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tv   Squawk on the Street  CNBC  May 22, 2017 9:00am-11:01am EDT

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what they'll get out of this? >> i think we're happy with the deal. amazon is happy. it was a fair deal with everybody. the better they do, the happier we'll be. we just want to see this out there in the world. >> eric, alex, thank you. 9:00 coming up soon. "long strange trip" will be in theaters this week and make their debut on amazon prime. i know this was a labor of love for you. >> me too. >> an unbroken chain between all of us. anyway, make sure you join us tomorrow. "squawk on the street" is next. ♪ good monday morning. i'm carl quintanilla with jim cramer and david faber. a steady week with multiple fronts. the president in israel, the second leg of his overseas trip. macro data, earnings finally
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wind down. the ten year is still stuck around 2.24. opec is trying to deliver some more cuts at the meeting on thursday. our road map begins with a major shakeup in the auto business. ford firing ceo mark fields amid investor ease about the stock performance. >> plus, middle east deal maker in chief president trump is in israel this morning. this after signing a record arms deal with saudi arabia. boeing, black stone and ge among the big winners. and the path to $1 trillion. rbc saying that apple has the potential to become a trillion dollar company within 18 months. first up though, changes at ford, the automaker announced that mark fields is out as ceo and that fields has chosen to retire. he'll be replaced by jim hackett, the chairman of ford smart mobility division. hackett has developed a reputation as a turn around specialist. and shares of ford have fallen more than 35%. the company has scheduled a news
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conference for 9:45 a.m. eastern time. being called a retirement, but we can read between the lines here. >> yeah, mark was fired and i think mark was trying very hard to develop on all fronts. autonomous car which gm is trying to do. trying to stem losses was not fast enough for the family to deal with some of the problems in south america and then problems in europe. didn't move as quickly as maybe they wanted in china. the stocks went from 17 down to 10. but i would say, geez, it wasn't a long time that he got a chance. and when you speak with mark or when i spoke with mark, i mean, typically what would happen is in the last quarter i really said, mark, i'd like to tell a story that would say that once you get the spending done in the second half, you'll have pretty good numbers and he discouraged it entirely. you had a ceo who said, listen, we'll have a down year and don't tell us it won't be a down year. that is a very discouraging thing for a shareholder to hear. >> yeah. you know what's interesting is the coverage of this led by "the
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wall street journal" which i believe broke the story. seems focused on the underperformance. i don't want to use the word underperformance, but the lack of performance of the stock price and i think that's really interesting over such a short time period. three years -- i mean, we could go through a list if we want to look at stocks of companies led by ceos whose stocks have not done well over three years. it would be a fairly long list of potential ceo firings that could take place. i understand that if you disagree with the ceo strategy or if the ceo has behaved in a certain manner that simply requires his exit from the company. but in this case, seemingly linking it so clearly to what they believe is the underperformance of the stock price. what are they basing that on? tesla? how can you do that? gm or the peer group i believe is down just as much if not more. so odd. >> look, i want to defend mark here. i think mark was tasked with coming up with the autonomous
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car. and they had nothing. okay? so he had -- i visited their -- i visited their autonomous car operation in silicon valley. if you're going to create your own, it is -- you're up again against -- you're up against alphabet. which is impossible to go against. was he competing with tesla? i mean, that's very unfair. tesla had a great stock price. does that mean that musk should be as the great leader in the group? >> no, gm has performed better -- >> gm did get out of some bad markets. when i would talk with mark fields and i talked with him quite regularly i said what are you doing in the markets that you're just getting killed? gm -- >> fiat chrysler, that would be helpful. or toyota. >> next year would have been a better year. but they did -- they were talking about last week maybe partnering with waymo which is the alphabet business that has a very good autonomous car blueprint. but geez, to give the guy the
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heave-ho after i thought that the goal was to try to take the profits and spend as much as you can. you have a good yield, but i do think that he was browbeaten about how the stock doing. more than a year. >> would have been hard to talk your way into any other direction. as for hackett, if you're being to admit and acknowledge that we're headed into the new chapter in mobility literally this is an interesting choice. turned around the university of michigan's athletic department, at steelcase, managed to see how the office is changing over the '90s. >> that's a flat line stock. if stocks matter, then that's not a criteria. this fellow, i know he did some good things about what he's been doing at ford, turning around the athletic program. i don't know, i think harbaugh played a role too. >> he was already leading the
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effort obviously on autonomy at ford. this clearly elevates that effort i guess. >> well -- >> replacing a 56-year-old ceo with a 62-year-old ceo who's apparently the guy who's looking more towards the future. >> need a good cabinet maker? >> you can always use a good cabinet maker. those are hard to come by, jim. >> steelcase survived. steelcase did survive, it did survive by moving a lot of the business to mexico. mark fields spent a lot of time under the gun of president trump. >> should fields have been more professional? should he have been a rah-rah guy? is that the lesson here? don't tell the truth? >> no. the last call i had with him, i just said, listen, you have the f-150 which is the aluminum f-150. you spend all this money on autonomous cars and he's like, jim, jim, listen to me. down year. down year. down year. well, you know, maybe the family
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was not willing to accept that down year. >> what do you make of david mentions churn in executives in manufacturing. claus, fields, something going on there. >> well, oeber hellmann got the shaft. arconic, that was an ill fated -- ill advised letter he sent. >> weird. i don't know if you can connect all three. >> but i think the thing you could do with fields, he was doing his damn test. and nobody can do all these things, and i think that ford is largely domestic. when you speak with ford about what they're doing in europe, nothing moves the needle other than domestic. domestic is peak auto. if you give him the heave-ho -- i bet you hackett -- when i saw
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that jim hackett was put, anadarko -- wrong hackett. i like jim hackett from anadarko, he's very good. but steelcase, he must have been friends of the family because if you look at the share price of steelcase that thing has been about as animated as a real bite. steelcase cabinet. you know? like maybe they should have picked somebody from herman miller. herman miller, that is a good chair. >> very interesting the board made a decision to move in this direction based on the underperformance of the stock and it does, again, i think beg that question. if other boards are starting to look at three year performance -- >> wow. was someone knocking on the door? >> when the industry is coming off the best time ever, it will -- i don't know. we can think of names i'm sure that have longer underperformance. much more significance based on a longer history of poor decisions where perhaps the ceo
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deserves to go. there's plenty i can come up with. >> when you get the president over to saudi arabia, you get some big orders from boeing and lockheed martin and raytheon and general dynamics. he did not come back with a big order for ford. >> $300 billion in transactions and investments out of the saudis. and jim's list is correct. dow and exxon mobil and ge and now he's in israel. he meets with netanyahu today. visiting the western wall and bethlehem tomorrow. was last wednesday's sell-off a one hit wonder? >> i'm beginning to think it was. i'm -- once you have a special prosecutor like mueller, it is difficult -- i mean, "washington post" tried to -- they broke another story about russian contacts and someone in the -- but you have mueller. he has some subpoena power. so if there is to find out, it's not leaks anymore. it will be a subpoena and i think that therefore a lot of this stuff that -- the drizzle
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out is going to kind of be done because we all got tired of that russian story. let's bring on the next story. we're tired of it. we have a special prosecutor. we'll get to the bottom of it. >> it could be fires. >> we have comey testimony coming up. >> it will be fiery. i don't know. in terms of just like the president and that one day, it's almost like we set off the algorithms. we have a good piece about algorithms. >> about the -- depends on who you talk to, but the volume generated by quantss is roughly equal -- >> what do you think about black stone -- i mean -- >> you're talking about the saudis investing -- >> getting off the wrong foot on the strike fighter and then did okay. remember he made -- he had to give a little bit with the air force one and now he did okay. >> black stone responded very positively to that. >> good to have the meeting withes the president.
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you get everything going through. you get the mojo. >> what's interesting is the saudis themselves are expending enormous sums to try to transform their own economy over the next 15 let's call it years. not to mention they're going to be at least at this point still taking public their one main asset, saudi aramco within the next year. right, could be a $2 trillion company depending on how you want to value it. it is like taking a country public. >> wilfred frost to his credit at 5:00 brought out the question of if you're in one of these -- if you're in a committee that helps with the president, you have done well. just pointed out -- >> except for fields. >> except for fields. >> wow. >> he was in every one of the shots. >> man -- >> he was living at the white house. so was mary barros. >> what are you implying? >> every time we'd go there, there was fields. plenty of time on his hands now. >> it's hit or miss. maybe some retailers need to be
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in there. >> we'll talk about barron's had an interesting take on retail over the weekend. as regards to the studies though, we have the reports that the saudi energy minister is flying to baghdad now to try to save the cuts. the iraqis want six months, the saudis want nine months extension. is that why oil is trying to get to $51? >> yeah. what the saudis should do, fly to the permian and speak to some of the permian producers about shutting down. because they're just pumping and pumping and pumping. and they're making up for everybody. you really need nigeria to shut down, because libya is pumping. but it's the united states that's the swing. that doesn't work, the saudis don't come here. i don't think trump who has been over and over again wanting to break up opec. i don't think he made any -- yeah, we'll cut back. that's not going to happen. especially with the epa cutbacks. >> wow. budget tomorrow. a lot of cutbacks in regulatory
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and medicaid. giving states some broad powers to limit benefits. >> things are happening very fast. really fast now. >> a busy week. one firm note, laying out the path for apple to reach $1 trillion in market cap. for now the dow is down 0.7% and the nasdaq is two points from break even for the month. back in a moment. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. usaa gives me the and the security
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apple's up in the premarket. rbc raising the price target to 168 from 157 says apple has the potential to achieve $1 trillion in market cap but even surpassed that level over the next 12 to 18 months. rbc says it sees upside from the iphone 8, services business, buy backs. it all adds up to $1 trillion. >> this is where you get the consumer products angle. this is a consumer products company with a great revenue stream. this is warren buffett framing the story as more of a gillette razor blade story than it is a story about cloud and social and mobile. and as soon as you take it away
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from the cloud social mobile you have a cheaper stock than colgate or a proctor. that's kind of the narrative that's driving this stock. i do think that next cycle is going to be a big one. because the surveys continue to indicate there's a lot of move from the five and the six to the 8. i know that the 8 has features that people are guessing on. kind of an interesting, better feel. a lot of people feel by the way you'll need it in order to be able to fly if they take you laptop away. you want to watch things, you're going to need your 8 plus. >> right. i mean, over 18 months we're not talking about that crazy assumption here in terms of how much the stock will go up. it's 20 something percent to get there from here. >> that's a trillion. the saudis could have a trillion dollar deal and apple versus saudi arabia. that is $1 trillion. >> when saudi aramco becomes public, it will be larger than
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apple. even by the more modest estimates. >> but the $1,000 phone is being heard about. that will be on verizon's shoulders and at&t's shoulders. i don't know. we can't afford -- the public can't afford $1,000 phone. heavily subsidized. >> you pay for it in the equipment and the installment plans over a long period of time. >> you hope that one of the carriers says, hey, look, we have the apple phone. we'll give you some sort of deal. >> meanwhile, related note today out of jpm, upping qualcomm to overweight. >> this is one i'll tell you this is right. we featured it last week on "mad money" on tuesday, saying this is about to break out. i believe that qualcomm, they're talking about the nxp deal, my charitable trust owns nxp. that's going to make it so that they're getting away from phones so they won't be as constrained. i don't know when the deal will close. i don't get a close that it will
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close as soon as i read that analyst report. >> couple of things. qualcomm versus apple what a battle that is. >> wow. >> really heated and quite notable. >> nasty. >> nasty. interestingly they're both investors in the vision fund. softbank's vision fund. qualcomm and apple. the only time you would see them together, but they're at each other. as for nxpi, guys, i wonder to wonder if you're not going to see a concerted effort led by one of the high profile investors saying we're not going to tender at 110. that's the price they need under dutch law. they might go as low as 70%. but that's unclear. and they have got to be at least wondering if they're going to face some resistance. given nxpi has performed so well. >> right. >> there's a belief amongst the investor base that the downside would not be significant were the deal to break. >> before we go to the middle east, nxpi there's a persistent
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call buying at the 110 level every single day. that stock -- that deal goes out at 110. who's buying the 110 calls? it's not a buy right, but trying to buy every single 100 -- >> i think it's interesting talking about nxpi watching that shot at the western wall. the president. >> that's our existence right now. trying to bridge ongoing business with what's happening around the world. >> yeah. nxpi is probably not as important as that. >> the president at the western wall. having flown from riyadh to israel in the first ever flight between those two countries as far as we know. >> yeah. >> they do not have diplomatic relations. >> i would like to say that goes the other way. >> netanyahu this morning tweeting perhaps one day there will be a diplomatic flight the other way. the other direction. >> anything is possible. they have mutual areas of cooperation. >> you have to go to egypt and then fly to egypt, to jordan. >> yes. >> yeah. >> of course the president still has a busy week. he moves on to the vatican,
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brussels, sicily, all by saturday. and this monumental first foreign trip. >> it's interesting that the papers are talking about that and not about russia. which we'll see how the market acts without the overview of russia. >> we'll count down to the opening bell in a minute. get cramer's "mad dash." we'll talk more about ford as fields is out. more "squawk on the street" in a minute.
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time for a "mad dash" here as we get ready to start trading on monday. i want to talk a little amgen. disappointing news. >> snake bit company right now.
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such a good company as it is. but they had a slipup on the osteoporosis drug. looks like there was some hard events which means it will be shelved at least for this year. who knows. credit suisse said it's off the table. clear radiant has a good drug. i know it's been -- this is when people get excited about a new drug and then it gets approved. nobody cares. but a lot of people feel this is more of a takeover target right now. that their drug -- osteoporosis is a very big market. up against the other ones that are good. but this is one that people say, you know what if i can own this one, i could have a suite of drugs that got some other things in the pipeline. amgen, wow. >> you have done some research. and $800 million in sales, 32 cents a share. kind of comes in line with where he saw -- 3 to 4% down side.
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>> look if their anti-cholesterol franchise gets endorsed, over the long term i can cut heart attacks, this company going to be great to own. it does have a patent and it has a good yield. it has a lot of money overseas but we can't -- you know, it's tough to talk about money overseas when there's no real momentum right now for tax reform. >> largest when you measure -- >> it's a market cap versus -- >> cash flow, the largest amount. all right, we have a lot of other stocks to watch. of course we'll come back to ford as well. the surprising firing of its ceo. the opening bell is minutes away. about your brokerage fees.
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quarters. and you have a weaker dollar. that going to help them. ulta obviously we know from jcpenney that sephora has been strong. i think dillard is doing a remarkable job. a fantastic quarter. so you have maybe 3 for 3 coming this week. >> barron's over the weekend takes a crack at arguing that some of the names, best buy, and some others, home depoe are actually gaining some traction against amazon. >> well, i think they have -- look, best buy, there's -- this switch, the nintendo switch we know from the target call has been very, very strong. the strongest game cycle we have had in ages. home depot, remarkable quarter. the stock went down, but no indication whatsoever. i feel that the idea that amazon can challenge everyone in the world, i don't think that bezos expected that. i really don't. >> meanwhile, you were tweeting about sears nonstop --
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>> i feel the rap against media has to be talked about. when eddie lampert attacked the media against sears, i got on like -- it's like what our president does. i went right to it. i said, listen, i want to know if you have a good sears or a good kmart. let us know. so you can go to my feed @jim cramer and let me know your sears and kmart experiences. there was a fellow that liked his kmart. there was. i'm not kidding. you know when i got my first corduroy suit at kmart they didn't care for it at -- a different look. >> the s&p at the bottom of the screen. it's alexandria real estate and ringing the bell from miami, the frost museum of science. how do we expect ford to begin to trade today? >> i'm still trying to figure out the steelcase, that's a low
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tech operation. i'm also trying to get my arms around the idea of the michigan -- no offense to the university of michigan -- their athletic program. but i have always felt that when you take a coach from the -- say like the niners and he goes to like a college program that often he could be -- he could be aligned with the possible turn around. by the way, it's not like michigan -- i didn't see them in the big bcs, but look, this guy -- i have to go back over my steelcase cabinets. maybe there's more it than that spring and how you can lock and pull down. there could be more to it, david. >> to be fair, already had been at the company spearheading the efforts right on -- >> not that long. >> not that long, but he had taken that job. fields put him in the job i guess. >> you're talking about etu brutus thing, you know, the star -- like that etu brutus -- >> yeah, i got it.
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i understand where -- look, i have to brush up on my shakespeare. i'll start quoting him now. >> looking for the turn. steelcase, you make those steelcases in mexico. that's not what the president wants. maybe fields can go work for the president. i don't know. he spent a lot of time with the president. >> big leaders that got a name out of -- a deal out of saudi. boeing and lockheed martin. >> boy, the white bodies have been a dud of late. maybe a good place to dump them off in saudi arabia. they were stuck with them. >> we have a settlement on arconic. >> we do? what do you have? >> a proxy fight will not go to a final -- annual meeting which is thursday. three of elliott's nominees i believe, ayers, dodi and patrice marin will join the board. there's no stand still provision. >> three?
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so they have six now? >> marin joins the ceo search committee. elliott gets consultation rights on the ceo search process. larry lawson will be among the candidates considered. >> oh, my. >> for ceo. >> three's who they want as ceo. >> david hess the current interim ceo will stay on the board. legacy director raphael rife will resign and current arconic nominee arbaugh will take his place. >> lawson is the guy they want, the turn around artist. >> interesting arconic will make the best efforts to reincorporate as a delaware corporation by the end of this year. that's interesting. so it's over. this was a heated battle if -- >> but this is -- >> unaware. it's been going on for many months. elliott which had three directors that it had placed on the board was going after another four and as we talked many times of course this battle already claimed ceo of arconic,
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klaus kleinfeld who maybe one night up too late wrote a very bizarre letter. >> yeah. >> to paul singer. the man who founded and runs elliott. and for that was dismissed from his position as ceo. something elliott certainly did want, but it was a heated battle, jim. >> right. >> good amount of nastiness on the elliott side certainly directed at -- >> yeah. >> the usual private investigators and all that stuff. >> yeah, i want to talk to leo -- the chancellor of delaware court. because i don't think he favors that kind of activity. lawson, he was the chief executive officer of spirit aero systems and when i spoke to klaus he felt that he could do things to boost the stock, but not provide long term gains. that's important because the short term versus long term fixation makes it feel as
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though -- my charitable trust owns arconic. if lawson can get the job, i think they have enough guys -- i think it's interesting, hess is going to step down. so who is the interim ceo right now? just stay hess -- >> it will stays he. >> from united technologies. >> he's not stepping down but he's staying on the board. he's staying as interim until they figure it out. and clearly, they -- they like lawson too. or at least they want him to be considered. >> lawson will be one of the candidates. i think he's the only candidate -- i don't know patrice marin, do you? >> no. >> that's the elliott person. joins the ceo search committee. that person wants lawson, i presume. >> yeah. >> wow. wow. the heat is finally over here. >> elliott, my god, never a more active activist than elliott. they have been taking it to bhp
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billiton. it's been going on for months for arconic. >> akzo nobel. >> after them as well. to try to pave the way for ppg to go hostile which they have to do before july 1st or step aside. >> this is a shock. they must have had the votes. >> they get three of four. >> be aware. look, this is a sign they'll take something that klaus said was short termism. and short termism that means stock higher, i guess. wow. >> meanwhile, jim, we have semiconductors nvidia, micron, a bunch of hours. >> i was waiting who was going to come out positive on nvidia today. now you have $7 a share which means that nvidia is not expensive. nvidia is deep learning. machine learning.
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it's gaming. >> machine learning, ai, gaming. it's everything. did you read that speech from that -- at the investor day? >> sure. jensen's speech. jensen's speech. remember, he feels that software at one point was going to eat the world and now he says that artificial intelligence is going to eat the world. and nvidia is in a lot of autonomous cars. nvidia is -- they make it so that you can -- you have that realistic take two reports this week. you get that on your pc. it just -- it's like a ferrari. >> i wouldn't know. never driven a ferrari. >> no, i'm just saying that chips are -- what do you have? >> thanks for sharing that. that's nice. >> a spaceship. >> enough driven one of those either. the deal -- it's not an m&a monday, but we got that chemical
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deal. huntsman got together with clariant. chemicals moe, that's huntsman -- at about $6.4 billion. overall value of the deal about $14 billion. so if you're a huntsman shareholder you get 1.219 shares of clariant. that's, you know, what they're talking about here. cost synergies to be realized within two years of closing, then you put a multiple on that. and a number of other things and you can say that you're adding about $3.5 billion in value or at least that's what they're claiming, jim. both stocks are responding positively to this chemical m.o.e, almost an even split. 46% of the combined company. >> a lot of concentration in the
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chemical industry. this is another deal that you want to have more tools in the box if you're a chemical company. the chemical companies -- ppg is not so much of a chemical company as a coating company. think of the combinations that have happened. monsanto used to be considered chemicals, now it's an ag company. deere had the great quarter on friday. there's a lot of things going on in ag that positive and these are real industrial companies. i think they're -- do we see a reversion to the industrials? last week remember was a lot of the nvidia. a lot of cloud. you know by the way, just metaphorically, the winner of the preakness, cloud computing. went back and forth with benioff this weekend whether you know -- what did that mean? >> he said -- >> not really. it's kind of funny that cloud
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computing, the horse won. see, i was looking for some sort of -- yeah that's who i'm looking for, jim. >> just take it. >> he came back with a picture of david blaine. refocused on david blaine who i saw firsthand. >> he's amazing. >> yeah. he turned me into elon musk. >> so the dow's up 90. led by boeing and apple and the s&p with its gain is going positive for may once again. let's get to dom chu on the floor. >> no surprise that the bullish tilt is pro cyclical, pro growth stocks out there. if you look at the early sector winners no surprise. industrial stocks, technology stocks, and financial stocks helped along by of course another record high in shares of nvidia as we move that way towards the chip sector. a hot industry. some of the more economically insensitive names -- or sectors overall are lagging a bit.
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utilities and real estate among those. and health care on amgen. one other place to look if you're looking for the bullish tilt, check out what's happening with regard to the internal machinations of the s&p 500. entering today about nearly 200 stocks within the s&p are trading within 5% of their 52 week highs. that's definitely bullish versus 50 stocks that are within 5% of the 52 weeks. so the bullish tilt is playing out. a couple of places for caution as usual here though. check out what's happening with the s&p 500 versus small caps. small caps lagging behind the overall large cap sector. 7% for the upside for the s&p 500 sector etf that tracks the overall s&p. the transportation stocks are still negative so far year to date versus the overall s&p 500 as well. a bigger gap to watch for. the down trend that continues for energy stocks, it was a
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positive day on friday. the xle, the big etf that tracks the energy sector, had a nice day on friday. rising oil prices are helping there. remember, was fracking and shale oil producers, you wonder if the down trend you see on the right-hand side of the screen continues. energy trade is one to watch here guys, back over to you, carl. >> thank you very much, dom chu. let's get to rick santelli at the cme group. >> good morning. rates continue to be hovering and albeit at a place that arguably is below an important range. but not far enough below it to really prompt any new technical movement. it's all about the dollar index once again today. let's look at one week of tens. you can clearly see there was a drift lower, but yields have held. if you look at the april 1st chart, what should jump out at us is that we held at 2.16, 2.17 area. which is below yield close. go back to november of last year, you can see how that fits
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in. dollar index a bit of a different story. look at the one week chart. we continue to take off without finding any traction. if you go back towards october prior to november you can see that's where we're comping to. we did take out a 9705 level from november. if you look at the other side of the coin, euro versus dollar, it really is a question about euro strength. we can argue about the longevity. the economic true underpinnings or we can argue about the ecb's balance sheet and how considering the value of the euro and all the quantitative easing it's bigger than the feds. is that something that in the long run will give investors confidence, long runs don't seem to matter anymore. look at the september 1st of 2016 euro versus the dollar. that's the last time it was at this level. if you look at april 1st of 2016, this is the dollar yen. last time we were at these levels so the euro is showing strength not only against the green back, but against the yen.
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to a lesser extent against the pound. maybe the pound would have a little more action considering the brexit issues are looming but there it's moving higher, the euro against the yen, but not in -- but not in the aggressive pound like the other two charts. many are talking about, you know, what's denominated in dollars that's important of late. well, treasuries, oil, to name two. a lot of cross currents here, but for all practical purposes it certainly seems as though the strength in the euro is arm in arm with some of the new analysts and the new found love for european based investors. carl, jim, david, back to you. >> thank you, rick santelli in chicago. ford is about to hold a news conference at the global headquarters in a few moments. the company's made it official that mark fields is out as ceo. he's being replaced by jim hackett. let's bring in phil lebeau who helped to break the story this morning. your take on fields departure and on hackett himself.
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>> well, it will be interesting to see what jim hackett can do. he's going to bring a sharper focus to what ford needs to do to turn around this company. i pointed to the fact that it's up less than 2% today is not a huge reaction. mark fields was trying to turn this company around. what's jim hackett going to do that fields could not do? perhaps he'll communicate better with wall street, but are they going to have greater investment in future technologies? are they going to cut some of the core businesses that are not making a lot of money, if not losing some money? are they going to pull back, how much effort they put into small vehicles worldwide which has long been a tenet of ford. what are they going to do beyond we're going to make this company sharper focused? i'm looking at the press release, improve operational performance. every new ceo wants to do that. give us something meaty we can bite into, otherwise, i think that wall street will look at this and say, okay, let's see
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what you're going to do, jim. >> yeah. thank you, phil. because i think that one of the things that's missing here is that i felt that mark fields wasn't in that job for very long. what's the perspective for someone who's covered this industry for a long time in terms of giving a ceo in the auto industry a little time to work the magic? >> well, you think you'd have more time than this. look, these guys are sitting down. there's jim hackett on the left. bill ford on the right. let's go into the press conference. >> -- the news release is available on both our media website and shareholder website. with us in the room is bob shanks our cfo and local media. we have stakeholders from around the world including the dealers and the suppliers. members of the investment community as well as media. with that we'll turn it over to bill ford and afterwards and jim and then we'll take a few questions. >> great, thanks, susan. good morning, everyone. thank you all for coming in.
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we have all seen the news by now. and so -- and many of you know jim. actually probably a lot of you don't know jim, this is a great opportunity for you to start that process. but before we go, let me say a few words about mark fields. mark had a tremendous career at ford and did great things. he -- those of you who have covered us for a while and now that i see who's here, covered most of you, you know, you'll know that starting with the way forward plan in north america that which was a huge building block for our turn around at ford. that was a great achievement he had. and then if i just look at the last few years under his leadership we have had record profitability, cash flow and really, really solid results. so what that's done of course is to put us financially in a great position so that we can chart
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the future that jim and i envisioned ford to have. so i'm very thankful to mark d and, you know, as i said he had a really terrific career here. but this is a time of unprecedented change and you know this. you follow this industry. in fact, you have seen all of the changes that we have been talking about for some time. well, they're here now. and time of great change in my mind requires a transformational leader. and we thankfully we have that in jim. because you all know jim's biography, but let me give you color to it because it's important. jim ran steelcase for 25 years. that alone is a huge accomplishment, but then you peel it back and say, okay, so what happened during those 25 years? and to me what was most instructive was that jim took a company that defined itself as a furniture maker and jim said no, let's imagine the future of the
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workplace. let's imagine how people are going to work and want to work in the future and then let's build our company around that. and he did that and of course they still made furniture throughout the whole -- they still make furniture. but in doing so he grew the company, took them to first in the industry worldwide. and the culture was one of optimism and a feeling they could get things done easily. because they had a very clear view of the future. then jim went to the university of michigan. and you can say well, is that relevant to what ford is -- has got going? i would say, yeah. in a couple of respects. look at again what he did. he -- first of all, it shows his loyalty because having played football for bow schembechler, he loved the university of michigan and when they asked him, could he come fix the athletic department, jim said
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sure. you know, i'd be happy to. walking into the very difficult and very public situation, what did he do there? he first got the students back because they were feeling alienated. then he got the -- all the volunteers that are the heart of any program like that. they were feeling alienated. he got them back. he negotiated and brought home the nike deal which was ground breaking for any university. then he hired jim harbaugh and then he helped select his successor and then left the athletic department in much better shape than he found it. so you say, well, what does that have to do with ford? well, nothing directly, except i think it shows that jim can be successful and operate in multienvironments. a corporate environment in
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steelcase where he re-imagined it and delivered not only a solid set of results but delivered a very convincing future. by the way he got them through '08, '09 which was tougher than the auto business so it shows his operating acumen and visionary thinking. then, you know, he was a part of the board for three years. then i asked jim, hey, you know, we need to build a new business. and, you know, could you help us do that or frankly, would you go do that for us? and so again, very selflessly -- you see there's a pattern here, he left our board. joined our management team. again, when he didn't have to do that and life had more -- probably appealing options. and he's in a year -- he's done an amazing job at ford smart
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mobility. you know, i'm sure you'll want to get into with jim what are the amazing things and he can tell you. i know them, but better hear from him. so my point is that, you know, he's really a proven transformational leader. he's a visionary thinker. he and i think very much alike. i have known jim a long time personally. and, you know, we have always clicked in terms of thinking about the future. but make no mistake, he's not just a futurist, but a very good operating executive but what he can do is integrate future thinking into the operation and help seamlessly deliver a future that has been envisioned. so importantly, this is very important to me anyway. may not be to all of you as important. he will continue to transform the culture of ford motor company. the culture of caring about each other, the culture of caring about the company. the culture of ideas flowing
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freely without regard to hierarchy. and so when i think about jim and what he can and will deliver for us, it's a lot. and that's -- you know, if i were to try to wrap him up in a few statements that would be it. so what do we need to do now? well, there are a number of things we need to do. first of all, we have to re-energize our business. including sharpening some of our executional excellence. we need to modernize our business. so what does that mean? well, if you think about the trends that are coming at us, things like artificial intelligence, deep learning, robotics, we need to have a point of view on all of these things and not only a point of view, but a plan to either integrate them into our business, to help us drive our business or a thoughtful reason
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as to why we don't think that's the right reason at the time. so we have to modernize the business. third thing we have to do is to -- we have to continue to develop and also invent the new businesses. so any one of those is a big task. we have to do all three and i'm very confident that we can and that we will under jim's leadership. so -- you know, underneath that, there's some other priorities. we need to speed up our decision making. that is very important. i think the way -- jim will speak to this, i'm sure. the way we're going of to organize and the way jim plans to drive this company, we will speed up our decision making. we need to invest our capital where we can create value. and that may seem self-evident, but it's something we absolutely have to do. importantly, also we have to move decisively to address underperforming areas. so we have a lot to do, but i
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have never felt more confident in our future. the good news is we're starting from very, very solid platform that mark has delivered us in terms of earnings and cash flow so that we have the wherewithal to create this kind of future i'm talking about. so enough from me right now. i'd love to introduce my partner, jim. >> thank you, bill. i'll add to the sentiment about mark. i worked for him for a year. i knew mark when i was on the board. he's an extremely dedicated ceo. 28 years of transformative exercises at mazda, what he did with the way forward here. he's agreed to help me, you know, we had a great talk last friday. and i'm going to go to a football game with him in the future. so you know we have a good relationship. but i want to go because, you know, it's really hard to be candid with you when bill says the nice things and talk about yourself and i'll let you dig
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into any parts of that, but i want to go to the company this morning and say that, you know, the year of being here, there's a lot of things going well. the company's record earnings proves it's able to make lots of things happen. in fact, if i contrast it for you in alan's era, he did a special thing to get the company to be a community again with the structure that he created in the one ford strategy. it worked really well. in fact we'll use parts of it in the way that we monitor our success. what it doesn't do as well is it doesn't handle when there's lots of complex strategy questions. if you thought a strategy like a rubik's cube, it's not just solving one side. there's lots of sides to the problem. i'm trying to design and you'll hear about a team that's a little closer to bill and i that allows us to make decisions very clearly for the organization. so that'll be the first thing. the second thing is that -- this
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is keeping with bill's ladder of points that he made for you. is the fitness of the business, it's always an objective. the improved fitness i should say. it's never -- it never can relax. the world is always moving. my old football coach used to say, you either get better or worse, but you don't stay the same. many of the things that ford is contemplating are in support of that. i'm going to take all of that work and get with bob shanks and my team. we're going to come back with plans to keep the fitness high. so our returns and getting our cost to capital out of every initiative is really important notion. it's not going to fall by the wayside given this ability that i have with bill to see the future. that's the third part. the future is not a fantasy. it's not where he and i are making up things. in fact, what we both do is we're really curious.
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we talked to lots of people who are real smart, from deep learning folks to deep thinking folks and thinking about where carbon fiber is going to go. we' we're triangulating and that clarity takes the top people in the company. i got a big advantage in that i have a relationship with bill that goes back years when we were the east and west ceos that we're meeting to deal with revenue sharing in michigan. we had dinner a couple of times to being on the board to witnessing this t.e.d. talk. i was not on the board when that happened. i got to introduce bill to a bunch of people at t.e.d. and i remember telling him off to the side, i think you're a hero in my world. why would you say that? well, first, you know, bringing alan in, the courage that that took for him to make that decision and then secondly, what he did when he stood ahead of
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the world on the environmental impact of business and then ahead of mobility, before others saw it. then at t.e.d. he said, here's -- you know, his great grandfather runs the company, he starts the company and he says, look, if we cut and paste the old model and put it all over the world you know we'll kill the world. so to have that sense of humanity, the sense of capitalism. the sense of people. you know, this is frankly the way i'm wired. so he's going to play an important role in a sounding board for me, really a co-conspirator in thinking about strategy. very, very comfortable with that. in fact, in our organizational design i have asked him to take two things off my plate so that i can focus in areas. so just to end on this, the future is really a source of optimism for both of us. and any time this rubik's cube is being turned around, you have just as much an advantage in that future as anyone else.
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we have a right to it. and what we have that won't be lost is this great business. this great vehicle business. the number one vehicle in the world is made here at ford motor company and that's not lost on me. in fact, steelcase as bill said, the license you get to make change comes from your care of, you know, where all the earnings are coming from. so i'm really committed to that. so i just would end this by saying i look forward to coming to talk to you less about myself in the future and more about ford's results. >> thanks, jim. so you want to kick off the q&a. >> we are going to start with the financial community on the line. we'll then move to media in the room and then media that are on the line. i think we have shaquita who is going to monitor. >> in order to ask a question, please press star one on your keypad. and your first question comes
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from the line of john murphy from bank of america merrill lynch. >> good morning. congratulations, jim. i wanted to -- you know, a lot of what you're talking about seems like it's -- you know, an acceleration of an existing strategy with some tweaks and changes. so i'm curious a lot of it seems like softer targets. as you look at the development and the implementation of your strategy, jim, what kind of metrics are you using to measure your success? you have been putting up some pretty good americas in cash flow so will it continue to be the standard financial metrics or how will you gauge the progress of your strategy? that's the first question. then just a second question, is there any change in capital, you know, structure. either increasing dividends, buy backs or anything else like that? >> so on the first question, thank you for your comments. you know, ford's ability to track where it is and to understand kind of the heart
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beat of the company is one of the things that it has mastery of. that's a process to watch where we are. and where i want to help impact is where ewe are going. that's news that you will hear about. i agree with you if we're in a rising tide market and earnings kind of enjoy the effect of that i want to see us differentiate ourselves. so you'll be hearing about things like that. and particularly in the areas of capital deployment. that's a form of fitness today. shareholders, ford family expect that we're returning that cost to capital. and that is one of the exercises that was in flight. but i think it would be wrong for you to say that we have that -- where we wanted it and i'm just kind of a caretaker. i actually think the first thing i'm doing is tearing into that to make sure that it's aggressive enough. >> and john, on your second question, on any capital
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actions, i wouldn't expect to see any announcements. we are always looking at it as you can imagine. but nothing related at all to this announcement today that would be different than what -- anything we have told you. but i also want to answer too, your assumption that we're kind of status quo in terms of where we're headed, i want to reiterate what jim said. that's not really the case. we need to have -- if you think of a clearer view of the future, and then once you have that, you can make decisions very rapidly against that clear view of the future. i think you should expect us to start articulating that. we won't have all of the is dotted and ts crossed by definition because we're in a very fluid world and our strategy will evolve. but you will see sign posts along the way and will be -- we
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will be communicating with the street metrics that i think you can judge us by. >> next yes. >> -- from ubs. >> thanks for taking my question. i think, you know, in some of your background, jim had mentioned you sort of had driven cultural change. do you think there's a need for a large cultural change at ford and what kind of things if so do you kind of expect to drive that? >> well, if you can see me i'm smiling because bill on my left here, see, the thing that shouldn't escape us, he gets it. so bill ford understands the culture and we're totally aligned. i would say it's an emphasis, you know, be more emphatic about parts of the culture that need to come out. both of us feel like over years, what happens in big corporations, the bureaucracy and the hierarchy is probably overwhelmed.
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what can be faster decision making, clearer understanding teams, working collectively. but in addition, fun, you know, we both tease each other. we like to have fun because we work really hard. we're both really competitive. but we want people to come to work thinking that, you know, they can have a great day here. so these are things that i would say, yeah, there's pockets of this that exist, but we're going to make it more emphatic. >> one thing i would just add to the culture that i think jim will bring us is, you know, one of the things that i have alw s always -- i love so much about our culture, but one of the things that's frustrating me over the years has been our obsession with hierarchy, within the culture. and if we're really going to get the best out of our employees and really have true team work, then we have to bend that notion of hierarchy within the company
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and that's very much a culture thing. it's hard to do. as jim mentioned it's existed for a lot of years. but jim is a cultural change agent. i promised myself i wouldn't compare jim to alan this morning because, you know, it's not -- it's just not right. they're very different leaders. for very different times, but the one thing that i think -- that i'll break my rule just this once. by saying that alan really captured the hearts and minds of our employees and made them feel that not only could we win, but that we were going to win and they were going to have fun on the journey. i think that's something very much you'll see with jim. >> thank you very much. congratulations. jim. >> thank you. >> your next question comes from the line of brian -- with barclays. >> good morning.
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ironically i'm at an airport looking at a dreamliner. so speaking of alan. so i wanted to ask -- really on two fronts what i think many in the financial community thought maybe ford seemed to be behind. i know it's not always fair to compare to the cross town rival because tesla is bigger -- but one, do you see any changes in terms of moving faster, moving bigger? i assume, jim, since you ran that area, you know, you had some thoughts on that. is it a question of moving that through the rest of the organization. and second on blocking and tackling in north america, a number of observers have been somewhat disappointed with some of the recent profit performance which is while strong, nevertheless it's lagged the cross town rival in similar markets. can you give us perspective on that? >> i'll take the first one.
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i think i would challenge that we're not moving fast with mobility. i think that the company's work in figuring out where to play has kind of mapped out a path that gives us a lot of opportunities. so we have a company inside there that had 12 people when we started and it's going to be over 600 pretty soon. and there's a lot of other promise there. so i just want you to be patient. that news will come as we have success. but maybe you can address the -- >> yeah. to answer your second question, this gets back to jim's operational fitness or the company fitness response. you know, north america has been doing well. but, you know, i said when you think back to what i said at the beginning about the three things we need to do, one of the things we need to do is re-energize our business and focus on operational excellence. we have some things to focus on and we're going to. and not in comparison to anybody
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else. or what any competitor is doing, but really for our own fitness. >> okay, thanks. >> and your next question comes from the line of evercore. >> good morning. congratulations, jim. >> thank you, george. >> i wanted to follow-up on brian's first question and specifically regarding some of the targets laid down at investor day in september of last year. i think you talked about investments of $4.5 billion in electrification, $1 billion in autonomous and also commitments to bring a level four car to market in 2021. did those goals and objectives still stand or will you be looking to review the strategy from this point on? >> i'm going to let bob just confirm where we are, you know, with those commitments and then i can talk about strategy.
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>> yeah. so george, you're right. those are the levels of investment that we targeted for those parts of our business and they continue to be part of our plan going forward and of course jim is going to drive the strategy around that. i'm sure we'll see changes as we go forward. but yeah, that remains the basis of our plan. >> i think next question. >> your next question comes from the line of joseph steck with rbc markets. >> thanks, good morning, and congratulations. first question is, you know, one of the priorities you mentioned addressing underperforming parts of the business, does that include a re-evaluation of what you consider core and then the second question is, jim, i wanted to get -- you talked a lot about the future. i guess i wanted to get your views on the importance of
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building a bench and a team. because, you know, undoubtedly some of these investments, i think even you acknowledged you're making now, the payoff is much further down the road. how do you view that element of rebuilding the ford culture. >> well, i think the first question to be really straight forward, bill said that the idea of one business -- >> if you don't listen to corporate conference calls this gives you a flavor of what they're often like. this is ford announcing the new ceo hackett. mark fields is out. extraordinarily light on details about their new operational objectives. a lot of talk about culture. and hackett's success in turning around a football program at the university of michigan, furniture business at steelcase. but virtually nothing regarding how mobility is going to change. other than the unit going from a dozen employees to 600 over time. we got that. >> no discussion as to the real
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reasons to why mr. fields was terminated. >> he actually got praise at the top -- >> he did. 28-year veteran of ford of course. leading the way forward. but alan mulally's name seemed to come up more often than fields'. >> mulally was a mentor for fields. he hand selected him. it's all around the framing of the stock price which we should note is higher on the news. we have a broad rally across the markets today. but ford is up more than 1%. nothing extreme. but it's higher. down 40% i guess is the big headline since fields took over three years ago. >> the dow is at 90. vix is close to 11. for more on ford this morning, let's bring in s&p global senior auto analyst efram levy. >> have good morning. >> we had a debate about whether or not fields deserved to be
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kicked out. did he? >> well, i think it's really a talk about frustration of the share price and that led them to go and remove mr. fields. i think in general i would have expected him to continue, because he was continuing alan mulally's theme. but they were investing in the future and that was hurting them and another thing that investor were concerned about, relative to the cross town peer, they're underperforming but having great jobs. >> i wanted you to elaborate on that point. mary barra has been in charge of that automaker. how is she dealing with -- sounds like the dual pressure of wall street and silicon valley. >> well, i think that it's been different ways of transforming the business. some of it were advantages that gm had certain head starts in terms of mobility. they had the on-star. they were doing partnerships for some of the alternate vehicle
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companies. and then now ford is playing catch-up. they were aggressive with the share repurchases, the buy backs, multibillion. something you weren't seeing the same way from ford so i think you were getting less excitement with ford than you were by general motors. >> what's your general thesis on the industry right now as we have been looking at four months of a down year on auto sales? >> we have been forecasting a down year for auto sales for this year. not so much about -- between 1.5 to 2% down. but that's pretty high on a historical basis. it's something that actually is pretty good and you have really positives coming out of the fact that the growth is in the more profitable trucks which helps a gm and a ford with their profits and you have seen that north american result. we think the prices on the shares is really attractive as they're very depressed with yields on ford about 4.5%.
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i don't understand why the stocks are so low. >> so there's a lot of talk today, right now going on in this news conference about re-imagination and speedier decision making. the stock is up more than 1%, does that surprise you? >> well, i think you would have thought a transformational change more than 1%. if they had hired someone like elon musk you'd be seeing a big rally but he's not available. i think we have a potential -- if he announces something more proactive which they didn't say in the conference call yet about being more aggressive for the shareholders because i think they need to be satisfied also. >> yeah, that's an interesting fork in the road. how do you envision them turning? toward traditional shareholder friendly measures, tinkering with the balance sheet or doing something truly out of the box that would lead them into more tesla like territory? >> well, i think it's a combination of maybe they'll be more aggressive with increased
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shareholder buy backs. you kick something back to the shareholders today, make the shares more valuable. but i think they're doubling down and trying to get more value out of the mobility business. we saw that with delphi splitting up to get more value. that seems to be -- to those companies with a more mobility focus. >> what do you need to see to recommend investors buy this stock and be convinced that this is a turn around story? >> well, i already recommend that they buy the stock. i have a buy on ford. i have a strong buy on general motors which is performing better operationally. i think that you have to get shareholders to come behind the new ceo. i think a catalyst of a more aggressive share buy back would help. the policy for dividend it's not at risk. they want to maintain their base dividend and depending on how profitable they are, they'll give you a kicker to the share
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price and maybe they want to give something earlier rather than waiting. >> thank you very much. efram levy talking about ford and the new jim hackett era. when we come back, president trump has arrived in israel. continuing the first foreign trip as commander in chief. we'll take you live to jerusalem where we're expecting him to meet with the israeli prime minister, benjamin netanyahu, this hour. we'll be right back with the dow up 85 points and a broad based rally in the s&p with almost all sectors higher on this session. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.
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saudi arabia and the u.s. striking a $110 billion arms deal that could increase to $350 billion over the next decade. morgan brennan joins us now with some of the details in this deal. good morning. >> hey, good morning, sara. so we reported it last week, now it is official. a massive deal with saudi arabia. $110 billion in agreements effective immediately. now, we're still light on details, but among the winners, lockheed martin, boeing, raytheon and general dynamics all of which the stocks are hitting all time highs today. one new wrinkle. some of those weapons systems will be assembled in saudi arabia as part of the kingdom's push to spend half its defense dollars with local companies by 2030. that's starting with the launch of the state owned arms company last week.
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so lockheed said final assembly of 150 s-70 black hawk helicopters will be done there. and saudi arabia is encompassing the munitions and general dynamics will help localize and design and support of armored combat vehicles and boeing is establishing several joint ventures including one to provide services for a wide range of military platforms. so up to $350 billion in prospective deals over the next decade. that's going to support more jobs stateside as well, but most agreements still hinge on further government to government talks with the pentagon then negotiating with the contractors. so the timing and the surety of those potential sales and accompanying jobs is less certain. nonetheless, the defense stocks are soaring again today. the ita, aerospace and defense etf is up 1.3%. it all comes ahead of the white house's 2018 budget proposal that's expect tomorrow --
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expected tomorrow. so i suspect we'll be talking about the stocks a lot more as the week goes on. sara? >> yeah, they're getting a double bonus today. thank you. meanwhile, the president continues his first foreign trip abroad. he's in israel today. he's expected to meet with prime minister benjamin netanyahu later this morning. for more we're joined by the former ambassador to israel, james cunningham. ambassador, welcome. thanks for being here today. >> glad to be here. >> how do the israelis view that, any reason for them to be concerned about the growing arms deals with some of the arab countries? >> it has been a concern in israel, but this administration as has previous administrations will remain committed to maintaining israel's qualitative military edge in the region. i'm sure that's one of the things that president trump will be discussing with prime minister benjamin netanyahu. i don't think that this arms deal which -- much of which was programmed in the past should be
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cause for concern. >> so we're coming off of hundreds of billions of dollars in deals in saudi, and today president trump has already been talking about the ultimate deal. of course talking about laying the groundwork for peace between israel and the palestinians. obviously, it's ambitious. how's president trump doing on this front? >> well, i think he's starting out the right way. having talks with others in the region as well as with the israelis and with the palestinians. this is a complicated fraught project and the prospects for it in the short term at least are not very good. but as a new president, he has an opportunity now to turn the page and take a fresh look and try to establish a fresh course for a way ahead and that's what he's trying to do. that's a good thing. >> can you elaborate on how complex it's going to be, what exactly what he needs to do and what some of the specific challenges are going to be in
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these talks? he is expected to go to the west bank later with the palestinian leaders as well. >> well, there's a long and difficult history behind this. the challenges at the moment are pretty obvious. the political situation in israel itself is difficult for the prime minister. the situation in the region is quite difficult with a lot of instability and chaos. and you can't detach the israeli/palestinian issue from what's going on in the region and what's going on directly that affects israel and our interest in the region. so one of the promising things i think that he is -- president trump is trying to do is to take a look at this whole issue of a region of instability and figure out how steps can be taken with partners in the region and with israel to help stabilize and strengthen the region itself. that then creates a better context for an arab -- for a palestinian and israeli peace
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process. >> how would you characterize if not the likelihood of a deal happening in the medium term, the willingness to work to try to hammer out a deal? >> well, that's -- that is a fundamental question and both sides have had reasons to suspect that the other partner isn't willing. even if able. isn't willing to go forward. that's something that is for conversations between leaders. president trump needs to sit down directly with prime minister netanyahu and with the palestinian leader abbas and have that kind of conversation and try to find a common ground that will enable them to move ahead. that will be very difficult, frankly. there's lots of reason to think that both ability and willingness is lacking at the moment. >> you know, there have been a lot of questions as you know, ambassador, about president trump's management style. his leadership style.
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both domestically and internationally. the fact that they've planned this trip -- i think it's an interesting display of religious tolerance, to the western wall and later to the west bank, is he bolstering his status? is it going to make it easier for him domestically if he continues to show and be welcomed around the world as commander in chief like this? >> i'm sure that's part of what's behind the -- this trip and the particular instances that you mentioned. as well he's going to the vatican which is also highly symbolic. but more importantly on the substance, it shows that he's trying to develop a broader sense of a concept of promoting cooperation and partnership between people who have very different views of the world, both religiously and otherwise. the message of tolerance that
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he's trying to engage as a way of turning the tide against extremism i think is important. it will take time to do this. but i think it's a necessary thing and i think he's picked the right places and ways to do that so far. >> finally, just help us get ready for what we're about to see with prime minister netanyahu. there are obviously so many sensitivities and every word matters. what should we be looking for in terms of body language and issues that will be addressed by president trump? >> well, i'm sure that both leaders will make every possible effort to demonstrate the closeness of their relationship. not just between our two countries but between the two of them. president trump wants to show that israel has a strong backer and ally in israel and prime minister netanyahu wants to show the same thing. that he has a strong personal
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relationship with the new american president. i don't think these little symbolic word differences are going to marry -- are going to matter very much at the end of the day. >> we'll see what happens. thank you for joining us with the perspective. the former ambassador of -- to israel under presidents obama and bush, ambassador cunningham, good to see you. >> thank you. >> take a check of the markets, the dow is up 87 points. the vix has come down, the s&p has gone positive for the month once again. a lot more "squawk on the street" still to come. don't go away. ♪ approaching medicare eligibility? you may think you can put off checking out your medicare options until you're sixty-five,
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good morning. i'm sue herera. here's your cnbc news update at this hour. former national security adviser michael flynn will invoke his fifth amendment right later today as he notifies the senate intelligence committee that he will not comply with the subpoena seeking documents. that's according to multiple reports. legal experts say flynn is looking for immunity. president trump's budget comes out tomorrow, but it's already getting panned by lawmakers in both parties. it would drive millions off of
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food stamps and cut benefit programs such as medicaid, federal employee pensions, welfare and farm subsidies. bill cosby arriving at a pittsburgh courthouse for jury selection in his upcoming sexual assault trial. cosby's lawyers demanding jury selection be moved to allegheny county to find jurors who have not been influenced by publicity about the comedian. a video that's gone viral. take a look at this. a sea lion looking for a snack snatches a girl from a dock on canada's west coast. the man jumps in, saves the girl. who appears to be okay. and later she walked away with an adult. the people were feeding the sea lions bread crumbs shortly before the incident. she's a lucky little girl. that's the news update. back downtown to you, carl. >> wow, that was briefly terrifying. thank you, sue herera. the markets are up after a volatile past week as you know, digesting the president's moves
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from the first foreign trip. joining us, john stoltzfus, the chief investment analyst. and the bulls have managed to string together a few good days, anthony. does that mean we can put wednesday aside? >> i think wednesday was one day. it was a little bit of a ripple and then you have to focus on the fundamentals. we got that chicago national activity index basically coming in five times stronger than the market was expecting. telling us that this economic expansion will continue as planned. >> yet, we talk about the curve constantly. twos, tens, below 100 basis points. suggesting the plan may be too aggressive. what do we do with that? >> if we look at the performance of the federal reserve over the last few years, the fed has been data dependent and sensitive in the way it acts. i'm not looking for any kind of a mistake by the fed and a
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flattening of the yield curve, that really suggests there's expectations there's a rate increase in june. after that, we might see the two year actually pull back a little bit. >> the dollar continues to collapse. we're looking at the dollar index hitting a fresh 6 1/2 month low. a lot of people thought that the weak dollar -- the loss of all the gains post election was a big tell for the stock market last week in terms of less confidence about the trump trade and the growth agenda. should we be watching that, anthony? >> absolutely. if you look at the dxi, it's down 3.5% on the year to date basis. that's good for s&p 500 corporate earnings. so much of the revenues come up from overseas. if you look at 2014 to 2016, that went up over 20% and what did -- they crushed earnings. now it's weaker. it's going to support earnings. >> i guess on the flip side, john, its could be a tell that things are not as rosy in the
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u.s. economy or the policy agenda as originally thought. >> i think in some ways it is, and i think it's good that the dollar is weaker just as anthony said. it lines us up for future quarters that could be even more enjoyable than the first quarter americas seasons. which is great, on the back of the revenue growth around 8%. but could be even better. in fact, i'd like to propose the thought that maybe the trump trade -- what happened is you had a lot of foreign investors come over here. now people are diversifying globally. even u.s. investors and that's taken the upward pressure on the dollar out and giving us relief. >> we heard sue mention flynn reportedly ready to invoke his fifth amendment rights. how much volatility is embedded in that, embedded in whatever comey tells us next month perhaps? >> i think if you look at the vix index there's nervousness out there. but it's still way below the
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average, so that tells me that that is noise and it certainly makes the markets nervous as you saw last week. but it is not noise that's going to hinder the long term viability of this bull market. >> are clients asking about that stuff? >> you know, they still do. but the big thing is that it would appear to be that related to the vix what people are thinking right now is it -- the vix is always out there. and people are looking for a catalyst which will give them an opportunity to take some profits. but at a relative basis as anthony was saying, the vix was up 44%. i think it went from 10.5 to 15.5. that's nothing -- remember 80 and 90 during the crisis. compared to what is the jazz -- as the jazz musicians used to say. >> page 1 of the times today looks at labor shortages where unemployment is 2, 3%. and how that's hampering just business. the wheels of business are hard
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to move. they can't find enough workers. does that mean we're going to get a wage number that breaks out of 2.8? >> there is no question that we're going to see wages starting to pick up. but i have done some research looking at the economic expansion compared to prior economic expansions and guess what i find, carl. we see less sensitivity of wages to tight labor markets. we now have an unemployment rate of 4.4% and yet wages haven't picked up. of course they're going to pick up, but not in the same way as in the past. there's still global competition, there's still the possibility to moving to more technology and the world in this expansion relative to others has changed but we'll definitely see higher wages. >> it's robotics, lower barriers of entry to competitors globally around the world because of the technology. all of that means a low inflationary environment essentially that could keep the economy rolling for longer. no boom, no bubble, no bust. i'll take it is what we like to say. >> see what the number comes in -- the next month.
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guys, thanks, good to see you. john and anthony. let's get some breaking news now from kayla tausche in washington. involving obamacare subsidies. >> hey, david, yes, this is going to impact the insurance industry. i have learned that the department of justice and the house of representatives today will file a joint motion to ask a judge for a further 90 day delay in a lawsuit over those payments that the white house makes each month to insurers as part of the affordable care act. this is according to four sources familiar with the matter. the delay will hope to buy 90 days for the trump administration to decide how it wants to proceed and also buy congress some time to working toward a legislative fix that will take months, though the judge does need to approve the request on behalf of both parties. the white house will continue making these payments to participating insurance companies during this time. during this 90 day additional stay that the parties are requesting. that was a key question for those businesses operating on
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the exchanges. the white house had only committed to making the monthly may payment and had been mum about how they planned to proceed thereafter. president trump said he wants to stop the payments unclear what they will do after that 90 day period or how they plan to proceed in 2018. at least for now a bit of certainty for that industry, as we await a decision and as we await a legislative solution from congress. >> thank you for breaking that news here with us. as we just saw sort of a mixed picture for the insurers in the trade. mean time, shares of ford with up 1.6%, announcing that fields is out, he'll be replaced by jim hackett from steelcase. ford shares have fallen more than 35% during fields' tenure as cove. let's bring in matt blunt, now the president of the american automotive policy council we
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represents the big three. thank you for pivoting. i know we brought you in to talk about nafta, but we have some real news in this sector. good morning. >> good morning. >> so there's a little bit of a debate going on right now, about whether fields was given a long enough shot as ceo and just how much was in or out of his control. do you have an opinion on whether this was the right move to replace him as ceo? >> well, i wouldn't want to opine on that, obviously. you have had an opportunity to hear from bill ford this morning and, you know, questions about ford's leadership would be best answered by ford motor company. obviously, it's an important company, a storied history. exports a lot of vehicles from the united states. i'm certainly excited about its future. >> i guess i'll rephrase it. how much pressure is the auto industry facing right now? how much of this is a tell of just the increasing amount of challenge coming from silicon valley, companies like goal
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getting into automotive driving and uber and lyft and from wall street who seems fed up with the fact that auto sales peaked a few months ago. >> well, there's over 7 million automotive jobs in the united states so it's really an unrivaled economic contribution that the industry makes and two out of three work for fiat chrysler, ford or general motors so it's really -- as i said unrivaled economic contribution these three companies are making. clearly, it's a very competitive market. both in the united states and globally. but they're competitive companies that i believe will thrive. >> i know you have been sending that message loud and clear to washington. what happens to fields' position on president trump's manufacturing council? he is not the first manufacturing ceo to be out of the job. in fact, we counted four of 24 of the ceos on this council that are no longer in the ceo job. does he stay on it or is hackett going to replace him?
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>> i don't know that answer. i think it's something for the white house to answer. >> but it still leads to this question, that president trump is relying on the auto sector to help revive american manufacturing jobs in this country. he references ford all the time when he talks about the better jobs picture in the united states, and yet ford is laying off workers. is there a disconnect between what is happening on the ground in detroit? >> i don't think so at all. if you think of american manufacturing, it's hard to imagine american manufacturing without the automotive sector. it's really the foundation for a lot of our industrial capacity and our ability to compete globally. so i think it makes sense for the white house to be as focused on the auts motive sector -- automotive sector as they are. all three member companies really want to have a cooperative and productive relationship with the administration and the u.s. government so that we can continue to be competitive globally. >> do you expect the
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administration to even attempt to put the brakes on the wave of automation and technology? we had a story about how robots and algorithms are suppressing wage inflation in ways we haven't seen in previous cycles or are we all in on robots and what they can do for overall productivity? >> i think you have to look at the automotive sector globally and the u.s. automotive manufacturers have become tremendously more productive over the past 25 years and will continue to do so. i think it's important to think about how we make u.s. manufacturers in particular the auto sector more competitive globally. that's important why we have a robust and wise trade policy. why we focus on how we can use technology to increase our ability to compete. >> well, we'd love to have you come back on to talk about some of the renegotiation of nafta. and other trade policies from the administration. but for now, thank you. governor matt blunt.
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coming up on "squawk alley," bill ford will be joining us today. the story of the day, deciding to replace ceo mark fields after about three years on the job. as we go to break, take a look at stocks this hour. still pretty nice gains to start of the week. the dow's up 79 points. boeing leading on the arms deal with saudi arabia. we'll talk about that and a lot more when "squawk on the street" comes right back. ready or not, here i come. ♪ anyone can dream. making it a reality is the hard part. northrop grumman command and control systems always let you see the complete picture. and we're looking for a few dreamers to join us.
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where can investors find the best opportunities right now? our traders weigh in at more "squawk on the street" coming up.
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let's get over to the cme group and check in with rick santel santelli. good morning, rick. >> good morning, carl. i want to welcome our special guest, peter chur. >> thanks for having me, rick. >> i mean this in a good way, you're my junk man. and with respect to junk, high yield should have much more
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credit risk in a simplified world than what is considered the benchmark of credit worthiness, sovereign paper. but as viewers are looking at the charts, three year, five year, 20 year of barclay's spreads they're very narrow, not only on investment grade, but high yield means that the price has rallied almost as aggressively as treasuries. why is this asset class acting like the darling? >> i think with support for the small companies, high yields should do well. and plus we have seen oil rebound significantly. so that helped the high yield market. there's a fairly strong market between high yield and oil. that bounce in oil really helped so we're sitting at okay levels. but my concern is how much upside is left versus what the downside risk is. >> well, there's two ways i would approach that from a question or a standpoint. one is if you're getting paid very small amounts for the extra
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credit risk that's an issue, "a." and "b" it seems as though the equity volatility we saw last wednesday seems to have been a one off. the vix is back down. will both of those issues maybe show investors leaving high yield in corporate and maybe going right to equities? >> i think there's been some of that going on. even last wednesday though when the stock market was down, the market performed reasonably well because it was having a good day. but a warning sign to everyone is the russell 2000 has underperformed and the correlation to some degree represents smaller american companies. so it's been weird to me that high yield has been able to perform so well. while the russell struggled this year relative to the other indiss. >> you know, you bring up great points. i want to look at them and lump them in one bucket.
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here is what's acting odd as well, the strength in the euro currency or the weakness in the dollar. it seems impervious to movement in rates and impervious to data. your final comment, is that a relationship with the overperforming nature of nature yield that we should pay attention to? >> yeah, i think when we look at the dollar weakness it's helping u.s. assets as a whole. the one thing again within that space is german bonds which you would expect to have sold off much more as the euro rose have been relatively stable. part of this is people unwinding positions they have had. as long as we stick in this relatively stable market where volatility remains low that's generally very positive for all trades including credit trades. i think high yield can do well. i still prefer leveraged loans for the safety versus the high yield bond market but there's nothing that should be causing great alarm. it would be more mild concern. >> excellent. peter, thank you so much for your comments. david, back to you.
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>> thank you, mr. santelli. let's send it over to jon fortt. we have bill ford, executive chairman of ford maybe shedding light on the ousting of mark fields, the new ceo coming in there. also a couple of ceos of genomics to talk about the future of dna sequencing and more. also, been 15 years since netflix' ipo. all that and more coming up on "squawk alley." i count on my dell small business advisor for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪ ♪
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mark fields is out, ford appointing a new ceo and president. bill ford, great grandson of henry ford, saying the new ceo will transform ford for the future. robert frank joins us now with more on the ford family and the important role it continues to play clearly at this company. robert? >> as you mentioned we still don't know exactly why and how this happened but one of the drivers we can be sure, or maybe the biggest driver of the change at ford, was the ford family. they own less than 2% of ford shares but they on 40% of the voting power and that's through a special class of super voting b shares held through a family trust. so any big shift at ford still
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goes through the ford family. now, there are two family members on the board, edsel ford ii and his cousin, william clay ford, jr. we call him bill. in a rare view into the family's financial concerns two weeks ago, bill told shareholders quote, we are as frustrated as you are by the stock price. the ford family wants the stock to go up. our net worth is tied up in this company. of course we want it to go up. now, their net worth on the other hand appears actually to be going down. the family had a net worth of around $2 billion in 2014 but today, there are no current family members on the forbes list. we are still trying to get an exact estimate of their value. as the wealth pie gets smaller, the family is now dividing it into smaller and smaller slices. the ford family is now under fifth generation so you have cousins, second cousins and a much bigger, younger and much more complicated family ownership of this company. what matters to the family along with the share price, of course, is their income.
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that comes from ford's dividends. those have been very generous, the dividend yield on ford is 5.2%. but there are questions this year about whether they continue with the level of those payouts given that sales and revenues are sort of plateauing. the family also owns the detroit lions, of course. that's run by bill ford's mother, martha, firestone ford and bill's sister has been taking a more active role in the team. but the bottom line is the ford family still depends on ford motor for their wealth. 100 years after henry ford founded the company. >> always interesting to get a look at some of those family dynasties of corporate america. robert frank, thank you. speaking of course of ford, when we come back, ford executive chairman bill ford, just mentioned, will join phil lebeau on "squawk alley." much more ahead. the overall market continues to rise. s&p up about a quarter percent. the dow up 70 points.
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welcome back to "squawk on the street." markets are higher with the
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industrials one of the top performing sectors in the s&p today. aerospace and defense stocks are leading the charge on the heels of a $110 billion deal with saudi arabia. lock heed martin is up 2%. boeing l-3, general dynamics among the biggest gainers. also the plane and auto parts supplier struck a deal ahead of its first shareholder meeting later this week and is up 1%. with that, back downtown for the start of "squawk alley." guys? >> morgan, thank you. good morning. it is 11:00 a.m. at ford headquarters in michigan, 11:00 a.m. on wall street. "squawk alley" is live.


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