buddy. >> same to my, my friend, joseph kernen, what a week it's been and we've got a lot to see at 10:00. we're both getting our popcorn out. >> 162, up 162, we'll see what happens based on his comments. so it should be interesting. >> yeah, okay, "squawk on the street" begins right now. ♪ good friday morning, welcome to "squawk on the street," i'm carl quintanilla with courtney reagan, mike santoli of the new york stock exchange. the wait is almost over. powell's speech at jackson hole over an hour away. futures supportive after the bulls dropped the ball, the dow's worst performance since march. a lot of earnings sneaking under the gate. road map begins with powell's inflation pitch, investors closely watching the rate policy tea leaves at jackson hole. plus, retail's reckoning,

nordstrom saying theft is at historic highs and gap also warning of an uncertain consumer. we'll bring you the ceos of property group, authentic brands and their new partner the executive chair of shehan. fed chair's remarks scheduled to be delivered next hour. steve liesman is in jackson hole, been busy all morning long and has a preview. hey, steve. >> hey, carl, despite the 5 percentage point decline in inflation since the fed last gathered here in the mountains fed chair jay powell not expecting to deliver a victory speech here in jackson hole. while powell may acknowledge the progress, and even hold out the possibility of a soft landing for the u.s. economy, he'll retain his flexibility, i think, to raise rates or hold them at a high level until there's convincing evidence, the phrase they've used, inflation is headed to the 2% target. ian jefferson from pantheon economics saying we so no reason mr. powell is ready to give up optionality given the den densy

of inflation numbers in the past couple years to disappoint after appearing to improve. markets have already kind of embraced this. but there's november at the even odds line at 50%. that's up from yesterday, after harper's remarks and up over the past couple weeks. the other change, markets have backed way off expectations for cuts in 2024. we're moving almost 64 basis points of rate cuts since mid-july. still, though, looking for cuts. it's useful to note the frame of the debate on the fed now is between hawks who want to hike again and doves who don't want to cut now, but just don't want to hike, like fed president patrick harker we spoke with yesterday. >> steve, that's absolutely the case. nobody is explicitly talking about cutting. but given the fact -- >> play out for a while and that should bring inflation down. >> mike, so powell, i think

could acknowledge the risks to the economy from tightening bank credit and the recent surge in rates but the tone at best for markets will be balanced, not dovish, and the inflation victory dance, guys, if there's going to be one, going to have to wait until next year here. >> yeah, for sure. steve, of course, i mean, fed chair will typically like to preserve flexibility and stay dated depending if it makes sense. it's certainly true that there's no rush to sort of start to foretell of rate cuts to come next year, but they also do have on paper, you know, this idea that the normal level of short-term interest rates is way below where we are right now, and presumably it's if the cycle moves on they're going to trend in that direction, do you think any of that discussion is going to be in the air? >> i don't think so. i tried to approach that yesterday with harker op this idea of cuts. they'll tell you, yeah, cuts could come next year if inflation comes down. that's not really an easing of financial conditions as you know, mike, because the fed likes to think in terms of real

interest rates or the inflation adjusted interest rate, and you might just get a little bit of that next year, and again, the hawks and the doves will differ over how much to cut, but also when to start cutting andhow much evidence they need. i think you're going to need several months, mike, of really good pce, and cpi inflation numbers in order for the fed to start talking seriously about that. i think today it's not -- you know, just because it's jackson hole, i think the fed chair delivers a thoughtful speech but i don't think he has to decide, and i keep hearing that from other folks, which is, look, we've got september, and then we've got october data, we don't have a meeting until november. they're not going to make a decision before they have to because we're not in a forward-guidance mode here, carl. >> we'll get a little more of that diet of data starting next week with pce on thursday, steve. we'll be coming to you a lot, steve liesman with that awesome live shot of jackson hole. the dow's worst session since march, the s&p and nasdaq

posted weakness one-day performance since august 2nd. a lot of hand wringing about yesterday, whether it was the roadway tail blowups or nvidia's inability to hold the gain at the open. >> interesting, i thought we lost -- nvidia, opens up more questions as to broader tech, what tech can do for this rally, if it can continue with these magnificent 7, holding onto the weight it's been able to hold. i think the consumer is so interesting right now, obviously the retail sales numbers were stronger than expected last read, but then some mixed signals from a lot of these retailers, the quarter was fairly decent for many of them, but so much cautious tone looking to the back half of the year. sort of just raising the question of how resilient is the consumer right now. >> i think that gets to why investors in general are uncomfortable or apprehensive about making a declaration that the current hot streak we have in gdp growth, it seems right now, based on the third quarter

tracking numbers, is something that we can actually rely on as being durable. if the bond yields were going up to 15-year highs on the long end of the treasury curve because absolutely the one reason was we have a strong economy and it's going to stay strong and therefore the fed can sit back, we'd be able to absorb it better. but the fact that ten-year yields have doubled in two month and you have this sense it might be a kind of front loading of economic activity, a little bit of a burst of the consumer strength here when you've got real wages turning positive in recent months, but how much life is there in that, so fast and slow, sprint and stumble has been my argument for what is on investors' minds about this current environment, and therefore is the fed going to seem too tight if all the sudden we decelerate into early next year, or something like that, that being said, i did -- i look at market mechanics and it seems like this pullback had unfinished business, carl, i've been talking about, the minimally acceptable pullback,

5% for five minutes not enough this time after a 20% run, so you're starting to get more in the technical oversold readings and sentiment has cooled from a pretty rolling boil, that may not be enough in the immediate moment, but once we clear through powell, i think the question is, do rates break out higher from here? and do we have to worry about that? or is it going to be a little bit of, hey, rates went to the top end of the range, oil went to the top end of the range, pulled back, the dollar is not going nuts, can we live with that environment? >> it's been an interesting split of the decisions, or at least views, i'm thinking of like katy -- morgan stanley thigs we need to fill the gap from nvidia's last guidance in may which would take you back at least another 5% on the s&p. >> that's what the chart is at least hinting at the possibility of. that was late may. that's the thing that got the s&p above 4200. remember how in the first half of the year everyone was like, well 4200 is the obvious ceiling for this market, that's the

range, look at the chart, we burst above it in part because in late may nvidia got us there. big deal going from 46 to 42? not really, routine, but it would be scary along the way. >> on the other hand, today -- constructive, says there is a split between hedge fund positioning and our fund manager survey and she still says stay long beta, cyclicals until either you see the waiting shift or macro deteriorates to the point it's obvious to everybody. >> i thought that was interesting, she says now the time for offense, not for defense, and i like her positivity in thepullish slant she's taking there. >> she's coming around this year, wouldn't you say? >> i would, and i would also point out that she is a quant. her positivity is not necessarily a pose or subjective call as much as it is, look, we see an earnings trough, the earnings estimates have not given way, they're actually still pointed higher, earnings estimates on a 12-month bad basis with the s&p are higher

now than when the market was at its peak. therefore, it's become less expensive and cyclicals is the call for a while. you can be neutral on the s&p, or even think that it has more to go on the downside and say, cyclicals look like they're well positioned here because they're not the predominant mover of the market cap, you know, the big blocks of market cap within the index. >> the other thing that's interesting out of bofa, it has a split personality in some sense, but mike hartnett, fairly bearish today says it's central bankly quiddity, fed liquidity, you see the split lately, the nasdaq wants new highs where liquidity suffered, he compares it to something we talked about at retail, and that's excessive savings ant consumer level, excess savings for the market. >> that is interesting, and of course the idea of savings, is it excess or waning, it just feels, again it feels like you could look at the data and decide, do you want to look at this as glass half full or empty

when we're looking at the savings rate? i can see an argument for both sides there. as well when it comes to the savings rate. so interesting stuff, and obviously paying so much attention to what's going on in the nasdaq with these magnificent seven stocks and otherwise the nvidia action this week of course caught everybody's attention in the headline that continues. >> my bias is to completely downplay any causal effect of fed bounce, not excess savings, but central bank balance sheets as somehow this direct channel into speculative or expensive growth stocks. you look at that chart, first of all the nasdaq went from 8,000 to 10,000, when central bank liquidity was like this in 2019. so, what's the point of the relationship? and then if it breaks right here you don't start to say hey, maybe that's not a causal relationship, you say the nasdaq's wrong. that doesn't make a lot of sense to me. they both move in the same direction for long periods of time. sync up the "y" axis to make the lines overlap, and magic.

>> i thought the other interesting tidbit this week was tom lee, looking at the last decade, years in which stocks were down ahead of jackson hole, and then the week after, six to seven times they did rise after jackson hole last year was the exception because we all know the pain speech. >> yes, that's right. >> i sometimes wonder whether or not powell, if he's -- if we were asked today is this the kind of pain you would have envisioned a year later, s&p up 4%? >> up 4%, although it did have a massive gut check into october, you have had the existing home market basically screech to a halt. i mean there are things that have happened. it's taken the economy a little bit off the boil. i think that's fine. what i do remember, too, though is we keep alternating between jackson hole speeches that are absolutely crucial and ones that we can just ignore. i remember bernanki at jackson hole articulated qa, and it was

this big signature movement, central banking is changed forever, every year after that it's going to be big, and then it was a little bit of a shrug. >> we'll see. we'll know more in about 50 minutes. >> still to come this morning, a new fast fashion retail partnership, sara eisen's rare interview with the ceos of simon property, authentic brands and the executive chair of shehan, what that means for retail and commercial real estate. on powell watch this morning, don't go anywhere. a lot more "squawk on the street" straight ahead. (fan #1) there ya go! that's what i'm talkin' about! (josh allen) is this your plan to watch the game today? (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!

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as we mentioned yesterday the world's most valuable private -- entering a partnership with forever 21. sara eisen spoke with ceo jamie salter, david simon shein's executive chairman, among the topics they discussed, the rising influence in the fashion marketplace. take a listen. >> i'm always looking at who's successful in the marketplace and i was noticing that there was this company called shein, s-h-e-i-n, they were performing better and better, taking more market share from the fast fashion retailers. what's interesting is they have 150 million customers, spark actually has 200 million customers. different customers. customers that actually come into the stores and physically

shop and of course some of those customers are also online because spark has seven brands in its portfolio today, you know, whether it's forever 21 or brooks brothers or reebok, lucky, eddie bower, arrow postale. what's so interesting about their customers and our customers, there will be overlap. there will be customers that want to buy other brands, and not just the shein brand, they'll want to buy forever 21. >> does shein clothing get sold in forever 21? >> we will be testing, definitely, some shop-in shops in the forever 21 stores, and, you know, obviously we have nice landlords that will allow us to do that. and we will test those shop-in shops. and our belief, based on the

pop-ups that shein has done in the past, that will be incredibly exciting for the forever 21 customer and, you know, it will obviously drive an enormous amount of traffic into the malls, which is good from assignment point of view but also very good from forever 21 point of view. return to store. that's something that, you know, we've studied sort of a little bit of what kohl's have been doing with return to store with amazon. >> returns at consignment malls. >> getting the credit, and then, you know, obviously hopefully they will spend that credit in the shein shop-in shop or the forever 21 store. >> i think it's our goal to, you know, to use both of our distribution networks back and forth. so shein comes on to our plt form, which is essentially mostly physical environment, right, so shop-in shop in the

forever 21 store. i've happened to see a couple of pop-ups that -- shein's done, and one in riyadh just recently in june and it was incredible. there was a line out. and they did a pop-up in indianapolis. i think that was just to seal the deal so they wanted to show me what the line was outside, like hometown. but -- and the line for the consumers to come into the -- you know, and this was maybe a week -- you know, your stores are like for a week or two or whatever, but the line to get into that was great. so i think introducing shein in a broader physical way will be beneficial for shein, and at the same time we can put forever 21 on their marketplace and expoesz all of the great stuff and all the product that f-21 has on the shein marketplace and expose it

to the 150 million consumers. so that will be what we want to learn from each other. but we expect it to accelerate the growth of both companies because we can use both of our distribution networks. >> yeah, for the first time you get physical retail exposure, right, forever 21 has more than 400 stores in the u.s. >> absolutely. >> how much of that is part of the vision and the growth plan for shein? >> we're always looking at customers, the consumer first, whatever the consumer want, we'll try to give it to them. we want to go deeper, go wider, and broader. >> we'll have much more from sara's interview in the 11:00 a.m. hour. i mean, really interesting stuff, obviously very rare to hear from david simon. in any format, but along with two other ceos for this deal and i think there's a little bit for everyone to like when it comes to these three partners. sara drove home the point with the executives that shein gets this physical exposure

potentially in the form of shop-in shops or otherwise with forever 21 in the united states which is a very, very key market for them. we tauls talk about shein as a chinese company but they almost want to shudder at that notion. they make zero revenue in china. they have manufacturing there, they were started there, they've moved their headquarters to singapore. there's been rumors of an ipo here in the united states. and i think they just want to prove, frankly, to lawmakers, to regulators, that they are a safe bet, that they are sort of a good player in u.s. commerce. and so i think that's what shein gets out of this deal, potentially more than actually the access to the u.s. consumer in a physical store. and then i think forever 21 can learn from them when it comes to making their fashion even faster, and even less expensive. shein manufactures in small batches, so they use on-demand search trends in a way to figure out what someone's searching for, what they want, shein then manufactures that in a small batch. they do so in order to eliminate

waste, and also to test what will work and what won't. and i think that's something that forever 21 would love to learn from. they both get a stake in each other with this partnership deal. >> i think it's really interesting, i'm thinking of one of the dollar tree or dollar general calls this week that argued in a -- when the consumer is suppressed, and, you know, stressed, that a lot of them pay cash. >> yes. >> in a physical location because membership fees are expensive too. >> yes, absolutely. i think that that is something that we need to watch really, really carefully. we've seen credit card delinquencies tick up at macy's and in nordstroms. >> we're going to handle retail earnings. tune in for more of sara's interview today at 11:00 a.m. eastern time. and still to come, the fed chair's speech at jackson hole, we'll bring you live coverage in the next hour. you know doug, ever since switching to workday

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interesting setup as we get into powell here coming off the worst day for the dow since march. worst day for s&p since the beginning of the month, dollar close to a two-month high, yields steady. opening bell coming up in about six minutes. to duckduckgo on all your device

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retail wrapping up a wild week on the earnings front, gap posting mixed results last night, weaker sales forecast as consumers pull back. there is nordstrom moving lower despite the quarterly beat seeing a cautious consumer as well as losses related to threat. this is ceo eric nordstrom. >> losses from theft are at a h historical high, and i'd say we find it unacceptable.

and it needs to be addressed. that being said while unacceptable it is within our plans, we have not seen continuing rising of shrinkage that has exceeded what we've planned. so it's in line with how we lay out this year, but, you know, the drag on earnings just from a financial performance, that needs to come down. >> interesting, nice chart circulated this week, court, looking at what shrink really is. about a third of it is actual external threat, the rest is internal or weak process. >> so much of shrink has been lumped into the idea of theft, it's not necessarily synonymous. theft is part of shrink, but not all shrink is theft. i think that's important to remember. i remember years ago, for instance, when some of the televisions that were being manufactured were much, much thinner than they previous had been, and best buy saw so much

breakage happening, just in the way they were unpacking them, had to learn how to handle that, and that increased their shrink. that had nothing to do with theft but that's an example of another way that that -- >> we saw the guys in the loading bay in 40-year-old virgin, just throwing that stuff around. >> they've got to learn to handle that with a little bit more delicate touch. but i do think that's interesting. and we've seen those fashion grab videos we showed that at nordstrom. obviously, that is concerning. i'm -- i am, for one, just sort of hoping that law enforcement is starting to pay attention to some of this because i don't believe that any one retailer can solve it on their own. i think there have been progress that's been made, lowe's for instance marvin ellison told me this week while shrinkage has been -- at home improvement retailers, they've spent a lot of time to improve the way they do things, enhance security measures and they saw shrink flat this quarter. didn't go away but it did not go back up. he's not going to tell us all the details of what they did.

don't want to tip your hand entirely to the bad guys but there is a lot of question, how much of this is pressuring retail? i understand those questions. but i also think, as consumers, it's hard for us to ignore when you go shopping, the difference measures that you see. >> retail a bit more, in a second, this is opening bell, and the cnbc -- big board, it's the international little league 12-u softball team celebrating its little league softball world series championship, if you watched any of the coverage, absolutely incredible. >> i saw a little bit of it, it was really cool. so happy for them. >> nasdaq -- technology celebrating. decent record at the open. >> long islanders can play ball, i'll say that. >> which exit, mike? >> yeah, you're getting around the mid-40s for -- mentioning retail, perhaps shrink is getting so much attention for

some of the retailers is, there's no room for error in terms of the mature retailers struggling with sales declines. if you talk about in order storm, i look at nordstrom, gap, kohl's, apparel centric retailers they all trade at .2 times sales so that's the valuation, the market is giving them. and the five years before the pandemic it was more than double that valuation, that ratio. and just basically says the market has said this is kind of some semipermanent decline, at least in market share, at least in terms of centrality, where does the market want to go? the kind of category winners like tjx and ross, even things like ulta and tractor supply where it seems like they have been trying to be everything to everybody for 30 years and they're struggling to get there. >> i think it was interesting hearing from richard dixon on the gap call last night who is the new ceo, just two days in so he's not going to tell us too much about his strategy but he has been on the board since

november, he has a good idea what the problems are. he came from matell, obviously as the coo but a co-executive producer of the barbie movie. so i think this is probably why gap did not name him as the ceo until they did. he had to see that through to the box office. he's been on the board since november. it's possible he was identified for some time as the new ceo but he had to see that movie through. i've talked to people that know him they say, he's got a healthy risk curve, he's a visionary, a really good leader, he's competitive, likes to play tennis, for example, he builds a good team around him. he was brought in to the jones apparel group to shake things up, then brought in to matell to do a similar thing and reinvigorate the barbie brand which i do believe he did. gap has sold off precipitously in the last several years, a lot of problems through the pandemic, they did not handle the supply chain well, flew in merchandise, very expensive to do and unfortunately once it got here, nobody wanted to buy that merchandise. there's a lot to fix here, but i'm starting to wonder what the analysts are going to start

evaluating when it comes to him and his ability to affect change there. >> old navy dun banana down 8, old navy down 6 and barbie, by the way, now the highest-grossing film of the year, and in the history of warner brothers. >> kind of amazing. >> which is something else. >> i was going to say, though, with gap, i mean, as a kind of, you know, non-expert in the area, isn't aber com bee doing well selling retro'90s fashion, shouldn't gap be there? >> totally. >> they might have this stuff sitting around. >> i know, that is such a good point, i mean, abercrombie is sellin selling retro'90s fashion, they're not selling the big logo tees, for instance, but the styles, absolutely. and i think that there is some opportunity there, dickson on the call said turnaround of this kind takes some time. it seemed like a plea to investors, be patient with me, but gap trading under 10. >> a&f gets upgraded under

morgan stanley. 51, credible kurnaround, hollister, healthy skepticism. >> and when we had fran horowitz, the ceo on the 11:00 a.m. hour, when she asked her about shrink, she said they're not seeing it, which i find trr interesting. tonally that has to do with the real estate of the stores, located in mall. not sure, but they're not seeing it like other retailers are. >> the other issue that nordstrom brought up is le lynn queensies, now above pre-covid levels could mean higher credit losses in the second half of the fiscal year and next year too. >> that obviously is concerning beyond just what it means to the business and their credit card revenues, but what's interesting is that kohl's didn't point that out and they have a decent credit card business and consumer may be similar to macy's than nordstrom but i do find that concerning, i also think with nordstrom, the nordstrom rack sales did get better, but they're still lower,

and that's obviously s. >> lagging ross and tjx. >> yes, they're off price, and i know that sounds silly but i don't know if the online component of rack makes a big difference from a fundamental standpoint. you can shop nordstrom rack.com fairly extensive product, you cannot do that with tjx and ross stores, they have a small online presence. the customers really like to go into the stores and we know that generally it is more efficient from a cost perspective for a retailer to sell you something from a store than from a website. and about a third -- a little more than a third of nordstrom's total sales do come online. i don't know how that plays into the rack exactly, a curious point. >> we're going to mention, we have the s&p up half a percent, and nvidia is down 1.4%, continuing that downside interday reversal, yesterday stock peaked around 502 and change yesterday, closed just about, you know, around 470 and now it's down 1.5% from this.

not at a major move. not cutting into too much of that gain but it shows you, you may be exhausted the near term demand for the one particular story even as the company delivered on the wildest hopes and dreams, that said, it's not really -- just that it didn't really have a broad coat tails yesterday on the upside. rest of the nasdaq 100 up by .4 of 1%. microsoft a winner, oppenheimer was out with positive comments on microsoft this morning, essentially saying we're early in the cloud story as it becomes perhaps the operating system for a.i., which of course is the aspiration, we'll see if it gets there. >> i love this goldman note this morning, off the desk, i was pinged more times than any other trading day in my 20-year career yesterday, with the same question, why did the most important stock in the world nvidia absolutely crush earnings and close up only ten bips, my reply, dip buyers are already

very full, that points to the positioning we've been talking about. >> rubner on this idea that structurally or mechanically right now, the way the systematic traders are set up is as a bias to sell, especially in dealers bias to sell into index declines, it's just kind of the way the exposures have been set up coming into august, the fact that you did have people kind of gorge on equity risk coming in, and then there was a lot of the options related machinations which he believes is causing a lot of this sort of leaning toward the sell side, i don't know if that's necessarily something that you have to say, well, we extrapolate that out from here through september because that's the market we have. it's still a two-way market to a fair degree, we're still sitting on just barely a 5% decline at the open or actually at yesterday's close from an inter-day basis on the s&p. volatility is not doing much. under 17 on the vix, and some people have attributed that to

also the interday options stuff, but what rubner has basically been saying in part, these kinds of funds that take their cue from how volatile are stocks and bonds and that tells me how much risk i should be taking, they're now net sellers because at least we have seen an uptick in the jumpiness of both markets. we'll see. >> almost every dow component is higher, the only negative one is unh, and not by hutch, that would include disney which of course nine-year closing low, yesterday, you might have seen some of the headlines from the information that amazon's in talks, to be part of an espn partnership direct to consumer offer, could cost between 25, or $35 a month, would expand distribution obviously, maybe even take a minority stake, nike, court, might post a gain at current levels, first time after 11 straight losses. >> yeah, that has been really interesting action there, and, you know, i find it really interesting when we heard from the retailers that sell nike and those wholesale partnerships,

and they actually called out nike as one of their stronger sellers in the quarter. including dick's sporting goods, kohl's, macy's is getting its nike product back but that did not do much to turn around nike. jp morgan's net boss told them nike has told them those relationships while important don't change the trajectory of top line assumptions. the downward pressure is more about what's going on in china, that's a really important market for nike, and obviously those questions still loom about if it can recapture some of those growth prospects, and innovation has been a question. does nike have anything cool when all these other athletic companies, on is hot and viori as athleisure wear. there are some concerns. we'll see if we can break the trend. up three quarters of a percent. >> and also the idea that, you know, foot locker, all this inventory they're going to have to liquidate, and in general the market is not necessarily set up for great pricing, and, you

know, for nike to capitalize on all that, at least short term. >> court brings up china, a lot of discussion today about moves they made there overnight to ease home purchasing rules, make it easy to buy back stock, make it easy to trade domestic stocks by lowering some of the stamp duties there, rallied shanghai rallied for 10, 15 minutes. >> yeah. >> before losing it all. >> yeah, exactly. it's really been kind of a busted market just in terms of trend, i mean i think it's almost to the point where people are saying is it finally getting hated and unloved and untrusted enough again where you might want to take a shot. but market clearly is calling out for something policy wise. some big, you know, persuasive stimulus type move or something that regenerates some enthusiasm for either investing or housing speculation, but it just doesn't seem like it's getting traction. so a different type of market, it's interesting, i mean, as j powell gets ready to talk jackson hole, i doubt he's going to discuss the global picture that much but there is a case to

be made that he can kind of temper any hawkish sentiments he has about rates have to stay higher for longer by saying, look, the long end of the treasury curve is doing work for us, it's restraining the housing market, and we have some delinquencies, upticking, also, china is no longer really annette contributor to the global growth, it's almost doing some of our work for us, it's got deflation there, we'll see if -- how that comes into the mix. i do think it's interesting that the u.s. is turned -- it's been a turn about. we're growing at 6%. china's economy, and economic growth has a percentage of u.s. growth is actually on the decline now. >> to that point, i mean, the theme of the jackson hole summit is the structural changes in the economy. >> yeah. >> and what do you think powell may say to that end? if china's not included in this sort of decoupling that we're going through, it appears. >> the idea of deglobalization, and reindustrialization, maybe that's a big part of it. i also think they're going to be

focused on demographics, and the fact that we have a structurally tight labor market, we have 3.5% unemployment, does that directly feed into inflation the way we thought it did before. make inflation stickier or upside spikes from time to time, so some of that probably in theory could be on the menu. >> speaking of which, as we go to break, keep a close eye on the bond market with the dow up 150 or so, not a lot of data today, although we will get count at 1:00, down nine or ten weeks, on the ten-year, south of 4.25. and the fed chair just about 25 minutes away. don't go anywhere.

we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a goldmine? i don't think they

have a clue. that's crazy! well, not everyone knows coventry's helped thousands of people sell their policies for cash. even term policies. i can't believe they're just sitting up there! sitting on all this cash. if you own a life insurance policy of $100,000 or more, you can sell all or part of it to coventry. even a term policy. for cash, or a combination of cash and coverage, with no future premiums. someone needs to tell them, that they're sitting on a goldmine, and you have no idea! hey, guys! you're sitting on a goldmine! come on, guys! do you hear that? i don't hear anything anymore. find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com.

as we await fed chair powell's speech at jackson hole, here's a look at this week's top performance on the s&p 500. see moderna up more than 10% leading the way, palo alto networks, as well nvidia, and tesla, neck and neck right below, almost 9% gape, and hasbro, josh brown and i will be back for another special edition of taking stock.

be sure to tune in at 6:00 p.m. eastern time, kick around the g ors t wk,hat matters and what's not a big deal for next week as well. "squawk on the street" right back.

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this point i see us staying steady throughout the rest of this year. then we'll see how the data evolves. if we see inflation coming down quicker than we expect. this is what i'm hearing from the soft data i'm getting from my contacts. we might cut sooner rather than later but i think we have to let that play out. >> sooner being the first half of the year? >> we'll see. i can't predict that right now. >> patrick harker yesterday. and former dallas president robert kaplan joins us talking about what we might hear later on. good to have you. i imagine you don't expect the chair to be as declarative as harker was yesterday. >> no, no, i think he's going to try to be neutral, say progress is made, but the job's not done, and keep his options open, be agnostic about what they're going to do next. and there's a bunch of cross currents that are going to create a lot of debate through the fall.

manufacturing's weak. anything interest sensitive is weak. it's hard for small business to get a loan right now. china's weak, as you guys mentioned. however, you've got substantial government spending, inflation reduction act, infrastructure act, unspent resilient, and so these cross currents are going to have to sort through the fall. the other thing that's going on, which i think you also mentioned earlier, is the back-end of the curve rates are backing up. that's a tightening away from the fed. so if i were at the fed i would want to observe that carefully and see how that plays out. it may have further to go. that could be a significant tightening than anything the fed might do. if the fed has a wide range, how can they really be sure they're either restrictive enough or not too restrictiontive to get to

their long-term goals? >> so it's a central question. i know that they're wrestling with, and i would be wrestling with, the tricky part is, without this sizable project spending by the government or government enabled project spend on manufacturing and infrastructure, i would think the neutral rate organically is like 0.75% in the economy. the thing that's tricky, if that's true, why is the economy so strong? but i think there's an x factor which is government spending, which is sort of confusing what -- how much of the neutral rate is organic and how much of it is artificial based on this government spending. i -- that's why i would be -- i would really make sure we had -- i had a good grip on what the forward calendar is for this project spending from inflation reduction act, infrastructure act, and so on, because i think it may make it look like the

neutral rate is a little higher than it actually is. >> robert, that being the case, and also the fact that chair powell has acknowledged that in all likelihood the fed at some point may be cutting rates before inflation is all the way back to its target, what do you think he's going to be able to say about just how the fed is going to be making its decisions? what is its reaction function to incoming numbers in terms of inflation and how are they perceiving the risk over tightening is a possibility? >> so potentially today, but certainly over the next few weeks, you're going to hear more about this subject that courtney asked about, the real neutral rate, and the difference between the nominal fed funds rate and the real fed funds rate and the point is, if they keep rates where they are, for example, for the next number of months, but inflation weakens a little bit, that will actually mean that the

real rate of interest is actually gone up and so they may feel if inflation is improving they have latitude to cut a little bit and still be as restrictive. that will be the kind of thing you're going to hear wrestling with over the next few months. >> robert, i've seen some work looking at the relationship between cpi and pce, what health care is doing versus what shelter might do and arguing that relationship could flip, and i wonder, are we going to be paying attention to one metric more than the other in the quarters ahead? >> i think sitting at the fed i would be looking at everything. you look at all these metrics, and i'm also very conscious of some of these structural drivers, which is the subject of this conference. workforce growth is decelerating due to agi. we don't have enough workers. you're seeing that in wages. we've gone from globalization to deglobalization and not using trade as strategically.

that will show up in the numbers. and the big one is the energy transition which is going to cost trillions globally and very expensive. keep your eye for the next number of months, for example, on energy, because i still think we're three or four years away interest peak energy demand globally for fossil fuels and the energy transaction will take a longer time than maybe some people think, and you may see that feed through and make inflation stickier. >> goldman did work on that this week looking at if we get oil to 100, they argue it could add 0.1 or 0.2 to headline. it's a district you know well. i wonder how much of a threat you think that does pose to headline? >> i think we should be prepared that you could get more spikes in oil prices, and i would, based on everything i see and

talking to contacts, we're under supplied relative to demand globally. we're vulnerable to spikes. the one other structural issue that i would point out, which is sof stating the obvious, we're a lot more leveraged today than we were precovid. i mean the government indebtedness is now over 100% of gdp, and i think the -- that's why this backup in yields in the long end of the treasury curve, i think, is more about supply of treasuries this year and for the next number of years and who is going to buy those treasuries than it is about strength in the economy and i think that's a structural development that's worth watching closely. >> robert, a couple years ago, a few years ago, jay powell at jackson hole gave a speech that gave a lot of credit, reminded us of alan greenspan in the '90s, willingness to allow the productivity growth of the economy to essentially help him set monetary policy and sort of

give the economy more room to grow faster than maybe it otherwise would have. is that relevant right now? we are talking about a.i. what it's going to mean for the potential of productivity growth? >> yeah. it's relevant. and you would like to believe, and i would like to believe, that a.i. and technology will lead to more productivity. we've got slowing workforce growth. we need more productivity. our educational attainment needs to be improved in that early childhood literacy scores, our educational attainment scores are lagging the rest of the world and post-covid they've deteriorated a little bit more. if we're going to take advantage of this a.i. revolution, we need to be focused a lot more on improving educational attainment. productivity improvement would help with better gdp growth and also with fighting inflation. >> robert, thanks to you on an important day. really appreciate it. good to see you. >> good to talk with you. >> thanks so much. when we come back, the moment of

truth. fed chair powell speech at jackson hole. we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a goldmine? i don't think they have a clue. that's crazy! well, not everyone knows coventry's helped thousands of people sell their policies for cash. even term policies. i can't believe they're just sitting up there! sitting on all this cash. if you own a life insurance policy of $100,000 or more, you can sell all or part of it to coventry. even a term policy. for cash, or a combination of cash and coverage, with no future premiums. someone needs to

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good friday morning. i'm carl quintanilla with courtney regan and mike santoli live at post nine of the new york stock exchange. sara and david have the morning off. moments away from the potentially market moving speech from the fed chair at jackson hole. investors expecting his latest read on the economy, inflation, and rates. pretty solid open otherwise. just south of 4400. all sectors are green. kind of setup you want to see going into the speech? >> pretty much. 4.25 on the 10-year. it's not as if it's coming from relief. we're taking back the late day sell-off as the market kind of buckled on no news late in the day yesterday. >> we'll watch it. obviously, just a couple moments away. meantime jpmorgan asset management global strategist david kelly here at post nine to talk about what you expect? >> yeah. i'm expecting a very balanced message. markets went into this thinking there's a 50-50 shot of one more rate hike before the end of the

year, and i don't think he wants to change expectations. i think he wants to do is leave the options open for the committee when they meet in september. he can take a little bit of a victory lap because the truth is, we've seen lower inflation and stronger growth than we expected a year ago and the real question is, are they going to try to press their luck here doing one more rate hike in an economy which is already meeting their goals? >> that's what i'm wondering. what's the bigger risk, staying steady, hiking when we don't need it yet? >> oh, definitely the bigger risk is hiking again. we don't know how long the lags play out. we know that there's every reason to believe inflation is coming down more. with the economy softening, those are lousy pmi numbers for the global economy but also new car prices haven't moved at all since the start of the year. they're falling. rents haven't moved since the start of the year. we're going to be in the low 3s

for inflation at the end of this year, and at 2 bit end of next year which they don't really believe right now, but i think that's on the cards and they don't need to push their luck here. >> david, what should we assume about the trajectory and pace of this economy? it's this late cycle acceleration phase. the market seems not quite to know what to do with it. if rates are going up for good reasons that's okay, but maybe it's going to be the making of its own demise. >> what we've got is we've still got the lagged effects of the pandemic, particularly 9.5 million job openings. that is giving the economy a recession immunity. it's almost impossible to go into recession when you have that many people trying to hire. that's keeping the unemployment rate low as inflation comes down. this is a bad time to try to figure out the long-term behavior of the economy. we're in a weird position here. >> just got umish we'll talk about those numbers in a moment. let's get to our steve liesman in jackson hole moments ahead of the fed chair.

hey, steve. >> fed chair is starting right now, going to be i would say mostly hawkish saying that fed is prepared to raise rates further if appropriate and holds follows restrictive level until we're confident it's moving down. the fed's job to bring down inflation, quote, we will do so, although he says inflation has moved down, it remains too high and says we are in a position to proceed carefully in assessing coming data as it's evolving. . he expresses doubt about recent decline in inflation, says even with more favorable inflation numbers, the process still has a long way to go. two months of good data are only the beginning. goes on to say he's concerned inflation is to -- sorry, the economy may be too strong right now. listen to the fed chair. >> i would conclude with a summary of what this means for policy. given how far we have come at upcoming meetings, we are in a position to proceed carefully as we assess the incoming data and

evolving outlook and risks. the ongoing episode of high inflation initially emerged from a collision between very strong demand and pandemic constrained supply. by the time the fomc raised the policy rate in march 2022, it was clear that bringing down inflation would depend on both the unwinding of the unprecedented pandemic-related supply and demand distortions and on our tightening of monetary policy which would slow the growth of aggregate demand allowing supply time to catch up. while these two forces are now working together to bring down inflation, the process still has a long way to go, even with the more favorable recent readings. on a 12-month basis u.s. totally or headline pce inflation peaked at 7% in june 2022, and declined to 3.3% as of july. following a trajectory roughly

in line with global trends. the effects of russia's war against ukraine have been a primary driver of the changes in headline inflation around the world since early 2022. headline inflation is what households and businesses experience most directly, so this decline is very good news. but food and energy prices are influenced by global factors that remain volatile, and can provide a misleading signal of where inflation is headed and in my remaining comments i will focus on core pce inflation which omits the food and energy components. on a 12 month basis core pce inflation peaked at 5.4% in february 2022, and declined gradually to 4.3% in july. the lower monthly readings for core inflation in june and july were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward

our goal. we can't yet know the extent to which these lower readings will continue, or where underlying inflation will settle over coming quarters. 12-month core inflation is elevated and there is substantial further ground to cover to get back to price stability. to understand the factors that will likely drive further progress, it is useful to separately examine the three broad components of core pce inflation. inflation for goods, for housing services, and for all other services sometimes referred to as non-housing services. core goods inflation has fallen sharply, particularly for durable goods, as both tighter monetary policy and the slow unwinding of supply and demand dislocations are bringing it down. the motor vehicle sector provides a good illustration. earlier in the pandemic demand for vehicles rose sharply, supported by low interests, fiscal transfers, curtailed

spending on in person services and shifts in preference away from using public transportation and from living in cities. but because of a shortage of semiconductors, equal supply actually fell. vehicle prices spiked and a large pool of pent up demand emerged. as the pandemic, and its effects have waned, production in inventories have grown and supply has improved. at the same time, higher interests have weighed on demand. inte interest rates on auto loans have nearly doubled since last year and customers report feeling the effects of higher rates on affordability. motor vehicle inflation has declined sharply because of the combined effects of the supply and demand factors. similar dynamics are playing out for core goods inflation overall, as they do, the effects of monetary restraint should show through more fully over

time. core goods prices fell the last two months, but on a 12-month basis core goods inflation remains well above its prepandemic level, sustained progress is needed and restrictive monetary policy is called for to achieve that progress. in the highly interest sensitive housing sector, the effects of monetary policy became apparent soon after liftoff. mortgage rates doubled over the course of 2022, causing housing starts and sales to fall, and house price growth to plummet. growth in market rents soon peaked and then steadily declined. measured housing services inflation lagged these changes, as is typical, but has recently begun to fall. this inflation metric reflects rents paid by all tenants, as well as system of the equivalent rents that could be earned from homes that are owner occupied. because leases turn over slowly, it takes time for a decline in market rent gross to work its

way into the overall inflation measure. the market rent slowdown has only recently begun to show through to that measure. the slowing growth in rents for new leases over roughly the past year can be thought of as in the pipeline, and will affect measured housing services inflation over the coming year. going forward, if market rent growth settles near prepandemic levels, housing services inflation should decline towards its prepandemic level as well. and we will continue to watch the market rent data closely for a signal of the upside and downside risks to housing services inflation. the final category non-housing services accounts for over half of the core pce index and includes a broad range of services such as health care, food services, transportation, and accommodations. 12-month inflation in this sector has moved sideways since liftoff. inflation measured over the past three and six months has

declined, however, which is encouraging. part of the reason for the modest decline of noun nonhousing services inflation so far is many of these services were less affected by global supply chain bottlenecks and generally thought to be less interest sensitive than other sectors such as housing or durable goods. production of these services is also relatively labor intensive and the labor market remains tight. given the size of this sector, some further progress here will be essential in restoring price stability. over time, restrictive monetary policy will help bring aggregate supply and demand back into better balance, reducing inflationary pressures in this key sector. turning then to the outlook, although further unwinding of pandemic-related distortions should continue to put some downward pressure on inflation, restrictive monetary policy will likely play an increasingly important role. getting inflation sustainedbly

back down to 2% is expected to require a period of below trend economic growth, as well as some softening in labor market conditions. restrictive monetary policy has tightened financial conditions, supporting the expectation of below trend growth. since last year's symposium, the two-year real yield is up about 250 basis points, and the longer term real yields are higher as well, by nearly 150 basis points. beyond changes in interest rates, bank lending standards have tightened and loan growth has slowed sharply. such a tightening of broad financial conditions typically contributes to a slowing in the growth of economic activity, and there is evidence of that in this cycle as well. for example, growth in industrial production has slowed and the amount spent on residential investment has declined in each of the past five quarters. but we are attentive to signs that economy may not be cooling

as expected, so far this year, gdp growth has come in above expectations and above its longer run trend, and recent readings on consumer spending have been especially robust. in addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking back up. additional evidence of persistently above trend growth could put further progress on inflation at risk, and could warrant further tightening of monetary policy. the rebalancing of the labor market has continued over the past year, but remains incomplete. labor supply has improved, driven by stronger participation among workers aged 25 to 54 and by an increase in immigration back toward prepandemic levels. indeed, the labor force participation of women the their prime working years reached an all-time high in june. demand for labor has moderated as well. job openings remain high, but

are trending lower. payroll job growth has slowed significantly. total hours worked has been flat over the past six months, and the average workweek has declined to the lower end of its prepandemic range, reflecting a gradual normalization in labor market conditions. this rebalancing has eased wage pressures, wage growth across a range of measures continues to slow, albeit gradually. while nominal wage growth must ultimately slow to a rate that is consistent with 2% inflation, what matters for households is real wage growth, even as nominal wage growth has slowed, real wage growth has been increasing, as inflation has fallen. we expect this labor market rebalancing to continue. evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response. turning to the path forward, 2%

is and will remain our inflation target. we are committed to achieving and sustaining substantive monetary policy that is restrictive to bring inflation down to that level over time. it is challenging, of course, to know in real time when such a stance has been achieved. there are some challenges that are common to all tightening cycles. for example, real interest rates are now positive and well above mainstream estimates of the neutral policy rate. we see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring and inflation. but we cannot identify with certainty the neutral rate of interest, and thus, there is always uncertainty about the precise level of monetary policy restraint. that assessment is further complicated by an uncertainty of the duration of the lags which with monetary tightening effects economic activity and especially inflation. since the symposium a year ago

the committee has raised the policy rate by 300 basis points, including 100 basis points over the past seven months and substantially reduced the size of our securities holdings. the wide range of estimates of these lags suggests that there may be significant further drag in the pipeline. beyond these traditional sources of policy uncertainty, supply and demand dislocations of the cycle raise further complications through their effects on labor market dynamics. for example, so far, job openings have declined substantially without increasing unemployment. a highly welcomed, but historically unusual result that appears to reflect large excess demand for labor. in addition, there is evidence that inflation has become more responsive to labor market tightness than was the case in recent decades. these changing dynamics may or may not persist, and this uncertainty underscores the need for agile policy making.

these uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much, against the risk of tightening too little. doing too little could allow the above target -- could allow above target inflation to become entrenched and ultimately require monetary policy to ring more persistent inflation from the economy at a high cost to employment. doing too much could also do unnecessary harm to the economy. as is often the case, we are navigating by the stars under cloudy skies. in such circumstances, risk management considerations are critical. at upcoming meetings we will assess our progress based on the totality of the data and the evolving outlook and risks. based on this assessment, we will proceed carefully, as we decide whether to tighten further or instead, to hold the policy rate constant and await further data. restoring price stability is

essential to achieving both sides of our dual mandate. we will need price stability to achieve a sustained period of strong labor market conditions that benefit all. and we will keep at it until the job is done. thank you. >> that is the fed chair finishing up his speech at jackson hole, prepared to do more, but will proceed carefully if we do. no change to the target. two months of cooled data, only the beginning of what it will take to build confidence. market is fairly constructive on it. nasdaq up more than 1%. steve liesman, bob pisani here to break it down. your thoughts? >> i thought he was relatively hawkish, though he could have been more so. i think he doesn't necessarily have be an itchy finger to hike, but he kind of put us on notice if a couple several things, including one new one, moved the wrong way, he would be prepared to do so. that new thing is talking about

the economy potentially running hotter than expected. he says if that persists, that could be a reason to hike. if the labor market doesn't cool down, that could be a reason to hike. he threw cold water on the recent inflation progress saying it was not enough. only two months. we can't be sure it's not going to go away. there were a few things in there for the doves about some of the progress on inflation, some of the easing in the labor market, but you'll notice a couple things he didn't say. he didn't say the word cuts. that's not in the forecast. the choices he faces are to hike more or essentially to stay on hold at a restrictive level. also didn't say, and david kelly mentioned this before he spoke, and i thought i might hear this, didn't talk about risk being balanced. maybe he sort of talked about a world in which risks are more balanced than they were, but he didn't use that phrase explicitly. i would say he's definitively on hold, but kind of leaning towards a hawkish stance if the data does not it continue to break the way it's been

breaking. >> didn't use the word pain either. would you agree it's a net hawkish speech? >> i think the -- he's reading of core services inflation ex-housing is interesting. the lag effect of higher vehicle prices which have pushed up auto insurance, auto repair and auto leases, and a big chunk of it is that. it's not really higher wages. and so i think he's just misreading this. he has this idea that high wage growth is actually going to cause inflation to be persistent and all our modeling says that's not what's going on here. it's interesting, but they can hopefully wait and see to see how that plays out. >> he also acknowledges, though, that's the part of inflation that doesn't or the economy that doesn't seem to be particularly sensitive to changes in interest rates in the short term. >> well that's true, and actually not very much of the economy is sensitive to interest rates at all. basically it's let's crush the housing sector one more time. also on the housing sector, talking about its resilience, yeah, but we've had an enormous

backup in mortgage rates the last few months. i don't know if the housing sector is hanging in there at 6, going to hang in there at 7.25. it's premature to say it was okay. it was a hawkish speech. >> jeelz are falling, markets fell and then recovered. what do you make of the market's assessment of powell here? >> well, i agree with steve's point. this is moderately hawkish, but not as hawkish as a lot thought. sentiment shifted a week or so ago on the strong economic data that powell was going to come out swinging like last year. remember what happened last year. we went straight down after his speech, almost 20% from the end of august to the middle of october, almost 20%. it was quite breathtaking. i don't think you're going to see that this time. the stuff we expected is here. getting inflation to 2% we're expecting to see below trend economic growth and below trend jobs growth. evidence of persistbly above trend growth could warrant higher rates. well, i have news for you,

that's what market did this month. that's exactly what happened. the market anticipated stronger growth, rates went up, and growth sensitive sectors like technology, went down. the market read this correctly. powell's speech here was sort of right in the middle. i wouldn't -- i would say moderately hawkish and better than some expected. rates are down and the s&p moving up right now. thank goodness we're past this vacuum. we're going to get into september where they will be real news, pce next week, jobs report, stocks are not cheap, but they're also, you know, it's -- this is a pretty garden variety correction right now. the market is anticipating this soft landing, and i think the risk is actually the growth is either too strong or much weaker than anticipated right now, and this economic data will be interesting in the next week or so. i want to see that pce number.

>> just on the pce number, did he release that pce number? seriously. he didn't say these were the fed's estimates of next week's numbers. these are the numbers. i think everyone is going to be looking at this closely to see, did we get an advanced copy of this? he reported a number that hasn't been reported. >> those guys aren't crunching on deadline? they have them a week in advance >> crystal ball as opposed to -- >> we'll find out in less than a week. steve, as you suggested, he did not want to get really in the weeds with trying to estimate what the neutral rate of inflation -- of interest rates are and therefore how restrictive the economy is, but he says, it's restrictive, maybe not sufficient yet. we have to wait and see. i like the way the market trades it. 1-year treasury yield are 5.4 in the current fed funds range. if the market is saying we're

kind of here, it doesn't seem as if the market needs to be talked aggressively off the idea that hikes, that cuts are coming. this is an argument you and i have had. how much is the stock market banking on future cuts or like we don't know what's going to happen past a few months? >> i argue with santelli and discuss things with you. want to be clear about that. a couple things on that. the first thing is that if the -- one of the interesting things to me here was powell reiterating this idea that if the economy needs to cool in order for inflation come down, that was something he said last year, something that hasn't happened over the next year, so if you want to be a trader out there or investor thinking about rate cuts, i think powell's kind of laying down a plmetric here r you that says we need to be below trend for a while. for me as a policy maker to have

confidence that inflation is really vanquished here. and before you get -- i'll argue with you a little bit -- too excited about the market reaction today i would take bob pisani's comments, advisely here, noting how far the market came in coming up to this level and reacting already to the strong growth and anticipating the fed reaction function here when it came to these higher growth rates. he did throw it out there as an issue that growth run too long high is an issue for the federal reserve. they have to address. he didn't mention higher interest rates which kind of suggests to you, at this point, he's not uncomfortable with what happened to rates. the market anticipated this in a good way. i think that they correctly assumed how powell would react to this. so there's no reprising necessary at least today either on the cut side of 2024, or in the hike side for 2023 when it comes to be 50-50 for the november meeting. >> i was struck, steve, by his

comment that there may be further drag from past hikes kind of reminded me of what harker told you yesterday, and kind of what david is saying right now. >> yeah. it is a big debate here inside the room. i will tell you this, in the hallways yesterday, the issue of drags, and it may be that what we're seeing now is the effect of what we were waiting for, which is now that rates are higher, these are the drags we're going to be getting. we haven't seen much in the way of explicit drags from bank credit tightening. that may be yet to come. now that these mortgage rates are so high it may end up cooling the job market. interesting to me is what's happening in the belly of the curve in the 3 to 7-year tenor of the treasury market where there is the place where businesses do business and i think in a place where you're going to have a bit more of that monetary policy drag than we've had in the past. >> david, he made a comment about inflation being more

reactive to labor market dynamics than it had been previously and we're looking at wage inflation, but is that just a catch up? is that actually productivity? what do you make of the comments in the labor market? >> i think that's not proven at all. because as i say, the big decline that we've seen in inflation over the last year, you know, we've had wage growth come down a bit, but it doesn't account for that. even in core services, ex-housing, we think the stickiness has everything to do with auto prices and the lag effect of that rather than wages. i think labor market dynamics, why don't we admit we don't know where it is. it's an important point because the fed says we have to loosen labor market conditions to fix this. that means we have a 3.5% unemployment rate. the fed says by the end of next year it will be 4.5%. that's 1.7 million people who will have to lose their jobs to get to 2% inflation. >> you sound like elizabeth warren. >> it could well be that the neutral rate of unemployment 3 is.5% not 4%, which case leave

it, may it out. >> i was mentioning the '90s before. we thought it was like 4.5 to 5 back then was the floor. >> this is not an inflation prone economy. the long-term structure they're going to talk about long-term structural changes in the economy, but the long-term structural changes in the economy push inflation down. it's more competitive than it used to be and unnull in terms of income distribution which pushsz wages down. you're not going to get a huge union movement pushing up wages even though you have occasional strikes. see what 3.5% unemployment does. if we can avoid a recession at 3.5% unemployment to get inflation down to 2 isn't that a win? why snatch defeat from the jaws of victory. >> i like that. >> steve, what's to come? goolsbee later today? >> we have goalsby and then the papers about debt and supply

chains have changed over time. david's point is an interesting one about whether there's a long run bent for lower inflation in this country. i'm personally interested in the question of whether or not china's going to be exporting deep disney d-- deep disinflatin and the idea on that. i will report in the hallways with the folks and this idea don't throw things at me, you guys, i think ultimately inflation may end up having been transitory to a large extent, except that it wasn't on the timetable that body required it to be, and i think people got frustrated with it. over time, the supply chain issues have been resolving themselves. you're into a goods disinflation regime right now. you may get more of that coming from china. and the other issue is that china was on a different schedule. china ended its lockdown this year and everybody got covid in

china and maybe china assupply for the globe is coming back online. they have to get their act together economically, but i think that there could be some better news to come in inflation. though it's not going to be a straight line. this issue of whether or not a lot of it ended up being transitory and the idea that the fed doesn't necessarily have to either go much higher or could think about cutting in the first half of next year if inflation falls further is something that might be a surprise for next year. >> yeah. s&p settling back in the meantime to steve's point about the market pricing the speech efficiently. amazing if we went out on the day up changed. steve, bob, david, thanks so much for your time. still to come the latest read on rates and where we go from here. we'll check in with veteran art cainn montsh ia me. we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a

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here's your cnbc news update at this hour. the kremlin is denying it had anything to do with the plane crash that killed wagner mercenary leader yevgeny prigozhin. putin's spokesperson called the suggestion that russian president ordered an assassination a, quote, absolute lie. the new study reports the diabetes and weight loss drug wegovy produces the largest benefit seen for patients suffering from the most common form of heart failure. the study funded by novo nordisk and appears in today's "new england journal of medicine." warner brothers is pushing the release of dune part 2 from november to march. the studio says the delay is because the stars can't promote the movie during the actor's strike. the first installment came out in 2021 during the pandemic and made more than $400 million at the global box office. back over to you. >> julia, thank you very much. the market giving up the gains. the dow is negative by 4 points.

s&p up 3. jackson hole, the fed chair speech moments ago talking about the possibility of further tightening. >> we are attentive to signs the economy may not be cooling as expected, so far this year, gdp growth has come in above expectations and above its longer trend. repeat readings on consumer spending have been especially robust. in addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking bab up. >> watch the 10-year today. 4.26. the dollar had a good morning as well. on the news line this morning, art cashin joining us of ubs. i think the line this morning is navigating under the stars under cloudy skies, nice touch by the

fed chair. >> i kacame across with the sam call. it was perfect. he didn't say his compass was broke, but he did say it's a tough time navigating and didn't want anybody to pick up it too strongly. so we are left looking at that yield on the 10-year which has become all important. we get down below 4.22 and we might get some bids coming into the stock market. we get back up around the 4.35 area. that will bring out some caution. so it's all about what that yield will be and how we react to what the fed chair said. you're right, he basically said, i'm not exactly sure where we are, but i'm trying to navigate in a very cloudy night.

>> now, art, i believe the last time you were on, you were talking about the s&p's levels and where we were testing. roughly between 4,440 and 4535. we're sitting at about 4380. what do you make of that in reaction to powell? >> again, the market is being cautious and taking its own pulse, and its own temperature. on the s&p, i would watch to see if they get resistance on any rally attempt to get above the 4400 level. there does seem to be mild resistance there. i would say if there's -- if i have only one instrument to look at it's the yield on the 10-year and i think that will dictate where things are going. >> yeah. that's 4.26 as we speak. it is symmetrical. you get the pressure from higher

yields and bonds back off. cloudy vision or confusion or ambivalence at this point in the cycle, i guess what's to be expected, right? you get somewhere in the zone of where a short-term rates probably have to be, and then it becomes a bit of a judgment call very contingent on the data. do you think we're in the mode of rooting for weaker wage growth or deceleration in the economy? is that what the stock market is going wish for? >> well, you know, he talked about the wage growth and made it to not be as big a threat as many of us had thought it was, and therefore, he intimated the economy might be inching along. steve liesman's point is well taken. well, he wouldn't dare use the word again. it became an albatross. he did hint that transitory effect of inflation was beginning to show up, that supply chain backups are coming

down, and things are getting in order. he wanted carefully not to say mission accomplished. he wanted that banner to read work in progress. and that's what he wants us to know. we're not finished yet. we're not sure yet. the skies are cloudy. don't ask me for an absolutely clear-cut. i'm steering as well as i can. so i will use that yield on the 10-year as my guide to see how the people who do this for a living are interpreting every verb or noun he puts out. >> while i have you, would you characterize nvidia's trade yesterday as a stumble for the bulls or not? >> not a major one, but if you look at the market overall, it was somewhat of a classic outside reversal, and it's something that we old folks, people who have been around for

a couple decades, take with caution because up until then, they were cruising along pretty well. and that not -- not an emergency, but certainly the check engine light is on. i would watch out. >> yeah. art, appreciate that. such a busy morning. glad we got to check in with you. art cashin. >> my pleasure. >> let's continue the conversation with point 72 asset management chief economist dean maki who says real gdp growth remains robust here, as the chair acknowledged as well, dean. what was your main takeaway of powell's message, i guess, relative to what you were expecting? >> it was largely as we expected. there was speculation he was going to take a strong deal [ inaudible ] that seemed unlikely to us. the new thing relative to the past was his concern about growth and the labor market

perhaps being too strong. he hasn't really said that directly before, so to me, that was the new things that he introduced. >> and that being the case, does it leave investors very acutely watching for signs of deceleration in the economy? i just asked art cashin. might be the thing now to determine where we're headed. importantly, he didn't want to tip his hand about the coming couple meetings? >> yeah. powell would prefer to be done now and hopes that they are, and i think the real determinant of that is going to be core inflation. if core inflation keeps coming down, then i think they'll live with the stronger growth that's coming through. if it does stop falling, then they're going to be very concerned if growth stays strong. >> and though that in general gdp growth is tracking this quarter to be well ahead of most estimates, maybe well ahead of

what it's going to end up as, but can this economy handle, can it absorb this level of longer term interests, what the mortgage rates are doing in response and a little bit of erosion around the edges of the consumer credit picture? >> i do think this economy is pretty robust right now. consumer balance sheets on net are quite strong, and the housing hit to new housing construction, the bulk of that has already occurred. so i think that we're in a pretty strong growth environment right now, something like 2% growth over the next year is what we're expecting. >> dean, i was struck that he didn't spend a whole lot of it time talking about the u.s. consumer, when that is such an important part of gdp and we've been trying to decide we think the consumer is resilient or pulling back, seeing as it seems like we're having a little bit of mixed messages based on what we're seeing in the data and what executives are telling us about looking forward. >> yeah. i think there's a couple things going on there.

i think on balance, consumer spending is quite strong. but there's things happening that make it unclear at an individual retail level that that's true. for example, the -- we're having a goods to services shift right now. so sellers of goods are having a harder time than sellers of services. plus, internet sales are taking a huge share from in store retailers still, so that's another reason why some of the department stores are not seeing very good sales, even though overall consumer spending growth is quite strong. >> yeah. absolutely seems like that part of the cycle would have a lot of bifurcation depending on incomes and the type of store we're talking about. appreciate the time today. >> thank you. still ahead, cracks in the hougz market beginning to show and rates and yields it continue to rise. more with one economist who says the fed's overdoing it. after a icquk break. stick with us. we'll be right back.

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. the slowing growth in rents for new leases over roughly the past year can be thought of as in the pipeline. and will affect measured housing services over the coming year. if market rent growth settles near prepandemic levels, housing services inflation should decline toward it's prepandemic level as well and we will continue to watch the market rent daughta for a signal to upe and downside risk to housing inflation. >> our next guest says while the housing recession is over the fed is overdoing it with rate hikes. joining us chief economist lawrence yun. thank you for being here. listening to powell this hour he had a number of points he made about housing and said that housing sector is showing signs of picking back up, but you think we might be at peak home ownership right now. what are your thoughts? are you disagreeing with the chair? >> if the interest rates

continue to rise, we are going to leave out many renters from converting into ownership. it has become a major challenge, because of the rising interest rate, limited inventory condition, that home ownership opportunities for the younger generation will become increasingly difficult, which is the reason, i'm grad the fed is acknowledging that rent should subside, which means that the overall cpi growth by december will easily be 2% or under, given those conditions the fed should clearly make a signal that they will stop raising interest rates so it will provide some opportunity for renters to seek out ownership in the future. >> i can understand, obviously, mortgage rates sitting above 7% on average, the highest levels we've seen since 2001 are restrictive but so is the supply. what are you seeing right now with regards to inventory levels? >> back in 2019, one complaint that we have heard from realtors

was lack of supply. back then, we had 2 million homes on the market. today, it is half that level. only 1.1 million homes available in the marketplace, so that is limiting the inventory choices, multiple offers still happening, classically, we are seeing prices beginning to rise again. the west region is very interesting. it saw a meaningful price decline early part of the year, but as soon as people saw price decline, they viewed it as a second chance opportunity and in turn, now prices in the west region are beginning to rise again. so there is clearly a solid demand out there. the question is, whether the buyers will be permitted to enter the marketplace with the high interest rate environment, but if the interest rate begins to slide down, we will have more buyers returning to the market, but also, pent up sellers, many refusing to give up their 3%

mortgage rate for 7%, they will begin to consider selling interest rates were lower, 6% or lower, we will see an increase of supply, increase inventory coming to the market. >> obviously, it's a huge spread between the current prevailing mortgage rate and the average rate that people are holding right now who have been in their house a while. who knows what the ehas it tisty of that is in terms of sellers coming to market, but you see the industry becoming creative here. new home builders are trying to buy down mortgage rates. it becomes expensive but they're doing it. we see a program from zillow, home loans offering 1% down payment in certain markets. what do you make of this? is this something that could have an impact or just a little bit of creativity around the edges? >> well clearly the industry is so fiercely competitive, everyone coming up with their own business plans and, i mean, the great thing about the

preentpfree enterprise that america is offering, many will try different business models for what works for the consumers and works to still get profitability in the future, so there will be many business models. i'm glad the home builders are wrapping up production. new home construction will actually exceed this year. the figures will exceed this year compared to last year, because builders are ramping up production. that is only small market share. currently only 15% of total sales, so we need more inventory. >> lawrence, i keep reading about the danger of over supply in multi family in certain parts of the country where there's been a lot of migration inflow, southeast, maybe austin arguably. does that make sense to you? >> the job growth has been strongest in the southeastern states, florida, georgia, carolinas, and also into texas. very strong. so the apartment construction has been rampant. 40-year highs.

that is why with so much empty units coming on to the market maybe there will be a temporary over supply, but i think long term, it will easily be occupied. also the 40-year high in multifamily construction means that rents will continue to subside. the logic is there. cpi growth cpi growth will easily be under 2% by december. there's no reason the fed should be considering raising interest rates. >> lawrence, before we let you go here, i see in your notes you're talking about home prices rising again, but as interest rates stay high or potentially go higher, is there any chance we'll actually see some housing prices fall? >> what we're going to have is buyers will pull back and sellers will pull back so we'll have limited inventory. higher interest rate if it was to create a job-cutting recession, remember, the fed was late in trying to contain inflation, if the fed overdoes it, it may create a job-cutting recession and that could lead to price declines. >> thank you for joining us.

national association of realtors chief economist. >> thank you. we're not done with the fed speak by a long shot. cleveland fed president loretta mester with her take on the speech from jackson hole. she joins us in ten minutes. stay with us.

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fed chair powell warning there could be further tightening ahead depending on the data. let's get to dom chu with some of the key names to watch here. >> we've seen a lot of the momentum come out of the markets right now. it's true for some of the more interest rate sensitive sectors and industries out there. let's get you the current state of play on some of those out there, like utilities. we are seeing gains across the board. fractionally speaking. trending towards the lower end of the trading range we've seen today. nextera, southern, duke energy, fractional lower. elsewhere with consumer staples, many of those big dividend payers, altria, philip morris, kraft heinz, losing a little steam now. those real estate investment trust, interest rate sensitive, simon property, crown castle, boston properties, healthpeak, towards the red side of things.

keep an eye on real estate. elsewhere in the markets as we check out more interest rate prone stocks, check out the banks in the red. jpmorgan chase, bank of america, wells fargo, u.s. bank. also these days technology, you have to look at them as more interest rate sensitive as well, given the valuation concerns. apple, microsoft, alphabet, nvidia tilting to the red. more outsized losses in nvidia. now down 3% off well from where we were from the highs we saw post-earnings. some of the big etfs thematically speaking we look at towards maybe some of the valuation concerns and interest rate sensitivity. the vanek vector semiconductor down 1.5%. software slightly positive right now. the global x cloud etf down 1%. global x robotics, down 0.75%. and the ark innovation down

two-thirds of 1%. i'll send things back to you. >> appreciate that. we are awaiting results on the strike authorization vote at the uaw. phil lebeau has news. >> we have the results. no surprise here, overwhelming majority of the rank and file members of the united autoworkers, approximately 150,000 between gm, ford and stelantis they have voted and overwhelmingly they have authorized their leadership to call for a strike if they deem it is the right move when the contract expires on september 14th. the breakdown on the vote among the three automakers, 98% of uaw members at ford authorized to strike. 96% authorized to strike at general motors if the leadership calls for it and 95% at stellantis. that was the expectation of

everybody in the auto industry, even those at the automakers didn't think it would be fewer than 95% of the uaw members who would call for -- or approve a strike if needed. so, that is where we stand. again, this is just a strike authorization vote. doesn't mean there's going to be a strike, just gives them authorization to say we are calling for a strike if there's no contract reached on september 14th. guys, back to you. >> phil, appreciate that. phil lebeau on uaw. looking forward to you and josh at 6:00 p.m. eastern. >> once more. >> any tidbits, any teases? >> going to be some game show props as we do. we're going to actually rank an analyst favorite to least favorite stocks. we're going to force him to make that call on fintech. >> it is the best way to end the week. >> or short the weekend, as i like to say. akg t feels that way. "tinstock" 6:00 p.m. eastern. let innovation refunds help with your erc tax refund

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helping businesses both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward. pnc bank. good morning. i'm carl quintanilla with courtney reagan, post 9 of the new york stock exchange. as powell says, inflation is too high and more hikes could be necessary. we'll talk to cleveland fed pres