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tv   The Exchange  CNBC  July 11, 2019 1:00pm-2:01pm EDT

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the s&p 500 is right at 3,000. the dow has crossed above 27,000 today. for the first time ever. the fed chairman testifying on capitol hill today setting the table once again for a rate cut later this month "the exchange" picks up that story right now. >> thank you, scott. hi, everybody. here's what's ahead. a record-breaking rally. the dow above 27,000 for the first time fed chair jay powell has affirmed the hopes for a rate cut even as inflation ticks up today. the cpi report we'll dive in to all of that plus, france is taxing america's tech giants. the white house is about to hold a summit to air their social media grievances and tech hearings loom next week on the hill one trader says with all this happening, it's time to dump faang. and who has the fastest growing music streaming service? the answer may surprise you. you may also be surprised where cbd is now popping up.
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it's everywhere. that's all ahead in rapid fire we begin with the market seema mody is here with the numbers. >> another record high the dow above 27,000 for the first time ever. the s&p 500 as you can see right there at 3,000 we're close to the highs of the day but the attention really is on fed chair jerome powell his comments today fueling expectations of a rate cut in the july two-day policy meeting. let's look at the sectors leading us to the up side. it's industrials it's tech and also retailers big pronounced comeback for a number of the retailers and low discount retailers like tj max, costco up about 2% a lot of these stocks disappointed during earnings season so it's important to see them play a big role in today's rally. one sector not participating in today's price action is big pharma, selling off as the white house drops its proposal to eliminate drug rebates the insurance stocks are gaining on this news as you can see, big pharma, eli lilly, pfizer, merck, all down
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on that news >> seema, thank you. welcome to "the exchange." i'm kelly evans. as the markets have been climbing higher, powell's dovish tone has continued, even after the june cpi report showed core consumer prices jumping. let's drill down on all of this with steve liesman we've also just heard now from barkann, from the fed. fed speak in general and we'll hear, you know, from corals here shortly as well. what do yomakeu of all these moves today? >> i think that there was no daylight between powell day one and powell day two he very much reiterated the ideas that have led the market to believe there's an interest rate cut on the way. he didn't really incorporate anything about that hot or inflation report this morning. or even the strong jobless claims numbers that continue to accentuate the negative with the trade uncertainties out there. the low inflation problems and the global economic weakness the question going in was, hey,
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what is he going to tell us about how much of a rate cut in july and how long this will go maybe he gave us a hint in this one answer to the question about what lessons we've learned from europe and japan >> you don't want to let -- you don't want to get behind the curve and let inflation drop well below 2%. what happens is you get into this unhealthy dynamic potentially where lower expected inflation gets baked into interest rates which means lower interest rates which means less room for the central bank to react. and that becomes a self-reinforcing thing we're seeing it in japan and in europe that's why it's so important that we defend our 2% inflation goal here in the united states >> now there's only about -- there's 100% chance of a rate cut in july with about a 20% chance of a 50 basis point rate cut. but looking forward, there's actually three rate cuts built in this year for a total of 75 basis points of cut. it's down a little bit today but
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pretty much still on the other side of the 50% probability line i'll be able to ask more of these questions coming up in just a little bit in this show the federal reserve vice chair for bank supervision who both is involved with monetary policy, but also the banking side of things it should be an interesting discussion >> for sure, steve thanks for bringing that to us the dow above 27,000 today for the very first time. and the s&p is back above 3,000. let's get straight down to the floor of the new york stock exchange where bob pisani is watching this action the ten-year yield moving back up it's all coming up roses >> the federal reserve, dovish central banks are going to save us don't worry. that's what everyone seems to believe. powell is done now we'll all turn to earnings season it's upon us it's going to be about guidance. the concern is the second half guidance will be lower than expected due to slower global growth and the related trade and tariff issues. now the bulls believe the
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likelihood of a trade deal this year and the dovish central banks all over the world, they are going to save us that's the whole reason we're holding up so well that's why we want to listen very carefully to companies that are exposed to the global economy and particularly commodities and what they've got to say about what's going on we've got them today fast ae fastenal they sell a lot of companies all over the world they reported lower revenues, lower gross margins. much higher cost largely related to tariffs see, already it's showing up these worries about slower global growth and tariffs is why the market seems to believe that cyclical sectors with global exposure have a high chance of disappointing on earnings for the second half of the year. this is why -- look at this. why certain industries like materials and energy and transports that are exposed to the global economy, like shipping companies, all are underperforming the markets in the last couple months kelly, back to you >> those are the places to watch. bob pisani
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will the fed still cut interest rates especially after stronger than expected economic data let me bring in david wesle from the brookings institution. art hogan is also here chief market strategist, and jim karen is a portfolio manager at morgan stanley investment management great to have you all here jim, you put it well after the first day of powell's testimony when you said, look, i thought we were just going to get a quarter point rate cut now i think it's going to be half a point and powell did nothing to change that today, or did he? >> it's almost like the payroll number never happened and the g20 number happened. it's almost like thinking about the dog that didn't bark for a moment essentially what i think the fed is doing is incorporating more global factors into their policy reaction function. most people are getting confused based on just saying their dual mandate is the unemployment rate and price stability. things like that all that stuff is going fine >> but nowhere in the mandate does it say unstable financial
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conditions >> and the fed did write a white paper on this from early june. the spairp "monetary policy and financial conditions, a cross-country study. and they explained they talk about an augmented tailor rule where they want an extra variable into their taylor rule called gdp at risk and they want to incorporate financial conditions which allows them to then look at more global factors >> basically, they're taking a lot of that global uncertainty, whatever you want to call it, and trying to quantify the risk of our gdp to that but i mean, i would love to know your thoughts on this having watched the fed for so long now. does -- i don't mean to put it that way, but does today's current environment really justify a rate cut when the cpi report this morning was basically around 2%? goldman's forecast for core pce by the end of the year is to be over 2% where's the urgency? >> the other question is where's
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the risk of cutting? you know, if they overdo it and we get inflation sustained at 2.1 or 2.2% for a while, offsetting the long period of time where it was below 2%, i don't think they'll be upset about that look, i also think it's very unlikely that the fed is going to change direction because of one day's worth of numbers i agree with what steve said they seem to have -- they are not telling the market anything differently than the market is hearing. we're going to cut rates in july i think it's more likely to be 25 basis points than 50. there's a chance of 50 i think that's what they are saying i think -- i don't think it's so much they're taking the global economy into account in some new and strange way. it's just that what happens, global supply chains, what happens in the rest of the world does affect the u.s. economy there's new paper out by kristen forbes at mit pointing out that inflation in the u.s. is more likely to be influenced by global factors than it used to be in the past they're taking that all on
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board. >> and that's fine but to make the case for cutting rates when it seems like he's basically saying, and again, if he said the economy is strong and there's no inflation, then fine. but they're saying we're cutting because we think there's going to be a slowdown and how do you do that after you have a jobs report as strong as the one we just saw? >> you have to -- you have a forecast and you change your forecast as new information comes in they seem to think that there's a risk that the slowdown will be stronger than you apparently anticipate and if you read the minutes yesterday, they are very worried about inflation consistently being below 2% and inflation expectations falling so today is a little bit on the scale on the other side. i agree. so that's why i think they are unlikely to signal at the end of the month and we'll keep cutting rates. they'll be very heavy on the data dependent stuff and all of that if i can throw in one other thing, if you watch today's hearing and yesterday's hearing,
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president trump has no allies in congress when it comes to beating up on the fed and jay powell member after member, democrat and republican standing up and implicitly saying, if we have to pick sides in this fight between trump and powell, we're on powell's side. that's significant >> here we are with the markets now above those key benchmarks, talking about all-time highs and the expectations for policy are pretty high. can you stay exposed to equities can you stay exposed to bonds at these levels what do you do >> we certainly can stay exposed to equities. you have to. they've gone from being data dependent on determined to take back at least the december rate hike and i think the epiphany that jay powell is trying to give us here is that, oh, by the way, here's what we've gotten wrong and have to adjust the unemployment rate at full employment that's gone from 5% down to, we'll fill in the blank when we figure out what that unemployment rate looks like and the neutral rate of the fed
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funds target rate has to be lower as well. so not knowing what the neutral rate is on unemployment and on the fed funds rate, we're influx what jay powell is battling against right now is more the ill effects of trade policy and using monetary policy to lean against it >> and we should say, and shouldn't overlook this. the news flow lately has not been great even the last couple of days the president saying china is not making these purchases yet they've put someone more hawkish on the china side in charge of these negotiations are you saying that's part of a response here? >> very much part of the response and the problem is, the other thing we don't know and can't figure out, does this administration think it would be better to take this all the way to the election cycle or have this in the rear-view mirror, this fight with china? no one knows the answer to that. until we do and we don't know how elongated this is going to be, we'll have easier monetary policy >> thank you all appreciate it very much. art and jim, we'll see you for reaction in just a moment. before we get to that, nfl
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commissioner roger goodell will join us live to talk about whether the nfl is poised to strike some mega new deals with the streaming giants as the battle for content heats up. looking forward to that. plus -- >> coming up, a white house venting session. france taxes u.s. tech and hearings on the hill what's the biggest threat to tech and social media? plus, the fed's randall quarls live. his reaction to powell's testimony. and the path ahead and bed, bath & beyond disappoints again. have investors thrown in the towel? this is "the exchange" on cnbc my reputation was trashed online,
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anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore... excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. welcome back in less than two hours, president trump will convene a social media summit, but the catch is that the social media companies themselves aren't invited. instead, critics of the platforms will gather to air their grievances with the current state of things. ylan mui has more. >> president trump likes to use social media to bash social media. just before noon he tweeted at the the summit they'll talk about the dishonesty and discrimination practiced by certain companies. we'll not let them get away with that much longer
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the conservative complaint is that companies act as moderators or publishers by taking down certain content but then claim they're neutral platforms in order to qualify for liability the industry is pushing back hard against efforts to change it the internet association put out this statement today saying the platforms are not biased and that conservatives in particular have used social media to great effect kelly, i think they'd point to president trump's twitter following as exhibit a back over to you >> ylan, thank you very much to talk more about this, larry mcdonald and jimmy is economic policy at the american enterprise institute this is one of many reasons you're saying you should be short faang right now. i don't want to put words in your mouth but why do you think tech is uniquely vulnerable on a day when amazon just crossed the trillion-dollar market cap >> you're talking about companies trading at 6 to ten
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times sales. earnings mult pells are up near 20 and a perfect storm coming. you have a number of debates on the democratic party side. they know trump stole a large section of democrats and independents in the last election so they're moving to that populist realm. and then you have a white house that sees this so you really have a crunch. remember the old "happy days"? >> a period of the -- >> i saw "happy days" but still don't remember that. >> you're talking about a white house and an elizabeth warren, bernie that are going to really come down hard, and the pressure on the doj to act is -- >> so you're saying this is, to you, a six-month kind of short this is not a long-term type of thing or is it do you think we've put in the highs here in terms of size, the trade for all of faang >> it reminds me a lot of microsoft. growing up in the business in the '90s, this was the host
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sto hottest stock in the hottest sector microsoft never got back to those highs. over the long haul you'll be fine microsoft is the perfect example. but you're talking about probably a period of like two, three years where some of these faang stocks aren't going to get back to those numbers. >> microsoft had to reinvent itself, too. no small feat. do you think larry is right about the regulatory risk? many people who say even seeing that risk coming, that could help these companies more than hurt them. is microsoft the right parallel or analogy here? >> well, it's interesting about microsoft, i think ultimately, the antitrust stuff was not their big problem. management was their big problem. but i do agree that there is a lot of risk here there is going to be this coming onslaught of regulation. pushes to break these companies up and the natural allies of these companies, which should be republicans who aren't going to want to see this government intervention, have really turned on big tech. more evidence of that today at
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this sort of social media summit going on at the white house. so those allies are gone tech does not have a lot of friends either on the left, right and, listen, there is going to be a push -- this isn't just headline risk this is real business risk and it's going to be a long-term risk >> so why do these companies continue -- every day with every new data point we get, they shrug it off >> i think amazon is probably the least vulnerable of the big four so i think google and facebook are probably the most vulnerable and i get investors may still think this is just a bunch of washington hot air and they don't see anything happening over the next year or two. it's going to be very difficult for anything to happen over the next year or two but beyond that, these companies are big companies. they play huge roles in american life and politicians on both sides view them as very easy targets and they'll remain so. >> gentlemen, thanks couldn't be a more popular trade or place to be in these markets right now.
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james and larry, we really appreciate it. the streaming wars continue. nfl commissioner roger goodell is out in sun valley with every major media network and streaming giant vying for content. how valuable does that make the nfl right now? julia boorstin is there joined by roger goodell >> thank you for joining us here today. >> thank you glad to be here. >> we understand you've been in back-to-back meetings and also that amazon ceo jeff bezos is here have you had any talks about expanding amazon's rights beyond the thursday night games that it owns through the end of next season >> we have ongoing discussions with all our partners and so many of them are here today. and over the next couple of days so, yes, we do we talk about our relationships, how to expand our relationships, how to develop new relationships. because the nfl has never been a better position, and i believe the content and live content that the nfl offers is some of
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the most valuable content in all of television and media. >> you have $130 million two-year deal with amazon just for those thursday night games but now that you're looking at your broadcast deals expiring down the line, what are the chances that some of those big right goes to a streaming player >> well, julia, i think those are the things we'll have to work out this next negotiation is going to be fun. more complex probably will include additional players because our whole strategy is to have great reach. and to be able to engage our fans and you have to do that on different platforms. and that's why on thursday night wither fox -- our linear partner and the nfl network we've also added amazon and twitch to be able to reach fans on their platform and in the way they want to do it the interaction that can be offered on some of these new plat dlm fo platforms. we'll look at that and continue to have reach and also some new opportunities exist in there >> it's been reported the nfl has until this fall to opt out
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of your deal with direct tv. can you tell us what the status is of that and whether you've been in talks with other player about potentially expanding those rights either to other satellite players or cable or other streamers? >> i go back to, we have ongoing discussions. i'm not going to get into the details, but we always look at opportunities for which we can expand our relationships with partners and with potential partners. and if there's a way to bring directv and give them an opportunity to expand the sunday ticket to other platforms, that's something we're interested in and engaged with, as well as looking at other p t platforms outside of that ecosystem. >> so many represented here and many more launching. are you concerned all these new streaming platforms, even espn plus and hbo max, they don't have football and are going to draw eyeballs away from the platforms that do have your rights >> no, i think what's happened here if you look at the big
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media players, the predominence is live sports you know, 91 of the top 100 top shows are sports the vast, vast majority of those, other than a few, are football and so from our standpoint, we're seeing the sports can aggregate that audience and deliver what those other platforms really want. and we're seeing a lot of interest in seeing how that worked in the linear channels. how it worked on satellite and cable and how we can use that in the context of these new platforms. >> tell us about the status of your collective bargaining agreement. what are the chances you'll strike a new deal before the start of the season? >> that's certainly our intent our intent is to make sure we have a collective bargaining agreement. we've been in for eight years. it's worked very well. mainly for our fans but also for our players and our clubs. and so we have the structure of the system that works quite well we're continuing that dialogue there are obviously changes we all want on both sides, and i
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think those are things that will improve us and try to make the collective bargaining continue to be successful for all the parties. so i hope we'll do that. >> it seems one of the sticking points is your push of 18 games. how do you address concerns about player injuries and whether there could be just too much football. >> well, we always talk about how do we restructure our season what is the right structure with 16 regular season and four preseason games? should we look at expanding the playoffs those are discussions we're having with the players association. i think the steps we've made to make our game safer and better have worked tremendously well in collaboration with our players but also in changing rules and equipment. we had a 30% reduction in concussions last year. and i think we can use that same model to reduce injuries and lower body injuries. so i think the way we've modified in the last collective bargaining agreement was to really work a way to train our players differently and modify
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our game in such a way as to address those issues >> and tell us what you're doing to take advantage of this wave of legalized gambling in different states which seems to only be continuing what's your plan to tap into that, to draw -- >> we've been preparing for this for several years. as you know, a franchise starting next year, the las vegas raiders. and we've also struck new arrangements with caesar's and other entities that i think are going to give us an opportunity to be able to engage our fans more deeply and across different platforms. it certainly will be an opportunity to do that we are going to do it with all caution towards the integrity of the game and protecting our intellectual property in such a way. but we believe that official data of the nfl, the speed and the quality of that is going to be a key feature, and people will want to partner with us and fans will like it. but we want to ensure that that experience for our fans is also protected. and make sure great quality. >> and it will drive ratings,
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you think? >> i clearly believe driving engagement will drive ratings. >> commissioner goodell, thanks for joining us here in sun valley >> our thanks to you, julia, and to the commissioner. a lot of interesting stuff there. we'll see where those rights end up going now to sue herera for a cnbc news update. >> here's what's happening britain says three iranian vessels unsuccessfully tried to intercept the passage of a british commercial vessel through the strait of hormuz it says the vessels only turned away after receiving verbal warnings from a uk navy vessel accompanying the commercial ship harvey weinstein is back in a new york courthouse for a hearing to approve changes to his defense team and also to iron out remaining issues before the september 9th trial. the judge approved weinstein's lawyers jose baez's request to withdraw from the case tropical storm barry has formed in the gulf of mexico and forecasters say it could become a hurricane as it threatens louisiana's coast.
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it could flood the mississippi river this weekend creating flash floods like the ones that walloped new orleans on wednesday. and a japanese spacecraft landed on a distant asteroid and connected underground samples. scientists hope it will provide clues to the origins of the solar system it's the second time the craft has landed on the asteroid and the first time it managed to collect underground samples. can't wait to see what they found. that's the news update this hour kelly, back to you >> thanks, sue here's what's still ahead on "the exchange. >> coming up -- bed bath bath & bummer? amazon hits the right note and american eagle jumps on the cbd bandwagon. that's all ahead in rapid fire advanced safety technology on a full line of vehicles. now, at the lexus golden opportunity sales event. lease the 2019 es 350 for $379 a month, for 36 months, and we'll make your first month's payment. experience amazing.
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- my degree from snhu has helped me tremendously. (gentle music) the flexible class schedules allow me to go to work full-time, run my catering business and be a mom and parent. when i reached this accomplishment, it was like, it's here, it's happening, it's now. souwe, atern new hampshire university, are the ones who succeed. we are the ones who break through.
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welcome back let's catch you up on a few stories that should be on your radar today. it's rapid fire. here with their takes are leslie picker bill, you're supposed to be in that chair today >> that chair? >> youwant to switch >> no, i'm -- no, no, wait i'm hooked up to the chair can't do that. >> i was going to say.
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i know our director can handle it alan can handle anything in any case, if you missed the show, what are you doing with -- >> where have you been >> where have you been >> skipping right along to our first topic. >> that's contessa brewer. >> that's right. i'm sorry. ms. brewer does join us. >> thank you for the introduction i appreciate that. better late than never bed, bath & beyond is down and cautioned full year sales and guidance on the lower end of its guidance shares down about 6% in this session now. they are trading under 11 bucks today. they were at $80 five years ago. >> there's a lot of competition for bed bath & beyond. it has -- i think its claim to fame are these coupons, 20% off. they show up in every magazine people who shop bed bath & beyond never go in the store without these coupons. now they're saying they're going to try to roll them back or exclude more items to improve profitability.
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to your hard-core customers, this is what brings them into your bricks and mortar store >> in fact, bye-bye baby which i have to make a lot more last-minute trips. they only let you do it if they're not technically expired. those drivers are huge i understand it may not be a great business model but that's how they can get people in the door >> they are going through a major culture change it's been a family owned company for years. that's going away now. they lost their ceo in may >> not lost. the investors forced him out this is what they wanted >> now they're trying to figure out who they are and what their purpose is life is you talk about competition their main competitors are williams sognome akohl's, wayfair, home depot. a major mountain to climb to get back in this game. >> did you ever think they'd think home depot would be their competition. >> or target as jim was talking about this morning, gunning for them >> and there are differentiators
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if you are one of these big box retailers. i don't know if you've been to bed bath & beyond recently we went there to buy an air conditioner because our building's air conditioner broke. >> these things happen >> waited 30 minutes for a customer service representative. it also looks the exact same as it did, a couple decades ago when i was looking for the college -- >> did you have to go there because it was the only close nearby place to look for an air conditioning unit? >> it was. >> she had a coupon. >> well, it was walking distance from the apartment and i was willing to wait the 30 minutes because i needed an air conditioner. >> they do offer knife sharpening now i'm going. >> is that going to improve their margins where investors want to buy? knife sharpening >> it might get me in the door twice and i'll report back don't you guys worry >> topic two amazon is now the fastest growing music streaming service, according to the ft.
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subscriber growth to the unlimited service is up about 70% year on year that's faster than spotify, which, granted, it's still growing 25% per year and has 100 million subscribers. it's more that no one talks about amazon music and yet it's clearly making inroads >> my high school math teacher will be very proud let's face it. 70% of $32 million, that's $22 million, and 25% of $1 help1 $1 million -- $100 million. we're in a land rush time for music streaming. everybody is growing exponent l exponentially. wait until things start to top out and growth slows then we'll see a good old-fashioned price war. right now it's all systems go. >> it looks like amazon is the exception to the rule. that whole late to the party thing. you miss out entirely. it looks like they're late to the party and serve like, norm when they are walking in that everyone is greeting. and i think in large part it's
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because they've done such a gangbuster job selling the echos. so when you have an echo at home and want to play music and all of a sudden that one song that you want to hear isn't on prime music, you are like, oh, well, maybe i should just sign up for the unlimited and have that artist show up, too. it becomes that whole brand. and it's cheaper >> that's why we subscribe >> a lot of the services are indistinguishable. >> pretty much >> so i'll take the cheapest one. i guess we're in the 70% food delivery services operating in new york may have to tighten their belts the new york state liquor authority is looking into new rules that could limit the fees start-ups like grubhub, uber eats and postmates can charge. these industries have to be able to survive the regulatory onslaught that will come it's come for uber and airbnb and now it's coming for these guys >> food delivery the key question is, how do you
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make up those fees if they go away do you pass them along to the consumers? if that's the case, there's so much competition in the likes of postmates and uber eats and, obviously, grubhub, of course. and if there is regulatory change, there really isn't too much you can do about it other than just lobbying your way out of it if you're not going to pass on -- >> they'll say, it's not going to hurt any one of us individually if we're all dealing with it. but what does that mean for mao big this industry can go >> it's going to change the culture. i had no idea that my local restaurants were shelling out as much as 30% in fees to the restaurant i know these guys. these guys are my friends. i know that they're operating on the slimmest of margins. and that can make the difference between being successful or not. i am more likely, after looking into this, to order from them directly >> that's what i was going to ask. >> and pick it up. >> i don't do any of that. i just cook. >> the chef over here.
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sur la tab >> open your own restaurant. >> do you sharpen your own knives >> maybe >> i'm looking for help. the lady is asking >> yeah. i do i got a little machine >> a machine >> i knew you had something. >> i'm coming over i'm bringing my knives >> bring your knives >> i'm sorry we're going to get this done >> i'm bringing my knives over to your house. >> honey, kelly is coming over with her knives. >> finally today, american eagle is the latest retailer to jump on the cbd craze they're striking a deal with green growth brands to begin selling cbd-infused body care items. they have deals with abercrombie and dsw. this is one of those, you'll now see this at your teen's checkout >> griffith's rule number one is novelty is a very powerful incentive to buy we're in the nov elelty phase w
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cbd. what does cbd do for you here are the things i read about. it promotes sound sleep. reduces inflammation and pain. improves heart health. supports weight loss and protects against some forms of cancer i mean, what doesn't it do >> exactly >> the fda is coming they're knocking on the door it will change >> who shops at abercrombie & fitch and american eagle? 12-year-oldses i'm more thinking it may be, that it was derived from marijuana that gets the 12-year-olds -- >> you'll get a contact high by rubbing this you're not >> i believe you can only put cbd on the market derived from hemp >> it's an agricultural product. >> and we haven't seen the cannabis products coming >> and it was just legalized i was walking around my neighborhood yesterday and passed by and it just opened a store that's all hemp products something that the title of the store was something like hemp
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world? something like that. but i think you should bring over some hemp and you can do like a hemp for -- or cbd for knife trade. >> i wonder if we're already getting to peak cbd. i feel like it's already over. it's over before it even began and certainly once we start vetting these claims >> maybe bed bath & beyond should add some cbd. >> leslie picker, bill griffeth and contessa brewer. still ahead, randal quarles will take the stage with steve liesman. we'll listen to their conversation when we come back to extremely happy. there's also angry. i'm really angry clive! actually, really angry. thank you. but what if your business could understand what your customers are feeling... and then do something about it. turn problems into opportunities. thanks drone. customers into fanatics change the whole experience. alright who wants to go again? i do! i do! i have a really good feeling about this.
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s&p and nasdaq have turned negative as you can see there. yields are jumping let's get out to rick santelli
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who has more this afternoon on what's moving the markets. >> yeah, well, we had supply all week tuesday, wednesday and thursday. of course, 3s, 10s, 30s. 10s was a bit on the soft side 30s even softer. not a particularly good auction. 2.644 was the dutch auction yield. that was well above where the one issue market was trading the metrics were soft. and it was the whole curve that popped in various stages, even if you go to the short end and keep in mind the short end and yield curve sharpening underlines the dynamics of what jay powell has been talking about and the markets expect him to deliver on with respect to a rate cut at the end of the month. two years pop. what's fascinating is let's throw up a two-day of the dollar index. following the two-year that made sense. a lot of dynamics with currencies in play when central banks start adding more
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stimulus kelly, back to you let's bring in our fed panel. art hogan is back. jim karen is global fixed income portfolio manager. especially on the fixed income side with all this happening this afternoon, today has gotten interesting because just a couple hours ago we were saying status quo from powell no change. the data doesn't matter, like art said they're determined at this point to cut what do you make of this jump? >> i think we have to think about this in sequencing what powell is saying is he's going to keep rates lower. lower rates should equal better growth or support for growth higher equity markets should cause bonds to rise. it tailed a little bit in the market at auction. which is a sign of weakness. >> speaking of fed speak, steve liesman is sitting down in conversation with fed chair randy quarls we'll listen and have a
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reaction >> people need to understand real quickly, randy has this interesting job where you're vice chairman of bank supervision but all the responsibilities of monetary policy as well but you only collect one salary. so it's like double the work >> left out the fsb. >> that's right. that's the international part. right. you're on a plane -- >> 50% of my time. >> how many trips -- >> exactly three things which is where i sort of want to start. and i do want to talk about alice as well. i'll come back to that let me start with chairman, the last several days, spoke fairly plainly about the need, the need the u.s. economy has for accommodation. which means easier monetary policy to most people. do you agree with that and if so, why >> well, i -- so i think if you look at the data about the u.s. economy currently, it's in a very strong position, right?
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everyone is familiar with the unemployment rate figures, the lowest they've been in half a century. current job production is well above what's necessary to absorb new entrance the productivity measures is something that i have been very focused on and thinking about the current state of the economy and the evolution of the economy over the course of the last year that's been materially higher. productivity has been. that has been in a long time and that's consistent with some of the things that i've expected and so if you just look at the current data, there's, you know, it's a very strong economy on the other hand, there are some -- there are some significant risks out there. and part of our job at the fed is to think about, what are those risks? we've been calling them cross-currents, global growth. the case for continued global growth is not as strong as the data around the united states.
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and that will have effects on us uncertainty about trade is also something that is having effects on business sentiment, willingness of business to invest and we've been seeing that at least show up in some of the data in restrained business investment figures over the course of the last year. so as a matter of risk management, as a matter of thinking about the course of policy, i am not going to predict what we're going to do at the next meeting, which will decide at the next meeting with everyone gathered around the table and all of the views presented. but i do think that all of those are factors that will have to be taken into account and especially those cross currents and risks, you know, will be something that we're factoring in >> so the reason i talked about both of your jobs is because i was asked a question this
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morning, what if the fed gets it wrong, if it eases when it shouldn't be easing? and the first thing that occurred to me was, we have excesses in the economy built up and then it occurred, well, if excesses in the economy build up, you'll blame randy so i'm wondering how concerned you are about the possibility of getting policy wrong to the down side and concerns about excesses in the economy in markets especially building up >> so that's related to the fundamental question of the relationship between monetary policy and financial stability risk and i -- it has become, i think, the most common view, and i share the view that the best way to address financial stability risk is with financial stability centric tools as opposed to monetary policy. a case can be made for the opposite view. i think jeremy stein would occasionally make a case for the opposite view, but on the
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principle of the right tool for the right purpose, i think that financial stability tools for financial stability risk are the right tools. and we have only a limited set of them in the united states but then, if you take that position, that evolves then into the question of, the principal financial stability tool we have in the united states is the countercyclical capital buffer so if we're, as a matter of risk management if we're moving into a case where for risk management purposes perhaps policy is going to be more accommodative and maybe there's a potential for a mistake there, that's accepting your hypothesis, shouldn't we as a matter of risk management turn on the countercyclical buffer. that's a perfectly reasonable, perfectly reasonable question to ask. when you look at the actual situation we find ourselves in, we consider financial stability and whether we risk quarterly at
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the fed as part of leading up to an annual decision as to whether we'll turn on this counterli countercyclical buffer it's a measure that would allow us to increase the capital requirements of banks at moments in the business cycle where we seem to be at the top of the business cycle to allow us principally to be able to turn it down as we move then into a downturn of the business cycle and, therefore, to stabilize to cushion if you will, the potential risk to the financial system of those sorts of moves -- >> the magnitude of that, randy. how much is the normal buffer, or how much would they go up if you were to turn that thing on >> the kourcountercyclical -- >> nobody has put it in place yet? >> the brits have turned it on and turned it off and turned it on again around the world we have experience with this
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it could range from half a percentage point to a few percentage points, right the view is that the relevant authority would come to a view as to what kind of an additionaa buffer is needed, given the level of financial stability risk, and then would create that additional buffer with the ability to bring it down again, as one moved into the bus part of the cycle in the u.s., though -- so we have this quarterly review of financial stability risk and as it turns out, every time we review them, although we see increased risk, we see areas of increased risk and some areas of asset valuation, equity markets, commercial real estate markets we see areas that we look at, that we analyze the level of business debt, for example these are all issues that folks here have talked about so we look at that and then we turn to the final area of our analysis, which is
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leverage in the financial sector how much capital is there in the financial sector and there is so much capital that it tends to swamp everything else. every time we go through this analysis, we conclude, financial stability risks are not meaningfully above normal, because there's so much capital in the banking sector. and i -- a way of expressing that is i've continued to think about that is that -- as we calibrated our through the cycle requirements, separate from this cyclical -- ability to have cyclical additions, as we ca calibrated through the requirements in the united states, we calibrated them at the very high end, everywhere. in some cases, doubling what the international minimums were agreed to. perfectly sensible to do that, but the effect of it is that we're -- our countercyclical counterbuffer is effectively on. we've never turned the countercyclical counterbuffer itself on, but we've created an
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amount of capital that every time we sit down, the capital in the banking sector is such that it says the risks are not meaningfully above normal. the reason for a countercyclical counterbuffer is, it would be to say, as you're coming to a place where it's rising, you would add more capital so you could get to the conclusion that we keep coming to, which is that risks are not meaningfully above normal we have never had to do that, because we have -- >> and that's vice chair randy quarles speaking with our steve liesman talking about countercyclical counterbuffers, but more specifically the issues are, are there signs of imbalances today in the markets? did you hear anything from him that goes against pa rate cut coming in a couple of weeks' time and again, how do you think the market's digesting all of this we've heard a lot of fed speak and heard from williams and b s
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boston >> i would not be surprised if we get to the july 31st meeting and you have a dissenter when they have a cut of 25 basis points or two. i think what's interesting is, remember at the last meeting, we had a dissenter who said, we should be cutting at this meeting. but we also saw the forward guidance, the dot plots change whereas eight people moved to cut some time in 2020. they don't have a firm majority as far as we know coming into this and randy just said, nice job, saying, we'll sit around a table and talk about all of these inputs and make the appropriate movement i'm concerned we're leeng inanio a rate cut that is predetermined. >> jim, it sounds like you're saying, it's done, it's done >> this is very complex. let me try to unpack this in a logical way. the fed is trying to ease policy, that's interest rate policy they also have regulatory. that's the other part and the part that randy quarles was talking about. it's inconsistent to be easing interest rate policy and also
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tightening regulatory policy so they're trying to ease that, because they believe there's enough capital at the banks to sustain the current risks. >> that's double-barreled easing >> it is it's an easier overall policy within the fed's mandate they talk about financial stability and risk management. and that's how they fine tune how much capital banks need to hold against their assets and how they measure the economy so why do we have banks in the first place? the reason we have banks is to direct credit to the real economy. if you can do that very efficiently, that is going to be very, very supportive for economic growth in the future. >> if they get it perfectly right, it all sounds great we've got a few weeks and then some to figure out if they do. guys, thank you. i appreciate your time and for sticking around with me today. jim karen and art hogan. we mention what had the broader markets are doing this afternoon. here are some of the individual movers we're also watching at this hour. delta is climbing higher after reporting strong earnings. ceo ed bostion tell egg cnbc that momentum in the company and
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airline industry will continue in the second half of the year another lens on what's happening in the economy and ww, which was formerly known as weight watchers is up more than 8% today from an upgrade to neutral. the firm saying stabilization in the first half of the year sets that weight loss company on the path to improvement in the back half and that's the theme this afternoon. late last year, robinhood announced plans for checkings and savings accounts with a 3% interest rate. pretty good, right, in this environment? but the thing that caught the regulator's eyes wasn't the high rate, it was the fact that the customers' money wasn't fdic insured. robinhood eventually scrapped the launch and a new in-depth report takes a look at their practices at this time dan dee francesco joins me, come on down, along with kate rooney who has been following this story as well, guys. thank you very much. obviously, it's been a busy afternoon here dan, it's a great piece, which really gave people an appreciation for how frenetic the atmosphere was for this
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launch now, frenetic for a start-up can be a good thing many this case, it backfired big-time >> i think it was a perfect example. kate and i were talking about this mentality of move fast and break things that works in a lot of industries but in something that's so kind of very regulated and dealing with people's livelihoods, it doesn't work here. and robinhood made the announcement that service sipc insured, but the big mistake was that they didn't check with sipc to be sure they were insured >> to be clear, they said, we have this insurance, but didn't actually have it as we look at their next steps, this is a company that's trying to get more and more like a traditional bank so how big a deal is this failed launch to their future >> they are still charging ahead. they're going for a bank charter, which would make them even more regulated. and one of the big criticisms was that they were really called no adults in the room. there was no one from wall street, but they hired a guy, the ceo of wedbush securities,
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formerly scott ricusin to run this bank and they're calling it robinhood bank, it's on linke n linkedin it would probably resolve some of the issues that regulators, i mean, senators, congress have got involved which you would think maybe they would back off they say they are still launching the product. it's probably in some sort of a holding pattern. but they're also -- they've said that they are still going to ipo and still raising money. they've got a $7 billion valuation now. >> even with all of this going on, dan. so robinhood started out with kind of trading, i guess, app aimed at millennials how would you describe the company today? >> i think that's the whole issue. they've kind of continued to try to grow. they start off with free stock trading and get into options and crypto this was the next big launch, of getting more of the customer's wallet and i think they were one of the first ones you know, a.c.o.r.n. had
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launched a debit card. but they went full on and we're going to be the next big bank. and clearly, they had a big messstep here in terms of going forward. >> but is it an existential misstep. in other words, do regulators seem forgiving because, hey, it's okay, you're new to the scene. or unforgiving, because, look, you can't come in and expect to play by different rules. >> there hasn't been any announcement as to whether finra or the fcc will put any action against them i think a lot of others are very interested to see what will end up happening them. everyone else will say, it's free-form and we have this, even if we're not insured >> the company has said, we are still going forward with it. they have said, we're still looking to ipo but in the meantime, you have wealth front and softi and others launching similar products so they have a 2.5% interest rate so in the six months that this has all happened, there are competitors moving in.
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so i think they were the first mover, but because of this, the reputation of, oh, you could go to marcus or wealthfront, is there going to be a trust issue. >> they've gotten lapped in a lot of ways. they were one of the first movers with this checkings and savings. now they've had to put that on hold, wait in a flying pattern and everyone else has been able to jump ahead. >> they also say, don't rely on this story for fact cull information. it's based on anonymous sources and this is a direct charge that you're reporting about what's happened on the inside any response to that or have we again seen the company maybe sort of responding in its own kind >> i think it's public record that they didn't reach out to sipc the former ceo has said that it's one of two things either as we reported, that they deliberately made a choice to not to reach out the alternative is, they don't understand sipc insurance. >> if that's the case -- >> either way, not a good look >> growing pains for a lot of
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these companies to put it kindly dan defrancesco from business insider and our own kate rooney. that does it for "the exchange" today. frenetic is the world. tyler for "power lunch." >> we'll keep that pace going. welcome, everybody i'm tyler mathisen new news at 2:00, a new tax for big tech and president trump's so-called social media summit. it's set to get underway if about an hour's time but facebook and twitter, apparently google, shut out of the social media summit. the fallout ahead. plus dow, 27,000, first-time ever has fed chair powell given the green light for the bulls to keep on running? we'll take a look at that. and the president dropping a crucial part of his plan to lower drug prices, once described as potentially the most significant move ever affecting drug prices. now out of here! stocks, moving big on that news. plus, what investors and consumers like you need to know. "power lunch" right now.


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