tv Worldwide Exchange CNBC May 9, 2017 5:00am-6:01am EDT
good morning. rally on. the nasdaq and s&p eke out records as the fear index falls to the lowest levels since the '90s. >> happening now, south korea heads to the polls to choose a new president following that massive corruption scandal. and pain for hertz. we'll tell you why shares of the car rental firm are taking a hit this morning. it's tuesday may 9, 2017. "worldwide exchange" begins right now. ♪ good morning. welcome to "worldwide exchange" on cnbc. i'm sara eisen.
>> good morning. i'm mike santoli today in for wilfred frost. >> let's get to the markets. glad to have you today. >> a lot going on. >> u.s. equity futures after a record close did not take much yesterday, but the s&p and nasdaq finished at record levels. dow futures are looking up more than 10 points this early morning. s&p futures up a half point. nasdaq futures up almost 2. as for the ten-year treasury note yield. yields ticked a bit higher that boosted the dollar a bit. still we're hovering below 2.40 on the ten-year. i guess that's an improvement from the 2.30 level from last week. >> it's grinding slowly higher like the equity markets. asian equities overnight, generally a mixed picture. we have the markets in south korea closed as they elect a new president. japan was down, hang seng was up. the korean vote comes after the former leader was ousted on
briarry charges. polls close there at 7:00 a.m. eastern time, in a couple hours. a live report in a few minutes. >> we have a chart issue. why don't we have our markets closed on election day. >> very good point. >> wouldn't he would see better turnout? >> not just markets, but it's a holiday or done on a weekend. in europe this morning. german enindustrid industrial o trade data topped forecasts. >> we would go through the markets now, we can do oil. let's show you oil. oil prices -- having some trouble with the graphics here. there's the wti chart. it's higher this morning. 46.61. up 0.4%. brent hovering below $50 a bar rem. 49.53. as for the currency boards, the dollar getting a bit higher boost this morning as i
mentioned from the yield play. 1.0907. strong dollar against the euro. stronger against the yen as well by a third of a percent. and stronger against the pound. 1.2936. as for gold prices, going the other way. down 0.2%. >> double line capital ceo jeff gundlach offering a bearish call yesterday at the sohn conference. he spoke to cnbc exclusively about the call. >> the valuation of emerging markets is half the valuation of the s&p 500. when you look at things like price to sales, price to book. doctor shiller's cape ratio. i think part of that valuation difference has been based upon, one, the dollar had been strong from 2011 until 2015. usually correlates with em under-performance.
that's part of it. the rest is that i think passive investing is something -- to use a word i don't like, bubble, where people greatly over believe this idea passive outperforms. there's a birth right to outperform all active manager. there's incredible cyclicality. it has been similar to how long they've lasted historically. >> jeff gundlach an active fund manager saying maybe indexing has gone far. it's an interesting call, not a doomsday call, because if you thought everything was going to fall apart, you wouldn't say own emerging markets. it's a valuation spread between those two regions. >> he accurately called for the weakness of the dollar at the peak when everyone was piled into that trade. this is also a play that that continues that weaker dollar. as for the overall market, mike.
explain the vix below 10. a lot of people are hand wringing over this, complacency, calm before the storm. it's the lowest point in ten years? >> it's touched the lowest point in ten years. the lowest close since the early '90s, though the calculation changed of the vix. it reflects other things we already know about the markets. it's been extremely slow grind, day-to-day volatility has been low. that's the main input to the vix which is what people are willing to assume about volatility over the next 30 days. yes, it's extremely low on the chart. typically the next big move will be higher. i don't think it's delivering that much more information than what we already know, which is markets a tt a high, high liquidity. people in agreement as far as the macro picture and global growth. all of those things can be upended. the fact we ticked below 10 is not a point. >> sort of a reflection that we
have gotten through some of the biggest risks in the market unscathed. the french election, and the price of apple. apple prices surging to a new high yesterday passing 8$800 billion in market cap after what was considered a softer quarter, but a lot of enthusiasm now. warren buffett came out packing it. there's the chart. >> reflects this sentiment if i have some money, might as well let it ride in some stocks. even if you don't have a particular edge, it's these companies that will be growing for a long time. again, that idea that we've gotten past all the possible bad catalysts might be dangerous if it gets to be too engainerained. people were saying after the french elections, it doesn't look like anything is identi identifiable as a problem for the markets. >> we can see if we'll see this
rebound in the second quarter like everyone is expecting. there's a lot of fed speak, but it doesn't seem the market is focused on that. >> one argument is that the market is underpricing how fast the fed might go. >> here's what's on today's agenda. we will get a read on small business optimism at 6:00 a.m. eastern. that's interesting lately with the surge post election. at 10:00, the job openings and labor turnover survey along with wholesale trade data. three fed speakers, regional presidents neel kashkari, eric rosengren and crobert cap lynn. lots of earnings. after the close, electronic arts, news corp., tripadvisor and the big one is obviously dow component disney, plus don't miss disney chairman and ceo bob iger in a first on cnbc interview, closing bell at 4:00 p.m. eastern time.
disney reporting. the question is are the espn woes lately, the layoffs, subscriber losses going to overshadow that wla hwhat has b story at the parks. >> comes at a moment when you are having investors freak out about the tv business. another big mover this morning, shares of hertz down sharply after the car rental company posted a bigger than expected loss. >> the car rental company reported a loss of 1.61 a share in the latest quarter, far worse than the 4 cent loss that the street was expecting. revenues falling to 1.92 billion down from 1.98 billion. hertz blaming tough year over year comparisons pointing to a later easter and leap year falling last year giving them that extra day.
the mits comss comes after avis budget posted disappointing results. hertz ceo addressing the miss last night saying we are executing on a turnaround plan. while we are mindful of today's headwinds related to use car residual values our commitment to investing in the business remains steadfast. shares of hertz plunged 88% since reaching a record high in 2014. the stock is down 17% this morning. back over to you. >> it's stark. you see airlines and hoe ttels having a great time. >> look at marriott yesterday. >> the car rental business in general seems like it has some challenges. >> thank you. some stocks to watch today. amc topping the street's expectations. admissions revenues surging more than 69% in the latest quarter. the stock bouncing after a tough start to the year. shares up at marriott. those are getting a pop after the company beating on the top and bottom lines.
the world's largest hotel chain reported a nearly 67% rise in quarterly profit as more people booked rooms at higher rates. pandora reporting a smaller than expected loss in its latest quarter but guidance was weak. shares trading higher as the streaming company announced a 1$150 million investment from kr and a boardroom shakeup as it gears up for a potential sale. few other stocks to watch. commerzbank reporting a 28% jump in net profit topping analysts forecast. the german lender helped by an increase in income from trading securities. dialog semiconductor posting better than expected earnings but current quarter rev ni wenu weak. apple, their biggest customer s developing an in-house solution to replace the power management ships. elliott advise seniors lunching legal action against akzo nobel. the activist investor says the
paintmaker breached duties to shareholders by rejecting ppg's third takeover offer yesterday. elliott is asking for a dutch court allow a vote to oust the chairman. in financial news, goldman sachs making the biggest changes to investment banking leadership in a decade. greg lemkow and mark nakman will join john walder as co-heads of the investment banking unit. waldron will sit down at 11:15 with cnbc this afternoon at 2:15, a conversation with lloyd blankfe blankfein. in other news, technology, amazon is preparing to launch an improved echo. the new device features a seven-inch touchscreen and a camera for video calling. the paper says an announcement could happen as early as today
with the new echo going on sale as soon as next month. the new device is said to be above $200, an increase from the current price of $150. i need to get one. i don't have one of these. >> you need to get something that can spy on you in your house? i'm not that much of a privacy alarmist at all, but they have to work out the bugs. >> everyone i talk to who has one, has a different use for it. i need to know the weather when i wake up. >> target is taking the fight to amazon prime. the retailer will test a next-day home delivery services called target restock in the minneapolis area. household essentials like laundry detergent and coffee will be packaged at a nearby store and allow for delivery the next day. why celebrations could be short lived for newly elected french president emanuel macron. we'll talk about the tough battles ahead for europe. you're watching "worldwide
data. france with a modest rally two days after the elections over there. >> v-day celebrations are underway in russia. today marks the 72nd anniversary of the defeat of nazi germany in 1945. dozens of russian cities are staging military parties to honor the event. for the first time russia rolled out president putin's youth army for its parade in red square. now to france. emanuel macron will be sworn in as the country's next president this sunday after winning the bid to lead the country. the political outsider faces a new battle, gaining control of parliament. joining us to discuss france's future is peter spiegel. good morning. welcome. >> thanks. good to be back. >> from a global markets perspective, clearly a sigh of relief when macron won by a bigger margin. the euro is safe. he's pro eu. pro euro what is the next risk or catalyst for france that
investors need to pay attention to? >> was interesting. after the first round of the election, huge round in french equities, in the euro in bonds. a huge relief rally. yesterday, as you said, there's a modest increase in the cac. but yesterday it was a selloff. cac down, french ten-years down. the euro down. and so i think markets are trying to adjust to the new reality, which is france is relatively safe. you're not going to see le pen or melenchon, the far left candidate. you do actually have good macro economic news. suddenly the you're rov zoeuroz grow again. you do have some geopolitical speed bumps. you have the french legislative elections. that comes next month. it's unclear whether macron can get his new party enough seats in the new national assembly to push through his reform agenda. you head to a state in france where you will get the
legislation not through the national assembly. that could be a problem for french growth. the other thing hanging over everyone's heads are italy. elections probably next year. but their populist party, the five star movement, they could win there. they are similar to a lot of populist movements in europe. calling for referendum on euro membership, potentially leaving the eu. again, sort of the third largest economy in the eurozone. so i think the markets are trying to absorb these things. everyone was making sure le pen didn't win. now that we are assured of a macron victory, it goes back to are we now safe? or do these geopolitical risks reassert themselves in six months. >> just quickly, doesn't seem as if global markets are tensed up in advance of those italy elections as they were for a while with regard to france. >> you've seen the vix, the fear index that comes out of chicago.
that's now at record lows. so you have seen the markets as we've said before. globally they're relaxed. it's just been a surprised to that you have not seen the rally since macron had a huge victory. we are talking to analysts about why we did not see the rally we saw two weeks ago, and the thought is, yes, the mcenroe amk good, but is mario draghi forced to end things earlier. and merkel was not inclined to give a pass on french fiscal policy. so there are a lot of questions that renewed themselves. >> the cac did, to be fair, run up 6% in the last two weeks ahead of this election. the markets were unlike brexit
and trump all over the results of this after the first round stre voting. i wanted to ask about the populist wave. is it over? we saw it in the netherlands and in france. is europe done with this wave? can we stop worrying about it? >> that's the other thing the markets are trying to decide. our view here is that, yes, obviously in france and the netherlands, we didn't see the results that we saw in the u.s. and the uk in terms of the break through we saw for the populists. but remember, the only reason mark ruzzo won in the netherlands is because he moved to right to occupy some neighborhood where wilders was. and in france, even though macron won with 66% of the vote, one-third of the french people voted for a candidate who was overtly against the euro. that's a huge result what r in one of t in one of the core economies of the
eurozone. suddenly, people have been hurting of late, but afd is still a political force, they could get a seat in german elections. i think it's naive to say this is over. it's still a factor. as you say, there has been profit taking because of the run-up to the cac, but this is still weighing on markets, the extent to which the populists could disrupt the efforts, the euphoria we've seen post-macron. there's still a non-zero chance these populists could ruin the plans of all these eurozone bulls right now. >> thank you for highlighting some risks for us. great color from the ft newsroom in london. peter speiegel of finance finance. > the "the financial times." we'll have more "worldwide exchange." exchange." [vo] when it comes to investing,
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welcome back to "worldwide exchange." to politics, former acting attorney general sally yates telling congress she warned the white house about a trump's insider ties to russia. tracie potts has all the details and the fallout from that testimony yesterday. good morning. >> reporter: ae acti5 good morn. the president says sally yates testimony is old news, but it seems to indicate this white house knew early on they had a problem with the national security adviser.
>> you don't want your national security adviser compromised with the russians. >> reporter: former acting attorney general sally yates tells congress she warned the white house it's then national security adviser, general mike flynn, wasn't telling his whole story about the conversation with the ambassador. >> that created a compromise situation. a situation where the national security adviser could be compromised by the russians. >> nbc learned that president obama warned mr. trump about hiring flynn two days after the election. >> president obama was truly concern the about general flynn, why didn't he suspend general flynn's security clearance. >> flynn's clearance was renewed before the white house learned that he was paid $34,000 for a speech in moscow. the additional cia clearance he needed was never happened.
>> sally yates did the right thing. >> reporter: president trump's firing back on twitter calling russian collusion a total hoax, old news. backed by no evidence. >> sally yates declined to answer a question about collusion, but james clapper said he saw no evidence that the russians and the trump team were working together to influence the election. however he also said at the time he had no idea that the fbi was investigating, so it looks like there are still lots of questions to be answered about russia. >> tracie potts, thank you very much. coming up, the top stories and a round up of the global markets, and ibm can't catch a break. first buffett takes a step back and now someone is calling watson a joke. "worldwide exchange" will be right back. right back.
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is take the pledge to go and get screened for the cancers that might affect you. so stand up to cancer and take the pledge at getscreenednow.org it only takes a minute to take care of yourself, and nothing rhymes with "org"... good morning. tech on a tear. the nasdaq hitting a record high as apple's market cap tops 8$80 billion. a pivotal vote. record turnout expected as south koreans head to the polls today to pick out a new president. and a big bang for milk's favorite cookie. why oreo is trending today. it's tuesday, may 9, 2017, and
you're watching "worldwide exchange." ♪ good morning. welcome back to "worldwide exchange." i'm sara eisen. >> i'm mike mike santoli in for wilfred frost today. >> after a record close for the s&p and nasdaq. we're getting strength again in the futures market. small moves. less than 0.2%, but still enough to put the s&p and the nasdaq over the edge in terms of record territory. dow futures are up 16 points. nasdaq up three. s&p futures are up one. as for the overnight action in europe, let's show you what happened. the nikkei pulled back from its highest level since back in 2015. south korea is closed today because the nation is holding a presidential election. there's the early action in europe. we will take you to seoul for that election in a few minutes. there's asia. the nikkei down a quarter percent. shanghai did rebound.
it was flat, but that has been lower and has been one of the nervous points for global investors in recent weeks. copper, for instance, trading at the lowest level of 2017. iron ore prices taking a turn lower as people try to figure out what's going on in china, whether it's a clamp down by the government, deleveraging or something more worrisome going on in the economy. >> some action in the metals seemed like that like a de-leveraging or hedge fund trap, but now much more calm. oil putting together a couple days in a row of firmer action. trading between $45 and $50 a barrel. also some reports that investors, fast traders basically have become short crude oil. that might be net bullish for the commodity recovering a beth now. look at the ten-year note. it's been grinding higher. it hasn't been really a dramatic move but made the slows un2.3%.
now pushing 2.4. still in that range. the highs are like 2.6. not there yet. but moving in the direction of equity investors would like to see. a look at the dollar. has been calm. did firm up yesterday against most currencies. there it is up. a mixed picture now. hovering on the dollar index, a bit under 100. gold, not a lot of friendly news, headlines for gold lately. it's down again another $2 to 12.25. happening now, voting is underway in south korea as that nation holds a presidential election. cnbc's sherchery kang is live i seoul with the latest what do we need to know about the vote today? >> reporter: thank you very much, so i think the key number that we need to watch for as the vote count begins in a couple
hours from now the number 40. will the liberal candidate, moon jae-in, will he have enough support from liberal voters. 40%, that's the number he's been enjoying and expected to win. in order for him to enjoy enough support from politicians as well as the people in order for his future policies to get momentum, moving forward, so far the voter turnout stands at 73% as of less than an hour ago. and this is important to note that regions that are traditionally liberal have a higher turnout rate. so i think that could be a favorable factor for moon jae-in as well. this also has to do with the fact that we had ten years of conservative rule in the past. and also this was the very loud process to begin with.
impeaching a president, calling a snap election because of a corruption scandal that involved a conservative president. >> i have a question what do we need to know as it relates to north korea, which is something that the u.s. cares about, is embroiled in now. and as far as which leader gets chosen. and maybe the relationship with china, if you could tie that in as well. >> i think north korea played a big role in this election campaign because we have only had two months of election campaign period to begin with. and we have had a north korea missile test and the trump factor. the key point that we need to watch for is how the new president in south korea coordinates with the leaders of washington as well as beijing when it comes to their efforts to put north korea as the missile and nuclear test or ambitions in check.
moon jae-in seems to be more embracive, open e ivive and comh north korea, he even said he would visit north korea, hold a summit at some point if and when he gets elected. the key question is how aligned will his north korea policies be with u.s. president donald trump. >> we will see. thank you for that update. chery kang in seoul. on the data front, we'll get a read on small business optimism at 6:00 a.m. eastern time. at 10:00, the job openings and labor turnover survey along with wholesale trade data. three fed speakers, regional presidents neel kashkari, eric rosen dpren rosengren and rob cap lynn.
discovery sglooifrnlgt kaplan. after the close, electronic arts, news corp., tripadvisor and disney as well. don't miss bob iger in a first on cnbc interview on closing bell today at 4:10 p.m. hertz shares are down double digits this morning after the car rental company reported a big miss. the car rental company reported a loss of 1.61 a share in the latest quarter, far worse than the market was expecting. pandora announcing a new 1$150 million in the stock from kkr. the online radio services posted a first quarter loss of 24 rents a share, better than the 34 cent loss that wall street was expecting. fallout from that united
passon rer drenger dragged off t last month didn't seem to dent the bottom line. we'll see if that changes in the ensuing month. munich re reporting a net profit of 6$608 million for the first quarter. the company also reaffirmed its full-year outlook. and toshiba warning american digital not to interview with the sale of its chip unit. this foll th this. now time for top trending stories, watson doesn't have a fan. watson was slammed at the sohn conference in new york. >> watson is a joke. to be completely honest. what ibm is excellent at is convincing people who have less
knowledge to pay for something. >> on a programming note, he'll be back on cnbc this morning, guest hosting "squawk box" from 8:00 a.m. to 9:00 a.m. eastern. >> it's a blunt slam, but people are trying to figure out what is watson. it's not a product. is it a platform. nobody quite knows. the ibm folks say this it's different techniques running through our business. >> isn't it their ai business? >> it is but what does that mean. is that a business? >> they say it will improve medical innovation. >> you discuss it by talking about its applications, but i think in terms of what it means for ibm as a source of growth, that is the big open question. bill clinton and james paterson are teaming up to write a novel. the book is titled "the president is missing."
clinton saying working on a book about a sitting president, drawing on what i know about the job, life in the white house and the way washington works has been fun. it is slated for publication in june of 2018. >> this is fictional? >> it is fictional. i guess informed by real-life. amazon is preparing to launch a new and improved echo. the "wall street journal" reporting that the new device features a seven-inch touchscreen, a camera for video calling. an announcement could happen as early as today with the echo going on sale as soon as next month. the price is set at $200, an increase from the $150 current price. what did you say about kids? >> they can talk to it and buy things. >> i don't have kids, but it's a risk that i do that. oreo is at it again. the company launching another new limited edition cookie. it's going viral. the fire work oreo features the cream center with rainbow specs of popping candy in it.
oreo is also asking for fans to choose the next special flavor. customers can enter the dream oreo idea by enterin entering #myoreocreation. i covered the parent company of this, mondelez. mondelez like so many other food companies has been struggling to speak to millennials. oreo is a notable exception. dore re dore re doritos is also an exception. they get it. they attract viral attention. >> this goes by the label of innovation and food, popping candies in cookies. >> any gimmick. look at the frappuccino explosion. >> we're talking about t right? >> exactly. and it's trending. which is why it's our trending story. coming up, 256 billion reasons why tax reform needs to
happen. today's must reads are next. as we head to break, another check on how things are shaping in europe. "worldwide exchange" will be right back. firm markets in europe right now. enterprise printers by hp. which is great, unless you're a corporate spy. unsecured printing makes your network vulnerable. enterprise printers by hp help prevent costly security breaches that can compromise your network and reputation. so i'm stuck spying the old fashioned way. hey. i'm not spying. secure printing by hp. i.t. orchestration by cdw.
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highs. the intraday highs above 2400 still need to be taken out. but it looks like basically across the board very modest gains. the nasdaq, it's been the out-performer for a while. apple, a big part of that story. apple up 3% most of the day yesterday. it's actually interesting, yesterday illustrated a point i've held for a while, which is that apple is not truly speaking a broad market bellwether. it goes its own way. it goes in streaks, sits out the market. it's been on a good streak. yesterday the market flat with apple up big. >> the buffett backing, a very strong way in our interview with cnbc. there's also the anticipation of the new phone coming this fall. this is the decade phone. spoe supposed to be a good one. and this repatriation idea. i wonder how much that is driving a stock. this is driving a company with
250 billion overseas that will just come back. >> what's interesting is all these things have been basically true for months and more. now that we have the momentum in theshgstock, it fits together ia way that makes sense. >> it is working. time for our must reads, stories catching our attention. my pick in the "washington post" titled jared kushner and ivanka trump should recuse thqodcuse t from china policy. they write we now face core questions about whether the administration decisions relating to an important perhaps the most important foreign power are being made based on the interests of the country and the american people or based on the business interests of senior officials. this was just too much for them. this idea that jared kushner's family used his position to
solicit chinese investors, particularly on the eb 5 visa program, which donald trump, the president is in charge. they go through some other questions, including ivanka's own business and copyrights in china. so heing this prese showing it presents conflict of interest problems and just the optics of it. >> if the administration and the family decide they don't care about the optics, what's the next step? not a lot of momentum to say here's why you have to stop. >> and if they're own lawyers are telling them, it's fine. they'll keep going unless the democrats raise a stink about it or we get more calls like this. my pick is in the wa"wall street journal". apple's case for tax reform. basically writing that businesses might use the returning capital to lift investment, boost wages or return cash to shareholders that could be reinvested.
republicans and mr. trump need to sell the american people on the benefits of tax reform. they could do worse than cite apple as exhibit "a." that sounds good to the "wall street journal" audience, but i would argue that if you're actually selling it to the public, the idea that apple has amassed a quarter trillion dollars outside the country in a tax deferred way, please let them bring it home, we might have added jobs or investment, i don't think it sells. it's an interesting point, you can make the case for just making it more rational corporate tax system here that reduces theincentives to keep money overseas, but if they think people will say poor apple -- >> i don't know. previous administrations couldn't do anything. they had such a regressive tax system, i'm here to finally change it. it's all about the narrative. >> it's a top-heavy group of companies that has that money. >> we're approaching the top of the hour. the team is getting ready for
"squawk box." melissa lee joins us from new york. >> we have a big three hours ahead. two high powered guest hosts will join us. at 7:00 a.m., sam zell, and also also we will have chamath, he said yesterday he was converting in tesla 2020 convertible bonds. he will discuss whether or not he thinks a company like apple should buy a company like tesla or net flick. after the bell tonight we have disney earnings. we will have somebody talking about the media networks. a lot ahead in the next throw hours. >> melissa, thanks. >> ask about that ibm comment. >> the watson comments. >> absolutely. still to come, the nasdaq and s&p 500 touching fresh records on monday.
will this record rally roll on? and catch lloyd blankfein's interview today at 32:15 easter. "worldwide exchange" will be right back. with type 2 diabetes a lower a1c is a lot about choices. but it can be hard sometimes, 'cause different sides of you struggle with which ones to make. well, what if you kept making good ones? then? you could love your numbers. discover once-daily invokana®, a pill used along with diet and exercise to significantly lower blood sugar in adults with type 2 diabetes.
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may cause low blood sugar. the choice is yours. ♪ lower your blood sugar with invokana®. imagine loving your numbers. there's only one invokana®. ask your doctor about it by name. welcome back to "worldwide exchange." there's your wall street setup. dow futures up almost 20 points. s&p futures look set to build on that close. up 1.5. nasdaq futures also coming off a record close. jo tobias, you have been saying this market is primed to go higher at record heights because of earnings and guidance? >> earnings, guidance and data. for example. the federal reserve loan board showed easing on credit conditions.
people have been focused on earnings, those tend to be good. it just tells us that there's further improvement coming. this has nothing to do with the political back drop, nothing to do with the elections in europe or legislative agendas. >> or the fed? >> it has to do with the fed in the sense that the fed is asking banks to tell them are you easing or tightening lending standards for business? business thinks about what is the cost of capital and what's the return on capital? that's how they make decisions. cost of capital is getting better here, and surprisingly it's tighter in europe. which i think has to do more with the banking system than the ecb specifically. this would go against the flurry of concern a month or two ago about the decline in commercial loans on the books of banks. you see some hiccups. are we at a whole new part of the cycle? are we just having a final
burst? >> i think if you look at it on the commercial industrial loan side. the business loans, the deceleration in growth, that's a six-carter lagging indicator. that's reflecting what happened in the second half of 2015 when you had the energy sector and trouble under duress. it was affecting the credit. >> rolls off the books. >> but that started six quarters ago. if you drive a car looking out the rearview mirror, you will hit a lot of stuff. that's what the bank loan activity is. the next six quarters are likely to be better in the bank lending side. chondromalacon on consumer and pressure in the subprime market, yeah, that's an effect of rising rates. >> if you look at what's working, technology, consumer discretionary. cyclical stocks? >> tech is different. tech was a combination of growth and cyclical.
people felt in case the cycle is shaky, we knows there secular demand for cloud, for artificial intelligence, autonomous driving. all those things capturing peoples fascination. i'm a little nervous about how far tech has run, particularly software an serviced zfservices. we backed away from tech as it's been getting better. we loved it a lot last year and made a fair amount of money. now we think it's better to look at more traditional reflation plays, so industrials, financials, materials are more chemicals in the u.s., it's not as interesting to us. we're underweight materials. in consumer discretionary, media, consumer services, there are some areas of pressure. >> if you look at the industrial report, they all look good on the year over year basis, which is how we score things. if you do a two-year look back, basically you're just kind of
recovering from a bad stretch a year ago. is that enough for the market? >> i think it's enough over the next 3 to 6, 9 months time fr e frame. beyond that, we'll need something moving on the legislative side to get people more comfortable. my view is let's get there. then make the decision. right now we have the probability of what we would call a positive cycle as opposed to the negative vicious cycle. let's take it as it is now. again, this stuff tells us nine months from now business should be improving, not weakening. this started may/june of last year. so we're kicking into the period in the second quarter of improving trend. >> where are you on this debate we've been having on the vix, and whether a sub 10 fear index which is no fear, is scary or is may
maybe -- >> you're asking the wrong guy. i don't think it's a fear gauge. >> no, we're getting your opinion on it. >> think of it this way. between 10 and 20, the probability of the market being up 12 months later is almost equivalent as if the vix was 30 and 40. between 10 and 20, low fix. we have risk. it's no different than we have 30 or 40, which is high vix in terms of the market's returns 12 months later. my problem with the vix is twofold. one is that everyone can see the vix day-to-day. there's no edge whatsoever for investors to look at the vix. number two, it's only one month out. if you look at skew of buying protection 6, 12 months out, it's very expensive. if you're worried about italian elections, months from now, that's not captured in the vix at all. >> you can play that, but it's much more costly. >> yes. >> so people are not worried in the near-term? >> in the next 30 days. >> yeah. not buying protection.
good morning. wall street's fear gauge hits the lowest level since the '90s as the nasdaq and s&p 500 hit new highs. a full market rundown straight ahead. we need someone who knows a lot about vix-type stuff. melissa lee is here. have we not already been talking about it? can we buy calls on the vix? can we as comcast employees? >> isn't complacency scary? i don't know. maybe not. >> we have two market experts -- no, they're great. sitting on each side of us. the polls are open for one more hour in south korea.
the country voting to pick a new president after its former leader was ousted by a corruption scandal. and pain for hertz. the stock is getting slammed after posting a bigger than expected hertz. it's tuesday, may the, 2017, "squawk box" begins right now. live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" right here on cnbc live at the nasdaq market site in times square. i'm andrew ross sorkin along with joe kernen and melissa lee hanging out with us today. becky quick has the day off. take a look at u.s. equity futures. dow opens up higher, about 19 points higher. nasdaq up as well. 4 points higher. s&p 500 about a point and a half. this is wh