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End of an Historic Week, BNY CEO on Banks, Retail’s Tariff Fight 04/11/25
00:46:05
The bond market is not backing down, but consumer sentiment is near historic lows. We’ll wrap up the latest data and look at how investors should position. Plus, BNY is reaffirming its full-year guidance despite all the uncertainty in the market. The CEO joins us with his take on rates, the consumer, and more. And retail is caught in the middle of President Trump’s tariff fight. We go inside one LA denim factory with a hybid manufacturing model that could be the new blueprint.
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B
The bond market still not backing down today. The question is, will the President? Hello and welcome to the Exchange. I'm Kelly Evans. Here's what's ahead. The dollar is under pressure. The ten year yield above four and a half percent at last check. The main concern, sky high tariffs on Chinese goods. Retailers are not filling orders because of these costs. We'll speak with one of them ahead. One area that's hurting is the toy trade hitting new 52 week lows today. Mattel down 27% just since last Wednesday's Liberation Day. Add to that consumer sentiment which just dropped to second worst reading in seven decades. Larry Fink thinks we're close, if not already in a recession. How much worse could it get if the deal with China isn't reached soon? On a day the President is having his annual physical. Let's hope he's not watching the bond market wearing that blood pressure cuff. Let's start with Don Chu and more on these markets though. And Dom, for everything that I've just said, the dow is up 420 points. Not just in high.
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A
Yes, not just that as you point out, it is just off session highs right now. So this volatility, the roller coaster ride continues. And right now, as Kelly points out, it's green across the board for the major indices. We'll start with the Dow which is up nearly 400 points. 392. So just backing off a little from session highs to 39981 thereabouts. The S&P 500. The broader measure of that large cap market is at 53.25, up 57 points. It's a full percentage point gain. At the highs of the session which happened maybe just five or six minutes ago, we were up roughly 75 points and at one point today we were actually down by about 48 on the broader S and P. So it's been a decently wide range. But tilting towards the higher end of that trading range today, the tech heavier Nasdaq really the leader so far up about 1.25%, 212 points to 16,598 for the Nasdaq composite. Now since that so called liberation day on the tariff announcement, we have seen the major indices now on balance still be negative. The Dow is down roughly 5%, similar percentage declines for the S&P 500 and the Nasdaq Composite down about 5% as well. So it's been fairly even and across the board on the large cap side of things since the tariff announcements came out. So let's put that in context about some of these moves that we're seeing. We still got a ways to go to get back to where we were just last week and then on a one week basis. Three sectors in particular are catching a lot of attention. Most notably what's happening with technology, the communication services side which are the two best performing sectors in the S and P so far on a one week basis. Meanwhile the worst and it continues to be a losing momentum trade has been energy. Those energy stocks down about 1% overall for these particular ETFs. That is your laggard among the 11 sectors in the S and P. And on the macro side of things, the recent near term trend of declines in dollar related assets or US related assets on the macro fund continues. The 10 year treasury note yield has declined in value pushing up yields to as Kelly points out, near four and a half percent of the 10 year. The dollar index is at right now about 100. Earlier this January it was 110 just about there. So about a 10% decline in that time. WTI crude prices up today so far but trying to find some stability around $60 per barrel. And Comex Gold. I'm going to put the star up Here Kelly up 2.25%. $32.46 is the current trade. 3263 is your new intraday record high. So gold continues that strong run higher. I'll send things back over to you.
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B
All right Dom, thank you very much. Dom Chu. Economists and strategists have been revising their forecasts left and right. Since the president paused tariff hikes on most 90 days except China. Recession still not the base case for many, but a big risk, especially with these wild moves in the bond market. This week, here to talk about it, Nancy Lazar is chief global economist at Piper Sandler. Mike Pond is head of inflation linked research at Barclays. And CNBC senior economics reporter Steve Liesman is here with us as well. Steve, do you just want to kick it off with the latest that you've been hearing about what's going on in kind of the global markets?
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D
Well, these are tenuous times. I mean, last night was a rough night for some that there were people on the phone with me and with other people that you had.
- [05:02]
B
You mean people in the government?
- [05:03]
D
No, not government, no, in the financial world. They were looking at lower, a lower dollar, a lower bond market, a lower stock market. Woke up this morning, everything was okay. And then we went through them. We were pretty much in that same cycle earlier. And now everything's going to be okay because the Dow is positive. I don't know. I mean, it just there's still pressure on bonds, there's still pressure on the dollar. People are thinking through scenarios of what officials might do. One of the things I heard is that there's a bit of a Trump put in the market. You don't want to be short in case the president strolls out into the Rose Garden and says something a little bit different from what he had been saying. There's that idea. There's discussion about the extent to which the Fed will or won't come in at these levels, discussion of what other central banks might do. So everybody is kind of gaming out worst case. But maybe the best way to put it is there's not a lot of best case scenario gaming out.
- [05:57]
B
Although, Nancy, so maybe you of all people can kind of put this in perspective for us. You've been tracking in great detail all of the kind of the blow by blow here as things play out. But recession is still not your base case, is it? Or maybe it is now.
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E
Well, no, it's not. It was a week ago. But as you said, the cancellation of the reciprocal tariffs on most of our trading partners was a positive event in that it did highlight that the administration is worth negotiate, is willing to negotiate. And so that was we didn't know that. And so that takes some of the uncertainty out. And indeed uncertainty has also stabilized. It's very, very, very high. But it stopped going down. And energy prices are lower, although they're up a little bit today, they are down Significantly an important tailwind going into the, into the second quarter when you get these spikes. So we actually dropped the odds from 55 to 45% chance of a recession. We're now using stall speed and again that energy thing is really important that energy drop because that's going to buffer the hit to overall consumer prices from, from the, from the tariff hike which will be severe and you'll see it in core goods in particular. But net headline inflation will probably be about 3% in the second quarter. Within it core goods could be about 6% but again energy is really a positive tailwind for the consumer. Capital spending last point. Capital spending is likely actually to get pretty hard though we call it stall. Unbalanced GDP will be stall speed some improve, some growth in consumer spending by the high end consumer but capital spending is likely to be down 33 percentage because there we also import a lot of capital equipment from China and you're likely to see a sharp spike in capital equipment prices really holding back CapEx in 2Q and most likely into 3Q and forget about housing in this environment.
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B
Right.
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E
Mortgage rates back up. Consumers certainly concerned about the job market. Housing will also be on the weak side. So no, we've changed stall speed from a recession in just a week. But yeah, it's a, it's a pretty risky environment and we could certainly change.
- [08:03]
B
That next week before I bring Mike in here. Nancy, it's funny because we seem to always talk to you on Fridays when we get the consumer sentiment survey. So I think literally the last time we touched base was when we were trying to dissect it. The headlines this morning from the report are horrendous. There's a huge debate going on about what you should take from that. Maybe the market can take it as a bottoming signal because it can't get much worse. It's more important politically than economically. It has no correlation to spending anymore are among the takes that I've heard. So I just wonder if you could sort out for us is this politically biased or no? Is it a real useful data point on the consumer, on the economy and markets?
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E
Some components of the Uvich survey are useful. The headline and the three, you know, three main components by income quintile and by party. There's a huge problem. Apparently they have a component that is now weaker than the gfc. If you're a Democrat you think inflation is going to be 7% and you think the economy is worse than it was during the gfc, let alone Covid. We have our own daily consumer confidence Survey and it actually rose today and is not egregiously down significantly. And so there seems to have a slight political bias to it where ours seems to be a little bit more balanced. Consumer confidence is edging down, but it certainly is, isn't declining significantly.
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B
All right, Mike, let me turn to you then and talk a little bit about the internals of the market this week. The worrisome combination has been that the stock market sell off broadly has occurred while the bond market has also been selling off. The dollar is weakening, gold is strengthening. And a lot of this is read as maybe the flip side of these high China tariffs. Meaning if you kind of grind trade to a halt, do you grind international finance to a halt? Do you grind that recycling of cash into the bond market to a halt? Do you worry about these developments or do you think that we're all making too much of them?
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A
We do. We really worry about the downside risk. And we are pricing in a recession for the second half of this year. The sentiment numbers that we're seeing from the consumer are leading to weaker activity. So in the inflation data that we got this morning on cpi, yesterday on cpi, airline fares, hotel prices plummeted. And that's a sign that the consumer is pulling back already on discretionary items, ahead of concern about tariffs. And on the energy sector, yes, lower energy prices are good for the consumer, but you have to remember that the US is now a net exporter of energy. So the US is a big energy producer. We saw in 2015, when energy prices went down in 2014, that it hurt the US economy. Yes, it might help the consumer, but energy producers, which is a big segment of the US Economy, do get hit and that leads to job layoffs.
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B
I thought, Mike, it was interesting you said you think the economy is going to need five rate cuts this year, but it's only going to get two.
- [10:55]
A
That's right. So we're pricing in two rate cuts from the, from the Fed. But the Fed is somewhat stuck by a stagflationary outlook. We have core CPI going up to 4.2% by the end of this year from about 2.8% now. So the inflation outlook is getting worse at the same time that the growth outlook is weakening. The Fed is stuck because it has that dual mandate and is very sensitive to incoming inflation data. Whereas pre crater, pre Covid, the Fed generally operated monetary policy via Phillips curve lens. So if the growth out was weakening, it would look at this. Inflation forecasts is coming down and therefore they could respond fully to growth. But here They're a bit stuck. We think that the growth outlook justifies, you know, at least five cuts, but they're probably only going to go to because of the inflation outlook that leads to a weaker than than otherwise economy because the Fed can't fully respond to it.
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B
Right.
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A
We talked.
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B
Nancy just mentioned the impact on housing. Let's bring Diana Olich in here for a second. As these wine swings in the bond market this week have reached some havoc on mortgage rates, there's another looming threat as well that could push things even higher right in the spring housing season. Diana, welcome. And what can you tell us? Well, Kelly, it has been a wild ride for rates this week. After surging 40 basis points higher earlier then pulling back a bit yesterday, the average rate on the 30 year fixed jumped again today to 7.1% even higher than where we were on Wednesday. As you said, not a good thing in the heart of the spring market. Now there, there is another even bigger concern for rates though, and the housing market, that is. What if China, which is one of the largest holders of agency mortgage backed securities or mbs, decides to sell those either in retaliation or simply because of reduced trade flow? And what if other countries were to follow? Well, at the end of January, foreign countries owned $1.32 trillion worth of USMBs outstanding, or 15% of the total in top owners, Japan, China, Taiwan and Canada. China had already been selling off USMBs last year with MBS holdings down 20% in December year over year. But they could accelerate that, which would cause mortgage rates to rise even more. One analyst I spoke with told me he had already been getting questions about this very thing last week from concerned hedge fund and mortgage finance clients asking what would happen if China started to sell more.
- [13:31]
A
Under the circumstances, we feel like that could spook the market and the lack of visibility for how much they could sell and their appetite for selling, I think that would scare investors.
- [13:46]
E
That would.
- [13:47]
B
Push mortgage rates even higher. And to add to the pain, the Federal Reserve, which is a major owner of mbs, is currently letting that MBS roll off of its own portfolio. Whereas in other times of economic turmoil like during the pandemic, they were buying MBS to keep rates low. Kelly, Exactly. Diana, thank you. Appreciate it. Diana Olek, highlighting that corner of things for us. By the way, we might also still have the sound from Jamie Dimon this morning when he was asked about what could happen in the bond market and whether the Federal Reserve might be next to step in. Take a quick listen.
- [14:18]
A
The big market makers could intermediate more in the markets. If they don't, you know, if they do spread will come in, they'll be more active traders. If they don't, the Fed will have to intermediate, which I think is just a bad policy idea that every time there's a kerfuffle in the markets the.
- [14:33]
B
Fed has to come in and intermediate. Now, Steve, all of this said, the 30 year bond has gone from about 495 to 485 this afternoon. So we've seen this shift towards a better feel both in the bond markets and obviously in equities as well.
- [14:46]
D
Can I just put some context around what Jamie was saying, which I think is important. What he's talking about is this regulation, one of the regulations that requires banks when they own Treasuries to essentially reserve against them. It's the SLR or the supplemental leverage ratio. And what he is saying there, if you would get rid of that, the banks could come in and provide essentially more balance sheet to intermediate the kerfuffle in, that's the word he used, kerfuffle in the bond market and the Fed would not have to step in. That leads me to two good points. Can we make a couple of good points, please? The first one is the inflation numbers were down today. The pie and the CPI was down yesterday. If you're going to go into this situation and I have no reason to think that either Michael or Nancy have the wrong thing, you better off starting from a lower base. If you look at other times where the Fed has acted preemptively in general, and we'll talk about this more on Monday, it is cut when inflation was low, that allows it to act preemptively. So if we do get it, I think, I think the bar is low for the Fed. The other thing we don't talk about.
- [15:53]
B
I think the bar is low for them to act like.
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D
But you need to have some bar clearance. I guess the other words you need to show some declining unemployment rate. The other thing, and I talked about this with Neel Kashkari this morning on air at Squawk Box the Fed. I keep calling people who are wearing overalls and holding wrenches because they're on the innards of the financial plumbing system. And I'm asking them, is there a problem? And in general they're saying no. And I wonder if one of the reasons, and this is what I talked about with Neil is the Fed has a bunch of existing liquidity programs already out there. And if you think about liquidity, it's a real thing, but it's Also a state of mind. Do I have liquidity? That's my first question. Does my customer have liquidity? So it's that other question, does my customer have liquidity? That creates my concern for my own liquidity.
- [16:45]
B
But in other words, you think because the banks sort of know the Fed's there, they're willing to keep those pipes.
- [16:49]
D
Going in a variety of existing programs. There's the, there's the sfr, the. I can't even what it is anyway, it's the repo facility special. Repo special is not right. But it's a repo facility. That's one. There are existing swap lines, so these things are there and the Fed doesn't have to make a grand announcement that they exist. I wonder if that's keeping some lid on, on, on, on the volatility inside some of these things. Look, these markets are going to adjust to a new equilibrium of the new trade situation of America. And that may mean that the dollar is lower, it may mean that bond yields are higher because, you know these investors. That's something the Fed can't get in the way of. It's the transition that if it's clogged can create other realities around it that we may avoid. And maybe I just jinx the whole darn thing.
- [17:38]
B
Maybe. But Nancy, let me give you a final word here. As we go into the weekend, can we go into the weekend and say, you know what, stocks were up on the week, things calm down Friday afternoon, or do investors need to go into the weekend and the White House thinking no, 447 on the 10 year is still, still a problem.
- [17:54]
E
I think we still, this is a period all of uncertainty has stopped going up. It is still very, very high. I don't think it's a time to be complacent. I think we all have to be ready for the unexpected. I worry about certain parts of the economy, the auto sector in particular. I worry about they haven't made any money in seven years, haven't hired a buddy in seven years. Sales are now going to come down sharply. Input costs are at risk of going up sharply. And so there are things to worry about. I worry about the world. Despite the decline in the dollar, Em ems aren't actually benefiting as they normally do in part because of China. So no, I don't think this is a time to be cool and calm. I think we have to be on our edge, keep doing the analysis. I've never sent out so many reports in my life in one week. And so at the end of the day we have to stay pretty attuned to what's going on. So I'm not going to much.
- [18:45]
D
Michael, my favorite question on the show is tell me I'm wrong. Should I be more worried about.
- [18:51]
A
I would actually amplify your point when it comes to the Fed in that, you know, they have shown in March 2020 in the Silicon Valley bank crisis that if markets start to show that they're just not functioning well, you know, it's not about the level, it's about whether the market is functioning right. The Fed has shown that it has stepped in and just knowing that the Fed will step in if things can get bad enough helps placate investors. That said, things probably need to get quite a bit worse right before the Fed would step in.
- [19:27]
D
So we have all that.
- [19:29]
A
There's, there's, this is not time for complacency for sure.
- [19:32]
D
We have all that Dodd Frank stuff that we did that added additional capital to banks and other supervision for sure. That might also buttress the banking system if there were and we're not there folks. But if there were a situation like that.
- [19:43]
B
Let me. Mike, button it with you as the inflation linked expert here. So 10 year tips yield is now at about 0.3%. Do you think the sell off in bonds is actually because foreigners are selling our debt or do you think it's because inflation expectations are so much higher and even just like traditional financial players, hedge funds, households, that's where the selling pressure is coming from.
- [20:02]
A
Well, we don't have evidence yet that foreigners are selling bonds but that's certainly, you know, I think a motivation for others to sell because they're worried about foreigners selling. The markets also worried about the fiscal outlook again given that the House and Senate seemed on trajectory to pass a bill that adds trillions to the longer term deficit without much spending cuts. The market is starting to worry about the fiscal outlook and then just the plumbing, the pipes. As Steve alluded to, the market's worried about balance sheet at dealers and the ability to handle this sort of selling. We're seeing that dislocation already starting in the TIPS market for sure. We, we think levels are moving away from those consistent with fundamentals. Yeah, we do think that really long term real yields, so 30 year real yields near 3% are fundamentally attractive and we do think that that's. There's value here but you got to be able to withstand the volatility.
- [21:05]
D
Excellent point is like me when I'm playing music, just one more song.
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A
One after always trying to.
- [21:11]
B
One more song Guys, thank you. Nancy Lazar, Michael Pond, we apprec. It's Steve, a pleasure as always. And despite the big swings we've seen over the past five days, the Dow's on pace for its best week since January. The S and P and the Nasdaq, it would be their best week since November. And our next guest says while the markets are wild, his clients are remaining calm. Jamie Cox is managing partner at Harris Financial Group. Jamie, this was a lot more provocative a week ago. Welcome, for sure.
- [21:36]
A
Good afternoon, Kelly. How are you?
- [21:38]
B
Do you think your clients who have been, it's not like you were calling them up. They were calling you and they were saying, we want to get in. And this was on Thursday and Friday as we were down 6%.
- [21:47]
A
I think a lot of people are trying to take this in stride. You know, the problem is, is throw out the models throughout the playbook. There is no, there is no plan for this. I mean, unless you're inside the president's head, you don't know when this is going to end. And so most of the clients are saying, okay, there's a market disruption. What can I do to take advantage of it? And so I'm seeing a lot of that. A lot of people want to do if they have retirement accounts they've got, they see dislocation in some of their favorite stocks. They're doing in kind Roth conversions. They're doing what they can do to take advantage of the price dislocations while they exist. In addition, I've seen a lot of people come in and step in and buy. They've been wanting to buy some of those tech stocks. They felt like they were terribly expensive. Now's their chance. But I will say, Kelly, the majority of people are just sitting on their hands just waiting to see and letting more information come in before they start making, you know, big decisions with their portfolios. You know, when you, when you, when the absence of information, in the absence of really understanding what's going on, a lot of, you know, really smart people will just sit and wait. And if you're a long term investor with portfolios that are balanced and diversified, that's largely the right decision for you. And I think that's what most people are doing right now.
- [22:55]
B
Yeah, I hate to get super in the weeds here, but when you say in kind Roth conversions and stuff, I think are there other kind of tactical moves people can make here? Some were asking about switching out of 1s and P fund into another to kind of capture some of the losses. But you got to Be careful with the Roche rule and that kind of thing. Any, any other tactical advice like that you can share?
- [23:12]
A
Well, the kind Roth conversion is probably one of the best, I mean you can. And the reason is not to get into ways, but just to explain it briefly. If the stock, your favorite stock, Microsoft, Apple, whichever it is, is down 10%, 20% and you can convert that stock in kind from a traditional IRA to Roth, as the stock reappreciates in the Roth ira, you may have a sneak tax free value over to the Roth ira. So it helps to offset the tax cost of doing the conversion. So that's, that's one of the principal ones that I'm working on right now. But apart from that, it's just if you have some, some, some, some stocks that have done pretty well, utilities or things like that to sort of help buttress your portfolio, you have an opportunity to rebalance. That's a responsible thing to do right now. When you see asset prices drop sort of in concert, sort of a synchronized downturn in all asset classes, they can't all be priced correctly. So you find the ones that you know that have the most had the better chance of having earnings growth in the future and you buy them and the other ones that you sold, you're likely to do better.
- [24:12]
B
We got to go, Jamie. But would you have clients buying bonds here, 10 year, 30 year bonds? I mean I, I almost see this cascading effect where just the US Is going to buy the debt. Maybe it's a mini stimulus plan that can benefit from the interest it replaces foreign buyers if in fact they are going to vanish. But that's only going to be the case if the concerns that we have about inflation and the deficit that Mike just outlined are not going to remain front and center.
- [24:33]
A
I don't see people running, you know, racing to buy Treasuries. Not at this point, no.
- [24:38]
E
All right.
- [24:39]
B
Doesn't sound like you're recommending it either.
- [24:41]
A
No.
- [24:42]
B
All right, Jamie, thanks. Appreciate it.
- [24:44]
A
Thank you.
- [24:44]
B
Short answer, right to the point. Jamie Cox with Harris Financial. Coming up, the KB Bank ETF is down today, in fact on its track, on track for its sixth losing week in seven. But one of its components, bny, is set to end the week higher after reaffirming guidance today. The shares had their worst week since the pandemic. After the break, we'll speak with the CEO Robin Vince, fresh off the earnings call about the quarter, the consumer and where rates go from here. As we head to break, take a Look at the 10 year's incredible run over this past week. Remember last Friday we hit a low of 3.86%, lowest since October. We hit almost 4.6 earlier today. 4,592. We're back with more after this.
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A
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- [26:59]
B
Welcome back. Shares of BNY, the corporate band of bank of New York Mellon, are higher on stronger than expected earnings today. They reaffirmed full year guidance. They're quote prepared for a wide range of macroeconomic and market scenarios as the outlook has become a lot more uncertain. Let's bring in Robin Vince. He is the CEO of bny. Robin, it's great to have you here. Welcome.
- [27:18]
C
Great to be with you Kelly. Thank you for joining us on earnings day.
- [27:21]
B
Listen, maybe you can give us the view from where you sit. Are we in a recession? Close to 1. What do you think?
- [27:29]
C
I don't think we're in a recession necessarily today. But you have. You never know that until you actually look back with the benefit of hindsight. Sort of a rearward looking measure. The way I would think about it is the facts of the economy have actually been pretty good so far this year. But there are a Lot of anecdotes, leading indicators and surveys that suggest that sentiments deteriorated in a pretty meaningful way. True at the CEO level. That matters for confidence around doing deals, building factories, investing, and true at the consumer level as well. And that matters for spending and comfort in terms of how people conduct their lives. And so those things have diverged, the facts have diverged from the sentiment. And as time goes on, particularly if it takes a while, then we have the risk that actually the facts will move down to meet the sentiment. If this was to be resolved quickly, we'd have a better chance that the sentiments would move up and support the facts.
- [28:28]
B
Do you guys have to follow the supplemental leverage ratio?
- [28:32]
C
So we do. All banks are subject to the supplemental supplementary leverage ratio. It's not actually our binding constraint, but it is the binding constraint for some. But we've made the point over the course of time many times in D.C. that we think the supplementary leverage ratio is an ill advised ratio. Maybe it was born out of the financial crisis at a time when there was a lot of anti bank sentiment, which was understandable at the time, but the people who pay the price today are market participants. The treasury market is less well supported because of the existence of that ratio, in our opinion.
- [29:09]
B
So would this be, you know. And you see exactly why I'm asking the question. Steve Liesman just raised this, but do you think the Fed might effectively say, okay, it could be time to loosen the rules here. We'd love to see more domestic banks come in and support the treasury market?
- [29:23]
C
Yeah, I think that the essence of this is we want a great economy here in the United States and for that matter around the world. In order to have a great economy, we need vibrant capital markets. And in order to have those, we need great sponsors of capital markets, including the big banks who can provide this critical accordion capability to absorb supply in the treasury market. And if you look back at what's happened this week, and you were just commenting on the fact that we've seen 10 years spike up just today to forfeit 58, they've retraced a little bit since then. But it's the ability for banks to absorb supply that helps to narrow bid office spreads, that helps to be able to keep liquidity in the bond market. And so what we've seen all across markets this week is we've seen widening bid offer spreads, we've seen reduction in liquidity in the depth at the top of the order book all across the board. And it's not the best thing for markets when that happens. It's certainly not the best thing when it happens in treasury markets.
- [30:21]
B
Right. And you know, Robin, you guys are the number one global custodian, number one, you know, clearing firm for broker dealers. You know, your top RIA custodian, you're a top global provider. So normally a lot of this stuff is kind of quietly humming in the background and maybe a great business for you. Not this week. So can you tell us, as far as you know, whether you've seen kind of a little bit of a seizure in these traditional functionings of the market, especially some of these international flows or no?
- [30:48]
C
Well, I would not use the word seizure. In fact, we've seen things operate completely normally in terms of the rails and the infrastructure. Infrastructure of the market. And that's good news and that's very important. What we've seen is we've seen a reduction in liquidity in the market in terms of the trading side of things. That's a simple buyers and sellers. And so if you can create more buyers in a market and you can create more people who can step in for a period of time to the buying market, that's helpful for liquidity. And that's, I think, why thinking about what is in the interest of the United States have a vibrant bond market, vibrant capital markets. That's a reason, I think, to take a little look at the leverage ratio. But it's not just about that. Ultimately we have a whole bunch of platforms. We want to support the market as do the other large banks in the United States. And we can do it. And so it's this is about unleashing the advantages that large capital markets players can bring to creating great deep markets in the US Well, I'm reassured that.
- [31:48]
B
This is kind of a garden variety liquidity of operation, you know, and not something more serious, at least as of now. But we take your points on all fronts. Robin, thanks for joining us today. Appreciate it.
- [31:59]
C
Good to be with you, Kelly.
- [32:00]
B
Thank you, Vince. CEO of BNY Shares are up today. Markets hanging on to its gains. Coming up, Silicon Valley had high hopes for a more relaxed regulatory environment under Trump 2.0. It hasn't quite panned out yet. We'll look at the headwinds they face and why it could give China an edge. Details after this.
- [32:23]
A
And now a next level moment from ATT business.
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C
Say you've sent out a gigantic shipment.
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A
Of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and international sleep day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
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F
Oh, I'm not.
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E
Switching my team to some fancy work.
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B
Platform that somehow knows exactly how we work.
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F
And its AI features are literally saving.
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E
Us hours every day. We're big fans. And just like that, teams all around the world are falling for Monday.com with.
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E
Workflows, it's the work platform your team will instantly click with. Head to Monday.com, the first work platform.
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B
You'Ll love to use.
- [33:26]
E
Welcome back to the Exchange. I'm Pippa Stevens with your CNBC news update. A hearing is underway in the case.
- [33:31]
F
Of a Maryland man who the Trump administration said was mistakenly sent to El Salvador.
- [33:36]
E
The federal judge on the case calling.
- [33:38]
F
It, quote, extremely troubling that the Trump administration is not providing details on the.
- [33:43]
E
Man'S location after the Justice Department failed.
- [33:46]
F
To provide that information by the 11:30am deadline, the judge said.
- [33:51]
E
A Los Angeles judge is set to decide today whether to allow prosecutors to.
- [33:55]
F
Withdraw their resentencing motion for the Menendez brothers, who were convicted of murdering their parents in 1989. The new district attorney has opposed their release, saying Eric and Lyle Menendez have.
- [34:08]
B
Not admitted to the lies they told.
- [34:10]
F
About why they killed their parents.
- [34:13]
E
And Prince Harry made a surprise visit to victims of the war yesterday at an orthopedic clinic in western Ukraine. A spokesperson for the clinic said the Duke of Sussex visited the facility as part of his work with wounded veterans. The hospital provides care and rehabilitation for wounded military personnel and civilians.
- [34:31]
F
Kelly, back to you.
- [34:32]
B
Pippa. Thank you very much. Coming up, navigating the tariff turmoil in style, an inside look at one business trying to strike a balance with their hybrid manufacturing model. Courtney Reagan is at a denim factory in LA Los Angeles High Court.
- [34:47]
E
Hi Kelly. So Sitex founder and CEO Sanjay Ball. It took him three years and $25 million, but he brought some manufacturing back to the United States. He's willing to show others, but he needs something from the Trump administration, too. I'll explain coming up.
- [35:09]
B
Welcome back. It has been a wild week for stocks. For retail in particular, the XRT hit its lowest level in a year and a half on then surged after Trump's 90 day tariff pause announcement. Then we got today's terrible consumer sentiment number and news that China is raising U.S. tariffs to 125%. It's fractionally lower, down about 3% negative on the week. And firms of all stripes are sorting out their responses to this trade turmoil. One company's manufacturing model could offer some guidance here. Courtney Reagan is in Los Angeles with more I court.
- [35:41]
E
Hi, Kelly. So, Sanji Ball. He is the CEO and founder of cytax. He wants to Trump administration to use what he's done here in Los Angeles as a playbook to help others bring garment manufacturing to the United States. Now, here in this facility, they make about 12% of the company's total orders for companies like Ralph Lauren, Levi, Madewell, J. Crew, New Balance, and others. But 88% is still done in Vietnam. It's a hybrid model. While they plan to scale up to 20%, there's only so much they can do.
- [36:15]
B
100% is utopia.
- [36:18]
D
If they believe in a blended model, there is an unlock there. But if they look at it as a standalone model, there's no opportunity.
- [36:29]
E
It's three and a half times more costly to make this identical pair of denim here in LA than it is in the factory at Vietnam, mainly because of labor. Labor starts at a wage of $16.50 per hour here, but it's 90% more than $1.50 per hour in Vietnam. But here's how the hybrid manufacturing model math can work. Ball says if 80% of SciTech's production is done in Vietnam at a cost of $20 per pair of jeans, and the remaining 20% is done in the US at a cost cost of $70, the average production cost is 30 bucks. But the formula falls apart under Trump's new proposed tariff rates. Now, ball currently pays 18% on goods imported from Vietnam that are apparel. He pays an additional 10% on the material if it's just the material imported. He even says he could take on an additional 10% if that's what the universal tariff ends up being. 46%, however, over Kelly is an existential crisis.
- [37:33]
B
So, Courtney, what's interesting about this is they're threading the needle, trying to find a way to do some domestic manufacturing, make it competitive, but they still have to ship the product back and forth a bunch of times. Yes.
- [37:44]
E
Is this so fascinating? So a lot of the cotton actually originates from right here in the United States, but there's no denim mills that exist in the United States anymore that can turn that cotton into fat fabric. So the cotton gets shipped to Vietnam. Sitex owns its own mill there. It then creates the fabric. Some of that fabric goes and stays in Vietnam to that factory to get cut and sewn into the finished product. But the rest of it gets sent here, back here to be cut and sewn. So it's US Cotton. It gets milled in Vietnam and then potentially back here to be made. And he said that part just cannot be done back in the United States.
- [38:20]
B
All right, Courtney, thank you very, very much. Much love getting an inside look right now at everything that's happening. Courtney Reagan, our next guest, speaking of inside looks, is still trying to figure out a plan B for her business. She says Trump's latest tariff moves have her exploring all kinds of options, including maybe shutting things down altogether. Let's bring in Megan Lamoth. She's Lamos.
- [38:38]
F
Lamoth.
- [38:38]
B
Lamoth, thank you. She's the CEO and founder of the women's golf apparel brand for a golf. Megan, welcome.
- [38:43]
A
Thank you.
- [38:43]
F
Thanks for having me.
- [38:44]
B
You've got a lot of different exposure points here, but top level, you make stuff, I imagine, internationally, you have to bring it here. Tell us the impact so far of what's all been going on.
- [38:51]
F
Yeah, we do. I mean, last year, you know, I'm really proud. We have an amazing women owned factory here actually just down the road from you all here in New Jersey. Last year we made about 40% of our goods here. But truly, you know, when we look at sourcing, we have to go where capabilities are a lot of times. So more complicated things have to have been sourced internationally. We talk about, you know, techniques like bonding, applying laces. There's just things that we can't do here. We do not have the machinery. And so it's been this really complicated, you know, sourcing where we can in the right places to get the right products.
- [39:22]
B
So do you do China? Do you do Vietnam? All of it.
- [39:26]
F
We source primarily in China, Sri Lanka. We've done stuff in Portugal and in Korea. And Korea was an amazing place for us for a really long time. We had the benefit of importing for Korea actually duty free for a very long amount of time as long as the componentry and the raw materials were made in Korea.
- [39:41]
B
How much of a cost, exposure or potential increase are we talking about? And can you give us an example of some of your products?
- [39:45]
F
Yeah, I mean, you know, the last 10 days has been we've been on the edge of our seats. I mean, truly. So, you know, I had a product that was supposed to leave the factory at $38 cost of goods when we would have landed it and, you know, maybe in January, it would have been a $47 give me $180 retail. Right now it's landing at $111 and $400 retail. And that's just not sustainable for any consumer, so.
- [40:07]
B
Meaning because the cost went up significantly, but you're trying to raise the price even more in order to kind of keep the margin and make it all.
- [40:14]
F
Yeah, I mean, I don't think any other small business has any other opportunity other than. Rather than kind of increasing our costs. So, you know, the question is, how can we, you know, I think we have to probably eat it at this point. We have all these orders, they're ready to go out. We're a golf company, so really heading into the main golf season. So what can we do? We have to eat it, or we can try to sort of near shore things landed in Canada and then bring them in piecemeal just to manage our, you know, our financials.
- [40:38]
B
And these products, where can we find them in golf clubs? They wouldn't be any of the presidents, would they?
- [40:45]
F
They're all over. Yeah, actually, you know, former Secretary of State Condoleezza Rice. Where's our stuff? You can find it all over. Golf is primarily an interesting industry. 62% of our products actually are bought on golf course, on, you know, facilities where you go to play. And so we're all over at about 400 different clubs. We've partnered also with Golf Galaxy and PTO Superstore in the past, but it's really primarily a wholesale model. So whatever the consumer sees, the real pain of it is that we have to sort of double mark up. Right, because we really have to supply to these wholesalers. And that's where the real pain comes from. The end consumer sees the worst of it. But since 62% of our business is in this wholesale business, you know, that's where we really have to cover our margin.
- [41:24]
B
So what do you do now? I mean, because. Because now, okay, there's 10%, like a Sri Lanka that has a 10% tariff. China, of course, now is. Is even higher. So if that's still a major. So. And we don't know for how long this will be the case. Are you ordering product now for kind of later in the year?
- [41:37]
F
We've actually. So the first half of the year, you know, we operated normally. Right now we're actually just trying to figure out what to do. We had a really productive conversation with our partners in Sri Lanka and in China. And I think what's really great about this whole experience is we've all kind of come together. I think there's a piece of everybody that understands we're in again, an unprecedented time. Nobody wants to hurt anybody else's business. So we're talking about moving our production to Sri Lanka, having our Chinese, you know, friends kind of partner with our intellectual property. We have an existence there. Move it over. Dual source. But truly, I think, you know, it's good that this is happening after a Covid world. Covid was a time where we really had to get incredibly nimble and creative. In a way, it was a little bit of a boot camp to where we are now. So I think if you're agile and you can kind of have the cash flow to kind of keep going, this is the only sort of way forward. But there's been all sorts of. I've talked to a lot of apparel CEOs. There's all sorts of interesting ways to kind of.
- [42:29]
B
Of fixes and other kinds of effects. I mean, you mentioned that even some of the US courses are seeing a drop in Canadian kind of visits membership, and that's affecting their. Their business and what they're ordering.
- [42:39]
F
We got an email actually, that one of our clubs, it's been a loyal club of ours, has to cancel their $5,000 order. Normally a fall order comes in. It's great. And, you know, she's just not seeing her Canadian, you know, membership return. And that's true. Pockets of South Carolina, in the Southwest, in California. So totally different.
- [42:58]
B
Would you literally pivot or shut down the business at this point, or is that too, you know, too dramatic? I know it's hard, like talking about your baby, but.
- [43:05]
F
No, it is. And it's hard because it's named after my daughter. And there's this whole show her how we can strive. And I think Covid made us really resilient. We're in this place of like, how can we get creative? But we absolutely did. I mean, absolutely had a conversation with my lawyer, my corporate lawyer, and you know, she got on the call and said, oh, my. You know, you're not the only one.
- [43:22]
B
One.
- [43:23]
F
I've had this conversation a lot. She's an apparel attorney and a lot of people are talking about, we just can't absorb this margin. It can't happen. You know, we're giving the product away and the consumer that jump in price over time. You can get a consumer there, but it's just. It's impossible.
- [43:39]
B
We appreciate you sharing it, Meghan. Keep us. I'm very curious, obviously, to see what happens.
- [43:43]
F
Me too.
- [43:44]
B
As we follow the news day by day, we'll be thinking of you, Megan. Thanks So much for joining us today. Megan lamotte of Foray Golf. Take a quick look at the markets. It's not quite at what it was earlier this week, but we have seen the Dow spike higher in just the last couple of minutes here. It's up about 668points. There is an FTSE headline. Want to draw your attention to there reporting that Boston Fed President Susan Collins has said the Fed is quote, absolutely ready to help stabilize the market if needed. And that is enough to kind of send us a leg higher. As mentioned on stocks, also do a quick check here of bond yields. This message is really aimed at that part of the community as well. The 10 year last check was still over about 4 and a half percent and there we are at 445. So it is calming things down a bit for 85. Still on the 30s. Before we go to break, check out the shares of the biotech companies as well. Sertara and Schrodinger are spiking after the FDA said they'll phase out animal testing and drug development. These companies make the software that supports drug RNA including using AI to run simulations. That will now be the new way the FDA relies on these trials. Both firms up 15 to 20%. The exchange should be back with more right after this. Dow's up almost 700 points right now and we've got a news alert on GM to get to Philip Bow with that story. Phil, what's happening?
- [45:08]
A
Kelly, General Motors according to Reuters has made the decision that it is going to temporarily suspend production of its Bright drop electric delivery vans which are made at a plant up in Canada. They are citing or at least the article according to Reuters is citing, the reason being slow sales for the electric delivery van. And that's true relative to the Rivian electric delivery vans that are run by Amazon which more than 1300 delivered in the first quarter. According to auto data, General motors only delivered 101 bright rep electric delivery vans. But add in the fact that you've got the tariff issues that are front and center and General Motors has made the decision that for now it is going to suspend that production and temporarily halt production in Canada. I think about 1,200 jobs are going to be impacted because of this decision from General Motors. By the way, Kelly, we have reached out to General Motors waiting for a statement from the company.
- [46:04]
B
But we are to presume that it wasn't a demand issue, Phil, for electric vans, that it was because of the tariff uncertainty.
- [46:11]
A
Well, slow sales, whether or not that's demand or if that's the fact. Well, that's what they're citing, according to Reuters. But I mean, do the comparison here. You delivered 101 bright drop electric delivery vans in the first quarter, and Rivian delivered more than 1300. Clearly that market with Amazon. And Amazon is an investor in Rivian, which is why they order the Rivian van and they use the Rivian van. The electric delivery market is expected to pick up in the future, but as of right now, Bright Drop is not a major player within that market.
- [46:44]
B
Absolutely. Great. But those numbers do tell that maybe this is a competitive story more so than a tariff one. We'll see. Phil, thank you. We appreciate it. Philippeau with the latest from GM there. The mega cap tech stocks, meanwhile, they've been caught up in the recent market volatility, down around 19% since the president took office. But up today. All of this despite tech CEOs efforts to court the President's favor. Deirdre Bosa has more in tech. Check Deirdre Kelly. So tech really flipped the script for Trump 2.0. They played nice.
- [47:14]
E
You saw Visits to Mar a Lago.
- [47:16]
F
Millions of dollars in donations to Trump's.
- [47:18]
E
Inauguration, hundreds of billions of dollars in American manufacturing projects. Yet they're facing arguably more uncertainty and hostility than they did during the previous administration.
- [47:29]
F
For Apple, there's no indication that Tim Cook's playbook will work this time around.
- [47:33]
E
The company reportedly airlifting 600 tons of iPhones from India to beat the tariffs.
- [47:38]
F
Shares are down 15% since Trump was sworn in.
- [47:41]
B
Meta and Alphabet.
- [47:42]
F
Meanwhile, they stand to lose control of.
- [47:44]
E
Some of their most critical and lucrative businesses.
- [47:47]
F
Monday, the FTC's antitrust trial against Meta.
- [47:50]
E
That kicks off, which could result in the company divesting Instagram and WhatsApp. Remember the DOJ?
- [47:55]
F
They want Google to sell off its Chrome browser.
- [47:57]
E
Then there is AI, the biggest technology.
- [47:59]
F
Shift in at least a generation.
- [48:01]
E
Tariffs threaten to raise input costs for data centers. And even if AI spending is reaffirmed, as it has been by the likes of Andy Jassy and Sundar Pichai over the last few days, they're now getting less bang for their capex bucks. Raising the question, Kelly, does American tech now risk falling behind just as demand is exploding?
- [48:20]
F
And could it hand China the edge?
- [48:22]
E
Companies like Huawei, ByteDance, Deep Sea Robotics companies, many of them are moving aggressively to scale AI. And they are backed by state support.
- [48:32]
B
So the stakes here, Kelly, they're only rising. Is it a philosophical difference or is it too soon to tell?
- [48:40]
E
A philosophical difference in. I mean, the difference is that I.
- [48:44]
B
Think tech thought they were going to get a lot more out of this.
- [48:46]
E
Administration, especially as the Trump administration filled.
- [48:50]
B
The White House with people from Silicon.
- [48:52]
E
Valley like David Sacks, like Marc Andreessen, like Elon Musk, tech leaders, mega cap CEOs.
- [48:59]
F
They played nice, maybe thinking that they'd get some relief, but that is not.
- [49:02]
E
At all the way it's going. And you know, the tariff picture makes.
- [49:05]
F
That that crystal clear. And China looking very opportunistic, may take the chance to really give their own companies a boost.
- [49:11]
B
All right, Deirdre, thanks very much today. We appreciate it. Deirdre Bosa, check out the Dow one more time, up 721 points on this potential word about the FTSE from the FTSE, about the Fed standing by to support markets. We'll have much more as we pick up coverage on the other side of this break. I'll join Don Chu for Power Lunch right after this.
- [49:37]
A
Football season is back. Sports business expert Mike Ozanian breaks down the latest numbers. The biggest and most profitable sports league in the world, exclusive NFL team valuations. September 4th CNBC.