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Quest Means Business

U.S. Markets Plunge Amid Recession Fears; Tech Stocks Get Hammered As Sell-Off Intensifies; Sources: Harris Narrows VP Search To Shapiro, Walz; Top U.S. Diplomat Addresses Middle East Tensions; U.S. Stocks Fall Heavily Amid Recession Fears; Bangladeshi Prime Minister Flees Country; Pivotal Day For Bangladesh As PM Resigns. Aired 4-5p ET

Aired August 05, 2024 - 16:00   ET

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

[16:00:12]

RICHARD QUEST, CNN INTERNATIONAL HOST: Closing bell ringing on Wall Street, an ugly day in the markets. That`s what the closing bell actually hits.

There we go. The gavel, sir. Bring our misery to an end. Oh, give him the gavel. Oh, there we go. One, two, three. Thank goodness. The day is over.

You see, excuse me, you see the Dow off two-and-a-half percent. The triple stack is equally unpleasant, if not worse for the NASDAQ where we are down

three-and-a-half percent.

But all in all, those are the markets and the markets are the main events of the day.

A wave of fear: That`s global markets from Tokyo to New York and all points in between.

Tech stocks including the darling NVIDIA take the bulk of the pain.

Another news that we`re watching tonight, in Bangladesh, the prime minister resigns after 15 years in office after mass government protesters and

unrest.

Live in New York on Monday, it is August the 5th. I am Richard Quest and yes, I mean business.

Good evening.

We begin tonight as Wall Street suffers its worst day in two years. The Dow falling more than a thousand points, you saw the close a second or two ago?

The S&P and the NASDAQ, broader markets and tech stocks down three percent, and take a look. Just look.

Intel off another seven. Every stock in the Dow is lower and it is tech -- Amazon, Cisco, Apple, Intel -- that are bearing the brunt. Even the value

stocks -- PNG, Caterpillar, Walmart, Home Depot -- the top of the market, they are still falling, but by no means as much.

It is anxiety. The selling started in Asia. Japan -- good grief, 12.5 percent off. Seoul`s Kospi down nearly nine percent and in Europe, much

more modest losses, but still sizable nonetheless.

I0nvestors are worried that the Fed has waited too long to cut interest rates. Quincy Krosby is the chief global strategist at LPL Financial.

Now, Quincy, let`s accept that markets like pendulums tend to overreact one way and then the other. So there is an equilibrium that will be found in

time. So if we take away the initial knee jerk, do you think it is justified that markets are falling?

QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL: Yes, I do. You have a cumulative effect hitting on the markets. One is the potential growth

scare that began last week with a package of data that worried the market to see whether the Fed was perhaps behind the curve, then you have on top

of that concerns about the individual stocks with Berkshire Hathaway, for example, selling another major tranche of Apple, despite the fact that

Apple actually did quite well in the earnings call.

And the question then is, what are they seeing about the markets? Where are they seeing about the economy. And then on top of all of that, you have

other questions about big tech as we`ve heard about the integration of generative AI despite all of the money that they are spending in terms of

capital expenditures.

And then as you pointed out, Richard, the NVIDIA today coming out early in the morning, suggesting that they are going to delay a major shipment of

their chips because of a problem.

So all of this combined and then as you know, then on top of that, you get the margin calls. On top of that, you get the carry trade out of the yen,

you know, spooking the market.

And you have then the Bank of Japan suddenly over the last week becoming much more hawkish, again helping to push down the yen vis-a-vis the dollar.

QUEST: Right.

KROSBY: All of this combined.

QUEST: Now, on the other side, you`ve got a U.S. economy that is fundamentally sound, you have a banking system that is robust, well-

capitalized with strong reserves.

So to make any comparisons with pre-2008 for example or even post pandemic, would be somewhat stretching it.

KROSBY: Absolutely. I mean, exactly what you had then, it was leveraged.

You`ll remember, it was the hedge funds, it was the proprietary trading desk with tremendous leverage based on those subprime mortgage packages and

that just exploded to the downside and the contagion was dramatic.

[16:05:20]

No, that is not the case now and markets do, you know, due to the upside too much and to the downside, too much, it is not to say that we won`t have

more. We probably will, but the market will find that equilibrium. That`s the market`s job.

QUEST: And the Fed -- the Fed -- do you think the Fed can wait until September before it does whatever it is going to do.

KROSBY: I think it is going to be difficult, especially if we continue to see the unemployment rate continue to climb higher. He will have a number

of reports once a month. But we also have every Thursday morning at 8:30 Eastern. The initial unemployment claims and continuing claims and they

arising and the continuing claims rising because people cannot find jobs.

QUEST: Can I suggest to you that this was inevitable. What we are seeing now is exactly what was always going to happen if you have 11 increases in

interest rates within a two-year period, nearly 2,000 percent in basically interest rates.

You know, inflation comes down initially first because that`s the leading part of it. But job losses was always going to be part of the equation.

KROSBY: Absolutely. And it took a while. But the link between the job losses and consumer spending and remember, the consumer is 68 percent of

the U.S. GDP, U.S. economy. That link is intact.

And if you start seeing the unemployment rate continuing to rise, the headlines suggesting it is difficult to get another job, consumers are

going to pull back even more.

QUEST: If you accept that markets over time might be well-balanced and finally tune, but in the immediate bit, they are not. They always react as

you were just -- as you were just saying. Can the Fed cut now with monetary lag, three cuts before the end of the year, won`t really have an effect

until mid-to-next year.

So the cake is baked for what happens next?

KROSBY: Well, their response is now a little bit quicker than it used to be the nine to 12 months it takes for it to work its way into the economy,

either a rate hike or a rate cut, because they will do a verbal intervention most likely as they come out and speak this week, they`re

probably organizing an orchestrated response to this market pressure for them to do something.

And also, what is interesting is, if you listen to who is going after the Fed to come out and cut rates regardless of its in between meetings, it is

not the traders, they are senior economists. They are people who had senior jobs at the Fed.

Actually, they are the ones that coming out and saying, you are behind the curve now, you should have cut rates last week.

QUEST: Ironic, isn`t it? There will be --

KROSBY: And there is chatter, Richard.

QUEST: Yes, but ironic, they were behind the curve going into it, seriously behind the curve.

KROSBY: Yes.

QUEST: And they arguably are seriously behind the curve coming out. And good to see you. How kind of you for giving us time on what must be a very

busy day for you as well. I am grateful. Thank you, Quincy Krosby.

KROSBY: Thank you.

QUEST: Tech stocks, they struggled. The magnificent seven were lower.

Now, NVIDIA was off, you can see on the screen. They are down six percent. The worst of them all, but then it has seen the best gains of them all. It

is now down 26 percent from its high in June. They are still up more than a hundred percent for the year-to-date. Apple shares are often as well.

And over the weekend, Warren Buffett announced that Berkshire Hathaway has cut its stake in Apple by half.

Clare Duffy is with me.

Well, firstly, let`s deal with Warren Buffett. Do we know why?

CLARE DUFFY, CNN BUSINESS WRITER: Well, Richard, he had initially said that there were tax advantages when Berkshire Hathaway sold off another portion

of its Apple shares earlier this year, but now there is a question as to whether he is seeing some underlying thing going on that`s making him wary

about investing in this company.

And I think what you`re seeing with Berkshire Hathaway and Apple is similar to what we are seeing across the tech industry right now, where investors

are starting to question whether the tens of billions of dollars that these big the companies have spent on AI infrastructure, when that is going to

pay off in terms of real revenue gains from artificial intelligence and it is looking like it is going to take a lot longer than people initially

thought -- Richard.

QUEST: Okay, now, Google. So Google has lost against the -- well, the Justice Department has won.

[16:10:10]

The judge saying Google is a monopolist. This is going to appeal, I am guessing, eventually. I mean, who knows whether it is going all the way to

the Supreme Court. But this is -- there is now a body of evidence in this case that Google does not want to have.

DUFFY: Yes, Richard, look, the heart of this case took aim at Google`s search business, which of course is the heart of the company`s business and

its profit driver. The case took aim at these exclusive deals that Google forms with Apple, with other web browsers to make Google the dominant

search engine.

And what we could see coming out of this case, of course, we do expect, Google to appeal. We could see a range of potential remedies from the

court, but if the court comes after these core -- these exclusive deals that Google comes to with search engine, with web browsers, with device

makers could take a real aim at Google`s core business.

And of course, this all gets back to the story that we`re talking about with AI here where investors are going to want to see these big tech

companies focusing on their core businesses rather than the future potential of AI gains.

And at the same time, you see the court coming after Google`s core search business could be a real hit to this major company -- Richard.

QUEST: I am grateful to you. Thank you, Clare Duffy.

Japan`s Nikkei fell sharply, indeed, down at 12 percent with the volatility in the country Yen is up 10 percent over the last month, the highest since

the start of the year.

We are talking about the yen carry trade. It is where investors leverage low interest rates in Japan, invest the money elsewhere, and the carry

trade -- Julia is with me.

Julia, we all -- the carry trade is a very dangerous prickly animal, which when done properly reaps great rewards.

But if you`re on the wrong side of the carry trade as some are, then its game over.

JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, "FIRST MOVE": Yes, ripples of the financial crisis, Richard, where we saw an unwind like this happen and

it causes what can be described as chaos elsewhere. Gold star to whoever wrote that introduction, by the way, because this is a missing piece, I

think today of the jigsaw puzzle.

What we`ve seen is a lot of investors borrowing money in a country like Japan where interest rates have been low for forever, let`s be clear, and

then they get U.S. dollars and they invest in U.S. or other assets around the world.

But the problem is, if the Japanese yen started strengthening, they then have to buy those yen back and they have to sell the dollars, which means

they have to sell the assets that they have bought elsewhere around the world that`s fed into the fear that we`ve seen today. So that`s just one of

the components that are going on.

The big question is, do we continue to see the yen rise? Because that cycle will continue. There are a lot of funds out there, Richard, that remain

long -- the Japanese, sorry-- short the Japanese yen and if the Japanese yen continues to rise, they will have to continue to sell other assets

around the world and this has nothing to do with the U.S. recession fears by the way, but it feeds into it.

QUEST: All right, but do you see anything out there that is structural in nature? And I am thinking 2008, you`re talking about, well, we all know,

you`re talking about the banks and the rot in the banks. Then you`ve got the sovereign debt crisis and the ability of governments to repay debt.

Is there any -- the junk bonds in the 1980s that we saw. Is there anything out there that you see as structurally imbalanced that would cause us

worry?

CHATTERLEY: Not compared to that time, but I do think there is a lot of exuberance that has gone into tech stocks and I think it makes sense for a

lot of people to be saying at this moment have this and has this risen too far too fast? I think as always, investors are deeply impatient. They see

lots of money, billions up to a trillion, perhaps, some of the big tech names over the next three years invested into AI? When are we going to see

the profits?

Give me a break. Give them a bit of time.

So I think seeing some of the steam and exuberance coming out of these markets makes a bit of sense here. And Richard, let`s be clear, the S&P

500, the Dow, the NASDAQ, they are still up what -- around 10 percent year- to-date. We are seeing gains coming out of this market. We are not seeing losses.

It is a subtle point, but it is an important point.

QUEST: Why am I always more upset about handing back money? It is a bit like roulette, if you go up at the roulette table, you know, seriously, if

you go up at the roulette table and hand it all back, you`re more upset than if you went straight out to begin with because you never had the gains

to begin with.

But when you start handing back gains, you feel a fool for not having sold at the top.

[16:15:10]

CHATTERLEY: My first boss used to say greedy pigs make great bacon, Richard. How much is NVIDIA up year-to-date bearing in mind it is down by

around a third?

QUEST: Hundred percent. It is up a hundred percent.

CHATTERLEY: You see, you checked already. You see, I can`t beat at this game.

QUEST: No, and also --

CHATTERLEY: Precisely, but you`re sitting on a hundred percent profit at this moment if you bought at the lows admittedly.

QUEST: Yes.

CHATTERLEY: But you probably didn`t.

QUEST: Oh, I didn`t, but well -- but also there has been the split. Don`t forget, there are some of the -- you`ve had things like, I mean, the NVIDIA

split was absolutely monumental. So there is a huge wash out there.

How long does this go on for? There is a how long is a piece of string question for you.

CHATTERLEY: As we`ve said, there are a lot of different elements going on here, and actually I was watching the market close, Richard, as I am sure

you were as well. And actually we saw a bit of selling pressure in the Dow, which is not a good signs, NASDAQ off the lows we will tell you something.

Even if you thought that there were value and opportunities in this market, would you be buying based on the geopolitics of this moment if you thought

there was going to be some kind of Iran-Israel problem in the next 24 to 48 hours? You probably wouldn`t.

So, we will see what happens in Asia and we will look at the futures overnight. I wouldn`t be surprised to see a bit more selling pressure, but

I also wouldn`t be surprised price to see people looking at the tech stocks here in particular and going hmmm.

QUEST: You ma`am have just done a classic on the one hand, on the other hand.

CHATTERLEY: I am a libra. What can I tell you?

QUEST: Well, see you later. Thank you.

Julia Chatterley there.

As we continue tonight, QUEST MEANS BUSINESS, decisions, decisions for Kamala Harris. Who is the potential running mate? Announcement very soon.

But also, she is now going to be tagged -- this market is the Kamala crash says Donald Trump. Is that something about which she should be seriously

concerned?

(COMMERCIAL BREAK)

QUEST: Kamala Harris is deciding who will be her vice presidential running mate. According to multiple sources, it is down to two. You`ve got the

Minnesota Governor Tim Walz, and the Pennsylvania Governor Josh Shapiro. She did speak to Mark Kelly of Arizona, the senator. We are expecting the

announcement on Tuesday.

Jeff Zeleny is in Washington.

[16:20:03]

Before we deal with this business of who it is going to be, Donald Trump tagging the markets the Kamala Crash, she needs to be very careful this

doesn`t stick.

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: There is no doubt. I mean, the economy is certainly was already the biggest issue in this

campaign when you throw out all the other extraneous things that Donald Trump and others have been adding to it. The concern over the economic

recovery was always the biggest challenge for Joe Biden and it likely is the biggest challenge over Vice President Harris, nickname or not.

I think the biggest challenge for her will be if this truly develops into, even something much short of a recession, this could be a challenge for her

and an opportunity to present her economic plan if it differs than President Biden`s or not.

But Richard, it reminds me that we never know what elections will be about at the end there often about different things than they were at the

beginning. In 2008, Barack Obama likely would not have been the Democratic nominee, have the election started out as a big economic election. You`ll

remember that one was about the war at the beginning, but by the end, boy, the final three months or so was really a test of his medal on the economy

and voters showed that they trusted him more.

QUEST: And what are you hearing about the pick? You know, to a large extent, either candidate, either governor, bring something by the state,

pluses and minuses. But if you total it all up, who gives the most?

ZELENY: Look, talk it all out, it has to be someone who has good chemistry with Vice President Harris and likely does not cause any grief, does not

spend the next couple of weeks really explaining themselves as JD Vance has done.

So, the Harris Campaign would like the talk about the running mate to be really high right now and then come next week, not as much.

But look these two governors are front and center. I am told that the vice president is giving a very strong look at Minnesota Governor Tim Walz. He

is from the middle of the country. Minnesota, not necessarily a battleground state, but Trump would like to make it one, but from the

Wisconsins and Michigans and really trying to be a bit of a pushback to all the criticism here, but Josh Shapiro is from Pennsylvania, those 19

electoral votes also important here.

But I think it depends who she is the most comfortable with as a governing partner and we shall see who that is. It is her decision, but were entering

the final hours here before she announces it publicly.

QUEST: Jeff, I am grateful. Jeff Zeleny in Washington. Thank you.

ZELENY: My pleasure.

QUEST: With all of the talk about swing states, Arizona is a key state this time. It is Senator Mark Kelly who had been one of the finalists to being

the running mate. Arizona is also one of the battleground states that Harris will visit later this week.

Our John King went there and spoke to Democratic voters and gauged the temperature right now.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: (voice over) Pablo Correa and Jacob Dials also walked these streets in 2020 when Joe Biden won Arizona by

just 10,000 votes. This year, things were looking rough, but now, this handout is a keepsake.

KING (on camera): Ever had a campaign year like this?

PABLO CORREA, RAZE CANVASSING MANAGER: Ever had a campaign year like this?

JACOB DIALS, RAZE CANVASSING MANAGER: No.

KING (voice over): A new version with Kamala Harris is at the print shop.

DIALS: Now, we are hearing conversations about like hope, well, I already told my friends, my family, my neighbor to go out and vote versus yes, I`m

going to go out and vote, probably.

KING (voice over): The canvassers or more excited. Democratic voters, too.

CORREA: It is palpable. Now, there is excitement, and if you can throw excitement on top of duty, there is something closer to home with Harris at

the top of the ticket.

DIALS: It is way easier to support a candidate who you can actually see go out and campaign and you like, you have that energy around you.

KING (voice over): Melissa Cordero is proof of the new energy. She is much more active, she says since her phone started humming at late July, Sunday,

Biden stepped aside.

MELISSA CORDERO, ARIZONA VOTER: I mean, just red dots all over my phone screen, you know, everybody is like, "Did you? Did you?" You know, did you

see this?

KING (voice over): Cordero is an Air Force veteran active in a group called Common Defense.

She was loyal to Biden when we first visited four months ago excited to work with fellow veterans and other friends to back Harris now.

CORDERO: Not all veterans are for Trump. Not all veterans are MAGA crazy, Second Amendment people. There are ones out there that truly believe in

democracy and we want things like our reproductive freedom.

I think Kamala coming in has brought this like just energy that wasn`t there.

KING (voice over): Nico Rios was too young to vote in 2020, but supported Biden. He is 19 now and compares Trumpism to fascism, eager to vote, but

not for Harris.

NICO RIOS, ARIZONA VOTER: I can`t commit to the Democrats. I used to think that they were better. I just don`t anymore.

KING (voice over): Rios sees both Harris and Trump as too harsh on asylum seekers and other migrants.

(NICO RIOS chanting "Free Palestine.")

KING: But his biggest issue is the Hamas-Israel conflict. Rios supports a socialist candidate who opposes any aid to Israel.

RIOS: There is nothing that Kamala can do in the next what -- two to three months that can wash that blood from her hands in my view.

(END VIDEOTAPE)

[16:25:10 ]

QUEST: John King reporting there.

And so to some pretty awful weather, actually that`s a massive understatement if you`re in the middle of this.

Tropical Storm Debby is unleashing huge amounts of rain over the Southeastern U.S. Look at the radar.

Landfall for Debby as a hurricane, more than a month`s worth of rain already in Florida. Georgia and South Carolina are readying for potentially

historic rainfall.

Isabel Rosales has more.

(BEGIN VIDEOTAPE)

ISABEL ROSALES, CNN CORRESPONDENT (voice over): Pounding rain, whipping winds, powerful current.

UNIDENTIFIED MALE: The water hasn`t quite made it up to --

ROSALES (voice over): Tropical Storm Debby, no longer a hurricane after making landfall this morning as a Category One storm. The Big Bend of

Florida seeing first impact.

GOV. RON DESANTIS (R-FL): We have seen significant storm surge. We have seen inundation. We have seen and will continue to see flooding in various

parts of the state of Florida.

ROSALES (voice over): But Debby still bringing life-threatening storm surges and rain as it crawls inland.

More than a month`s worth of rain has already fallen in Florida, triggering at least 10 flash flood warnings.

DESANTIS: There is going to be a lot of water that is going to be dumped throughout the state and we are going to see effects of that not just

today, but in the ensuing days.

ROSALES (voice over): The rain will likely be Debby`s biggest danger, strong winds and potential tornadoes will continue to be a threat.

The first confirmed death from the storm, a Florida teen crushed by a tree that fell on his mobile home; a tractor trailer driver lost control on a

wet roadway near Tampa, plunging off a bridge and into a canal is the second death blamed on Debby`s severe weather conditions.

JAY MELDER, CITY MANAGER, SAVANNAH CITY: This is a once in a thousand-year potential rainfall event.

ROSALES: Debby is slowing down in speed and officials expressing concern over the amount of rain forecast as it continues into Georgia and South

Carolina.

Residents in Savannah bracing for unprecedented flooding where they could see 20 inches of rain in two to three days.

CHESTER ELLIS, COUNTY COMMISSION CHAIR IN CHATHAM COUNTY, SAVANNAH, GEORGIA: This type of rain hovering over us, coming with the intensity that

they tell us that it is coming is going to catch a whole lot of people by surprise.

ROSALES: As Florida continues to clean up, the storm did wash up one rather unusual find, $1 million worth of cocaine near the Florida Keys, according

to the U.S. Customs and Border Protection.

(END VIDEOTAPE)

QUEST: As you and I continue tonight, growing calls for the Fed to low rates at a faster pace to prevent this downward economic spiral.

The market off so sharply, we will discuss it after the break.

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

[16:30:00]

QUEST: Hello, I`m Richard Quest. There`s more Quest Means Business in a moment. I`m going to tell you why Bangladesh`s prime minister fled the

country after weeks of protests. And the only thing we have to fear is fear itself. When the market panic, that could lead to the vicious downward

spiral of economic pain. Only after the news, because this is CNN, and on this network, the news always comes first.

At the Olympics, the Brazilian gymnast Rebeca Andrade beat out Simone Biles from the U.S. for the individual floor gold medal. Germany won the mixed

relay triathlon amid controversy about the water quality in the River Seine. Some athletes have fallen ill after last week`s triathlon races.

Hundreds of people have been arrested in the U.K. after this week`s violent protests. Much of the violence is targeting migrants, fueled by far-right

groups spreading misinformation about the background of the suspect in the Southport attack in which three girls were killed.

President Biden is holding crisis talks with his National Security team amidst fear of all-out war in the Middle East. The U.S. is tightening

defense cooperation with Israel as it braces for a threatened attack by Iran. The head of the U.S. Central Command is in Israel right now assessing

the security situation. You`ll hear from the U.S. secretary of state in a moment.

The U.S. Secretary of State has been speaking about the unrest in the Middle East and the measures that the United States is taking.

(BEGIN VIDEO CLIP)

ANTONY BLINKEN, U.S. SECRETARY OF STATE: We are engaged in intense diplomacy pretty much around the clock, with a very simple message. All

parties must refrain from escalation. All parties must take steps to ease tensions.

Escalation is not in anyone`s interests. It will only lead to more conflict, more violence, more insecurity. It`s also critical that we break

this cycle by reaching a ceasefire in Gaza. That in turn will unlock possibilities for more enduring calm, not only in Gaza itself, but in other

areas where the conflict could spread.

So, for the United States, for many other countries, both in the region and beyond this is our focus. And What it comes down to really is all parties

finding ways to come to an agreement, not look for reasons to delay or to say no. It is urgent that all parties make the right choices in the hours

and days ahead.

(END VIDEO CLIP)

QUEST: Now, returning to our top story and stocks falling heavily following the global rout of the Dow, finishing off, well, 1,000 points,

2.6, but it`s the NASDAQ, which had been more than 6 percent down at the open, closing down 3.5 percent. The reason, of course, two factors,

primarily. The labor market is slowing and there are concerns the Fed has waited too long to cut interest rates. You then have the fall in Asia

overnight, the carry trade, et cetera., onwards and upwards.

The Fed must now be on the lookout to keep the economy from entering a downward spiral. Think about it. Markets are falling, then financial

stability deteriorates, that causes job losses, people have less money, companies laying off people, workers can`t afford to pay bills, they get

laid off, that in turn creates and unleashes more fear, more market chaos. That`s how the cycle goes.

[16:35:00]

Nathan Sheets is the global chief economist at Citigroup. He used to be, of course, a top official at the Treasury. Avoiding that cycle, bearing in

mind, Nathan, just, you know, to a large extent, the economics is baked, whatever the Fed does now, we`ve got -- it`s going to happen from the last

six months to nine months. But avoiding the downward spiral, how do they do that?

NATHAN SHEETS, GLOBAL CHIEF ECONOMIST, CITIGROUP: I think clearly the Fed has got to move aggressively. And I think that means 50 basis points of

cuts at the September meeting, further cuts through the remainder of the year thereafter. And I think between now and the September meeting, which

is about six weeks away at the moment, the Fed`s got to be signaling that they`re on the case. They`re watching the economy, they`re watching the

market, and they`re prepared to do what`s necessary to provide support.

QUEST: OK. But what an admission not of just -- I mean, that you`re behind the curve. You stand in front of everybody, and last month at FOMC, no need

to cut rates. We`re still watching very closely. Within weeks, you have so -- or one has so misread the data that you end up cutting 50 basis points.

SHEETS: Richard, I think clearly that if Jay Powell was allowed to do a mulligan, and he could get in a time machine and go back to last week, he

would certainly start the cutting cycle at that last meeting. And they were backward looking. They saw an economy where there was still more inflation

that they want -- than they wanted. And I`ve been surprised by the weakness of the labor market data and the sharp turn in market sentiment, which is,

you emphasize, really is a first quarter risk to the outlook for the economy at this stage.

QUEST: OK. But here`s the problem. Get your 50-basis point cut, and you -- and maybe a couple more before the end of the year, and you do risk -- you

know, when I say stoking inflation, I`m not suggesting it`ll roar up, but you do negate the ability to hit target.

SHEETS: Whenever the Fed has to make these decisions, they have to balance the risks. But I think we`ve seen enough slowing in the economy at the

moment, and what we`re likely to see in coming weeks and months, that there is scope for Fed policy to be a notch less restrictive without

significantly jeopardizing that 2 percent objective for inflation that they want to achieve. So, I`d be more sanguine on that side of the mandate right

now.

QUEST: How do they avoid the criticism that they`re rescuing the market? The Greenspan criticism, the Bernanke criticism?

SHEETS: Honestly, I think when you`re doing good monetary policy and you`re responding to the economy, you`re always going to be vulnerable to

the charge that you`re creating a Fed plot, and you`re moving to bail out the market.

And the Fed isn`t happy about that. The Fed doesn`t like that perception. But clearly, the worst outcome for the Fed would be to allow the economy to

further deteriorate in an effort to avoid the perception that there`s a plot. So, it`s kind of a catch 22 for them, and they just keep their eyes

riveted on the data.

QUEST: OK. Nathan, let`s end on a positive note. Give me a reason or a thought about why this is not a market meltdown crisis.

SHEETS: Let me give you two reasons. First of all, when I look at the structure of the U.S. economy and when I think deeply about the ongoing

A.I. revolution and the standing of the U.S. economy in the global economy, U.S. looks very strong.

And then the second point that`s positive, I`d say is more a cyclical point, that when I look at the data right now, I see a slowing economy. I

see a loosening labor market, but I don`t yet see signals in the data of a full-scale downturn. So, I think there are both cyclical and structural

reasons to remain optimistic.

QUEST: You`ve had a busy day, sir, and I`m grateful that you found time to talk to us and put to perspective. Nathan, always good to talk to you.

Thank you, sir.

Quests Means Business. To Bangladesh, a sense of monumental change. The prime minister stands down following weeks of deadly rallies.

(COMMERCIAL BREAK)

[16:40:00]

QUEST: U.S. embassy in Bangladesh is telling American citizens to shelter in place following the dramatic resignation of the prime minister. Sheikh

Hasina has reportedly fled the country after weeks of deadly protests. Crowds have taken to the streets celebrating her departure. She was in

power for 15 years, at least. I spoke to Hasina last year about the massive economic issues that Bangladesh was facing, and her response, which

included talk of people growing more food, felt out of touch even then.

(BEGIN VIDEO CLIP)

SHEIKH HASINA, FORMER BANGLADESHI PRIME MINISTER: Well, taking loan, I already, you know, explain to you that it depends on our project or our

development. Yes, we want to develop, but of course, we are very much careful that taking loan, we, I cannot put my country in any problem or any

disease. I am very much careful that taking loan we -- I cannot put my country in any problem or any (INAUDIBLE). I am very much careful about it.

Our economy is still stable, but yes, because of this international problem, this is not only our problem, and the inflation all over the

world. But I have instructed my people to grow more food and work hard so that we don`t need to depend on others. We can ensure at least the basic

need of what people want. It is food. So, in that case, we are very much careful.

(END VIDEO CLIP)

QUEST: Grow more food and work harder. The country`s army chief now says the military is forming an interim government. Hanako Montgomery reports on

the volatile situation in Bangladesh.

(BEGIN VIDEOTAPE)

HANAKO MONTGOMERY, CNN CORRESPONDENT (voice-over): Forced out of office, Bangladesh`s Prime Minister Sheikh Hasina, in a dramatic resignation Monday

after weeks of deadly antigovernment demonstrations.

Thousands of jubilant protesters stormed her official residence and scenes aired on local TV. Chairs, tables, and televisions looted from what was one

of the most protected buildings in the country.

GEN. WAKER-UZ-ZAMAN, BANGLADESHI CHIEF OF ARMY STAFF (through translator): I have given orders. The army will not fire at anyone. The police will not

fire at anyone.

[16:45:00]

MONTGOMERY (voice-over): The country`s army chief, Waker-uz-Zaman, now calling for the same students who brought about Hasina`s downfall to help

them maintain peace, and announcing that an interim government will be formed by the military.

It came after antigovernment protesters were attacked in the capital Dhaka on Monday, according to a CNN fixer in the city.

Dhaka is a battleground. That`s how one witness described the chaotic scenes on Sunday as tens of thousands of protesters took to the streets,

some wielding sticks and knives, demanding has seen his resignation. Dozens of people were killed on Sunday alone in a resurgence of protests that have

spread nationwide with violent clashes erupting between demonstrators, police, and ruling party supporters.

Rallies that began last month over quotas for civil service jobs have escalated into widespread fury with protesters demanding Hasina and her

ministers be held accountable for the rising death toll. Protests began in July, led by students angry over hiring rules that would reserve more than

half of civil servant positions which are highly prioritized for select applicants. Students said it`s a discriminatory system that would cut down

on job opportunities in a workforce where an estimated 18 million young people are unemployed.

In the clashes that followed, at least 150 people were killed, thousands injured, and about 10,000 arrested. A military enforced curfew and a mobile

and internet blackout attempted to suppress protests, as well as a ruling by the country`s Supreme Court to reduce the quotas. But public anger has

only intensified with protests returning in recent days.

UNIDENTIFIED FEMALE (through translator): It wasn`t possible to stay at home anymore. Everyone is on the street. Many people who are younger than

me are no longer with us. They`ve been killed.

MONTGOMERY (voice-over): Hasina blamed her political rivals for the unrest, saying the main opposition party and other adversaries infiltrated

the student movement. The human rights groups have accused authorities of using excessive force to stifle dissent and curtail civil liberties in the

past.

Now, Hasina`s 15 straight years in power are over. The student movement celebratory, but what next for the country now under military rule is

uncertain.

Hanako Montgomery, CNN.

(END VIDEOTAPE)

QUEST: Now, interestingly the location of those pictures that we just saw of the rioters, that room actually where I interviewed the prime minister

back in March of last year, was exactly that room where the rioters came. It was at her residence. A beautiful residence.

As we continue on Quest Means Business, a perspective from the trading floor, a familiar face. Peter Tuchman, it is good to see you, sir.

Hopefully, you`re going to spread wisdom and calm, all we see.

(COMMERCIAL BREAK)

[16:50:00]

QUEST: Our top story, the turmoil in markets. The Dow closed more than 1,000 points down. It was lower at the start and stayed there, arguably

just off its lows. The CNN fear and greed index swung into extreme fear. And so, now what`s next? Peter Tuchman, oh, it is good to see you. Broker

at Quattro Securities with me from the New York Stock Exchange, my dear friend. All right. We know the reasons why. We know what happened. Should

we be worried?

PETER TUCHMAN, FLOOR BROKER, QUATTRO M SECURITIES: So, look. I -- you know, I heard what you said before with the gentleman who was speaking and

I`m in a little disagreement. Yes, I don`t see -- and he said at the end, look, that economically, nothing`s -- think about, 10 days ago, and markets

were trading at record highs across all indices, and we felt like we were never going to have another down day.

Yes, there was some economic data that was coming out that was pointing towards some problematic results. But, you know, we were trading at record

highs across all indices. So, the question is, what in fact did happen, and is every -- is there anything completely fundamentally different than it

was seven days ago?

OK. So, let`s think about it for a minute. Maybe 10 days ago, we had a CPI number that was disappointing. We started to see that the NASDAQ got hit,

you know, the high flyers, the magnificent seven, right? They started taking profits there and rotating into gold and the Russell. That was

legitimate. That was fine. That felt OK.

And we -- but we`ve been pushing or pushing that, kicking the ball down the road on this interest rate cut, and I think we probably kicked it one road

down a little further than they should have. I appreciate what the gentleman said because I -- if I think if Jay Powell could turn back time,

I think he would probably review Wednesday and say that was a missed opportunity.

But let me just say one thing, Richard.

QUEST: Go ahead. Go ahead, Peter.

TUCHMAN: No, I just wanted to say, I think what we ended up having was a perfect storm. We had the economic numbers come out. We had a mixed message

out of the Fed on Wednesday.

QUEST: Right.

TUCHMAN: Poor economic data on Friday. We had sort of doomsday over the weekend around the war with Iran and Israel and then the Tokyo Stock

Exchange, which had a sell off that was the worst since 1987. We come in on a Monday and all of this was a perfect storm.

QUEST: All right. So, if we look at previous market selloffs and, you know, some of the great -- the ones we`ve known and loved, housing crisis,

dot-com bust, pandemics, there`s nothing that you see here that suggests more than a cyclical, or if you will, you know, the Fed perhaps a bit late,

but actually should not turn into a self-fulfilling downward spiral.

TUCHMAN: I think this is a situational story. I think the A.I. revolution is still intact, and as I said, not that much has fundamentally changed. I

think the Federal Reserve probably waited a little too long, because, look, markets can handle virtually anything, Richard, except given expectations

that are not being fulfilled.

And that expectation of an interest rate cut has been dangled for a couple of months now. And the economic data has pointed week after week, CPE, CPI,

PPI, all of these numbers that have been disappointing over the last six weeks should have given them a red flag this week to know that this may

have probably been the date.

Now, could we -- did we miss the opportunity on Wednesday? Perhaps. We will never know that. But the problem is we may end up now having to play catch

up because not -- if we had pulled a 25-basis point cut on Wednesday, look, the economic numbers that came out Friday still would have come out on

Friday, and they would have still been disappointing, right?

QUEST: Right.

TUCHMAN: So, I think there`s more to it. The perfect storm around Tokyo, and around the war in the Middle East, and all of these things coming

together over a hot -- over a summer weekend, really made the VIX spike, because this was not a panic story, this was a fear story.

QUEST: All right. Peter, I`m grateful. Thank you, sir. Suddenly, the world looks a lot better with you at the helm.

TUCHMAN: Stay positive.

QUEST: Thank you.

TUCHMAN: Yes. It`s always a pleasure to see you. Bye.

[16:55:00]

QUEST: Peter Tuchman, joining me. The markets are pretty horrible. But when you hear Peter Tuchman making a such sense of it, you think, well,

let`s not get too excited. We`ll take a profitable moment, and after that, well, who knows?

(COMMERCIAL BREAK)

QUEST: Tonight`s Profitable Moment. Should we be panicked? No. Should we be worried? Potentially. What`s the difference? Well, there`s nothing

really terribly structural about what`s taking place at the moment in the market.

In the past when we`ve had major crises, and arguably, we didn`t really know the full depth of the structural issues. 2008 for example, you have a

crisis where you`re -- you`ve got a banking issue and the rot is well and truly in the banking sector. And then, of course, you`ve got the sovereign

debt crisis and you have the pandemic crisis. In all of those cases, there were absolutely extraneous and exogenous events that were going to push

things even worse than you`d expect. That does not exist now.

What you have is a Fed that has raised interest rates, if you will, given the patient 11 doses of medicine in a short period of time, and the patient

has responded exactly as we intended. Inflation came down dramatically, but the corollary to that on the other side is that the slowdown that was

created has raised unemployment and made it more difficult to hire workers. Again, all as predicted.

And now, the Fed has the tricky task of deciding, do they cut by a quarter or a half? Do they take a risk with inflation and undo, or is the downside

too much? I don`t know what the answer is. And neither do you. And maybe the Fed doesn`t either. But the reality is, yes, what`s happened today is

nasty, but, B, it`s not a crisis.

And that`s Questing for Business tonight. I`m Richard Quest. Whatever you`re up to in the hours ahead, I hope it`s profitable.

JAKE TAPPER, CNN ANCHOR: Welcome to "The Lead." I`m Jake Tapper. This hour, it was the reunion that brought tears to so many eyes. American

journalist, Alsu Kurmasheva, reuniting with her daughters and husband after that massive prisoner swap with Russia.

END