Skip to main content

tv   Squawk on the Street  CNBC  July 28, 2016 9:00am-11:01am EDT

9:00 am
. >> among today's top stock to watch check out netsuite. oracle buying that company $109 per share. all cash. you're looking at that trading almost at the takeout price. >> quick check on the markets before we go. the leaderboard -- we don't have time. markets down 22 on the dow. go ahead. take it. >> okay. join us tomorrow. watch some golf, hillary tonight. see you tomorrow morning. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber and jim cramer on the new york stock exchange. wondering what the busiest day for earnings is this is it. plenty of reports to unpack, software m&a, clinton accepting the democratic nomination, global stocks treading water, europe flat, keep your eye on
9:01 am
bonds as we get q2 gdp this time tomorrow. earnings, the busiest day of the season. majors like facebook and ford on the move, dow chemical, inside look of the quarter from andrew. >> hey, you get on to my cloud. oracle buying netsuite for $9.3 billion citing strats you-like synergies. >> the final day of the democratic national convention ringing endorsements for hillary clinton from the president and mike bloomberg last night. the candidate takes the stage tonight and we will go live to philadelphia. first up, facebook with a massive earnings beat that has the stock set to hit all-time highs this morning. eps 97 cents, beats by 15 cents, 6.4 billion in revenue, monthly active users 1.71 billion an mobile continues to grow, mobile ads 84% of the ads that facebook shows. mark zuckerberg stressed video again and again on the call. even turning a question about pokemon into an answer about video. take a listen. >> one of the big themes we're
9:02 am
talking about here is becoming video first. right. and as people look for richer and richer ways to express themselves, you know, just like people in the past have shared a lot of text and photos on facebook, we think in the future more will be video and more of these augmented reality tools will be an important part of delivering that experience and making that fun to use and expressive as it can be. >> just as we watched their turn to mobile those years ago the turn to video has been just as stark. >> there was so much great stuff including the preamble, ten years ago most of us, what we shared and consumed was text. now it was photos and soon mostly be video. zuckerberg, what he made a case that basically said look there's going to be 7 billion people, he will wire the world, they have the solar planes basically, going to wire the world and their natural way to communicate is through video. saying listen, the virtual is
9:03 am
now. obviously the advertisers love the it branded advertisers. the way they do the call, he gives the big think and sheryl sandberg talks how the advertisers will like it and get the numbers. i thought sheryl did a lot of great stuff in the quarter talking about how the brand companies love it. compare that to twitter where basically said we have to go direct response. what these guys are doing, they have 60 million customers bubbling up. when you go to a major -- go to coca-cola and say listen we want to match your product with our video. i mean, coca-cola will say i can reach billions of people versus giving an ad to a domestic broadcast company. >> live is yeah the times are changing. >> international brand you're going to give a -- >> live video, i mean he made no secret of it. it is going conceivably they see it as the real growth opportunity. who knows. the early days right now. very early days. >> normally you would laugh. a guy says there's 1%. only 1% there. i can't laugh. i felt very small when i read
9:04 am
the call. i felt very small, like i'm a small thinker. only thing i edent fy with him i play pokemon. they really do not think on the same plane as we do. kind of like they think their food for the world that you're going to have to be on facebook. i'm not kidding. >> it's not just -- >> not a conflict i had -- >> with the existential conflicts. >> i'm small. i'm a small thinker. he's a big thinker. >> ai, by the way, is something that he's thinking a lot about. >> oh, yeah. >> let's use all the initials, vr, virtual reality, artificial intelligence, something people are focused on and you would expect that facebook would be too. only mentioned a couple times i think on the call but something i think that's going to be significant in terms of their ability to offer and how they run their business. >> they could do $8 in 2018. not an expensive stock. i think what's interesting here is that even just his throw away thoughts, at one point someone says, look, you know, why do you like bot so much. i think i like to be asin crowns
9:05 am
you than sin crowns you. i google and go wow. people like to do many things at once. this is a very millennial thing, david. me i pick up the phone, can i have a reservation for two. he's saying, i want to do that while i'm doing five other different things. that's why i'm saying i'm humbled by him. because he really is thinking about what we want well ahead. steve jobs did that. henry ford did that. what do we want. edison did that. this guy is the real deal. >> so it sounds like you're saying to put a period on it, the ownership structure at facebook that affords him all this freedom is a positive, not a negative? >> oh, yeah. i mean i just think it's a wondrous company. anyone who like bad mouths our country listen to that conference call. this is a wondrous company. it's truly just fabulous. >> why the board allowed that creation of a separate class of stock to make sure that he would remain in control even as they doll out stock potentially for future acquisitions and to the like and their employees. when he leaves it changes back. very interesting when you
9:06 am
read -- >> he must not leave. sandberg must not leave. >> the beta about the creation of the stock -- >> everyone is humbled by them. you listen to them -- >> talk about the stock itself for a minute though. >> 8 bucks. i would pay 160. >> 160. >> 160 bid. >> 8 bucks on 2018. >> 2018. >> thinking $8 a share in earnings. >> they did what arguably you could argue they did the fourth quarter of the is quarter. i mean they're so far ahead. we used to see these things in the hay-day of the personal computer. you would get a quarter i thought they couldn't do that until the end of the year. the quarter is so far ahead of what i thought they could do. and they are -- again, you're going to write them if you're coca-cola and you're in every single -- 100 countries how do you reach them? put every channel in the world. >> ramp from a billion in profits to 2 billion in no time. >> six months. >> and by the way, snapchat, fine, one point, fine, there's room for everybody. >> he said 160, right.
9:07 am
>> for the stock. >> 160 price target. >> yeah. >> it's not expense. i'm giving you 20 times 2018 earnings. >> no. my question is -- who is suffering as a result of facebook's asen dance? where is it coming from? >> no. >> not twitter, maybe. >> those clown show. >> maybe cap net -- >> did you just mention them in the same block? don't put twitter in the same -- 68 block -- >> only because it's not as though people are advertising that much more. it's coming from somewhere. where? because that would be an opportunity to short those stocks. >> well, i mean arguably people are saying it's going to come from tv. my problem with that is that i think it's really been -- it's in addition. some of the -- now coca-cola is taking directly, a lot of companies taking directly from other forms of media, from print, still from tv. but when you listen to facebook, what facebook is telling you is, we're creating a certain kind of ad and people are just kind of doing it and they're not thinking well i have to cut out somebody else. i'm not -- look, there's --
9:08 am
there are ways to be able to say this is so disruptive but there's also ways to say it's just additive. i think that this is a different -- >> i don't know that they're adding more add dollars. that's a static number. >> the tv numbers are not showing anybody is losing in tv. >> not yet. >> not yet. >> in the times about political ads and how they appear to not be moving needles the way they used to. >> the local guys are saying it's still good there, but i'm just talking about that facebook does not have a lot of advertising yet. versus what it's going to have. >> let's quickly before we run out of a block, get some m&a. breaking in the last hour, oracle buying netsuite for $9.3 billion in cash. founder and executive chairman larry ellison owns a significant stake in netsuite an early cloud company he co-founded in '98. deal expected to close this year. another chapter in software as a service m&a. >> this was a company i've always felt oracle had the high-end enterprise, okay, and then the mid-size was netsuite,
9:09 am
people were always afraid that oracle was going to come in and beat netsuite even though ellison owns 40%. >> personally. personal investment. >> the other day we got a couple pieces that said, you know, that look this is going to happen. j and p came out july 20 -- >> wow. >> just yesterday -- >> the stock moved up a lot into this. i'm sure the sec will be taking a look. >> look, i mean there was literally a piece yesterday from j and p saying this could happen. a limited number of potential aquiers as a bmo piece. what i like about this is that small, medium-sized business are really good at. oracle has that too. enterprise resource play. it makes a great deal of sense. what can i say. >> oracle always aggressive when it comes to doing a deal if they see it and think it's going to work they do it. don't waste time. >> will benioff come in, salesforce come in, look, sales force have other enterprise resource planning. they let other companies do
9:10 am
that. work-day trading up on that. i think that's silly. i do not think that they're a seller. service now trading up. give me a break. that's a great growth company. i mean the extrapolations going on this morning seem silly. >> finally it's the final day of the dnc. hillary clinton speaks tonight. a combative optimistic tone from the democrats who spoke last night including the president and vice president biden. our chief washington correspondent john harwood is in philadelphia with more. good morning, john. >> good morning, carl. you know, the democrats last night rolled out more major players to swing hard at donald trump and try to lift up hillary clinton. it started with vice president joe biden and the man who wants to succeed him as vice president tim kaine. they tried to peel away working-class voters from trump from a candidate they called dishonest and mean spirited. >> no matter where you were raised, how can there be pleasure in saying, you're fired. he's trying to tell us he cares
9:11 am
about the middle class. give me a break. that's a bunch of malarkey. >> folks, you cannot believe one word that comes out of donald trump's mouth. not one word. >> reporter: then there was former new york city mayor mike bloomberg who spoke to independent-minded, college educated voters. he mocked donald trump's business record an even questioned his mental stability. >> as an independent, i am asking you to join with me, not out of party loyalty, but out of love of country, and together, and together let's select a sane, competent person. >> reporter: and finally there was president obama. he swung at trump too but he also tried to reassure those americans feeling left out by economic changes and cultural trends, he told them that we're
9:12 am
still perfecting our union and that hillary clinton is exactly the kind of person who is able to do that. >> no matter how much people try to knock her down, she never ever quits. that is the hillary i know. that's the hillary i've come to admire and that's why i can say with confidence, there has never been a man, or a woman, not me, not bill, nobody, more qualified than hillary clinton to serve as president of the united states of america. >> reporter: and, of course, tonight we will hear from hillary clinton herself introduced by her daughter chelsea clinton, one of the questions that we're going to be watching for is, to what degree does she express that anger that many voters in the country feel. the majority of people feel the country is headed in the wrong
9:13 am
direction. she has to navigate that as the candidate of the incumbent party and somebody who has been in national politics for a quarter century, guys. >> our coverage begins at 10:00 p.m. eastern time. we'll see you then. john harwood in philadelphia. lot more earnings to get to including big miss for ford and what that number means. also ahead, andrew dow chemical's ceo on his company's merger with dupont and earnings this morning. premarket dow has taken a turn down three straight and down four out of five. more "squawk on the street" from post nine in a minute.
9:14 am
9:15 am
9:16 am
shares of dow chemical are criming this morning, the -- climbing this morning. the company reporting a quarterly profit of 95 cents a share. revenue ahead of forecasts. jim and i spoke with dow's chairman and ceo andrew liveris a few moments ago and started with the company's strong performance in plastics. here's what he told us. >> plastics which is driven by packaging david, so consumers are out there, the u.s. consumer is out there. see it our building construction result as well which appears in infrastructure solutions and see it in our dow consumer solution section which has automotive, construction, packaging for
9:17 am
food, packaging for goods that people buy, whether they be toys or whatever they may be, it's consumer driven demand in the u.s. in china and actually even in europe. so, you know, it's a mixed global economy, but our sectors are very indicative of where consumers are and i would tell you right now, this result that you just saw which is 11 quarters in a row of volume growth for dow, we produced a billion more pounds this quarter than we did a year ago, or 2 billion more pounds for the first half. that's actually showing a strong consumer economy. >> yeah. which is somewhat interesting. and perhaps surprising. i mean as is the fact that frankly and you say this in your press release this morning, despite the varied economic landscape you're seeing favorable conditions and robust demand in core consumer led markets across the world. construction around the world. >> construction. >> i mean put in perspective for me is this a stronger quarter
9:18 am
than perhaps you've seen in terms of demand in some time. >> well you've got to say it's a record quarter in terms of profit and, you know, we're producing more than we've ever produced before and we're in a run rate of ebitda for the company at $10 billion. that's double digit ebitda, first time in our history. you've got to say, we're making the products that people want and the people who are buying, consumers, are spending despite, you know, what you just said as being an uneven global economy. the downside pockets whether they be in latin america, parts of europe, those downside pockets are not bad enough to overcome the consumer led demand which means if you saw -- i saw the mastercard results, also strong on the consumer side. the consumer is spending, you know, call it whatever psychological impact you want. maybe people feel so bad they want to spend. whatever the driver is. >> yeah. >> you can go that way if you wish. our view of it is, we've got the right products in the right
9:19 am
portfolio in the right geographies and that exposure is giving us growth and we've narrowed the company's portfolio, especially with our transactions to the point where we are in secular positive growth trends. 15 quarters in a row of eps growth year on year doesn't happen by accident. >> andrew, the one division that was not up to what i know you wanted is ag but you're merging with dupont which had an amazing ag quarter. how do the two dog tail. soy not that good. sunflower not that good. are these divisions going to create the number one company or because of your -- i don't know. the weakness i saw here will you still be number one if you combine? >> yeah. so yes. but to answer the question right on. but if you do the comparables our friends at dupont did great, did great. remember, they're taking out a lot of costs, a lot. ed's done a phenomenal job over
9:20 am
there. we've taken our costs in the ag sector because of the downturn but we've come off a lower term base. the comparables against everyone else in the space, science did very well and the standout was dupont which is terrific. put the two together and get more powerful. yes, very, very high on the compli men tarety of our two companies agriculture positions. >> i was surprised you didn't call out free port or saudi arabia. i think both of these are one of the reasons you said you all that much more production and low cost. what do these mean versus dow two years ago? >> well thank you for saying it. you're right. we're right now starting up both big units. i came back from saudi arabia on the weekend. try 135 degrees heat in the desert, guys. i would like you to come and visit at that time. >> no, thank you. >> but -- but the answer to your question, jim, we'll say -- david, we'll have it on the call, i have one slide at the
9:21 am
end of the call that talks about profit contributions from those two very large project, you'll see our run rate ebitda i talked about at $10 billion as we go through the start-ups and get to steady state and all the synergies, dow, corning, the dupont deal and those two projects our run rate ebitda will go to $15 billion or north in the next several years as a material science company. that's a lot driven by those low-cost positions you mentioned. >> finally, andrew, i would assume you're going to get questions on the call since we're taping this prior to it about where things stand with dupont in terms of the regulatory review and there are some who believe your synergy number was low early given some of the numbers you're talking about, from both you and dupont. there are expectations perhaps those synergy numbers will come up. is that something you will address on the call? >> yeah. we will. you know, ed and i and the teams are working hand in glove. we've had a lot of these six, seven months getting detail and
9:22 am
granularity around the synergy numbers. we're confident in the number we announced. you asked about it, both companies are taking out costs going into the deal. so you got premerger synergies, during merger synergies. put those two sets of numbers together there's a lot of costs out that will come from creating these three incredible market leading companies that this merger speaks to. so yeah we're on track and we're very confident of the numbers we've announced. >> and, you know, there are some who worry about the regulatory front, simply because well for any number of reasons including what seems to be an aggressive doj and ftc right now, are you concerned? >> look, concerns probably a word we use on our daily life on anything. we can go around really getting anxious about many things going on out there. you haven't even talked geopolitical. look, regulatory environments are what they are. we've got exactly what we need to do with this deal in the talk about what we have said to the regulators about the three rating. it's not a three.
9:23 am
it's -- it's not a one, it's a three. we're close by year end. >> always good stuff from liveris with david and jim. when we come back cramer's mad dash and count down to the opening bell. one last look at the premarket. more "squawk on the street" after a break. narrator: adventure can be found anywhere but the best place to start is in the forest. kubo: i spy something beginning with..."s" beetle: snow. kubo: no. beetle: snow covered trees. monkey: nothing to do with snow. narrator: head outside to discover incredible animals and beautiful plants that come together
9:24 am
to create an unforgettable adventure. kubo: wow! narrator: so grab your loved ones monkey: don't even. narrator: and explore a world of possibilities. kubo: come on, this way. narrator: visit discovertheforest.org to find the closest forest or park to you.
9:25 am
more earnings to get to, including ford, hog, groupon, opening bell a couple minutes away. .
9:26 am
9:27 am
9:28 am
you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in 90 seconds. let's get cramer's mad dash before the open. >> so many things i could talk about. the fact that groupon not too early to start buying, grub hub should buy groupon. focus on whole foods when talking about food.
9:29 am
this is a company that once again moved up from 30 to 34, 35, lot of it was takeover situation, a lot of it people feel maybe they do something private. this was a miss. it was tough. i think john maki -- he was the co-ceo, really kind of told it all when he said at one point in the call people may not be driving as frequently as far as they used to because they can stop by a kroger or heb or wegmans to get products they used to only get at whole foods. there's overlap. what he's basically saying it's not that special. now, against that they're doing a lot of different things. they got a loyalty initiative they're rolling out in dallas/ft. worth, tested well in philadelphia. terrific 365 the smaller format. they are doing everything to try to turn this thing around but they're doing so many things at once that i think it's actually hurting the message. not unlike what happened with starbucks when howard tried to do the frappuccino and change in loyalty. only do so many things at once and whole foods is doing a ton
9:30 am
of things at once. execution is being called into question. i don't like the fact that they didn't have a lot of more items being bought. it was not a great quarter. >> not a great quarter. >> interesting we've seen some of those pioneers like netflix and whole foods, who started something, have others come and say we would like a piece of your lunch. >> yeah. >> that's a really -- amazon, hulu, in this case kroger sprouts, goldman had taken whole foods to a sell that looked like a good call at 34. >> there's the opening bell on the s&p at the bottom of your screen. big board it's tell every amazing lady about ovarian cancer highlighting the foundation ovarian cancer's walks and runs and nasdaq comics unites nations aiming to bring the messages of sustainable development to children through the power of comics. let's talk some ford. jim? >> yeah. >> wow. >> a lot of these on higher defaults, lower resale values. >> it's funny, we have -- he told me this at the end of june
9:31 am
when i was out there to see him. he basically said, exactly this. get a listen to what he told us here. >> this is mark fields back in june. >> we're going to have a strong year. we've said that. but we're starting to see some things in the marketplace that we hadn't anticipated last year or even the first quarter. in the areas here in the u.s. on -- that we're dealing with the expanded takata recall which we -- >> right. >> did not anticipate. >> that's more than a million -- >> it's a lot of vehicles that we have to take care of for consumers. we're seeing, you know, auction values across the industry come down. >> i saw the carmax numbers disappoint sthoog that impacts our residuals. >> rights. >> those are impacting us and listen, we're still going to have a strong year but as usual, we'll provide updated guidance at our second quarter earnings call. >> there was. he told you. i think that he was basically saying look, all the things that he's pointing out now, it's just not a great time for ford.
9:32 am
general motors reported better numbers than ford. this brought the stock market down when it came out. he's been concerned for a bit. peak autos are we there? the auto business had been on fire around the world. that's been a major prop. i thought it was very sobering when he said carmax was directly related to ford and he meant it. and i think people kind of ignored his negativity there, but now they're not. >> interesting. donald trump talking i think it's in the detroit news today, sort of softening his stance on what kind of tax ford would face if they didn't repatriate jobs the way he wants. says it could be 10, could be 5, could be 20. >> yeah. when you speak to ceos who run global businesses trying to understand what a trump presidency would mean for them, i hate to use the word, but it comes up time and again, simply uncertainty not knowing which way it will go, hoping for the best, he will walk back some of the things he's said, certainly.
9:33 am
and that we don't end up in a trade war or anything along those lines which would conceivably be ru nous for many businesses. >> ford moving jobs to mexico, a lot of this is just front and center, the idea that look, new koer came on "mad money" the other day, you can make a car for $3 an hour workers, full health care, no benefits needed ship right up from mexico, trunk line right there. fully educated work force. absenteeism nil. how do you compete? why dot germans and japanese build their luxury cars in the state of [ inaudible ]. they're there because it's the cheapest, and for many people the best. and if your a -- if you believe in nafta, you're facing it. nucor is a classic free -- they want fair trade but opening a plant with the japanese because that's where the building is. there were no cars being built there five years ago. >> where is apple going to build their car? >> good question. >> by the way -- can i say it in jest but we know that apple is
9:34 am
spending an enormous amount on r&d and people backing into numbers who say who knows it could be $5 billion alone on the car or whatever the car represents. maybe it will fly. >> that could be four years from now. how about fourth quarter apple giving the read through through serious logic, serious logic makes the microphones for the iphone put out tremendous, you know, great number last night, crus, and people are reading that through to apple. why not buy twilo on the facebook numbers. two i'm saying right now, serious giving you a good read through apple and facebook through to twill lo. >> apple shares up after the large move yesterday. >> they're building a lot. >> facebook up 3.5%. some would have expected given the numbers last night the stock would be up more. >> i'm not going to disagree with that. >> all right. >> yeah. >> check. >> david wins that one. >> yeah. >> david one, jim zero.
9:35 am
>> virtual reality. i'm not here. he has a headset on? him with the existential crises. >> i'm blue teeth. you're jim. anyone that knows -- he's a jim. anyone know that. >> is this pokemon? are we talking color war camp. >> don't use your pokemon. >> you can be blue. >> i am jim he is a gym. >> from ford to hog, jim, we've seen lots of downgrades, right, they've cut their shipment forecast several times now. again on slow u.s. sales. >> yeah. look, u.s. consumer, we heard andrew liveris say the u.s. consumer is great. i know that the stanley black and decker masco said that the u.s. -- ppg said that the u.s. consumer is great. the u.s. consumer spending on the house. on the house. not spending on the vehicle. they're not spending on apparel. they're spending -- >> on plastics. >> unless buying adidas. >> spending on plastics. >> isn't that funny. it didn't jive with what i'm
9:36 am
hearing but mastercard said good things about the u.s. consumer. the consumer is just doing crazy things. the consumer spending a lot of makeup, because of, you know, taking millions of pictures, video. >> selfie nation. >> the consumer spending on odd places that we can't figure out. now under armor going down. it has been down the last couple days. nike. i pick up adidas' preannouncement last night and adidas went from mid-double digit -- mid teens to high-end teens. they're taking share. it's hard to read who's taking share of wallet, of apparel. all i can tell you is that this is a time where we cannot -- the consumer spending we just can't figure out what they're doing with it. >> they're spending it on their car. >> not going out to dinner as much. >> right. >> it's hard. >> andrew liveris' call did not -- i can't relate his consumer -- >> doesn't jive to what's going on. it was interesting to listen to him talk about that. we haven't talked this week about beer. when i say beer i'm talking about the enormous deal abi buys
9:37 am
sab which some are concerned about because abi, anheuser-busch raised offer for sab by one pound to 45 pounds. the deal itself has become cheaper in some ways as a result of the fall in the pound and so there was the hope that they might go above that. they seem to have preempted sab in the midst of another buyer. it's different than a takeover. how they would respond and when the deal would be recommended by the board or continue to be recommended by the board to shareholders. and now they've introduced again some uncertainty to this process because of preempting it and not entering too any sort of negotiations and using the words best and final which have real meaning in the uk. when you say best and final you're done. and so the question now is will the board of sab continue to recommend the deal. of course the chances are yes, of course they will, but it has
9:38 am
at least given them some people pause who say well, maybe it's not enough. because the premium is not as large as it was originally when the pound was here. now that it's here. >> boy. i tell you that beer business is fabulous. no price -- >> they're only waiting for china anti-trust. that's it. and then they're on their way to being done but they do want that recommendation from the board. there's a lot of other complexity here. we will get more into it as it moves along. >> the spirits business is good. louis vuitton, lvm, high-end shipping, reported great numbers. diageo, unbelievable johnny walker numbers. the spirits business is fabulous. constellation did well. we know one place they're spending. high-end liquor. >> one last note, facebook about to challenge berkshire hathaway in market cap. >> interesting. >> being an overtaken company after company. >> well i thought the stock
9:39 am
would have still been higher at 131 but the overall market is coming down here and i think it's coming down, i think the ford read through is really, really killed the market. >> dow is down 63 points. let's get to bob pisani. >> it's all earnings carl all the time. a lot of focus on the oil with oil around $40. where is it going in the second half of the year. right to it. baker hughes, of course one of the big oil service companies out there, out with earnings, it was below expectations. bigger loss than expected. on the surface doesn't sound very good. baker hughes says they don't expect activity in north america to meaningfully increase in the second half. they're looking for higher oil prices for more spending and the customers are oil companies. pricing is remaining challenging. we all knew that, of course. restructuring is continuing for them. so it's continuing still low prices and they're continuing to cut costs overall. let's take a look at oil earnings out there. baker hughes despite the fact that it was bigger loss than expected.
9:40 am
premarket was trading on the upside. conoco phillips if you take a look biggest exploration of production company out there, bigger loss than expected, production is remaining high. they're continuing to produce a lot of oil. they're raised their full year production and continuing to cut costs. this cost-cutting theme continues to hang on. elsewhere, royal dutch shell and total, their numbers outside the united states, a bit on the disappointing side. they made it clear low oil prices even in the $40 range and even close to $50, is continuing to be a challenge for them. so what's up with the oil companies? it's pretty simple. recovery, low and slow. my friend at oppenheimer used the phrase. that's right. production levels are still high. a lot of companies still producing a lot of oil. cost-cutting is the main theme. where is oil going? goldman said 45 to 50. into mid 2017. now remember, there was some talk from morgan stanley about $35 oil. goldman said they didn't think that was likely but still this is well below expectations of just a few weeks ago.
9:41 am
let's move on here and talk about some other things related to the earnings situation. you hit on ford and see ford down 8% there. they talk about brexit but that huge miss in north america, higher incentives are a problem for them and the big comment, of course, full year guidance may be at risk. that's the headline everybody is focusing on. gm down as well. meantime, though, the other parts of the auto business are doing great. o'reilly automotive one of the darlings of investors had a fantastic run. it hit at historic high the other day. they were -- it's a small miss for them, but their guidance was better than expected. still below analyst expectations. the bottom line with this company is it's really priced to per fecship. the historic high on tuesday, 25 times ford earnings that's a big issue. mention cole gate, 75% of the sales outside of the u.s., 4.5%, 2.2% dividend yield. historic high just a week ago.
9:42 am
same problem, 25 times forward earnings. david we're going to be back in about an hour with a halftime recap of where earnings are. we hit the halfway mark for the s&p 500. we'll show you the winners and losers when i come back. >> thank you very much, did want to get to ahere, the movement of this stock is extraordinary. not far long before the close yesterday "the wall street journal" reporting a story that with headlines that came out that just scared everybody who is in this stock. it said criminal probe, subpoenas issued to ahere, a diagnostics company in a deal to be acquired by abbott for $56 a share. the stock plummeted into the close. it was halted. then it plummeted. down about 36%. then we heard from ahere. they were not on it in the pr game in terms of being ready for a journal story and ahere comes back and says listen, the subpoenas in question that we got from the doj addressed ahere toxicology services and seeks
9:43 am
records related to medicare, medicaid, tricare billings for patient tested at the austin, texas, pain management laboratory fully cooperating. they did not need to release a subpoena and talk to various people it was not deemed something that needed to be put into the public realm and i can tell you at this point is, that it deals with less than $15 million in revenues for a $2.5 billion revenue company and related to i'm told 44 patient records. 44. to refresh here, ahere in april, which has yet to file its 10k due to a number of different issues, told us as well that abbott was trying to get out of the deal, that it offered to pay it between 30 and $50 million to get out of the deal when the stock started to take a hit. the question is whether abbott could get out of the deal. abbott in the deal to buy st. jude, perhaps don't want to move down the road of buying ahere which they agreed to buying st. jude because we're talking about a deal that has about a $5.8
9:44 am
billion equity value. we're still waiting on the 10k from ahere. this does seem to be relatively small in terms of concern at this point in terms of the part of the business that deals with only 44 patient records, less than 15 million revenues. when we get that 10k, people close to ahere tell me they're fully waiting for abbott to try to sue them to get out of the deal, charging material adverse kang. it's a tight merger agreement. lots of people playing they think the merger agreement will hold out even if they go to court abbott will be forced to buy ahere for the $56 they agreed to. interesting movements in that stock having plummeted on that "wall street journal" story that perhaps was blown a bit out of proportion. >> wow. that thing was down 13 points. >> yeah. >> it is -- >> that's good reporting. >> 44 down to very low level. up $5 now. as you can see nowhere near the 44. >> scared the heck out of me. i thought for sure the deal was over. it's interesting. >> we're going to have more on that one as we move along. we do so many other stories.
9:45 am
move to the bond pits and join rick santelli at the cme group in chicago. >> hi, david. you know, if you just look at what's going on right now, versus yesterday's settlements, all maturities are at or above yesterday's closing yields. the short end is the at, and the longer you go, the higher the yield are. we're not talking a lot, several basis points. little bit of curve steepening which no matter how you try to die cipher history and how the markets are managed and central banks are powerful we still eek out a message flattening more fed steepening less fed. if you look at a two-day of 2s and 10s the interesting part is, all of this is going on with lower yields versus yesterday right before the fed. that is significant. you see on the two-year flat on the right side, the 10-year is a little up. it really comes out one week when you compare 2s and 10s. it's all about the dollar index. you know, the markets are trying to have a life, trying to have a say so, trying to get aggregate
9:46 am
trading behavior meaning even with central bank's thumb on the scale and we are. but here's the way it works. the fed looks at the markets, the markets are a bit impaired but they still move and the fed reads the signal. it's a strange daisy chain. everybody was talking how hawkish the statement was. the market didn't agree. whether you look at fed funds or look at the yield curve, but especially as you look at the dollar. now let's look at that dollar. a two day of the dollar index lost a lot of ground. one week really shows how you got back below the range and if you look at it from the last fed meeting, did move up a bit on the stronger data but that's a rounding term, long-term implications for less horsepower on the old greenback. carl, back to you. >> we'll see you soon. rick santelli in chicago. when we come back, a lot more earnings to get to. having gotten to marriott cutting its forecast after hilton did the same. we'll talk to arnie sorenson and after reporting the earnings beat, check out gopro shares moving higher. exclusive with founder and ceo nick woodman today on "squawk alley."
9:47 am
with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and i'm a usaa member for life. usaa. we know what it means to serve. get an insurance quote and see why 92% of our members plan to stay for life.
9:48 am
9:49 am
9:50 am
the dynamic between the two, is that in your mind, is that ch clintonen? >> it does come up a lot. there is a lot of first couples based on, a lot of things it's based on. ironically, it seems like whatever we have written ends up becoming true. >> yes. >> so i'll always say jokingly say we should have the writers write what we want to have happen because we're shooting that well before. >> i'm livid. >> where is that? i don't see it. >> i remember in the first season we thought we were going a little too far with some of the stuff and go home and watch the news and maybe we're not going far enough. >> yeah. >> "house of cards" producer on the clintons and underwoods, hillary clinton set to speak tonight at the dnc. >> that's great, carl. really is great. >> they went far enough this one. i'm not going to say anything. >> if you recall without giving anything away last season involved conventions, conventions was a big plot
9:51 am
point. >> oh, yeah. not since the man tour yan candidate -- >> the producers shake their heads at what they say here, comes out there. crazy times. by the way, apparently clinton's last day at state was the day the show premiered on netflix. >> no kidding. >> in terms of coincidences. see more of our digital series "binge" on cnbc.com apple tv and hulu. >> good stuff you're doing. >> we will get stop trading with jim in a minute. dow down 51 points. guys, what's happening here? hey nicole, this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.
9:52 am
9:53 am
9:54 am
time for cramer and stop trading. >> something we didn't get to celgene better than expected. i'm going to give two that were much better. pioneer, with oil going up the stock will be flying, almost where they did the big secondary, raising their guidance for how much they're going to produce in oil, adding rigs, so you can see why that rig count is going up. the sweet spot. making $8 a barrel on the permian. and then one -- david and i joke, is it too early to buy groupon. buy groupon. $780 million in cash, $2 billion market cap. the company is on squawk this morning. most importantly, they are going
9:55 am
to be very free -- they will be free cash flow positive by the end of the year, significantly -- >> now it's up 32% you want to buy it. >> well, look, did i catch the bottom? >> never mind. go have a great -- >> i do want to -- we want to touch on ford again. it's the worst day in five years at these levels. >> yeah. you know, i thought he gave you a head's up things are weaker but people get so joyous about things. gm had been acting badly too. >> all right. i'm saying -- >> just can't catch the bottom groupon. >> i don't expect you to. of course not stew it was a quarter i've been waiting for. they missed. had a couple good quarters but saying grub hub should buy groupon because they're in food delivery and groupon has gotten in food delivery with jack in the box. yu once you buy the other, grub hub, expected a better than quarter doing the deal and asking for nothing, not to be rid dualed by david. that's my payment. >> that's priceless. >> mastercard. >> i love you. >> good quarter.
9:56 am
>> what's on mad tonight? >> iff, a company that can make me smell good, fragrances, aep, great utility company and tanger because i want to find out how come these retail malls and outlets are doing so great. >> keep going. >> even as we keep thinking retail is no go. i'm going to -- i was supposed to take off tomorrow, i'm coming in. because you know why, amazon and alphabet. >> and alphabet. >> double a. >> missing you on these fridays. >> very happy about that. >> i told the wife, listen, everybody has their place. >> gdp tomorrow. >> she was shocked. what do you do at 9:00. >> i have a show. >> and at 6:00 which we'll see you tonight for. "mad money" at 6:00 p.m. when we come back, a lot more on the facebook blowout quarter. stock is up 3% as jim said amazon alphabet tonight. what's your best bet in tech. we'll talk about that in a moment. when it comes to medicare,
9:57 am
9:58 am
everyone talks about what happens when you turn sixty-five. but, really, it's what you do before that counts. see, medicare doesn't cover everything. only about eighty percent of part b medical costs. the rest is on you. consider an aarp medicare supplement insurance plan insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it could really save you in out-of-pocket medical costs. so, call now and request this free decision guide. discover how an aarp medicare supplement plan could go long™ for you. do you want to choose your doctors? avoid networks? what about referrals? all plans like these let you visit
9:59 am
any doctor or hospital that accepts medicare patients, with no networks and virtually no referrals needed. so, call now, request your free guide, and explore the range of aarp medicare supplement plans. sixty-five may get all the attention, but now is a good time to start thinking about how you want things to be. go long™. ♪ good thursday morning welcome to "squawk on the street." i'm carl quintanilla with sara eisen and simon hobbs and david faber. busiest day of earnings season,
10:00 am
a lot of attention being paid to ford which is a police and warn. politics, of course, also in the docket as we await the acceptance of the nomination by hillary clinton. dnc kicks off day four after a big night with the president taking center stage last night. john harwood joins us from philadelphia. hey, john. >> hey, carl. week long conventions are about building your case. democrats try to multiple fronts last night, national security officials making the case that donald trump isn't fit to be commander in chief, you had vice president joe biden and vice presidential nominee tim kaine telling working-class voters not to rally behind a candidate they called mean spirited and dishonest. >> no matter where you were raised, how can there be pleasure in saying you're fired. he's trying to tell us he cares about the middle class. give me a break.
10:01 am
that's a bunch of malarkey. >> folks, you cannot believe one word that comes out of donald trump's mouth. not one word. >> and for independents there was former new york city mayor michael bloomberg, mocking trump's business record and questioning his mental stability. >> as an independent, i am asking you to join with me, not out of party loyalty, but out of love of country and together and together let's elect a sane, competent person. >> and finally, there was president obama, 12 years after he burst on to the national stage at another democratic convention acknowledging public discontent but saying it's time for hillary clinton to take over
10:02 am
the task of trying to perfect our union. >> america, you've vindicated that hope these past eight years. and now i'm ready to pass the baton and do my part as a private citizen. so this year in this election, i'm asking you to rejoin me, to reject cynicism and reject fear and to summon what is best in us, to elect hillary clinton as the next president of the united states and show the world that we still believe in the promise of this great nation. >> now that was a warm embrace between hillary clinton and barack obama. those former 2008 rivals. but tonight hillary clinton will stand on that convention stage on her own as the candidate for president on the democratic party. she's got big problems. voters not trusting her. negative feelings about her personally. we'll see how much she can improve those tonight, guys. >> john harwood in philadelphia,
10:03 am
thank you so much for that. joining us from philadelphia today, house minority whip congressman steny hoyer, democrat from maryland. congressman good to have you again. good morning. >> good morning. good to be with you. >> we heard president clinton repeatedly call hillary clinton a change agent the other night and then we have this essentially baton passing last night in which apparently the president expects hillary clinton to leverage his popularity. which is it? >> i think it's both. the president referred to her as a change maker and went through frankly 40 years of her life, all of her adult life, making changes, making changes for the better and consistently focused on children and families in the welfare of working families. i think that the testimonies she got last night, corroborated that from their perspective and their experience including michael bloomberg. who not only talked about donald
10:04 am
trump and said as a new yorker he knows a con when he sees one, and i think that frankly is accurate, but then he went on to say, and frankly we have a person who i've worked with when i'm mayor of new york and 9/11 occurred and a person who worked very hard unrelated to party, but focused on how she could make the lives better of those folks courageous on 9/11 and their families. i think that president bill clinton's speech which was a very personal observation, a very warm presentation of his wife, but i think the four people who spoke including tim kaine and joe biden, as well as the president and bloomberg, corroborated what had been said the previous nights. >> lot of people talking about the president's aspirational message last night. to what degree does clinton
10:05 am
tonight need to essentially acknowledge the fears of people who believe that trump's law and order message has value? >> well i think that she needs to recognize the apprehension, the anxiety, the fears that you refer to. they're real. we know they're real. bernie sanders also talked about those fears. but i think what we have tried to do is talk about the positive. this is great country. the president made that very clear, others made it clear. it's absurd that donald trump presents this as not the greatest country on the face of the earth. it is. it's absurd that he tries to say our military is hollowed out. that's not true. the men and women in the armed forces know it's not true. the fact of the matter is, though, we need on the one hand, to have a very positive conviction as the president pointed out last night, america can do. yes, we can. but we also need to recognize
10:06 am
there are a lot of people in this country who aren't doing as well as they need to do. they're not making it in america. the reality for them on a daily basis is of anxiety and wondering whether or not they are going to make it to the next week or next month in a positive way. she needs to speak to that and give those folks confidence her last 40 years of focusing on working people, children, families, was not an aberration. in fact, that is her life. and i think that she -- if she does that, and i think she's going to do that, that clearly she's going to win. we're going to also be talking in the future weeks about how under every democratic president, americans have done better. >> i just want to make some room. with that in mind, don't you worry at all that the more we hear this from president obama and vice president biden, the
10:07 am
more it -- the narrative becomes she is just running as a continuation of their term? they both talked a lot about how the economy is better and the country is safer. doesn't that feed into donald trump's narrative? >> i think donald trump's narrative is wrong. it's dishonest. it's misleading. we are better off as a nation than we were eight years ago. and that is demonstrable. the a ritholtz ma tick -- arithmetic shows you that. what it shows you there are millions of americans who are not yet there. the country as a whole is there but too many millions not there and i'm going to make the point, i think hillary will make the point, if you step back, forget about the rhetoric of trump, forget about the rhetoric of any other democrat, the facts show very clearly that since harry truman under every democratic president, everybody in america, rich, middle, poor, have done better under democrats than
10:08 am
under republicans. and i think that what you saw last night was an affirmation that hillary clinton can do, has done, and will do better for the middle class for working men and women. and for our country. i think that's going to be our argument. i think it was made well last night. but i think we understand she has to make it herself and personally connect with people and people have to have a sense that yes, she can do it and she'll make my life better. but as bloomberg pointed out, there really wasn't an alternative and that's what george bush, george h.w. bush, george bush, john mccain. >> yep. >> romney, all said by not coming to their convention. ironic almost everybody is here participating saying we're in this together but in the republican party, it is deeply divided. real fissures. awful lot of very responsible republicans who think this guy,
10:09 am
donald trump, is not worthy of being president of the united states. >> congressman, thank you so much for your time today. we will be watching tonight. congressman steny hoyer. joining us from washington today with the gop response, former mccain campaign manager and bush/cheney political director terry nelson with fp 1 strategies. good to have you. >> thank you. >> is the congressman right? are those absences, do those speak volumes? >> we've got two different conventions going on. one as he said that has former presidents, the current president, the vice president and last week in cleveland we didn't have that. i think, you know, part of this gets to the trump campaign is running a very nontraditional campaign. and they wanted i think to put on a nontraditional convention. they wanted his children to speak, speak to him as, who he is and his character. un u, you know, the democrats are putting on a traditional convention. those of us who have watched this campaign for the last year with donald trump, we've seen
10:10 am
his unconventional tactics have often wondered whether they would work. i think the two conventions present the same kind of dichotomy in this campaign. >> can i ask you, mr. nelson, since you have experience of where we are, what happens in the course of the campaigns, sort of security briefings that donald trump is receiving at the moment, front page of many newspapers this morning he has called for vladimir putin to hack into hillary clinton's elon musks ae-mails and find -- hillary clinton's e-mails and find those missing. many were alarmed that the united states might not come to the aid of its nato allows as they're buzzed by russian planes over the past few years. does he have the secrets of this country? does he speak with the authority and the knowledge that you might hope that he would have as a presidential nominee. >> as i understand it once you become the nominee of your party your do have the opportunity to
10:11 am
have those briefings and you are given those briefings. i think, you know, that's separate from what he's saying about policy matter as a candidate about inviting russia to sort of medal tal in our elections or hack hillary clinton's e-mails. what he's saying on that in my view is wrong and don't think you should say those things. don't agree with him on nato. but there are a lot of voters who don't understand what nato is or does. and, you know, while that i think has a lot of people kind of in the policy community and national security community concerned i'm not sure our approach to nato will be a defining issue for most voters in this country. >> but the parallels are strong to the vote that the uk had to exit the european union. many people in britain didn't really understand what the european union was either. buts the rhetoric and the noise and the anger and the emotion that they triggered over that, was enough to actually push the vote through.
10:12 am
in an uninformed way. my question given what you've just said is whether that might happen here in the similar vain? >> i think it might happen. you know, but i think what's driving this campaign so far is really a lot of dissatisfaction with what's going on in washington and steny hoyer addressed this also. 70% of the voters in this country think we're moving in the wrong direction. and until, you know, our -- until i think part of the burden for hillary is to address that and to put forward the direction that she wants to take the country and in her positive vision for it. you know, the trump campaign is totally different. as i think people know and people have seen, you know, they're running a campaign based more on the dissatisfaction of voters and those dissatisfactions are partly based on foreign policy concerns that voters have but largely based on domestic and economic issues and i don't think that's -- i think those issues will be the factors that will be most important in this election. >> certainly that's reflected in last week's convention. for sure. terry, thank you for your time.
10:13 am
we'll see what happens tonight. terry nelson. >> the federal reserve, of course, left interest rates unchanged yesterday. july meeting. but importantly there was a statement that suggested to many that interest rate rises might be nearer. steve liesman joins us with the latest. how much do you think the tenor has changed here. >> what we had yesterday simon was a fairly upbeat economic report from the fed and language many saw as essentially hawkish, but the market overall, you look at how the market is trading dovish or as not really changing the view that september is pretty well off the table. take a look at the fed funds futures percentage chance of a rate hike from reuters, 18% in september this morning. 35. you don't get to 50% in march 2000, here's what the fed said about the economy. the stuff simon was talking about. consumer spending growing, labor market strengthening, economy growing at a moderate rate and near term risks look to have diminished. if the fed intended to make the market more worried about a
10:14 am
september hike it didn't do the job. fairly unsuccessful. and they have work to do. on the other hand looks like the fed's message it is happy where the market is priced and they will let the data do the talking including gdp tomorrow and the next jobs report in a week's time. quick note on data. new government data never been seen before in response to criticism about the government growth numbers including from work done by cnbc the census bureau today began publishing inventory data about two weeks earlier than previously thought. why does it matter? the advanced reports on retail and wholesale inventories it will give the street and other government agencies a better head's up a better read on where the economy is going. going to make those gdp numbers coming out tomorrow a little better. they've done something like this on trade before. it's reduced the gdp revisions. guys? >> yeah. hard to imagine making changes that make gdp look worse, right, steve. that's the trouble part. >> well if they give it earlier instead of imputing data and kind of guessing at what it is they'll have actual data for the third month of the quarter. look they've been criticized and
10:15 am
we're going to get revisions to gdp and they're going to change how they're doing it. the government agency has stepped up to make changes in the face of the criticism. >> steve, thanks so much. steve liesman. >> when we come back facebook shares all-time high today. blowing away analyst estimates. we're going to break down that quarter. plus the ceo of diageo, shrugging off the possibility of brexit impacting the bottom line. more after a break when "squawk on the street" continues.
10:16 am
10:17 am
10:18 am
menezes,. facebook delivering another huge earnings beat with a sharp uptick in ad sales growth. the social media company topping $2 billion in quarterly profit with its mobile app and, of course the push into video attracting new advertisers. ceo mark zuckerberg addressing the company's video first strategy. take a listen. >> we see a world that is video first with video at the heart of all of our apps and services. over the past six months we've been particularly focused on live video. live represents a new way to share what's happening and more immediate and creative ways. >> joining us now for analysis on the stock jason, internet analyst at oppenheimer and john, senior internet analyst at cowan andco. >> hard to argue with the figures with a company of this age and size can continue to innovate and innovate in mobile. it's just extraordinary, jason. >> yeah. i mean it was a phenomenal
10:19 am
quarter. the fact that you beat the street revenue by 7%, i mean typically it's 1%, 2%, i think this was the largest beat basically in a year and a half or so and really, what mark is saying on the call is we're still in the early days. i mean live video they're making no money off this and i think you can tie this into, you know, what twitter is doing, the hail mary to fix twitter is live video. bringing it back to revenue you saw staggering figures in the quarter. revenue per u.s. daily active user up 58% year over year and they said on the call that minutes per daily active user was up double digits. the point is more people are using it and they think video is a way to drive more usage. >> i imagine you would underline what really what a great quarter it was. should we be concerned about the investment now in video first, presumably that's an expensive strategy. >> look the reality of this company is -- go ahead. >> you take that, john. >> please.
10:20 am
>> yeah. thanks. yeah, no, i don't think so. you know, from a video perspective, they're not spending on content at this point. as jason talked about, they're doing -- their big initiative is a live streaming which ceo zuckerberg talked about last night and then, obviously, kind of like friends and family content and other news and sports clips and basically i think what ceo zuckerberg was talking about last night over time video is going to be most of your -- news feed experience and also tying that back for investors, it's going to attract ad dollars. the global tv ad market is a $200 billion market. and we think facebook is going continually get share of those ad dollars. >> jason, you have looks like a $150 price tag. so clearly you think this stock has further room to run. what do you say to investors that wonder if this is as good as it gets, 63% ad revenue growth hard to lap next year in
10:21 am
terms of comps and, you know, how much more runway is there for growth beyond that? >> yeah. i think you have to think about going into this right, the stock was at a high sentiment was usually bullish and actually a concern, you know, is the sentiment too bullish and if you take a step back and you look at the revenue per times or revenue per hour that facebook generates relative to yahoo! aol, you know, other companies out there, and they're still under monetizing. i know that sounds hard to believe on these type of numbers, but people are spending so much more time with facebook and arguably spending so much less time with the other platforms and dollars lag time spend. so we think there's further to go. >> well, i mean eventually john, whatsapp, messenger, instagram i guess you could argue -- snapchat is gaining ground, isn't it, quite rapidly here? >> yeah. i mean snapchat is resonating with the younger cohorts, the 13 to 17-year-olds, 18 to
10:22 am
24-year-olds. but as jason mentioned and what they called out last night engagement growth grew double digits and it's very strong at facebook and instagram also recently reported $500 million monthly active users, adding more people between 400 and 500 million than between 3 and 400 million. on the price target our price target is 150. we think it's straightforward. facebook has beaten the last 12 quarters the last year beaten our earnings estimates by 10% on average each quarter, we think they're set up well to continue to take share that will drive and perhaps beat expectations, numbers will grind up. stock will grind up. that assumes no multiple expansion. >> what about this warning that zuckerberg reiterated last night the ten-year plan. it will focus on growing its user base in developed nations and then over the next ten years look to build new technology to get more people on line and
10:23 am
these internet beaming drones. sounds very, very expensive to me, john. it's a good point. that's a long way's away. i would say this, they're incremental margins are super high, 90% incremental gross markets, 60% ebitda margin. taking the long-term view they want as he referenced i think 4 billion people are not on-line at this point. they want to get them on-line. they're not going to break the bank to do that though in our view. >> okay. we'll leave it there. thanks for the advice. jason joining us from oppenheimer and john at cojuan. >> coming up on the show, ac kaed my technologies getting crushed right now. it's off the lows down about a half a percent after reporting shrinking revenues from two main clients apple and facebook. we'll talk to the ceo of that company. plus, diageo reporting earnings. ivan menezes tells us what's driving the turnaround. where the turnaround is happening and the impact of
10:24 am
brexit on the bottom line. diag
10:25 am
10:26 am
10:27 am
behind smirnoff vodka and johnny walker reporting mixed results this morning. profits down for the year but that nearly 3% organic sales growth pointing to signs that ceo ivan menezes' turnaround plan is starting to take shape. a company that sells in 200 countries around the world. i asked mr. menezes what's driving the business and growth right now. >> north america was a standout. we have strong performance building in north america. the u.s. spirits business is performing better. our second half was better than our first half. our scotch whiskey business around the world is improved, beer is performing stronger. the emerging markets are overall back and europe did well. >> diageo is one of britain's biggest companies. its stock has soared after the country voted to leave the eu because it is a major beneficiary of the weaker british pound. with such a big global business
10:28 am
and footprint but before the vote ivan sent a note to his employees saying, quote, it is better for the uk, diageo and the scotch whiskey industry we remain in. i asked how he feels now that britain voted out. >> our focus is all about keeping the conditions for scotch whiskey to trade around the world in a healthy way. this is the leading food and drink export business of the uk. johnny walker was in over 100 countries around the world before coca-cola left the shores of america. our business is truly global. we're in 200 countries. to me, the most important thing now as we go forward, is keep the conditions for global businesses to be healthy and that's very much the message we're working with the uk government on. this is a thriving sector for the uk economy. and we want it keep it that way. the impact for the larger of the brexit scenario is, i mean it's
10:29 am
not significant one way or the other because we trade in so many markets around the world. if you look at our trading with the u.s., it's unchanged. and the u.s. is nearly half the profits of this company. >> why it's so important guys he works on the u.s. turnaround at half the operating profits. scotch whiskey is much more popular than vodka helping a trend he thinks will continue, brands like don julio and bullet bourbon growing 30%. >> tequila. >> don julio is tequila. >> i know that and johnny walker very well. >> that whole movement away from sort of vodka and beer into other spirits, that's taking hold. of course talked about sab miller, abm inbev if the deal would happen. he doesn't have insight into that. asked how it would affect him because that would create a major competitor. you've done reporting on this is, it's the battleground
10:30 am
africa. that's where the overlap is in business. the african beer business. he said we're focused on accelerating that business specifically africa and india. those are two exciting growth avenues for them and that's really part of inbev's motivation. >> yeah. i mean -- >> is it going to happen or be the first victim of brexit. >> no. it's more likely still will happen but there is a more uncertainty injected into the process as we talked about earlier. we'll have to see what that board recommends of sab as they huddle with their advisors to understand the one pound increase and whether it's something they feel they can't accept. seems unlikely but not impossible. >> i guess we should point out that that's because the pound fell and therefore they have to make up the currency move. >> became less than the premium they're offering is still less than what it was when they originally put the deal together quite some time back. >> coming up on the program the fed leaving interest rates unchanged as everybody expected. but were they as optimistic as suggested september or december
10:31 am
is on the cards. we'll break down with michele meyer, bank of america and adam parker chief equity strategist at morgan stanley. that's next on cnbc. mayor, hey e.r.a., mayer, mayer, meier, meyer, meyer mier, meyer, michele meyer, adam parker. michele meyer, adam parker. meyer, meyer,
10:32 am
your business needs better technology to drive better performance. so you need it to be reliable and fast. really fast. introducing the comcast business summer savings event. fast internet speed to drive performance, plus cutting edge wifi for your employees and customers,
10:33 am
and voice mobility so your calls find you wherever you are. get some of our most advanced products at a great price with over $500 in savings. call today and ask how to get these savings plus a $250 prepaid card. comcast business. built for business. . good morning, everybody. i'm sue herera. your cnbc news update. turkey's prime minister sharing a top level military meeting in ankara likely to lead to a shake ja jaupup of that country's armed forces that follows the failed coup. the meeting after 1700 officers including 149 generals, and admirals were discharged. german police have raided a number of buildings in northern germany including a mosque that are believed to be hot spots for islamic extremists. no arrests made but evidence was
10:34 am
apparently confiscated. a american airlines jet landed at dallas/ft. worth airport after flames shot out of the engine after takeoff. the video you're looking at right now was taken from inside the plane. when the incident occurred. there were no reported injuries. and the power ball jackpot closer to half a billion dollars after no winner was announced last night. the jack pot is now at $478 million and growing. there hasn't been a winner in nearly three months. get your tickets. got to be in it to win it. the news update this hour. over to jackie deangelis with the inventory report this morning. >> good morning, sue. >> natural gas spiking after the department of energy said we had a 17 billion cubic feet build for the week ending jew ining j. the five-year average. this is a bullish number sending the prices higher. a small draw will do it. the hot weather has been a
10:35 am
treacherous july and august could potentially be worse. remember that natural gas is given up about 6% in the last month or so. we spiked up to around $3 in early july and we're backing off that as there's less summer left on the books. total stocks also helping reduce some of the panic out there. over $3 trillion cubic feet. about 15% higher than last year. if we make it through the summer natural gas will be okay. trading 273 before the report and as you can see about a 5 or 6 penny spike after that. back over to you guys. >> jackie, thank you. as for stocks relatively flat to lower. the dow down 57 points. even with the federal reserve yesterday upgrading its assessment of the economy leaving the door open for a possible interest rate increase this year. for more on the markets and the economy, joining us now is michele meyer the head of u.s. economics at bank of america ml and adam parker, u.s. chief equity strategist at morgan stanley. good to see you both. >> nice to see you, sara.
10:36 am
>> thanks, sara. >> michele, sounds like -- it seems like economists after the fed decision are falling into three camps. september, december, or not on the table this year. where do you think we will see the next rate hike? >> we're in the middle of that. so we're in the december camp. i think september is still a hard case to make. the data has been better but it hasn't been particularly robust. you're still potentially concerned about a number of shocks including the election creating some additional uncertainty into the economy. i think what the fed has told us very clearly since the start of this year is that they are going to be patient, they are going to be cautious, and they are going to be risk averse. so to me i think ta lines up better for a december hike. >> and adam, i know you're positive on the u.s. equity market. the best in the world you call it. does the federal reserve rate hike forecast interfere with your calls at all for the stock market? >> not really. no. to be honest with you our chief
10:37 am
economist ellen has a view that the fed won't act not off the table as they have to mark down their own economic forecasts, so, you know, we'll see what happens. where it is. ultimately whether it's 25 basis points points higher or not i don't think that impacts my view you have a big set of liquid stocks in the u.s., 72% of all stocks trade 100 million a more a day in the u.s., relative safety there, 2.1% dividend, 2.3% net buyback and people aren't positioned for a lot of upside. the simple bull case is just expectations for ap earnings low, momentum good, an the u.s. looks like the best place to invest. >> in terms of your sector picks, is tech your biggest underweight? strange because that seems to be where the earnings power is right now? >> well look, tech is 20% roughly 20% of the s&p 500. we hold 15% tech in our portfolio. the logic is simple. value part of tech and a growth part. the value part is declining
10:38 am
revenue. that's only happened in 01 and 08. don't have a product cycle or end market tough to get excited about value tech. on the growth side you're seeing broadly a lot of stocks have p/e or priced to earnings contraction. what you need there is margins to expand. there's select stocks able to do that. we try to find the ones that our analysts like that have margin expansion and put those in the portfolio. >> i mean, michele what's behind that? is that sort of persistent lack of margin expansion here at this point and the lack of revenue beats? is that driven by the fundamentals of the economy or do you see it as a global issue? >> well i think that the biggest concern is coming from the global environment. that's where you have the relative weakness. even if you look at what's happening in the domestic economy, we have been seeing pretty weak cap x since the start of the year core capital goods orders and shipments have been steadily falling it looks like for the full year investment in capital structures likely to be negative even if you have some pick-up at the end
10:39 am
of the year. it is an environment where businesses have been cautious and continue to be pretty subdued in their investment in capital and structures. >> adam, what you telling the clients about the election? at what point does it start to bite if at all on the market? >> well, morgan stanley behind our municipal bond strategist michael and our chief economist ellen put together a larger port on the u.s. election, the scenarios that can unfold. a little tricky to predict. i remind people always that at least clients i talk to in august of 12 thought hey, if romney wins that will be great for the market, if obama wins again that will be bad. look back at 2013, i'm not ascribing, i'm just saying factually 2013 was the best sharp ratio in the history of the s&p 500. it went up every day. it's always a little hard to predict. we try to identify areas that we think could benefit whether it's select parts of health care, opportunities or infrastructure
10:40 am
or defense or other areas and clients are getting interested. a lot of the undecided folks do it after labor day. interesting to see where the polling shows things are by mid-september. >> you're steering very clear of an overall call as to what the market overall like top down might do. not something you don't want to go there or you don't think it will be effective. >> i just think it's too tricky. if you look at the recent example i told you, everyone thought obama wins it's terrible and then the market is an absolute rip fest in 2013. a little premature to get it rounded. i think the more micro level you can find areas where it's infrastructure and see some of the stocks acting better. or other things that look maybe oversold like we like biotechs. trying to find where maybe the same assumptions aren't equally digested in the market and do it that way as opposed to make a blanket call that, you know, she's good, he's bad or whatever the case may be. >> and finally michele where are you getting your next clue from when it comes to the federal
10:41 am
reserve's next move? >> i think the minutes are going to be really interesting. inn three weeks time. so that will tell us about what kind of debate they had around the table. what are the factors that have influenced them to say near term risks have abated. so that conversation on a global level, how concerned were they about brexit and how are they seeing financial conditions now after we had the actual vote. and then i think jackson hole will be of interest the end of august fed chair yellen speaking a great opportunity for her to present her views as well. >> all right. thank you very much. good to see you both. michele meyer from bank of america, merrill lynch and adam parker from morgan stanley. the busiest day of earnings of the season, 65 companies reporting today on the s&p 500. bob pisani joins us with the more detail. bob. >> 55% of the s&p 500 has reported so far. it's the halfway mark. take a look at the score dards. talk about a report card. simple answer is, things are
10:42 am
still bad but they're improving for the second quarter for the s&p 500. earnings as a whole the blended earnings down 2.8%. that isn't great but down 3.7% on monday. it's moving. i don't think it will be if for the second quarter but it's moving in the right direction. the whole narrative has been very simple. take a look at where we've been in the last four quarters. supposed to have bottomed in the first quarter. numbers bad in the first quarter. slowly they got better in the second quarter. and in q3 they got even better. they're going to be 1%. q4 up 9%. slowly improving second half of the year better. guidance has been okay, haven't been taking it down. this narrative slowly improving going positive ending the earnings recession so far is holding. so what's the issues? where are we right now? there are four issues that are going to dominate earnings in the second half of the year. the first one, oil. dollar brexit and china. oil is a major problem right now $41 oil. earnings for the big oil companies are going to have to
10:43 am
come down at $41. dollar strong since april another potential issue. brexit in china quiet. the bottom line it's too soon to call an end to the earnings recession right now. however, q1, likely was the bottom for earnings. and the second half guidance is holding up. there's your headline the most important thing, look at the s&p 500. this is why the s&p is holding up shy of historic highs because the guidance in the second half has been holdi ing up. they have not dramatically taking down numbers. we have been moving sideways for a couple weeks that's fine. remember we need to have a positive earnings narrative. we need get out of this we're in an earnings recession story and into we're slowly going into an earnings growth phase. if you don't have that story, it's going to be much higher to justify stocks at this price. the bears will say the market is overvalued and they'll have a point. back to you. >> okay. dow down 79 points. thank you very much, bob. coming up on the program, shares of akamai falling hard on
10:44 am
earnings. coming back up to those to a certain extent. we will talk to the ceo about what's going on some of the big players like amazon and facebook are changing their strategy and tom leighton's business is hurting.
10:45 am
10:46 am
the s&p 500 is reminding one technician of 1995. you're going to find out why and what it might mean for the markets at trading nation.cnbc.com. more "squawk on the street" coming up. .
10:47 am
akamai stock pummeled after warning on core profit after big customers increasingly side step its network of 00,000 serve -- 200,000 servers worldwide in favor of their own new network capacity. joining us is akamai's ceo tom leighton. welcome to the program. >> thank you. >> the big six are changing the way in which they handle their own data.
10:48 am
>> i don't think it's really changing. the big platform companies have always delivered some of their content themselves. we have seen a couple of them do more of that this year. but i think it's important as you look to the future to know that those big platform companies only account for about 10% of our revenue and the rest of our business is growing at a very healthy clip at 15% year over year. our security business is on fire growing over 40% year over year. >> yes. but used to be a far higher percentage before the quarter, that those six occupied within the revenue and the profit streams. why would they spend billions of dollars on their own form of technology when they could subcontract to you? is it a question of trust? is it small to them? why is it happening as a phenomenon. >> first, they're in a position to afford to spend billions of dollars, which most companies aren't and i think some of them
10:49 am
view it as a core part of their platform, being in, you know, the big cloud platform providers. you know, when i think the key is mostly that's done and they do continue to be akamai customers and we have opportunity to grow in those accounts as well. >> what's interesting, what i would love to know the degree to which you talked to amazon and facebook about their capacity needs moving forward. because you did correct me if i'm wrong have a major investment to increase your own capacity only to then see some of them walk away. i wonder if you look, for example, with ups and fedex, there's a continual discussion about capacity in mail services. do you do the same in tech? >> oh, of course. you know we're always talking to our customers about their capacity needs going forward. traffic on our platform is growing at a very rapid clip as it always has. right now we're gearing up to deliver the olympics on-line for
10:50 am
50 major partners and customers around the world. and so there will be i'm sure lots of internet traffic records set by akamai over the next few weeks with the olympics. >> in the meantime one of the fascinating things that's happening are these very big super fast cables microsoft and facebook of course working together as partners on one. i wonder has that interconnectivity around the world has massive broadband. when that gets faster and bigger the extent to which people will need service systems like yours to mirror data if they can transmit it so rapidly around the world. >> that's a great question. it's incredibly expensive to be laying cables across oceans for thousands of miles and it's a tiny, tiny fraction of what you need to deliver video at any kind of quality or scale to end
10:51 am
users. and the end user and there's no way you'll be delivering large amounts of video across oceans. >> people will remember when your stock is $300 a share. and there's a 30% decline in it over the past 12 months or so. why should people buy the stock here do you think. as you look to the future we have a rapidly growing business they look to improve their networking and security and we
10:52 am
secure and against their websites today. i think they have a bright future and that's what it's all about. >> help me out here because it seems that everybody, all big tech is moving into supply services you is what you do really that different from ibm or amazon web services? is it a completely different area? >> absolutely. we will accelerate your website. those companies that you mentioned use us to do that. we will deliver very high quality video at scale. the companies you mentioned use us to do that. we'll secure your websites and properties against the tax and all the cloud companies use us to do that as well. so what we do really is different and it is a core part of the future of the internet. >> it's good to meet you. thank you for your time. the ceo of akamai joining us
10:53 am
from san francisco. >> coming up on squawk alley, marriott earnings beat the street and simon sits down exclusively with the marriott ceo. much more ahead on squawk on the street with the dow now down about 80 points. look at you. you're at the top of your game. at work or at play, you're unstoppable. nothing can throw you off track. oh hey, she's cute. nice going man.
10:54 am
things are going great for you. you've earned a night out. good drinks, good friends. yeah, we can go ahead and call this a good night. wait, is that your car? uh oh. not smart. yeah, i saw that coming. say goodbye to her. ouch! that will hurt your bank account. you're looking at around ten grand in fines, legal fees, and increased insurance rates. i hope you like eating frozen dinners. alone. let's try this again. smart move. because buzzed driving is drunk driving.
10:55 am
10:56 am
>> it is the busiest day of earnings season for the s&p 500. relatively flat to lower. some of the losses picking up steam here with the s&p do down .3%. the dow is down 91 points. boeing and caterpillar are at the bottom of the dow. apple is at the top continuing it's post earnings rally and at the bottom of the s&p 500 is ford. >> the cfo thinks that the new vehicle market is coming down and the second half would be lower than the first. incentives are rising and auction prices are falling. so it's a bad day for ford. >> it's the only sector just along with utilities here that is positive in the s&p 500. we await earnings after the bell. >> speaking of which, much more tech ahead on squawk alley.
10:57 am
they'll sit down with the ceo of go pro. plus that exclusive interview closing very shortly to start with. & in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t.
10:58 am
10:59 am
11:00 am
good morning. it is 58 a.m. at oracle headquaters and 11:00 a.m. here on wall street and squawk alley is live. ♪ carl is out on assignment but i and john forte are here at post 9. mike santoli here as well. markets have gone lower on a gdp revision but tech is helping the nasdaq higher. >> big news to get to this morning. facebook of course reporting a big earnings beat ahead of amazon and alphabet tonight. the stock is up

117 Views

info Stream Only

Uploaded by TV Archive on