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Stocks on Track for Worst Week Since 2008; Turkish Soldiers Killed in Airstrike; Democrats Make Final Push for South Carolina. Aired 9:30-10a

Aired February 28, 2020 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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[09:30:04]

POPPY HARLOW, CNN ANCHOR: There is the opening bell on Wall Street. Markets, seconds away from opening, just one day after the Dow fell a remarkable 4 percent.

JIM SCIUTTO, CNN ANCHOR: CNN's Alison Kosik at the New York Stock Exchange, as she has been all week.

Alison, futures looking at another drop today. Do traders see a bottom here? What are they looking for?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know, a lot is just unknown at this point. One thing is clear, though, anxiety is just gripping Wall Street and continues. You know, we did see some relief in the early -- the pre-market trading when an idea was floated of some sort of global coordinated central bank action that could happen over the weekend, i.e. a rate cut, but that relief looks like it has fizzled out as the Dow is still beginning several hundred points lower.

You know, heads are still spinning about that 1,200-point drop on the Dow, not just because of the amount of points it dropped, but because of the speed at which it took for the Dow to go from a record high to a correction yesterday. It took just ten trading sessions.

If you're keeping score, the Dow has lost a whopping 3,200 points this week. For all of the major averages, $3.4 trillion of stock market value has literally been wiped out.

One trader puts it this way, saying, there just doesn't seem to be a lot of confidence that the U.S. has any -- has any control or is prepared for the coronavirus, even if officials say they are prepared.

Jim and Poppy.

SCIUTTO: That's a big question there. Investors, at least, not convinced that the government is ready for this.

KOSIK: And that's at the core of this.

SCIUTTO: Alison Kosik, at the stock exchange, thanks very much.

KOSIK: Yes.

HARLOW: Let's talk about all of this with CNN economics commentator Kevin Hassett, of course, formerly the chairman of the White House Counsel of Economic Advisers for President Trump.

Kevin, so good to have you.

You read Goldman Sachs' note on Wednesday. They're saying, quote, a more severe pandemic could lead to a U.S. recession.

How imminent do you think that may be?

KEVIN HASSETT, CNN ECONOMICS COMMENTATOR: Right. I think we're right at that moment where we just don't know.

One thing I did last night as I was getting ready to be on the show is I charted the equity market during SARS back in 2002-2003 and the equity markets now. And if you look at it, then we're following almost exactly the same path.

And the bad news is that SARS ended up down about twice as far as we are right now --

HARLOW: Right.

HASSETT: Before it was clear that we had a cure, or that, you know, that we could contain it. And then once that became clear, then the market took all of that space back.

HARLOW: Yes.

HASSETT: And so to go out a couple hundred days from the discovery of SARS and markets were up from where they were when we learned it existed.

HARLOW: Yes.

HASSETT: And so -- so the question is, do we get ahead of this one, too? And if we do, then I think there will be a happy end here and, you know, they'll be clapping again. Right, we saw them opening with clapping, but I don't think there will be any other clapping today at --

HARLOW: Yes, I think that's only the opening bell.

HASSETT: Yes, that's right.

HARLOW: You know, this is not clapping at the market.

But it's important to put it into context for people because there have been 22 market corrections since November of '74. Only four of those have actually turned into bear markets. Is this going to be a bear market?

HASSETT: It depends on whether the coronavirus is contained, you know, because right now the kind of things we're hearing are giving us negative news about that. We're hearing that people are getting it a second time.

HARLOW: Yes.

HASSETT: We're seeing new cases spread all over the place. And, you know, even places like Iran, where it's pretty warm. And so if basically people are able to spread it outside of the flu season, then this has legs into the summer and you're absolutely looking at a recession globally.

HARLOW: Yes. Wow.

HASSETT: Yes.

HARLOW: OK. So I want you to listen to what your good friend Peter Navarro told me when he was on with us last week. Of course, one of the chief economists now at the White House. He -- this was his answer when I asked him about Apple saying that they're going to miss earnings projections because of this.

(BEGIN VIDEO CLIP)

PETER NAVARRO, WHITE HOUSE TRADE ADVISER: Well, the good news about Apple is that it's kind of sui generis. It's one of the most heavily dependent companies on China both for its production and some of its growth. So we don't see Apple as the norm.

(END VIDEO CLIP)

HARLOW: But since then you have the warnings on earnings from Microsoft, from Coca-Cola, Alcoa, Marriott, you name it.

Is this sui generis? Is this a one-off?

HASSETT: No, absolutely not. Like -- so, again, think about it this way. Airline stocks are going to have a lot of trouble.

HARLOW: Yes.

HASSETT: Oil prices are way down because there's depressed economic activity and so there will be less drilling and mining. And, you know, again, I said on your show the last time that I'm looking at taking about a percent off of the first quarter. Right now GDP now has the first quarter, thank goodness it started strong before all this came out, you know, almost at 3 percent. And so I think that we're still looking at, even with all the bad news, a first quarter that's not in recession territory. So if a recession starts, it's really got to start in the second quarter.

HARLOW: So, OK, but, Kevin, look, everything you've said about what we're seeing with the markets is all having to do with coronavirus. But when the president was asked about it this week, he pointed multiple times at the Democrats and their performance on the debate stage.

Here's one of those moments.

(BEGIN VIDEO CLIP)

QUESTION: Are financial markets overreacting here?

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I think the financial markets are very upset when they look at the Democrat candidates standing on that stage making fools out of themselves.

(END VIDEO CLIP)

[09:35:01]

HARLOW: Is this a reaction to the Democratic debate?

HASSETT: You know, the history of this is something I studied is that you tend to get big swings in equity markets as the presidential election gets closer. And with Bernie --

HARLOW: Yes, but, Kevin, the market fell 2,000 points before the debate.

HASSETT: No, this is -- yes, yes, no, I am responding --

HARLOW: OK.

HASSETT: But -- but it will be normal.

My point is just that -- that -- so let's just say I stipulate that this is a coronavirus moment --

HARLOW: OK.

HASSETT: That if we have a typical equity market response to the presence of an election, just the uncertainty of it, then you're looking at say another ten points down from here. And so it's -- and so the election effect is very common going all the way back to the civil war. You see that market -- everybody sort of takes risk off as an election approaches.

HARLOW: Yes.

HASSETT: And I don't think we've necessarily seen that yet --

HARLOW: But you're not --

HASSETT: But I think the president's right that it's going to happen this year at some point.

HARLOW: OK, but you're not saying it's because of how the Democrats debated. I get it.

HASSETT: Right.

HARLOW: Let's move on from there because Goldman Sachs' note and warning this week also said, quote, if the coronavirus epidemic materially affects U.S. economic growth, which you're saying it will, at least a point off this quarter, it may increase the likelihood of a Democratic victory in the 2020 election.

Do you think that this could hurt the president's re-election chances?

HASSETT: You know, I'm not a political expert. The one -- the one thing I was thinking about, though, just as an economist, is that what we're seeing in markets is flight to safety. And the flight to safety is going away from equities and loading up on bonds and so on.

HARLOW: Yes.

HASSETT: And I just wonder if flight to safety doesn't have an impact on the Democratic primaries. And then, you know, I'm not exactly sure who the safest one is, but, you know --

HARLOW: Yes.

HASSETT: Maybe it's Joe Biden because he was there for so long and so on.

HARLOW: Huh.

HASSETT: But I would expect that maybe, if these are troubled times and they have a political effect, it will be that it will reduce the risk preferences of people out there who are waiting to maybe used to take a big swing for this guy but now they're going to run back to this other guy who's safer.

HARLOW: Are you -- are you saying a Joe Biden presidency is less risky than a Trump presidency?

HASSETT: I'm not even comparing the two.

HARLOW: All right.

HASSETT: I'm talking about the current Democratic primary.

HARLOW: Within --

HASSETT: So -- I'm saying --

HARLOW: OK.

HASSETT: So I bet you that flight to safety is one of the stories you guys talk about --

HARLOW: Well, we'll see.

HASSETT: After you watch the elections in the next week.

HARLOW: You've got bond yields, you know, Treasury yields at 50-year lows.

HASSETT: Yes.

HARLOW: Quickly, quickly, 30 seconds, they're telling me, you saw Kevin Morris (ph), the former Fed board member, write in "The Journal" this week that basically we need a coordinated effort among central banks, led by the Fed, to get in front of this. That's a big ask.

Is that what we need to terms of rate cuts, coordinated global rate cuts?

HASSETT: You know, I disagree with my Hoover Institute colleague Kevin. I think that what's happening here is we've had a negative supply shock. And when you have a negative supply shock, that reduces output, but it increases inflation because, you know, basically the little bit of stuff that's still being made has to be sold at a higher price. And so against that backdrop, most people think the Fed needs to sadly just sit there and watch for a while.

HARLOW: OK, we'll see if they do.

Kevin Hassett, always good to have you.

HASSETT: Thanks.

HARLOW: Thanks.

SCIUTTO: Tensions are escalating in Syria after government-backed forces killed dozens of Turkish soldiers. A reminder, Turkey is a NATO ally of the U.S. Russia involved here as well. We're going to have more on that attack, what it means, coming up.

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[09:42:22]

HARLOW: A significant development overnight. Right now two Russian war ships armed with cruise missiles are moving toward the coast of Syria. This comes as Turkey vows revenge after 33 of its soldiers were killed in air strikes launched by Russian-backed Syrian forces in the last rebel-held part of that country. The attack coming days before a Turkish deadline for Syria to pull back those troops, Jim.

SCIUTTO: CNN's Jomana Karadsheh, she is in Istanbul.

Jomana, tell us about this, because what you have here is you have Russia, you know, I don't want to say at war, but exchanging deadly fire with a NATO ally of the U.S., which, by treaty, the U.S. is committed to defend. Is this escalating?

JOMANA KARADSHEH, CNN CORRESPONDENT: Well, you know, Jim, overnight this did look like a very dangerous situation where we were basically looking at a situation where you would have had a military confrontation between the Russian and Turkey.

Now, what we understand happened, according to Turkish officials, they say that their troops inside Idlib province came under aerial attack. They say air strikes carried out, they say, by the Syrian regime. But what the minister of defense is saying here is that they notified the Russians.

As you know, of course, the Russians, the backers of the Syrian regime, they had notified them of the position of these Turkish forces. And as this air strike was taking place, the initial air strike, they sent warnings to the Russians. They say the attack did not stop. And that it continued even as ambulances were arriving at the scene.

Now the Russians, for their part, are denying that they knew that Turkish forces were in that position. And they're also claiming that this was the Syrian regime basically responding because Turkish forces were in the area with what they call terrorist groups. That's the blanket term they use for the opposition groups.

Now, Turkey says it has responded, that it carried out multiple air strikes and drone strikes on different regime targets inside Syria. And as you mentioned, we've seen the movement of these two war ships by the Russians to the region. And it really looked like a very dangerous situation with this escalation.

But in the past few hours, Jim, we have heard from the Kremlin. We've heard from the Turkish presidency saying that both presidents, Erdogan and Vladimir Putin, spoke on the phone and that they have agreed to meet face-to-face in the near future. It's unclear when. As you mentioned, there's a deadline that Turkey set, that ultimatum for tomorrow, the end of the month, for the Syrian forces to withdraw from positions they've advanced to in Idlib province.

[09:45:06]

So while this might seem like a possible de-escalation here, that this is where it's headed, it still does not resolve the key issue of what happens to Idlib province and the situation there.

Jim and Poppy.

SCIUTTO: Yes, 33 dead Turkish soldiers. And we know, as you said, Russia backs that Syrian regime.

HARLOW: A huge development.

Jomana, thank you very much.

And, Jim, I mean, just if you listen to Esper, the defense secretary, this week, it was pretty clear, there's no appetite for re-engaging there at this point.

SCIUTTO: From the U.S. perspective, absolutely.

HARLOW: Yes. Yes, yes.

SCIUTTO: And a lot of people fleeing that violence. A story we're going to stay on top of. Meanwhile, here at home, new reports that Democratic leaders are willing to risk damage to their own party. Why? To stop Bernie Sanders from becoming the nominee. We're going to have reaction from his deputy campaign manager next.

HARLOW: All right. And to the U.K. Queen Elizabeth takes the throne but soon faces scandals and rumors involving her sister, her marriage and the role of the monarchy. "The Windsors: Inside The Royal Dynasty." There is a new episode this Sunday night, 10:00 Eastern, right here on CNN.

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[09:50:45]

SCIUTTO: Joe Biden and Bernie Sanders are fighting for the top spot in tomorrow's Democratic primary in the crucial state of South Carolina, a state that's a critical springboard into Super Tuesday. Sanders looking to build, of course, on his momentum from the first three contests.

Joining me now is Ari Rabin-Havt, he's deputy campaign manager for Bernie Sanders.

Thanks for taking the time this morning.

ARI RABIN-HAVT, DEPUTY CAMPAIGN MANAGER, BERNIE SANDERS 2020: Thanks for having me.

SCIUTTO: So let's start in South Carolina. I don't want to get too caught up in polls. But if you look at them across the board, they show at a minimum a strong performance for Joe Biden, perhaps even a strong victory over Bernie Sanders.

I just wonder, from the campaign's perspective, is this concerning for you about Sanders ability to appeal to African-American voters who make up a bigger proportion there than in the states that have voted so far?

RABIN-HAVT: No, we think we're going to do just fine here in South Carolina. We've had some great turnouts, some great events in Myrtle Beach, in Charleston. We've -- you know, thousands of people out to see Bernie Sanders. We think those people will come out to vote. We think we'll get a -- our coalition, which is a multiethnic, multiracial coalition of working class Americans will come out and vote here in South Carolina like they did in other states, Jim.

SCIUTTO: Would a distant second, would you consider that a loss for Sanders?

RABIN-HAVT: Look, I'll leave the punditry to the pundits. I think we will fight for every vote, we'll fight for every state, we'll fight for every delegate. We are taking a message to voters that says we need the working class in this country, we need an agenda that works for the working class of this country and we think that will be a successful message here in South Carolina. SCIUTTO: OK, you've undoubtedly heard the reporting, "New York Times,"

CNN's reporting as well, that 93 Democratic Party officials are willing to have a brokered convention if Sanders does not receive the majority of delegates by convention time.

I wonder what your response is to that. Do you see the party or some the party as working against you?

RABIN-HAVT: Look, Bernie Sanders consistently polls as the Democrat with the highest favorability ratings in this race. Bernie Sanders is the candidate who can win Wisconsin, Michigan, Pennsylvania. Yesterday or this week there was a poll from Ulenburg (ph) that showed him as the only Democratic contender in this race to win Pennsylvania. We are 100 percent confident that Bernie Sanders is the best candidate to beat Donald Trump and the Democratic Party will see that.

SCIUTTO: Let's talk about Florida because, as you know, that's crucial. It's proven decisive, in fact, in many recent presidential elections. We had Donna Shalala on a short time ago, of course, Democratic congresswoman from Florida, who took particular issue with Bernie Sanders doubling down on the praise that he's had for Fidel Castro. She describes him as a brutal dictator. I asked her a question just a few moments ago. I want to play her answer and get your response.

Have a listen.

RABIN-HAVT: Sure.

(BEGIN VIDEO CLIP)

REP. DONNA SHALALA (D-FL): It's not only his comments on the Castro regime, but also on Maduro in Venezuela, he seems totally insensitive. It's not just about politics. It not only puts us at risk, but it puts the whole country at risk when we have a presidential candidate that has good things to say about murderous dictators.

(END VIDEO CLIP)

SCIUTTO: I asked her directly if it makes it less likely that Democrats would win Florida in November. And her answer to that was absolutely.

What is your response?

RABIN-HAVT: Look, there is no candidate in this race, and I'm very confident in saying this, no candidate that has stood up against authoritarians more than Bernie Sanders. He has always condemned authoritarianism, be it in Cuba, be it in Saudi Arabia, where Washington, D.C., was about a year behind Bernie Sanders in condemning MBS. So I am very confident Bernie can win Florida and all over the country.

SCIUTTO: Why not condemn this dictator? Why not -- it's a simple answer to a simple question, why not condemn this dictator and talk about literacy programs when you and I know what Fidel Castro does to his people in that country?

RABIN-HAVT: He has absolutely condemned -- he has absolutely condemned the authoritarianism of Fidel Castro. Nobody -- nobody wouldn't, Jim, but he has -- he has a consistent track record, unlike others in this race who, for example, are profiting from Xi in China. Bernie Sanders has consistently defend -- condemned authoritarianism all around the world.

SCIUTTO: But here's the thing, as you know, Donald Trump has been criticized, often rightfully so, by Democrats and others, for praising Vladimir Putin or perhaps separating qualities he likes in a Putin or a Xi or an Erdogan in Turkey from their, you know, horrible record on human rights.

[09:55:18]

Why does it make sense to say, OK, here is a brutal dictator, but, by the way, he helps kids read and, you know, I'm not going to back away from that? Why not just a definitive, I don't support this guy?

RABIN-HAVT: Well, Bernie Sanders has said he does not support authoritarianism around the world. In fact, Bernie Sanders has delivered speeches about how he does not support authoritarianism around the world, how he is for democracy.

Bernie Sanders is the only candidate who has consistently condemned authoritarianism all over the world. So I really do think this is a nonissue brought up by people who want to find something to condemn. But the fact is -- because Bernie Sanders is the most anti- authoritarian candidate in this race.

SCIUTTO: Well, there are Democratic lawmakers, we should note, who don't share that view, but we appreciate you taking the hard questions.

Ari Rabin-Havt, with the Sanders campaign, thanks very much.

HARLOW: Countries around the world are taking really major steps to try to contain and stop the coronavirus from spreading. And the markets here reacting with another huge sell-off. The Dow down nearly 900 points right now.

We'll have much more on this ahead.

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