Simone Marchetti wears Apple AirPods during Milan Fashion Week in Milan, Italy.

Melodie Jeng | Getty Images

Apple is often referred to as the “iPhone company,” because that’s the product that’s driven the majority of Apple’s sales for years.

Since 2012, the iPhone has accounted for over half of Apple’s revenue for every single quarter. But that streak broke when Apple reported earnings on Tuesday — instead, Apple’s biggest product only accounted for 48% of total sales, and iPhone sales were actually down 12% from last year.

Yet Apple beat expectations and total revenue was up from a year ago.

The main product category picking up the slack? What Apple calls “wearables” — the category including Apple Watch, AirPods wireless earbuds, and Beats headphones.

Apple CEO Tim Cook called it a “blowout quarter” for its wearables product category and said there was “phenomenal demand” for the $159 AirPods.

Apple said that Wearables, Home and Accessories sales totaled $5.53 billion in the most recent quarter, which was a massive beat — analysts surveyed by FactSet were only expecting sales of $4.59 billion, nearly a billion less than the actual number.

It’s hard to do a year-over-year comparison, because Apple rearranged its product categories late last year, but Apple Watch and headphones used to be in a category called “Other Products,” which totaled $3.7 billion in the same period last year.

“As I mentioned at the outset, it was another sensational quarter for Wearables, with growth accelerating to well over 50 percent,” Cook said in a call with analysts to discuss the company’s results.

Apple doesn’t break out unit sales anymore, and never did for products like Apple Watch, so it’s unclear eactly which products are driving the growth, but Cook said that wearables by itself — not accessories — was up “well over” 50% and was the size of a Fortune 200 company over the last 12 months. (The 200th company on the Fortune 500 is General Mills, with $15.74 billion in revenue last year.)

Perhaps the biggest positive for Apple’s growth going forward is that competition is less fierce in the smartwatch and wireless earbud categories than in smartphones.

In the fourth quarter of 2018, the last quarter which estimates are available, Apple was by far the number one wearables company by unit shipments, according to IDC data, with 16.2 million units shipped.

Next was Xiaomi, with 7.5 million units, primarily shipped to China.

“We’ve got the wearables area that is doing extremely well,” Cook said in response to a question about the future of Apple aside from the iPhone. “We stuck with that when others perhaps didn’t, and really put a lot of energy into this and a lot of R&D, and are are in a very good position today to keep playing out what’s next there.”

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Shares of Levi Strauss have come down to a level that is worth pulling the trigger, CNBC’s Jim Cramer said Tuesday.

As of the close, the stock is down more than 23% from its $24.50 peak in mid-April. Earlier this month, the “Mad Money” host argued that the jean maker’s stock should not have climbed above its $22.22 opening trade price when it returned to public markets in March.

Levi finished the session under $19.

“Guys, now what can I tell you. At $18, you’re getting a bargain,” Cramer said.

The comments came after the host sat down with CEO Chip Bergh to get an update on the company.

Catch the discussion here

More tariffs on the way?

President Donald Trump listens to a question from the news media as he sits behind the Resolute Desk in the Oval Office of the White House in Washington, July 26, 2019.

Leah Millis | Reuters

Cramer said that investors should be prepared for the United States to slap another round of tariffs on Chinese imports.

A tweet from President Donald Trump bashing the country earlier that day confused Wall Street, the host said, causing the Dow Jones Industrial Average to fall more than 23 points and both the S&P 500 and Nasdaq Composite to tumble about 0.25%.

The market would have finished much lower during the session if it weren’t for optimism that the Federal Reserve will cut interest rates on Wednesday, he said.

“If the trade war with China escalates again, we’re going to need these rate cuts,” Cramer said. “Taunting does not a trade policy make. But it sure does sound like we’re about to get another round of tariffs.”

Read more here

Wait for the next harvest

Jim Collins, CEO of Corteva Agriscience, a former division of DowDuPont, rings the opening bell at the New York Stock Exchange, June 3, 2019.

Brendon McDermid | Reuters

There is reason to be bullish about Corteva, but Cramer suggested that investors should wait for brighter days before investing in the agribusiness.

“I hope they will deliver a better-than-feared quarter when it reports on Thursday, but hope should never be part of the equation,” the host said. “As much as I do like the company … the sector is having a very rough time.”

Go deeper here

Cramer’s lightning round: The reason why Canopy’s stock is dragging

In Cramer’s lightning round, the “Mad Money” host answers stock questions in front of a live audience.

Tiffany & Co.: “I didn’t like that last quarter … I do think management is good, but it’s not coming around so far. I also think the strong dollar is hurting them.”

Canopy Growth: “No. … I do like that one, it’s the one I like. I like their new management. But understand: there’s a scandal right now that’s bringing that down, but … I do want to buy it. I don’t want to sell it.”

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

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Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com

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U.S. Treasury yields came off session lows on Tuesday after investors saw additional signs of strength in the U.S. economy, with healthy consumer spending and consumer confidence indicators reported.

The two-day Federal Reserve meeting also kicked off, with investors expecting at least a 25 basis point interest rate cut from the U.S. central bank.

What are Treasurys doing?

The 10-year Treasury note yield

TMUBMUSD10Y, -0.34%

 rose 0.7 basis point to 2.063%, after plumbing an intraday low of 2.044%, while the 2-year note yield

TMUBMUSD02Y, -0.21%

  was flat at 1.850%

The 30-year bond yield

TMUBMUSD30Y, -0.48%

 was up 0.4 basis point to 2.586%. Debt prices move in the opposite direction of yields.

What’s driving Treasurys?

In a busy week for economic data, investors glimpsed another sign of the resilience in U.S. households even as the Fed is set to embark on its first cut since the financial crisis. The Conference Board’s indicator of consumer confidence for July jumped to 135.7 from a previous 124.3 in June.

June’s core personal consumption expenditures gauge, the Fed’s preferred inflation indicator, rose 0.2%. Meanwhile, pending home sales for June climbed 2.8%.

See: What the consumer spending report tells us is incomes and savings are up, inflation is down — and the Fed is cutting rates

Members of the Federal Open Market Committee, the Fed’s rate-setting body, will deliberate on monetary policy over the next two days. Some say the Fed may choose to terminate the reduction of its $3.8 trillion balance sheet of Treasurys and government-sponsored mortgage bonds, earlier than the scheduled September date.

A U.S. delegation resumed trade negotiations with China on Tuesday. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Mnuchin landed in Shanghai earlier this week. President Donald Trump said negotiations hadn’t made much headway.

What did market participants’ say?

“The market’s expecting a 25 basis point rate cut, and a clear signal it will ease soon after, maybe even September,” Nick Maroutsos, co-head of global bonds at Janus Henderson, told MarketWatch.

He said though the domestic picture remained resilient, the deteriorating global economy and the Fed’s communications had pushed it in a corner where it now had to cut rates.

“At this point, the market is telling what the Fed to do,” said Maroutsos.

“If the Fed is looking into ease based on data, the consumer confidence data isn’t very comforting,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in an interview with MarketWatch.

“Why is the Fed moving when stocks are at all-time highs? Well, the Fed is moving because of market expectations, and the lower rate complex coming out of Europe,” said di Galoma.

What else is on investors’ radar?

Most will look towards the all-important U.S. monthly jobs report at the end of the week. Economists polled by MarketWatch anticipate the U.S. economy to pick up an additional 160,000 jobs in July.

Irish government bonds softened up amid growing questions over what a no-deal Brexit would mean for the border between Northern Ireland and the Republic of Ireland.

The spread between the 10-year Irish government bond

TMBMKIE-10Y, +8.28%

and its German counterpart widened by around 5 basis points to 63 basis points, before settling at 60 basis points, based on Tradeweb data.

The Bank of Japan left its monetary policy unchanged and didn’t commit to any additional leasing measures. But Japan’s central bank said it stood ready to re act if any overseas issues started to weigh on the domestic economy and “if there is a greater chance the momentum for hitting its price target is lost.”

The 10-year Japanese government bond yield

TMBMKJP-10Y, -3.00%

was down around a single basis point to negative 0.15%.

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Shares of Capital One took a dive Tuesday, after the financial services company announced a major data breach affecting 100 million people in the U.S., but Wall Street analysts say investors shouldn’t rush to sell.

The stock

COF, -5.87%

 slumped 6.6% in afternoon trading, putting it on track to suffer the biggest one-day drop in four years. The selloff comes after the shares shot up 8.2% last week, which was the best weekly gain since October November 2016, on the back of better-than-expected second-quarter earnings.

“Short term we think this is a bit of a pride blow and could cause a short-term perception problem, but people will eventually move on.”


Oppenheimer analyst Dominick Gabriele

Capital One said late Monday that it expects the breach to increase costs by $100 million to $150 million in 2019, which is roughly $1.00 to $1.50 per affected customer, or 1.9% to 2.8% of the FactSet consensus for 2019 net income of $5.36 billion.

Don’t miss: 100 million Capital One customers were hacked — here’s what you should do next.

“The current information does not change our fundamental thesis on [Capital One],” wrote J.P. Morgan analyst Richard Shane in a note to clients. “We believe [Capital One] continues to benefit from a benign credit environment and highly profitable loan book.”

Shane reiterated the overweight rating he’s had on the stock since at least December 2016, and kept his price target at $107, which is now 19% above current levels.

He said that the fact that the alleged suspect has reportedly already been arrested “is a positive development” as it suggests the breach may be contained.

Oppenheimer analyst Dominick Gabriele said he was “a bit surprised” by the breach, given the perception Capital One has created that it was ahead of its peers in the “tech game,” but he doesn’t expect any material or long-lasting negative effects.

“Short term we think this is a bit of a pride blow and could cause a short-term perception problem, but people will eventually move on,” Gabriele wrote in a research note.

He said his “key takeaway” from Capital One’s announcement wasn’t the estimated cost of the breach, but that the company it continued to expect the “modest” improvements in operating efficiency ratio this year and next to drive “significant improvement” in annual total efficiency ratio in 2021.

The improvement could lead to “significant market share gains, using marketing spend that leads to account growth down the road,” Gabriele wrote.

Meanwhile, credit rating agency Fitch Ratings affirmed Capital One’s investment grade A- rating and the stable rating outlook, saying that while the data breach is credit negative in nature, it won’t have an “immediate impact” on its ratings as the direct financial impact appears to be “manageable.”

Fitch said, however, that the breach has opened the company up to outside investigation, which could result in larger fines and settlements over the long term.

Capital One’s stock has run up 20% year to date, while the SPDR Financial Select Sector exchange-traded fund

XLF, -0.23%

 has also gained 19% and the S&P 500 index

SPX, -0.26%

 has climbed 20%.

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Getty Images

Shoppers in Miami check out the latest in designer glasses. Consumer confidence surged in July and is close to a postrecssion high.

The numbers: The Federal Reserve is worried about the economy, but American consumers aren’t. They’re very confident, in fact.

The consumer confidence index jumped to 135.7 in July from a revised 124.3 in June, the Conference Board said Tuesday.


The index now sits just a touch below an 18-year high of 137.9 set last October.

Confidence took a dive in June after trade talks with China hit an impasse and President Trump threatened to apply tariffs to all Mexican exports in a dispute over security at the Southern border. The White House has since backed off threats of additional tariffs to ease the angst of businesses and consumers.

Yet the Federal Reserve is quite worried about the damage caused by the trade disputes, especially to the global economy. The central bank is prepared to cut interest rates on Wednesday to help support the U.S. economy and to nudge the low rate of inflation a bit higher.

Read: It can happen here: Interest rates to fall despite soaring stocks, low unemployment

What happened: The present situation index, a measure of how consumers view the economy right now, rose to 170.9 from 164.3. Another index that looks out over the next six months also advanced.

Both indexes are near the highest levels of the current economic expansion that began in mid-2009.

Big picture: Even while the Fed frets about the durability of the U.S. economy, Americans are going on with their lives without too much worry. Spending is up, unemployment is low, incomes are rising and savings are near a three-year high.

Read: Incomes and savings are up, inflation is down and the Fed is cutting rates

While the rate of inflation is seen as too low by the Fed, it’s giving households a boost. Lower oil prices have reduced their fuel bills and their inflation-adjusted take-home pay is higher.

In short, consumers aren’t the problem. So long as employers refrain from slashing jobs due to worries about slower domestic sales or the world economy, a U.S. expansion now in its 11th year should continue for the foreseeable future.

That’s a big if, though.

What they are saying? “Consumers are once again optimistic about current and prospective business and labor market conditions,” said Lynn Franco, director of economic indicators at board. “These high levels of confidence should continue to support robust spending in the near-term despite slower growth in GDP.”

Market reaction: The Dow Jones Industrial Average

DJIA, -0.08%

and S&P 500

SPX, -0.26%

fell in Tuesday trades, though both indexes remain near record highs.

The 10-year Treasury yield

TMUBMUSD10Y, -0.34%

edged up to 2.06%.

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A nurse holds up a one dose bottle and a prepared syringe of measles, mumps and rubella virus vaccine made by Merck at the Utah County Health Department on April 29, 2019 in Provo, Utah.

George Frey | Getty Images

Pharmaceutical giant Merck said Tuesday that high consumer demand for its measles vaccines, amid the largest U.S. outbreak in decades, help boost sales in its second quarter.

Sales of children vaccines, which includes the New Jersey-based company’s MMR vaccine for measles, mumps and rubella, jumped 58% year-over-year to $675 million, Merck announced in its second-quarter earnings report Tuesday. Merck, which is the sole U.S. supplier of measles vaccines, said the strong growth was due in part to this year’s measles outbreak, which was the largest in the U.S. since 1992.

“There was some buying to the private sector within the U.S. this quarter based on some of the measles outbreaks that you read in the news,” Merck Chief Commercial Officer Frank Clyburn said in a post-earnings conference call with investors. “And we do believe that we’ll continue to see growth for our pediatric vaccines going forward.”

Shares of Merck were up more than 1% in mid-morning trading after posting quarterly earnings and revenue that easily beat Wall Street’s estimates. The company also narrowed its earnings and revenue forecast for the year due to its $1 billion acquisition of biotech firm Peloton Therapeutics, announced in May.

In May, Merck said it had increased production of the measles vaccine to meet an uptick in demand in the U.S. in the midst of the country’s biggest outbreak in decades.

The Centers for Disease Control and Prevention has reported a total of 1,164 individual cases of measles as of July 25. The CDC said the new cases represented a 1.4% increase in the number of cases from the previous week. Officials had officially declared measles as eliminated in 2000, but warned that if cases continued to climb this year that the U.S. may lose its “eliminated” status.

Before the creation of the measles vaccine in the 1960s, the disease infected an estimated 3 million to 4 million people, hospitalized 48,000 and claimed the lives of between 400 and 500 people annually.

Measles started to spread again in recent years as more parents refused to vaccinate their children, even though health officials stress immunizations are the best way to protect against the measles. The WHO reported a 300% increase in measles cases in the first three months of this year compared with the same time last year.

–CNBC’s Angelica LaVito contributed to this report.

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The Gap and Old Navy stores located in Times Square, New York.

Adam Jeffery | CNBC

A 7-year-old blind pianist and 13-year-old electric guitar player, rocking out to “Sweet Child O’ Mine” are the stars of Gap‘s newest ad campaign. 

The videos, which rolled out last week on the Gap’s social media channels, are also a step to focus Gap’s identity — something the company has been aiming for after announcing in February it would spin off Old Navy into a separate, publicly traded company.

On an earnings conference call in May, CEO Art Peck had signaled this push. 

“You’ll also see Gap brand reinvest in marketing, kids and baby business with a strong back-to-school push later this year. This is especially important, given that market share is now up for grabs, and this is a clear opportunity for Gap brand given its strong equity in kids and baby,” he said. 

Children’s clothing retailers like Gymboree have gone out of business, while others like Children’s Place have closed stores, providing a possible opportunity to win market share. 

[embedded content]

The back-to-school season is the second busiest time of year for retailers after the winter holidays. This year, parents are expected to spend $27.8 billion on clothing, electronics and school supplies, according to a survey by Deloitte.

“The Gap Back to School ‘Forward’ campaign was designed to spark conversation, celebrate self-expression and propel the next generation in the direction of their strengths, said Alegra O’Hare, Gap’s chief marketing officer. “… We want to give kids the confidence they need to pursue their passions and inspire them to break boundaries.”

But the campaign might not be enough to clarify the brand’s image to consumers, according to Jan Kniffen, a retail industry consultant. 

“Gap has been struggling to find their identity for 15 years,” he said. “It needs to be reinvented. It’s just a mishmash of men’s, women’s, and children’s clothing. They’re in an extraordinarily competitive environment and they have nothing unique.”

Kniffen added: “One campaign is not going to change anything for the Gap. If they can follow this up with more innovative, interesting, catch-your-attention ideas, it could be a start.”

The spinoff also is part of this effort. Peck has said the split would help each company create a “sharpened strategic focus and tailored operating structure.”

Old Navy is the company’s most successful brand, and has regularly accounted for more than 40% of the entire company’s annual sales. After the announcement, the stock surged more than 20%, but Gap shares are still down about 25% since January. The company has a market cap of around $7 billion.

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Jin Lee | Bloomberg | Getty Images

Despite Procter & Gamble‘s write-down of its struggling Gillette brand, executives expressed confidence about the future of the shaving business.

P&G reported an impairment charge of $8.0 billion in the fourth quarter, resulting in a net loss of $5.24 billion. The one-time, noncash charge was to adjust the carrying values of Gillette’s goodwill and intangible assets.

“Grooming continues to be a very attractive business — organic sales up year-over-year,” CFO Jon Moeller told analysts on the conference call.

In its fiscal fourth-quarter earnings report, the company said that Gillette has consistently generated “significant” earnings and cash flow and continues to be a strategic business with growth opportunities. Last year, Gillette sold $6.22 billion of men’s razors and blades and $1.28 billion of women’s razors and blades worldwide, according to Euromonitor data.

The consumer products giant gave two reasons for the write-down. First, the company said that currency devaluations since the carrying values were first established in 2005 played a significant role. Over the last decade, currency has hurt its global business.

“You’ve got here a business with a very broad global footprint, and particularly with the year that we have just been through, that impacts that value assessment,” Moeller said.

P&G’s second reason for the write-down is the market contraction of blades and razors, primarily in developed markets. In countries like the United States, growing beards is more popular, leading fewer men to buy razors. Gillette held a 52.8% market share of men’s razors and blades in the U.S. last year, according to Euromonitor.

Additionally, Gillette has faced competition from disruptive upstarts like Dollar Shave Club, now owned by Unilever, and Harry’s.

“More recently and much less of an impact, new competitors have entered at prices below the category average,” Moeller said.

Edgewell Personal Care, the parent company of Schick, announced plans to acquire Harry’s in May. CEO David Taylor told analysts that because both Unilever and Edgewell will count on the start-ups for sales growth, those acquisitions benefit the entire shaving industry.

“We see it as again a competitive category, but an attractive category,” Taylor said.

P&G has been trying to rejuvenate Gillette and Venus, its razor brand for women, through new marketing campaigns aimed at millennials and Generation Z. Its direct-to-consumer online business for Gillette remains small but is growing.

Investors shrugged off the write-down Tuesday, instead focusing on the company’s earnings beat and optimistic forecast for fiscal 2020. Shares of the company hit a record high, jumping 4% in morning trading.

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Asian markets gained in early trading Tuesday, ahead of the first round of trade negotiations between the U.S. and China since early May.

Talks are scheduled to begin Tuesday in Shanghai, though expectations are low. “I don’t know if they’re going to make a deal,” President Donald Trump said last week. “Maybe they will, maybe they won’t.”

Investors were also watching two influential central banks. The Bank of Japan announced Tuesday that it will leave its monetary policy unchanged, as expected, and maintained its guidance of extremely low rates at least through spring 2020, while noting it would not hesitate to take easing action if necessary. Traders had been looking for indications of future easing in the wake of the European Central Bank’s signal last week of a potential rate cut to come. Meanwhile, the U.S. Federal Reserve is expected to announce a small rate cut on Wednesday, its first since 2008.

Japan’s Nikkei

NIK, +0.43%

  rose 0.7% and Hong Kong’s Hang Seng Index

HSI, +0.23%

  gained 0.5%. The Shanghai Composite

SHCOMP, +0.39%

  advanced 0.7% while the smaller-cap Shenzhen Composite

399106, +0.45%

  surged 1%. South Korea’s Kospi

180721, +0.45%

  rose 0.7%. Taiwan’s Taiex

Y9999, -0.50%

  slipped, while benchmark indexes in Singapore

STI, +0.05%

  and Indonesia

JAKIDX, +0.86%

  gained. Australia’s S&P/ASX 200

XJO, +0.28%

  advanced 0.2%.

Among individual stocks, robotics maker Fanuc

6954, +3.14%

  rose in Tokyo trading, as did chip maker Tokyo Electron

8035, +3.03%

  and Hitachi

6501, +2.98%

 . In Hong Kong, Sunny Optical

2382, +0.48%

 , Ping An Insurance

2318, +0.47%

  and Wharf Real Estate

1997, +2.48%

  posted sold gains. Samsung

005930, +0.98%

  advanced in South Korea, while LG Electronics

066570, -1.60%

 slipped. In Australia, Beach Energy

BPT, +0.48%

  and BHP

BHP, +0.57%

  ticked up.

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CHICAGO — Amid an intense national furor over the fairness of college admissions, the Education Department is looking into a tactic that has been used in some suburbs here, in which wealthy parents transfer legal guardianship of their college-bound children to relatives or friends so the teens can claim financial aid, say people familiar with the matter.

The strategy caught the department’s attention amid a spate of guardianship transfers here. It means that only the children’s earnings were considered in their financial-aid applications, not the family income or savings. That has led to awards of scholarships and access to federal financial aid designed for the poor, these people said.

Several universities in Illinois say they are looking into the practice, which is legal. “Our financial-aid resources are limited and the practice of wealthy parents transferring the guardianship of their children to qualify for need-based financial aid—or so-called opportunity hoarding—takes away resources from middle- and low-income students,” said Andrew Borst, director of undergraduate enrollment at the University of Illinois. “This is legal, but we question the ethics.”

One Chicago-area woman told The Wall Street Journal that she transferred guardianship of her then 17-year-old daughter to her business partner last year. While her household income is greater than $250,000 a year, she said, she and her husband have spent about $600,000 putting several older children through college and have no equity in their home, which is valued at about $1.2 million, according to the property website Zillow. She said she has little cash on hand and little saved for her daughter’s education.

An expanded version of this report appears on WSJ.com.

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