dominos in the debt world on top of a weaker economy? which is a bad brew. >> yeah. wells today, harvey has a great chart, or table, i guess, of names with non-info tech, xps members with 15% exposure to china. >> underperformed. >> they've all underperformed, 500 basis points. las vegas sands, el, tesla, dupont, tapestry. i mean, you could very sharp line -- >> tesla's on that list too with more than 15% sales exposure,

which could be a part of the problem. and then look at tech too, and names are underperforming there as well, like qualcomm, for instance, that has exposure to china. the china factor, you know, mike, it's hard to read of what it -- what it means for the u.s. markets. besides -- and we saw, first of all, we saw the estee lauder news today on their earnings and we see where they're getting hit, which is asia travel, which we'll talk about in a moment, but that's clearly the weaker china story. but broadly, for the u.s. economy and the u.s. market, have not seen necessarily a big direct correlation, even though it feels -- the chinese stock market has underperformed greatly, and it feels like they're craving some sort of baa z bazooka or stimulus to deal with these problems. >> it seemed like china is struggling with growth, dealing with deflation, which can act as a drag on global inflation. in other words, it seemed as if it was helping the things we wanted to be helped, which was reinforcing disinflation story. now, i do think it's more about

financial conditions, you know, any kind of financial accident risk that is rising over there, what's going on with the chinese currency. you know, even though it has firmed up in the last couple of days as the authorities try to protect it, i think that always gets people's attention, not because it has a direct feed-through to things we care more about but it just is a what if factor. >> it's a signal, also, that they're willing to step in more than they have been. i think the $28 billion to cash this week speaks volumes. that was according to the bank of america fund flows data. so, positioning more for risk off or more defensively positioning, we know that was a huge headwind -- that was a huge tailwind in the first half of the year when everyone was getting bearish. are we getting to those levels again? >> we're probably edging there. i think there's a psychological hurdle to say, why should i take risk when i can get 5% in money market funds? yes, we're at record levels, going towards $7 trillion, but compared to the market cap of stocks, in total, it's not even close. i mean, back in 2008-'9, money

market funds were 50% of equity market cap. you want to talk about money on the sideline. now, it's really right in the historical range. >> meantime, this reuters poll just crossed. recession odds in terms of the reuters poll, down to 40% in a year. that's a one-year low. and the market's clearly coming goldman's way, which is, i think, 15% now. >> they keep lowering their own to more negligible levels. in 2024, are we even going to have a recession? are we going to continue the no landing? one stock i did want to hit early here is blooming brands, the restaurant name. activist investor starboard value confirming it has built a 10% stake in the parent company of outback steakhouse. they also own bone fish grill and flemings prime steakhouse. shares are up nearly 30% year to date. this is notable. it's obviously moving a lot, and

what i hear about this position is that so far, it's a very friendly conversation and a friendly relationship between starboard and between bloomin brands. starboard, what i hear, thinks that bloomin' is very undervalued and plans to use its operational expectation from the darden and papa john's efforts, which we know about, to try to help them. and looks forward to dialogue with management. the friendliness and the looking forward to dialogue is interesting, guys, because remember, the darden story is pretty legendary, because they replaced the entire board of directors. i don't think something that's ever happened in corporate america, may never will. and went into that company. they did not spin off the brands, and it was sort of an interesting comp because they have olive garden. and they have this conglomerate of different restaurant brands and were able to change everything, including the pasta recipe. >> that's right. >> and here's the chart since

starboard's stake. it has far outperformed. it's been a winner, even in tough environments like inflation. look what it's done since covid. blooming has underperformed. they had success in papa john's, starboard did, when they went in there. remember, theyput shaq on the board and worked with new management to turn it around after the founder errors there. it's also been a big outperformer, so there's a lot of expertise in this space from starboard, which is probably why investors are excited. >> it's definitely look like a super cheap stock. it's been more just flat. >> that's what starboard thinks. >> there's no doubt about it. it's hung on to this very low valuation, market giving no credit for having a longer term growth thrust to it. that's probably the opportunity there. multiple chains, figure out exactly how to starve or feed capital into all of them and how to execute there. >> kind of a tough category. it's not fast casual. it's not cava. they're middle market. >> in theory, it's sort of the wrong part of the -- >> but they did it at darden,

which was the same thing. >> salt in the water. famous. when we come back, china's economic and property fears, which we mentioned, evergrande now filing for bankruptcy protection in new york. we're going to head live to beijing for the fallout on that. bulls not getting any respite today as we're looking for 1% declines on the nasdaq, at least. more "squawk on the street" after the break. rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

wow, you get to watch all your favorite stuff. investment objectives, risks, charges, expenses it's to die for. and it's all right here. streaming was never this easy, you know. this is the way.

you really went all out didn't you? um, it's called commitment. could you turn down the volume? here, you can try. get way more into what your into when you stream on the xfinity 10g network. markets definitely watching growing concerns around china's real estate sector today with

property giant evergrande now filing for bankruptcy protection in new york. our eunice yoon is live in beijing with more. >> i'm outside one of evergrande's many projects here in china, and the residents have told us they are concerned that the value of their homes could fall because of all the negative news that they're hearing, even here in beijing, involving their developer. now, evergrande had filed for creditor protection in new york. it's applied under chapter 15, which states that non-u.s. companies undergoing a restructuring can be safeguarded from creditors looking to sue them or tie up u.s. assets. now, evergrande says its restructuring talks in hong kong, the british virtual islands, as well as the cayman islands, should be considered in a hearing in manhattan on restructuring on september 20th. now, to appease investors' concerns about this filing, evergrande issued a statement to

the hong kong stock exchange today saying this is a technical move, that the application is "a normal procedure for the offshore debt restructuring and does not involve bankruptcy petition." the filing comes as evergrande's domestic property arm confirmed that it is being investigated by chinese regulators because of what they described as a breach of disclosure rules. local media say that the probe is for suspected data manipulation, and then adding to the gloom, a mid-size commercial developer known as soho china, which once was eyed by investor blackstone for an investment and a takeover, said that profits fell 93% in the first half of the year due to uncertainty. meanwhile, guys, just one update on the investors in the trust firm that i was talking about yesterday who had -- that trust firm had missed payments because it had bet on the real estate recovery. well, we spoke to some of those

investors today, and they said that they, along with other investors, are now getting contacted by the police and being told not to come to beijing if they're not already here, and not to take their case to the financial authorities. >> eunice, talk about what the pboc has said in the last 24 hours about supporting not just the economy, but the markets over there. it's nowhere near the bazooka that the markets are looking for, right? >> absolutely not. these are all incremental steps as we've discussed before. and that's a big problem that a lot of people see. but the pboc, as well as the other financial authorities like the securities regulator, had said they wanted to do -- take some steps in order to help to support the real estate sector as well as, for example, the stock market, saying that they would cut some trading costs. they would support a share buyback, again, making a lot of statements about some level of

support but not really doing enough from many analysts, as well as economists' and just regular people's points of view. one thing that we are watching from the pboc is on monday, they are expected to make a decision on lending rates, which they do every month, and this time, people are expecting a much bigger cut than previously expected, and also, than would be normal, especially on the reference to mortgage rates in order to try to, again, prop up the real estate sector, at least provide some support, although there are many people who think it's going to come too late anyway. >> eunice, as i mentioned, it's like you have these two problems colliding in the chinese economy, these debt issues, which seem like dominos every day we talk to you. there's another company to worry about. so, you've got these debt issues, which leads people to worry about like a lehman-type situation at the same time that the economy has disappointed and is slowing.

it feels like two separate issues colliding in a bad way. is that right? >> yeah, it is. that's one of the reasons why there are so many people scratching their heads and wondering, where's the leadership? is president xi jinping going to take some action and try to help fix the situation? it is -- i mean, just because there are so many issues right now that the country is facing, it's hard to know exactly which way he's going to go, especially when one of the big priorities has been national security, and even though earlier this week we heard from the premier, saying is there a way to -- that basically they want to see development and security organically, he said, combined, it's -- you know, it's difficult to say exactly how you're able to do that, and therein lies another conflict. >> indeed, eunice. very much rock and a hard place

between the debt burden and the weak growth we talked about the last few weeks. we'll talk soon, eunice yoon in beijing tonight. still to come, bitcoin sliding to this two-month low. we're going to tell you where elon musk fits into that picture as we keep an eye on futures. got some movers as well, dee,er e.l., far fetch when we return. could tell you how they could be more efficient? i'm listening. well, with ibm, you can use software to help you connect and analyze data— from hvacs to elevators to lights. what if we use ai-driven insights to pinpoint inefficiency? yep. and act on it. saving energy, money... ... and emissions. yup. that's a big one. now you've built something better for everyone. that's the sustainability solution ibm and a global real estate company created. what will you create? ibm. let's create. ♪ ♪

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some of the biggest losers on the nasdaq 100 this week and no surprise some of the chinese names are in that group with all the worries about china's economy, jd.com. also has some of the cybersecurity stocks like crowdstrike. nasdaq 100 is down 2% for this week heading into today and 7.6%

f ofthe recent highs. opening bell just moments away.

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bitcoin under some pressure this morning. it's a fresh two-month low due, in part, to the rate hike worries we mentioned in this report from the "journal" that says elon musk's spacex did write down i wouts holdings. we were chatting about what the cause and effect was. >> a pretty quick little air pocket, even though it's been under some air pressure. i revert back to it tends to behave like a risk asset. it tends not to necessarily do well when real bond yields are rising, you know, high and rising. similar to gold in that respect. whatever element of bitcoin is like digital gold would respond in a similar way, and actually, on a six-month basis, this drop in bitcoin brings it right in line with the performance of gold recently, so i don't know. for all we know, there could always be some big sale that's hit the tape or some other technical, mechanical element of this, but to me, it's just like, we're risk off right now, and

that's hitting bitcoin as well. >> and now, unfortunately, bitcoin community is very angry at musk. i think the more interesting revelation from the article in "the journal" was the peek inside spacex, showing it's profitable in the first quarter and losses have been narrowing. that's pretty interesting. that says a lot about development. >> let's get the open here. and the realtime exchange, at the big board, it is citizens, provider of live-in benefit life insurance products celebrating their first a.m. best rating. at the nasdaq, it is cintas, celebrating the 40th anniversary of that company's ipo at the podium. so, 43, 36, 35, we mentioned -- i had to give jeff degraaf a shoutout yesterday, mike, because he did say 4,300. >> i think, to be specific, it's more like in the 4320s was a particular level and what's fascinating is that's not the reason he was saying that but it was the high of the day, august

of last year, when we went to jackson hole and powell thought the markets were getting too comfortable. we've round-tripped to that level. it brings us back to late june. we had that big push higher into july. it was a big anticipation of better-than-expected earnings. there's a way to frame everything that's going on. of course, as just, we had a massive run, seasonal weakness hits in august, we've had an illiquid bond tape. we've seen the yields spike higher. we have to have a reset lower. if that's the case, we're looking for tactical oversold conditions to really develop and as i said earlier, we're getting there on some of those, but if it's a bigger picture issue, if yields really continue to levitate or there's another sense out there that the economy's really just too confusing because the higher economic growth story feeds very quickly into maybe the fed will ultimately have to kill it next year. so, it's not as if it's a one-sided worry that we're dealing with right now. >> we just have to wait on yields, and there's no data today, and there's no fed speak

today, so yields are the story of where they drift, and it feels like, well, there's a little bit of a bid. they're still holding these high levels. best performer in the s&p 500 is ross stores, which i just wanted to hit, because they reported earnings last night, and this is where the strength is in retail. we got it first from tjx this week earlier and now from ross stores, comps up 5%, a lot better than what they were expecting and what they saw a year ago, which was down 7%. gross margins came in better than expected at 27.7%. the ceo, barbara rent ler, while she did talk about the strength and the results, also echoed some of the cautions. said, our low to moderate income consumer continues to face persistently higher costs on necessities, so they think it's prudent to continue to plan the business cautiously. but they did raise guidance because of the improved q2 performance there and the second half sales and earnings outlook. they're expecting comps in q4 to be up 2% to 3%. bottom line, this is where the

value is for consumers right now in these discount retailers, ross and tjx. they up the target to $127. they say tjx is executing better and has better profitability numbers but because the sales are almost identical, it shows you the strength of the category there. >> walmart, similarly, back above the 50-day after thursday's selloff. sara mentioned e.l. earlier. that's a fresh three-year low, down 6%. even with asia up 36, we keep getting these quarters rolling in, ralph lauren was the other example, where you did have ch china 50, but the worries that the guidance from e.l. is no good at all and i guess there's a sense that the -- once the pent-up travel is exhausted, where do you turn for growth in that area? >> there's a few problems. it's not just the asia travel. it's also north america and there are signs that e.l. is losing share because cosmetics has been a very strong quarter. we heard that from ulta and lvmh

and l'oreal, so it makes you wonder what's happening in north america, even though estee lauder is seeing growth. this was a really controversial stock going into the print because it was already down more than 30% year to date, so a lot of the analysts were saying, look, it's primed to hop, similar to target, for instance, which had a lot of negative sentiment going in. and while results were better, the profitability numbers on the quarter were a lot better and so were the sales numbers. it was the guidance, carl, that you mentioned and that missed the low bar. >> oh, yeah. >> and that's why the stock is selling off even further. >> 350 to 375 is fiscal 2024 guidance right now. the consensus prior to that was 488. stifel saying the buy side seemed to be more around $4. it did undershoot there. the stock is basically back to where it was at the covid low in march of 2020. the other issue is super

expensive stock. it was considered to be can't m -miss, and that's just been unwinding very quick. so, based on sub-$4 earnings next year, you know, you still pushing 40 times earnings. >> do we want to mention far fetch on this revenue miss? give me a five-year. that's an all-time low. jpmorgan cuts to neutral. they go from $15 $6. key also cuts. is this a warning sign about luxury or something else? >> well, china was a part of the story here. macro pressure there. this is the online retailer that sells a lot of luxury goods, so i think there are cracks in the luxury story, but some are handling it better than others. >> yeah. >> and farfetch clearly is not. it was that outlook that really spooked the street and has analysts downgrading the stock today. look at that move. down 38%. >> yeah, this is a -- kind of a give-up. it's 80% off its highs at this point. although i was surprised to see still more than a billion dollar

market cap, even after this drop. >> yeah, i mean, oliver chen says maybe the wholesale trends or the weaker trends at farfetch could be a read-through to luxury department stores, wholesale, like nordstrom, which reports next week. we'll see. but overall, i think just weak on the china story and the overall -- you know, we got a lot of retail results, and there are a lot of confusing signals. i was going back and looking at sort of all the comments that we got. we had target and walmart and home depot and some of these other retailers, and while i would say broadly, the numbers were better than expected, on all of them, there was caution in the outlooks, and not necessarily in the financial outlooks but in the commentary, even walmart, which had a good quarter and raised guidance. doug mcmillon warned about risks ahead for the consumer, pressure on the consumer because of inflation and rate hikes, and the renew of the student loan payments, and we really had that theme throughout. home depot said it. target said it. so, nobody's talking about

recession, but they are warning about the consumer, even with these numbers coming in better that be expected. it's just interesting to note on a week where we get retail sales a lot stronger as well. >> it was only a few days ago we were talking about b of a upgrading consumer and listing all the reasons why the consumer is kind of shielded from stress, student loans notwithstanding. the flip side, i mean, look at deere today. crushes 8/19. they raise the guide. construction up 19. they raise the guidance on construction to 15 to 20. prior, 15. on the same day that goldman has this note about manufacturing construction. >> exactly. >> you look at the chips act. look at the inflation reduction act. they think probably has another 10 to 15% to go from here. another quarter million manufacturing jobs by the middle of next year. >> it's been an incredible, you know, source of strength in that one part of the economy, and it's interesting with deere because i think there's a little bit -- even though it's been great and the estimates were going up, farming coming

aggregate is due to be down this year. it was basically up this year, down last year. that's one of those things that is sometimes an overhang on the stock but the construction piece clearly making up for it. heavy industrials kind of look cheap at the highs in profits, so there's a little bit of apprehension. it still does look relatively inexpensive, but i think that might be one of the reasons we're trying to figure out where to from here. >> they raised -- not as much as the beat so there's a little bit of -- >> that's one of those, was it really a raise? >> also has to be a part of the macro factor in calculation as you look ahead, and as you wonder why the unemployment rate is still at 3.5% and that has led to strength across the economy, and that is, there's so much fiscal stimulus out there still, and there's more coming from the i.r.a. and the chips act and from the american rescue act, which is still doling out millions of dollars to municipalities to build things like health centers around this country. so, you know, it feels like that doesn't get factored into the

models and the economists haven't paid attention to it. i'm not sure the fed is paying attention to it. i asked jay powell about it back at the end of june, and he said, yeah, we see it in the construction numbers, but at the scene permeating the economy. >> it's fascinating because all the legislation passed a year ago, the appropriations were there. what has surprised to the upside relative to economists' expectations? i know there's a lot more uptake on a lot of the ev incentives, a lot more uptake in terms of people saying, fine, we'll take the government money to build something. a lot of it got front-loaded. >> it's also hard to know when it gets disbursed. it's been a delayed trickle effect. the chips act hasn't disbursed any amount of money yet. they have more than 400 applicants and the i.r.a. is just getting going on some of those subsidies. >> it's interesting because, hey, what's the subject of j jackson hole next week? it's structural changes in the u.s. economy or something like that. you want to listen for whether powell is willing to say, maybe we have just structurally

tighter labor markets and it's not a linear relationship with inflation. we've managed to see inflation go from 9 to 3% on the cpi with inflation staying at 3.5%. so, just throwing it out there. also, productivity effects. he has to acknowledge either suggest that productivity has some momentum to it or saying, don't expect productivity to bail us out. because real yields at 2% in the long end suggest that we should have some productivity growth to justify that. otherwise, it's very restrictive policy. >> yeah. well, the q2 data, as a reminder, was good, and i think renmac pointed out philly fed where you had shipments up 5, 7% but employment down 6%. maybe manufacturers are finding ways to do more with less. >> i sort of hate monthly and quarterly productivity stuff. it's just a residual number. it's very messy, except over long terms. although i will say with regard to the regional fed pmis, there are models that show if you compute all the manufacturing indexes that maybe that's

suggesting we're up off the lows. and that could be a net contributor to the economy. >> well, prices paid were also strong. >> that is true. >> that's something to watch too, although they're kind of all over the map, mike. philly fed was strong. new york empire manufacturing this week was pretty weak. >> yeah. no, it's true. i'm just saying that the models are suggesting that we're -- >> uptick? >> bumping along. i guess we maybe just mentioned apple. we mentioned it earlier. it's down 0.7% again today. $172 really breaks below the early 2022 highs. if you look at the two-year chart, it's below its highs from last august, and the explanation for me is, the -- and i mentioned this at the time -- that linear climb of the roller coaster we got in the few months up into the july high, that you couldn't explain by earnings estimates going up, excitement over new product cycles, about anything except this is the kind of symptom we want right now, 7% of the s&p, we can't own enough of it.

so, i think we're having an unwind of that effect. you got valuations up toward pretty much forever highs in the iphone era and so this payback phase is interesting, but i would note the s&p is down, what, 5.5%, 6%, apple is down twice as much from the highs. >> those peaks are fascinating in the 170 to $180 range. >> people are going to look at that and say, okay, i guess we're back in that range or can make a stand here, whatever it is, but it is interesting and definitely the china -- >> it's china. >> -- piece of it is not irrelevant. >> second worst performing s&p stock this week is tesla. actually. we don't usually see that at the bottom of the pack. down 11% week to date. could be a china story. yield story, too, factors in there. and some of the other worst-performing stocks, mike, are regional banks like truist and citizens and zion's bank corp., which lost a lot of air after the incredible run-up that they had from their lows. they were late after the -- they lagged for a while after the svb

fallout, and now we're watching them again as the talk is of higher rates. >> well, exactly. if you remember what the original scare was, it was about paper losses on their bond portfolios and so what are you seeing right now? >> it's so ironic because high rates are supposed to be so helpful for banks, especially regionals and their profitability. >> it's a broken relationship at this point. >> sara mentioned tesla and there's a lot of news in the ev space, in the auto space today. x bang with a revenue guidance that's way below forecast. inventory writedowns, margin compression, and you have page one of the "detroit free press" today is a story about ford prepping white-collar workers to do blue-collar jobs in the event of a strike. of course, the contract expires on the 14th of next month. jim's been all over this. shares aren't actually down on ford or gm today, though. >> no. i mean, there's not a lot in those stocks in terms of high

expectations and value for the long-term, but look, the way u.p.s. has traded since the teamsters agreement has not been great. and so image you have some alertness to that and, you know, this is a time for workers to take their -- the deferred share of the pie that they have and had for a while there and, you know, we'll see how -- i've seen some work that the auto parts companies, like that food chain is starting to look like it's a little washed out. the stocks could potentially work a little bit better from here. but between the strikes coming and then you have potential government shutdown september 30th, as i say, this stuff is always there, but when the market starts to act squirrely, people notice it more, and it starts to become a retrofitted reason for why the market has had trouble. >> well, it also is a reason why we could see inflation remaining persistent and sticky, especially on the wage front, where we're already seeing real wages rise faster than inflation, where finally we got

that wage growth. and now, you have potentially hundreds of thousands of americans on strike and receiving higher pay because of union action and because of strike. it worked at u.p.s. potentially another 150 150,000 workers in the auto industry. >> meantime, we continue to monitor whatever progress there is between the studios, the amptp and the writers guild. the writers guild did issue this report, in which they said that disney, netflix, and amazon were the so-called new gatekeepers of media. i'll just read one line here. "each company is now taking anti-competitive vertical integration to an extreme, turning its streaming service into a walled garden for self-produced content." it doesn't sound like this is going to move along very quickly. >> it's been how long now? >> a hundred and some-odd days. >> i don't know. it's very complicated. i don't understand what a deal looks like because i think the issue is a.i. and streaming, they're new ones and they're more difficult than hourly pay

on the auto line. >> the studios have offered to share more information on the non-monetary kind of non-long-term income royalties areas that there's maybe some gestures of movement. but in general -- and meanwhile, the companies are saving a bunch of money right now and as they talk to wall street and the analy analysts on the earnings call, they're like, we're going to have upside surprises on the cost line because we're not spending money on content, and i think it's a really interesting question as to when and whether that comes back to bite in terms of subscriptions down the road and, of course, box office. >> the other group you have to watch is home builders. they've been so strong in the face of rising mortgage rates, but this week, things changed because first of all, yields reached new highs for the cycle, and so did mortgage rates. 7.5% on the average 30-year loan, according to bank rate. the group is a little bit higher today and some people were

wondering if berkshire hathaway's revolution that they were buying the home builders marked a near-term top, but also, at some point, and i know people are locked into their 3% mortgages, but at some point, that's going to hurt. there's going to have to be a changeover, and we know there's a weakness in housing supply in this country, and there's going to be more demand. >> yeah. >> yeah, bzh gets downgraded at wedbush, although they keep their target of 32, just saying not many catalysts here. we're going to step to the side. speaking of all of this, we did see a little bit of nibbling on bonds this morning. you see yields down fairly -- i would say, across the board. yeah. you got the ten-year back to 4.25% with the dow down almost 80 points to start this friday. don't go anywhere.

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taking a look at this week's worst performers on the nasdaq 100 in a tough week. tesla topping the list, of course, on the downside.

mercado just sur mounted it, jd.com and walgreens big losers on the ndx. tonight on cnbc josh brown and i back for another special edition of "taking stock." tune in 6:00 p.m. eastern. "squawk on the street" will be right back. heat makes it last. feel the power of contrast therapy. ♪♪ so you can rise from pain. icy hot. new nature's bounty hair growth. clinically shown to help grow thicker, fuller hair with just one capsule a day of advanced hair complex. conquer hair thinning... ...and fall in love with your hair all over again. only from nature's bounty. your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory.

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ferrari is on a roll. shares of the luxury sports car maker up more than 40% so far this year. robert frank is at the pebble beach car auction with a look at what is powering that company's growth. good morning, robert. >> good morning, karl. over 800 cars expected to roll over the auction block in monterey. $400 million worth and the king of the weekend, as always, is ferrari. for the most expensive car expected to sell this week, four out of five are ferraris. sothebys announcing what is likely to basket most expensive ferrari sold at auction, a 1962 ferrari gto the holy grail. they made 36 of them. this car expected to sell for over $60 million in november when it's auctioned. the owner paid $6,000 for it back in the 1960s.

so from $6,000 to $60 million, that's a return even better than the stock market. >> you can look around at ferraris from 10 years ago, 20 years ago, 30 years ago, like this behind me and see that they've just progressively always gone up in value. they have dips and go up and down a little bit, but long term, they're, you know, a good place to put money, looking at past history. >> the star of the weekend is a 1967 ferrari. bonhamm is selling $40 million. want something a little more affordable, $3.5 million 1966 ferrari, part of a collection being sold here at mecum. 13 sold by one collector expected to fetch over $20 million. we are going to talk a lot about ferrari values over time and how that and the demand with the ceo

of ferrari of a stock that has been on a continued run as you mentioned up 45% and a lot of that story is because their margins right now are more than twice that of tesla. these two really about margins and how ferrari is keeping that margin even growing it at a time when so many companies, especially in the auto space r under that profit margin pressure. >> exactly where i was going to go in terms of implications for new ferraris. now it's a public company, 78 billion market cap or something, they only produce and sell, what, 13, 14, 15,000 cars a year. it's still low production levels. is part of the sale today to a new buyer this thing is going to hold its value over the decades? is that a prom yoise you can ma? >> for a long time it was the only brand you rolled it off the lot it was worth more than you

paid for it. most cars depreciate 20% as you roll off the dealer's lot. if you have one like this one, they're going to increase in value and a lot of the profit story is just that buyers today want something special and so they're adding these options that have increased profitability, even though production is low, as you mentioned, mike, they're making more per car because customers are adding so many expensive options to it. they have a three-year waiting list. even if we have a slow down they'll be fine. >> where they're not winning, f1. number four. get beat by aston martin. i guess that's not impacting sales. >> sara, i will promise you, i will drill the ceo on what they're going to do to improve that performance tonight. >> you better. they have charles le clarc. >> thanks, talk soon. robert frank. got near 1% declines on the

nasdaq, although we do have energy, utility, staples in the green. not by much. don't go away.

happy friday. good morning and welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla and mike santoli live from post nine of the new york stock exchange. david faber has the morning off. stocks in the early action, another tough week for the bulls and we're under pressure again. s&p down 0.5%, bringing the losses for the week to now more than 2%, 2% for the nasdaq as well. the nasdaq comp down 1%. the center of pain has been about it technology so far this week. that continues today. there is strength in utilities and staples and real estate, but the communication services and tech and consumer discretionary groups are at the bottom of the market. here are three big movers we're watching. earnings, deere in the red, beating on the top and bottom lines this morning as well, but shares are down as some warn of a slow down ahead in agriculture equipment demand. ross stores going the other way on better than expected earnings and raising their guidance,

echoing results from other retailers like tjx. ross and tjx some of the best performers this week. cost conscious shoppers are on the hunt for bar begins playing out in the sales picture. we're watching estee lauder lowering its guidance after net sales fell 10% this year from last year amid continued headwinds in the business in china and that's the good place to begin because china has dominated the conversation this week about some of the weakness in the economic dautta, missed payments and evergrande and country garden and lenders over there. estee lauder's ceo talking ability the weakness, in particular, in asia travel demand which weighed on the skin care. he also talked a little bit about weakness in north america as well, by catches some folks on attention because cosmetics has been a strong part of the industry. we heard the conference call kicked off a half hour ago.

i think we have what the ceo is saying about china. >> our company has great confidence in the long-term development of china. we are proud of the very strong business we have built, led by our exceptional local team. the chinese consumers continue to be the number one growth drivers of our industry throughout the decade. we are pleased to have returned to organic growth in mainland china this fiscal year 2023, and to have expanded our prestige butte share. >> sentiment was weak going into this report, and it was under performing big time down more than 30% year to date. it's knocking on 3%. it could have been worse if it didn't have that setup. >> no doubt about that. the kind of setting a new perceived floor for guidance to grow from here. i mean, the earnings guidance for 2024 essentially matches

levels seen, you know, i don't know, six years ago or something like that. you're wiping away a few years worth of growth and you have to try to expand profitability in from there. as mentioned earlier it's not a cheap stock, super premium valuation because they had so many growth drivers from place and, you know, it's kind of a 50-50 sort of stock on a global brand. >> some of the headlines out of the call as sara said in may and june, retail detellriorated and turned steeply negative and the note they expect to increase advertising as a percentage of sales. try to get back some of that by stepping on the gas. >> there's been criticism and articles lately about how they have not -- they've under advertised and market share in places in north america to companies like l'oreal. the comments were interesting he doubled down and the company did well in china. it's really the pan-asia travel

demand, the airports that aren't as busy where people buy those duty-free cosmetics. that's hurting this company. you mentioned the great note from wells fargo today looking at companies in the u.s., stocks, that have a lot of exposure to sales in china and how much they've under performed this week which shows you the week. we made the graphic. there's las vegas sands, where 40% of sales are from china. it's been hard hit. lauder is in there. albemarle and tesla, one of the worst performing stocks this week this is excluding tech, some of the tech names like qualcomm have been hit hard. >> there's no doubt it's been coloring things and, you know, again, what's going on in china with regard to the finance companies and, you know, these investment vehicles that aren't paying out, obviously, not going to help consumer confidence has been the thing we're waiting for to come back there. >> the other story the march higher in yields and treasuries.

that's the other headwind that equity investors are looking at. it's china and yield and we've seen the sell-off in bonds, yields reach 15-year highs, so going back to 2008, and we're watching the impact of that is going to have on the economy. the first place you look is mortgages where we saw the average loan beon a 30-year hit 7.5%. a chart that shows the gap in the blue and orange, of where the average home price should be, versus where it is. it's high because we have this shortage of homes, right, so it's artificially high, but based on where mortgages are and where we are in the cycle it should be 30% lower. and this is the problem with housing affordability. housing makes up 10% of our economy, so he thinks it's a big headwind here as we go forward that houses are becoming unaffordable. >> yeah. no doubt. for the home builders it's more expensive to buy down the

mortgage rates as they've been doing to induce new sales. a big week as we've been talking about for bonds, the 10-year note hitting the highest level since last october and before that back to 2008. let's get to steve liesman with more on the multiple factors behind the moves at the long end, steve? >> the recent increase in bond yields mostly pegged to the fitch downgrade as the precipitating event august 1, along with supply coming from the treasury. top managers says there's a lot more play here and it's not clear the move is over yet which could mean more pressure or trouble for the stock market. the bonvoyage list, the massive supply from treasury, better economic data pushing up yields, strains in chinese and japanese flows. jpmorgan tells me there's short-term issues like lousy

august liquidity and investors off sizing their positioning with the surprise supply announcement. the long-term issue may be that banks, central banks and foreigners are not as big in the market as they have been. he says in a world where budget deficits are increasing, treasuries will have to be underwritten by more price sensitive investors which is why we're calling for a steeper yield curve in the second half of the year. the bond sell-off dates back to before the fitch downgrade and links up with better economic data like stronger numbers we had in july and just recently in august. there's the july fed meeting played a role. the announcement of new supply from the treasury. and the recent inflation report also going the other way. better inflation but higher yields as a result. leader from black rock says it's just hard to buy the long end treasury when the short end is paying 5% and higher. what's more -- what is more clear, he says, that the fed is closer to easing, there will be a greater demand for duration,

but we clearly are not there yet. now all that said, one big bond investor i spoke with said, it makes sense, you figure in 2, 2.5 on inflation. it's only high if you're under the mistaken impression going back to 2 or 3% 10-year yields and i believe that ship has sailed. >> right. therefore, right, the 2% yields means you're getting compensated over and above inflation more than we have in a long time for that matter. negative real yields for much of the prior decade. i guess what that means is that the bond market on some level is restrictive based on those measures, at least more so than it was before, so either allowing the fed to do less or having the fed taking that into consideration for its stance in policy, and its effect on the economy. >> yeah. i'm glad you brought that up, mike, because it does raise a question ahead of the jackson hole summit next week whether or

not the yields are something the fed wants, is it happy about those. i don't imagine it's happy with a 7 and change mortgage which sara was talking about and whether or not the fed needs to address it. i will tell you there's another debate going underneath the surface that i bet sara is aware, this idea of whether or not the real neutral rate ought to be higher. another issue that's out there that needs to be discussed. so i just -- one other thing i want to aeshgsds the investor i talked to said, at a 5% 10-year, there might be a buy brand. >> maybe you'll hear about that next week in jackson hole. it's going to get wonky. >> thanks. let's move to tech. apple down double digits month to date as the nasdaq looks for three negative weeks in a row. our next guest believes that higher rates make it tough to argue for multiple expansion and that is a key driver for names like apple. bring in barton crockett, security analyst, downgraded apple to healed with a target of

198. do you think the relationship to rates between it rates and apple is the most important name in evaluating the stock? >> i think it's certainly important because, you know, what you have with some other tech stocks that we favor is meaningful growth. you have margin improvement at amazon, margin improvement at meta, and rate top line. at apple you don't have that level of kind of re-set to the margins and you don't have that level of kind of top line. the stock has been a great performer and that's been really propelled by valuation, which now at close to, you know, recently close to a 30 p/e, about 1.5 times the s&p 500, is at peak absolute and relative levels. i think that's been a great driver. hard to say you want to make more of that from here. >> the two-year chart earlier this morning and wondering whether or not these levels around 170, 180 are support or as they were resistance in

late '22? >> they could be. i'm not going to go too far into the technicals, except focus more on the fundamentals. i'm not negative on apple. i've got a neutral rating at this point. but i think you've got to be careful without the great earnings revenue reset that we see at some other companies and with inflation rising or interest rates higher, it's hard to say this stock is going to be an out performer like it has been going forward. >> barton, where else do you think -- you mentioned a couple other names that you think have growth. are you seeing enough differentation in terms of investors, you know, kind of migrating toward the growth stories? we were, you know, used for a little while to people considering this, at or 8 stocks as a block? >> yeah. look, i do think that there's separation in the tech group broadly. so i think you have a group of companies that are benefitting

from, you know, basically reset of costs that got way out of whack into the pandemic. and we're seeing that really kind of propel margins forward. people like amazon, people like meta, people like pinterest. and we've recently kind of moved in to more constructive ratings on amazon and on pinterest. so we like that story. we do think that macro is healthy enough we're supporting a good ad market, particularly those on the secularly side of the divide, more internet stories and seeing a consumer that can spend, which is helpful for retail at amazon and helpful i think for cloud services which are also getting over it time i think a benefit from a.i. so there are opportunities. there's growth stories. margin stories. we favor those versus banking on multiple reset, which has been the story at apple. >> do you think of apple as a

high multiple tech stock that sells off during times when yields are going up like we've seen or is it more consumer staple bond like to own during tough times? maybe they go together. how do you think about the multiple and what kind of environment works best for apple? >> i'm not saying that apple's multiple retrenches. it's appropriate to be valued like a premium consumer products company that people will buy these devices when times are tough. and i just don't have the call today that we're facing tough times. the macro has been more healthy than i expected into this year and, you know, today continues to be more healthy. if we were to go into an environment where the macro is less healthy and growth is harder to come by, you know, maybe you cling tighter to the names that are just kind of comfort food like an apple, you know, but today we don't see that. today we see margin and growth opportunities that are more

interesting in the space. >> we should talk about those another time. appreciate it on this friday. see you soon. >> thank you. as we head to break, here is our road map for the rest of the hour. a look at one restaurant name headed higher as activist investor starboard takes a stake. >> yields hitting fresh highs this week. are dividend stocks worth buying here. we'll discuss that. >> women own the summer according to some. how much celebrities like taylor swift and yoe bencare boosting the economy. big show still ahead. don't go anywhere. your record label is taking off. but so is your sound engineer. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

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welcome back to "squawk on the street." dividend payers under performing in the rising rate market. could they make a comeback? our next guest manages a fund targeting companies that pays 2.5% or greater dividend yields. pnc texas instruments, ray thee yan technologies and more. the senior portfolio manager joins us now. why would i want to be in dividend stock, when i could be in a money market fund or a lot of fixed income assets right now paying higher yields? we have competition. >> i totally hear what you're saying and most people are running through that call cu lus as they think where to put their money right now. the thing is, dividend stocks dproe their dividends where treasuries you get one coupon you have the coupon for the duration of the bond and that's

it. think about a bond yielding 4% can give you over a five-year period, find a dividend stock paying 10% you will end up ahead over a five-year period of time. add inflation into the mix, you're going to be better off because many companies have pricing power and they will be able to price their products, their profits are going to go up in line with what inflation is and you become ahead of the game where you won't in a fixed income security. >> it makes sense, but it's not the way the market is looking at it right now. do you need to see a reversal in rates for dividend stocks to work? >> that's an interesting question, and i don't really know if that's the case or not. they are so cheap right now, that maybe you just have a reversal based on the fact that they're as cheap as they've been since the tech boom of the 1990s. when we did that we were three standard deviations cheap relative to that period, three standard deviations cheap now.

and they went on to have a great decade. they were the outperformers for the next ten years. that could happen again in our mind. >> on what metrics are they cheap? how do you do the analysis? i wonder what sectors tend to surface as being more attractive in those spaces? >> which sectors within the income paying stocks? >> yeah. >> the ones that we like are ones that not only have a valuation component cheap, but also have growth potential. in our mind the biggest opportunity here is in industrials. that's where we have our largest overweight, you know, relative to the market. they have an opportunity to grow mostly based on the fact that we have an infrastructure boom going on, we have investment taking place because of the ira and we have just really rickety infrastructure all over this country that needs to be rebuilt. so we think many of these companies like cat, like deere, you know, like eaton are going to be beneficiaries of that.

those are where we have most of our from a sector perspective. >> i wonder how you think about how old an investor needs to be to really emphasize this in their portfolio? how young could you be and still pay serious attention to dividend growing stocks. >> i think it's part of an asset allocation and i understand the logic on why a young person would want to be in something that's got a little bit more growth potential and what not, but the valuation of growth stocks is so high relative to the valuation of dividend stocks, that i think there's an opportunity for all ages and when you think about an overall asset allocation, having a little bit of defensiveness in the portfolio makes a lot of sense. we think of this strategy as being more defensive as the overall market. if you look at last year, for example, the market was down, call it 18, 20%. we were down 4. so, you know, in a market that goes down a lot, this offers some protection and we participated in the upside. we don't have the juice being in the high flyers provides.

>> pnc one of your top picks, and it has been one of the strongest of the super regionals a but if you think about companies that are raising their dividends. >> yes. >> that's a space especially? rising rates the regional banks that has been under pressure and trying to conserve more capital. >> yes. so, you know, the issue with banks right now, particularly the smaller banks and regional banks as you mentioned, has been this sort of duration mismatch they have on their portfolio and they have a net interest margin issue. they've got pressure on costs because of deposit costs going up and their opportunity to lend is, you know, somewhat muted right now. we think pnc is the best run of all the regional banks, and it is really cheap right now and pays over 4% dividend. we feel like we're being paid to wait while the environment turns, but we don't have a large exposure in the financial sector relative to other sectors that we own and so this happens to be

a stock that we think is too cheap. >> is that because you're worried about dividends not growing or getting cut? >> they're not going to get cut. they might not grow as fast as other sectors like the industrial sector i mentioned or energy, for example. you know, we think energy is very cheap right now, but has -- you're being paid to take the -- to wait so to speak. and if energy costs go up, which we think they very well could as you look out for the next year or two, you will get a faster growing dividend stream than in the financials. >> thank you. >> you're welcome. >> defense of dividend stocks. >> thank you. >> still to come this morning, one under performer in cyber security and what summer fdariys including today could have to do with it. that story is next. don't go away.

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just a few hours away from results out of palo alto networks. kristina partsinevelos joins us with more on what maybe to expect. >> well, what summer fridays, what happy hour drinks if you're an analyst or journalist

covering cyber security firm palo alto today you're out of luck, sorry, because oddly enough the company like mike mentioned moved their earnings to this afternoon and scheduled a two-hour conference call and offered to conduct one-on-one calls with the sell side to clarify any issues. the company says it's because of scheduling. the company did announce the friday afternoon earnings date on august 2nd. see on the stock chart ever since then the stock has dropped over 18%. why? well, speculation that the company could be hiding something bad which is why they announced on a friday, which, you know, attention tends to be elsewhere. dan ives from wedbush who maintains a buy calls it one of the biggest pr disasters and black eyes we have seen in decades of covering technology and a point of concern is guidance. competitor fortnet guided billings to grow by 10% year over year in the december 2024 quarter, that's down from 18% in the june quarter, down from 30%

in the march quarter. another thing is earnings were also soft for fortnet, why the street is most likely fearing the worst for palo alto. according to guggenheim spending survey, spending intentions on palo alto products among large enterprises have actually deteriorated for the second half of this year, but improved for small to medium-sized businesses, which could impact billings which could then in turn impact free cash flow. but the company or palo alto for the last four quarters has had modest revenue beats versus the guide so maybe, just maybe, picking a friday is a way to say look at me and if berkshire can post earnings on the weekend why can't palo alto do it on a friday afternoon. >> it's a good point, cyskristi. people are freaking out about this and we've seen the stock reaction, and it might be much ado about nothing. in the press release where they announce their earnings, they

say that they are going to give new medium term outlooks, so i mean they are telling analysts they want to give them the weekend to absorb the information and update their models on the three-year guidance and apparently palo alto starts their sales kickoff on sunday and they will talk to 5,000 people, and they want to have the information out there so that they can feel that they can talk to those people during the sales time freely. then the other thing to mention on a scheduling basis, they have a three-day board meeting this week. maybe friday was the only day they could do it. for those reasons maybe people should stop freaking out about bad news. >> how considerate of them if that's all true. the other interesting point i didn't get to mention there are rumors that palo alto may benefit from a department of defense contract. they awarded a contract to booz allen in july. palo alto could be one of the vendors and could add according to morgan stanley 1% to billings

for the full year. we could see a revision in guidance to your point. >> yeah. >> at the very least gives santoli and josh something to kick around at 6:00. >> i will be here. >> yes. >> still to come this morning, oil is set to snap a seven-week win streak. but are there more gains ahead. we'll check in with rbc with her take on what comes next. the move in regionals we talked about them a second ago as a lot of attention gets paid to what w elneyid environment is doing to the bank space. we're back in two minutes. (hero fan) uh, yea. i have to watch my neighbors' nfl sunday ticket. (josh allen) it's not your best plan. but you know what is? myplan from verizon. switch now and they'll give you nfl sunday ticket from youtubetv, on them. (hero fan) this plan is amazing! (josh allen) another amazing plan, backing away from here very slowly. (fan #1) that was josh allen. (fan #2) mmhm. (vo) for a limited time get nfl sunday ticket from youtubetv on us. a $449 value. plus, get a free samsung galaxy z flip5. only on verizon.

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welcome back. with your cnbc news update, california, is preparing for the impact of hurricane hilary after it strengthened to a category 4 storm overnight. if it makes landfall it would be the first time that's happened in southern california since 1939. the storm is currently churning off of mexico's coast. it is expected to bring heavy

rain and possible flooding to the southwest this weekend and early next week. maui's top emergency management official resigned last night. the move came after herman andaya received intense criticism for deciding not to sound emergency sirens as the deadly fire broke out. he defended the decision by saying the sirens were meant for tsunamis and would have sent residents inland toward the flames. and india sharing views from its lunar lander today, as it closes in on the moon. it's headed to the previously unexplored south pole which is thought to contain ice. russia is trying to get its happeneder there first and the u.s. hopes to be the first country to land astronauts at the site in 2025. mike? >> thank you >> just over an hour into the trading day. let's get to bob pisani with more on what's moving with the s&p down half a percent. bob? >> yeah. we're off the lows. the low print at the open. that's the good news here.

4335 or so, about 10 points above that with the s&p. 6 to 1 declining to advancing at the open. it's ate even on the nyse but not at the nasdaq. that's the problem. tech weakness. take a look at the sectors. it's really tech and communication services that are having most of the problems right now. we're seeing some stability in the banks which have been on a downward slope the whole month and china is the other issue. mchi, the china etf, also down today. it's really tech and china. look at big cap tech right now. there's no relief here. meta had a fabulous start to the year and has been down all this month down about 13% this month as is apple down 12%. you can see the other big names, nvidia, alphabet, amazon, why tech and communication services are the two weak sectors. look at the banks, still down, but some attempt to stabilize today. there's a few that were in the green earlier on. citigroup which has been a terrible performer, wells fargo

and the regional banks, a little more stable, but many of these are head and shoulder patterns. on the right side of it, the shoulder has been down for most of this month. we're looking for stability after a weak month. the market issues again, it's china and the macro, the u.s. economy here. china will be talking about the real estate and slow state of the recovery. the data has been strong and a little too not goldilocks and inflation may remain high. it that has been the major issue why we've been seeing yields higher here. jackson hole, two weeks ago, most people i was talking to, are expecting powell to pivot away from tightening. some are saying that may not be the case and sounding hawkish. confusion about what powell will do with the stronger data. we have been obsessed with treasury yields all week and it was nice to -- good idea to point out a recent studio that concludes most stocks do not

outperform treasury billions, a study took several years to complete, 64,000 global stocks studied in a 30-year period from 1990 to 2020. enormous study. the conclusion were two, a few companies account for most of the gains. look at this number, apple, microsoft, amazon, alphabet, and tencent in china accounted for 10% of all global stock wealth creation in the last 30 years. that is remarkable. only 44% of the u.s. stocks, carl, out perform u.s. treasury bills. this is 17,000 stocks in the united states that were studied. there isn't 17,000 stocks right now. most came and went. that was the point. a lot of creative destruction goes on below the surface in the stock market. the study concluded indexes are the key to understanding, helps smooth out winners and losers. >> that is fascinating, yeah. the slowly shrinking stock

market which we've talked about before. thanks. bob pisani, this morning. watch oil today. down around 3% on the week on pace snap a seven-week win streak. fundamentals appear stronger than macro headwinds. head of global commodity strategy is with us. good to see you. >> thank you for having me on. >> so are you saying that the more -- which is the more powerful dynamic right now, the supply or demand? >>. >> right now, it's been macro worries, china, concerns about rate hike that have caused softening in oil prices. when we look at what's happened from july onward we have saudi discipline when it comes to the five, unilateral 1 million ba barrel a day cut and you've had improving signs of demand. inventory draws from the united states, a 6 million a day barrel draw it this week. china import numbers have held up.

june was a monster month it for china imports. july softer. if we look at august data so far it looks solid. refiner utilization rates in china look solid. you have this macro worry about china, the property sector, but when you look at the oil data, it looks constructive right now. >> interesting. what do you think that says, that china is not as weak as we think or is there some other -- go ahead? >> i mean i think when we look at sort of where we are in terms of oil demand, it certainly means that china remains an active buyer. some people say it's going to the inventory. some say a barrel off the market is a barrel off the market. refiner utilization rates would indicate it is being used in country. the interesting question will be, i think, going forward in the fall is, if you have some improvement in the macro picture in china, is that that sof tailwind for oil going into the end of the year? >> is it all demand led?

what's happening with supply at the same time? >> i mean, the saudis have been very disciplined. i mean, they came out in june, they did a million barrel a day unilateral production cut, alongside the opec cut. initially, sara, there was skepticism, people were saying the saudis are going alone, they can't get everyone together, but we took the view, we were at the opec meeting, the saudis mean business and they were basically saying, we will steer this recovery. if we have to do it alone alongside opec, we have to bear the burden of adjustment, we'll do it. that's really what's different than 2015. remember when we had the china stock market credit scare in 2015 that caused oil prices to collapse. opec was in a passive mode. now they're in an activist mode. the question is going to be what happens with the unilateral saudi cuts come october? we them extend it another month because they're concerned about the china story? we will they start adding

barrels back. that's the decision to watch when it comes to opec. >> how does the russian factor figure? right here whether it's just how much production they're managing to get out there. they had to jack up rates, the central bank did, to try to defend the currency. >> this has been an interesting story because one of the big headwinds for oil in june was the fact that you had so much russian oil on the water. people said wow, look at the ships headed to asia, russian exports remain high. we've started to see russian exports come down and if you look at the start of the year, we're off 800,000 barrels when it comes to russian output. we are seeing russian output trend lower. so the question is, does this hold up, are we going to see further declines, but right now, nobody is talking about this armada of russian crude like we are earlier in the summer. >> we'll see what happens in the coming weeks. such a fascinating story for the last month and a half.

thanks. >> thank you for having me. shares of restaurant company bloomin' brands are rallying. starboard value confirming it has built a nearly 10% stake in the parent of outback steakhouse releasing a statement saying we are committed to driving shareholder value and take all viewpoints of stock holders into consideration. kind of boiler plate language when you get an activist. i will say what i hear about this situation is that it is very friendly so far which is notable and important. starboard is known for picking fights and replaced the board of darden restaurants, the closest comp here a conglomerate of restaurants including olive garden. i hear it's friendly so far. starboard thinks that bloomin' is very under valued relative to a darden and other restaurant companies. and that they look forward to working with the management here, and i mentioned darden, because that is really starboard's big success story if you look at the stock since they got in there and started

changing the board and changing operations. everything that company did, including we were joking about the pasta recipe at olive garden, it has been a success for investors. they went into papa john's, has a history there. put in new board members including shaq. worked with the new management to turn around the brand perception when they were facing difficulty as well. this is a space star board -- >> the friendly aspect makes sense they're not saying put it up for sale. we think it's badly mismanaged. we think we can get the evaluation up. it gets other investors interested in noticing and the stock up %. >> noticing how cheap it is. >> starboard and something like this $2.2 billion market cap, very manageable size. >> bone fish grill another one of the bloomin' brands. they have one in cincinnati. good fish. big winner, 7% higher. >> as we head to a break, check

out the biggest laggards on the s&p 500 today as we sit here. dow down 43 points. key sight technology is the big leader, deere, ndi fvia,reeport and alphabet also down.

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welcome back to "squawk on the street." folks on the floor applauding as some navy s.e.a.l.s. make their way toward the podium at the new york stock exchange. markets in the red. the s&p 500 looking at its longest weakly losing streak since february. fidelity investment director of global macro is here to talk about it now. good to see you. you know, i know you've been doing plenty of work trying to break apart what's going on in the bond market, what yields at these levels are telling us for, perhaps, how restrictive, you know, the bond market is against the economy, what it's going to mean for risk assets as well.

>> yeah. so good morning. at the october lows last year the market started to sort of pivot from one narrative which was, you know, the fed is raising the cost of capital and when that happens, the present value of future cash flows goes down, bond valuation math stops working, equity valuation math stops working and that was the story for 2022 and last year the market got oversold and the stock market decided to move on to an earnings recovery narrative and typically the first, you know, two to three quarters of a market cycle you see that recovery play out with rising p/e ratios, which is exactly what we've seen. earnings are still actually declining, but they're starting to decline at a less bad pace, not that it was bad to begin with because earnings are only down about 3% year to date, but the market is moving on to the recovery narrative and as typically happens, the first phase of that is all p/e and so

the p/e ratio, which was 15 in october is 20 now. you know, the market has kind of front run a lot of good things that are supposedly going to happen, but now they need to happen. on the earnings front i think that's generally playing out, but as you mentioned on the interest rate front the bond market is giving the market some indigestion here and i think ultimately comes down to this whole kind of esoteric consent called the term premium and whether the term premium really deserves to be negative because historically it tends to be positive. you think about a term premium is the compensation investors want to get paid for for owning long-term bonds, it could be an interest rate premium inflation premium and the term premium is typically positive but it has been negative, and it is still negative despite fiscal deficits, foreign currency intervention in china and i

think that's really what's driving yields higher here and the market has kind of moved on and i think this is a wake-up call that maybe it's moved on a little bit too much. >> so what's gone on a little bit too much? the stock market had gotten too far ahead of itself relative to the cost of capital, relative to where risks are? i guess the question is, you know, we're in this zone right now, talking about these invisible kind of factors in the bond math, right, we have the neutral rate, you talk about the term premium, we're talking about potential growth levels in the economy, what does it mean in your view, bottom line, for the stock market, just as everybody got comfortable calling it a bull market and calling for a soft landing, we've had this gut check? >> yeah. and i think that the bull market narrative still stands, but the market kind of rallied in a pretty symmetrical channel. it got to about a 20.5 p/e. if you look at maybe a 50%

retracement down to the 200 day moving average that gets you an s&p of around 4200, 4150. not the end of the world, but, you know, you raise a good infl through the tips market, these are all just assumptions, right? when the fed is at 5.5% and we assume our star is at 1.25 and you add inflation of 2.5%, which is the fed's target for the cpi, you get to a sense of the fed being pretty restricted. what if our star is higher, what if the tips market is strong? this makes investing to difficult because you're always dealing with assumption. on the valuation side you have the same thing, right? it's like what kind of earnings growth do you plug into the dcf model? what kind of risk-free rate? what kind of equity risk

premium? this is kind of the point. it's one thing if we're sitting at the lows in october where really nothing good has been priced in yet, but now we've had this five pe point rally, an almost 30% rally based on expectations that certain things are going to happen. now they need to happen. if they happen later or not as much as the market thought, you get this indigestion. i think that's kind of what's happening here. >> absolutely. had worn away whatever cushion we had there. 4200, a little below that, gets you to the 200-day moving average. talk to you again. >> i feel like i have to do a psa on our star and i mentioned it earlier and he's talking about it. >> absolutely. >> it's an economic term. it's the real neutral rate of interest, which is basically up for debate and it's the rate at which the federal reserve puts interest rates that doesn't expand the economy or contract

the economy. and there's debate on whether that should be higher. >> i look forward to your public indication. coming up at 11:00, speaking of the ceo of one of the world's biggest asset managers, pimco, who says the rate hike game may be ending here but what does he think is the long-term rates that interest rates should be at in this country? we'll join us inenines t mut. municipal bonds don't usually get the media coverage the stock market does. in fact, most people don't find them all that exciting. but, if you're looking for the potential for consistent income that's federally tax-free, now is an excellent time to consider municipal bonds from hennion & walsh. if you have at least $10,000 to invest, call and talk with one of our bond specialists at 1-800-376-4376.

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who runs the world? do we really need to ask? so far this summer three women-led productions have injected billions of dollars into the economy. we have to start with taylor swift's heiress tour projected to generate $4.6 billion for local economies and swift could earn $1.6 billion. at the same time, beyonce could earn even more from her renaissance tour projected to bring in $2.1 billion as fans spend an average of $1800 on tickets. that's just the music circuit. we know what's happening in theaters. "barbie" is still on track to be the biggest movie of the year, surpassing $1 billion at the box

office globally. greta gerwig with $1 billion film. and i know it's fun to talk about this stuff, guys, but the truth is, it's really boosting the economy and we're all sitting here every day wondering why we're seeing this acceleration from consumers and the economy, and i'm not saying this is the only reason, but it's definitely part of the story. you can see it from companies like a michael's who run out of beads because all the swifty fans were making the friendship bracelets and they're having a supply chain to the federal reserve beige book which talked about occupancy levels at 100% for hotels in the region where taylor swift was going. it is seriously a prioritization for consumer spending right now. and there are billions of dollars behind it. so, i think the fed should be paying closer attention to it. >> it's pure discretionary, and it's a highly motivated kind of spending in groups concentrated into one. i've been happy to underwrite a portion of this. >> your daughter --

>> with taylor swift tickets and "barbie" tickets as well. >> service inflation, you want to know where it's happening the most? concert tickets and theater tickets. >> mike and i have had a debate whether taylor swift concerts are a service or a good given -- >> i belief instagram immortalizes it, it's a product. you're reexperiencing it. >> it's an experience. all right, guys. taking stock, of course, as mike and josh have put together a really fun hour on friday nights. hope you join them for that tonight, 6:00 p. ete te.m.asrnim "squawk on the street" back in a minute. in your defense; look at the size of that- gaaaaaaaaaaaap!!! is that a goat?! you talkin' about me? gaaaaaaaaaaaap!!! i think this goat is saying “gap.” must be talking about the expenses health insurance doesn't cover. so who's talking about the money aflac pays to help close that gap? gaaaaaaaaaaaap!!! aflac! aflac! gaaaaaaaaaaaap!!! it's about to go down, baby! aflac! aflac! stop that goat! get help with expenses health insurance doesn't cover at aflac.com

good friday morning. welcome to another hour of "squawk on the street." i'm carl quintanilla with sara eisen. setting the agenda for today, pimco's emanuel roman headed for jacksonville next week. hawaiian electric continues to grapple with the fallout from the devastating wildfires in maui. we'll talk to one of the company's largest shareholders about how they plan to move forward with this. rosenblatt with new target on nvidia. we'll talk to the analyst hyped that call as the bulls continue to say this recent dip is a buying opportunity. hour and a half into trading. take a look at the markets.