tv Squawk on the Street CNBC June 26, 2017 9:00am-11:01am EDT
>> paul singer is going to be here talking big business, a lot of interesting ideas always come out of this conference and it's a remarkable thing so for now back to you guys. >> andrew, thank you very much i'm told andrew took his ifb out so we can say whatever we want about him. >> missed opportunity there. >> great to see you. be sure you join us tomorrow right now it's time for squawk on the street. ♪ >> good monday morning cramer is off today. last week of q-2 and we'll start it out with a pretty good trade. futures are higher as the dow tries avoid the five day losing streak from march. the ten year yield near the lows for the year durables are negative for the second straight month. the final trading week of the month. the quarter and the year stocks set to add this morning.
>> plus moving in the free market. >> and the prime minister of india meeting with president trump today as major ceos make their way to the capital we kick off the final trading week the first half of the year after a week where the dow and s&p did hit the highs. the fifth straight week of losses for the first time since august of 2015 we'll talk more about it later on but it puts into perspective how spoiled we have been for the first six months of '17. >> stocks up about 10% year to date total return you had bonds up as well so you didn't have to give up anything on the bond side. there's been so little down side volatility along the way so all of those things together has been this unusually quite rally and look at what happens there there's a risk that this numbing effect is taking place i don't know if you really see that, though if you look at the data, quite
rallies in the first half don't fall apart all at once and in fact you have better than average second half upside and a little bit less down side but more than you had. that's the key. >> you look at some figures and you look at years that treat you this well in the first half rarely hit you in the face the second half. >> right. >> things start to get ragged and you have more volatility i will say one of those years that was like this one was 2015 so in 2015 at the end of summer it did fall apart. you had a 15% correction high to low back then so you can have obviously some shots but right now the way conditions are holding in and all the other things you were looking for to be early warning systems you're not seeing a reason to right now be overly concerned. >> over the weekend the column that you noel says the flip flop, the leadership on energy financials the market can't seem to make up his mind, they argue that it needs to decide on
something. so remains the same. >> yeah, you would think that at some point they have to v either we're going to have a verdict on whether we have an economic acceleration whether the data is going to come through and the stocks and financials take you to the next point or are you going to stay in this mode of low rates, disinflationary technological boom and then the growth stocks working there. so i think there's a push-pull look at the bright side though and the market has managed to support itself by handing off leadership on a very short-term basis and not really having those deeper pull backs. we'll watch that with more data. move on to nestle here taken that $3.5 million stake in the largest food company it represents one and a quarter of nestles shares pushing them to improve margins and buy backs
and stocks they're calling it the biggest bet ever. >> it's a very large bet dollar wise not that he's not one of the largest players in activism as we know. one tool that they use not necessary through only one at third point that does plenty of investing outside of the arena so to speak but interesting in the approach. similar in a way that he communicates with a letter to his own shareholder instead of a letter released sent to the company. that's not the case here but i want to make a couple of important points that have been able to at least learn which is there is more urgency here i'm told by people familiar with the situation than for honey twell the last activist situation in which he was not currently engaged. honeywell is engaged in it's own view of its businesses whether a spin might be
appropriate. something that he has been behind but when it comes to nestle a focus on the loreal ownership position whether that is strategic or should be sold he thinks it should. on margins or capital structure overall. taking leverage up with the company is something that he is saying they should do and what i am toney told is the tone is some what different. there have been a series of meetings i'm also told this has been going on for awhile how long not quite sure. but it didn't just bubble up over the last couple of weeks. the meetings have been respectful they have a new ceo who i am told he is quite happy with at this point that is made clear in the letter that he sent to his own shareholders explaining the reasons behind this. so we'll see how things develop here it's interesting from the perspective i think he is
positive i'm told on the macro europe trade and in and of itself and you see this a lot with the largest activists taking a sizable stake though small percentage wise in the company in a highly liquid security that wouldn't seem to have that much down side and that seems to braps the case here and yet if you get what you want if you're lobe well it certainly is brand building. it certainly helps in terms of your overall marketing and ability to attract assets under management and even if it doesn't work toward what you're going after you may have the wind at your back regardless. >> the entire trade doesn't depend on a very specific set of actions being taken. i was struck by his comment in regard to nestle that it's rare to see a company of such high quality have these opportunities for perhaps getting margins up and it's a concession that you
don't find broken companies of this size. the market isn't cheep but you might have some leverage you might. be curious to see if this thing does tend toward a more adversari larks relationship overtime and it's not now. how that plays out or what tools he has to be able to try to get what he wants. i remember sony from a few years back it is another foreign company where he was pushing for them to get rid of sony pictures didn't get what he wanted there. >> in terms of the business profile, some what like activists in this similar vain lots of brands, maybe the margins have lagged and maybe they juan to increase their metabolism of management somehow to unlock value. >> i also do believe there's a couple of the largest activist
funds with these very large positions where they are almost trying to make themselves seem as though they are somebody that puts a stamp of approval on the strategy being employed by the company they have chosen to invest in. sort of a different approach and i know lobe he's a very competitive guy and sees himself as being one of the giants and wants to get bigger. perhaps this is another opportunity to do that i never overlook the branding opportunity that comes from talk about him and one of the largest companies in the world but it will be interesting to see there's not the consolidation that some believe needs to take place in terms of food in europe and we know there's plenty of potential u.s. based or other acquirers for certain brands nestle would be an inquirer but remember it's not that long agatha kraft heinz went after it briefly. so you have to also
interestingly i think look at it through that lenses. >> people are talking about the pressure on packaged food. >> is it more active now food, packaged goods and semi-conductors. we'll watch that closely after meeting with the top ceos over the within the indian prime minister is set to meet with the president today. seema is covering that for us today. >> good morning, prime minister modhi and president trump will meet at the white house but ahead of this meeting he met with a powerful group of ceos including jeff besos from amazon and apple's tim cook that left with a smile on his face. >> can we ask you how the meeting went >> it was fantastic. >> jamie dimon also said he was receptive and a strong leader. now in today's first face to face meeting between modi and
trump the key will be relationship building and establishing trust for years they enjoyed a strong relationship with india seen as a strategic ally and economic and defense partner and also a way to countier balance the role china has been playing in the region but in trump's presidency india hahn been part of the foreign policy discussion dominated by china, russia and mexico i'm being told by a senior indian government official that modi will be prepared to have that discussion around the trade deficit and the visa program and defense but he is coming in to learn more about how trump views india and whether he will prioritize this relationship going forwards prior to coming to washington modi has been engaging with leaders across europe and he also has talk with vladimir putin and russia if modi doesn't get that confidence from trump in today's meeting he could look elsewhere. that's why this meeting is so
important. >> busy day for you as we watch that meeting interesting, india, so many stock specific stories regarding that country, amazon, clearly tim cook. >> apple, yeah, glad he said it was fantastic. it's very true plus of course all of tech cares so much about the imfwrags issue. >> it's a very tough country to do business in, very difficult i think. i remember the experience of vodaphone just trying to get things done is hard. >> right number of languages, dialects. >> modi tried to change that but a lot of government regulations, competition regs not to mention graft. it's a huge issue there. >> the level playing field when it comes to these bilateral trading agreements india is a lot of what is brought up what a company has to do there.
>> fascinating story we don't cover enough when we come back, moving lower in the free market shares of royal caribbean up what has been working for the cruise operator. dow down 4 still riding a five week win streak a lot more from post 9 in a minute ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? why invest in average? welcome to holiday inn! ♪ ♪
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just about 15 minutes until the opening bell let's bring in our director of floor operations that joins us here happy monday to you. >> happy monday back to you. >> what's your thoughts as we're nearing the midpoint of the year >> it's been a reasonably successful first half. everybody is still hopeful that the so-called trump agenda has some life left in it that will be critical as we go into the second half the other thing that will remain important is oil it looks like it's trying to get some stability here around the 43 level if that holds that will give us a little bit better underpinning we're coming in this morning with a lot of help out of europe the ifo is good. the italian bank bailout looked
good things are looking slightly better in the british political sense. >> and the nestle deal they're going to get involved and that's going to help stocks generally in europe. >> markets have been very tolerant of this rollover in the u.s. economic data hasn't been awful but below expectations pretty consistently today as well. stocks kind of hover here. >> looks like the bond market is farmer than the fomc so we'll see how that continues going down the line. i do think that things are slowing and we got this kind of wildcard remark out of the bank. in their report they encourage the central banks to continue with this normalizing of what's going on yet they raise the possibility that the markets should be becoming potentially
down sharply this morning. morgan is at hq with details. >> good morning, they're tumbling premarket it is down significantly right now and that move that the medals manufacturer knowingly supplied to a distributor to be used despite the fact that it has warned that those panels were a fire risk for high-rise buildings. now the report cites e-mails from a sales manager that raises questions about why it supplied this type of product reuters saying panels would be used but that it was not up to the company to decide what is or isn't compliant with local building regulations now you'll recall that deadly fire which is london's worst fire in decades with 79 people dead started with a refrigerator but it quickly spread to insulation and up the building sides. now at least 11 others use combustible cladding that is
similar in nature and they're testing hundreds more buildings for similar safety risks this comes amid a risk they stepped down in april and happened until the midst of activist pressure from elliott management which is the company's top shareholder. i reached out to arconic and others for response. i'll bring all of that your way once i hear back meantime shares are down almost 7% premarket back to you. >> thank you for that. we'll see what the opening trade looks like in about ten minutes. when we come back facebook's push into hollywood. the social network said to be looking to produce original television quality content take a look at the futures more squawk on the street still to come. don't go away.
facebook is in talks about producing original tv programming. they're willing to spend up to 3 million per episode. the aim is to launch it by next summer they're considering sports to comedy to reality. going after late teenagers into the 30 year age range and then willing to look at shows that other networks might have passed on. >> it feels as if everybody with a platform feels like anybody with money can bid for the same projects out there why not have a direct pipeline and do it. it's not as if you have to build a whole apparatus but it's interesting.
every disruptive company seems to be edging toward what they were competing against originally this is not a huge move. they don't pay anything for their content. people give them their stuff they have to adapt. >> that's a lot of what the company is built on. without a doubt. having a billion people participate but it is what a time for content providers facebook isn't going to spend near the almost 7 billion that netflix will spend this year and amazon not far behind in terms of what it's willing to spend not to mention all the old line media companies as we describe them interesting they would be willing to consider other people's cast offs. >> yes apparently as well looking to release an episode at a time wouldn't necessarily be bingable content but this story out of london that they're threatening to pull ads from facebook and google because of what they say are fraudulent clicks.
julia spent the past few days there and it's more nuisanced than that but the issue keeps coming up. >> it's the issue of measurement and verifying that the video views occurred and essentially very difficult cull. i almost people like the market is telling you there's a lot of slippage in that because the cost keeps going down but it's a thorny thing and i don't think any company feels like they have the integrity around the numbers. not that it's fraud but we simply don't know. >> meanwhile, as far as google goes we might get a final decision on this eu fine out of brussels possibly by wednesday. of course discussions have been going on for months about whether or not they abuse their dominance and search as ramifications not just for the company but eu white house relations. how would the white house respond to a fine that large we'll watch that. >> it's interesting. isn't the rule like the cases are aggressive and they go on forever but the actual dollar
ams while big not big for the payer. so google is what? a billion dollars. >> wasn't that the microsoft story too? >> it was. >> what does that mean for business practices later on? >> we don't talk about any antitrust action in this country anymore but there was a time whether it was at&t or ibm, there is a history here. >> we're going to see if it starts again with companies getting big enough we'll get to the onipeng bell in fyffe minutes. don't go away. hey gary, what are you doing?
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conditions and as one precondition for more hikes so in other words the new york fed has to be the one with the eye on our markets getting too happy or pricing in a little bit too much of a positive scenario and everyone is looking at the credit markets for that. i don't think it was redder especially in light of the new data. >> few futures look good and it's a nice close for europe so far. we have that nestle news and another round of that where you have this drama free kind of folding in and failing banks into a bigger one and the market rally so the mark likes the idea at least for european banks. >> don't you feel like something is going to happen the second half of this year. >> the government says -- >> just a general saying he has never seen the six month period if you look at the data it takes you back to the 1995 which was one of these types of years and
before that i think you're looking at 1960s so yeah. often. >> the markets have been sitting at all time highs. let's get to the opening bell and get a look at the s&p at the bottom of your screen. celebrating the launch of two new exchange traded funds. the mazz dak and starbucks celebrating it's 20 25th anniversary. >> people don't remember that was one of the great growth stocks of the entire 90s and reaccelerated after that. >> speaking of places that are in the food business we continue to watch shares of whole foods reuters over the weekend said that walmart not actively considering a bid. said whole foods has not received a rival bid at all as
of friday but we continue to see it trade above 42. >> late friday we saw that walmart was not considered to make a bid it's as if they're leaving the place holder possibility out there that there is a rival bid that would get amazon to raise it's level i don't think anybody looks at $42 a share and says that's maximum value the world could pay for whole foods but on the other hand who wants a bidding war with amazon. >> you think strategically it may make sense you're only going to move forward if you want tone the company. >> sure. >> this argument that others made well it could make it more expensive for amazon, that's not a reason other companies get into a nasty fight with an overbid for another one. you don't do that. the advisers will say that's not right. you have to make sure that you can pay the highest price. >> walmart doesn't, can't imagine paying 2 million more is
going to change amazon's long-term strategic profile. >> it's not clear what walmart brings to the table that would enable them to pay the price and justify it over what amazon has been paying but it has been interesting in the week or so that we watch the stocks fill trait above. it's an option in case you do get some sort of highly unlikely but unlikely bidding war. >> meanwhile, the parlor game continues. bloomberg story today looking at the degree to which amazon would automate, where they would automa automate where the robots would take over the first bloomberg argues would be managing inventory. they could go up and down the aisle and alert employees when items are running low. >> it's not clear that amazon itself sorted that out but i do know that one of the cases that was made by some of the investors in whole foods that were not happy with management
is that their controls and operations they really didn't have a centralized way of doing a lot of things. a lot of managing a merchandising operation. they weren't there so you would think that would be the area. >> what's been fast nate as good that amazon doesn't give you any rational or explanation as to why they're buying this and then everybody comes up with them meanwhile we get to really understand from amazon the reasoning behind the deal itself not that they need help but now they have all sorts of things they can choose from with so many people writing these analysis. >> there was an opportunistic element of amazon doing this deal they didn't have this written down saying that whole foods is a quasi restaurant operator as well
with all of that stuff that you want there with delivery and the whole blue apron type business if you care to get into that. >> right arguments were made that disruptors are subsidizing the cost increasingly of grocery for years they have been subsidizing the cost of digital music and we do have a pandora story today. >> it's recode saying he's preparing to leave as the ceo. that's not a surprise. and step back years later. the question here is who is going to be the chairman because they have the right to appoint the chairman most likely going to be the ceo
of liberty and already a board member onion how many companies and chairman or the man that runs sirius so i don't think that's been decided yet. but it does appear he will be stepping out stocks come back it's funny this was the $6, $6.50 range a couple of weeks ago. big move back but nowhere near recent levels. >> so the market suggesting here with this potential move that an overall pass there. >> on the daily operations that accompany to the extent that because they like free maybe they start pulling back on the subscription service that they have been rolling out and make other decisions different than twuns they have done and maybe they could get themselves back to a level of profitability. >> pacific crest ups them today
to sector weight from under weight got some guidance out of mirkcrn earnings expected. they raise physical 17 gap to 355. rating remains out performed target goes from 32 to 40 so the bullishness and the cyclical supply chain dynamics remains. >> just the slightest wobble in these stocks if you look at a long-term chart it doesn't look like anything but then you did have a stutter step and a lot just love the general industry, you know derks hand story for years to come so we'll see if that and it's always about the direction and pricing. >> keep an eye on that but that's lifting a lot. >> it's the topper former today. >> i have been looking for a
goldman note that cut cans utilities and some are look at phone shlly a vote that we're heading for a rising rate environment. >> it's tough. utilities have been the surprise out performer for a long time. if you look at the analyst ratings utilities is the least recommended sector so it's a bond market call right now and the idea that we have got sboon the bottom end of the yield range maybe that's going to be the thing that makes the difference there. >> keep an eye on biotechs what a week they had last week as it appears the threat of pricing regulation out of washington might be disapating some what. we'll watch along with the jury selection in the federal securities fraud trial that happens today meg is watching that but for awhile there the biotech had one of the best weeks. >> you had a lot of people excited about the fact that the etf did break out. you have technical folks saying
finally a group in health care that's been a leadership area might start to participate and this is like we were talking about the market keeps going back to what hasn't worked and says okay maybe it's your turn and bio tech fell into that category last week. >> what about financials do they fall into that category? >> it's been a little while on a one day basis now and then but it's been tough. obviously still so much focus but now we have a stress test coming out how much is in price. >> how much return of capital happens soon. >> 2.13 on the ten year. it's not where people expected it would be at this point in the year there was an expectation that we would be talking about something with a three in front of it. that would be higher than it might otherwise be. >> swoer looking at about 80 bases points as the 2 versus 10 year ands been sitting there for awhile it's not telling you anything scary about the economy but it's
not helping the facts. >> what does that say? 2.is it 12 >> you're still above where you are before the election. >> finally fang is performing well apple is the best dow component and the chatter about pulling out from facebook, facebook had an all time high today let's get to bob. >> happy monday everybody. great start so we had a great start over in china up 1%, italy up 1%. european banks are all up nicely here the italian government bailed out two failing banks and there's a full state backstop essentially so if you look at some of the european banks, deutsche bank all the usual
suspects are trading to the upside over there. elsewhere the food stocks are all up taking a 1% stake in nestle. they're all on the upside. they're also trading on the upside as well here. here in the u.s. it looks like every day this year semi-conductors are leading. that's the first one there consumer discretionary have been strong and energy stocks are lagging and this is every day and we're ending the first half of the year later this week and it looks like that so if you take a look here an amazing run up about 20% overall with semi-conductors leading and health care has been strong and consumer discretionary and energy down 14%. tech had a great rally last week up about 3% on a number of different moves here so a lot of the tech exchange traded funds had strong volume in the month of june. internet, software, you can buy all of these in different
sectors in the tech sector through exchange traded funds now. the big market leader have been flat throughout the month because they had one or two down days in the early part of june but overall tech is a clear market leader. bio tech had a huge rally last week up almost 10% in just five days. so we had health care reform but we haven't been rallying at all in the energy group and we talk about the fact that the numbers will be coming down aggressively we had cuts last week and the ratings. the big energy companies out with an interesting note about the production companies saying no company wants to be the first to cut production but few of them are financially positioned to wait out a multiyear stretch of sub $50 lower for longer and they're seeing production cuts coming down the road. the streets are way ahead of all
of the analysts. we have seen most of the companies down dramatically. they're not down as much but the smaller companies like continental, oasis, all of these guys in the 2 billion to 10 or $12 billion market capital sa s capitalization down this year vmt not clear how much they'll drop notable ipo, blue apron will be here on wednesday. the concern here is the announcement from amazon about buying into whole foods and potential competition there. meal services kit. they're going to try to raise about $480 million that'ses a good sized ipo. and also secondary offering. one of the most successful ipos this year. remember canada goose. the company that does the outer ware in canada they had a great ipo they priced around $12 back in
march. so you see $20 now they'll float another 12.5 million shares in addition to what they already floated they tend to be small. the story these days is float a very small amount. on thursday we had a company float 8% of its market capitalization it's very common now to see 15% and do follow on offerings if they're successful and that's what canada goose is doing now dow is up 92 points. back to you. >> thank you for that. let's get to the bond pitts as well check in with rick santelli in chicago. good morning rick. >> good morning, carl. if you look at the global he equities in europe they're up. we talked about bank bailouts and how many rules and regulations were made across the globe not to put tax pay yes, sir on the line but in italy bond holders were spared
what's going on in fixed income i can tell you quickly two are unchanged. tens are just down two they're now down one 3rd years are down four. sounds like flattening it is. steady as she impose feds continue to remove the combination reflected there. you see we're dropping off we're dabbling with it now pretty much the same pattern of course if the government is going to orchestrate bailouts the market is accommodating even on the switched income side. i talked about the flattening curve. let's look at it hovering and 78. going back to september of 2016. 30s minus 5s now hovering around 94 this is the lowest, flattest it's been in ten years as you see on the chart starting in '07. finally the dollar index june was going to be the month
of the dollar index. look what it did today and granted the preliminary durable goods for the month of may were not good i broke that number out at 8:30. you can see we're headed to 98 carl, back to you. >> rick, thank you very much i want to check in on crude as well jackie at the energy desk. >> oil prices are higher kicking off the week with about a 13 cent increase here some people crediting the weaker dollars. others citing storms brewing in the south and others calling this by the dip. consensus continues to be that even if we go higher first we'll probably still go lower over a prolonged period of time average for a gallon of regular is down 11 cents from a month ago. for those worried that oil is going to drag the market down
there's a decoupling occurring and oil can go down while stocks can continue to rally. lower prices are good for consumers and good for companies that use oil as an input there not as bad as they once were roughly 6% now so weakness in the sector carries a little bit less weight. back to you. >> thank you for that. a court date for controversial former ceo shkreli dow up 100 points to start the day. s&p almost 2450 again. we're back in a moment (baby crying)
he was arrested in december of 2015 and charged with 8 counts of securities fraud, conspiracy to commit security fraud and wire fraud jury selection is is just getting going here at the brooklyn federal court all of these charges have nothing to do with what made him famous that was when he raised the price of a drug when he was ceo of a company all of these stem from former hedge funds he ran and biotech company he founded essentially the government is accusing him of using it as a piggy bank to pay back investors they allege he defrauded in the hedge funds. that's what the trial is going to be about. it's going to be interesting because he is such a public person he made himself that way doing things like buying the album for $2 million refusing to testify on capitol hill, taking the fifth but then calling all of the congressmen
out on twitter we'll be here inside the trial and we'll bring you any updates. he has really become the poster child for pricing controversies. back to you. >> we'll come back to that getting some headlines the supreme court today, hampton pearson has that for us. >> we're getting word on what is going to be heard during the next term. specifically one of the cases that the court has decided it will take up is the question of some of the scope of the whistleblower protections that were part of the dodd frank law. specifically they're going to take up a case this is digital realty trust essentially they had a lower court ruling they were appealing a lower court ruling about alleged misconduct by a supervisor that was never reported the case hinges on whether or not the whistleblower protection
rule required by dodd frank are lawful so again it's the first news we have got of the day of future cases being granted we of course are standing by for possible news on the fate of the trump travel ban going forward and this is the last full day of this term. there are six major decisions that we are awaiting word on as well back to you. thanks for what. when we come back a happy development for a member of the president's cabinet. squawk on the street has that in a moment
the president and the first lady were among the guests it's the third marriage for mnuchin. steve roth apparently in attendance along with some of the others that mnuchin knows from his days in the private sector. >> a lot of cross over between the hollywood wall street political world. a lot of secrecy.
>> now he's married. i don't know if that changed his approach to the job. i doubt it will. seems busy. >> she was right there. >> yes she was >> a scene steeler when he was being vetted and confirmed there's the commerce secretary from over the weekend. when we come back, this morning, a lot to come. the president is gearing up for his first ever meeting with the indian prime minister. atema modhi is watching th we kick off the final week of q-2. back in a minute
good monday morning. welcome back to squawk on the street sarah is off today a pretty good opening trade on a monday 110 on the dow oil pretty steady after the rough last couple of weeks. >> that's where our road map begin with the markets the dow up for the first time in five days. health care, tech, energy, all fron and center as wall street
kicks off the final week of the quarter. we have you covered. >> a big bet of nestle we have details. >> and just crossing the tape right now dbmw announcing new jobs for its plans in south carolina we'll hear from their chairman straight ahead a person we rarely hear from in the industry here. >> first up straight to the markets it's the final trading week of the month and stocks are set for a record run as investors look ahead to potential corporate tax reform and deregulation out of washington joining sus the senior global equity strategist. good morning to you both. >> good morning. >> scott, wrapping up the quarter here would you argue that as we head into earnings season the next couple of weeks that preannouncements were light? >> i think there has been. i think it's been light and really carl the markets looking
beyond these earnings seasons, you know, it's important to see, you want to see what's happening. the first quarter was obviously better than expected that's going to be the best of the year they get tougher as you go through. we're looking at 8% of earnings growth for the full calendar year t. market is paying attention but paying a lot more attention to what's going on down the road or anticipating what's going on down the road. you're getting positive reactions to worse than expected economic news like this capital goods order number this morning so the market is saying hey economic data hasn't been great lately that might cause the fed to back off the interest rate hike path and we like that in equities that's the story today i think. >> at the same time when the economic data comes in soft when you start to see oil do what it's doing lately for example the yield curve is flattening out. is that signaling that this expansion is getting long in the tooth and at some point equities
react to that? >> well, just the calendar will tell you it is long in the tooth but the oil problem seems to be more of a supply issue than a demand issue and that's by looking at the other indicators that are out there industrial prices broadly not much of a problem there although the price action is flattened when you look at where the spreads are in terms of corporate spreads. so i think the fading of the expectation for the faster inflation picture i think that that has given some leeway on hikes and with most of the data coming in okay that's a good cocktail for the markets. >> remind me if the s&p has blown through your year end target. >> it is and right now worried about 9 and change on our 127 number
we came in and set our target last september 2230 to 2330. our story then and story continues to be we thought we'd see the high around the middle of the year and it would be at but not too far above the range. so we have been spending time above that we're not all that far above that and our analysis still tells us we're going to see it here in the second half. >> yeah. sparked by what? >> well i think you got a couple of things going on one is valuations that i just mentioned. another is lack of physical progress in washington we haven't been expecting much this year. you might get tax cuts we hope so also fed, we're in a fed rate hike cycle that tends to be a head wind for multiples and the things that we have been talking about the most since we set our target last september was that we think the market is going to
start to be concerned about wage increases and the negative effect on corporate margins as we move through late 2017 and they're going to be concerned about 2018 so we have no productive growth. we have high margins if wages go up at all which they're starting to climb up. >> so i'm confused if the fed going to back off or not? you talk about all the other issues for reasons why the fed might back off but that sounds like a reason why they would step in. >> that's one reason why we're calling for the market to be lower is because i don't think the fed is going to back off this six hikes in two years story. the ten year yield is telling me that. >> riding above your year end? >> yeah. we were look for a 6% gain for the year and that's what we have gotten it's a moving target and there's more of a range than a target that we think in terms of and the thing we would focus on is
the momentum in the data and what we saw is pretty good momentum it's flattened out but still positive we're going to see a very good gdp print for the second quarter and if you have a longer term perspective you're not going to worry so much about the target as much as the health of the economy so for us we're happy to see an economy that's making progress and if that began to rollover that would be more concerning to us given where we are today and the other investments that are available out there. cash is still not yielding very much and bonds are not either. >> scott, today goldman cuts utilities. they say low interest rates lead to inflated utility multiples. are you saying that that for example is a precursor to rates starting to steal some of the thunder from equities? >> they most of the thund their we anticipate we are underweight
utilities. i think no recession this year no recession in 2018 but unless we get physical help from washington to push this economy ahead there's always another recession on the horizon and if we don't get physical help from washington rates are going to stay down and, you know, that recession moves in closer than what a lot of people would like to think. >> guys, we'll see what happens in the next week and in the next six months good to see you both >> thanks, carl. >> president trump getting ready to meet with indian prime minister modi for the first time in washington. seema is at the white house with more. >> prior to the arrival at the white house the prime minister will meet with secretary of state rex tillerson where the conversation will stem to around defense and military cooperation. india has been a big buyer of u.s. arms. we're hearing the indian government may express interest in buying high-tech drones to
better patrol the indian ocean where china has been elevating it's presence. now in today's meeting with trump, the first face to face meeting between the prime minister and the u.s. president modi is looking to create a special bond they have a lot in common. probusiness nationalist leaders and big users of social media. trump with 32 million followers on twitter and modi in second place. but there's a topic they don't see eye to eye on and that's immigration. the hotly contested via program that was one of the points that was discussed between leaders that attended the ceo round table yesterday including some of the biggest silicon valley tech ceos like jeff besos, tim cook, among others but the attendee list was not limited to tech
walmart's doug mcmillan were all there to discuss the challenges and the opportunities in investing in india one of the other attendees was jamie dimon and once he exited that meeting it was interesting to see he had lunch with a special guest and that was the former ceo of uber i'm not sure what they discussed. there was a lot of security around them but makes for a good caption contest. guys. >> your tweet over the weekend got a lot of attention that's for sure. seema covering that in washington today let's get over to dominic and get a quick market here. >> shares up by about 17% on heavier average volume in the early morning hours of trading this on bloomberg headlines saying avis and alphabet entered into an agreement for a
self-driving car fleet management system. we are in the process of reaching out for come men but for right now the market move is intense. 17% right now to the upside. back over to you >> that's a big move. >> and also even a move or two your business traveller now goes and kept saying no, no, no but we watched what happened. >> i'm trying to think of what a structure this deal would be to help avis. you're going to do what with alphabet to bring in more revenue? >> you have an enormous group of customers right. >> yeah. >> which you can bring to bear for the future google service that would be brought. >> and so those people would instead of getting an uber when they get off the plane or using an uber to go around town would rent a self-driving avis car
>> who knows we don't know where this is all going to evolve in terms of the subscription service that is national where ever you go or different tiers. i can imagine lots of things i want my car any time, anywhere i'm willing to pay $1,000 a month for it or i occasionally need a car. >> self-driving car on retainer. >> it's lots of different things. >> investors are pleased they're thinking about it. >> or conceding. >> speaking of the car business when we come back bmw making a big announcement on jobs and an investment in it's largest plant in the world right here in the united states. phil talked to the chairman. he will join us next plus facebook might be getting into the tv content business. we'll get to details on that later on, 60% in 12 months
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for bmw. again, let's recap what this investment is. $600 million will be invested between now and 2021 another 1,000 jobs will be added. more than 10,000 workers at this plant here the capacity at this plant is 450,000 vehicles last year they built 411,000 vehicles this investment will go into retooling, a few other things here at the plant will allow them to up that production just a little bit and get closer to the capacity of 450,000. when i had a chance to talk with the chairman of bmw he made it clear that this is investment that they planned before donald trump was elected president but i still asked him are you worried about the threats that have been coming from the president reapproximate guarding a possible tariff on all imported vehicles? here's what he had to say. >> no i'm not worried. we explained when i was in
washington and we had the opportunity to talk about our business here in spartanburg i could explain and the president acknowledged clearly how successful our operation is here in south carolina. that we created around about 9,000 jobs now 10,000 we are 70,000 employees. >> this is where all of the bmw cross over into suvs are built not only that supply here in the united states but they get shipped around the world but in terms of what is built in the u.s. and sold in the u.s. in terms of total sales about a third of bmw vehicles are built here in the u.s. just under 30% built here in the u.s. and sold here the remainder are imported from germany, from south africa and the other locations and guys remember bmw is building a plant in mexico that's scheduled to open in 2019 i asked harold krueger is there any sense of whether or not they
might change those plans given the possibility of a change in nafta and he said no, we're still building it. back to you. >> phil, thank you so much congressional budget office set to release it's score for the senate health care bill possibly as soon as today. >> the two big questions are the bill's impact on the number of uninsured and on premium costs particularly for older americans. remember under the house version 23 million more people would be uninsured a decade from now compared to current law. premiums would also go up for those over the age of 65 president trump said he wants the senate bill to have more heart and this morning he put blame on democrats tweeting that they are obstructionists and saying all they do is delay and complain but actually several republicans want to delay the senate vote on the bill to give themselves more time to reach a deal five senators are opposed to this bill and nbc puts at least
nine on the fence. that includes rob portman that was on cnbc earlier this morning. >> my concern lies more in this area of low income americans ensuring they can have access to health care. particularly with the opioid crisis we have so much of that is paid for by medicaid. >> senate majority leader mitch mcconnell wants a decision before law makers leave at the end of the week but the senator is saying the real deadline isn't until august 1st. >> never mind what's in the content. thanks joining us is the president of the committee for responsible federal budget good to have you here. >> thank you for having me. >> so your goal is to approve the status of the federal budget, reduce the deficit, balance budges et cetera do you take a philosophical position on health care and health insurance because the way you solve the issue with the
deficit and spending really depends on your philosophical viewpoint about how health care should be enacted at all in this country. >> that's a perfect question because a agree with you that your take on the obamacare and replacement, so much reflects varying points of view on the role of government there's those that want health insurance to be subsidized more for more people and provide more coverage there's those on the right, those on the left, those on the right that prefer to have more freedom, lower taxes and less coverage as a result of that >> if your primary goal is to reduce the deficit and federal spending, eliminate government from as much as possible. >> your question gets at the core because there's a whole other perspective which is health care cost growth is the biggest driver of our national
debt at record levels right now. putting pressure into the budget so much of this discussion run away from the big trade offs for that reason the policies have in many ways reflected the politics of this discussion. we haven't talked about critical things like medicare reform which is is the biggest program of course. not part of this at all. the tax breaks that subsidize insurance and drive up costs and does bring down cost to consumers and takes that pressure off of the budget as we go hurdling toward unprecedented
levels of debt. >> so i interrupted you earlier when you were just about to say from my perspective. >> well, yeah, my perspective is that you can't ignore the overall effects on the budget and this is kind of, so much of our debate is these days this is everybody pretending we can have everything for free and there's so many things that we want to be willing to cover but if it's going to cover a variety of different things for people we have to pay for that in taxes. it doesn't make health care cheaper just to promise people something. somebody has to pay for that in taxes. one of the problems that i would say that exists in this current bill is they do scale back a lot of the health care benefits but the savings go for massive tax cuts and if we want to do savings in health care the republican budget relied on savings of $2 trillion from repealing obamacare. now they're going to get about
$2 billion that's a massive scaling back of your ambitions and how are they going to fill in that gap when it comes to their overall budget. >> slightly removed. has the committee taken a stance on ultra long bond structures and whether or not you'd be in favor of that? >> we haven't taken a stance on that but we have looked into that and basically just like with so many other areas of policy there's no free lunch so if we expand and start issuing say 100 year vehicles that might make sense but it also has effect on liquidity of the markets and my guess is those in treasury that study this and are always working to maximize our borrowing structure if there were massive savings to be found we would have already done it. so as usual i don't tend to believe it's the answers that sound easy really provide as much as we're going to need. we have to make policy choices on taxes, entighttlements and nobody wants to talk about
policy choices. >> explain your concerns about liquidity when it comes to a 50 or 100 year bond. >> if your turning over your treasuries less often so there maybe higher demand. this something i assume the experts weighed the cost and benefits of length and cost and demand and figured out what the right structure is. >> we have a treasury secretary that used to trade them. >> that's true. >> thanks maya. >> thank you so much. >> getting an update on that avis-google story. more from san francisco. good morning. >> hey, good morning guys and yes we can confirm that alphabet's self-driving car unit waymo entered a partnership to manage it's fleet of aon the mou - autonomous vehicles. it will support the self-driving cars in phoenix arizona. remember there are many m
partnerships in this space they recently announced its adding hundreds of chrysler pacifica minivans. also interesting to note they own zip car. over many of them in large urban centers and avis budget group the stock jumping nearly 13% guys. >> we'll keep our eye on that. when we return facebook might be getting into producing scripting tv quality content in the latest season of our digital binge series we spoke to frank rich about the competitiveness in the content space. >> how do you do creative work in entertainment in general at a time when people have so many options and can watch anything they want at any given moment. all of these things we used to talk about is all gone so this whole culture is being reshaped.
it's possible there will be a third way that's not hbo or netflix model that we have emerge we don't know what over the long-term snapchat means for things we do. >> whether it's facebook or apple. >> so it's all up in the air it's a very scary time in some ways but it's also very exciting time >> you can catch the new season of binge on cnbc.com/binge also apple tv youtube and hulu. we'll be right back. ♪ a baby's skin is never more delicate. ♪ what do hospitals use to wash and protect it? ♪ johnson's® the number 1 choices in hospitals.
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the 40 million share stake represents one and a quarter per cent of overall shares it's having a very positive impact on the stock today in a letter to his own holders, that is the investors in his fund he lays out a case that he believes is a positive one for nestle and one the company has yet to focus on implementing.
i am told by people familiar with the situation that the two, that lobe and management at nestle had a series of meetings over the last few weeks if not perhaps months since he has built this position and that it is more pointed perhaps than has been the negotiations or conversations that have taken place in another targeted company being honeywell. none of this is to say that it is hostile in anyway recently he's been more friendly in his approach and that's to at least a certain extent part of the case here. he is asking or discussing the view that nestle could unrealize potential or has unrealized potential for margin improvement and should be focused there. and could add more debit to the company and therefore optimize it's capital truck stur
reshaping of portfolio products and perhaps most importantly but certainly among other things he's talking about sell that 23% stake in loreal which is quite significant. we'll see where this goes at this point lobe himself i'm told has a generally positive view on the macro story. there's the things we're just talking about that he is focused on for them. he has a generally macro view of europe so given the highly liquid position at an enormous company he thinks europe is moving in the right direction michelle you would imagine there's not that much down side for him here and also as i pointed out previously it does always help in the brand building some of the activists like to do. >> it's a big company. i wonder how much we achieve. >> we have seen this often times. bill ackman previously as well it does sometimes move the
needle. >> yeah. >> meanwhile getting headlines on the supreme court and white house travel ban let's get to hampton pierce is on in washington. >> the u.s. supreme court has agreed to hear the appeals of rulings blocking the travel ban on six muslim majority nations now we don't have a date as to when that hearing will take place. they also say barring enforcement we grant the governments applications to stay those injunctions to the extent that the injunctions prevent enforcement with respect to foreign nationals that lack any bone identified relationship with a person or by sbientity o the united states. we leave those with respect to respontaneous ten respondents and those situated in the opinion the supreme court will take up the trump challenges to enforcement of the travel ban. we'll keep digging for a little
more information and obviously update and get back to you shortly. >> hampton, thank you for very you much for that. the supreme court will hear arguments for the ban in october and is lifting the injunction, most of the injunction until then he joins us to talk about what is already considered to be a big week or final week for the court before they go into their recess look at headlines that there were partial decents on the move what else can you tell snus we don't have any reaction from the trump white house but we'll get that as soon as they offer it to us but the supreme court is granting trump emergency request allowing parts of the refugee ban to go into effect so that would be seen here as at least a partial victory. this white house has been ham strung during the course of the year by rulings from lower courts that looked at the president's rhetoric on the campaign trail about a muslim
ban saying that rhetoric can be used as part of the analysis of whether this ban is constitutional or not. we'll see whether the supreme court in the months to come whenever they do make the final ruling looks at it the same way. this is a white house that's been frustrated by the court we'll see what their official reaction is and they may see this as a partial victory that they'll get their day in court. >> they're certainly going to declare some kind of victory at this point the question is how quickly do we see enforcement going good-byes into place now that the supreme court has said until they actually hear the case they could allow for a limited part to start taking place. does it happen overnight at airports >> we'll see to the extent to which the executive branch is ready to pounce on this and where the court draws the line of cha pieces they're able to
enforce or not we'll get more detail as we get more aal justice of this ruling but at some point the federal government is going to be able to take some steps whether they can take those today or not i don't know the answer to that. >> always important to point out as well that the initial travel ban was instituted with the idea of allowing a time frame for homeland security to revamp or revisit our visa policies as regards certain countries and come up with a new plan. of course six months now passed. no word at all on that plan which apparently they were still going to be going ahead with in terms of formulating but may not have been able to as a result of the ban not being able to take place. never been made clear. >> the point you're making the original idea was it was a temporary ban until they came up with a new set of structures to think about it. >> that's right. >> finally thank you. if we do get a health care vote this week there's speculation
about whether or not justice kennedy would announce a retirement this week could be consequential week for the white house. >> you don't need 60 votes no anymore which means you can get a much more conservative person on the bench now you only need 51. >> absolutely. >> when we come back, the chairman and ceo of royal caribbean is with us on set. companstk y ocis up 36% this year squawk on the street will be right back
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>> we have reached an agreement with the conservative party on support for government in parliament this agreement will operate to deliver a stable government in the united kingdoms national interest at this vital time. >> japanese air bag maker takata filed for bankruptcy protection overwhelmed by lawsuits and recall costs related to its air bag inflators new video this morning of the near fatal fall at six flags amusement park in upstate new york that occurred over the weekend abystander capturing a 14-year-old girl dangling more than 20 feet above ground but a crowd bathered below her and she fell into their arms she is in stable condition at a local hospital we'll keep you posted and see how she does that's the news update i'll send it back to you.
>> thank you very much royal caribbean cruises the stock has been surging up more than 36% this year susan good to have you. >> good to be here richard let's get quick reaction to the supreme court willing to hear parts of the travel ban do you think that impacts visitor sentiment? >> i just heard it as i was walking into the booth but no i think for our business it's been booming anyhow and so we don't expect that to have much of an im of course in the travel business you don't like any travel ban. one of our tag line is sailing beyond boarders. has been for a long time so for us a travel ban is not a good thing but we haven't seen any impact. >> talk of a travel ban and then terrorism events in northern europe where a lot of your itineraries originate.
i'm wondering if you think you've seen impact so far? >> fortunately as terrible as it is people understand these things are isolated events and cruise ships have really good opportunity to be a little more protected from some of them so no we have not felt any significant -- >> you haven't seen bookings go down >> on the contrary we're experiencing the best year as long as i can remember. bookings volumes is up booking pricing s'is up. people are seeing the value our cruises have and they're flocking to us. >> when i see the changes or lack of them under the trump administration when it comes to cuba policy it seemed the new policy would almost help your company because it's going to be tougher to get on a plane and go but still easy to get on a cruise and go to cuba. >> certainty is better than none cuba has been good for us and
change versus no negative effect i would much rather understand exactly what they're doing and that would help us but as interesting as cuba is in the long-term it's really a trivial part of our business today. >> you fought so hard for it all the tourist companies fought so hard for it why? >> we do see cuba as being a wonderful destination for americans. a lot of people will want to go there and over time lit grow but it's still small and likely to remain small for awhile. >> so much attention on the bells and whistles where are we on ship innovation. can much more be done in terms of bringing activities and things to the upper deck or below? >> we just had tremendous things that brings on that question and my experience is we just
started. as much as change has been as spectacular as the new ships are and as exciting are the innovations we have so much more to come. we have symphony of the seas coming out which will be the world's largest crew ship and will blow everybody away and then we have celebrity edge coming and we have already started to reveal those features and it's that that everybody is talking about. it's amazing to see the innovation our people have. >> susan pointed out many times the actual very low penetration rate of americans going on cruises. there seems to be a lot of growth potential what's the hurdle to getting people to get on a cruise for the first time is it this idea of why want to be stuck on a boat with all of these other people >> it's funny because that this has been the question for 30 years. it's growing and continued to fwroe and done well in the
states what's really growing is our foreign cruisers europeans are taking cruises at a third of the rate of u.s. people and that's growing even more kbquickly. in china we're growing quickly. >> but reduction in china in the last quarter and this year so maybe china isn't the great hope for cruising as some had expected. >> no i think china is terrific for us it's been growing at 30, 40, 50% so for one year we have a little bit of a slow down >> carnival surprised the market and disappointed the market by forecasting lower revenue yields for the final three months of this year. what does that say for the broader cruising sector? >> we're looking at a terrific year and terrific fourth
quarter. we had the best fourth quarter in our history and we're looking to do better this year so we're not seeing any signs of a problem. what's really happened is we're doing so much of a better job with our branding and our performance, our crew, our satisfaction rates have never been is high from our employees and that's driven tremendous ratings from our guests and toward our double double program. >> how much of a tail wind after the first half we had this year? >> terrific. you know, now we're very proud of our ability to cut back on our energy consumption we worked hard at that but the price of oil helps us. it's a boom to the bottom line it's been more than offset by foreign exchange losses.
you have to take the good and bad. we say our job is to perform come what the gives us. >> we're not in the oil business or bankers we're going to hedge our bets and do it strategically so we hedge whether the price of oil seems high or low and that's served us well. >> does that mean you hedged so fully you can't capitalize on the decline in price are you paying $50 instead of where it's gone to >> so our hedge is 50% rolling forward. and the result is we get benefits going forward if it goes down we protect ourselves and we bring it to an area that we can afford to work with >> we have to get all of these guys on a cruise. >> we need to get you to take
our cruise everybody that does it loves it and that's why we're doing so well. >> thank you nice to see you. >> meet you at the port of call. >> thank you, susan. when we come back take a quick look at stocks as we go to break. dow has come off significantly squawk on the street continues in a moment.
italian banks getting bailed out. not going through the ecb procedures for liquidation so brings me to the point, order ri liquidation authority right now is under review. house financial services committee, the chairman representative wants to get rid of it and just throw it in normal bankruptcy. do you think that's a good idea bill >> rick, i think that would be a very, very serious mistake the -- i didn't like almost anything about dodd frank but the improvements that dodd frank made in big banks supervision and the handling of potential failures of wig banbig banks in the liquidation and recovery plans when you're sick those are the biggest improvements in bank regulation in the last 50 years in my
opinion. and i really wanted those authorities when i was at the fdic and i'm so glad they have them now. >> now when i consider some of the issues, i know that elizabeth warren, senator warren feels very strongly about. this one of the issues is the living wills do you think these institutions have done a good job to put us in a place where we can really decide if this is the right way to see it certainly seems to me that the whole issue of designating a bank systemically important has some flaws to it, does it not? >> well, i think there are some flaws, perhaps, in regarding institutions as systemically important and labelling them that publicly. but i do think that the living will process has been a huge improvement in bank supervision. and, you know, you just -- when i was at the fdic, i handled the
failure of continental illinois. that was the seventh largest bank at the time and we knew absolutely nothing about it. and so it was almost impossible to hand will couldn't nentinent orderly way. we had to devise our own ways on the run. and there just no way to conduct bank supervision and it's no way to handle failures you really to know what's going on i've been urging processes like the living will ever since continental illinois i realize what we didn't have and what we needed i'm really happy they got. that i hope they don't give it up. >> so funny you mentioned that, the chicago america an tile exchange in the early 80s had a cd contract. en that contract died because of continental banks issues i was trading that contract at the time a very good point. there is always two sides over to issue bill, thank you for your thoughts david faber, back to you >> okay. thank you very much, mr.
santelli let's send it over to jon fort who gives us a great look at what is coming up on "squawk alley. >> today we have big news in the cloud. oracle specifically. you're going to hear it first on cnbc also, a bombshell on the vc world. story of harassment, a resignation, we'll have the report and information who bkero that that's coming up on "squawk alley. ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions, by sensing cyber-attacks in near real time and automatically deploying countermeasures. keeping the world of business connected and protected. that's the power of and. i put everything into my business. and i had all these points from my chase ink card. so i bought ingredients, utensils, even made custom donut cutters.
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pharma bro, meg terrell is outside the courthouse and joins us with all the excitement that is yet to come meg? >> hey, david. jury selection is just starting here in the trial of martin stkreli. the judge telling jurors it's okay in a case to have media attention around them to have opinions about the case as long as the opinions don't mean they can't decide fairly about the charges here in the case when she asked the prospective jurors to raise their hand if they were worried they couldn't be fair, nine out of 40 raised their hand said they worry they might not be tibl be fair. this is sort of a unique case for that reason. let's recap. martin skreli arrived here this
morning. he's facing eight charges of securities fraud, conspiracy to commit wire fraud. he has pleaded not guilty to all of those charges he's, of course, stemmed from the prior hedge funds and prior biotechnology company that he founded called renter fin. the government is alleging he used that biotech company as a piggy bank to pay back investors. they allege he froauded in those funds. he really came to fame in the summer of 2015 when he raised the price of an anti-pair sidic drug by 1,000% that depressed biotech stocks as hillary clinton started tweeting specifically about martin skhkreli we'll be here all day to bring you any more news. back to you. >> yeah, a trial with ate love interest behind it, thank you, meg. when we come back, more on the supreme court's decision to review trump's travel ban. li rorfr t wteou straight ahead [vo] when it comes to investing,
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stronger start securities and telecom the best performing sectors financials also in the green bank stocks in particular higher after least in part the italian government reaching a deal that was involving two regional banks. the banks feeling the mini ripple he vekts. the big banks have been underperformers so far this year that does it for this hour of "squawk on the street. let's send it back downtown for start of "squawk alley." >> thank you very much good monday morning. 8:00 a.m. at facebook headquarters in california 11:00 a.m. on wall street. "squawk alley" is live