Transcripts For CNBC Squawk On The Street 20240622

48. Road map begins with global head winds. U. S. Futures taking a hit as chinas market turmOil Continues. Seeing a little relief so far today and now investors turn their eye to the fed whose meeting kicks off. Big names this morning include ford, dupont, and ups. Merck reporting some mixed results this morning. First up futures rising as the s p looks to avoid its first sixsession losing streak in three years. Another decline in china. Shanghai down after an 8. 5 slide. Jim, you tweeted this morning the government took out some bad longs in china overnight. What does that mean . Im watch where the government is playing this and believe me the government is the natural buyer in this situation. They get the market come in bad. Then they let the market drop about 4 and futures were down. Then they just jammed it up plus one. Then the sellers came in and they stabilized it. Its kind of a victory for the bulls because it didnt close down. A typical collection and now theyre stabilizing it. You catch the shorts looking the wrong way and get the longs thinking maybe i can get out of some situations. I continue to believe that in this great bear market the government will stabilize the rate of decline. We are china. Its like we are penn state. We are china. Lets not confuse things. The Chinese Government is a very good trading organization. Think history, chinas government has been good traders, whether its for iron oar or copper. Theyre putting their skills to work to work on the chinese market. I cant tell if youre sarcastic or serious. I am serious. Ive stopped sleeping entirely because sleeping makes no sense because were china. But you know these experiments add badly. But slowly. Youre saying this is nothing new for them. One school of thought is theyre new to capitalism and open cap 258 markets. They screwed up and now theyre playing catchup. When you try that down pocket of 7 to 8 , thats to kind of say we cant keep it up forever but we will stabilize it a little bit lower and then take it up a little bit. I think they probably want to take it up tonight, maybe a 1. 5 tonight and then let it come in a little. They will manipulate think thing for months and well have to deal with this for months. This is bigger than greece. When i say im staying up i wake up every hour to say what are they doing . The government is making a stand here. Im not being facetious. You think real buyers are coming in . You they i dont. Thats the reason i felt it was more important than greece when it was important, kind of. You know where it all ends or the impact overall and the chinese economy ends up being the key. Bridge water was last week pointing out the fact that 67 of those buying stocks had less than a High School Education and were doing so on margins. What does this mean for psychology was a key question some for asking but for an export driven economy, the question is still is it going to make that big of a difference in terms of what china buys . They got 1. 2 trillion in treasuries. Thats a lot of fire power. If they want that market to go down, maybe they want it flat. The regulars is up about 20. They want that thing flat. Again, what i am saying is that the chinese have even if you read novels about how they trade the pickle market its called pickling. They pickle. They pickle tin. They pickle ierpron. And they screwed up. There was too much enthusiasm. A lot of their State Government banks went in. That was a bad call. Theyre trying to clean up the market. Dont count them out to be able to have the air come out of this market in kind of a 2000 nasdaq way. It wasnt great but it didnt destroy the economy. Thats a good point. It destroyed a generation of investors who then went. That will happen here. But it didnt theyre looking at our market closely, i think, 2000, theyre saying listen a lot of people are going to lose money but were not going to let this destroy our economy. The economy is terrible. Everyone still says its growing. Who knows . The numbers that come out of china, are they the central committee. Right. Im not kidding about any of this. I think this thing has become one of the giant Theatrical Productions of our time the chinese economic numbers. The piece in the Washington Post today saying the reason they have trouble with open Capital Markets is the idea is all investors get treated the name and this notion of of you may win or lose is difficult to get their heads around. Theyre trying to readjust. If you want to know about the readjustment, you have to think about Johnnie Walker blue going down to Johnnie Walker red. There are stages between blue and red. Ive never been a scotch drinker but yeah. Red, black, green. Theyre trying to walk it down to Johnnie Walker red. I never once thought it tasted like terpen tine. Are there scotch drinkers in china . Its like the idea of the big watches, its out. Now its pops watches. They are literally trying to bring this thing down in a responsible way, and its just difficult to figure out what theyre doing other than the fact that its bringing it down. You see the iron oar . Yeah. Your friends, second biggest quarter of iron oar ever. My friends, yes, all of them. Even in his worst moments jerry jerry vail had bigger hits. We have strength in north america helping ford beat the street. Dupont in line company lowering and ups is exceeding forecasts led by growth in international. Well talk to the ceo in the next hour. Intraeurope was up 8. 5 even as u. S. Deliveries are up 1. 8. Theyre saying europe is helping a lot. Ford was impressive. Ups was impressive. Ingersoll not impressive. Dupont is not impressive. For is the stock price. Its got a couple little stops inbetween but mid 70s to mid 50s is what were talking about. And interesting trian is holding on. Some thought perhaps having lost the vote to get on the board in any way, they would have been a seller. That was the threat but they didnt do it. And one has to imagine, jim, that theyre going to mount another proxy fight. Have to. Its a while away but if im dupont, im thinking about it. I doubt it but maybe they reach out and do something proactively instead of going through it again. But staying on as a shareholder means theyll have to do it again. The lines of business is weaker. The chemical has been a horrible stand out. Norfolk southern could bounce. Dupont how can nelson peltz after what he said at alpha not come back. This is that peltz told you a couple of weeks ago. Dupont was a significant loss because you did a lot of work. The stock ran up. Its been a significant loss for shareholders. Stock has gone from 80 when i was on your show march 12th. It was my wifes birthday that day, and the stock was 59 yesterday. But we havent sold our shares. Thats not our style. And were going to wait and watch and see what management and the board will do from here forward. And Ellen Coleman was in my office last week and i said to her, the second least favorite thing that id like to do is have another proxy fight. But the first least favorite thing id like to do is to see dupont next year at this price. People are asking you on twitter, does ellen go on the wall of shame and whether we all need to apologize for peltz for accusing him of targeting women. I never thought he targeted women. He made a pretty good case that you know. We asked him about that and he said it had never to do, it was pure kwoinscoincidence. The record is not bad. And trian is up a slight bit on their position but very little. Obviously its an underperformer. The wall of shame you have to knock yourself out to get on there. You have to work hard. This is an not an easy thing. The hofers its easier to get on the hof than the hos. It requires the amount of work youre seeing from caterpillar. That guy, i know hes trying to get in. Hes doing his best. No . I think youre right. Nice fella. In this case it is a final point here the idea that they might launch another proxy fight would be a ways out is probably enough to get dupont to say come on. They can invite everybody on board at this point. Anybody whos related. Nelson mentioned march 12th was his wife. They could come on. On ford north american record profit. The outlook stays flat even as they take china down on industry sales. Jpm, transition year to break out year. I thought mark fields did a good job. I saw a lot i liked. I thought europe was good. I dont want to call it a breakout quarter in the autos. When you do that you end up with egg on your face. This is marks best quarter, and that stock has done absolutely nothing. Maybe theres a chance it can go to the high 15s from the 14s. July auto sales may see 17 million rate again. That would be the first three months in a row weve gotten that since 2000. The auto sales, its the brightest brightest part of the economy other than than investing in your home. We had one that was as good of fortune brands. Im looking for stanley to have a good report Stanley Black and decker. Thats a great thesis thats working in a market where its very narrow. Yeah. Well see how ford does today. When we come back merck boosting on its cancer and diabetes drug. Later on Susan Cameron, the cigarette maker posting an earnings beat two for one stocks split. The s p clinging to a 4point gain for the month of july even as the dow has gone negative for the month. Squawk on the street will be back in a moment. My name is ronda derosa and im a gas superintendent for pg e. As a gas superintendent, im responsible for the safety of the public and our employees. Pg e is using a lot of new technology to improve the safety and reliability of our pipelines. My wife and i live in the bay area with our two kids. This is where i choose to raise my family. I want it to be as safe as it can be for our customers for my family, for my friends. Thats what drives me. Pg e is here to help our customers. Were here to deliver power, were here to deliver it safely and reliably. Together, were building a better california. A long losing streak here. Dow futures up 76 points on a day with a lot of earnings. Twoday fed meetings. When we come back the merck ceo will talk to us. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Here at td ameritrade, they work hard. Wow, that was random. Random . No its all about understanding patterns like the mail guy at 3 12 every day or jerry, getting dumped every third tuesday. This happens every third tuesday. We have Pattern Recognition Technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. For all the confidence you need. Td ameritrade. You got this. Stronger dollar hurting sales at merck. The drug maker reporting earnings which topped estimates by a nickel. The company also reporting an expansion of the cancer drug pipeline. Megs with us this morning joined by the ceo ken frazier. Good morning. And good morning, ken. Thank you for joining us. Always a pleasure mega. I want to ask you about your big immune know therapy drug you said its the most prescribed drug in melanoma. Tell us about how you anticipate competing with Bristol Meyer in lung cancer. Were advancing the promising pipeline across the board. But this drug is progressing ahead of expectations in advanced melanoma narcotic. As we move into lung the key will be how we can work with the fda to present the data that we already have which we believe is impressive in a way that helps physicians and patients understand the drug and how kk best with used. Were very excited about the opportunity to bring the drug to patients with noncell lung cancer. All i can say is were well prepared. Folks are operating some data on how well that drug improves overall survivor helps people with lung cancer live longer. When do you anticipate that data to come out . I cant give a date for that but i can say the information we have now with respect to this drug pdl one positive people we see a Response Rate of over 50 and thats incredible. That presages the kind of outcome data well get when it matures. You mentioned an update about your Hepatitis C Program saying you expect an fda decision early next year. How are you looking at the market. Gilead is there. Theyre curing a lot of patients. Is there still room for you to come in and make big sales . Absolutely. We think this is a market thats going to be a strong market for many years to come and what we hear from outsiders, patients and groups and others is that people are very excited about the particular drug. As you know this is a drug thats very useful in a sub population for people who have chronic renal insufficiency. It provides unique therapeutic value that none of the current products do. Sir j, thank you for calling in. What i thought was interesting, theyve got a fabulous antidepression antidepression, schizophrenia drug. Where are we on that what would be kind of a miracle drug . Our focus right now are on the new opportunities coming through. For example, in the area of neuroscience, the base inhibitor for alzheimers is coming up earlier than that and were focussed on our late phase pipeline. Alzheimers is a huge area. Thats a great question. I thought biogen was too promotional with aslzheimers. Youve been reserved about the situation. Duke do you think youre ahead of these guys and merck has not been a promotional company. We have good data that says inhibition is linked to the development of the plaque thats related to the alzheimers disease. Weve always been a company that followed the science and until we have data we think the responsible way to deal with this particularly given the fact that patients are waiting for a breakthrough in this area is to say what we know based on the data and we are very excited by the opportunity, but thats just not our style to try to talk about it before we know what were talking about. Mr. Phraser, david faber. A broader question from me. I know youre no strange tore watching the consolidation taking place amongst the hmos or the pharmacy benefits managers. Is it your thought that there will be even more pressure on those who develop the drugs to keep the prices as low as possible . Certainly, as you have consolidation of buyers youll have more pricing pressure but weve anticipated that. Look, we do business around the world in single payer markets like in europe. Weve learned its important to bring products that bring unique value and meet unmet medical needs and thats what merck has been good at. Weve been great at first in class medicines that make a huge difference. You can see that right now with drugs like hepatitis c, the program that we just talked about in alzheimers. At the end of the day, i think were well positioned to succeed in that kind of world. Were hearing more and more an outcry over the high cost of drugs, particularly cancer drugs and as key truda will be combine with other cancer drugs, do we need to change our pricing paradigm to pay for this . Pricing is a big issue. I think right now we are focussed on the therapy and were seeing incredible results and i think theres no question from a payer standpoint or patient standpoint when you look at the benefit this provides and the other costs that are avoided with people who are being treated well and are responding, theres no question in my mind that key true is valuable and frankly, while theres been some stuff in the newspaper, its well accepted and thats why you see it launch ahead of expectations. Thats why we have leading market share in this category that were participating in now. Thank you for joining us. Its always a pleasure. And at merck, were looking forward to the great scientific breakthroughs we know are coming over the next through years. Thank you. Thank you both. Well get cramers mad dash and count down to the opening bell . Just a minute. Just a minute. Just a minute. I just a minute. In just a minute. Just a minute. Just a minute. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . A little more than a minute from the opening bell. Lets squeeze in a mad dash here. David, i think i found the worst quarter of the year and it is baidu. From now on its called buy dont. They had an 81 increase in expenses. Theyre doing this john line to offline business. Theyre doing a grub hub business. Youre going up against amazon. Theyre doing streaming and Deutsche Bank takes it by the hold. Theyre painting a lot of their hopes on a show called the running man. My stepson is fluent in chinese and he says this is a game show where they set up some six or so men on the starting blind date with women and the person becomes their partner for all these weird competitions. They push each other out of rice bowls. And the final objective is to name a queen or king. Thats the number one show. Theyre pinning their hopes on the running man. All you need to know. Theres the opening bell. The s p at the bottom. And at the big board, kevin oh leery. Hes going to join us later. A huge flag of kevin outside the nyc. That was a little arresting to walk into this morning. Over at the nasdaq its bed bath and beyond doing the honors. A lot of people arguing that ford should be doing better than it is and that even gm and larryear faded. Ups, theres a big short base because people thought they would screw up and they didnt. Theres no short base in ford. The stocks that are going up like fang these are stocks people are betting against. I was in maine and i picked up the paper and there you were. I said i know fang. I know that and i even know the reference to soupy sales. Ive moved on now. And now there is a thought that unless a company has a considerable short moment here where a lot of people are betting against it its hard to get it higher. Thats the sign of a bad market not a good one, but if the fed says were on hold because of china, a lot of buyers are going to come out of the woodwork. Masco is the number one gainer on a list you put out last night in stocks you feel comfortable this. They are part of the investment thesis that home depot profounded on the last call. When you feel your home is going up in value, you fix your cabinets. Kitchen and bath does better. This is all the investment. Now, what they say, a great cfo, she says on the Conference Call that if people think their house is losing in value, they dont invest. If its gaining in value, you make investment. Thats whats happening right now. Dr horton makes me feel the same way. We crave investable thee tis. New orders up 22. Bag log up 15. There were no flies. Remember leonarda nard put in a good number two. Norfolk southern shows you what happens when you have a short base. That quarter was just horrendous. Every line was bad but everyone expected it so it wasnt super horrendous. Remember that . I do. It wasnt like that. It wasnt like scoobydoo either. What is . Where this time the monsters are for real. Everybody was worried about Norfolk Southern being a tremendous kind of movie. Dupont is down, its been down 6. 5 percent. Its trading actively now. We always strive to be fair and we are. Pbg is having issues. Dow is having issues because this is going to become a focus again at dupont. Whose fault is it. Is nelson right that theres still overhead. They did a spin that hasnt done well. No but then lyondell had good numbers this morning. Dupont is nelson peltz was saying theyre going to miss the quarter. This was a major miss not a minor miss. And, obviously, i think theres going to be action. The guidance may be painful for people on the stock right now. The dividend was cut. Theres a mixture but lets see what the constant dividend is going to be. Its not a good story. We have a bounce back in transports. And we have a bounce back in oil which is rather shocking. Pfizer we mentioned merck, but like merck, pfizer is a beat and a raise n 56 beats by 0. 04 moving to inno native products. Its all about getting out of the primary care business. I keep thinking allergan that stock usb raises the price target. Cow wan finally the 400 price mark ive been looking for. That move to sell the generics business at teva. Hes not necessarily a buyer. Hes going to take it when we can buy it and sell it when theres a market for it. 17 times endbita. That was a brilliant trade by that man. And even more so if the trades are approved. Ill have more but youre right on allergan. Refreshing to hear ken frazier talk about innovation and drugs. As opposed to other companies who like to talk about their tax rate more than anything else. I think ken was really interesting and i did an exposition on biogen last night on my show. Merck does have a terrific alzheimers combination. He doesnt want to give false hope to people. Thank you. A lot of other Companies Give a lot of false hope to people. Are you referring to lily . Lily a little less than others. Not crazy about this idea. People who suffer from this disease, you kind of got shafted. That was your big complaint on biogen. Yeah. Dont give these people false hope. This is a horrendous disease, and thats why i like what ken frazier said. He said maybe in 2017 well have data. Let the science speak for itself is not a bad strategy. And with the baby boomers aging, its only going to become more widespread. My trainers father passed away from it young and he would say, i think they have something. They did manage to make people feel they had something. Bp getting a little bit of a bounce today. Profits down twothirds year on year. They cut cap ex. Theres a quarter thats kind of like ups. Its like thats another wow, what a miserable quarter but it wasnt so miserable as to make people feel even worse about it. Exxon has to hold here. People are telling me if exxon holds the 80 level which its been able to do the oil stocks led and then the futured followed, the crude followed. Watch exxon. They report on friday. Theyre going to either turn the oil market around or were going to slice through 43. Exxon is the stock. This has become so important, its almost ridiculous how one company but its a big company. Maybe not as big as google but it is one of the largest. Any chance bp gets taken out . I think so. I think it could. I think now that the legal issues, the poison pill the legal issues behind them they have some great properties. I think its a do. I wouldnt be surprised. Now, dont go buy on that. I am saying yes, all the legal issues are cleared up. And as you said exxon, it slipped below 80 to 79 and change for the first time. You have finally, twitter tonight. Yeah. Expectations people say relatively low looking for 0. 04. Relatively low . Im saying extremely low. Like lower im back to baidu. Im looking forward to watching the running man. Its on youtube. They all drink these green and red cool aid. I found it compelling. Its like the voice meets the bachelorette. The duck dynasty. I think when i look at what twitter has to say, maybe they talk about a new ceo but if they talk about what they have in the pipe about making twitter your News Organization and easy i think the stock could make a stand. It could make a stand. Otherwise, its going to make a stand like custer and thats by the way, not dairy queen. Thats the one that didnt go well. On twitter, dont expect theyll have anything. Its way too early in the process. My sense is the board would like to see mr. Dorsey take the job and give up square. Hes not going to give up i think thats the prevailing hope. Whether or not he does that i have no idea. But i think thats what they would like to see. I just want to be sure. A lot of other speculation about other names but hes the guy. How about this visa stake in square . I met collison. Hes an impressive guy. I dont know if youve met him. No. Sharp guy. And scharf. I love him. But that was a very smart investment. In skriek. Yes. And soft spoken irish fellow really young, impressive. I think he was like hes worth a billion already. Everyone is worth a billion out there so you feel poor. A lot of billion airs. Airebillionaires. Finally p and g. P and g was up a touch earlier this morning. He has worked at every single aspect of procter and ganl gamble. He even worked in the antitheft division. Thats impressive. Have to combat shrink damage. Forget the now is only up 45. The ad line is what matters. Industrials are strong. Energy leading. We need a little bit of a under the around. Its been a strange seven or eight striding conditions. The s p is down five days in a row. S p materials, i couldnt even find down nine days. I think its 2012. The New York Stock Exchange the advanced line down 7 days. More than a year. And we hit almost 500 new lows on the nyse. Its a lot. Its a long time since weve seen this. Were over sold. The leadership is getting selective. In the last month weve lost energy stocks. Material stocks down. Industrials down. Tell telecon down. There are financials technology and health care and theyre all okay. Finances have been holding up fairly well. Theyre up about 2 in the month. Put up the board and youll see. Technology stocks are on the up side a little bit and health care is Still Holding up fractionally. The important thing is the sub sector leaders. Everyone is holding out in a small group of internet biotech, and bank stocks. Those are holding up okay so far this month but be careful. Boir jen biogen was a problem but holding up all right. Earnings are coming in really good today. Dr horton numbers were fabulous. The important thing is beat on the top and bottom. I look at the revenues for dr horton. Smooth increase every year. This is what the Home Builders have been doing. Its been another great year. On the earnings front here cummins great numbers. Tremendous demand in north america. And brazil is weak. Everybody is talking about the weakness in brazil. Pacca, gave fairly good commentary going forward. And textron, revenues down because of bell helicopters but by and large Big Industrial companies all with good numbers. Masco, cabinets up 6 and plumbing up 7 . Those are good numbers. And the biggest biotech ipo ever is happening today on the nasdaq. This is a cancer immu know therapy. Its a 2. 2. 6 billion market cap. This is run by the richest man, supposedly, in los angeles. Big backer of biotech. The only problem, very small float. 2 0000 200 million. Thank you. Yesterday that huge deal. A big surprise in many ways. Allergan selling the generics business or agreeing to teva to about a price about over 40 billion in cash and stock. It takes them out of the run for myelin myelin. And they say good riddance. Incredible deal for allergan and teva. That brings us back to mylan ease bid for perigo. You may recall in one of my many reports there was a big argument, mylan saying where the stock would trade is around 68 a share. Yesterday i think we got the answer on what the real unaffected stock price will be. Im sure the companys chairman will take issue with it but its 55. 45 right now. Thats the lets call it the unaffected stock price and that becomes important for mylan as it bids for perrigo and what that bid will be. The vote probably no longer really in question since its no longer a referendum on te vas bid for the company. Its 50 of the votes cast to. Under irish law you have 60 days to get shareholders to tender into the exchange offer, enough to do that so you control and take control of the company. So we wont know until lets call it early november where this thing really stands. But, of course a stock price of 55 is a lot different than 68. So is the implied multiple and the overall value for perrigo shareholders. We will see thousand progresses from here. But you have a sense in the time line. The vote probably no longer in question. The simple question is what are perrigo shareholders willing to accept. Management rejected a price the price is below with management rejected because of the fall in shares. A significant fall that teva is suffering from too. They own 4. 6 . They bought that stock in order to get standing in the dutch courts. Theyll be a seller nature presents something of an overhang. One would expect theyll get rid of it in due course. This is going to get tougher and tougher with these mergers. All these hmos that is the key question. You do want to see consolidation among the players but youre right. Could there be a bit of peak or anger, teva toward mylan saying you could have had this amazing bid that were giving to brent at allergan but were giving it to him so take that. Stick with the bachelorette. Stick that in your pipe and smoke it. I dont know. But i dont get to say that very much after this. You wont have to say it anymore. And i may not bring up the running man if baidu keeps going down. Lets go to rick. Reporter good morning. As i look up and see the equity markets doing a bit better, everything seems to fall in place, even the yeld curve. Weve discussed how a flattening yield curve may have implications or at least be an indicator of whats coming down the fed highway but i also could be the long end of lots of Global Markets in response to weak equities. Today gives credence to that argument. Were audiotape one in twos were up threes and fives, five in 30s. Steepening equities writing themselves. Year to date charts a twoyear. Its unchanged on the year. Now the rest of the chart pattern is going to look different. Im going to the longer end on the tenyear. Year to date of tens a couple of things to notice. The pattern in particular but also the fact of Holding Anything between 223 and 225 is significant. Theyre ready to break about 100 base points. Its now under at 99. Look at the pattern. Jgbs about ready to test 40 basis points. Bunds, flirting here in the 70s. Also very similar pattern. Markets arent the same place but theyre moving exactly the same and percentages match up. Tens minus bunds, steady. Look for the relationship to continue. Dollar index reversing. Maybe thats why the dax and the equity markets are doing a bit better. Rick santelli. When we come back one of todays earnings winners, ups, well speak to the ceo later. Were back in a moment. Need to hire fast . Go to ziprecruiter. Com and post your job to over one hundred of the webs leading job boards with a single click. Then simply select the best candidates from one easy to review list. And now you can use zip recruiter for free. Go to ziprecruiter. Com. Up big news on earnings. Two for one stock split. Well talk with ceo Susan Cameron in a moment but first well get to stop trading with jim. Dont go away. Some come here to build something stronger. Others come to build something faster. Something safer. Something greener. Something the whole world can share. People come to boeing to do many different things. But its always about the very thing we do best. So youre a Small Business expert from at t . Yeah, give me a problem and ive got the solution. Well, we have 30 years of customer records. Our cloud can keep them safe and accessible anywhere. My drivers dont have time to fill out forms. Tablets. Keep them all digital. Were looking to double our deliveries. Our fleet apps will find the fastest route. 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Trading. They bought a company that is a European Company that does h vac. Its a kpliemt controlclimate control company. He said hes not done but this is a deal typically honey well gets a company in and cleans it up and brings out the margins. Everybody knows that dave cody is a superior acquirer. This is a brilliant move. He is my next door neighbor but my congratulations on a terrific deal. And the way honey well gets its stock up is through deals. Weve all been waiting for a deal and now that we have it you cant say anything other than the fact that this one is right. They had a good quarter. Whats on mad tonight . Weve got a couple companies that i think are really interesting. David demshur made a call a couple of days ago saying listen, let me tell you why oil is bottoming right here. Its going to bottom in the second half of the year and martin richenhaugen is having a huge year. Dem sure says were hitting a bottom in oil now. See you tonight, jim. Mad money, 6 00 p. M. And there will be no shrinkage on the show because were in the talking about theft. Well talk about Consumer Confidence when we come back well get to the ceo of ups when we return. Dont go away. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . What if there were only one kind of dog . Then it would be easy to know everything about that one breed. But in fact, there are over three hundred breeds of dogs. Because no one can be an expert in every one. An app powered by ibm watson will help vets tap Specialized Knowledge in the cloud for every breed. And whatever else walks, flies or slithers through the door. Ibm watson is working to make medicine smarter every day. Good tuesday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sire sara eisen, simon hobbs and david faber. The s p getting back about 7 and Oil Continues to trudge between 47 and 48. Lets get to Rick Santelli with breaking news on Consumer Confidence. How does it look . 90. 9. We are expecting a perfect score. Were looking for 100. Obviously that doesnt sound so bad and it isnt, but it is some of the lightest numbers were getting since february when it was, well i take that back. It was 98. We have to go back to september of last year. September of last year to find a lower number. These are both july numbers. Were getting real reads. 13, unlike Consumer Confidence is the best level since october of last year. We want to continue to monitor. Fixed income markets are selling off a bit, pushing rates upmostly because the equity markets mostly because the u. S. Markets seem to have gotten their rutter back. And ups, earnings beating on the quarter driven by europe in a stabilization and profitability at home. Ups guiding toward the higher end of the full year earnings range. You see ups is also extending to 100 cities. Its offered to drop packages at businesses local to you for safekeeping. The stock up. Joining us is the ceo of ups. Great to have you on the network. Good morning. Good morning, simon. How are you . Im impressed by what appears to be happening in europe for you with operating profits up 17 . Is that because youre able to Service European exporters benefitting from that much lower euro . You know simon, its due to quite a few factors. Obviously the strength of the u. S. Dollar is one of those. I think also equally important is our Pan European Network that is really unmatched in the industry and european shippers are taking advantage of that. Thats why we have such momentum in our International Business right now. If you look through everything thats happened in the Conference Call comments and your results, the one thing that stands out really quite surprising is your commentary about whats happening in this economy and what happened in particular, in june. A lot is working for you and well get into that but can i focus on your largest market and what you see as a bellwether in. Yes. And i dont want to overplay that story either. We had good results, and including in the u. S. In the Second Quarter but what we did see is were seeing some mixed signals in the u. S. Economy. I think part of it is the u. S. Dollar the strength. Part of it could be worried about what the fed may or may not be doing in the next coming few months. But there is a little bit of a slowing. Weve even seen the pace of b to c while its still growing pretty rapidly, not growing quite at the pace it was. We expect to have a good rest of the year but we do have a little bit of caution about the u. S. Economy. Within that what about the pricing . I mean obviously youve switched to dimensional pricing. Its not just the weight of the package but the size that youre going to charge people for. City is suggesting that the underlying pricing ability for you in this economy is getting stronger. Is that correct . You know we have had success in proving the yield in the u. S. And around the world, and really the focus is on providing the value to our customers, and then explaining that value and then whether its the base pricing or whether its dem weight or whether its other charges that we have to talk to our customers about, the real focus is on the value that we provide. Lets talk about this expansion now to 100 cities. Where youre going to give people the option to have their packages delivered to a business local to them for safekeeping. Be it a deli or a grocery store. I think you call it access point. What does your research tell you that that will do for people wanting to take delivery of e commerce packages in this country which up until now they have clearly had reservations about . Okay. Ill start with the fact that Access Points was an acquisition that we made in europe a few years ago. And we have organically grown it ever since. In europe we have clearly seen that it increases Customer Satisfaction because people get their packages more likely on the first time and from a cost standpoint, Access Points in europe has allowed us to pull 1 million of cost a month out of the networks. That says how significant it is. In the u. S. We opened in five cities as a test. Now were moving to over 100 and we believe that we will see the same Customer Satisfaction and the same economic success in the u. S. As weve seen in europe. But its a very different answer to the local question than uber and amazon who might use social media or other apps to try to connect people locally to deliver packages. Your approach is different because youll always be unionized and it will always be the guys in the brown uniforms who have the deliver the packages. Our focus is the needs of our customers and what weve been able to do is take ups my choice which we now have 16 million subscribers, and take our ente integrated ground network, and add points and it differentiates us from the marketplace. No one else can offer what were offering here. David, im curious what youre seeing in the bricks. A lot of other companies have warned about particular pain in terms of the pain of economics in brazil and china. Can you give us some color on what youre seeing there. Ill start with china. Theres a lot of news lately and a lot of the issues are more domestically based. Most of our business in china is export related, and weve still seen continued good success. This last quarter, our exports out of china was almost 5 and with the growing middle class there, we just see a lot of opportunities in china. Brazil also we think theres a lot of potential in brazil. Theres a lot of unrest right now, and a lot of uncertainty, and i think that has slowed down just a little bit. Our customers view toward brazil. What about acquisitions . I imagine youre not going to give me much color on this talk that you could pay upwards of 1. 8 billion for caytycoty but some people were surprised why you might buy what is essentially a broker for trucks. What is the feeling about where you would have acquisitions and what they need to do . You know acquisitions are a part of our strategy along with the organic, an organic strategy but the rumors out there right now, and in general, we just due to confidentiality and due to competitive reasons, we just dont talk about m a activity. But you could talk to me about the strategy and the color on what management is trying to do. I mean you have a new cfo taking the reigns next week no . The new cfo has already taken the reigns and really its a continuation of the strategy we talked about before. We look at opportunities that are out there, and do we have the present capabilities or do we need to add those capabilitys . We look at geography, and its a combination of things. Our strategy has been a mixture of organic or nonorganic and it will continue to be that way. Were always actively looking. Much more to discuss but were out of time. Its good to see you, david. The ceo from ups Head Quarters from atlanta. We have another big name reports today. Ford. The company easily topping expectations. Phil has more on that. Reporter good morning. Huge quarter for ford. And what we saw is similar to what we saw from general motors. North america is the profit market. They earned ten cents better than what was expected. And similar to gm a hit from currency that. That was what we saw on the revenue side. A little below expectations. This is automotive revenue at 35. 1 billion. Again, what was driving the big haul in the Second Quarter, north america. The net income 1. 9 billion worldwide. Up 44 . The most profitable quarter in north america and pricing was a big driver. Some of it because of the pickup trucks but also because of suvs and across the line yumup. For the negative. Ford is cutting the outlook. This year in china it is believing the sales for the industry will be down slightly compared to last year. Just a few minutes ago, the ford crow on the companys analyst call talking about the outlook for china. Were still very bullish on china but its going to go through fluctuations and thats what happens in markets and were going to work our way through it. That Conference Call is still going on. Well hop back onto this. A lot of questions about china and about whether or not they could say apple and google as competition some day. His answer sure. Were looking at a lot of companies. The company beat on earnings the ceo at reynolds will join us coming up. Squawk on the street will be right back. Welcome back to squawk on the street. Check out whats happening with caterpillar shares. Moving higher. Take a look at the shares after they announced a 1. 5 billion accelerated buy back program. Youll see them up. Caterpillars one well keep an eye on. Thank you, u. S. Markets in the green after five Straight Days of losses. Focus now on the fed as the twoday policy meeting kicks off today. Joining us is the Portfolio Manager and the president of a global strategy company. Good to see you. Good morning. Carl. Michael, lets talk about china. People either have this feeling like you have the biggest economy in the world under big time duress. Others say its not correlated to Global Stock Markets and theyre going to correct their access and thats going to create an oversold condition for us. Which do you agree with . I agree with both the statements. The economy, first of all, you cant trust the data. You dont know whats coming out of there. But the economy is still growing. Al bee it as a much lower rate. That needs to be segregated from the stock market which is in a selling situation and is an artificial market. And that artificial nature that you can only sell in certain times as caused a liquidity crisis. I think thats one of the reasons for the downdraft in commodities. If you cant sell stocks and you have a margin call you have to sell commodities. In the long term theres real conditions there whether its the equity market or economy. It bears watching because it has an affect on us. What do you think the exit strategy from the strategy is if they have one . I think if youre talking a couple of things. First of all i think compared with what michael said i would say that china is a lot more important not only to their stock market and their economy but to the rest of the world. Even though only 9 of the savings of the chinese are in the equity market. The government has put so much weight in terms of the access on the stock market that its not working out as of great social significance, political significance, so we should worry about it. In terms of the exit strategy that you asked about, i think what they will eventually do is they will deploy a part of the reserves that they are holding and Foreign Exchange alone is now about 3. 5 trillion worth, and clearly what they need is an enormous amount of fire power in the stock market. What theyve done so far is to go into the stock market and i think they withdrew from it yesterday, monday which is why you had a big decline. Then they went in on tuesday you had the volatility. Then they came back. And the stock market when up. When they exited the, the stock market went down. You really need to come in in a big, big, way, and you need to crush the seculation against it. That has to be the exit strategy. As we debate which china can or cant do to get the market under control, the Federal Reserve is kicking off a meeting. And yellen has made it clear they are itching to raise Interest Rates for the First Time Since 2006. Do you think theyll go forward and hint at that tomorrow and how will the market react . Is the equity market prepared for that . Ware wait theyre waiting on every word. I dont think well hear anything new tomorrow. I think its as good of a case in september or december as it is in 2016. You have make an argument either way. The one benefit is theres such a divergence between the dollar and u. S. Interest rates compared to the rest of the world that its providing a run to u. S. Assets which is giving them a lot of time to be patient in that they dont necessarily have to act. And i think theyve been using that patience probably correctly in light of whats been going on whether its china or europe. For that reason i dont think theyll do anything right away i would argue for normalization as soon as possible. I think if you go up to 100 basis points youre not going to impact the economy. The economy and the stock market will digest. If the economy is really growing, its a function of a normal economy. Can i let me pick up. Im not sure if you saw as you were waiting. The ceo of ups on the program like ten minutes ago. Yeah. He was quite cautious on the u. S. Economy. Retail has been uneven. We saw weakness in june. And hes talking about the stronger dollar or perhaps people are fearful of Interest Rates rising. At a time when the breadth is much more narrow in the market overall. And that has been the story over the last week or so here for us. Samei think hes spot on and i listened to the ups ceo. I think the concern about the u. S. Consumers, the use of the service, is very important. He also spoke about china. And the fact that the exports are doing well. So i agree that in both markets, it is very there are very different segments that you have to look at. Regarding the fed, i think sara is spot on that the fed has been itching to raise Interest Rates for quite some time. I think once again tomorrow sara youll hear in the message that they would like to do it that the economy is doing much better than they thought, but ive been saying in the program in the past there is not going to be any rate hike in settlement or december. It is just more and more talk trying to cheer lead the market into believing there will be a rate hike. We have Commodity Prices dropping. Inflation is not picking up. A continuing crisis in europe and greece and this is no time to do that because if they did, the dollar is going to go through the roof. Youre going to see that cross pattern with the euro in that case and u. S. Exports simply cannot take it. And simon, along with what you said about u. S. Retail consumer and what the ups gentleman said thats going to be a double whammy for the u. S. Economy. Its going to be an interesting couple of days. Thank you both. Thank you. Coming up on the program, it is, of course speaking of rates, day one of the fed meeting. Has the stock market already discounted a rate hike . Will it come as they indicated . New data says there could be trouble ahead. More on that when we come back. Ery Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. No students ever done the full hand raise in ap calc. But your stellar notebook gives you the gumption to reach for the sky. Thats that new gear feeling. All hp ink buy one get one 50 off. Office depot officemax. Gear up for school. Gear up for great. Welcome back. Breaking news on the housing front. The u. S. Home ownership rate fell to 63. 4 in the Second Quarter of this year according to u. S. Census. That down from 63. 7 in q 1 and this number for q 2 is the lowest since 1967. That is 48 years. Whats interesting about this report is also that the number of occupied housing unitings is rising. That is the household formation is rising but it is all on the renters side. Owneroccupied units dropping. Thats why you see this Home Ownership rate continue to fall and that is why avalon bay did so well in the Earnings Report yesterday yesterday. Renter nation continue continues to plod on as we see Home Ownership drop. Continuing to see the number fall. Thank you for bringing us the breaking numbers. After a series of swings the stock market has gone nowhere this year. The s p up half a percent. Whats ahead for stocks for the rest of the year and beyond . Our Steve Liesman as the exclusive results of the fed survey. Hes live in washington with all the details. Good morning, steve. Reporter good morning. This entire survey is one of enthusiasm. Tempered growth still seen rising. Interest rates seen rising but less than previously forecast and the same is true for the stock market predicktions of our survey in july. What you see in the charts is were still predicted to be up in 2015 to 21. 35 in the s p. And in 2016 about a 9 increase. Both of those are down from the prior forecast. All of this happens amid an Interest Rate outlook for the tenyear that remained pretty stable. Down about 5 basis points 3 basis points for 2015. But the trouble ahead could be that fewer of our respondents believe the stock market is ready for the rate hike than they did in the prior survey. Those who say the stock market has discounted the rate falling compared to the prior survey. That is less true as it has always been for the bond market where more respondents think the bond market is ready for a rate hike. Taking a look at the path funds predicted. Its still seen rising this year. 82 see an increase but by a bit less than previously forecast. Looking to the left of the screen and seeing a year ago what the group thought was going to happen this year you can see 40 basis points of tightening worked out of the expectations for this year and almost 60 basis points this year. So sara and carl that sort of shows how the fed has leaned against whats happened to the dollar and other economic developments which is by not tightening as much as the market anticipated. A big debate carl though about whether the fed needs to see the Market Expectations far rate increase rise before it actually does that increase. Steve, cant wait to see what happens tomorrow afternoon. Well come back to you. Steve liesman in washington for us today. When we come back chinas market, down 10 in the last two days. What does this mean for the Global Economy in well get more on that after the break. The dow now up only 19. Some come here to build something stronger. Others come to build something faster. Something safer. Something greener. Something the whole world can share. People come to boeing to do many different things. But its always about the very thing we do best. Whoa what are you doing . Putting on a movie. Im trying to watch the game here. Look i need this right now ok . Come on i dont want to watch that. Too bad this is happening. Fine, what if i just put up the x1 sports app right here. Ah jeez its so close. He just loves her so much. Do it. Come on. Do it. Come on yes awww, yes that is what im talking about. Baby. Call and upgrade to get x1 today. Good morning, everyone. Here is your cnbc news update at this hour. Closen an historic visit to africa. The president urging the leaders to prioritize jobs for future generations. The president says they can choose between economic stability or further disorder. A bit earlier the president ed a food plant. The food plant is supported by a u. S. Government program and it is basically aiming to spur Economic Growth and reduce hunger. The president telling Workers Technology is the key to progress. In the meantime french farmers are angry over low prices. They continue to protest in the eastern part of the country. Dozens of tractors slowing down traffic and they also dumped manure in front of a Meat Processing plant. Hitchlmitchel is accused of providing matt and sweat with tools to escape from a correctional facility in new york. Back to squawk on the street. So the shanghai composite closing down again today. The government in beijing pushing now for capital injections to stabilize the national markets. Joining us is head of global macro at Morgan Stanley investment. Good to be here. It is an awesome sight to witness. Should we be worried about it . I think we should be. Because i think its suggesting to us that beijing is not that much in control of all things going on in china as the world has believed for the past few years. I think thats the real message for whats happening in shanghai. This some any this. Thats a safe thing to say. One says the break down in chinese equities continues to be of little importance than not driven by fundaments and the wealth is not likely to be important enough. That surely is closer to the truth, isnt it . This is just a side show for most people around the world. Well in pure economic terms that may be the case but im looking at the broad psychological message. Most people still believe that china will be able to achieve whatever it wants to when china dishes out a growth target of 7 Economic Growth most people in other parts of the world would not believe in growth targets for their country but in chinas case we take it seriously. But when you youre not being able to achieve that, i think it creates a different psychology as far as the entire economy is concerned. The market itself may not have much of an impact in terms of the wealth impact. But the data in july showed the chinese economy has taken another leg down after slowing. But to be clear, these are two completely separate effects were arguing. One is the break down on the stock market and the other much more importantly is whether the chinese economy is slowing, and whether we saw that being priced in similarly last week with commodities . Yes. Theyre somewhat separate but also related. As i said its the psychological impact. When people say that beijing is not in that much control of whats going on in the stock market i think that is the fundamental problem out here and yes, the Economic Risks from china are much more significant. As i argued in the past that there is a global recession. Every seven to eight years over the last 50 years, thats what weve seen. Historically, thats been led by the u. S. But this time i think it could well be led by china just because the size of the chinese economy. And thats where the vulnerability lies given the debt buildup china as seen. I have a question. Clearly weve seen a brutal sell off. Some commodities trading at lows. Your warnings in your book for a long time now youve been warning. How much further do they have to go down given chinas voracious appetite for those Raw Materials over the last few years. Commodity prices have fallen a lot but after a very extended bull market. One way of doing this is if you look at the 200 history of Commodity Prices. What we say is in inflation adjustment most commodities including oil have only returned to their longterm average. Yes, there are some commodities like iron oar trading below but most commodities are only back to the longterm average in inflation adjusted terms. Theyve fallen a lot but because they went up to much and the history of Commodity Prices is that after one very good decade they typically require about two decades to repair the accesses that were built up in that one up decade. I would guess were in for ha long winter for Commodity Prices. Even if it falls from here its not too significant. Just bottom line it then if you would for us. For emergeing markets in general around the world, given all that youve just said and the fact that presumably at some point the fed will hike rates which has pushed a lot of pressure on those markets traditionally. I think on emerging markets as a whole, this is 40 of the Global Economy. Its hard to make a generalized statement about emerging markets but i can see a clear divide between commodity exports nations likely to continue. And the importing are likely to benefit more than the exporting countries in the next few years. Thank you for your time. Still ahead, a toxic. They are calling apples music efforts. More on that and more apple complaints coming up. But first the ceo of Reynolds American joins us as her stock hits highs. Squawk on the street will be right back. Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Behold, these are two wind turbines. Can you spot the difference . The wind farm on the right was created using digital models and real world locationbased specs that taught it how to follow the wind. So while the ones on the left are waiting the ones on the right are pulling power out of thin air. Pretty impressive, huh . Now, two things that are exactly the same have have never been more different. Ge software. Get connected. Get insights. Get optimized. Is the high yield bond market issuing a big warning to stock investors in we have a shocking chart that could show more trouble in store. Thats on tradingnation. Com. More squawk on the street coming up next. Hi my name is tom. Im raph. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here were here and weve got your back. Legalzoom. Legal help is here. Try the superior hold. Of fixodent plus adhesives. They help your denture hold strong more like natural teeth. And you can eat even tough food. Fixodent. Strong more like natural teeth. Fixodent and forget it. Welcome become to squawk on the street. Transportation stocks ticking higher today. Led by ups after reporting a better than expected quarterly profits. If these gains hold at these levels transport will post their best. But down over 12 from the most recent highs. Back to you. Keeping an eye on the transports. Lets get to the cme group. Rick santelli has the santelli exchange. Reporter good morning. And good morning to my guest, my housing guy, mark hansen. Thanks for taking the time. Thanks for having me. Reporter listen i like one of your comments i read recently. Basically you said new home sales the is the money ball of housing. The most recent number pegged it at i believe 4 482,000. 1. 39 million was the peak in 2005. Tell me what the spread means and why you like new home sales the best. New home sales is the window into end user not speculative strength and demand. Resales existing home sales are speck heavy. People committing fraud in their mortgage mortgage loans. Builder home sales is a pure play into housing. We saw 482,000. That was a huge miss. It was down 45 from the 20 year average entering into the crash. 482,000 seasonally annualized adjusted rates is a contemporary taster of whats on deck for macro housing in the back half of 2015 which is another stimulus hangover. This Housing Market is a story of stimulus and hangovers, stimulus and hangovers. In fact housing in the back half of 2015 looks to be so weak on the demand side that yellen will not be comfortable starting a rate hike cycle if in fact, housing has anything to do with it. You know mark it always distressing me a bit when you get something that should be quantity fiable and its confusing. Much of the material ive read of late is specifically in the homes arena. It talks about things looking pretty good. Why do you see it in one fashion and many others see it in another . Im just a data partrot. In fact, with regard to builder pricing and the report yesterday, down seven months straight. Down 14. 4 from the october 2014 high. And only up 2. 7 from when twist first kicked off at the beginning of 20132. People are looking at last year. What happened last year . We were in another demand hangover following the rate plunge and the cycle, the stimulus cycle of 2013. Its better to compare this year with 2013 because the backdrops are the same. When you do that youll see that new home sales are only up 4. 65 , and prices are relatively flat. All right. Mark, we only have a few seconds left. You refer to janet yellen in your final comment, having rates at zero doesnt seem to be the magic solution either. Your final thought. Having rates at zero hasnt done much if you take a look at the numbers but having rates 200 pay basis points higher would crush housing. I dont think they can take that chance. That makes a lot of sense when you state the in that fashion. Thank you for being my guest, mark. Thank you very much rick. Up next on the program, a first on cnbc interview, an interview with Susan Cameron. The stock hitting an all time high today. More on that when squawk on the street comes right back. Hi my name is tom. Im raph. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here were here and weve got your back. Legalzoom. Legal help is here. [music] jackies heart attack didnt come with a warning. Today her doctor has her on a bayer aspirin regimen to help reduce the risk of another one. If youve had a heart attack be sure to talk to your doctor before you begin an aspirin regimen. Reynolds american shares are hitting an all time high today. The nations second biggest tobacco companies. The earnings forecast and declaring a two for one stock slit after split. Joining us Susan Cameron, the ceo of reynolds. Good to hear you. This is the first time were talking to you since that 25 billion purchase finally closed and it looks like its already adding to the results and boosting sales. Can you talk about how new port helps . Sure. We closed the transaction on june 12th. We had about two weeks of new port sales. They added about 6 to net sales and 6 to adjusted operating income but that was off jetset by the shares we imported. It did have a material impact. That was driven by the strong jungds underlying business. A lot of people see new port as the strong jewel in the axis and analysts want to know what your plans are for this brand when it comes to and were evaluating our opportunities for the brand portfolio. Very clearly though it has very strong geographic complimentary to the original reynolds portfolio. Newport very strong in the east camel very strong in the west. Weve just about doubled the sales force from the lower large sales force in terms of handling newport in retail. So were very excited about the growth prospects. Newport picked up. 4 of a share point year over year and we expect to energize and continue that momentum. Looking at the numbers for the Second Quarter volume was a standout. Came in a lot better than analysts were predicting what drove that betterthanhistorical volume . What drove that really is in the first half of 2014 it was more about inventories, so we had lots of inventory monies being tied up in vapor and other alternatives. So the first half of 14 was a lowvolume number for the cigarette side. So cigarettes have the volume for the industry was up 1. 9 . When you look at that on an adjusted inventory basis, it was down about. 8 of a percentage point. Wanted to ask you about ecigarettes, seem to be losing some momentum here. How is views doing . Views continues to be the number one ecigarette in convenience gas. I would call the vapor market now relatively stable. And i think the challenge for all of us is to continue to innovate in the space. Consumers are very interested. But the products are not equally satisfying. So the necessity to continue to innovate to offer them alternatives that have the potential to reduce harm thats the journey were on. Susan, i cant, i cant miss the opportunity having you on the show no thet to ask you about z map zee map, one of the biotechs was developing under your ownership with the u. S. Military. Two questions, moving forward what can the tobacco plant do for the creation of new antibodies for us all, and secondly can you give us any color on supplies of zmapp at the time and who had access to those supplies and whether the u. S. Military took it all off the market for very obvious reasons . Thats a lot of questions about kbp. What i will say is we were very proud to be able to work to to produce the serum. Kbp is the entity that actually grew the plants and injected and made the serum. And we are now working on contracts with barta, to produce the supplies that they believe they require. Tobacco plamt has enormous potential to produce protein. Its an adjunct in our business weve been proud to assist in that effort. People will be surprised that a Tobacco Company is doing this how big is the market mog forward . How revolutionary is whats going on here . Well i think you know there have been numerous ways that people, that serums and antibodies and things are produced. And obviously through plant life versus through mammal. And we are, the tobacco plant in this case this particular species, is a copy machine. And what goes in comes out. So i am certainly not the expert in that field. And but kbp, we are proud to be their owners but today is a great day all around for Reynolds American shareholders. Just want to get back to cigarette demand for a moment. Its been a tough slog for the low to middleincome consumer. In this country are you starting to see with the wage improvement and the jobs improvement that recovery taking hold . Well we are hearing from our convenience gas partners this that with gas prices being lower and certainly one employment improving, that that the store and gas traffic is strong. So in the context of cigarettes we are seeing some mixed shift to more premium products. And so we do see that amongst our consumers. And that i wouldnt directly equate that to the volume increase, i think is really much more about inventories. But nonetheless, we are seeing a premium mix. What is happening with sanafi, doubledigit growth really a driver for you in terms of pricing. It is its a fascinating phenomenon. A natural american spirit is now 1. 8 share points. But if you actually look at the sales for natural american spirit it is much much higher than that in many key urban geographies. If you look at san francisco, its nine share. If you look at new york city its five share. I think it continues to gain momentum, and the reason for that is it is a truly differentiated product. It is certainly has no additives in any of the tobacco. Its also being driven somewhat by its organic tobacco styles. It is what we call sort of a Super Premium price point. It is not discounted. But it truly is its accepted by consumers of today. Who want something different, and unique and authentic and, and natural american spirit fits that bill. Very quickly, susan. I mentioned the dividend increase, when will you be able to buy back stock again . As we said today, our priority is to delever and we will delever until we get down to about that, were sitting at about 3. 6 times today. Well get down to about 2. 5 times and then we will revisit the dividend percentage payout as well as stock buybacks, they will be revisited by the board. Thanks for joining us as always Susan Cameron, ceo of Reynolds American. Straight ahead on squawk alley, whats keeping facebook from breaking through the 100 a share mark . The key levels to watch on that stock and more. Its 8 00 a. M. At facebook headquarters and 11 00 a. M. On wall street and squawk alley is live welcome to squawk alley for a tuesday morning, joining us post 9, kevin oleary, chairman of oleary finds, chairman of shark tank on the desk of the New York Stock Exchange this morning. Special edition can simon hobbs and sara eisen. Stocks rebounding a bit, as dramatic declines from china start to impact