♪ this is "nighrey business rt" with bill griffeth and sue herera. ♪ stocks tank. the dow falls 800 points, it's worst day of the year as the bond market flashed an ominous sign and fearsf a worldwide economic slowdown took hold. we'll explain what it means, why it happened and what it all could mean for your investments and your money. we have those stories and much more tonight on "nighory business r for wednesday, august th. and we do bid you a good evening, everybody, and welcome. this says all right here. as sue said, it was the worst day of the year for the dow average.ustrial it was ugly before the opening bell as investors remained on edge about slowing global growth

after new reports out of china showed the world's secon largest economy is hurting and a separate report showed that germany isn't doing much better. that set thetone. then our bond market gave the loudest signal of all, yields inverted. that means that shorter term treasuries paid out more than longer term treasuries, and that doesn't happen very often. but when it does, it has been a good predictor of recessions. ulledthere investors money out of stocks today with the dow plummeting 800 points, it was the low of the day at 25,479. the nasdaq dropped by 242, the s&p fell by 85. technical.of this is we know a lot of it is complex, but we're going to do our best to try to explain it and describe how it could impact you. we begin with the market sell-off and bob pisani at the new york stock exchan >> reporter: the stock market is getting punched in the gut from all angles, including the bond market, which is now flashing

warning signs of a possible recession. as it concerns yesterday's tariffs delays maybe isn't the secret sauce i that wirove the markets after all, but the immediate driver of today's weakness was more signs of a global slowdown. overnight china released its industrial production figures for july, which showed industrial output in the world's second largest economy slowed to its weakest groh in 17 years, and germany's second quarter gdp shh rank as well, meaning europe's largest economy is on the verge of falling into recession. growth in the eurozone all slowed down significantly from the first quarter. now, naturally economically sensitive cyclical stocks like financia, retail, energy and tech led the markets lower. banks got beaten up from pressure on bond yields and falling crude prices weighed on energy names like chevron and apache. really everything sold off except for goldnd utilities and a handful of consur staple

stock. energy stocks dropped to bear market levels meaning down 20% or more from their recent highs. it has been a tough day all nd ar where is the bottom? some are looking to the 200-day moving avera for the s&p 500 for short-term support. it is still a ways away from today's close ofis840. i'm bobi at the new york stock exchange for "nightly business report." bob menoned the weak report out of china that schws how f a toll the trade war is taking on the chinese economy. let's go to eunice yoon in beijing. >> reporter: the tariff dispute is squeezing the economy here. the july industrial output came in athe worst lev in 17 years, retail sales sank, hit by weaker auto purchases. the statistics bureau says the economy is facing pressure. as for the presidentar asf

reprieve, the interesting part is that beijing didn't officially respond the state news agency reported on the phone conversation between the titegotiators but only said that china lodged its opposition to the tariffs that will kick in september 1st, which suggests that china doesn't see the move as particularly meaningful. i spoke with suppliers who sell nt the united states, and many said that presitrump's relief wouldn't have a major impact since many christmas oeipments are already out, though it give them extra time to adjust pricing into 20y . for "nighsiness report", i'm eunice yoon in beijing. and now to that warning sign from the market. the last time the yield curve inverted was more than a decade ago and we all know what happened soon after. that is why wall street had such an intense reaction to this market phenomenon. >> it don't happe often, but when the two-yearreasury bill begins paying more interest than the ten-year note, recentnd historyates there's a recession coming. this morning the payouts on the notescrossed, an ominous

warning to investors and market watche. think o it is tame way you would think about how your bank pays interests on certificates of deposit or cds. a six-month cd is lower ris and it ties up your money for less time, so the interest paid on that cd is typically less than the amount paid on a t longem cd, like a three-year or a five-year. so why is it important? the last five times it has happened since the late 1970s a recession has followed, sometimes a year later, sometimes almost two years later. the inversion itself won't cause a recession, but it means markets, the federal reserve and consumers will all be extra sensive to economic data in the coming months. and, in fact, according to critics we hear recession usually occurs on average 22 months following such an inversion and often the s&p is actually higher one year aer an inversion. now that the warningas signal h been flashed once again, what

happens next? we're joined tonight by cathie jones. she is chiefncome strategist at charles schwab. cathie, always good to see you. thank you for joining us tonight. >> thanks for having me. >> janet yellen said today it was possible it was a false signal b the bond market. what do you think? >> well, there have been instances where we've had t yield curve invert in the past and it hasn't led to recession, so there have been a few false signals. i think what she was referring to was the fact that in this particular case theeason short-term rates are above long-term rates is that long-term rates are falling rather than the reason being that rates are rising and the federal reserve is tightening policy by raising short-term rates. so because it is being led by the longer-term rates, s may be implying that this may not be consistent with t past. >> so what could change the situation? because this inversion came, as bob mentioned earlier, againl

weak glogrowth, the numbers out of germany were bad, the numbers out of china were bad, which complicates the situation, doest not? >> absolutely. i think the falling long-ter yields in the united states and all around the world are flecting that slowdown in global growth and that fear of a global reces compounded by the trade situation. so i think theiskf recession certainly is rising for those reasons. i think what happens next is we probably will see the federal reserve lower short-term interest rat to tryo offset some of the impact of the wn slown the global economy. >> and, of course, the on$64 ques what does the individual investor do with all of this right now? >> well, you know, first things first, is if you are an invest, take a deep breath, take a look at what you own, and are you comfortable with where you are in terms of the rreks that you taking. and do you need your money in

the next one to two years? if you do, tt money should be in a safe place like a cd or a treasury bilav and if you that tucked away is the rest of your money for long-term horizon, then, you know, you may be okay.t if it is uncomfortable, you might want to rebalance. you might wntt to move less volatile securities, have more bonds than stocks. of a about having kind financial plan laid out where you can ride the ups and downs of the market. butavou have to the capacity to do that, to take the risk. >> cathie jones with charles schwab. again, thank you for joining us tonight, cathie. and a little later in the program we will look at some other investment opportunities that are taking shape in this market right now. concerns over the global economy rippled into the oil market, both bench mark brand and domestic crude set 3ed% lower today. here to discuss oilpr es, john killeda, founding partner at

again capital. good to see you. >> good to see you. >> where do we go from here? do you think that theil drop continue? >> a couple of weeks ago we tested potentially breaking the $50 mark for the u.s. grade wti. all of the economicata points that bob pisani spoke about earlier in the program go right to the heart of the demand side of the equation for oil prices. it is the key. given how much the u.s. is producing, given how hard opec is trying to hold back on supplies, the crucible of all of this is asian demand. and theout from the u.s./china trade war affects the major asian economies you have been talking about the most, pan, south korea, china itself. of course, germany, the other main manufacturing ail demand center, because they manufacture so much and sell into the asian reghich is weakening. so it is a really bad car for the oil market we're having this trade wis pe not get better. >> what do you expect the producers to do about it, not

just opec? u.s. producers are a major portion of the equation now as well. >> no doubt. we are certainly seeing signs of financial strain within the pure play shale drillers.e none hone down yet although we had a bankruptcy last week and there's probably mor to me and we're seeing the u.s. rate count slowly creep lower and lower. there's still a bounty. we are still providing 12.3 million barrels a day, exporting upward of 3 million barrels a day. p the point that the saudis have said thet week they're going to do, quote, whatever it takes. sound familiar? to try the balance market and get prices stabilized, which is latin for them back higher. but they have their yeoman's work cut out for them and i don't think they can do . >> okay. in they can't do , that begs the question as to where oil prices go from here. key levels are 50 certainly on the oil market. where do we go? >> i think we're going to go back down and test tha 50, probably go back down into the 40s. this is bad news for the u.s oil patcut nothing is better

for helping to stimulate the economy, prop up the u.s. consumer, who is two-thirds of the economy with lower gas prices. they will be usually smiling agence those gas p in some communities can dip below $2 a gallon and you will see that. >> thank you, john kilda. >> see you later john. as bond yields have been declining so have mortgage rates. as a result homeowners rushed to refinance last week surprise. the mortgage bankers association said this morning volume surged to the highest level in three years. c refinancin support the economy by leaving households with extra cash and overall applications for new mortgages, they were up more than 20% last week compared to theor pri week. it is time to take a look at me of today's upgrades and downgrades. bristol-myers wasde upg to overweight from neutral at atlantic equities. the analyst cites upcoming data on some o the dru in second half of the year. the price target is $63. shares fellearly2% to 45.64.

cvs was b upgraded to from neutral at bank of america merrill lynch. the analyst cites the deal with viacom and the new company's strategic positioning. price target is $63. but not all firms agreed. bernstein downgraded cvsoday to underperform from market perform. this analyst says that cvs stands to los more from inheriting viacom's structural problems than it wou gai from any synergies. the price target there, $46, and that stock was down 8% today to 44.65, part of the sell-off today. meanwhile, ferrari was upgraded fromuy to neutral at goldman sachs. the analyst cites the luxury automakers strong backlog and solid demand. price target, $182. shares fell 3% to 155.90. still ead, why the magic of macy's may just be an illusion. ♪ ♪

♪ a tough quarter for cisco. the company is forecasting first quarte profit below wall streeta ess as it tries to transition away from selling routers and switches. earnings in rhe mostent quarter came in slightly better than expected and revenue was higherrom a year ago, but investors focused on the outlook, sending shares lower in initial after hours trading. josh lipton has more on cisco's quarter. >> reporter: cisco is a tech bellwether, giving us a good readeanto the hlth of

enterprise spending. that's why investors pay close attention to the company's results. rbc's mitch steves, who covers cisco, says the report itself was basically in line including its so-called infrastructure platform segment that refers to the company's corenetworking offerings reled to switching and routing, but guidance he said was weak on the top and the bottom. that tells us, steve says, that more broadly overall i.t. spending could be slowing down here too. for "nightly business report", i'm josh lipton in san francisco. and the quarter wasn't any better for macy'seither. it is facing a number of issues from higher costs from t diffs p discounts that eat into profits. the department store chain missed profit recast for the first time in two years and cut its refull-year st at the same time. that stock -- it sent the stock down 13% today in the session. courtney reagan has more on the mess at macy's. >> reporter: macy's quarter didn't go as planned. some of the department store's

women's clothing disappointed shoppers, sales ofarm weather apparel was slow and international tourist spending was down. internationals touri typically buy full-price merchandise and make few to no returns. as a result, macy's discounted merchandise more than planned to ttice consumers boy and it took a big bite out of earnings. the ceo told us, we took our medicine, we took almost a full point of margin with the additional mark downs, adding, we needed to protect fall. still, there are headwinds and uncertainty ahead. macy's lowered its annual earnings forecast to reflect thisssquarter's mi but it doesn't include the impact of tariffs on september 1st and december 15th. the retailer isti s evaluating itss plan to addhose higherst he told me he learned from the last round of tariffs going from 10% to 25% in may that, quote, e customer has no appetite for price increases, and that right now we are expecting thatn' the be price increases, at

least with new tariffs at 10%. if tariff rates increase to 25%, he says he will have more work to do ture out how to manage the higher costs without raising prices. macy's stock plunged on the disappointing earnings and on the more persistent concern for department stores in general, which he addressed a he tried to reassure investors on the conference call. >> while we know there is me negative sen on our sector, we are confident in our plans. there is strongan consumer d for high-quality, affordable fashion. we are strengthening ourti reship with current customers and bringing new kuss myrrhs into the brand. >> macy's comparable sales grew slightly. it just logged 40 straight quarters of double digit online sales growth and its back-stage hediscount department at stores that have it. the retailer is experimenting withonsignment clothing and the bloomingdale division is piloting a rental program. >> i think he is doing all of

the right things. i don't think there somethi macy's really could be doing different than what they are doing. i just think the environment as a mall-based retailer is really tough and notoing to get easier. >> reporter: especially if broader concerns about are ssion become a reality. for "nightly business report", i'm courtney reagan. -- and mylan are getting pressure from washington. that's where we begin tonight's market fos. u.s. lawmakers want the pharmaceutical companies to hand over documents as part of an ongoing investigation into generic drug price increases. the probe was initially launched in 2014, and in may '44 states filed a lawsuit against bothie comp alleging price fixing. shares dropped more than 10% to just about $6.30 mylan was off more than 8% to $18.04. outer wear maker canada goose saw its sales grow in all ographic regions which helped that company top revenue estimates, but the railer

reported an earnings miss and plans to maintain its prior full-year outlook. canada goose shares dropped more than 7% to 39.97. >> disney fell 3% today to 132.85. charter shares dropped more than 1% to 375.18. > and starbucks' main rival in china, lucken coffee, posted the first earnings report since going public. it beat earnings estimate but fell short of earningsargets. it has been discounting prices and found success with several smaller pickupre s shares plunged though by 16% to 20.44 today. >> with recession fears creating steep declines in the stock market you are probably wondering if there are still opportunities in the market.

our next guest, ben phillips, joins us with ideas. ben, nice to have you here. >> thanksor having me, sue. >> quite a day to have you here actually. what did youalake, first of of today's sell-off and what did you do during the sell-off? >> well, we're long-term instors which i think most of your viewers are as well so we're not reacting necessarily to the news, b we are looking for opportunities. i think that's why you're having me on. we are looking for areasf the market that are being dis-lochted because di of -- dislocated. >> so you a looking for sectors that didn't deserve to be sold off, those not necessarily as exposed to the global economy as others. what sectors are we talking about? >> we like telecom, particularly ion of the fifth gener telecom roll out. we like health care as well, certain areas of health care, ev some of the managed care which has been beaten up. we are generally more cautious

on pharma and the drug distributors, and we like some renewable energies. we like some, you know, some infrastructure names as well. there are pockets of opportunity out there, but you do have to know where to look. >> right. perhaps just as importantly, what would you be staying away from? >> well, we're more cautious probably on technology, both from more policy-basrs inves looking at policy changes and how that will influenceector economics and the fundamentals of different companies. our view on technologyill be continuing challenge the regulatory environment. we are seeing it more and more in the headlines but we expect it toontinue. think that individual investors are overexposed to technology, given the run tech stocks had over the past few years. so you see the tech stocks a coming a bigger portion of the portfolio but people are not necessary selling and rebalancing back to lower weightings or more appropriate weightings. >> do you see any opportunity in

fixed in yields low?w with >> we do. we have -- we think the ten-year could close to zero and dip into the negative territory in the next recession. there are opportunities in bonds, parcularly u.s. treasuries, municipal bonds as well. weor arecautious on corporates, investment grade and high yield both, buthere are opportunities in the u.s. >> do you think the longer term investor should perhaps increase their cash position , indeed, we still have the headline risk of the trade war slowing global growth, especially in germany and china? >> yes, absolutely and great question. i think a lot of people forget to view cash as an ass cash. it creates a lot of optionality in your portfolio. people sitting o cash right now probably feel pretty good when they look at the volatility and theye able to dip in sooner and buy some of the bigger dips. you know, this isot the beginning of a recession we don't think, but it is good to be raising the dry powder, raising cash balancesyb have

two years on reserve plus four times when the markets get really volatile and everyone says, don't ever own a stock again. >> on, that no ben phillips with event shares. ben, thank you. >> thank you. coming up, the airline industry is facing a number of challenges and now it is dealing with one more. ♪ yes, the sun u will come tomorrow and here is what we are watching. walmart reports earnings amid o questionr the impact of tariffs. retail sales overall for july will tell u if the consumer is still spending, and we will find out if the home building industry is feeling confident in

the interestnvironment. >> wework is e ected to go public as soon as next month. today the company released thes etailed financial report to date and we learned that the workspace rentalt company l $900 million in six months on $1.5illion in revenue. at rk's business was valued $47 billion after its last funding rou y. in ar full of public offerings, it is expected to be one of the largest of the year. and concerns over a global slowdown pressured the airline sector today. american, united, delta, they all fell about 3% to 5% in today's session. add to that the ongoing grounding of37oeingmax, and that's creating an additional headache for the industry as it arts to plan for its next big rush,id the holay traveleason. phil lebeau hasmo . >> reporter: there's no slowdown in demand for air travel. great news for airlines. but with hundreds of 737 max

planes grounded, setting schedules has become a juggling act. just ask the head of scheduling for american airlines. >> ts is probably one of the more hard, if not the hardestli sche problem that the airline could have. we're making a lot of changes to hie schedule impacts literally every part of the airline. >> reporter: since the faa groued the max in march, american has pushed the return of the plane from april to june, august, september, and now november. here is the problem. all airlines set schedules up to a year in advance, chtrdinating crews, maintenance themes and airport operations. for american, that means planning almost 7,000 daily flights with more than planes flying to 365 destinations. not just in the u.s., in 61 countries around the word. lock in a schedule so customers book trips with no last-minute h ges. >> most of our customers,

certainly in our domestic system, start booking their travel at about 90 to 100heays from time they actually plan to ply. theoint at which we would like to be able to make that decision is the 90 to20ay window. >> 90 days from now is early er nove when american and united plan to fly the max again, while souedwest has put off the schedule until january. but if the max is not ready to take off and american has to cancel more flights, again, then bookedavelers who flights for thanksgiving weekend that were supposed to be on a max wil have to be rebooked on other flights, and the schedung headaches begin again. >> the last thing the airlines would want is to aave schedule that they have to all of a sudden change and then people, you know,ave to cancel their plans. >> reporter: it is not just the impact on passengers but also on the bottom line. take southwest. it cut flights for lat this year because it won't have as many planes as originally planned, and at american it is delaying the retirement of

older, less fuel-efficient aircraft in order toh have eno seats to cover its schedule. phil lebeau, "nightly business report", chicago. before we go, here is a look at the day's final numbers on dll street. th plummeted 800 points. nasdaq, down 242, and the s&p 500 skidded 85.th is "nightly business report" for tonight. i'm sue herera. thanks for joining us. >> i'm bill griffeth. have a great evening. see you tomorrow. ♪ ♪

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