Transcripts For CNBC Squawk Box 20240714

What we had seen with the weakness last month. Overnight in asia, the nikkei actually was down almost 1 . The shanghai was up by a half percent. In europe you will see the dax is flat. So is the ftse cac is up. There are green arrows across the complex of stocks. The treasury markets this morning will be closely watched. The tenyear at this point is yielding above 2 . We want to start with some developing news. The New York Times reporting that President Trump approved military strikes on targets in iran that would be in retaliation for shooting down a surveillance drone but the mission was called off at the last minute eamon javers joins us in washington, d. C. With the latest good morning. The New York Times and the Washington Post are reporting that the president authorized these air strikes last night but backed off at some point subsequent to having authorized it the New York Times is reporting that the mission was under way. There were planes in the air, but missiles had not been fired at the point at which the president called off the planes. The president sent a message to tehran earlier in the evening before this apparent calledoff military strike suggesting that he wanted talks, not war we dont have any confirmation of that from the american side were waiting on confirmation from the white house in terms of what the president s decisionmaking last night. The New York Times is citing multiple Administration Officials involved or briefed on the events of last night and suggested the president ordered this attack and then backed off at some point after. The big question of the morning is did the military or diplomatic facts on the ground change after the president authorized these strikes or did the president simply change his mind and the approach he wanted to have. Yesterday in the oval office the president suggested he didnt want any military intervention he said he was a president elected to get out of wars, not into them. And he suggested also the iranians may have been the victim of a rogue iranian general who ordered the strike without the approval of the iranian government, and that this might have been a big accident some questions this morning in terms of what president s mindset was, what the facts were that caused him to reverse course after the operation had already begun last night eamon javers, its a developing story hope we can try to suss this out. Weve been pinging some Administration Officials early this morning no response yet. You do expect the white house will have some explanation for it it went from, yeah, they made a big mistake to, yeah, maybe it was a mistake. Difference in tone, right . One means youll pay for this, the other means maybe it was a mistake. The president seemed to be offering them an out but the iranians didnt take it. The president said if there was a person on board, personnel on board that would have been a different situation. Its a 1 125 million piece of equipment, but as we tell our kids, look, anything that is just property, anything short of hurting someone or a loss of life, its not even close. Fires, accidents, whatever youre talking about i was going to say, can you raise your hand, anyone who is glad it didnt escalate yesterday . We are all raising our hands, right . We dont i hope cooler heads prevail we are fatigued from this stuff. Though again, if it was more than a piece of equipment maybe we wouldnt be raising our hands. The bigger challenge for the president is he pulled out from the iran nuclear deal, he intensified sanctions on iran, but the iranians said this week they want to restart their nuclear program. The president will have a difficult decision on his hands here the sanctions may be working. Maybe thats why things are ratcheting up. It could be why theres real pressure there one reason for exiting the deal was that all their activities didnt change other than maybe the enrichment. As Condoleezza Rice said this week, he didnt act rationally it wasnt the Campaign Promises he made to pull out on the first day. He gave it a year to see what would happen so how do you keep the Iranian Nuclear ambitions in a box without using force. Thats the real conundrum, especially if the iranians are set on a provocative course. The bombings of some ships, the shooting down of some drones, the iranians are taking measured provocative steps. With the iranians in that mindset, how do you keep them contained given that you have already used the sanctions to the maximum extent that can be used all right thanks lets look at the reaction to the Financial Markets with all these things oil, currency, gold. Oil is back to 57. 30 system of the tension started when we were at a 4 handle even though were up 10 or 15 as somebody pointed out earlier this week on the show, look, iran, because of the sanctions, is getting below market value for the oil it is selling. Its a harder place as a result. They have to sell more to get the same revenue i saw 1. 13 on the euro i heard a politic yesterday calling the Federal Reserve the feds the feds did this. The feds did that. A little different. The feds. Sounds like al capone this is the same politician grilling people on Student Lending activity yes yes. Thats a buffett thing, right . Check out gold. I was talking about a big green monster, you said the name of the big green monster. I wasnt going to say it you said shrek, like that. Remind me that was way too much information. I did name him by youre more like cicero yes, i wont mention Maxine Waters coming up, the bulls are running hot. The summer begins with the s p 500 at an alltime high and the nasdaq topping 8,000 again i have a question about this you know how people criticize the trade war, they love to calculate the market cap losses, trump cost us 5 trillion, 10 trillion it comes back, you never hear about it the market has not been affected has the underlying economy or is it just the fed action that has widened the gap between a weaker economy and i think it depends on which company you talk to. Target says they can manage it to this point because they have so many different products has it really not ban big deal or is the fed flooding us with liquidity again and exte extending the disconnect its 65 degrees, do you want 75 or 80 . Well look at challenges ahead as we head to break, a look at premarket winners and losers in the dow give me the yew foeuphoria, il with the aftermath when it comes to your customers expectations, theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Cool. Mno kidding. Rd. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Breaking news this morning theres a massive refinery fire taking place near philadelphia lets get to brian sullivan. He has the details i know that you lived in southwest new jersey when you were younger people as far as southwest jersey felt the explosion. This is not just a refinery. We got video coming in, hopefully we can run it. Thats a live look at the fire now. Lets be clear, the Philadelphia Energy solutions refinery, 330,000 barrels a day, it blew up about 30 minutes ago. That explosion actually was felt tens of miles away thats the video of the explosion. Watch this its on fire you will that is the Largest Oil Refinery in the east coast Philadelphia Energy solution are a private company. They filed for bankruptcy last year they came out of bankruptcy earlier this year. Its part of a joint venture between the carlyle group, sunoco and enterprise transfer partners thats the 54 billion pipeline company. So the refinery employs about 1,100 people, makes gasoline and jet fuel gasoline futures, we just hope no one is injured in this. There is right now an Economic Impact gasoline futures are popping right now. We know its tough already with gasoline on the east coast that refinery, whatever the cause, we dont know how long it will be offline. The biggest gas refinery in america, not only on fire now but as you saw from that video, literally blew up about 30 minutes ago. Ow. Brian, thank you. Well be watching this story all morning long i want to talk about a story were watching all day long yesterday. Workplace messaging service slack coming off a successful wall street debut. The stock jumped almost 50 relative to its Reference Price. Stewart butterfield explained to us why he opted for the direct listing. I think theres a lot of investors who are used to a model where they get a small allocati allocation they wanted a big one in direct listing, at least they have the opportunity. One of the hopes is that theres not too much volatility. And we are hoping this model, where theres many sellers, many buyers, we hope we reach a market clearing price earlier. The gain was the 17th best of stocks that debuted so far in 2019 the biggest first day gain belongs to beyond meat, which was up 163 when it debuted on may 2nd. Now questions on whether airbnb will follow this model i asked you yesterday what the picture of success would be. This is success. The other piece of it is theres no money to be left on the table. In a traditional ipo, if it set at a scertain price, the price goes up, you say thats terrible, or if the company wprt lower, the xeen tocompany took advantage of the lenders the 26 Reference Price was too low, but it was only a Reference Price it wasnt a price to anybody. The analysts we had on with a 31 price target i think 37. He had 31 the guy we had we had two. We only spoke to the one analyst of the two i was thinking 31 its 26. I know youll have to either raise it or change to a sell has to be a sell now to him if he has any convection. Now watch, he wont hell raise his price target and stay at a buy. Youre right. I was thinking that yesterday and i was going to tell him. I learned my lesson. With uber yes trying to figure things out. This is like a 50 bump. Its a different lesson i learn ted my lesson the lesson right now is enterprise companies, you saw it with zoom and a number of big Software Companies that deal with enterprise. This will an profitable company, and you can say i see the light at the end of the tunnel the guy we spoke with said the problem was its overvalued because you with have to get lots and lets of s p 500 companies willing to take this on, get rid of microsoft and put this in. As a way of actually justifying the valuation. I think youll have more Traditional Companies did you start using it as a verb yesterday slack he was using it as a verb before i have been slacking for a couple years now. I think ed lee said i cant slack you, but i can slack myself all these things sound weird to me im googling you, googling this can you say go slack yourself. Its nicer than what i heard you say. Thats what i mean. Im uncomfortable with that on tv if that makes you uncomfortable on tv lets get to our guests a fed induced rally lifts the s p 500 to record territory as invests welcome the possibility of a rate cut. Lets talk about the markets with Janel Woodward and anastasanastasi ash anastas anastasia amaroso. The comments bring back what im trying to figure out, is this based not only on recessionary fears . Its based on inflation . Or does this actually widen what i talked about earlier is there more risk now because the markets are at new highs and here we are with bond yields way down here. Is the economy weaker and now theres even more risk the economy is definitely weaker the fed is trying to take out an insurance policy if you look at global growth, the pmis are 50. Philly fed came out earlier this week and Business Confidence was almost at a threeyear low all these indicators suggest to the fed that there is downward risk developing to the economy you couple that with inflation consistently below 2 , Inflation Expectations are weak. Thats the best case for why the fed should be cutting rates in their opinion. You throw a little bit of trade fears on top you have a case for them to do something. So i dont think its because were just on the cusp of a recession here, even though our recession probabilities have been going up. I think the fed is trying to extend this expansion and the best way to do that is to preempt it theres a guy coming on later, hes always bearish, hes at 43 prgs f for a recession. Is that possible is our recession probability at jpmorgan. It is yes 43 for 1 mont2 months out its been consistently trending higher the estimate is usually 20 yes you youre seeing double that, even though unemployment is at 3. 5 you look at a labor market thats tight tight because its strong, right . It is, but where does it have to go from here. If you have wages rising, not the pricing power, and then on top of that youre facing tar f tariffs. We had 43 recession probability back in 1995 we had a bit of easing of Monetary Policy in the market and the economy kept on going. This is what the fed is trying to engineer. We have to see if theyre successful janel, i found the line in your note. What we are watching, the disconnect between rates and risk the s p at a new high yesterday, the fed in cutting mode. Thats not usually the way it is i think thats definitely what were watching. When we look at risk assets, we look at spreads. Investment grade veries spreads. Our concern is that theres a bit too much optimism. People are looking through to what does broader accommodative policy mean, but not thinking what that means for the data and the fundamentals so were more balanced in here, a bit more tempered than the market does the fed still have the power to offset what were seeing with the trade war . Is the trade war not yet reflected in an economic slowdown its not been reflected in the averages unless the s p is at a new high because of the fed. Is the trade war effecting the underlying economy or is it just not doing anything yet were seeing some softness in data flow through but not in material its not about the direct impact, its the indirect impact we look forward to data points one important piece here is going to be what does the Second Quarter earnings season look like what are we seeing out of guidance are we seeing changes in capex and Spending Plans this is one thing that chairman powell highlighted earlier in the week the fixed investment what does that look like when we look at the data points and what weve seen them look like, were not quite there. We think the market may be underwhelmed, it may not be july or 50 basis points initially and so we think that this risk asset and the bid for risk assets needs to be tempered. All right thank you both okay. Have you changed your libra have you seen my that ive back cult hero with the bitcoin . You said it was a fine cryptocurrency, you liked it i hope they start seeing youre not really that woke that im not into bitcoin no, that youre not woke. You dont understand that one is blockchain the other one is just based on the dollar, so its not real the other one is blockchain, too, but not crypto. One is digital gold one is a currency. Different things youre still lecturing as if you know something people you can talk to your woke people on twitter. Theres thousands of woke people there was a promise of billions of investment dollars pouring into West Virginia from china, but so far nothing, zero. You have to hear this story. Well talk about it right after the break. My experience with usaa has been excellent. They really appreciate the military family and it really shows. With all that usaa offers why go with anybody else . We know their rates are good, we know that theyre always going to take care of us. It was an instant savings and i should have changed a long time ago. It was funny because when we would call another insurance company, hey would say oh we cant beat usaa were the webber family. Were the tenneys were the hayles, and were usaa members for life. Get your usaa Auto Insurance quote today. Instateoftheartn Technology Makes it brilliant. The visionary lexus nx. Lease the 2019 nx 300 for 359 month for 36 months. Experience amazing at your lexus dealer. As President Trump tries to negotiate a trade deal with china, here at home the biggest deal the administration has already done with china is serving as a cautionary tale the state of West Virginia was supposed to get 84 billion from chinas stateowned energy giant, a boon for workers that helped give President Trump his widest margin of victory in 2016 we found that promise nearly two years later to be a pipe dream under the foothills sits a gold mine of natural gas. Vast reserves of underground energy eyed by u. S. Companies and foreign powers thats what china wanted when it reached a deal in 2017 with West Virginia, more valuable than everything the state produces in a given year an 84 billion promise endorsed by President Trump and president xi jinping billed as a game changer to the Mountain State imagine the magnitude of what were talking about. This is the best thing that could possibly happen. Really and truly, its coming reporter 18 months later, West Virginias governor jim justice acknowledges the reality is much different. Has there been any money that china energy directly invested in West Virginia no, dont think so. Reporter it was supposed to fund the states new gas burning power plants a socalled steam cracker that turns gas into a byproduct for plastics and fibers, and an underground reservoir to hold the regions excess energy until it gets processed. The goal, according to those involved, invest in the states infrastructure and send its Natural Resources back to china. But china is nowhere to be found. The stumbling block is our countrys in the trade issue that we have but after we get through that, i think there could an green light to it. Reporter the production of the cracker stalled. The department of energy says it wont be operational for at least three more years at its proposed location. The power plants are under way, but lawmakers tell us beijing is no longer investing after the u. S. Flagged National Security risks with chinas involvement then the storage hub flexible storage for propane and butane reporter steve runs the Firm Planning it. He joined state officials in china to tout the original deal. When you went to china and learned it would be an 84 billion pledge, what went through your mind . Thats a lot of cash. Thats exactly what i thought. Reporter he says he would welcome a Chinese Investment but expects the 3. 3 billion he needs to come from elsewhere as far as you know, is china participating in this . What weve seen thus far is investment out of the continental United States, while our investor slate is proprietary at this point, we have only been invested in out of the continental u. S. Reporter Dennis Zander has been drilling in West Virginia for the past 45 years. He doubts china could come close to the mark it wanted to is there 84 billion worth of Shovel Ready Projects here no. Would there be in 10 or 20 years . I doubt it. Reporter in a statement provided to cnbc china energy says the project in West Virginia is progressing as planned, however because this stage of work involves business secrets, it is not suitable for media interviews its unclear how many stages the deal entails the document is a memorandum of understanding between the two parties. It was never made available to the public and it is not legally binding. Woody thrasher signed off on that document when he was commerce secretary hes now running for governor. Why get the state excited about something that could be years off or not happen at all there was a lot of significance that took place with President Trump visiting, with president xi. There was a great desire to show well Work Together and well work on that trade imbalance i think the temptation was too great to not sort of announce that deal. Reporter why not announce this deal when there was a document or an agreement that would require china to make good on its investment . Thats a level that is at a National Level in sort of the enforcement. Reporter its a state deal its actually a private company that is going to invest in the state of West Virginia. And its their money and any company he in the world can invest in the state of West Virginia. Reporter but you signed this deal correct n support of that investment its not an enforceable document where we can make them spend their money. Reporter the white house declined to comment. The Commerce Department which put together the slate of deals for President Trump said trade missions are positive for the country that work continues on this deal, but that it cant guarantee any individual deal is successful the states lawmakers disagree on the fate of this specific one. Republicans tell cnbc that resolving broader trade issues will help. But democrats tell cnbc that china never intended to spend this money it catches us up with the trade wars, with our concerns about security with china. Its kind of an example of how much our overall sentiment has changed over the last few years. It shows how much work needs to be done on the details. You heard the former commerce secretary saying there were issues that needed to be worked out before they signed on the dotted line that were not worked out because they wanted to have something to announce. It also highlights how difficult a memorandum of understanding is to enforce this sounds like a bigger deal than what happened with foxconn in wisconsin we sort of set this piece up and said what does this portend for the larger china negotiations. If you were to talk to lighthizer or pompeo or mnuchin, would they look at this deal and say this is an example of china renegotiatie i renegging on something, or do you think they know or knew at time this whole thing would never happen i think there were questions in 2017 when this slate of deals was rolled out in beijing about the fact that some deals that were included had already been in progress for a while. Some that were brandnew to the headlines. People scratched their heads and said these might be too good to be true. Fra t the reason you hear every official using the buzzword of enforcement is because if they dont get a deal that is ironclad that china would actually have to be held accountable to, then this fate will await the broader trade deal the obvious question, was it hyped at the start or did the trade talks hurt what never existed in the first place depends on who you ask. People say trump likes to hype jobs that were never being bru brought back you can criticize the trade wars, or you can say which one do you like better to criticize . Both of them work. One is they never had it and hyped it the other is the trade deal messed it up ill go with they never had it. I knew you would. As i was listening, i knew foxconn was the next thing coming thank you. Coming up, getting ready for the g20 summit we check out the High Expectations next. 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This morning theres some giveback its red across the board, but not much to talk about here. Down 5 on the s p. Nasdaq indicated down 22 dow down about 25. Next week President Trump will be meeting with chinese president xi at the g20 summit for more on what we can expect from the conference lets welcome kevin rudd, former australian prime minister. Hes also now Asia Societys policy Institute President great to see you, mr. Prime minister good to be back on the program. Lets talk a bit about what to expect. At this point i think the market is relieved that theres definitely going to be a meeting between these two players. What would you anticipate coming out of it . I think the underlying logic which we spoke about on your program over the last few months has not really changed theres a deep fundamental economic interest on the part of both xi jinping and President Trump to get a deal done from the chinese side of it, fundamentally they have been growing their economy in a fairly problematic way over the last year or so. Chinese private sector growth has been slow. So frankly the headwinds created by an unresolved trade war with the United States put too much downward pressure on the chinese economy. So the deep economic interests on the part of xi jinping is to get a deal done. But heres the catch not at any political price thats where it all came unstuck about a month or so ago. So the art will lie in how we manage the politics to get the economics done i think they can do that by rebooting the negotiations next week and the osaka summit. Then it will be down talking dirty for a month or two after that the problem is with the jam we got stuck in last time where things had been negotiated at a lower level, and then not accepted at a higher level, how do you get past that logjam . Whats different does america have to say okay, well accept that you wont take that or does china say well get over the hump and agree to some of those things we were balking at you are so right this has become a question of politics and frankly political face on both sides of the negotiation. The economics should be pushing both governments, the Trump Administration and xi jinping towards a deal lets deal with the politics i spent three of the last six weeks in china and talking to a bunch of people there about the basis of the chinese if there were a pullback during may in the middle of may they published their three red lines for the future of negotiations they were to deal with first the american insistence that the u. S. Retain tariffs in place on china even after the trade deal is signed. The chinese said thats unacceptable number two, the chinese have said that the part of the draft negotiation which said that america could unilaterally reimpose tariffs later on if they didnt think the chinese were doing the right thing but china could not retaliate under those circumstances, that is also unacceptable to the chinese. The third one is the chinese objection to President Trump pushing up constantly the actual quantum of the purchasing order by china of American Goods to reduce the scope of the trade deficit. So where does the solution lie i reckon its along these lines. America giving ground on the first two points, which frankly the chinese will never move on the two tariff points i mentioned. On the third point for the chinese to up their current offer in terms of the quantum of the purchasing order, not as much as President Trump has indicated he wants, but enough for him to demonstrate victory and declare victory to his Political Base in the United States unfortunately theres not a lot of trust between the two nations now. Weve had an investigation that showed when china signeds a m s showed when china signeds a miga memorandum of understanding, its not always in stone how do you do this to make sure this mechanism is enforceable . Well, the bottom line is i just saw your report on West Virginia its a sobering tale as has the earlier commentary on foxconn. So we understand where the problems come from the bottom line is the United States, if they judge that the deal is not being implemented properly, either in the spirit or the substance of the agreement it can act any way in the future to take further measures it doesnt need to stipulate those in the agreement the key thing here is given the absence of Political Trust is to find a policy and political way through this thing as for the osaka meeting, frankly the aspiration of the g18 is to get this deal done they want these 2,000 pound gorillas to find an agreement. Prime minister rudd, thank you very much for your time. Appreciate it. Look forward to seeing you again. Kevin rudd coming up, more on squawk. Speaking out about the Opioid Crisis thats next. Johnson johnson is a baby company. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Welcome back to squawk box. The next guest had a chance to speak with the member of the family in the headlines so much, the sackler family, behind oxsonsy conton and the story went live online this week and she joins us now with more. Welcome to bethany mclain. Good morning. Nice to see you of course vanity fair a cnbc contributor. Bethany, you know, the sackler family, david said he was uninvolved in all of this and the family has been unfairly discredited. Having spent time with him now, where do you personally land well, the family was on the board of directors since davids father richard was personally involved as in an executive role they havent served in executive roles, but look, the overarching thing is the family made a great deal of money, 4 billion according to the complaint filed by the massachusetts attorneys general by selling a drug thats turned out to be do a lot of damage so shes the the big so thats the big picture of the story and the other players were complicit and to paint the sacklers as the big villain is an overstatement, but they played a role in it. But this money has been described as blood money there are now philanthropic institutions that have returned money and wont accept it from this family. Were always looking to simplify bad things down to one person who is the evil figure. And in this case i think the simplification has been to paint the sacklers as the root cause of everything thats gone wrong and i think i think thats unfair. Having now spent as much time as you had with the sacklers as well as with this story, i know its a look, its going to be a complicated story, but if you were to pinpoint where you think things went wrong, what would you put the moment at . Well, there certainly is this moment when the when they launch the drug called oxycontin and they do the marketing push behind it and they change the marketing push and it has the effect of changing the culture of opioid prescribing from something you did at end of life or for very short term periods into something used long term to treat chronic pain and the opioid deaths skyrocketed and a lot of people signed off on this, including the fda. To say it was just the sacklers is unfair. But that that really had the effect of suddenly making prescription opioids widely available in a way they werent widely there was a statistic that i think by 2008, the United States which has less than 5 of the worlds population is consuming 80 of the worlds opioids what was your sense of David Sackler on a personal level. He seemed defensive but at the same time i hope or at least i have to imagine that there is some regret here. Hes apologetic and the family says they want to do what they can to help now, you could someone said to me yesterday that doesnt include giving back their fortune, does it thats a very fair point, but he makes the point over and over again that purdue did more than anything else to try to combat the Opioid Crisis. You can argue that purdue did a lot to cause it as well. But hes defensive i think because his family has been painted into this very black corner and his kids have been threatened and so he wants to say, look, this wasnt we didnt set out to do this. And so theres some theres validity to that. Okay. Bethany mclain, a fascinating story. For our viewers. If you have a second, check it out in vanity fair. Great to see you. Thanks, andrew. Coming up, turning up the heat on iran well hear from a senator on the Foreign Relations committee about this very tense situation after plans to strike iran were reportedly called off at the last mutine. We have a complete update on this developing story. Thats next. Markets and the military tensions rising with iran after yesterdays news that a u. S. Drone was shot down in the persian gulf region. The latest in the developing story and what it means for your money is straight ahead. Concerns about vaping on the rise will more cities seek to ban ecigs former fda commissioner lee will join us to talk about it. And shake shack expanding the offering south of the border and well discuss if there are plans to add meatless alternatives to the menu as the second hour of squawk box begins right now shake it up live from the beating part of business, new york, this is squawk box. Good morning, everybody welcome back to squawk box here on cnbc im becky quick with joe kernen and Andrew Ross Sorkin after some big moves that actually pushed the s p 500 to a new high, the highest level we have seen since april 30th, a little bit of a pullback today the s p futures are down by about three. And the nasdaq down by 16. At this point though, for the month of june were up 7 . That makes up all of the losses the 6. 6 that was lost back in may and then some. Dow futures only about 70 actually at this point about 90 points from the all time high if you look at the losses that would be implied this morning as well. The u. S. Ratcheting up pressure on iran after a drone was shot down in the persian gulf region. Eamon javers joins us again. Good morning. Good morning. Theres a lot we dont know and the story has been changing even during the course of the morning as we have been reporting on it today. Let me bring you up to speed about where we are right now the New York Times and the Washington Post both reporting that President Trump authorized strikes against iranian targets last night, but later backed off. The New York Times is reporting that the operation was under way at the time that the president called it off. Now, an iranian official is now denying a report that was carried by reuters earlier that said that iranian officials were saying that President Trump sent a message to tehran last night before the apparent launch of the strikes against iranian targets. The iranian official now we have two officials who are denying that report. Saying there was never any message from President Trump to tehran so that has changed during the course of the morning this morning and iranian general separately is also now saying that they warned the u. S. Drone before firing on it last night so were going to wait this morning for more comment from the white house to explain the time line here and whether or not the president s decision was driven simply by the president changing his mind or whether something changed diplomatically or militarily between the time he ordered the strike to proceed and the time he called it off. A lot developing this morning. Thanks. For more, lets bring in our guest joining us now, senator chris coons, a member of the Foreign Relations committee. Someone asked you yesterday about some specifics about what was happening and you said, i know what i read in the papers or in the news, i may know later. Do you know more based on the classified briefings and what are you able to tell us if it was classified i have not gotten a a classified briefing in particular whether or not iran warned us they believe it had drifted into their space what technical evidence there is to confirm our assertion that it was over International Waters. Ill remind you the strait of hormuz is very narrow. This is about a 12 mile wide shipping channel and maybe twice that between the coastlines. So its entirely possible there was a misunderstanding about this a global hawk is about 100 million piece of surveillance equipment thats very sophisticated it is just a reminder that tensions are quite high between iran and the United States there has been achingly few consultations between the administration and iran. And the headlines for escalation or for a military strike against iran and what the off ramps would be at a time when our own military is still conducting is still engaged in afghanistan and iraq and syria, i just caution against our sliding into another war that might escalate beyond our control without really discussing and understanding the costs. Im not sure that the American People are behind an escalating conflict with iran and so im encouraged if the administration is acting cautiously in the face of provocation by iran. But we of course well stand behind protecting american troops in the region. Right at this point it was still equipment. So we should not assume that because of the tanker attacks that we now are fairly certain was iran, we should not assume this was the next deliberate escalation by iran, it could have been a mistake, and you said its a narrow strait, youre not assuming they deliberately decided to take the next step after the tankers. It seems kind of logical that you would assume this is deliberate, right . Thats right. And, you know, let me be clear iran is a dangerous regime that has spread instability and terrorism throughout the region. The humanitarian catastrophe in yemen is because of their support of houthis and how its escalated and been so brutal for the people of yemen and iran has projected force over a long period of time into lebanon and into syria they are an aggressive and destabilizing country. I am clear eyed about the threat that iran poses to our interests and our allies but i think news reports this morning that President Trump had first ordered and then called back a strike as your introduction to this piece reminds us need to be better understood if that reflected indecision on the part of the president or whether there was a development in the region that caused them to stand down and i dont think we should leap to either conclusion without better information. Right we know about President Trumps aversion to any type of anything in the middle east. Other than, you know, trying to pull back from the middle east so we have that on the one hand. Then on the other hand, we have people saying that things like this cannot be you know, we cant just ignore it without any response at all. Is there a response that would be measured that wouldnt need congressional approval that you would support, senator, or you know, i dont know, hitting some radar stations. You dont know if thats the next escalation that brings something even worse back from iran. Well, first the larger question about authorization well debate next week on the floor of the senate. And an amendment to the annual Defense Authorization bill that would require specific authorization from congress. Of course the president under the constitution has the power to act and to defend the troops if they are struck by a foreign power. But we are trying a Bipartisan Group of us to reassert some of Congress Power in making decisions with such great consequences the tragic history of how we got into the iraq war, the cost, the length, the consequences sort of hang in the middle of the air as we debate these things on the senate floor i dont think we should ignore provocations by iran but i think its important for the president to be clear about what his red lines are and what will bring an american response. As President Trump heads towards very important multilateral conversations about trade, and bilateral conversations with xi jinping, i think its important that we not have a brush war with iran that might escalate unintentionally as a significant distraction for what is very important conversation about the future of u. S. china relations. Red line is a loaded term now. A red line means after you know, after recent history some red lines seem real. Others seem like theyre a much paler shade. A light pink some lines. Lets talk china i do want i know how much you know Vice President biden and youre from delaware and you know, are you going to watch the debates next week, senator yes its going to be an interesting two evening show of ten candidates each night and frankly, my hope is that the candidates will focus their time on introducing themselves to the American People and laying out concisely what their vision would be, what theyd like to do to solve the very real problems that face our country and the lives of working families around the country. Every minute that candidates spend attacking each other is a better minute for the reelection candidate and all of us as democrats hope that well replace him in my view with the former Vice President , joe biden. I was i was leading that i dont know whether i dont have any reporting on this, but i understand that Vice President biden might have reached out to cory booker yesterday. Do you know whether they spoke do you know whether this is going to be put to rest, the segregationist comments before the debates or is he going to have a huge target on his back as of next week . Well, i think thats up to the other candidates and whether or not they choose to hear what joe was saying, which is that he has a lot of experience working with folks in the senate he really disagreed with he has crafted a significant piece of legislation with people like orrin hatch or john mccain who he really disagreed with. He picked the worst people i mean they were democrats why did he say richard lugar, who he disagreed with on taxes what was the thought process there . It seemed like another i dont know, i dont know how you come up with that you pick segregationists to say i disagreed with them, but i worked with them but that seems its wacky i will say that they did have a good conversation joe biden and cory booker and my hope is that their long standing deep respect for each over will win out over what is a temporary disagreement over specific examples chosen. The larger point here is that joe biden is someone who has real experience working with folks with whom he had strong and vigorous disagreements and what i hear from folks in delaware over and over is theyd Like Washington to work again. Joe is not naive of course as the Vice President he was part of an administration who had many of the judicial nominations and legislative initiatives blocked or thwarted. He understands what obstructionism means its something hes had to deal with for decades in government but there are moments that call for us to Work Together in the interest of the country and my hope is that the outcome of the next election will result in votes being cast at all levels by folks who want solutions and want us to move forward. The democrats havent seen what can happen in one of the food fights when theres 15 you know, with their republicans i think there were 17. And watching those debates was like i mean, you cant believe it like a circular firing squad or something or a food fight. Im sorry, but im thinking you might see a little bit of that next week. I wish i just wish it wasnt two nights because i want to see all the interplay between all of them, because there may be some that are ready to slam another and theyre not there that night. Maybe they can do it do it in absentia theyll do it with or without them on the stage. I wonder if there will be any names. First name monikers, that worked well for the current guy you ought to give joe a couple if youre backing him, senator maybe not. Thank you. We appreciate your time today. Well all be watching. The first time maybe im going to watch this to see what goes on. Because you want to see them destroy each other. Dont say that. Senator, thank you. We know what he wants. Thank you senator, he was one of hes a very bipartisan guy. A very reasonable guy the comment about Vice President biden and the comments he didnt make. Wisely done when we come back, a massive explosion at a a gas refinery in philadelphia, the largest in america. Well talk more about what happened there this morning and show you the Energy Markets on the move we have the details right after this break plus, tensions with iran mounting how will the markets react well talk about that. Stay tuned youre watching squawk box right here on cnbc this cnbc program is sponsored by land rover. Above and beyond moving is hard. No kidding. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Breaking news this morning on the energy front. A fire breaking out at Philadelphia Energy solutions refinery in philadelphia, pennsylvania pes runs a 335,000 barrel per day refinery in philly and is the largest refinery in the entire east coast. Checking the gasoline prices a big move there well keep updating you throughout the morning in the Energy Market and the Energy Market reaction we saw it might be this right here, where it was on fire and then theres a video where they actually caught the explosion. The refinery is in southern philadelphia it was so loud that people in southwest new jersey reported hearing it. Wow. 1,100 workers there were still waiting to hear about any human loss we hope there was not, but this was very loud. Not only do they process gasoline, the prices were up when we first started to report this, but jet fuel is produce there. And theres opposition to the latest tariffs on china, the latest came from apple, keurig dr pepper, dollar tree and fitbit and it would cut the contribution it makes to the u. S. Treasury. Fitbit said that the tariffs would provide an advantage for chinese wearable device makers and economists think home sales rebounded last month the leest Mortgage Rate lowest Mortgage Rates in a year and a half the may existing home sales at 10 00 a. M. Eastern time, well see that expected to show a 1. 2 increase. When we return, geopolitical tensions the fed and oil prices driving markets around the globe well look at whats moving this morning. And talk Market Strategy right after this break the meantime, check out the futures ahead of the opening bell slight pressure to the downside after the s p 500 set a new high yesterday. It was the first time we have seen that record high since april. The dow futures are 95 points away from a new high themselves. Dow and s p 500 have erased all the losses they saw back in may. Squawk box will be right back. But not when to use it. Do i use aflac when the kids get slime in the plumbing . No. Thats home owners insurance. Slime in my motorcycle. No. Thats motorcycle insurance. Slime everywhere . Ughhh nooo, theres no insurance for that. Do they help when i have bills Health Insurance doesnt cover . Yeah thats it aflac gross guys. Get help with expenses Health Insurance doesnt cover. Get to know us at aflac. Com all right. Lets get a check on the Market Movers dom chu is here. Good morning, happy friday. Well start our tgif segment off with caterpillar down 1 and part of that comes on a downgrade of the construction maker to underweight the target price is cut to 110 they cite the subpar Economic Growth that led to head winds for the heavy equipment demands. Theres some dueling analyst activity on tesla. Shares are down just about 1 , 20,000 shares premarket volume jefferies cut them from 300 to 400. They feel good about the focus on making the cars more affordable but are reducing it for unit, sales, of course the sales targets themselves meanwhile, analysts at baird have raised it to 355 from 340 they can kept their outperform ratings saying that the expectations have overshot to the downside with potential for more catalysts in the coming months the tesla shares are lower well end on shares of amazon, down fractionally premarket. Just around 2,500 shares premarket. They are getting some positive analyst mentions at rbc capital. They reiterate the 2,300 price target citing the u. S. Online shopping where it has a strong lead even though walmart is making bigger gains and the Market Expansion can be bigger than expected. Andrew, ill send it back over to you. Thank you, dom. The best move right now is still to buy and the chief Investment Officer is here is it ofi . Ofi. So the fed has made it easy ride the train. This is what we have been talking about since november the whole idea is the Global Economy is moderating. On the back of it there will be a significant amount of stimulus from every central bank in the world and things are playing out according to plan. The fed has pivoted and really hard and the ecb has pivoted really hard and thats what everyone will be doing and next up is basically fiscal and monetary stimulus from china i think that gets the emerging Market Growth going. Overall the second half from the Growth Perspective is looking good monitoring from the financial stand point this sick what youre saying. Why is it sick . This is all stimulus driven. Again im not disagreeing but thats a sickness, a perversity to it all. Overall, the trend growth rate across every country is lower than what it was ten years ago. If thats what the issue is, absolutely that is the case and the fact that we are where we are is driven by policy stimulus and accommodation on a global basis and thats true but that doesnt but that has always been the case the Central Banks have always supported economies in bad times. But is it going to be effective, i guess will it be as effective as its been in the past or will you get to the point where we keep saying it pushing on a string you do it, you do it. It is going to be effective to get the economy back to what the trend growth rate is, which is somewhat and in some cases significant i will lower than a decade ago i think if the fiscal policy or the Monetary Policy didnt work, we wouldnt be where we are today. Why is stimulus automatically have a bad connotation for you if doesnt result in a weaker dollar, it doesnt result in you know, asset these arent normal activities how long has china been still lating their economy and get stimulating their economy and can getting 6, 7 growth. 10 or 15 years. And unless theres a day of reckoning if you have inflation low because of innovation and everybody else, you try to get to 3 or 4 thats the key point that iss the key point. Put your five years ago you used to sit and complain bitterly that about the fed. About the fed, stimulating the economy. Worried about too worried about employment and all the other issues its not about me are you talking about the tax cut stimulus or the fed stimulus i think the bottom line on that front is the fact that i think five years ago, we werent as sure that all of this stimulus would not cause inflation. A lot of us did. Right. When the employment rate is down to 3, 3. 5 , the inflation is not picking up so were dealing with a new reality sooner we accept it, the better off well be because otherwise well get into the recession. Lets go back to the idea of theres no such thing as a free lunch and a bill comes at some point. I dont know when or how. Keynesian economy that can be stimulative too. Rather than relitigate the philosophical issues what are you doing and what do you think our viewers should be thinking about when it comes to investing . Well, the slow growth in the Second Quarter but the growth picking up meaningful any the meaningfully in the second half. We are back into buying cyclicals and back into buying the because it will cause the dollar to go down some. If youre right first of all, the Central Banks ease and keep things easing for a long time ago to comeyou should buy everything if youre looking at these incredibly low yields, where else are you going to be able absolutely. I thinking you have to buy i think you have to buy Global Equities in general. Its a question of where the action is going to be far more than others. I think from a cyclical standpoint, probably in the second half more than defensives. Then finally in terms of buying tech for example, you thought was not something that you were like two weeks you didnt love tech certain types of tech like consumer tech. Well, if cyclical growth picks up, i think Companies Like software and all communications or new communications companies, tech companies, they do reasonably well. Just so were clear, i know we have to wrap but you would completely write off how much do you write off china trade or what happened overnight with potentially with iran and what that holds how much do you write offwhat happened in philadelphia you know, equity investing is about risk taking. Its not nothing is sure or guaranteed ever. We have had the risks in the past you know, we had the brexit, we had all sorts of things and despite that the markets have done well and theyll do the same over the next 12 to 18 months we can all agree, war is stimulus, but probably bad stimulus we dont want it although its stimulative. But not all stimulus is created equal i dont think. For a while the fed needed to raise the wealth effect. Because there was no demand because of the financial crisis. We have to save some time because we have something cool coming up. We need it will taste good. We ought to take a couple of breaks together. You know, go away for like six minutes because we have some stuff over there, shakes and fridays and hot dogs youre not going to eat . Not this morning. Not beyond meat coming up, the big business cow farts the Carbon Footprint is two degrees warmer here. Anyway, shake shack is opening up south of the border well talk to the ceo about the companys Global Expansion and the meatless craze speak for yourself. And then later the former fda commissioner gottlieb on the growing vaping and more driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. No matter what you trade, at fidelity pnc bank has technology to help a pnc business line of credit, because sometimes inner peace requires a little external soundproofing. Or pnc total auto. A place online to easily find and finance the right car for you. And your passengers. Or pnc home insight, to search for a new house within your budget. Hopefully with a grass yard. Pnc make today the day. Hey i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. This is great. Still to come, i asked for backtoback breaks because we have food. President trump reportedly ordered air strikes on iran, and took it back the latest on the tensions between u. S. And iran. Plus, a growing number of cities looking at banning vape sales. Well discuss that and much more with dr. Scott gottlieb. Then later, well no, were not go well talk about netflix. Revealing some interesting numbers. We are not. I am told i dont know what that means murder mystery starring adam sandler and Jennifer Aniston is t cpaheomny loosening up on releasing numbers it is highly secretive of thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Shake shack has made its way to mexico. The chain is now in 16 countries and joinings now to talk about expansion and the biggest taste trends, randy garutti, the shake shack ceo. I think youve got like abs. We were just so everything in moderation i eat a lot of shake shack and i work, out and i have more good food. The shake is amazing. I havent tried everything on my plate. You going to eat that yeah. Chicken bites try it. Okay. Heres Something Else i dont want to mention a competitor, but chickfila is number three behind mcdonalds. Are your International Expansions more aggressive than the number of locations youre adding here . Were doing more here today were about 6040. Shake shack is in the 15th year. At some point in 2009 when we had two restaurants we made a naive and brilliant decision to go international our seventh shack was in dubai we opened this first one in shanghai i got back from the philippines where people were camped out overnight. We were in singapore we were near the airport and next week i go to mexico to launch theres something about this brand that has transcended borders. Even at our relatively small size were a pretty small company. Could it be the shakes and the hamburgers we sell the most massive appealed product in the world. The hamburger. We didnt invent it and we wont be the last ones to make a great one, but we do it in a way that people want to take out their fine and take a picture. You dont do that much marketing, you do viral marketing. Very little paid advertising. I think we have always said, you know, we stand for something good we were born in new york city as a fine dining Restaurant Company and we just apply the same ethos. When you go halfway around the world do they know that . They do because when we go to mexico we found the best chef one of the best chefs in mexico city and we team up and make one of the menu items with him we find the best chocolates, the best ingredients we say our core menu is the same but were going to give the cameos to some of the best Food Producers in your city. Does it only work in cities only an urban definitely not. I think that was a narrative for a long time. Certainly almost five years ago when we went public, people said thats a new york company. Today, you know, less than 20 of our companies are in new york city and were all over the u. S. Thriving in california s have, we have a lot of suburban shacks in the midwest in florida even in california now so were opening in birmingham, alabama. Its really working wherever we have gone. So were excited about the future. Well, if you cant beat them, join them. Are you doing the cow fartless beyond meat crap ill ask it like that. Heres what ill say about that i think there are great people and Great Companies and we have had a Good Relationship with beyond meat. They have been in our test kitchen. Youre doing it so we have no intention of doing it today we want to see how it plays out. Shake shack was built on doing classic things so lets watch a little bit see how much would it cost . Im fascinated by the early impressions that people have by it and i want to see if those impressions continue. You guys have invested early in lots of interesting food projects lets call them would you invest in Something Like this . I think i probably would i think theres a future for it. I think it will evolve and when you see giants like tyson and other Companies Getting in to play thats thing thing to shake out. Can the small independents with the initial product compete against the huge food manufacturers who will come up with some pretty good stuff. But we like to do our own thing. A millennial wont touch a gmo product, they wont touch those and any preservatives but theyre going to want something that is all chemicals and put together and didnt have one scintilla of natural how do you talk to them about that . No hormones, no antibiotics thats why were not ready to jump on it. Do you think its a flash in the pan . No, i think it has to improve. It has to see evolution. Does the story have to be more than just a climate story and effectively turn into the story about health because the one piece of this thats so interesting, the possible burger is not better for you. Its probably worse. Than the classic burger. To me, this is not about plant based protein science. This is about i eat a lot of hamburgers you shouldnt eat a hamburger every day. The next time i go somewhere i want something i can enjoy thats healthier for me. Lets talk labor. Why would four day workweeks we have never see lower unemployment and lower wages i grew up in the Restaurant Business since i was 13. It was a badge of honor to work six, seven days a week, 14 hour days whoever wrote the rule has to be that way i want to build a company that our team can have a balanced lifesty lifestyle. We ask have new moms be successful. You want to go to the four were trying really hard. I dont know if it can work. We have it in about 40 of the restaurants right now. We are getting some great feedback. Why cant it work its a math challenge if i dont come in today, its kind of okay, right . But someone has to run that restaurant during those hours. So mathematically we have to figure out how do we cover the great leadership it seems to me like its a huge perk that doesnt cost you any money. Thats what were trying to get to if we can get to that there has to be incremental costs in having the incremental employee. Yes what were trying to do is figure out how to you it without an incremental employee . So we can have the same great leadership what do you say to the employees who want to work five days a week . Lets work on how you can be amazing in four days and take another day off. I feel like theres a huge number of people who would love that alternative that would be a draw like you said for moms or anybody else who want to be who want more flexibility. We have will you get back to us and whether you bet. For you or for me it will never work for us because we have to be here five days but you can give all management in cnbc a couple of days off nothing will change. Want me to write a letter for you . Take a camera shot. Im moving over here. Nothing would change. Make it three days well stick to cooking burgers. Make it the afternoon just stop by on mondays. During the commercial break we were talking about distribution and not the distribution, but delivery you guys are using postmates and doordash and, you know, ubereats whos the winner of all this i think youre going to see the larger players shake out and win. Its a larger players, there are three or four. Uber is great, grub is fantastic. Post mates is trying to go public and grow. I think the four have a real strong opportunity. You work with all of them whats the difference . Each one regionally is different. Theyre all trying to figure out how to make money in a very tough business and i dont think theres been a bigger change since the invention of the drive through than this. Do you think it has to change i think all of them have to figure out how to have a long term sustainable business. They cant do it forever as a money loser that means better logistics and figuring out how to work with Companies Like ours and making sure we have good, long term economics. You dont want to tell us theres one id get on shake shack if i were you. So politic. What was your view on shake shack, do you remember 4 1 2 years it was overpriced or something. We had 100 million in sales. And this year i cant remember. By the way, im hearing from a lot of managers here and theyre saying if they get paid for five days theyre totally done with the whole idea of a three day yeah i thought there would be some push back. Whos watching . Very low level. Im kidding, sandy youre very high [ laughter ] okay. Thank you for that thank you very much. Can i eat this now i wish you would. Im going to is are you sure you didnt sneak some of the beyond meat in there please come on back joe may not be here next time. Ecigarettes are under fire as cities are looking to ban vaping dr. Gottlieb will discuss that plus, drug pricing and much more well be right bk. Ac ncer fighti, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. Your daily dashboard from fidelity. A visual snapshot of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. Theres a growing call by city lawmakers to ban ecigs and vaping dee dee roy has more good morning good morning to you its starting right here in San Francisco where supervisors voted unanimously to ban the sale of ecigarettes in the city it faces a final vote and the mayors approval but if it passes San Francisco would become the first city in the nation to ban ecigarettes the irony, juul is based right here in sf and opposing the measure. In a statement juul says that the prohibition of vapor products for all adults in San Francisco will not effectively address underage use and leave cigarettes on the shelves as the only choice for smokers. The company has been under a lot of scrutiny from regulators, to lawmakers for the role in the teen vaping epidemic the ecigarette use increased 78 between 2017 and 2018. The only other city to make a stand on tobacco is bever lirr hills which recently went a step further banning all Tobacco Products as of the first of the year. Aditi, thank you very much. Lets bring in the guest on this point joining us is former fda commissioner dr. Scott gottlieb and a cnbc contributor great to see you. Thanks for having me. What do you think of cities taking steps like this theyre in a bind because the epidemic is growing at a great proportion the fda made a representation to the federal court so they lost the court case in maryland around the application that i had implemented around the ecigarettes so the fda came back and said well require applications within ten months of the manufacturers and give them ten months to come in with applications that would have had to undergo high level scrutiny within the application. I think its hard to walk away from that so the companies are on the hook to come into the agency to come in with applications sooner than expected this moves it up even further. I have noticed marketing from juul lately are those who used to Smoke Cigarettes and now smoke ecigarettes i guess theyre trying to win the court of public opinion. Will that work in your eyes . Well, i think juul created this phenomenon. The acceleration, the use that we saw in 2018 which caught us by surprise was a juul phenomenon most of the growth was in the kids because of how they were marketing up because of how they were marketing. They have cleaned it up, but once you target to millennials and very young people it will bleed over into kids i think juul is in a hard spot to ever get their product approved quite frankly they have so much historical youth use with their product i dont know how theyll prove a net nos a private company. Theres a lot of the private shares held by hedge funds you know who are looking for liquidity in the next 12 months. I dont know how juul gets through an application process and gets a product approved. I think their Long Term Plan was probably to come to market with a Second Generation product that was sort of kid proof if you will but if applications are required to be due sooner they wont have time to do that. They have to file an application on the current product with all of that historical youth use. Do they not realize that it was children in a lot of ways using it or do they not care i have a hard time believing that sales of 10 to 20 was to kids a large proportion of the sales is to children i have a hard time understanding how you dont recognize that also remember they were out in the Market Making forward representations to investors well representing trailing earnings that were predicated on illegal sales to kids so i dont know what the investors will say when they made Investment Sales baked in a lot to children. I was watching euphoria, a new teen drama on hbo, very explicit all the kids in high school for the most part, all smoking ecigarettes all vaping all vaping looks like pot a lot. I mean, how much this to me is exactly what you were worried about when you were in this role sort of how you think about not what is just happening in real life, but how its not just portrayed not only in the advertising, but in the media. Dramatic Television Like this. I think we need to bifurcate. So juul has the ecigarette market and its 5050 with the big contrapships and i think we need to split and treat the open tank systems differently than the cartridge based system and require them to be sold as over the counter products its a much higher bar. Lets switch gears and talk about the Major Drug Companies coming back around bringing lawsuit and bringing lawsuits saying we dont want to tell people what our list prices are in commercials not a great look when you dont want to tell people what the cost actually is i can understand some of their complaints that the list price isnt the real price but change your list price isnt that the case who wins in this battle . I think theres a very high bar for the government to compel speech thats what theyre suing on, the First Amendment right to protect the speech they regard that jealously and its whether or not the federal government has enough to compel the speech i think first and foremost when we compel companies to speak in these advertisements, it needs to be for the Public Health purpose and does the disclosure of the price enough to impel the disclosure of the information . Remember 44 drugs are actually advertised on tv. Thats it it seems like a lot because you see the same ads over and over again there were 89 ads but in the last 30 days only 44 drugs were advertised on tv. How many of the drugs are actually life saving drugs versus Lifestyle Drugs well, theyre big market drugs. So they probably you know, humira theyre the big sellers because you advertise with high revenue. But only 44 medicines. That brings us back to the original point is there any reason why Drug Companies need to advertise something for clotting like a warfarin or something . I mean, i hear the ridiculous commercials they set up where i dont know the guy said im using like that discussion would never go on im using this warfarin product versus this blood clotting one and they ask their doctor for that you shouldnt be asking for a particular drug. Unless theyre whiny like you and they want them to go away. It drives people into the doctors out of to have a conversation. Extended release patented protected drugs for the Company Never mind. Never mind never mind never mind so when you agree, stop. Yeah. Bullseye. What was it thinking i love those advertisements. I like the two bathtubs that theyre in them and not in them. Thats actually generic its off patent. Cialis. Why it is so expensive . Scott, thank you for joining us always great to see you. Talk to you soon tmi. Coming up, its they wanted a reaction shot coming up the latest on tensions on iran. Major airlines from around the world are rerouting their flights. Creating the perfect night. Just takes a little creativity. The light beer youve been waiting for has arrived. Lower carbs. Lower calories. Higher expectations. Corona premier. New developments on the u. S. Tensions with iran President Trump reportedly greenlights then scraps military military strikes we have the latest details. Slack stock doing anything but slacking off in the wall street debut whats the next big ipo in the pipeline netflix touting strong viewer data and why is they hyping them so much . We do things together so can we please figure this out . The final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernen with becky quick and Andrew Ross Sorkin and John Killduff well get to him in a second i figured id throw that in there. Down 31 points this morning. The nasdaq indicated down 21 or so and the s p indicated down 5. Treasury yields are back up above surging. Up above 2 now. 2. 02 . Yeah if you were in a time capsule and came back from a year or six months ago youd be like, no, thats got to be wrong but its not. Yeah. 2 . 3. 5 unemployment. 2 is higher than yesterday 1. 9 yesterday some breaking news from the energy sector. Take a look at the video a fire breaking out in a massive explosive at the Philadelphia Energy solutions refinery in philadelphia dramatic footage pes runs a 335,000 barrels a day refinery there its the largest and oldest oil refinery on the east coast philadelphia fire Officials Say that one employee complained of chest pains this morning but no other injuries have been reported and thats phenomenal and amazing there are 1,100 people that work there its had an impact on the Energy Markets though check out rbob gasoline prices and gasoline and the jet fuel, manufactured there, and well keep you updated on this developing story throughout the morning. Reports out this morning that President Trump had ordered a retaliatory strike on iran over that downed american drone and pulled back. Eamon javers joining us with more i imagine you didnt talk to us last hour and then go like take a nap somewhere. You probably tried to find out more, didnt you and any luck . Yeah, we are getting some comment now from the white house. Heres what with know as of this hour and well try to find out more the New York Times and the Washington Post both reporting that the president approved strikes against iranian targets and then backed off. The New York Times reported that the military operation was actually under way when it was called off by the president last night. A white house official this morning telling cnbc quote we do not comment on preoperational military planning. And an iranian official is denying an earlier report that the president sent a message to tehran suggesting he didnt want war. Instead, he wanted talks the iranian official said no such message was delivered by the president. And they declined to answer my questions if anything changed between the time that the president approved the strikes and the time he called them off. That is did the president simply change his mind here or did something the facts on the ground in some way change that caused the president to decide that this operation was no longer worth it the white house official saying theyre not going to comment at this point we expect the white house will get a lot of questions about this throughout the morning later today. Well monitor that and of course the president can tweet any time explaining what happened last night. But an unfolding story here this morning in washington. Dont tweet we dont need Foreign Policy through tweeting, is that really going to happen, eamon it could, i guess. It certainly could. I mean, the president tweeted yesterday about iran saying they made a big mistake and people took that tweet to suggest that the president was saying that they made a mistake and he was going to punish them somehow later though the president suggested in the oval office that what he had been saying was that it might have been a mistake to shoot down the u. S. Drone. That some rogue iranian general might have fired off a missile without authorization, from headquarters so to speak he hasnt been able to tweet about this in the last 24 hours. So far, pretty quiet. Normally im not the antitweeter but iran, im not sure we have the most level headed regime over there unless things have changed recently. Look, its a dangerous situation and when you have the military assets in the area its a very small Geographic Area that were talking about here. Theres a lot of hardware there and civilian airliners also had been operating in that same air space. So the potential for misunderstanding or mistake is definitely there as you look there at the persian gulf and the gulf of oman and you see that tiny lit strait of hormuz between the uae and then the dispute is where that drone actually was the u. S. Says it was over International Waters iranian said it was in their space. Lets welcome in jack jacobs a retired u. S. Army colonel and medal of honor recipient and john kill duff, a cnbc contributor. Colonel, lets start with you. What do you think . Is this a regime thats going to be thinking clearly . How big is the risk for things to get inflamed beyond what either side had intended well, the risk is always hire high we have been squeezing them for quite some time. Theyre quite desperate, actually one of the interesting things about this incident is this. We have a tendency to perceive our enemies in particular as being monolithic theyre homogeneous. Chains of command are inviolate so decisions made in tehran immediately get translated down the field and are executed flawlessly there may be something to the president s observation that it was a mistake. Theres a gulf thats opened up between the mullahs on the one hand and the revolutionary guards on the other. Dont forget the revolutionary guards before have conducted operations deleterious to our and our allies interests in the region and there was some indication it was not ordered by tyran. So its entirely possible that the revolutionary guards undertook this without tehrans approval. If thats the case what is the measured response . It would have to be directed towards the revolutionary guard or do we write this off as a mulligan maybe a little bit of both. Whats really interesting is that we didnt respond immediately. We have the capability of seeing exactly where the strike comes from as the strike is being unleashed from the ground. And we have protocols that call for counterbattering fire immediately on that target and if we didnt do it and we didnt do it when this occurred. That would indicate that our our crowell of our own fires in there, the rules of engagement in the region were such that we decided that we were not going to necessarily respond and that were going to give ourselves time to figure out what actually had happened and who had done it but our response we assume is going to be a military response and thats probably not going to be the case. Among other things this is probably a mobile launcher and its gone by now. The and we have been very successful with economic sanctions and will probably do more of them. The back and forth saying this was over open air space and they say it was over their air space that has clear to prove. The satellite pictures can determine where it was why is this a situation . We have the capability of sighting things to within one meter. Theres no doubt who pays attention to this and the people that i have spoken to that the drone never got within 2 is miles of iran. So this was over International Waters, absolutely no doubt about it. We should stop saying we say this and iran says this. It happened over International Waters yes it was over International Waters and i have to confirm i got it confirmed from a number of people i spoke to. John, lets talk about the impact on the energy department. The prices are up significantly two weeks. But we are at 57 a barrel. We have spoken before about the sort of situations back in the day this would have been a 100 plus dollars per barrel. Because you have more production from the United States mostly the production from the United States that provides a firewall if you will of supply against the sort of tensions and an oversupplied market and slowing demand but you have to give it to President Trump for being measured about this and calling off this attack. The way it was set the way its been presented this would have constituted an escalation that would have invited more from the iranian side. I understand this revolutionary guard is given objectives to carry out. They do they sort of freelance and pick these sort of targets and so thats what we have to still be on guard here for upsets to the oil market, plus whatever Cyber Capabilities that were going to unleash on them but you know, this is a this is going to keep the security premium and oil prices inflated. If there is another step forward here in terms of an attack from either side, we will go off to the races. The oil market is only going to sort of forgive all of this for a limited amount of time here in my view going forward. Colonel, could you see the iran regime at the highest level saying take the next step which will almost force President Trumps hand to answer is there something, would that be in their interest with the way that the economy is there to actually take it to that step or do you foresee that they would want to avoid actually, you know, poking the bear to that extent no, the latter, i think and i think whats liable to happen is that, you know, trump wants to have talks with these guys they also want to have talks but they dont want to do it in public you know, it was Woodrow Wilson who said what we need is open pacts openly arrived at. The only way to do them is to do them in secret and if i think if the diplomatic and i think if the diplomatic instrument is properly used on both sides it is entirely possible well have secret talks with the iranians over this and other things but only in the secret in the meantime, the revolutionary guards will carry on what theyre doing and i would anticipate there might be local tactical skirmishes with either the revolutionary guards or their proxies in the gulf so the threat for incidents there on the seas and the threat to shipping and the possibility of prices going up is going to continue to be there whether were talking in tehran or not. Jack, thank you very much for joining us its great to see you today. Good to see you. John, very quickly, before we let you go, lets pivot back to the refinery story the largest refinery on the u. S. Rbob up 6 for the gasoline. And the oldest, that was the key thing. Refineries when they explode are spectacular like that. Its amazing to see. Look, we had record gasoline demand this this country last week so this is going to potentially upset the low price gasoline environment that we had been forecasting for this summer particularly here in the east coast. This is meaningful production. Usually though a lot of times these refinery fires dont inflict lasting or material damage to the units believe it or not we have to wait and see. What . Yeah. Its a crazy business, becky. Depending on the damage a lot of stuff can go boom and it does. But they withstand the things. Thats not the first fire there. Let me put it to you this way and this thing has been around for a really long time so its been its been having issues for the past several months and production had been lowered so were not necessarily going to go over a cliff, if you will, supply wise from the outage but it will bear watching. John, thank you for joining us coming up when we return, we are going to talk movies specifically one movie that has netflix giving itself a pretty hard pat on the back but what is the streaming giant really trying to tell us abo about really the biggest rivals and the rest of hollywood. Were going to explain that. Plus the latest on the big refinery fire near philadelphia. As we head to a break, check out this live look well show you that right now in just a moment. Stay tuned youre watching squawk box on cnbc this cnbc program is sponsored by land rover. Above and beyond netflixs new original movie with adam sandler and Jennifer Aniston is making headlines in the viewer data. They tweeted via the comedy twitter profile over 30 million accounts watched the film in the first three days and thats the biggest weekend opening for a netflix production but what exactly do the numbers mean and can you trust them . Joining us now michael olson, Senior Research analyst at Piper Jaffray and ed lee, Corporate Media reporter for the New York Times and a cnbc contributor. Michael, i saw numbers like 120 million opening weekend. Wait a minute. I mean, this is my life. I was making plans to watch this tonight as a date night with my wife since its free so its well, its on netflix, but then i read the reviews and its like the worst reviewed movie i have ever seen. Adam sandler and Jennifer Annison mail it in, its lame and the plot is so hackneyed it is barely worth watching if you had to pay for it would it have done 120 million or people can get it so easily that 30 million downloaded it or watched it yeah, thats a got assessment of the movie from what i heard as well and the name of the game is for netflix to retain and attract subscribers. They do through that a mix of good and licensed contract and they found a formula that keeps the people engaged i think the basis for the formula is really data data on what were watching, how much of it were watching and based on that they can predict what well watch. Its said that our plans are back to dateline tonight its free. We dont want to watch it. I think thats you hit the nail on the head in your mind its basically free, right . I have already paid for this, or the cost this specific movie is demin us in to me, because i pay 9 or 11 a month. Its a much going to the theater. What would the opening have been 20 million . Thats hard game to play. It is but how much is it overstated . A factor or three, four or five . But theyre not playing in the same game. I know, but the comparison was made it would have been a huge opening weekend. What do you think of the different idea that sometimes these actors very big named actors and sometimes big name directors are taking advantage of the netflix this idea they mail it in. Good for them. I dont know if its good for them. Paid a lot that somehow because these services are competing so crazily for all of this and because theres so much content theyre just doing something and theyre taking the check and taking the check. Thats terrible and yet, by the way, you look at the stars that are lined up on Big Little Lies on hbo i dont think anyone theyre not phoning it in over there. Thats what im saying is there something going on here . I think theres a lot going on with netflix. They are funding so many productions its not a topdown organization there are a lot of producers that are powered to greenlight things like at hbo it goes all the way to the top and i think the numbers are more about its more a message to hollywood talent like hey, come work for us, not only will you get a nice paycheck but people will watch the content. They call it art. Or at least its like, you know, im not going away. Its their craft. Adam sandler has a craft. Right now, theres a fight for talent in streaming. Michael, does it help the netflix mode, because im worried about netflix. Does have something proprietary help them and bears the entry for people to take away their business yeah, i think it does youll have more competition coming into the space with disney plus and some others and i think having all of that, all of the data on what were watching and how much were watching it really does help them to find product that is more engaging. I think it creates a barrier to the entry. How much is Jennifer Aniston being thrown up there because friends is the number one property playing on netflix right now . That struck me as not a coincidence. I think that youre right probably not a coincidence i think theyre using not only the genres of content or the style of content but the specific actors and actresses that are involved in the content to create new original content so i think youre absolutely right about that thats one component of that, that formula that theyre using for original content Development Based on the data theyre give gathering on us. Any guess on how apple will do and how it will work . You know, i think apple is going to continue to develop certain original shows well see to what degree they you know, they license additional content but i think in general, its going to be more of a cue rated collection, where netflix its not throwing stuff at the wall, but a shotgun approach where theyre throwing stuff out there and its sticking. I think apple wants to be more your Cable Provider not the place that netflix is not signing on with apple. You wrote a fascinating piece that hbo yeah. Disney is doing it at this really, really low price. Apple, you only have a tiny amount of content. How about zero . If you have an apple device you get it for free. But they want to upsell you into the showtime subscription thats the play that apple wants to make here. Why did they hype its a way to entice people, right . Get into it. I think its so much good for everybody. But the writers the Writers Strike they have no raises in five years. Its not good for everyone, michael. Everybody is for the big stars we have the story of noah actually being filmed out here in in his ark filming it in time square. Its not going away. Im starting to believe im starting to believe. You believe im starting to believe starting to believe. Yeah. Yeah. One day so obviously its real after 4 billion years of variability. Its obvious that your suv did it thanks, ed so clear, its so obvious. All right, when we come back, slack doing anything but slacking off in the market debut. The Software Company charging out of the gate in a strong first day of trading so the question returns where can investors look for the next big ipo pay day . Well run down the names to keep an eye on. Slack is up this morning. Plus an update on the massive explosion and fire at the largest refinery on the east coast and the market impact. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade breaking news this morn on the energy front check out this video, you have to see it. It is dramatic a fire breaking out at a massive explosion at the Philadelphia Energy solutions in philadelphia they run 330,000 barrels a day the largest and the oldest oil refinery on the east coast one employee complained of chest pains this morning but no other injuries have been reported thus far. I want to get some more on the Market Reaction from all of this i want to get over to dom chu right through. What we are seeing right now is a gasoline futures especially those tied more towards east coast markets moving higher. By about 2 to 4 at one point earlier this morning so those futures certainly reacting to whats happening as you can see theyre up by over 4 for the particular gasoline futures and checking out whats happening with the latest upbecause as you mentioned its the largest east coast refiner of crude oil products when we talk about the 335,000 barrels a day it works out to be about 110 Million Barrels on an annual basis the latest update we have from the Philadelphia Fire Department and office of Emergency Management was around 7 00 a. M you mentioned that there were no injuries reported. One other thing we can tell you right now that the last update that we have is that the fire was contained, but not yet under control. That the Philadelphia Fire Department is working with the people at Philadelphia Energy solutions augmenting their efforts to contain the fire itself it started from a vat of butane there a little after 4 00 a. M. Today. We should point out some of the other interesting points here. This is again very visible you are seeing live shots there right now. Very visible from interstate 76. For those familiar with the philadelphia area, a very main artery for that whole area also, its just about 3 1 2 miles south of the university of pennsylvania campus. Like that gives you an idea of the proximity for the southwest philadelphia facility. Also its only about three miles away from certain parts of downtown philadelphia and near south street where many of the eateries that people associate with tourists are in philadelphia so this is certainly an area that many folks understand and know given the proximity of where that refinery was we are still waiting for updates from the fire marshal and the fire chiefs and the office of Emergency Management but for right now it appears as again, no updates yet the fire has not yet been fully, fully controlled but it is contained. I would also point out some of the Market Reactions here. Well point out some of the stocks involved. Valero is not part of this process, but you can see here some traders perhaps looking at shares of valero as being a competitor to this privately held facility for, you know, Philadelphia Energy solutions. So well keep an eye on the movements around this, andrew. But for right now, thats what were seeing, the Immediate Impact being felt in the Commodity Markets certainly with gasoline futures and tied to the east coast markets andrew, back over to you. Thank you, dom. Well keep our eyes on this. Were about an hour away from the market opening it was only wednesday when many were convinced that the market needed a rate cut from the fed and then the stocks set a new all time high. Have they ever cut rates when the stocks were this close to records . That conversation next when squawk returns there is a freely traded market for Equity Securities and slack. Really it will open at something, it will close at something. Same thing will happen tomorrow, monday theres a big opportunity that thats got to be where our focus is. That was slack ceo Stewart Butterfield yesterday morning. What a good first day might look for the company stock, they had a great day as a public company. The shares popped around 50 relative to the Reference Price of 26 and we have more on the debut. Hey, andrew, youre right no other way to slice it, shares popped around 50 when compared to the socalled Reference Price of 26 but no investor made a quick one day gain of 50 as they might in an ipo in fact, the most that any investor would have made buying and selling slack shares is around 9 return thats because the Reference Price is somewhat of an arbitrary one set by the Financial Advisers and nyse and the shares opened at 38. 50 and rose as high as 42 and ended at 38. 62 to many thats the beauty of the direct listing strategy versus the more traditional ipo. Theres no favoritism on the part of the underwriters by the most prized investor clients and the slack didnt raise any capital in first place its further evidence that the direct listing model works there were no crazy price swings and the Public Markets valued slack well above where it had been trading recently in the private markets. Garnering a valuation of 20 billion yesterday. Okay. Thank you for that, leslie stick around, we want to bring in john elton. Lesson is what i think direct listings are terrific the only issue is that theyre not raising capital so for some Companies Direct listing arent the right approach you do achieve liquidity i think its an efficient market and gets the pricing quickly you see that in you know, trading throughout the day. But heres the question we say theres Certain Companies its good for, but other Companies Less good for. You can approach it, do a direct listing and then do a secondary. After its already out. Establish the price. I think in this markets its the reverse. You do a huge round with you know in and in slacks case, softbank, they had a prior round where they sold a bunch of secondary. So you have already, you know,it a lot of cash on the balance sheet. They raised 1. 3 billion, they have only they have 800 million on the balance sheet. So they built a 20 billion company off of 500 million. Thats the capital what did they raise what was the price they rose it before 7 billion. 11. 91 per share. Oh, thats kind of sucks for slack. They could have gotten way more if they went to the open market. There you go. I mean, no money left on the table there. But in the secondary market. Which is the better version well, i think, you know, theres going no need to get greedy here. They have done very well stewart has done very well the employees will have liquidity. I think its a winwinwin for everyone youre right, they still have the ability to raise more capital as a public company. Softbank this or uber . What was the last price they played on uber theyre largely locked up because they were supposed to sell into green shoe which never happened. So we have a couple of big ones on the docket i mean, the two big biggies will be we work and probably airbnb i dont know if that will happen this calendar year you have peloton coming. Postmates coming realreal next week. How do you look at those relative to each other well, i wont comment on those because we have interest in some of those but i think in general, the success will i think be a real win in the column of direct listings it wouldnt surprise me if more people look at that stuff. I think the deciding factor though is this element of do you need to raise capital or not now, 15 years ago, google went public using a dutch auction method which isnt too dissimilar from the public method no one replicated it after google used it, the direct listing model seems to be working and seems to be a lot more people have more confidence in that model. Yeah, the dutch auction is where you run into the process and take the second highest bid and then everyone clears at that so theres just the mechanics of it i think the bidding mechanism that theyre using now just to create a market sort of then they start to trade, so the first block is enormous. Its just its a more efficient way of doing it, apparently it seems like the market is working well, you know, small rise in overall shares throughout the day. What about the idea of all the fees that ultimately get saved . I mean, you ask stewart that. He said thats not a deciding factor for us. If you look they did spend 22 million so its not nothing. Right. But the price tag, what would it have been people focus on the cost of it and its substantial. But the time youre doing ipo prep two years out and theres a lot of regulatory overhead. So its time and money and youre not saving any more time. You still have all of the regulatory and accounting work to do. I dont think thats a big factor. So my big question is this. Enterprise companies have done fabulously the Consumer Companies specifically uber and lyft have done less fabulously is there any possibility that the market has got this wrong . That actually the enterprise guys are undervalued well, i was joking with the head of m a from one of the top Software Companies and he made the same comment like hey, all of the smaller cap Enterprise Software businesses are trading really well. I said thats because you keep buying them all. He sort of laughed, youre right. I never thought of that but its true all of the companies all of the Companies Get swallowed up, you know we saw salesforce bought one of ours, map anything so it was salesforce you were talking to no. Someone else so its a all of these companies they go public capital is efficient, growing nicely, they have great teams and some will grow into enormous companies but a lot will get swallowed up by the bigger guys. Okay. John elton, elton john, nice to see you. Thanks for having me. Great to see you. Go see murder mystery. Hes recommending murder mystery. My viewers are split. Im back on board i think. For a free movie youre on board. Absolutely. Watch dateline on a night when its not on. Anyway, the countdown is on to the next Federal Reserve decision with many on wall street banking a rate cut to start this summer or midsummer in least summer doesnt start until today. But at the same time, the stocks are at or near alltime highs so why is a cut even on the table or is that why stocks are at alltime highs is the fed straying into iasd rroragn. Y ai w going to say well explain into infinity and beyond. That move us forward. Every day, invesco combines ideas with technology, data with inspiration, investors with solutions. Because the possibilities of life and investing are greater when we come together. Dear tech, youve been making headlines. Smart tech is everywhere. But is that enough . I need tech that understands my business. I need tech that works at scale. Dear tech, dear tech, dear tech, were using ibm blockchain to help make sure food stays fresh. Were exploring quantum to develop next generation energy. Were using ai to help create more Accessible Health care. Were using iot to create new kinds of digital wallets. Lets see some more headlines about that. Lets expect more from technology. Lets put smart to work. Welcome back to squawk box this morning fed officials are making their first Public Comments including a statement from the dissenter senior economics reporter Steve Liesman has that and plus a look at weather the first rate cut from the fed means sell sell sell or buy buy buy or people think its buy buy buy. At the moment. Byebye bye. Can you do that can you do that on camera . Byebye bye. There you go. Happy birthday, mr. President . Wow. Oh, boy never mind. That was last week. How do you put me on after becky doing that its not right byebye bye was that britney . Too much laughter here on that joke. Keep it down, guys. Go for it. Because youre smart. Thats the point. Youre clicking through. Got to stop. Because he knows what hes talking about. The latest thing is viral, the latest discussion, have you seen that . I have not. Ill tell you i was the lone dissenter said that he wanted a quarter point cut this week as insurance. The u. S. Economic growth is expected to slow for the remainder of the year and moreover uncertainties about this outlook have recently increased. I believe that lowering the target range would provide insurance against further declines in expected inflation in the slowing economy, subject to elevated downside risk. Unlike Jerome Powell he did think it was transitory and looks like the market is coming around to this idea, even while stocks are at alltime highs how do equities perform in the first year after the cut results may vary a lot what we did is we circled those first cuts there thats the red line. Thats the fed theres the s p. You can see it goes positive after that 89 situation there. Mike, you youre again, Mike Santelli are you getting this i am. Then the shaded area is the recession. And then you can see it was not that great until it was a few years later. This is thanks to james bianca who helped us out with this. It didnt work so good after 07. I dont understand the chart. See the blue line yes thats the s p 500, right . Yeah. Thats the annual return at that point. Got it. So basically, sometimes it ends up going up higher but not all the time you can cut at an alltime high and the stocks will have good returns and it depends on the situation and when it happened i can give you the returns but they dont end up being monolithic here. That the fed can cut sometimes it works, sometimes it doesnt. Exactly. The instances that were circled were when there was a recession . Right. In 95, there was an initial cut, no recession. 98, there was a couple of cuts and no recession. Does it work this time . Thats the question so the market is behaving as if a rate cut in july or soon is something that they want but dont need its a precaution, not a rescue. I think so far the market its sort of unusual but not unprecedented to see as steve mentioned to have a cut with the stock market at or near if the the high. So Mike Santelli is here. Something that joe is pounding on, but the idea that the market is trading like theres a free lunch out there thatsing thats interesting to me we can have the weakening economy and make money through the rate cuts at the same time. Stimulus is even okay. So youre now what . Inflation today it was different from yesterday. Right inflation and innovation have given us a lot of leeway to stimulate things so question dont overheat right away. I want to tell you really quickly i realized what happened so our conversation yesterday its 59,000 views, i think its a lot. I think thats a lot. For our conversation. But youre not getting any of these because we have blocked each other on twitter. Not exactly the tale of the tape, you blocked me. You blocked me afterwards and i tried to unblock you. Ill unblock you if you unblock me. In is like iran and the u. S. We cant have peace at the table. How will we have peace on the world. Youre not missing out im not missing out. Dan, what do you think . If you look account chart, whats obvious when the fed is cutting rates thats generally a bad time for the markets so the last time hay started to cut september of 07, the market tell 50 from there. In the prior recession in 2001, it fell another 40 . The other times when it didnt work, that was when the market had already started to worse an it was kind of too late from that perspective what if this is an insurance cut . This would be out of the realm of anything the fed has ever done. The fed has always been lagging. 98, 98 of lets talk about 98 as an insurance cut. What was the ism in 98 . Well below 50 and right now were at 95 it was too. They say preemptive cut, but the growth story was less preemptive to me than it is today. 98 the Asian Financial crisis, and a lot of stuff going on then that you dont have today. The market is at an all time high it is a different story to say what if we say the fed reacts in a panic, in other words, not to fundamental weakness that things can work out okay, but when they react to fundamental weakness, im trying it come up with a rule of thumb sure. They react to fundamental weakness, the fed can offset some of that weakness, but it cannot get rid of it. I agree with everything you just said. I think people the markets are giving the fed too much credit. Their ability to offset the weakness youre seeing if things are as bad as the market thinks it is, to the point where we need that fed cut, i think the fed has the ability with the couple of 25 basis point cuts to really reverse that situation without benefit of fiscal stimulus as well, which i think is a if i can recap that, if, mike, if this is just a trade thing, remember, that was my question that to powell, is this just a trade thing . He said, no. If it is just a trade thing, the fed cuts we can do fine. If it is the trade thing, plus the global weakness and the slowing domestically, thats a different story. It means more than one cut. If it is a trade thing, why price it in in such certainty today when were going to have the g20 meeting in a couple of weeks. If it is a trade thing something can change. The fed is certainly in this era is more sensitive to the fact that it operates through the Financial Markets, right into Business Confidence it is not really about 25 or 50 basis points affecting employment or immediately juicing inflation or anything like that, it is about sustaining Business Activity through this soft patch if thats what were in. Jim grant, famous line, the fed cant make things, they can make things appear to look better but they cant actually make things better. I dont think thats true with the wealth effect we saw, five, six, eight years ago so great for the world, why is gold and bonds why are gold and bonds why is gold 50 below the highs . How long have you been bearish how long have you been were overweight equities. I dont mean but when you come on, i think of you as absolutely, because were at all time highs isnt it hard to be this is why were overweight equities what were saying to people is they should be here given if you ran the strategy and not rich, would you be overweight absolutely. You would, okay. We ran all of our communities not by rich, not by me, but by committee and generally we think the fundamentals are getting worse here, which is why you want to sell into this strength, not buy into it here you dont want to chase it people show up to a bar, an hour before closing, you miss the party, it is time to not do a bunch of shots and catch up. You want to tone your optimism. Unless youre going to the after party. Unless youre going to the after party. Catching up. What is wrong with can i have one for the road please im going out to drive people used to say that. Get a drink for the road. They have to go cups in new orleans. They have drive throughs in new orleans. Unbelievable. Thank you unless you get an uber. Then great benefit of uber. But why did it open so weakly were back to that now why oh, uber sorry, im trying to follow the conversation lets get down to the New York Stock Exchange and jim cramer joins us now. Always have something unique, jim, on your radar or follow on to the conversation we have been having new highs yesterday. God almighty, people were negative. Right i think thats that was wrong. I think that when you lower rates, there say lot of stocks that go up and join the party. I do believe there is not a Single Company i talked to that is going to have a stronger quarter this quarter as they had the previous quarter and i think thats one of the things why, if youre jay powell, youre making youre paying attention to real companies. Not necessarily some beige book or necessarily linked to employment, i mean, i literally do not have a company that is having a better quarter. And i speak to i dont know, dozens of ceos you can say this, i would rather say the stock market is wrong than i would say the real economy is wrong there is a lot of companies in these averages that do spectacularly in slowdown we forget how Many Companies we had to do well in slowdown car max, great numbers why . Used cars. There is a lot of stuff that does badly in a slowdown. Quarter to quarter subsequentially, or year over year. Subsequentially year over year, it is the dollar but subsequentially, yeah. It is just not a good quarter. Not a good quarter in retail, not a good quarter in lending, not a good quarter with the materials, not a good quarter with anything related to housing. The only part of the economy doing well are some of the companies that help other companies do things like a slack. And thats look, i think the real world is much less than the stock market indicates. But if lower rates means expanding multiples, maybe you can hit, maybe it is not about the e, maybe it is about the multiple that keeps amen. Amen were in total agreement again yeah. So thats what keeps i would love to hear from larry on that. Larry always loved that. Yeah, we cant as much. Too bad there is not a kudlow and cramer or maybe hell come back bring that show back for a little bit. Maybe cramer and kudlow. You never know. But larry larry always had a good feel on this kind of thing. Would be terrific. I know. Hes not on enough hes on some other channels. Thanks, jim. We will see you in a couple of minutes. Stay tuned for a big post earnings interview on squawk on the street with Canopy Growth ceo bruce linton that comes your way at 10 00 a. M. Eastern time. Guy has been on our show, hasnt he mmhmm. Several times. Stay tuned. Squawk box will be right back. Goin down the only road ive ever known like a drifter i was born to walk alone youre a drifter . I thought you were kevins dad. Little bit of both. If you ride, you get it. Geico motorcycle. 15 minutes could save you 15 or more. You should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. But youre not mad, because you have e trade which isnt complicated. Their tools make trading quicker and simpler. So you can take on the markets with confidence. Dont get mad. Get e trade and start trading today. The second half of june tends to be challenging for stocks the sectors that tend to far what a morning it has been the news overnight about potential strike with iran that didnt happen and then the news about this refinery in philadelphia lets take a quick look at futures right now ahead of this friday open. Dow looks like it would open up 40 points down s p 500 off about 6 points have a great weekend, everybody. Make sure you join us next week. Squawk on the street begins right now. Bye, bye, bye good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the New York Stock Exchange. Busy friday, reports the president approved and backed off a military strike on iran. Refinery fire in philly has gas futures up eurozone pmi showed some stabilization. Oil on pace for the best week since 16 and quad witching today. We begin with the geopolitical risk for stocks after notching a new record for the s p markets are poised to pull