tv Squawk on the Street CNBC May 10, 2016 9:00am-11:01am EDT
cnbc. good. good for you. stamps.com soaring. earnings handily beating the street. the internet posted service raising its full year outlook as well. kayla, thank you. >> thanks for having me. >> you represent that entire group of people in a very positive way for me. >> you say that now. >> i say that now. and i'll see you tomorrow. >> tomorrow's another day. >> make sure you join us tomorrow. "squawk on the street" is next. ♪ it's a beautiful day good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. premarkets high coming off the second biggest volume day of the year. a lot of earnings to get to today. allerg allergan, gap, disney tonight, misses estimates second month in the row to the downside. nikkei higher on some yen weakness helping to support oil as saudis say they're going to
increase production to meet demand. roadmap begins with shares of gap falling hard after the retailer reported slumping sales, stock's down more than 40% over the past year. could it be time to buy? allergan is on the move this after the company's earnings report and announcement of a $10 billion share buyback program. what is behind this big move? we'll discuss. >> and valeant's new ceo joe papa joined jim on "mad money" last night. we'll see what he had to say about generating cash and buffett's right hand man charlie munger. gap poised to open at four-year lows on the company's fifth quarterly sales decline. comps down 5%. the retailer also issuing some disappointing profit guidance for q1 saying it's looking to streamline some operations and evaluate banana and old navy primarily outside of north america. old navy down 10, gap down 4, banana down 7. we were looking for increases in some of these comps. >> yeah, this is just one of those cases where this is part
of this overall we have way too many stores. i really i'm trying to be unemotional about how bad they really are because people just don't seem -- i remember this from the heyday. and this is a company that's seemed to have lost usefulness. when you lose usefulness, it's hard to get back. identity crisis across the board. deeply embedded in the mall. the mall traffic is way down. we know that from l. brandts a very good models. >> you flagged that last week and that was an outlier because of course leslslie -- >> numbers beat, numbers beat. and a lot of it was victoria's secret which i think was undermanaged. gap is not undermanaged. have you been to a gap? >> i've been to a banana
recently. there were some lines. >> there were? >> there were also huge sales. >> well, i always feel like what's happened is you get into a situation where you look in there and it's just like why do i have to be here. i mean i'd be lucky to buy jeans. >> somebody said this morning the traditional retailer who outperforms now is an exception, and for a long time that exception was l.b. >> yes. wloostz what's happened -- we have not talked about sports authority how they went down, pac sun, anna's linens, a very good company -- they're not dropping like flies. that's way too little. there is just a sense of i'm going to call it existential. >> right. is it poetic the day we get gap comps -- >> i hate to invest in irony but
that's one of those massively ahead of consensus estimates. you read this report and now we know in 1999 there were a couple thousand dollar price targets that were the top. >> there were. but i think we're going to go over a bit of that later because it is fascinating to read that report. a real outlier in what they're looking for in ebitda for the company. back to gap though to this point we're all making i see some of the research notes, they had a huge degradation in terms of gross margins in part because they obviously weren't selling stuff where they wanted to. 100 million short of a lot of estimates on the sales side, they're now looking for 31 to 32 cents a share for first quarter earnings per share, that's well below the street and so you will see the stock down this morning. >> yeah, you're in a situation where you're in a vicious cycle down. how do you pull out of that? frankly, look, my mom worked at lits, my father worked at g
gimble's, we used to say how were they going to pull out of it, they never did. >> they never did. finally the theme of mall traffic we come back to and we've had this conversation a number of times, which the mall -- i did watch one of the key presentations the other day. even though i was there i didn't see it. those guys are doing okay. you made the point they're replacing gaps with things you got to go visit. >> they want gap. no one wants anybody to go under, no one wants anyone to lose their job but the fact is the long-term leases when they roll over the prices are much higher because no one is building malls. shopping centers are rarely being built. just remember shopping center and shopping mall -- >> do you see a day more people are going to go to the mall again? >> no. but malls have change in what they -- you know, they have restaurants now. imax theaters. they have a pet -- you can't
amazon a pet. they have pet co. >> piercing pagoda. >> piercing pagoda. it's very hard to sell -- no, i don't know. what the heck do i know? >> really quickly we started the show saying is it time to buy, your answer is no. >> no. i mean, look, you want to go buy a retailer, costco is about the switch from american express to viz u visa and costco has a value proposition. do you have a costco card? >> i do not. >> you do not? my wife is an executive member. >> we've never had the closet space for the giant ketchup and mustard and all that stuff. >> well, i feel bad for you. >> thank you. >> when we go to costco we're two different people. >> i'm sure you are but you have a lot of homes to fill up. a lot. >> we should get drexler on and ask him what he would do here.
>> mickey drexler, he has enough to worry about right now at j. crew. >> that means mall traffic. when i go to the mall now i often feel like, wow, i mean, where is everybody. it's like the bull more lanes. let's get a couple sixes and bowl. >> they got a lot going on there. >> the mall stores are great. the apple store is still jammed. go to the apple store and there's still people there and you got to -- you know, apple. but the macy's, saks, bloomingdale's, you're like this is what people do in the country. >> i'm aware of it, but they're not doing it as much. >> you go to macy's? what is that like? what do they have like shirts? i was in tjx the other day, i got these socks. i paid like -- >> those are nice. >> do you like these? >> they're very nice. >> i got these for nine bucks.
the guy said do you have any dress socks, and he goes those are dress socks. >> amazing, in and out in four minutes. >> you know where else you can get those? amazon, right to your house. >> cheaper? >> a story from the morning and a name we've also talked about recently is allergan authorized a new stock buyback program up to $10 billion. the drug company also says it expects -- excuse me, to execute $4 billion to $5 billion in open market repurchases in the next four to six months. they'll buy a lot of it back pretty quickly to what they say are favorable market conditions. >> but it has to be volume limitation. if you're an irish company you can't do accelerated repurchase. >> right. >> they'll be a function of the volume every day. >> perhaps more importantly of course company reported what was an in line earnings per share number $3.04 and revenues were a bit light in terms of at least what analysts went into the quarter expecting.
they maintain guidance for $17 billion revenues and 10% branded growth for 2016. and the stock's looking up a little bit. you can see there in part on the buyback efb though the revenue number was not exactly people hoped for. >> you know, the eye drug care from allergan that was up 21%. botox up 14% year over year, those do matter. don't forget they're up against your friends at valeant in some of these determine to logical -- i just said your friends, that was mean and gratuitous, they are not your friends. >> no. they've never been particularly friendly with me. >> no, but i do point out these are companies that are gunning. >> you however did have joe papa on who i don't know if i would describe him as a friend, but he is the man who now is running valeant. i watched your interview with him last night on "mad money," jim. you held his feet to the fire in terms of why he left perrigo and why he came to valeant.
and i think we do have a couple of thoughts from him in terms of what he thinks he can do to turn this company around. >> sure. look at the tape. >> i know we've got some things we're going to work on. i believe we're going to be generating cash, because that's obviously important. >> right. >> we are generating cash. we're generating ebitda. we've got over $10 billion of sales. so i do think the footprint is in place. do i have to execute on things? absolutely correct, jim. but i look at it first thing i need to do is stabilize the company. that's working with our employees, working with the physicians, making sure that we work with patients. i've got to get that stabilization. then after that i've got to turn it around and that's going to be launching some of these new products. i've got to make sure i take care of the debt holders. i'm comfortable i have a plan to take care of debt holders and generate shareholder return. >> he's got a lot to do. my takeaway in listening to it was this could take a while. >> yeah. and i think that's important because due diligence, you come
in but are you going -- let's say you boost r & d, well, that's five times. >> 3% of revenues to -- >> let's say you look at what they're doing -- what allergan is doing this morning to medicines. right now. remember allergan is sworn -- bought by valeant. let's see in that $11 billion what do you get the libido drug. if you want to become merck, if you want to become pfizer, you have to pay the price. the price is a lot of that cash flow the $2 billion in cash flow, you don't have it. >> when you have $30 billion in debt you have to make sure you can maintain a nice cash flow generation pace to your point margins will potentially decline if they're no longer able to raise price and/or also have to spend a lot more on right turn. >> -- r & d. >> he did talk having to roll back. you're talking 15%, these guys are three and change. joe made a point that he wants
to be in that milieu so to speak, allergan 19%. >> 19%. >> and now i've not seen this morning's. >> the deal we're talking allergan still to close perhaps as soon as june, jim, a lot of money coming to the balance sheet. they'll be able to prepay some debt. >> they have $40 billion in debt, you have $40 billion in cash. >> obviously they're in a position to buy back a lot of stock. >> but remember the volume restrictions will keep them in there every day most likely, but they can't do -- or it's not as earnings per share overnight because an irish company -- you know, they'll be in there standing there. not unlike apple. apple is not an irish company, but i think you'll find them in there right now at that $93 level, i understand. >> when we come back, wall street call has amazon going into the thousand dollar club. we'll get some details on
bernste bernstein's report. also a live interview with mark cuban spohortly after the openi bell. we'll get to rough opens for lumber liquidators, solar city, gap and some others in just a minute. you can fly across welcome town in minutes16, or across the globe in under an hour. whole communities are living on mars and solar satellites provide earth with unlimited clean power.
amazon's up in the premarket. the company announcing this morning it's launching a youtube competitor called video direct. amazon account holders will be able to upload clips on the new platform and then bernstein raises its price target from 770 to $1,000 saying it sees strong revenue trajectory from both retail and cloud businesses as well as expanding gross margins. amazon, google is making coke, pepsi look like child's play. >> it is. what's interesting about this amazon call from bernstein is this idea they say simply that they won't not be able to find new areas investment to keep up with the growth in gross profits, meaning margins will expand because they won't find enough things to invest in the way that amazon has throughout its history. that's the one thing i wonder about. i mean, they write this report and then 20 minutes later they come out with a new service that one would expect may require some investment.
from his first shareholder letter jeff bezos told you he's always going to invest to secure future cash flows. and so bernstein puts out some incredible targets. and, again, a lot of it is due to what they say will be margin expansi expansion, but they always seem to find something to invest in. >> you're so right. the irony here is that this basically says, listen, they are out of things. and one of the things that i find is that if you look at youtube, i think it's one of the more undermanaged assets so therefore it's vulnerable. i think it's very vulnerable. i think facebook live and -- look, the convergence is rather remarkable, but if you look at what youtube does, it just does not move the needle as much as i would have thought by now. for alphabet. and i think amazon's -- he senses weakness he just pounces. he really is amazing. >> he's -- you know, here, carl they're talking video providers distributing content directly to the tens of millions -- they
never give us the number, the tens of millions of prime users out there. and then they'll pay you based on how many people actually stream you for how long. >> but trump says the same thing. millions and millions. >> millions. >> many millions. >> bernstein's point is that estimates on earnings and 17 and 18 are in their words shockingly low. we've heard from bob peck earlier talking about his projected valuation of aws. >> more than 100 billion. i remember when it first came out i chided him. i said, wow, 100 billion. well, i think that was about a 300 billion valuation, probably low for the coal company. >> yeah, i mean, this bernstein analyst has aws revenues at $12.4 billion this year, $17.6 billion next year. so the growth rate's slowing but still incredible. to get to $100 billion you have to throw a pretty hefty multiple on it, but it is an extremely high margin business. but importantly also sees the growth of the third party
business which obviously has a lot of margin with it. you're doing fulfillment by amazon, but they're just taking money right off the top. >> it's a great business. >> it's a great business because there's no cost of goods sold for the most part except for wrapping stuff up. they continue to see this rampup in margin. i think this guy's going to keep finding things to invest in. >> i think go after everybody. that's what he does. just goes after anybody. and it's smart because the market rewards it without having to max out. but he's rewarded -- that conference call was amazing because they basically said, listen, we can do whatever we want. people said, well, they're going to do whatever they want and we like that. most companies staid #said they're going to do whatever they want, like solar city. >> say please don't. >> yeah. hey, well, that's not in the cards. but amazon, when you get off the desk with retailers they'll say, yeah, our comp stores -- i hate amazon. you know, the business was pretty -- i can't stand amazon. it's like, guys, you want to
just like give them a xanex and say okay. >> amazon is the underlying theme there. it can move onto video and spend $3 billion on content this year or close to it. >> remember when we used to think, wow, they're going to disrupt the book business. >> yeah, geez. >> in for a punishing. >> how about a little lack of imagination i think on a lot of peoples parts back then. >> a sell on kroger today by piper jaffry, i didn't think it had that much merit but talking it's a bad time for bricks and mortar grocery. that's all about amazon, go to one of their biggest outlets, it's crazy. when they do pets, forget about it. >> sell them? >> just bring them to your house. you want a dog, be like virtual reality, you look at the dog, get the cage and then it's brought to your house. who needs petco? >> i like that idea.
>> your kids want a dog. >> how about walking by amazon, dog walking by amazon. they'll send a person to walk your dog too? >> look at amazon see what dogs they got there today. >> when we come back cramer's mad dash, countdown to the opening bell, another look at the premarket and other news, icahn going net in one of his funds. more to get to when "squawk on the street" continues. at ally bank, no branches equals great rates. it's a fact. kind of like social media equals anti-social. hey guys, i want you to meet my fiancée, denise.
tuesday. nobody's going to be playing solar city. >> david, i'm a fish ficionado conference calls, this is one where the ceo starts, he says bookings are great, but they came in a lot lower than expected. so not as great as we thought. david, i have not heard these kinds of questions in my career. bank of america says -- you're going to love this, what exactly is the business model of solar city? then this guy, ben, he goes what is solar city? i mean, what is solar city. >> that's a good question. by the way, what is the answer? what is the business model? >> it wasn't really clear. this analyst, bank of america lowered installation outlook for 2016 -- lower contract pricing, increase operating expenses, the
headline for it is, who am i now? existential crisis now -- who am i now? david, this is a company that i regard in first class crisis. >> still getting credits for putting these things on the roof. are you -- your energy costs are lower if you're a consumer? >> basically you're saying it's all done with mirrors and not solar mirrors, but there really is no business because they keep pushing out things. now, i think it was a little harsh. but i've never heard analysts say what are you? i mean, who are you? who is solarcity? what is she? it was just a total -- it was sart, no exit. >> yes. all right. we got an opening bell a few minutes away.
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you're watching cnbc "squawk on the street" live from the financial capital of the world. we'll get the opening bell in just about a minute's time. a lot to get to. we're going to have a live interview with mark cuban in just a few moments, but amazon, guys, we were just talking about that call out of bernstein raising their price target to $1,000. it's going to test some key resistance including that all-time high of 696. >> when i put together fang, that was the -- and facebook all-time high the other day, netflix looking very bad, google now alphabet not doing that well. so, i mean, this is a very interesting test because two out of four isn't enough. it isn't enough. netflix has to make a stand here. technically people tell me it has to make a stand here. alphabet i continue to believe that that company's doing better than people think and is so much low hanging fruit that it's not been harvested.
>> with all that lelts get to the opening bell and s&p at the bottom of your screen. at the big board paint company sher w sherwin williams celebrating it's 150th anniversary. you've been a fan of that one. >> i have of both of these companies. at the nasdaq another one i've been all-in. these are two great stocks. when that valspar deal closes, it's such a winner. and henry schein. >> i knew the man when i was a kid. a lot of paint behind us right there. look at all that paint. sherwin williams with the paint drums and the brushes. nice. >> as long as there's no rags, combustible rags. >> you know what paint was like 150 years ago. >> i don't know. >> allergan's going to be your leader at the get-go.
>> there you go. david was somewhat critical of the revenues. i felt -- i'm looking at botox and i'm not using botox just for the record i could use some botox, my daughter graduating this weekend said, dad, go for it. i said no, but restasis and botox are -- both issues -- those are drugs that are very much what brent saunders is all about which is making them -- you know, taking them to the next level. there are a lot of drugs, a lot of approvals coming. remember, they own a face. they have the botox, they have the stuff here the juvederm could make any 61-year-old look 50. >> yes. those products will become more important as we age. >> yeah. well, some of us are there already. i could be like stp. >> whenever we see brent saunders he's all over us. >> he's younger constantly.
>> he's got people to send you to also. because the application of these drugs is very important who does it. >> he's got that look of the unshaven. >> yes. >> the unshaven look. will you look at this guy. there is not a wrinkle on this guy. can i show this? there's not a wrinkle on him, no double chin, he looks 30. >> he's like 45 years old. >> he's 30. this is remarkable what this man -- >> by the way -- >> he is a poster boy for his company. >> why do people put their picture in their deck? >> because when you look this young you do it. do you think my picture would be in my deck. >> not everybody has that luxury. >> unbelievable what david doesn't get. david, you should get more vain. >> i'll work on that in addition to so many other personality flaws. >> brent's so vain i bet he thinks this whole piece is about him. >> ba-da-dum. >> gap, followed by -- ralph lauren, macy's --
>> there was a downgrade on hasbro, wrecks the whole day. >> piper cuts it to neutral. >> what is that about? come on, the day they come on? look, the mall is -- it is just one of these things where howard schultz said it a couple of years ago. >> he did? >> he said the mall is your cell phone. you just order away. i just find that the young people just don't like shopping. we used to hang at the mall. where are you going, jimmy, i'm going to the mall, what are you going to do? >> well, it was a place to meet girls and things like that. >> that's right. i'm still reeling from that slide about coors light. >> yes. >> suddenly out of nowhere my wife says, hey, i don't know if i like that comment about coors light from carl. she never watches the show but she hears about it from her friends. >> you don't need to be watching necessarily. you'll hear about it in other
circles. doesn't watch twitter, doesn't do anything but she heard that comment. >> how about the story iep, ie c -- icahn enterprises short to the net tune -- >> certainly puts his money where his mouth is. when he had that interview with scott wapner he sounded pretty negative and now he's all in. i'm not as negative as he is obviously. guy's got a long rap about -- kind of an armageddon rap going. >> he does. he does. zoetis, a big one there. >> what's that i know pershing square, this is a great story thrks is companion animals right now they have a drug that makes it so your dog doesn't itch, a dog that can make it so your dog doesn't react to sirens and fire
crackers, which is an issue by the way for dog lovers. >> right. >> this is a very inventive company helped to solve swine flu, chicken flu, foremost company with vaccines when it comes to animals. he made a fortune on this. >> 16.9 million shares, b of a merrill got it done. >> spoke to them friday and this is smoking. >> interesting when we watch, big owner of valeant, still owns 10% of the company roughly almost. >> uh-huh. >> they have 6 billion in permanent capital there. >> all right. >> but the question is how much will be left beyond that given per for mans numbers and the difficult year it had last year and this year thus far as well a lot of it due in part to valeant. canadian pacific certainly down from its highs.
zoetis. >> yet this is a day where you're seeing money pour out of retail going into the jnjs. just a tremendous rotation intraday. banks, they like the banks today. i saw credit suisse reported a number that was hideous and the stock was up. i mean hideous. worldwide revenue down 60% in terms of trading. no one's trading but today seems like a day where because oil's up we can carry over from europe. >> yeah. >> really rather amazing. >> yeah, japanese rattling the forex cages again. >> it's a beautiful day. >> let's get to btig hosting its annual charity. bob pisani is there. hey, bob. >> about a few hundred thousands shares -- >> hello, guys, btig charity day. $5 million, $6 million raised every year. we're here with the man in
charge the ceo and mark cuban joining us as well. steve, you're the guy putting this whole thing together. you did $5 million last year, can you do $6 million? >> we can try. >> you're on every single day on the trading desk. you're one of the most personal high touch, high feel guys on the street. you got your fingers on the pulse of the market. where are we right now? >> looks like the s&p is opening up about 10 points this morning, europe and asia both strong, commodity prices kind of slightly higher. and looks like a positive opening. we keep running into this wall at 2100 in the s&p, which is kind of been a little bit of mental resistance. i think if we manage to at some point get through there, we could have some positive follow through. sentiment continues to be weak. >> mark cuban, where are we rielgt now in the markets? 2100 he mentioned, we can't seem to breakthrough to new highs. earning season's fair, not great, where do we go from here? >> we're in never-never land, i don't know where we're going to go and i don't think anybody does. we seem to be in a trading range, but the reality is there's really no triggers. then we had the uncertainty of
politics. i think depending on where things go in the polls we're going to start to see it impact markets more and more as we progress. >> speaking of politics, you brought it up, you were an early backer of trump, a supporter of trump. >> yeah, when donald first came out i liked the fact he was changing politics. what i said was don't listen to what he says, listen to how he says it because that's how he's going to inspire people to vote for him. that's exactly what happened. but now he's kind of turned into the "seinfeld" candidate, candidacy about nothing. i think he really has to avoid the issues and that could be a real problem long-term. >> well, we were trying a week and a half ago talking about putting together trump portfolio stocks that might do well if trump became president. it's tough to do. the positions aren't very clear in a lot of issues. >> and that's to his credit. he doesn't have to take positions. his voters don't care. they're not coming out to the polls in record numbers because they like his position on any particular issue. they're coming out because
they're trying to send a message. they're sending a message that things have got to change. and the one candidate we think introduces change particularly if you're on the right is donald trump. and he deserves credit for leading his flock to the polls. >> yeah. chris christie's already been put on a transition committee should he be elected. do you see a role for yourself in the trump administration? >> no. no. not at all. i mean, you know, if you look at the people around donald right now in particular his kids, they're completely different than him. i think he's smart enough to bring on people that are not donald trump. not donald trump-like. so traditional politicians that may be good or bad in some people's eyes but i think he's going to surround himself with people that are completely different. he doesn't need another entrepreneur or business person. >> you talk to trump on a fairly regular basis. what are you -- if he asks for advice, treasury secretary? >> oh, i don't know. i'm not versed enough to know who should be in that role. >> i think the important thing is the federal reserve is under a real microscope right now.
>> unfortunately. i think they're doing a fine job, right? i mean, look, we're talking about neil, i don't pay any attention to the federal reserve. i've got investments in over 150 companies. and the federal reserve has never come up one time. i don't think entrepreneurs care. >> do we pay too much attention? you brought him up. very interesting comment a day or so ago he said we spend way too much time microscopically analyzing the federal reserve that's not going to make a difference whether they raise a quarter of a point or not to the welfare of our children basically saying stop spending so much time. is there something to this? >> yeah. of course, i've never looked at a stock before investing many and wondered what the federal reserve was going to do. i've never considered starting a company considering what the federal reserve was going to do, right? either you're doing your business and you're competing and excelling and being profitable, or you're not. >> and i think the fed has been accommodative in general. again, unless interest rates have a huge move, i think it's
really not going to have an impact. >> yeah, you're talking enormous move. >> exactly. >> any advice on the trump-ryan meeting coming up this thursday? >> it's interesting. donald is who he is, right? like i said he's got the candidacy about nothing. what's going to be more interesting is what hillary does. you know, will she come more to the center, will she be more personable? imagine -- forget donald trump asking me to be vice president, imagine if hillary brought me in or somebody like me in and went more to the center and became more business friendly? it could change the entire tenor of the race. i'm more curious to see what she does because we know what donlds's going to do. >> let's talk about "shark tank," aspirational television, even at cnbc we're doing more aspirational stories. the country seems to be in a difficult mood right now. they're unhappy with a lot of institutions but it's clear people want to be successful and they want to hear from success stories. >> the reason i do the show is every week it sends the message
that the american dream is alive and well. it used to be i'd walk up and down the street even in new york and people want to talk about the knicks and mavs, now it's my 10-year-old watches "shark tank" with me, my 11-year-old watches and they want to start businesses. "shark tank" does a great job every week and every night on cnbc saying the american dream is alive and well. >> 71 companies i think you told me about. >> yes. >> you personally have invested in 71 companies. >> yeah. >> can you give us a report on how they're doing? >> and new ones. >> lots of new ones. i've got probably 10% have not done well or two have gone out of business. probably 50% are doing okay or better. and the rest are doing pretty well. i've got some home runs that are just crushing it. so i'm happy with it. >> and where do we go from here on that whole aspirational television game here? i think people and judging by the reaction to make it our cnbc endeavor here, it's been enormous, people have been very interested in it, what can we do
to convince people the american dream is alive and well? >> encourage entrepreneurship. people want to go out and start their own thing. i hear people say that millennial are not into entrepreneurship. that's not what i see. what do you see with kids? >> i got a 20-year-old who just started his own app also. american dream and land of opportunity. >> the important thing is we are in an inflexion point right now in the stock market. we've been talking about this for a long time now. earnings seem to have stalled out. we're in four consecutive quarters of negative growth on the s&p 500. it may be five now for the second quarter. we don't know yet but it's looking in that direction. what is the american corporations now need to do to get earnings growth back? obviously there's a revenue issue, but even beyond that? >> in my opinion and this is only my opinion there's a disconnect right now because so few companies are going public. that gives an incentive for any s&p company, any major public corporation to just wait and rather than investing making capital investment in their own company the things that make them competitively strong just
waiting to make an acquisition. if you're not investing in yourself -- look, there's hundreds of billions of dollars being invested in start-ups of all kinds. whether it's retail, retail start-ups, technology start-ups, biotech start-ups. so rather than big companies having to invest in their own r & d, they just sit back and wait because now the culture of start uchs is you don't go public. you look for an exit. if that's the case you just wait. if some companies get caught, they haven't made acquisitions, they haven't made investments and obviously particularly with retail you have the amazon effect. >> let's face it i talk to a lot of start-up ipos, they simply say we'd rather stay private longer because the regulatory burden is so great for us. it's worth it for us to stay longer -- private long. >> they're 100,000 percent wrong. what's happening is companies are going public too late. ten years ago, twenty years ago, you went public in your fourth, fifth, sixth year of existence during your hypergrowth faze.
when you're going public in hypergrowth, you're getting people excited about you, getting markets, the general public excited about you. now when you go public in your tenth or 11th year, your hypergrowth is gone. we're waiting on uber. uber's days of 100% or 200% annual growth are gone. if you look around how many companies -- how many public companies are there? how many young ipos are there growing at 100% or 200% a year? >> if you want to invest in hypergrowth, you can't do it. that's a fundamental problem in the markets. >> going to have to leave it there. mark cuban, always a pleasure talking to you. steve, pleasure as always. see if we can make that 6 million mark. a lot of people coming up in the next few hours, many other big sport celebrities here at the btig charity day. >> good stuff, bob. thank you very much. bob pisani at btig. dow's up, let's get to dominic chu on the floor. >> good morning, carl. let's talk about this idea of
the inflexion point that bob pisani just brought up here. we are seeing some churn in the marketplace, and hopefully those guys at btig are going to have a charity day. if they would have had it yesterday they would have seen the second highest volume day of the year for total shares traded in u.s. exchanges, so we are seeing some action here. let's see if it carries over. in the early going right now we are seeing a little relative strength, at least in the early trade, for the likes of energy stocks, also looking at telecom stocks as the early leaders so far in terms of the overall trade. some of the laggards right now utilities and technology. i want to hone in on technology because that's one of the big focal points, this inflexion point argument in the marketplace. if you take a look at year-to-date basis performance, financial, technology and healthcare, they are the only three sectors in the s&p 500 that are red, negative year-to-date, also coincidentally maybe not so happen to be the three biggest sectors in the s&p 500. again, a little churn in the marketplace, debate happening right now. if you look at three points in the market that are going to be closely watched in today's trade
and over the next couple of weeks or so it's going to be what happens here first of all with transportation stocks. they have seen some strength going in of course over the last couple of weeks here and now we're seeing a little bit of signs of weakness in the last couple days here. transportation stocks one to watch. also small cap stocks. they have been lagging a little bit over the past couple days here, we'll see if the small cap market can show signs of life. and one other place getting quite a bit more attention and of course it's going to be a big harbinger of what's going to happen in the market, the junk etf those have been showing some signs perhaps of a little weakness over the last couple days here. we'll see if that happens, carl. and see if high yield can tell us something about the market's direction. back to you guys. >> thank you very much, dom, talk to you soon. when we come back, as gap tumbles on weak sales, one analyst reiterating his sale on the stock. he'll tell us just how low he
take a look at the dow 30. sessions highs up 158. disney of course tonight we're looking for $1.39. this will be the first report since that abrupt resignation of tom stags. >> this is one where i think not to tell bob how to do the narrative but keep it short about espn if it's at all fine, just say it's fine and emphasize the fact for the first time you have a stream of money that is from movie quarter to quarter to quarter never seen in shanghai disney. so there's a lot to talk about as long as you don't get bogged down in the nitty-gritty of espn. there's a way to tell the story that does not make it so it's the granularity of a couple subs. say, figured it out wu know how to put a movie out every quarter. it's not just here, there, it's
captain america going to swamp next week's box office. >> certainly a portfolio of businesses that extends well beyond espn. >> yes, it does. i know the espn if your honturn pretty great. but this movie business something that's never been done before. it's an annuity and it's incredible. >> coming off tough comps too. last year was a banner year as well. we'll get stop trading with jim. dow is up 153. don't go anywhere.
time for cramer and stop trading. >> white wave falls on the heels of hanes celestials. i point this out a lot of the traditional food companies still had very low actual sales. i mean, but this is what people really want right now. and remember backdrop whole foods was a little bit better. it just does seem like this group got oversold to the downside as people flock to campbell's soup and general mills, which become more natural and organic, but natural and organic is alive and well and i think this company can go higher. >> also been a consolidation story sort of involving this name.
not that it's necessarily going to happen. >> they have good growth prospec prospects. >> i don't know that he's ready either. >> no, greg doesn't want to sell and i thought maybe general mills would go for it campbell's but it's gotten too big. it's just not going to happen if it costs them too much. >> deen foods by the way getting back to late march levels. >> dean, commodity milk is back too. plant-based milk is something worldwide this is soy and almond people really love these. and whitewave has had a momentary setback because they weren't able to do china and goldman very negative for a while. but it's back. and i think that people just have to understand that health and wellness remains a major focus in this country. >> what's on mad tonight? >> we have fort net, cyber security, rand gold and brian goldner hasbro downgraded today by piper but i think this is a
company doing quite well. haven't done tv in a long time. >> good lineup all week long. >> well, you know, staff comes to play every day and i'm just merely a player. >> david and i will be over here interviewing other people. >> interviewing each other. >> we'll see you tonight, jim. "mad money" 6:00 p.m. eastern time. dow's up 154, all but two components on the dow are in the green.
good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen, simon hobbs and david faber at the new york stock exchange. dow big reversal as the s&p revisits 2073, disney in earnings tonight, wholesale inventories by the way crossing your screen. you see them up 0.1 for march. our roadmap for the hour starts with gap. shares are plunging double digits on another sales miss. we'll talk to an analyst who had a sell on the stock. >> recovery in stocks and
commodities this morning dow in triple digits as oil market remains in focus. >> and mcdonald's hitting another all-time high the stock up big in the last year. can the run continue? more on the golden arches. first up though april adversity continuing for retail. the gap reporting a drop in same store sales for the fifth straight month in april. retailer still struggling with banana republic and old navy stores as demand weakens. for more on the gap joining us at post nine is retail analyst at deutsche, paul, welcome back. good to have you. >> thanks for having me. >> cramer's words in the last hour, lost their way. identity crisis across the board, he says. is that true? >> i think that's absolutely true. gap used to be a core basic apparel retailer with low prices and great product for the family. i think there's other retailers that frankly have taken that place within the retail sector today. and i think that fashion such as h & m, i think that off price such as t.j.maxx and ross stores
have taken considerable market share and this is all happening while the consumer has been very willing to go ahead and buy apparel more and more on their mobile device. >> uh-huh. for a while old navy had been the last pillar, right? has that pillar now been broken? >> that is frankly why we think the stock is down double digits today. old navy led the decline with a 10% drop in sales. and in our view that's the most disappointing news and takeaway from the april results for investors. the banana and gap brands were supposed to be following old navy's lead and therefore this deceleration is really concerning and really leads to simply a lot of questions as we go forward. >> the weakness in the numbers that we just got, are there any implications for other retailers that we're going to start to hear from in the next few week sns or is this really just a gap story right now? >> look, in our view gap does have very company-specific issues. we think the company's
overstored. we think they're missed price versus the peer group. at the same time, yes, we also think we have a little bit of a down beat view on what's to come over the next few weeks across department store earnings as well as specialty retail. april did have a bit of a weather headwind. and we did have some cooler temperatures. we hit the consumer spending a little bit closer to need. and overall we also think apparel's a little lower on the totem pole in terms of where consumers are spending their money. >> the pull off is dramatic. this stock basically hall halte. ceo said this spring would be the point of no excuses, i think, is the quote. what is the structure here? is he protected on the board by the fisher family? are there other angry franchisees here? how does it work? why is there not a bigger implication as they, again,
hemorrhage a lot of those? >> i think that will certainly be part of the conversation for the gap story going forward. i think that at this point in time there is difficulty to have visibility on where the turning parts and the catalysts are that lie ahead. and i think we look forward to hearing, you know, what those strategic initiatives are on next week's earning call. they did mention that they're going to focus a bit more on where they're putting up new stores, where they're allocating capital, but part of the reason why we're reiterating our sell rating here and have a $17 price target is because in our view frankly maybe it's a little bit too late, too little. and so from our standpoint we don't see a near-term turnaround. >> i'm thinking there's been a path carved in the past few months, sports authority, aero. >> yes. >> i want to be careful but are they headed for restructuring
type trouble like that? >> i think gap historically has had a bit better balance sheet than some of the peers that you just outlined. they never took on a substantial amount of leverage. so i think it may be a little too soon to have that type of conversation, but again, we are talking about a retailer with thousands of stores globally, margins are decelerating and contracting at a meaningful rate. and therefore i do think that strategically as we think about this company, we probably need to think about it at a different size and store footprint. we need to maybe think differently about some of the actual banners. banana republic for example has for a number of years struggled. what's the place in that market for a banana republic? should it have the store size and presence in the mall that it does today? and also, you know, we do know that the free cash flow though to your point has certainly been impacted by these results.
and now gap is at a point where they are not able to buy back as much stock to support the bottom line as they used to. again, leading to the meaningful earnings contraction. >> the management question that simon brought up is interesting because pac, came from inside, was the digital guru, focus on e-commerce. this is a company with a history of very well respected management, best in class. is that no longer the case? is this a management execution story? >> look, i think that the headwinds facing gap are extremely, extremely difficult for any management team. we've wrote a report recently discussing all the various transitions going on throughout apparel retail. and, again, this is the number one purchase category on a mobile device today. this is also a scenario where the consumer is very willing to trade down. >> hang on a minute, paul. if you're able to sell your
merchandise online. >> yes. >> the margins can actually be huge. >> correct. >> if you can do that because you're cutting out the bricks and mortar. so that in itself isn't a reason for the demise of a brand provided you're able to make good. and people may be watching and saying, well, how hard is it in 18 months, two years, to realize the stock you need to sell and put in the stores at the right price? if you don't manage to do that then either you're not recognizing the problem -- i mean, talk us there why you would fail after this amount of time. >> what i would mention is that a few years ago we were having a conversation about omni channel and about buy online, pick up in store, about digital transparency, of price points, you can find out what the consumer wants to buy online and put that in a store. we're past that point. today i would say that online purchasing of apparel in particular is coming at true cannibalization of in-store sales. so the gap problem and what many other peers are dealing with is a scenario where you have
unproductive real estate, you have inventory sitting on shelves useless, you are paying higher labor wages and giving hours to workers that are sitting idle as the consumer fully shifts to online spending. we estimate that online represented two-thirds of all growth in the apparel category last year. that's twice the amount of just broad retail. so the issue in apparel is actually much, much deeper than just the broader retail conversation that we have around amazon. >> yeah. we got a long week ahead of retail, that's for sure. >> you're absolutely right about that. >> thanks for coming in, paul trussell of deutsche. in the meantime point to contain the wildfires in canada. estimates this morning are up to $1 billion in damage already to the canadian economy. we're in edmonton with more,
deirdre. >> reporter: hey, simon. for the thousands of evacuees many of them still at temporary shelters like the one behind us still a lot of questions, like when they can go home. there's a very somber tone here especially as they get their first glimpse of their charred city. a lot of them looking for their own homes and businesses that they just haven't known for about a week now whether or not they are still standing. 10 to 15% of the oil san city has been wiped out, 2,400 structures have been destroyed. this is a first good look since the fire ripped through revealing images of destroyed you can see them houses, cars, businesses, buildings. the city was once a symbol of alberta and canada's oil boom, it is now a ghost town. officials say that it will be a long time before residents, many of them oil sans workers and their families, can return to fort mc. there's no gas, electricity or
water in large regions of the city. and we are hoping that officials they say that they're going to be providing a timeline over the next two weeks. now, the fire itself is still burning and growing though at a much slower pace. alberta's premiere today is going to be meeting with oil sans executives this afternoon. and we will be there. we're going to be trying to ask them questions and we'll bring that to you as we hear it. back over to you. >> thank you very much. for more on how this is affecting the oil price itself not least of course with saudi in the mix as well let's get to the nymex and jackie deangelis. >> good morning, simon. the scene just laid out explains what oil workers are maintaining it's under control conditions are supporting the fact that the fire will be put out the estimates on how much oil is coming offline are rising. yesterday we were saying about a million barrels, now some people are suggesting it could be a million and a half barrels per
day that's coming offline out of canada. it is fwoigoing to take a while get the workers back to the sites and get the production facilities up and running. some people were suggesting yesterday it could be a couple of weeks. now they think it could take a little lupita nyong'oer. canadian impact sending prices up about 2% on the session. we're very range bound so over $44 we're at the top end of the range at this point. and traders still expect for the next few weeks potentially months to be in that volatile range of $35 to $45 a barrel. but there are some other considerations here to take into account. first of all the dollar. the dollar index has been relatively low. that's supporting these prices, but also it's been creeping up the last few days. shows you the sentiment on the back of this fire right now is to the upside. i'll also add we have inventories on deck. we'll get the api numbers tonight. the department of energy numbers tomorrow. expecting a small build in crude, but again, draw downs in disla ladistillates and gasolin.
seasonality definitely drives prices up. not just the disruption in canada but we have other fire disruptions domestically as well that will keep prices a little on the high side. just to talk about gas prices aaa is saying right now the national average $2.21. at this time last year we were at $2.66, so significant consumer savings still at this point, but imagine these prices creeping up over the summer. the peak of that season is july 4th, guys, back to you. >> jackie, thank you very much. when we come back, mcdonald's hitting some new all-time highs today under ceo steve easterbrook up another percent this morning. can that run continue? we'll talk about that. plus, later on facebook trending for the wrong reasons. a former employee claiming the company suppresses certain news stories. the company's now responding. we'll get more on that when "squawk on the street" continues. frsz i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data
stocks are solidly in the green right now. the dow is up 145. rising oil prices are certainly boosting stocks. energy is the best performi ini s&p group right now as investors try to reconcile a recent rebound with kind of a lackluster earnings season and concerns about the health of the global economy. joining us at the new york stock
exchange now is global strategic advisor at pimco. can you help recognize some of these growth concerns in the u.s. economy punctuated by the weaker jobs report on friday? how much of a concern is it heading into the second half? >> well, that's a good point, sarah. i think the q1 number was largely anticipated and so right now there's hope that we get a rebound. you know, traditionally q1 data has had a seasonal down tick to it, so i think the view is that we'll get some rebound in the economy, but it's an excellent point. we need to start seeing some hard data and move away just from the forecast. >> looks like we got the report openings a bit down in march from february. >> yeah. >> in terms of the labor market, on one hand we're seeing wages improve. >> good, yeah. >> but on the other hand the pace, the number of jobs that are being added every single month is going down. >> i know but i think the markets are going to have to start getting used to that because as we approach full employment with a slowdown in labor force growth we're not
going to be getting 200 k payrolls, probably next year we'll be in the low 100s and that will be consistent with full employment. >> that gets right to the question about the federal reserve and the topic this is your expertise, there's some question about whether the fed is really abiding by its dual mandate, maximum employment and stable prices. if we're seeing both of those things happening, why isn't it raising rates? >> i think the fed has a difficult communications challenge. they're trying to start a rate hike cycle when inflation is too low. they want to raise rates gradually to get back to a more neutral level. you're right, they've got a complex message to communicate. >> how does that work itself out this year? >> well, i think they will hike this year. i think they were right not to hike in the march meeting. they want to see more data. and i would expect that we'll get at least one hike this year, possibly two. but yellen has made clear and other fed officials they know
there's a limit to how aggressive they can be without the impact hitting the dollar and exports. >> they haven't really done anything yet. two or three and still not very aggressive. what i find amusing is the fact the market doesn't think june's on the table. >> right. >> yet if you look at what they're saying june is on the table. and if you listen to alarian or bill gross, think the market may be wrong far too complacent. i wonder why there's that disconnect. >> i think it's a good point. i think everything in life's a probability. right now i look at my screen it says there's about a 10% chance of a june hike. it's probably north of 10%, but certainly if it were close to 50/50, we'd be getting confirmation from fed officials and we haven't seen that yet. >> so you think the coast is clear? you think the coast is clear because they're not to a man or woman out there signaling -- >> no, i think there's probably about another month or so they have to tee up a june hike. but i agree a june hike is not eminent. and as sarah said the payroll number was weak and also the fed
realizes although there's some seasonality, they want to start seeing hard data to support that number. >> you told us as we reach full employment the headline number will be weak. wages are strong, aren't they? >> we did get a nice rebound for wages and i'm rootding for that. right now wages running about 2.5% per year which is better than it has been but isn't great. >> there is this narrative idea right now that the dollar as you mentioned for the fed is the lynch pin for global markets right now. if it starts to sfrengten strengthen again that hurts commodities, emerging markets, the whole fragility of this entire equity market rally and in fact china might have to devalue and we know that worries people a lot. >> yeah. >> so is that the right thinking right now? should people be so scared of the dollar rising? >> i don't know if i should say they should be scared but the fed has emphasized that the dollar is important for all the reasons you mentioned, profits and oil and e.m. and i think that puts a natural limit on how aggressive they can be, but i do expect that by the end of this year the fed will
continue to hike. i think that's the baseline case. >> and the dollar will strengthen? >> well, i think the dollar's in a range right now. we've had a pretty substantial movement in the dollar. we don't expect a big breakout of the dollar on either side right here. >> what happens to the stock market? >> you know, i think the stock market basically treads water. i think, you know, earnings are being hit by the strong dollar and slowdown is hard for me to see a big breakout in stocks to the upside. >> what about the second half earnings will rebound argument? >> i think if we get the earnings, sure, that would be supportive. i think what the fed's low rates do right now sort of keep value weighs at current levels sustainable. but they certainly don't provide rocket fuel to an upside from here. >> so you're a right-leaning economist. you're in the bush treasury. >> i was, yes. >> can you wrap your arms around some of trump's economic policies, this idea of renegotiating on sovereign debt? >> well, my goodness, i mean certainly i don't think that would be a good idea. my understanding is that he's since clarified that position. i think it's too soon to tell
what that platform's going to be. i look forward to seeing what comes outd of the convention. but right now i think we're still sort of in campaign mode coming out of the primaries. too soon to tell. >> you're waiting to hear more. >> yeah. >> thank you, rich. always good to see you. >> you bet. >> meanwhile, shares of mcdonald's are reaching some new all-time highs day after day thanks in part to this recent turnaround strategy? can it continue and ripple out to the rest of the sector? jeff bernstein, and also an investor joining us. good to see you both. >> good morning. >> jeffrey, it's the inverse of last fall and last sump mer, cos higher, currency down, market share they're taking not giving away. what could go wrong from here? >> we met with management last week and i'd say confidence is high on sustaining momentum in the short-term. the big pushback we hear from investors other than the fact
the stock's had a big move is once you get to the fourth quarter of this year you start to lap those very strong sales numbers and people are often spooked when you start to face those more difficult comparisons. >> so what's your target? what's your outlook for the next 12 months? >> i think mcdonald's continues to grow from here. i don't expect it to be necessarily an investor's best performer, but in this environment it's large, liquid with a healthy dividend and i think the fundamental momentum is there. i think you'll see comps remain strong, i think there's earnings upside we think mcdonald's is well positioned to the upside. >> tim, i'm interested to know your thoughts given your experience, what do you do when your turnaround has been executed well and then you have to convince folks that you're embarking on some longer term strategic plan? >> yeah, i think it's a very interesting topic you bring up because we do the same things all the way down to the small scale of saying to private dining coordinators at restaurants you're doing great this year but how do you beat
year over year sales? that's really the question that comes up for mcdonald's, but i have to say easterbrook has created a new culture for mcdonald's. who would have thought having breakfast all day would be something that spark the company the way it has? generally it has. people think breakfast is healthier, breakfast is a little bit lighter. so having it all day has changed the concept the way people look at mcdonald's not heavy fast food but, pick up quickly, inexpensive and feel somewhat healthy about doing it. >> yeah, so much of the improvement has been from the all-day breakfast. i wonder how much is that just the change. we know they're testing out garlic fries and other looks at healthier options. how much of that is also helping? >> yeah, when you speak to mcdonald's they would tell you all day breakfast was the biggest component, but they think there's lots of little things at play. whether it's new product news or whether it's improving the
quality of the proteins or cage-free eggs. they think they're slowly elevating the brand and the related message. but breakfast in the fourth quarter clearly was a whole lot of euphoria of consumers looking to have egg mcmuffin for dinner. that provided tremendous excitement and now they believe they have the levers in place to sustain that momentum, whether it's the value platform that they're pushing in the short-term, whether it's digital, both menu boards and the apps and online ordering and whatnot. and clearly new product news to come. so it seems like they've got the drivers to sustain that momentum in the short-term. >> jeffrey, who's on their tail? the one we hear about most often is wendy's, which has made some headway regarding the way people perceive them from a quality standpoint, from a taste standpoint. is that what you're seeing? >> what's amazing is prior to the past six or nine months all of the quick service names other than mcdonald's were doing quite well and mcdonald's was the
laggard. now mcdonald's is doing better but we're seeing the quick service names perform extremely well. wendy's is doing well, they report results tomorrow. burger king is doing quite well. sonic is doing well. there are a variety of quick service names that are all holding their own despite mcdonald's resurgence. but wendy's definitely has chosen the path of higher quality perceived healthier product to try and differentiate from someone like a mcdonald's. >> tim, i thought your analysis was interesting that by serving breakfast all day it gives this image of being healthier and lighter and cheaper and faster. how do you extend that out through the industry? what kind of opportunity does that clearly create, or have they filled the opportunity with what they've done? >> i mean, i would guess you're going to see wendy's come out with something that's similar to that trying to do a competition with mcdonald's saying that bringing breakfast to the table all day long. because to me really you can look at them -- mcdonald's what they've done is gone back to their own authenticity, which i think is what sells the brand
the most which says we make great food and we make it really fast. by adding breakfast all day it really drives that message home. so these other fast food people are going to have to chase that, i feel like. look at somebody like chick-fil-a who's really outshining everybody in the same-store sales. they serve breakfast. who would have thought chicken sandwich would become breakfast foods? but people like that mental thought of breakfast they feel like it's a lighter meal. and if you eat breakfast at lunch or dinner, you just mentally think you're eating a little bit lighter meal even though you may not be. >> yes. it's true. breakfast seems guilt-free even in the middle of the day or at night. jeffrey, tim, appreciate the insight. >> your mom always told you to eat breakfast every day, you know. >> jeffrey bernstein at barclays and tim love talking mcd. >> thank you. coming up on the program, two primaries, west virginia and of course nebraska in focus as voters head to the polls. can the gop unite behind donald trump? or can donald trump perhaps unite the gop? more on that next.
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it is primary day in nebraska and west virginia, as many are already moving on to the general election. cnbc's john harwood reports from washington. john, good morning. what should we watch in the primaries today? >> well, not much, sarah. look, this is the first primary day since we have known both likely nominees. donald trump's opponents have dropped out of the race, hillary clinton is still facing bernie sandsers, but nobody believes bernie sanders can catch her in the delegate race. so you have the west virginia polling today which shows in the average of polls that bernie sanders has a lead over hillary clinton. he's likely to win today. but it's not going to help him make up the lead. he needs to win an overwhelming majority of the pledged delegates in the remaining race and also turn some super delegates to his side. now, nationally we've got a new nbc/survey monkey poll out this morning showing hillary clinton having a lead of only five points over donald trump. we've seen larger leads in other polls, some others more
narrowly. the key for donald trump is going to be can he unite the republican party, and that's what he's going to try to do later this week when he meets with paul ryan and mitch mcconnell, the house speaker and isn't the republican leader. mitch mcconnell more politically minded has already said he endorsed donald trump's candidacy. paul ryan has said i'm not there yet. i'm not ready. donald trump in return said i'm not ready to support paul ryan's agenda. that's a dangerous game for donald trump as the republican nominee. we'll see if he can patch things up and become the full leader of this party and not only the leader of a faction of it, guys. >> okay. interesting times, john, thank you very much. meantime apparent lly peter thi is backing donald trump. he has previously supported rand paul and ted cruz and of course is a noted libertarian. we've reached out to peter thiel and we are awaiting a response. one of the early investors of course, guys, in facebook.
i think that maybe will surprise people in silicon valley, maybe it won't. >> well, he's always had a libertarian streak in him. and any notable republican comes out and supports donald trump, it's interesting given that we're hearing a range of opinions from the matter with, you know, bobby jindal, former governor of louisiana yesterday saying i'll support trump, but i don't like him. coming up on the program, more on disney leading a few important earnings reports tonight. what to expect going into the quarter and as we head into the break check out the stock of norwegian cruise lines which this morning has failed really fo follow through on the earnings beats from bigger rivals. and analysts call starts at the top of the hour why the company says ilt plans to reach its earnings per share target for 2017 rather than exceed it, which is what they said in the fourth quarter. more "squawk on the street" straight ahead. the pursuit of healthier. it begins from the second we're born. because, healthier doesn't happen all by itself.
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good morning everyone. i'm sue herera. and here is your cnbc news update at this hour. president obama will travel to hiroshima this month where he will be the first sitting president to visit the site where the u.s. dropped an atomic bomb. the president will bolster his call for deknew clearization and honor victims of the bombing that killed 140,000 japanese in august of 1945. however, the white house says he will not apologize for the bombing. a man stabbed four people at a train station in munich killing one and injuring three others. a senior politician says it does not appear to be a terrorist attack. forensic officers on the scene collecting evidence. treasury secretary jack lew getting a firsthand look at the humanitarian impact of puerto rico's $70 billion debt crisis on monday. he toured an elementary school in san juan struggling with limited electricity. and he did that with the region's governor. storm chasers in oklahoma
capturing dramatic video of a tornado on monday. this video was from the city of wynnewood south of oklahoma city. there were reports of one death and widespread damage from multiple tornadoes in that area. that's the cnbc news update this hour. carl, back down to you. they have more bad weather on the day today too. >> between that and the fires it's been a rough week, sue. thank you so much. disney reports fiscal second quarter earnings tonight after the bell. julia boorstin in los angeles with the latest. >> hey, carl. well, going into earnings it's disney's studio making headlines this past weekend "captain american: civil war" setting records the latest in a set of blockbusters prompting analysts to raise price targets and estimates for the media giant. now, those hits are projected to offset an expected $75 million writeoff from the finest hour. but it's espn's massive media network division that will be in particular focus.
cautious comments about declining subscriber numbers that sent disney shares plummeting last august, and it was his bullish comments after disney's last earnings that helped the stock rally around 20% from a bottom in february. while analysts see subscriber trends stabilizing, they're outlook on espn is mixed. piper jaffry predicting grow nearly 3% in the quarter writing, we do expect to see some upside from recent inclusion of espn into verizon's custom tv and sony's view packages. despite the strong underlying ad marketplace in the quarter, we expect a steep reported decline in advertising revenue at espn largely owing to the timing of certain sports. he's referring to certain college football games falling into the first fiscal quarter this year rather than second fiscal quarter last year. now, another hot topic we can expect questions about on the earnings call analysts are sure to ask about succession plans for bob iger.
it has been a month since heir apparent ceo and tom stags announced his departure. >> julia, i wonder if tonight might mark a step change in disney and how we understand the culture. a lot of commentary that the culture is changing to one of cost control and operating efficiency. i mean, if you google disney at the moment, or disney parks certainly you're going to get a lot of commentary about how they may be seeking to cut costs there even of course it's an expanding business even though prices are rising. what do you think we'll get on that front tonight? >> you know, i haven't heard anything about the culture at disney changing. it's one of these companies that because it has so many different divisions, you know, there's the parks, the movie studio, the tv business, there's consumer products, it has different people running each of those businesses. and when it comes to parks there's a lot going on right now in terms of expansion, they're building "star wars" worlds at the two parks here in the u.s. and in shanghai they're working to finish that park which is set
to open in june. i think we're going to hear a lot about the trends at the parks. i think the u.s. is expected to be a lot stronger to help outweigh weakness in europe. we expect terrorism to have an impact on the park in paris, the terrorism in europe to have an impact on the park in paris, but i think there are going to be bigger questions about what's next for disney when we are waiting to see who's going to be the successor to bob. there are a lot of people who would like to see him extend his tenure there. i don't think disney has plans to announce anything yet, but there are certainly going to be questions. >> yes. julia, thank you very much. we'll see what happens later tonight. coming up, more on this market. we're still looking at a triple digit gain here for the dow. broad based rally all industry groups are higher in the s&p led by energy. on the flip side we're watching shares of solarcity as well. elon musk's solar company plunging on a wider than expected loss, disappointing outlook. the stock is down 70% in the
welcome back to "squawk on the street." i'm susan lee. toc stocks are rally today and energy leading the s&p 500 higher today. this is crude rebounding to $44 a barrel on supply concerns. almost all constituents are in the green today. and among names leading the way chesapeake energy, hess, devon energy and transocean all up between 2% and 5%. now, remember energy is one of this year's best performing sectors up over 8% year-to-date but still down double digits, si simon, over the past 12 months. >> thank you very much. dow and s&p having the best gain now since april 13 of 170 points
on the dow. art cashin is director of floor operations at ubs. good morning. >> good morning. >> it's interesting, i mean, if you looked over the last months yes energy and financials they're up 4%, 5%, but in broad terms we've kind of topped out for the last three or four weeks. what do you feel is going on here? >> well, there's been a concern that there's no new money going into mutual funds. and corporate buybacks have started to dry up right in here. now some people thought it was because of earnings season, but there is some evidence that they're actually beginning to slow down on a corporate repurchases. and that may have allowed the market to stall. we're right up against some key resistance here in the s&p 2075 to 2080. and, again, crude is the story of the morning. wti above 44 puts a bit under the market below 44 not so much. >> in the meantime massive corporate bond sales yesterday and today and through the end of
the week on both sides of the atlantic as people seek to lock in the interest rates that they have at the moment. what do you think the narrative is behind the scenes when you couple that with the argument that maybe corporate buybacks are beginning to wane? is this a fundamental reassessment of what ceos should do or where the market's going? >> well, we'll see how that money begins to deploy. they take that some $50 billion or so if that starts to come in we'll look for further announcements about corporate buybacks. if they don't come through, then that will be some new corporate assessment of where they want to go. >> i'm just looking at technology. i mean, all the groups are rallying today, but it is not in one of the higher flying groups energy financials and consumer discretionary in the lead, i wonder how much the sort of damper we got from the tech earnings and outlook on technology is weighing on the overall market and is a cause of this hesitation that you talk about about putting new money to
work, like apple, which has also performed very weak over the last few weeks. >> yeah, the attitude toward apple has changed dramatically. you're hearing among the real bears things like they're one failed product away from a real problem. that if they brought something out -- for example, look, if the siri 7 comes out and it's not a big hit -- >> i guess i'm just wondering what that does to overall market sentiment and can the overall index rally without tech and without apple? >> well, it may be very difficult. the other thing that we haven't spoken about is that you're very close to the top of the range here too. so that may make people hesitant to deploy new funds into the market. say this may be closer to the top than i care to buy. let them break it out on their own, i'll come in later with the money. >> i think apple's down 15% over the last month. the move is absolutely huge. where are we on interest rates? we were talking about this earlier. are you steadfast that the fed
can't raise rates despite the noises we hear june might be active from bill gross and members of the federal reserve themselves of course? >> no, i'm in the lap crowd, i think there's an outside risk they may do something, but it could have a ve-- >> they might be prepared to stomach that of course if they -- >> well, they could be. but as john dunce said no man is an island. what happens here will have an impact in china. what happens here will have an impact in europe. so i think they want to be careful. you know, we talked about that back in december. i said that they wouldn't raise in september. i said they are committed to raise in december and it's the wrong thing. and i believe it was the wrong thing. and the market suffered for it. >> one of the things you're very good at, art, is simulating the news flow around you and then
selecting and linking to the market so people better understand what's going on. where are we on the election? and the arguments about trump or clinton and the degree to which people market participants are noticing that or thinking about how they plan for that? >> i think that thursday could be a very, very important day. how they come away from the ryan meeting -- >> this is when trump meets the gop. >> that's right. and how that comes out whether people will decide to try and unify the party and support him, will allow people to better assess how his role will do against secretary clinton and how they will do in both the senate and house races, which are critical. so i think when you come out of thursday and get an assessment as to how unified the party will be, you might get a better look. >> are you surprised we're not seeing more of an impact from the election, from some of these headlines on the markets? or do you see it as a contributor to the recent volatility? >> no, i don't think it's fully
in yet. i think as we get to see whether the republicans will unify and how they're going to set the run, you may see some early attempts at maybe some talk about -- >> if republicans unify around donald trump, is that positive? >> no -- >> you talk about a lock situation is the inference you're making if they lose the house, if the president is blocked from whatever he can do. i think that's what you're driving. >> yes. and i think you would originally asked me was it affecting the market yet, and i don't believe it is yet. but if the republicans look unified, then you can make a certain kind of an assessment, or if they come out and they're absolutely not unified, then you can make a separate assessment. >> okay. thank you, art. great to see you. art cashin from ubs. coming up on the program, a busy morning for earnings more on some of the big movers next. amazon getting a big vote of confidence from bernstein, the
it is btig's annual charity day, and our bob pisani is there as always talking to big names. earlier he caught up with mark cuban and asked him about the market right now. >> we are in never neverland, and i don't know where with are going to go, and nobody does. we are in a trading range, but the rereality is that there is no triggers and then we have the uncertainty of politics. i think that, you know, depending where where things go in the polls, we will start to see it impact the markets more and more as we progress. >> on that note, cuban weighed in specifically on donald trump. listen. >> when donald first came on i liked that he was changing politic, and what i said is don't listen to what he says, but how he says it, because that is how he is going to be inspiring people to vote for him, and that is what happened. but now he has turned into the "seinfeld" candidate where a candidacy about nothing. >> a candidacy about nothing.
cuban also, simon, made the point that companies are waiting too late in the game to go public. he mentioned uber for example, and gone are the days of the 100% to 200% growth rates and missed the opportunity, and lack of supply that is hurting the market. that is interesting. >> and as far as donald trump, you have six months of this, and the key questions with the gop meeting thursday and whether he can raise the $11 billion, and whether there is a policy change on the critical factors and what it does for the senate and the house, and on the market sense, that is going to turn you in a number of directions as you will get the different combinations. >> meantime for now, the market is calm in rally mode, and the s&p and the dow are up triple-digits, and wildly held names trayding at new lows. dom? >> well, a number of the large
wildly brand name stocks are making the 52-week highs and if not record ones. you have 37 stocks hitting fresh 52-week highs. and substantive stocks are making fresh high levels are hitting the intraday today. and you have the likes of home depot, and the consumer product type of thing like altria on the tobacco side, and pepsico for snacks an consumer staples, and o other names such as johnson and johnson and hitting fresh record highs in the trading today, and one thing they have in commonle yields, dividend yields north of 2%, and the 10-year yields on the u.s. treasury notes are about 1.5%, so they are paying hefty dividends. and wone thing that simon hit before the break, the shares of amazon hitting highs. the star trade outperforming the
market, and up by 3.5% year-to-date, and amazon shars s are ones to watch. and you have ford stocks in early trading hitting the fresh 52-week in some case multi year low lows, and gap and the l-brands on the reare tail side, and the seagate, and that and western digital hitting lows, and sampling the flavor of the market. an consumer names, and dividend payers, simon, they seem to be in focus for the traders. back over to you. >> 179 on the dow now. thank you, dom. over to jon fortt, and find out what is coming up this morning on si"squawk alley ". >> well, we are going to be talk about facebook who is defending against charges of impropriety with gizmodo who has zero sources on the record. and what is up here? and amazon with the big upgrade
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in on the streets of amazon, and 11:00 a.m. in new york, and it is "squawk alley ". >> i am thinking about my doorbell and when you going to ring it ♪ ♪ i'm thinking about my doorbell ringing ♪ ♪ when you going to ring it ♪ ♪ i'm thinking about my doorbell ringing ♪ ♪ when you going to ring it ♪ yeah, i have been thinking about my doorbell ♪ ♪ oh well ♪ what is the chance ♪ >> and welcome to "squawk alley" with myself and kayla tausche and jon fortt. and joining us from san francisco kate mitchell partner with scale ventures and in new york dennis berman, editor of the "wall street journal," and thank you for coming back. and now, amazon hitting new all-time highs after the note