Transcripts For CNBC Squawk Box 20240714

At the open. S p looking to be up by 1 point, the nasdaq off by 1 1 4 points overnight in asia, japan was closed for a public holiday. No trading or the nikkei most of asia was digesting Economic Data out of china the Second Quarter Economic Growth gdp slowing to 6. 2 , also coming off 6. 4 in the first quarter. Thats the weakest pace in 27 years. Industrial output, retail sales data also fixed Asset Investments were all above forecast chinese shares were down before the data was released. Then they turned positive. Overnight in europe, we are looking at i thought we were going to follow asias lead, pretty much flat across the board. The dakotas is off by 4 100 of a percent. The treasury yield market, the twoyear note 1. 845 . Just mention on the china data that markets responded better to the data for the first portion of trading in asia and europe and weve just sold off a little bit in the last few hours. As you pointed out that was just for june. Gdp for all three months it did see a little bit of an uptick towards end of q2 people questioning whether that can continue the general consensus seems to be theyll need another bout of easing to kind of continue the june momentum which was a little stronger than expected in the last hour, President Trump reportedly considering a move in commerce secretary wilbur ross. This comes after the Supreme Court threw out a Citizenship Question from the census the Census Bureau falls under the Commerce Department. Some white house officials tells nbc news they expect ross to leave as soon as this summer this is not the first time the president has expressed frustration with ross. Their close personal relationship is believed to have let him keep his job thus far. Wilbur a long time friend of the show hes been with us so many times in the years and has been in this role. There have been a couple of moments where it looked like he might be on the in, might be on the out. Thats true for most administration hes outlasted most thus far on a relative basis if you start to think about it like that. Well see the Citizenship Question has been the biggie, and the question is whether he handled it properly. Interestingly because theres still ongoing cases, this is interesting, there are going to be ongoing cases resolving around this for the most part, i think. He would still have to testify there is an argument to you want to keep the people who are going to have to testify on these things closer as opposed to. Well see what happens. Also a big update on the grounded boeing 737 max. Weve been talking about when its going to get in the air American Airlines has removed the plane from its schedule through early november american and its competitors have canceled thousands of flights that were supposed to be serviced by that 737 max the plane is unlikely to be ready to carry passengers now until 2020 this extends the time line because of the time it will take to develop the software and train pilots on the changes. The report saying boeing executives and regulators have expanded their safety analysis to cover a growing list of safety issues. So you know, you remember this happened then investors said its going to be fine by the summer now were into the summer. Its all going to be fine in september. Its all going to be fine in 2020. Its amazing from the getgo how analysts were quick to dismiss an extended time frame for the grounding of the 737 max. Here we are looking at january already. The question is is it now still a shortterm blip, which it may be. If youre going to hold boeing for ten years, you cant even think about this if youre going to i dont want to say play it, this is meaningful. The other point if the delays continue and extend into 2020 is does it cause pressure on the management who so far have been absolutely fine. There was a retirement last week, but two levels of report below the ceo. At the moment, no ones really putting pressure because of the fallout emotionally, financially or in terms of delays in earnings and orders for this. I think theres time to assess the fallout i mean, immediately getting the 737 max, you know, off the ground is of import, but a little bit longer range you have to wonder what kind of impact this will have on some of their other projects in the pipeline, like the midmarket plane. A guy who replaced the 737 max guy was the guy who headed that mid market Plane Development if youre going to move him there, how does that prioritize the next plane to come out we will see. Gilead scientist wills invest 5. 1 billion to raise it. They a the deal includes an upfront payment and a 1. 1 billion Equity Investment from gilead. Daniel oday will join us at 8 30 a. M. Eastern time. The years biggest ipo was shelved on friday. Anheuser busch ab inbev was to begin trading in hong kong this week the company withdrew the offering citing Market Conditions sources tell reuters investors were unwilling to accept high valuations in the orders from u. S. Long only Fund Managers never materialized this was one was always slightly odd on the surface i dont know, Market Conditions seems like an odd excuse, lack of demand completely because were at record all time highs, not quite in asia, but shanghais had a great run yeartodate, so has hong kong how much is this a feature of this issue do you think this is a china slowing issue . I think this was an odd ipo to try and get away to see if they could capitalize on relatively buoyant markets and in a slowing business in the u. S. , beer sales arent particularly exciting at the moment theyre still growing in weve seen businesses spinning off their asia specific businesses before to some degree of success, yum china has done it where theyve isolated their growth in china or asia believing that that part of the business because its faster growing could command a higher premium. I dont know. Weve got a lot more coming up this morning. Coming up in just a moment, this week marks the official start of earnings season. Weve got the big banks reporting. Were going to get you ready for a flood of those reports then we kick things off at 8 00 a. M. Eastern time, we will begin crunching the numbers. Were going to be hearing from citigroup. As we head to a break, heres a look at the biggest premarket winners and losers in the dow. Squawk returns in a moment investors saw markets pass multiple milestones last week ending the record setting run on a high note on friday. Joining us now, Global Investment strategist at pro shares advisers, and brian leavitt. Great record closes on friday. Over the weekend weve seen a little bit of lackluster data out of china do you expect that to weigh on the u. S. Sentiment last week seemed to shrug off any of the kind of mixed numbers there i mean, i was kind of it brought me a little more optimistic to see a little steepening in the yield curve out of the feds comments. If the fed cuts, you want to see the long end go up a little bit. Maybe theyre not pushing on a string i think with decent Economic Data that weve seen, were not going to get blockbuster earnings, but maybe we avoid that earnings recession and stocks hold up reasonably well the record closes are justified. Were in an environment of modest growth, modern inflation and accommodative Monetary Policy that is a good backdrop for equiti equities the at fed thats backed off whenever theyve tightened conditions and chinese policymakers who have come forward with stimulus every time china has slowed neither of those two stories have changed and thats what the markets are applauding. Simeon, small caps havent hit their earn record of late. I think theres a real opportunity there, about 30, 35 discount from large caps remember that small caps do tend to react quite well for fed easing cycles. The challenge there is theres a lot of debt, you know, five times net debt to ebitda on average for the russell 2000 if we get a little bit of steepener, it might be a wise idea to state a quality side of small caps with a little less leverage. With the central bank easing, and coming into earnings season . How are you positioned i think the time for defensives has passed. You want to be in the cyclicals as Inflation Expectations pick up, as the yield curve steepens some you want to be in the cyclicals. Its going to continue to be those companies that true growth, globally that are going to be the out performers thats going to exist until the depths of the next recession into the recovery. When youre talking about going to cyclicals, youre talking about the sort of notion that technology, for instance, because it has idiosyncratic growth could actually be a sort of defensive cyclical play youre looking for pockets of the market that are going to see growth no matter what goes on. Right, thats right, and what you find, if you look at the past cycles, you usually dont see market leadership change meaningfully from the time you get from a flat yield curve to an inverted yield curve into a recession. I think that thats far out. If you look in the 90s, technology was the big winner through the cycle until the end. If you look in the mid2,000s energy was the big winner. We should not expect to see meaningful market change the companies that are the big winners are likely to continue to be the big winners. In terms of retail stocks, prime day, whats your view on the split between online and offline . Big event sort of reminding us to take a look. If you look at the last ecommerce report, youll see a couple of things online sales growing at five times the rate of the overall retail environment the thing that might surprise people is how early we are in this transition. Only 10 of u. S. Sales are online theres a long way to go in the continued disruption of the brick and mortar folks to the advantage of the online players. Look at walmarts struggles. They grow the online side so fast and yet theyre not making money on it. Its a challenge. Walmarts doing well as a stock. You can get some sort of dead cat bounce over the longterm, the margins that are online as the legacy players grow their Online Businesses are just smaller than theyve enjoyed. So walmarts rise is a dead cat bounce in your view . I think it is you saw the challenge with the chief revenue officer and the move there i think you see some real challenges that even though theyre transitioning these businesses, the margins arent there and you have to have almost double the distribution cape the ability to support thek and mortar business. Would you say the same for a costco which largely doesnt have much of an Online Business . You have to have a differentiator, and of course the differentiator in the costco is those surprises you go in there and find something you didnt expect, something that has to draw you into the store, something unique. Banks start their reports today. Are you positive on that sector . The steepening yield curve will certainly help. The banks were facing the challenges of what i would deem a policy mistake by the Federal Reserve last year, so we still have the lag effects of that an the flattening yield curve i wouldnt expect to see robust earnings conditions are certainly improving. Fed backing off, easier financial conditions, dollar stabilizing, steepening this the yield curve. To follow up on the notion that market leadership doesnt change in a cycle, does that mean the laggards stay the same during the whole period . Or should we look this Year Health Care is the laggard, will Health Care Continue to underperform the laggards over the part of the cycle, so what weve seen from the laggards, things like croutes, things like staples, those are going to continue to be the laggards. The value parts of the market need a catalyst, so you know, at different points in the cycle, investors say well that catalyst will be the trump stimulus, and that lasted for a very short period of time, or then more recently the catalyst is going to be deep contraction in Economic Activity and perhaps a recession, and that lasted for a brief period of time then investors always go back into this environment where were not getting to new higher sustainable level of growth, were not going into a recession. Were kind of in this 2 growth environment that hasnt been great for the politicians. Its been really good for the shareholders thats likely to persist. Thanks very much. Simeon and brian coming up, gasoline prices reversing the trend jumping more than 0. 10 over the past three weeks. Why storms may be playing a bigger role than usual. And later, the fake Retail Holiday has begun. How retailers like walmart and target are competing with amazons prime day. Its not a fake holiday. It is a fake holiday. What does it celebrate i will give you more when i get paid again i hate those people who love to tell you money is the root of all that kills ty veheha never been poor, they have never had the joy of a welfare christmas for starters, we provide you with Financing Options for your customers. That way, you can help them buy the things they love instantly and pay over time. And that turns them into serious fans. Hang on, theres more. Want Customer Insights . Weve got those, too. We use data to show you what your shoppers have already bought so we can tell you what they might consider buying next. And you can offer them the perfect products. That ceo gets it. From adding unique capabilities to your companys apps to bringing you loyalty programs, our financial and Tech Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Welcome back to squawk b box. The gulf coast escaped the worst of the wrath of hurricane barry. The storm revealed dark clouds for drivers in the northeast we want to get to Brian Sullivan who joins us with more on that. Good morning, thank you luckily, listen, the storm not as bad as expected here. Flooding still severe there. From the oil and gas perspective not nearly as bad as many predicted. Heres the reason we need to pay attention. Every storm in the gulf of mexico, louisiana, houston, wherever it is is going to be more important to east coast drivers than it had in the past. Why do we say that remember, about a month ago the Philadelphia Energy solutions refinery in philadelphia exploded and is now closed likely for good. That was not only the largest refinery in the east coast, but responsible for about 25 to 30 of all gasoline supply in what they call pad one. That is basically the area from miami to maine in other words, we are now a lot more reliant, not only on imports by ship into new york harbor, but imports from the gulf of mexico via the Colonial Pipeline or the plantation pipeline those two pipelines, which every couple of years we talk about them when theres a storm, guys, they have suddenly become literally the main artery if you will, the jugular for u. S. Gasoline supplies. Thankfully the storm not nearly as bad as people had thought, but every time we have one of these storms, all of our Refining Capacity is now going to be coming from houston and louisiana for the most part for the east coast that means if youre driving in new jersey or maryland or connecticut or massachusetts, youre probably getting most of your gas from a refinery in louisiana or houston so if they flood, if there are storms, all of a sudden, you might really care. How quickly could that react in prices, do you think . Theres 25 days right now of gasoline supply out there, give or take a day or two which is a little higher than expected. If we had had major shutdowns, if we had some pipeline problems, no sign of that right now, but if we did, right now the supplies are enough that we could drive for a week or two. However, were already starting to see prices going up i know a lot of people wanted to see that philadelphia refinery shut down. There were a lot of environmental concerns, it had a very dangerous chemical. The point is people said its not that big of a deal we can make up the capacity. Yes, we can as long as a, those pipelines keep flowing, and b, those refineries on the Mississippi River and in the houston ship channel, they continue to operate so when you fill up your gas, think my gasoline, is it local . Is it refinery to table . Its probably coming from the gulf of mexico now okay. Brian sullivan, thank you, sir appreciate it. Still to come here on squawk box, billionaire tech investor peter thiel is calling for a treason investigation into goo google as we head to break a look at fridays s p 500 winners and losers, a record closing high for the s p as well as the dow and nasdaq on friday through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning, were listening to the bangles its not crisscross if you were watching the beginning of the show, take a look at u. S. Equity features at this hour. Ahead of the market open, we are still several hours away from it, but when it opens the dow looks like it would open up about 24 points higher, nasdaq up well call it 1 1 2 points right now, s p 500 up about two points we will be getting Bank Earnings from citigroup at 8 00, well see where things really land we should tell you that chinas report ago big slowdown. It is the worlds second biggest economy growing at 6. 2 last quarter. That is its slowest rate in 27 years. Stocks in asia were trading lower ahead of the data but ended up turning positive after the numbers came out a little bit of sell on the rumor, buy on the news thats almost the opposite. We had positive data coming out after the gdp number which was better than expected. And last week shanghai was down 2. 5 relative to the u. S. Gains as well. The june date Industrial Production retail sales, fixed Asset Investment all better than expected, which shows the stimulus is. Kicking in. Lets talk tech news. Peter thiel calling for the fbi and cia to investigate what he says are googles quote, seemingly treasonous ties to china. Speaking last night at the National Conservatism conference in washington, thiel posed three provocative questions. Here we go, first, how many foreign intelligence agencies have infiltrated its Manhattan Project for ai second, do googles top executives believe theyve been infiltrated by chinese intelligence and third, has google engaged in the treasonous decision to work with chinas military and not the u. S. Now, thiel sayshed like authorities to ask these questions in a not excessively gentle manner. Thiel did not offer any evidence that google has been infiltrated by china, but he may be referencing googles decision last year to not renew a project with the pentagon. At the time the company said it would not allow ai products to be used as military weapons. Google also came under fire after reports said it was working to launch a censored Search Engine in china, which then google said it was not going to do, but google has not responded thus far to cnbcs request for comment, but its an interesting shot across the bow. Peter thiel is on the board of facebook, facebook in the cross hairs regulators themselves. There has been a bit of deflection within the facebook, google, i dont know if amazon said it publicly but sort of the big tech world, which is to say if, you know, stop looking at us and start looking at china in terms of the you know, people say should these companies be broken up or how should they be regulated and theres sort of this increasingly sort of argument from the Big Tech Companies to say hey, go look at whats going on over there. But the competitive threat isnt china. Now to try to connect the dots between the two i think its a stretch too far personally its an interesting one. The questions seem a little bit accusatory. A little bit . Just a tad but i think its fair to ask whether or not our Big Tech Companies are actually walled off completely from cooperating with chinese authorities i think if were going to ask that question in terms of National Security concerns dealing with Chinese Companies fair enough, i would say larry page and sergei were probably the first executives of any of the Big Tech Companies early on, this is now probably a decade ago almost that said were not going to do business in china originally. I mean theyre also blocked from doing business in a free way thats why youve got chinese Tech Companies because theyre the ones who pulled out, meaning they could have back then said you know what well live with this environment, and they said no, and that was actually a principal decision at that time. Yes, in the past couple of years they did start to look at whether they could return to china and yet have made the decision not to. I think that, you know i think certainly your point there is that for all the ip theft from American Companies were talking about across every sector, not enough discussion is object ceos who accepted whatever the rules of engagement were in order to get some growth in sales in china and obviously years later discovered that a lot have been taken, and Tech Companies dont tend to be in that bracket, google included. It does sound a little bit wild card. Google has less business in china than apple does. If googles trying to make a play for the ai globally and theyre hiring people from around the world, there is a legit mat question to ask who are these people, do they have ties with other foreign entities, whether it be the chinese or other governments legitimate question only if theres evidence to lead to that. I want to think noknow knowig peter that theres something bind these questions. Right, but we need to see the evidence. Meaning he has some suspicion or theres some chatter. Hes wellconnected. That there are people inside fwoog google or people they have hired hes concerned about. For google this is not really like the growing concern about should they be broken up should there be more privacy regulation this is pretty binary. Either hes going to stump up with some evidence and theres going to be a huge investigation or not its not like this is a slowly building kind of wave of antibig tech sentiment. On the tech front new this morning, congress searching for ways to Keep Technology companies from acting like Financial Institutions or issuing their on currency. According to reuters, a proposal is being circulated on capitol hill that could prevent facebook from issuing its hotly debated libra digital coin the s. E. C. Is looking into whether or not libra should fall under its oversight. Well hear more about all of this tomorrow and wednesday when facebook executive david marcus testifies before congress on the libra launch. And youve seen i guess were about to talk about it bitcoin has fallen on this. And all of this, people are looking at it through the lens of trumps tweet on friday or thursday, criticizing crypto currencies as well as libra specifically and questioning whether facebook has the authority to issue a currency without having a bank charter, which would probably be a game changer in terms of how facebook would look at a project like libra. Im sure facebook wouldnt want to fall under that quickly. Banks barely want to be banks. The French Finance Ministry came out clearly against it. It would be interesting to talk to the u. K. Finance minister on the show about it. Lawmakers seem to have gotten their heads around this and pushed back unanimously. Dont you think theres a distinction we can debate this a distinction between what libra represents as a currency and what bitcoin ultimately is, or do you think that theyre the same . I think theyre completely dic different. And should be regulated differently . Yes, because bitcoin theres no entity which issues a bitcoin, whereas facebook and its consortium would be the i dont disagree with you therefore the question is when people look at bitcoin and you see bitcoin fall, is bitcoin falling because the view is if libra doesnt take off, theres not going to be this many digital wallets. Exactly. Or is there an argument to be made if theyre going to regulate libra one way or the other if its a regulatory effort on libra, will they regulate bitcoin, thats a different story. I think one of the bear cases for bitcoin is the moment that Central Banks and regulators started to think it is a genuine alternative currency to the dollar the euro and the yen, you would see regulation that starts to hit bitcoin and its interests, and the reason theres such a quick move against libra is because people fear that could happen quicker and bitcoin ran up initially its pull back now i think theyre two separate entities but regulation of this area will be hard and fast, as soon as it threatens the actual value of currencies. Thats a chart of bitcoin by the way. Its down about 15 or so percent since friday initially on friday on the become of the trump tweet it was up by about 7 , but it did give back some of those gains. Prime day isnt just for amazon this year several other major retailers offering deals this week, what does it mean for investors earnings season kicks off later this morning, we hear from citi well bring you instant reaction to the numbers when they cross stay tuned, youre watching squawk box on cnbc its the most wdeulonrf time of the year 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. Amazon prime day sales event, it has started. Consumers are primed to shop were looking forward to seeing what all the deals are going to be like. I know andrews already lining up the things he wants im looking for a go pro on sale its down about 75 bucks, the black one which i always wanted to get, 400 bucks, down to 324. Are you going to be refreshing all day to see if the go pro pops up its already there. Im say i may do this. I may buy this. A live sale right here. Courtney reagan will join us now with more on what we can expect. Prime day has been underway for about three hours. Looks like andrew is already getting ready here this years event is two full days consumers have plenty of time to shop on amazon and competing retailers. What of consumers told us that theyll do before this event starts a survey found that 76 of u. S. Prime members will shop the event. Thats up from 63 last year makes sense, and then of those plng planning to check out the deals, nearly all of them 98 are going to shop on amazon. 6 in 10 are going to compare prices on other retail websites before they check out on amazon. Theres some competition and more than a third say theyll shop for deals at other retailers. 17 , though, hey, theyre going to check out the stores, too could be deals to be had there mpd says prime day shoppers, primarily female, more likely to be single. Millennials and gen xors, high and low income, though half have Household Incomes under 75,000 for these prime day shoppers and the third have Household Incomes of 100,000 or more. Shoppers are looking for deals on Electronics Just like andrew. That comes first, the biggest category then its apparel. Thats a big growth area for amazon that we know. Thats followed by media and then lastly toys and consumables. While youre shopping for a tv, the consumables make sense, why not add that toothpaste refill to your cart thats how amazon can continue to win there theres a good amount of buyers remorse with prime day adobe says there was a 30 increase in returns for items bought on prime day last year. Perhaps some of those initial numbers that well begin to get on wednesday morning may end up actually being below those totals once you factor in all the returns. Melissa. Thank you lets bring in senior media and entertainment analyst at cfri, gentlemen thanks for being with us in terms of the impact on amazon specifically, isnt it all about signing up new prime members it is indeed. I think these manufactured shopping holidays obviously have taken a huge life of their own in the case of amazon its been the primary catalyst for prime growth around the world, which is estimated close to 200 million. A prime member is superior in terms of the economy that it generates compared to nonprime. Its no surprise that amazon has invested heavily in transitioning from twoday to oneday delivery it is the first prime day that amazon will be getting a test run on its ramped up delivery infrastructure. With so many other retailers offering Free Shipping or 35 or more for instance on walmart or target, what can amazon do to say you know what, aside from Free Shipping, aside from next day shipping, this is what we offer. We offer you for instance discounts on whole foods, amazon fresh, prime video, prime music. How do all these other offerings get showcased . Thats a great question every year amazon keeps tweaking how they perm eutate the differn product offerings. You mentioned whole foods,wer seeing deeper integration with whole foods where, you know, when you shop at whole foods now you can get a card that allows you to shop on prime day, and the product categories have grown tremendously to your question, the Free Shipping is huge on the music side, theyve got a lot of selections. Prime members are really gobbling up all of these features you heard courtney say that 76 of prime members now can use the service. This is growing exponentially. Whats the remaining 24 thinking why arent they jumping on these huge deals on the site july is typically a slow month for retailers. How much do you expect this halo effect on retail overall because people are thinking about shopping, theyre thinking about deals. Theyre now Comparison Shopping and potentially spending those dollars not on amazon . Well, its fascinating when you look at it july has always been the second slowest retail month of the year, and suddenly amazon creates this holiday thats the anniversary of when they sold their first product 24 years ago, and everybody has to jump on the band wagon or lose market share. Now we sort of look at it and say this is the official kickoff to back to school. Amazon has created this event. Macys played, nordstroms played already, walmart and target will be huge players. All across the board, people say now ive got to have real product for july it cant just be clearance im going to compete im going to kick off back to school, and im going to do some business against amazon. Everybody still loses market share to amazon at walmart and target because thats where the business goes, but everybody plays the game. Is this new money thats being spent or are we just pulling forward money that would otherwise be spent are you always going to buy that go pro either way i was eventually going to i wanted to buy this go pro. Right, if im the example, its pulling it forward at a cheaper price. I would have probably gotten this go pro sometime in the fall, maybe for the holidays for the kids or whatever it is but now the go pros on sale, and i want it. Thats a fair point as to whether theres a potential kind of pull forward impact there is, but i think when you kind of rook look at were expe close to 6 billion in prime sales potentially, and a lot of that is due to thirdparty sellers, those small and medium enterprises. To your question, i think a chunk of the Business Amazon is going to do over the next 48 hours is actually going to be incremental. By the way, all these small retailers that are on this platform are also lowering their prices im assuming praying theyre going to be able to get enough volume to make this make any sense. Some of these prices are ridiculous, in a good way for the customer im assuming terrible for them. Last year north of 1 billion, those small and medium enterprises. This year potentially could rise 50 . There are to your point, discounting as well to get the traction, and i would argue the volume is compensating much more for those discounting theyre giving. Were going to have to leave it there jan, tuna, thank you so much. Moments ago President Trump has tweeted and its on chinas gdp this morning he says chinas Second Quarter growth is the slowest it has been in more than 27 years the United States tariffs are having a major effect on china wanting to leave companies for a nontariffed countries thousands of companies are leaving. This is why china wants to make a deal with the u. S. And is wishing it had not broken the original deal in the first place. We are receiving billions of dollars in tariffs from china with possibly much more to come. These tariffs are paid for by china devaluing and pumping not by the u. S. Taxpayer the headline point of this of course very accurate, chinas growth slowest for 27 years since 1992, though at 6. 2 for the Second Quarter, only just shy of q1 of 6. 4 . Still on track for their target of 6 to 6. 5 for the full year as we also know, the june data itself was stronger. Certainly china is slowing, its the question of the delta of how much its slowing. And if theyre slowing enough therefore he can put them this a box in terms of what comes next. Right . When we return, lets talk about a new report we got overnight suggesting that u. S. Companies may be able to sell to huawei again this is all part of this trade war weve just been talking about in as little as two weeks. rgohat the right decision wee ing to debate it and explain when we come back. W . W . Uo huawei plans to lay off hundreds of u. S. Employees grappling with a black list imposed by the Trump Administration expected to Reach Research employees and huawei added to the blacklist in may over National Security concerns a new reuters report says u. S. Firms may get approval to restart sales of huawei in as little as two weeks. The change came after President Trumps meeting last month with chinese president xi. And white house trade advisers peter international var navarro was on squawk box friday he had this to say. The only thing secretary ross is going to allow to be sold to huawei are things they could buy from other vendors worldwide, and so if we dont have that kind of policy were harming our own American Companies so were threading that needle beautifully, and its a relatively small amount of sales in the neighborhood of less than 1 billion, which is small in the scheme of things here to discuss all this, senior fellow at the Hudson Institute previously, and senior director of the National Security council who penned a memo how to redine design from the ground up and protect the u. S. From espionage. Good morning to you both. Good morning. A view by allowing huawei to trade with anybody at all that we are giving them some wiggle room to continue to grow, and that that is a bad thing what do you think . I think the entity list is designed to prevent sales of western and allied equipment, u. S. And allied equipment to companies that are deemed to be a National Security risk there was an executive order stating that there was a National Security emergency with regard to huawei when they, telecoms told they cant sell that equipment and put on the list. And that list is repeated through 42 countries that ar part of the arrangement that also agree to not sell their Technology One of which thats on there is russia so its an interesting how much of this is about slowing huawei down across the board so theyre not going to be in europe, not going to be in africa, no the going to be theyre going to be in china by default, but to effectively give some u. S. Companies room to effectively set the standards for not 3g, for 5g i support that but thats not what this is about this is about not selling equipment to huawei. Its not about not putting your huawei equipment in your networks thats still a debate thats ongoing. Where do you land on that question on that question i obvious werely agree we shouldnt but huawei in. Its not about do you trust huawei or not. Do you trust the communist party not to take the data and do things with it you dont agree with. And i talked to chinese executives and officials has said, andrew if theres was a war between the u. S. And china, dont you think the u. S. Government could wall intel, qualcomm, cisco. Apple. And every other u. S. Company and say we need your help. Is there a back door, a way to check this out, and the companies would comply he said that. Were not talking about a war. Were talking about you go about your business day to die e day to day. Even here. Say something about shes family, theres Financial Arrangements with cnbc and they say we dont want him talking onair anymore it happens all the time in chi e and beginning to increasingly happen in the United States. A guy was fired for liking a tweet about tibet. When you see the co of huawei, so far a handsoff situation. We have not been influenced by the Chinese Government do you believe him finite put out a report interesting thing about that, it went through thousands of pieces of equipment firmware for thousands of pieces of equipment. Some had fir firmware updated. Got a problem . That same problem was moved to another area of the firmware how could it be they could take that mistake and propagate it somewhere else to be hidden . Theres something going on here. A great conversation. Come back. A lot going on and its going to continue thank you. Still to come, can banks bring us more record highs so when they report earnings this week, and well talk to a technician what the charts are telling us and later gileads ceo joins us to discuss this mornings big news a 5 billion deal to boost its ay tedin firm galapagos. Stun were back in a couple 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. 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. New this morning china posting its lowest quarterly growth in 27 years as a trade war hits its economy. And how San Francisco is looking to made highly paid ceos pay up. Plus vaporize. A cnbc investigation into americas ecigarette addiction. The second half of squawk box begins right now announcer live from the beating heart of business, new york, this is squawk box. Good monday morning to everybody. Welcome to squawk box right here on cnbc im Andrew Ross Sorkin along with becky quick and two and a half hours before the open, dow looks like it would open higher. Nasdaq looking to open 5. 5 points higher. S p 500 looking to open three points higher. Of course, getting earnings throughout the morning that may move this around a bit. Citi, first up in about an hours time. Making headlines, china posting slowest growth in 27 years during the Second Quarter. Chinese economy grew at 6. 2 annual pace pressured by the ongoing trade war. The results werent as bad as feared posting some gains positive data on the front of retail sales as well as fixed Asset Investments and other things President Trump is considering removing wilbur ross the president said to make calls to allies outside the white house about replacing ross that changes adding a Citizenship Question to the census that is under the jurisdiction of the Commerce Department. And peter thiel says investigate googles ties with china calling them seemingly treasonous he wants google to be asked if its ai Manhattan Project has been infiltrated by foreign agencies to explain its decision to work with chinas military and that questions should be asked in a not excessively gentle manner. Google has not responded to requests for comments. Thiel made these remarks at the National Conservative conference in washington. The major u. S. Indices rallied to record highs last week dom chu joins us with a look at the stocks that have led that charge. Good morning. We talk about the cyclical or economic sectors being drivers of the market and its the case so far this year on the yeartoyear basis, the performs has been with the Technology Sector of 31 Consumer Discretionary sector up about 25 and you can see here the Communications Services sector featuring a lot of big tech and media, those guys up about 24 on a yeartodate basis. As for the stocks that have been doing it it really matters when the Biggest Companies in america in the s p 500 are doing their fair share or more than theyre fair share. Check out shares of microsoft, amazon and apple the biggest shares, market capweighted index microsoft, 37 year to date. Amazon, 34 and apple 29 poweral a huge amount of gains to record highs in the s p of course, look at value versus growth no surprise here its the growth oriented stocks doing more of the heavy lifting as well versus value. These two etfs track growth and value in the russell 1000. The growth side of things up about 25 year to date value side up a respectable but still underare positiving 17 . Melissa, as we talk about whos doing the heavy lifting it is very much cyclical, very Much Technology and very much the mega cap stocks. Back to you. Thanks, dom chu at headquarters banks reporting results including citi group bank of america, Merrill Lynch chief equity and a senior commentator. How does the bank chart look look at the financials, for instance, the sector, it looks like its improving, and we broke above a down trend line going back to 2018 seen this setup before for financials actually. Tried to lower a year and a half and started breaking ot. One was right in the middle of 2016 in fact, it was the breakout, triggered after the election of donald trump as president in 2016 and also in 2012. Interesting about that is, b bo yields were going lower yet financials were finding stability. Not just on absolute basis, also relative the s ps if 2019, the back half of 2019 rhymes with the back half of 2016 and 2012, we actually should see a good rally for financials, and leadership versus the market when you look, though, at the bank index, like the kbw bank index, for instance, and the spreads, is there a correlation between those charts yes if the curve is going lower, for the most part, youll see financials do a little worse you know all else being equal but the curve found some stability this year and so has the sector and the banks in general. But i will tell you, the leadership within financials is actually more Capital Markets and Life Insurance, which actually is kind of fascinating, given the tenyear yield just plummeted this year and Life Insurance outperformed thats interesting as well. Yeah. Seems like the Unsung Heroes within the Financial Talk about financials think of bank of america and Morgan Stanley not the blackrocks of the world close to 52week highs, for instance, or the insurance stocks. Insurance stocks point out berkshire hathaway, its own animal a good proxy on the overall market interesting, if the rally to the new high has largely been about a collective decision, hey, overanticipated a recession maybe things arent headed in that direction yield curve has been a huge shadow on the market if thats lifting a little, obvious beneficiaries of that because they are obviously so cheap. By the way, the threemonth tenyear curve uninverting tenyear goes out that countrco list of something youre worried about. And closed high of the session. Impetus into the close how this sort of makeup of last weeks record close looking in terms of bullishness i think pretty sturdy just look at the breadth of it rhythm of the market, i dont want to make much of it, often you observe these things and they change right away european closed a couple days and market got traction throughout the day like to say bull markets are boring this has been a slow grind and a drift higher as opposed to this burst of theyasm i dont think people are grabbing for this market letting it go higher reluctantly in a while. Does boring mean tired on the charts what are you seeing . No. A fresh breakout everybodys talking about s p 3000 thats a number. 2940, 2960 and two weeks holding it to me the whole market actually looks like mid to late 16 and mid to late 2012 think about it, the big decline we had in december probably was a precursor to all of the concerns and negative data we had. So the fact that as michael mentioned, the curve is starting to look a little better, suggesting that perhaps the next move on yields could be higher actually rather than lower, even though the fed has a lot of people think the fed are going to cut i mean, the curve is starting to improve, and bond yields stabilize around the 2 range. In terms of market leadership, technology specifically does that Overall Group look strong and wynn that group which subsectors look stronger than others. Last weeks rally was important. Think about it you had actually tech lead and discretionary lead consumer is strong tech is strong thats a good ingredient to have for the bull market and if you start to get financials kicking in as well as industrials, which also dont look that bad on chart. Wheres the rotation . Seeing bids, where does that money come from . Think about the trade here. The relative trends longer term for sectors like utilities, staples and real estate are downward sloping, from 09 also energy has a weak trend materials might do a little better showing some signs within tech, the Growth Software names still look like leadership got to be very selective in semiconductors aswell as tech hardware, be selective the real leadership is the software and services. Amazing how energy, we talk about energy a lot trained from the last bull market cycle that energy is important but actually energy is the least important. Yeah. Kind of arguably an aberration in the mid2000s that was the biggest sector. A combination of cyclical and longterm structure stuff. Yes, waiting 5 or so but probably a down trend as opposed to something that will snap back towards 10 . Last question, whats your target whats the banks target i mean, on the technical side, break out above the 2950 area, round numbers on it. The next projection around 3160, 3180 going out a year from now we think we could actually see 3200 to 3500. Based on the width of the base, also taking overlay charts of prior pullbacks and rallies. Looking at the breadth thrust. What it looks like going out 18 months after that signal a lot of things are clicking here technically. Wow maybe 240 points to the upside on the s p 500 in one year its potential. The potential is there based on a slew of charts im looking at. 80 . Not bad. No. Also yeah 8 in a year is okay. What the market gives you. Up 20 . Another 8 is pretty good. 3500 is what the base counts to 3200 3250 to 3500 the range im looking at somewhere in there. Thank you thank you both. Still to come, bitcoin plunging briefly falling below 10000. Well tell you why, next. Back in a couple of minutes. Dont go away. Announcer squawk box is poncered by i need your attention for a minute. What are you looking for . Is it inspiration . Because shes changing the world. Every post out there is like dream big but when it comes time to take action girl scouts are making a change. Were the risk takers. Athletes. Leaders. Im not saying you cant be part trendsetter, but i am saying you need to be all girl scout. 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. Welcome back a rough few days now for bitcoin. The cryptocurrency briefly falling back below 10,000 up about 17 just in the last week the latest drop following President Trumps criticism of crypt occurrencesies when he took to twitter late last week and of course this week coming up, david marcus from facebook and libra on the hill. Lots of questions about how congress ultimately will try to resolve, or not, how they may or may not regulate libra and whether that will impact the price of bitcoin when we come back well talk about, well, ecigarettes. Vaporizing joining us with a cnbc investigation into americas ecigarette addiction. Dont want to miss it. Stay tuned youre watching squawk box right here on cnbc announcer Halftime Report weekdays noon eastern on cnbc. Big numbers for amazon high hopes for prime day reveal rivals closing the track . Squawk on the street, 9 00 eastern. Welcome back to squawk box. Local officials across country are cracking down on the public use and sale of vape products. San francisco home town of the vaping Industry Leader is with us recently enacted the countrys first blanket prohibition of ecigarette sales, and Carl Quintanilla sat down with the founder for a cnbc documentary on the vaping craze. Welcome home, my friend. Nice to see you here. Thanks, guys. Big deal. Fascinating story epidemic use among teens in the country, pretty rough. One of the first news teams to get a look inside a juul factory to meet the renormous demand for the product. Talked about the role in the epidemic of teen vaping, one of the companys cofounder an epidemic we saw across the country in all kinds of communities, urban, royer rural, wealthy and poor. Juul is the fraction of use of vapor products by minors. I think we get a lot of the attention and criticism because we are the biggest brand, the biggest manufacturer, but were certainly not the only product out there. Reporter its not the only but it is the most popular ecigarette among kids kids dont think theyre using any cigarette. They think theyre juuling. Reporter presents their own internal data argues percentage of minors is a small fraction of total minor use, your reaction is look, we have other data that suggests Something Different its not a trivial portion Scott Gottlieb a paid contributor and board member of pfizer said it was juul that triggered the vaping explosion among adolescence. For an indepth look at this 10 00 p. M. Eastern time and pacific vaporized americas ecigarette addiction. I like the story, a cultural story. These families have stories to tell its a tech story. Two stanford grad engineers said they are smokers themselves said why are we doing this . There must be a better way to deliver nicotine and, of course, the money. Altria put a huge amount of money juul stopped flavors . In stores in this country. Yet you can still buy flavors for their actual devices from everybody else yes. How did that square that circle the industry is so fragmented some sketchy from countries we dont have much control over thats part the industrys got to consolidate and set rules. Why i think thats why juul opened their doors to this. Having spent the time you have on this where do you land on the Health Concerns theres no way to know. You need a tenyear study of nicotine use and gottlieb said this on this desk many times i do think it helps people get off the combustible cigarettes and saw that really in the uk. The government is actually promoting this product. The growth kind you spent a lot of time for this documentary in the uk. The growth we know about it, obviously. Juul came about later in the uk and its taken off quickly. Whats the difference between the u. S. And uk . Lower concentration of nicotine in the uk pods. Right. So even if you get to a point where you want to adjust it, theres always an obvious adjustment the u. S. Could make that the uks done that is a lower amount of nicotine per hit . Juul argues, people truly addicted need the nicotine you need to have a decent amount in the puff to get you to switch the theory is over time you could graduate down to a lower dose, lower dose even go to zero and sort of get the hand feel before you finally wean yourself off of this incredible drug. From the time altria made its investment in juul to now, a lot of hair on this investment where do people think investment is at this point at a standstill when it comes to companys investing in Cigarette Companies by hedging, or putting their own dollars in it . Last week gold mapp upped altria to buy, time to buy tobacco stocks overlooking the San Francisco ban. Just looking at the opportunity overseas if they can crack india, crack china and sell, i dont know, hundreds of millions of these units to people who smoke a pack a day, thats really going to end up being an international story. A great story, carl thank you. A culture story, a business story and so much more check it out tonight 10 00 p. M. Eastern time and pacific nice work. And coming up, taxing wealth how one u. S. City is taking aim at highly paid ceos. First a break. Look at equity futures looks like were building on record closes from last week u watching squawk box on ever to help them get the things they love instantly. Our data provides insights into what your shoppers have already bought. So you can offer them what they might consider buying next. Our financial and Tech Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Weveryone, looknk isntat your phones. The design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. Still to come on squawk box taxes wealth. How San Francisco plans to make ceos pay up in a big way, and uk chancellor joining us instudio talking about the biggest issues facing the Global Economy and later Bank Earnings citigroup set to take off at 8 00 a. M. Instern time brg you the reaction squawk box will be right back. Welcome back to squawk box. A check on how we set up the open monday morning. S p up 37 on the dow nasdaq up by 8 points and in a half hours time results our citigroup first major bank to report could see the numbers change then meantime talk taxes. One of our favorite topics on this program a major u. S. City is taking aim at ceo pay and others could follow robert frank joins with that story now. Robert good morning, andrew. Members of San Franciscos board of supervisors approving an excessive ceo salary tax the tax applies to any Company Whose ceo makes at least 100 times the median pay of its San Francisco employees. Now, companies would pay between 0. 1 and 0. 6 of additional tax on gross receipts in San Francisco. Thats on top of the current city tax of up to 1. 3 on gross receipts the tax face as vote on the spring ballot. Authors say it will raise up to 140 million a year which will go to fund a new Mental Health program. This comes a year after the largestever tax increase in San Francisco. Proposition c taxing companies to help pay for Homeless Services the revenue from that tax is actually still tied up in legal challenges portland actually became the first city in the world to basically tax highly paid ceos and, of course, many people in San Francisco blame the tech boom and highly paid ceos for driving up housing and living costs, of course adding to that huge homeless problem in San Francisco. Others warn that San Francisco risks chasing away companies to more businessfriendly states like utah or texas its its interesting anyone whos going to San Francisco knows that the homeless problem there, between 8,000 to 10,000 homeless in San Francisco. Somethings got to be done i dont know that this is the way to solve it, but its sort of emotionally satisfying for people to blame the highly paid people for gentrifying San Francisco, increasing housing prices, therefore, lets tax them. Continue this conversation. For more on this proposed ceo tax, welcome jared well, a senior policy analyst for the Tax Foundation center for state tax policy also Jared Bernstein is here served chief economist to Vice President biden. Bernstein first. Robert has said maybe this isnt the way to do it do you think this is the way to do it . I think its the second best way to do it its better if you can have a higher level of government administer this type of a tax but the fact that its a 0. 1 tax against a relatively narrow base, groat receipts within the actual city of San Francisco, research on kind of taxes that Push Companies out are much more aggressive than that glad robert mentioned the portland tax that is somewhat similar to this a surcharge on profits and havent seen down sides and its raising the revenue its supposed to raise. I want to second best. And you said it yourself. It probably wont be a significant tax and portland its race raised 2. 5 million to 3 million, and its a drop in the bucket is it really just symbolic as opposed to economically meaningful no. It is i wouldnt say its economically meaningful, as small as you say but administratetively meaningful because the earmark, dollars here, are going to pay for the Mental Health services that the taxes is constructed for, and i think we said it was going to raise somewhere between 1 million and 150 million, with an m talking ms not bs. Right. Apparently about what it could cost to pay for these services i actually think its a good, small bore idea but bet fer it was administered at a higher level. And i imagine you think this is a terrible idea my question is, what would you do to fix the problems in San Francisco if this is not the right answer problems in San Francisco various. Homeless problem, significant in San Francisco. A lot of that has to do with things other than tax. Its almost impossible to build in San Francisco zoning ordinances are tough. They want you to build single occupancy homes. Detached homes in a city that has a huge housing shortage. A lot of things you should be doing in San Francisco hey, revenue may be part of that, but you have to consider what this is doing, because this tax is not going to change ceo compensation ceos are not necessarily the most sympathetic population but no ones going to change ceo compensation around this what they may do is change their employment patterns within the city, because its your median San Francisco employee so you drop some of the lower compensated employees, push them out of the city and then you dont have to pay the tax or dont pay at much. Push back on one point the idea this is on a narrow base this is on gross receipts. Gross receipts are all receipts of the company that are attributed ed td to san francio a broader base than profits by gross kreets have lower rates than Corporate Income taxes. A significant tax and more that that, headquartered in San Francisco top rate not 0. 6 its 2. 4 . What weve seen in San Francisco, the types of companies that face this tax are banks and retailers because of highly paid ceos but the local workforce is not as well paid. Look at the Tech Companies everyone says none of them would get hit, because the median pay in San Francisco is so high. Thats right. Yeah. I mean, a couple of things first of all, my understanding is that its gross receipts within San Francisco. Correct. Still considered i consider that a pretty narrow base and jared makes two, one good point and one questionable. The very good point we should all listen to from the other jared is this idea that at root housing is such a significant problem and it intersects with Mental Illness as well, and i think economists on both sides of the aisle would love to see loosening restrictions on zoning thats not going to happen in San Francisco anytime soon so theyre faced with Mental Illness, serious situation now, so they have to do something. Right. The other thing i would push back on is this notion that somehow youre going to end up laying off lower paid workers. I mean, hypothetically, perhaps, you might end up lowering ceo pay or raising median pay. Theres zero evidence far as i know jared can correct me if im wrong. Zero evidence for the phenomenon he is concerned about. Its a possibility, but its certainly not anything ive seen in research on this. A practical question. Whats the chances this actually happens . Got to pass a twothirds vote for the general public in the spring most of the general public in San Francisco like we saw with proposition c supports higher taxes on the wealthy and companies because theyre not paid so the political analysts and pollsters in San Francisco say it has a very high chance of passing. I dont know what the two jareds think about, but once it passed the board of supervisors they said pretty much done. Are they expecting legal challenges if it ensues . Absolutely. Saw it with proposition c and passed, seem fairly tied up in court all that money still tied up in court. It cant be used for anything. Thats expected to happen here as well. They try to pass a tax like this in 2014 and i believe it did not pass in california but this is San Francisco. I suspect it will. And quickly, at the national level. Ceo pay compared to median worker has gapped up a lot over the last two, three decades. Whats driven that and should it be adjusted for by some kind of federal rule now disclosed the big changes. S. E. C. Required it to be disclosed what the gap is. You can actually target it with a tax. Yeah. I think we should at least throw out this number. Used to be 30x top comp to median pay now its somewhere between 300 and 400x right. Its exploded. The reason has to do with, a lot to do with just the inequality story for which there are many explanations weve had relatively stagnant median pay and excessive increases at the very top of the scale. One place youve seen it a lot is tech and finance and that takes you right back to San Francisco. Thank the two jareds. Jared w. , jared b. Thank you. Appreciate it. And robert. Thank you. For bricki inbringing the st coming up, Philip Hammond joins us live for a stake on the euro economy trade, brexit and much more. Dont go anywhere. Squawk box back in a couple. And most of that debt is actually from credit cards. Its just not right. But with sofi, you can get your credit cards right by consolidating your Credit Card Debt into one monthly payment. You can get your Interest Rate right by locking in a fixed low rate today. And you can get your money right. With sofi. Check your rate in 2 minutes or less. Get a nofee personal loan up to 100k. 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. Dont get mad. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Welcome back to squawk box. Investing 5. 1 billion to raise its stake. The two companies partnering to develop and commercialize treatments for inflammatory diseases and other disorders the deal includes an up front payment of 3. 9 billion and 1. 1 billion Equity Investment. Gilead with a programming note joining us at 8 30 a. M. Eastern time a first on cnbc interview. And planning to layoff hundreds of u. S. Employees as it grapples with a black list imposed by the Trump Administration the layoffs are expected to hit Research Employees in texas, california and washington state. Huawei added to the blacklist in may over National Security concerns a new reuters report says u. S. Firms may get approval to restart sales to huawei in as little as two weeks. That change came after last month the meeting with chinas president xi. And investigating treasonous ties with china by peter thiel he posed three provocative questions he says should be asked of google. First, how many foreign intelligence agencies infiltrated this Manhattan Project for ai and second, do executives believe theyve been infiltrated and third, involved in the treasonous decision to work with chinas military and not the u. S. Thiel would like the questions asked in a not excessively gentle manner. He didnt offer evidence google hasnt been infiltrated by china on any level but may be talking about not renewing a contract with the pentagon at the time it wouldnt allow ai could be used for military items. And google has not responded to cnbcs requests for comments. And i want to believe theres some substantiation underneath this if youre going to come out and say this as publicly as he has, theres something underneath it, and i dont want to say its hard to believe there is, same time we talked earlier, google was one of the first major u. S. Companies after put in a box by china to say were leaving not going to do business here. At this peoint in time, on te broader question of safety, to ask what security is surrounding these sure. Then argue ask of facebook and amazon and apple, a huge business in china. Bringing all sorts of hopefully smart people who will you know, educated either in china are 0 the u. S. But may have connections back. A lot of companies have had ips stolen from them a much more. Pointed has to be followed up. People inside, not stolen moles. Sharing ideas, we need to see the evidence of that. Of course. Its a very strongly worded accusation and as you say, need to see followup well see. New reports this morning suggest boeing could face more trouble. Phil lebeau joins us from chicago. Whats the latest . Reporter melissa, take the news wall street journal article speculating we will not see the 737 max back in the air until early next year. Then you have american yesterday doing what united did late last week and announcing it is scrubbing the 737 max from its schedule to the beginning of november so when you look at the three u. S. Airlines that fly the max right now southwest is at october 3rd but many believe thats going to be moved back relatively soon. You have american and united in the beginning of november. Guys, we should point out, there is zero zero confidence that these planes are going to be back in service by november in fact, even though boeing has said, look, we expect to have all of the fixes done by the september time frame, thats even loose i get no confidence when i talk with people. I hear no sense of, yeah were close. We think we have this in hand. Instead, its a case of, were working through the issues one at a time. Thats why many believe, look, this may not be finalized in terms of applying for recertification until late this year and then once that process takes place, which could be anywhere from a week and a half to 45 days i mean, theres no set time frame there, and then even after that happens, guys, its 30 to 45 days to get this software in the planes to get the planes through maintenance, because theyve been sitting idle for, what . Three months now it will be longer by then. This is why most people are saying, look, if you see this before the end of the year, that will be good news for boeing the reason the stock is holding up, guys, weve talked about this for a couple of days now. This stock is going to hold up as long as production remains at 42 737 maxes per month concern among analysts, getting to a point given the backlog of planes already built plus everything happening they may have to bring that production level down, and that would bring the stock down. Quickly, implication on management is there any and, two, what does it mean for the airlines that are going to be potentially in a little bit of trouble come christmastime and the holiday stretch when they may not have all the inventory youd want start first with margaret replaced the head of the 737 program. Another brought in to fill the role and hes been with boeing since 1983 i was talking with one longtime boeing executive over the last week, and i said, give me sort of a thumbprint in terms of mark and they said if i had to call him a mr. Fixit thats the term i would use. Moved around in a number of highprofile positions maybe not positions you or i would know but somebody they have a lot of confidence in. Now hesin that spot the focus is how do we get the max done . In terms of the airlines, andrew, theyre in the same spot they were in this summer the problem here is that, remember initially you had, what, 14, 24, 34 of the planes ouch service for the three u. S. Carriers that was early in the year well, the schedule was for them to receive more maxes between march and the end of the year. So now theyve got to take those out of the schedule. They are in a pinch. Especially those three u. S. Carrierss they do not have the capacity that their competitors do and the busy Holiday Travel season is the one that they would love to have happen. Do you see this story ryan air, i dont know if you saw the story. A picture posting that ryan air tried to drop branding of the max on a flight. There was i guess called an aviation spotter took a picture of a plane that used to say 737 max and literally it was stripped out yes this is andrew, what we were talking about. You know that when this plane goes back into service, even if there is no reference at all to the max on the plane, there will be somebody who will be at a gate getting ready to get on a plane and they will say, what kind of plane is that out there . And the gate agent or somebody will say, thats a 737 max, and, boom then it goes on social media nobody told me im getting on a max. I dont want to get on a max this is exactly the problem that the airlines will face when this plane is certified and ready to reenter service thank you very much, phil. President trump tweeting late last night. Were doing great economically as a country number one despite the feds antiquated policy on rates and tightening, theres much more room to grow. Joining us, Philip Hammond, uk chancellor thanks for joining us. Wanted to start on the broad topic of Central Bank Independence the president has criticized the fed heresy youre well aware wa many, many times is the case loud and clear for keeping Central Banks totally independent . Yes, i do for us only a 20yearold story but its positive, improved stability. Its a good thing, and im very much supporting Central Bank Independence and would hope that we will see more of it, not less of it, in the future. The president often criticizes the ecb japan sometimes uk as well as if the Central Banks are targeting their currencies to give exporters in their own regions an unfair advantage. Do you think thats a fair criticism . Its certainly not the ka is in relation to the bank of england. The target is clear. Its an inflation target symmetrical target and the bank of england has done a pretty good job at maintaining a focus on that target want to talk about big tech, chancellor last week france introduced a tax on big tech, which was 3 of french turnover for companies with revenue over 750 million euros. Should the uk and the u. S. Consider something similar weve been very clear we would much rather have an International Solution to this problem. There is a problem because consumers in europe and elsewhere are not prepared to tolerate very Large Companies making very large revenues in their markets and paying no taxes at all locally the problem weve got is that the International Tax system was designed in the 1920s and 30s it was designed around the shipping of physical goods and it does not work well we in the digital age. By far the best solution is that we come to a new International Agreement and then we wonts need these National Taxes, but both the french and ourselves and the spanish and one or two others announced National Taxes on a contingent basis, in case we dont reach International Agreement. I should say were meeting in two days time a in france meeting with secretary mnuchin to have another go to try to thrash this out and find about International Solution. Fair to say the likes of facebook, amazon, google, apple, are top of the list in terms of those that are gaining too much from the lack of this tax . Of course these are the big players whose Business Model is based on the acquisition of data and interaction with consumers and theres a perfectly understandable argument that if your Business Model is about interacting with consumers, collecting data from consumers, then you are making, youre generating value where those consumers are, but those companies do not, in fact, pay any tax where their consumers are. Whats your take on libra well, its potentially a positive, transformative step, but it also has the potential to deliver great risk in to the system how well, because if its not properly regulated it could become another channel for money launderers, terrorists finances, organized criminals. Do you think of it differently than bitcoin sorry differently than bitcoin . It is different because its owned in a different way from bitcoin. Look, weve made the decision in the uk were going to engage with this. Were not going to turn our back on it or try to stop it. Were going to engage with it and try and work with others to ensure that it is effectively regulated, and if it works, and its properly regulated, it could be transformative in operating payment systems, for example. Could be a have positive thing. Libra was brought up during Jerome Powells testimony last week a lot of interest and President Trump said by a tweet that perhaps facebook would need a banking charter. Would you agree with that move that if there is this issuance of this alternative currency, that the company issuing it would need to be a bank . That is an issue for the regulators we have an independent regulatory system as you do and essentially thats an issue for the regulators to determine. Not for politicians to determine. But it is very important that anybody thats operating any systemically important structure and this could be systemically important, is properly regulated and appropriately regulated. I wanted to move on and talk about trade. If the fred president at the sto the last sought uk and european support in his trade battle against china, would he have gotten a warm reception weve always said and i think i can speak for europeans and the uk we understand the concerns the president has about chinas trading practices. As china gets bigger and more important it has to comply with international norms, it has to play the game. What weve never ay greed with is the approach of using punitive tariffs as a root to resolve this issue we think that just leads, as it has done to a tit for tat spiral making everybody worse often the problem has to be solved the chinese have to accept that there are things they need to do differently. And we very much hope that this, there will be an amicable solution i think if the two president s can get together they can fix this do you hope that . Do you expect it, though i hope it and i expect it i know from talking to both sides that both sides really do want a deal. Theres a genuine desire on both sides to get this fixed. Its very important for the rest of us as well, because china and the u. S. Are the two largest trading blocs, but for the rest of the world a great deal hinges on this and the fallout, the damage, will be huge if not fixed. One of the few countries in the world where the president has open and positive 0 rhetoric on the topic of trade is the uk. Says he wants to do a u. S. uk trade deal after brexit. How optimistic are you that can be delivered wimg a peri eed wia ermdof a year after brexit i dont think its realistic. Trade deals are intrinsically complex and what i hear the president say as well as we want to do a uk u. S. Trade deal, i hear the president say, america first. The president s idea of a trade deal may not entirely coincide with some people in the uks idea of a trade deal theres going to be Big Questions about how we manage access for farm produce, how we deal with different food hygiene standards we have, different farming practices. There are very deeply entrenched views about some of this stuff its not just about economics. When you come to issues around animal welfare, very deeply held views in the uk. So i think it can be done. We should be ambitious, but i think weve got to be realistic its not something were going to do in five minutes. Youre here in part to meet some Financial Services companies that have a presence in london. Yes. Do you fear the shortterm outcome of a Nodeal Brexit for those companies in london or also the longterm outcome i think the shortterm outcome is less of a concern right now, because all of these big players, the goldmans, the jpms, have done what they need to do to make sure their businesses can carry on operating in any brexit outcome in the short term. So i think the shortterm thing has largely been mitigated but over the medium and longer tomorrow, theres concern. If we dont have a deal allowing us to continue to access european markets some may move some may come back to new york and some relocate into the europeanunion. Chancellor, in two weeks a new uk Prime Minister. Do you expect nine days. I know. Do you still expect to be chancellor no. I will not continue in this role under the new government but i will continue to take a very close interest in brexit and the way its managed and in the Uks International trade and commercial affairs generally and i will continue to be a member of parliament the new government, the new Prime Minister will have majority of two or three in parliament and ill be one of them so a lot of power rests in Parliament Going forward. Are you suggesting you might make life difficult for the next Prime Minister thats not my desire. I want to work with the new Prime Minister the new administration so long as they are focused on doing the things that will strengthen the uk economy and make it resilient in the future, i will be fully supportive but if the new government tries to drive the uk over a cliff edge called no deal brexit i will do everything i can to stop that. Thanks for joining us great to see you uk chancellor Philip Hammond. Coming up, expecting Quarterly Results in minutes time Market Reaction straight ahead stay tuned youre watching squawk box on cnbc i switched to liberty mutual, because they let me customize my insurance. And as a fitness junkie, i customize everything, like my bike, and my calves. Liberty mutual customizes your car insurance, so you only pay for what you need. Liberty. Liberty. Liberty. Liberty. Welcome back citi group Second Quarter numbers hitting. The bank earning 18. 8 billion in revenue the forecast was for 18. 5 billion. Eps reported, is reported at 195. The forecast was for 180, but theres a oneoff gain in there for trade, and gained about 350 million for that not sure analysts really had that in. Its a positive one off bid if you strip out the eps is more like 182 nonetheless, a beat on both lines. On the headlines, good expense control down 2 . Return on equity good. Expectative tax rate, just below, 22 a little extra help. Forecast at 23 . What about the core Interest Rate affected parts of the business well, net interest margins coming in at 2. 67 the expectation was for 2. 71 . A little behind forecasts there. But loan growth strong up 3 deposits strong up 5 . So offsetting that effect a little bit credit, of course, a key area of focus, given how late we are, potentially late in the cycle pup 16 year over year 6 higher month over month feel its relatively on the surface, but also stable in general kind of the longterm trends and also very fast growth in their consumer cred irt cait Business Trading revenue at the Morgan Stanley conference recently guided that would be down single digit. It was down 5 year over year for fixed income plus equities when you strip out the oneoff of trade web fixed income down 4 equities down 9 soft down single digit not as bad as it could have been, perhaps, might be good nor other banks and banking revenue guided down midteens came in down 10 the stock higher premarket giving those beats on both the top and bottom line. Up 1. 1 . Joining us for instant raeactio to numbers is director of research and good morning to you. Whats your take on these numbers . Yes well, on the surface, not too bad. Revenues came in slightly ahead of expectations here we had what looks like a decent quarter. Of course, we expected some decline as citi mentioned and you mentioned in fixed mccurrency Commodity Trading thats not a big surprise. A terrific quarter for equity Capital Markets. Equity is not so much in trading necessarily but in Investment Banking. A terrific ipo quarter the backdrop was there for a Strong Quarter over 60 ipos in the Second Quarter and over 25 billion raised a good backdrop there. Eck m not a hu ecm and what about loan growth and what youd look for on the call what it means for the broader sector thats certainly a big topic given what we expect the fed to do later this month. Banks are absolutely under some pressure here with the yield curve. If our expectations are that the fed does lower later this month, ironically, that will actually steepen the yield curve a little and be a bit beneficial for banks particularly if the tenyear yield moves up a little bit. Overall, the lending environment hasnt been that stellar either. Weve had a lot of uncertainties for corporations a lack of Business Investment spending and really that environment and their take on it will be pretty critical as well as their impact from rates of course, citi is one of the least asset sensitive banks among the large ones slightly lower term Interest Rates have less impact than say a bank of america. The stock is up 37 or so up year to date. Where should shares be valued at this point price to book is 0. 9 5. 1 is the other where should we stand . Right shares have done very well this year, year to date 37 , versus 20 for the 500 over the past year only up 3 perce percent versus 8 for the 500. I value citi at a discount to the other major global banks they have a higher risk component particularly with the last hand operations that added some uncertainty in volatility to the operations. A lower return on equity generally than the other banks and lower Revenue Growth theyve targeted, a 3 theyve frequently missed over the last couple of years. I think it deserves a trade at about a 15 to 20 discount to the other s stephen, how much can you extrapolate from this report than what well hear from the others i think as you look at the fixed income, the big swing factors like fixed income, currency, commodities, trading, were looking at a pretty soft environment in 2q. Citi tends to be a bit less of a bellwether among the major banks. Theyre among the lead tables. Fifth in Investment Banking fourth in m a. A global powerhouse in Global Fixed Income one to take watch, but i tend not to look at citi as a bellwether for some Investment Banking or other areas stephen, thank you for joining us thank you coming up, new contract talks between Union Workers and the big three American Automakers are about to begin. Why it could be a rough road ahead nor negotiations and we speak with Michigan Democratic senator gary peters on what he thinks American Manufacturing can really learn from the National Institutes of health its a conversation you wont want to miss stay tuned youre watching squawk box on cnbc you run a business, that means a lot. We create Financing Options for your customers. To help them get the things they love instantly. Our data provides insights into what your shoppers have already bought. So you can offer them what they might consider buying next. Our financial and Tech Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things 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. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Welcome back to squawk box this morning amazon kicking off its fifth annual prime day last years its biggest ever account Analysts Expect amazon to post solid q2 results echoing that analysis, powering large growth Merchandise Sales value and high membership penetration in the u. S. And international markets. One of the big goals is to attract new prime members. Not just to prevent the churn and everything else. Its to bring in new folks. Do you have prime manageship more for free delivery or more the tv stuff for me always been a free delivery story how i started i was an earlier prime i cannot imagine that this company is making money off of the sorkin family, given the the paper clip the way we, the shipping situation. We do the card, credit card. Get 5 off we are trying to maximize value here very good. Good. More of a tv thing. Tv for you . Yeah. A streaming customer. Right . Yeah, but still go for both but thats what attracts me. Its an torreimportant weekr the auto workers set to begin with the road ahead anything but smooth. Phil lebeau joins us again with more keep the mics open. Pop quiz name the last time we had an extended work stoppage with the uaw. Not talking a couple hours or a day. Talking about weeks . Guys take a guess five years . No idea. Nope. 1998. What . 1998. Wow. Think about that. Think about that the question becomes, do we see one here in 2019 thats because today is the formal handshake between the uaw representatives and representatives from ford. See a similar photo op perform between General Motors representatives, feet yau chrysler and the uaw when you look at this negotiation this year, three things stand out in terms of the issues out there worker tier levels how long it takes for entry worker to get up to full pay the uaw wants that condensed use of temperature error hiorar. And health care costs. Health care part of the issue part of this negotiation, yes. Why might we see the end of labor peace . Could we see labor trouble brewing . A couple of reasons. Auto profits slowing down. Auto production is at a plateau and then you have the gm plants idled. Scheduled if they cant reach an agreement on a contract, when this contract ends in september or november, i should say, youre likely to see those plants fully close theyre idled at this point. A couple of automaker stocks to keep an eye on here. First off, General Motors. This contract ends november 15th wont see heavy negotiation until probably the begins of november do a lot of negotiating but the easy stuff they solve first. Look at shares of ford remember, ford has the most uaw workers in the United States really, all of the automakers, the big three, this is going to be one of the more difficult negotiations, guys remember, the last two contracts the industry was growing profits improving. A little easier to say to the uaw, we can make concessions or come up to the level youre looking for. Go back through restructuring Auto Industry back in 2009 and also 2011, those guys were coming out of bankruptcy uaw had to make deals. Very little pushback now back to the late 90s, last time we saw this kind of dynamic where the uaw will say, huhuh we want a Little Something here. Fair enough phil, thank you for that i got it wrong so off on the dates. I would have never guessed. So long ago, it is a long time ago. Talk more broadly now about revitalizing u. S. Manufacturing for that welcome senator gary peters of michigan he is the Ranking Member of the Homeland Security committee. Also serves on the Armed Services commerce and joint economic committees. Good morning to you this morning. We just talking about this by the way, did you know that, senator . I dont know if you heard that report i did yeah being from detroit, we follow that closer than most, but its correct. Its fairly straightforward negotiations in the past likely a little more complicated now. So, senator, where are we i mean, sort of put this whole thing in context for us. Manufacturing generally yes. What really is my focus weve seen manufacturing decline in the United States relative to around the country, other countries have seen that increase im particularly focused on manufacturing, because i believe you cant be a great country unless you actually are making things, and making products that you can sell around the world. We need to have a focus. We havent had a focus, National Strategy or policy on manufacturing ever if you look at our international competitors, they take it very seriously. Whether its the south koreans or germans and other countries that have manufacturing policies i think its very important for us to be more focused than we are right now. Senator, do you think its a myth when people say, look these jobs are never really coming back to the United States, and that actually we dont want these jobs . Well, i think, one, it is a myth, because we can bring those it jobs back particularly with manufacturing of today manufacturing is a whole lot different. Its certainly not your fathers or grandfathers manufacturing plant. We have to look at a new paradigm even different than the 20th century. Its not about just finding the lowest cost labor. Its about integrated technology, particularly with Machine Learning, Artificial Intelligence its transforming the factory floor. That means jobs can come back. Those jobs will be different you have to make sure youre training folks to deal with the new technologist thats part of why i think vis Natural Institute of manufacturing, debidentify the b and fill it and train. We all want more jobs, better paying jobs. Right. There is an argument this is last centurys war meaning when you think about all of the robotics and ai and computers that are being, and technology that is going to be powering manufacturing, that maybe this is not a human game well, theres still humans. True, fewer humans for every level of productivity but still humans will monitor the robots, monitor the advanced machines. The amount of data youll get off the factory floor now, that Machine Learning can process, but still need humans to direct that so the job changes the nature of the job. The training changes thats why right now we have manufacturers across michigan who have job openings but they dont have people with the right skills to fill those jobs and that requires understanding of both robotics as well as Machine Learning and computers. Senator, im sure you know this very well General Motors, you know, recently cut some plants and a number of workers really trying to get ahead of things in many ways but criticized. Where do you land on that issue . The criticism is warranted and youll see that brought up you mentioned the uaw negotiations going on. We have excess capacity in the United States and yet part of that is because of capacity that increased in mexico. And General Motors case building the new blazer in mexico that blazer could have been built in the United States with the excess capacity that existed in this country and i think you have to have a focus on making it in the United States. You mentioned Ford Motor Company in your opening there. All of the vehicles that are sold in the United States by ford are actually built in the United States. You can build vehicles in the United States with american labor, and do it in a Cost Effective way, and so i think some of that criticism is very justified and youll see it addressed in the labor negotiations. When you have conversations with management at gm and management with other Car Companies in your state, what do they tell you . Well, you know, ive raised these issues with them, and were going to keep pushing to have that production here. I think they can do that especially with the changing nature of manufacturing we talked about earlier these shop floors are a whole lot different. Clean, highly automated and skilled workforces in the United States we have the highest productivity per worker in the United States and a highly trained workforce got to make it work for us even more highly trained and expand the numbers going into manufacturing. I believe we can compete with anybody in the world how do you feel when you see President Trump call out particular company, i dont know if you saw Lockheed Martin actually changed its decision as a function in large part of the president calling out that company from where theyre going to manufacture some of their products well, i hope companys need to make decisions based on the economics but hope they focus on the fact and understand the fact American Workers are still the most productive folks in the world we have to continue to increase productivity and should make every effort to, whatever clearly theyre selling in the United States should be made in the United States, but because of the quality of the products we produce here that also makes some very good in the export market. Senator peters. Thank you for your time this morning. Thank you. Appreciate it coming up, earnings season is under way with st. Groouciti reporting a few minutes ago. Off the market highs when we come back, what its like to do business as a big bank today on wall street. The war for talent with big tech, and whether the Trump Administrations assault on regulations means were actually in a new golden age ofanng bki stay tuned youre you watching squawk box on cnbc. Plike. Zelle. To conveniently makesend money sier, to your babysitter. For overtime. Or pinacle, to tap into your organization in the office, on the go, or in the stopandgo. Pnc make today the day. Welcome back to squawk box. Futures pointing a little high of course record alltime closing highs for all three indices on friday. Closed high of the session 1. 5 for the duh last week. Up 41 points this morning. S p up 4 nasdaq up 11 comes off the back of slight gains in asia. More pronounced earlier in the session shanghai finished up 0. 4 europe at the moment up 0. 2 of 1 . This years biggest ipo shelved friday anheuserbusch invest Asia Business expected to price last thursday night begin trading in hong kong this week. Instead withdrew the offering citing marketing conditions. Unwilling to accept high valuations and orders from u. S. Fund managers never materialized. Coming up, a lot more on squawk. Bernie versus and reporting earnings talk about the culture at wall streets biggest banks and bring you up to speed on the twitter feud between the president and Bernie Sanders and the ceo and daniel oday on the companys new multimillion dollar investment in biotech that just took place this morni morning. All ahead when squawk box returns. For your heart. Your joints. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally discovered in jellyfish, prevagen has been shown in Clinical Trials to improve shortterm memory. Prevagen. Healthier brain. Better life. Welcome back to squawk box on cnbc. Live from the Nasdaq Market site in times square. We have the latest Quarterly Results from citi Group Earlier this hour. Right now get a check on the other big banks in the broader Financial Sector dom chu is having a look at movers. As you pointed out with the better than expected results weve seen a positive move in many of the large money center big banks in america, but they are well off their premarket highs. As you can see, citigroup up over percent earlier on up half percent now. Jpmorgan chase and bank of america both report results later op as well as throughout the course of the week jpmorgan up almost a third percent and bank of america half a percent as well. Generally positive start whats going on with banks. As you take a look at perhaps the whole slate of things coming up this week, remember, we have citi today, wells fargo, jpmorgan tomorrow. Bofa on wednesday Morgan Stanley thursday and blackrock, other big financials throughout the course of the week thats going to be huge. Remember, also, the big focus will be the relative performance of this sector to the broader market, the s p 500. To that end look at the s p 500 year to date, 7 , 7. 5 over the last year. Up 5 , the spyder. Bank etf down in that same time span over 12 months under performer see if the big bank can threatt guest t get if positive. Both up in the premarket looking for out of citis results, the standout, trading and Investment Banking not faring as well helping investment banks more than money centers. Absolutely right. Continuing this conversation about the big banks and what we may or may not want to expect, ceo, worked as an investment banker 17 years and writes about wall street, of course, as a kpeshl correspondent for vanity fair and a cnbc contributor and author of a new book called four friends promising lives cut short. Get to the book in a minute. Read it and enjoyed it immensely but i want to start with the big banks and specifically what you imagine we may see tomorrow when it comes to Goldman Sachs, a company you have written an entire book about as well . Look, andrew, i think this is the golden age for banks. Do you . Absolutely. Hasnt been for the stocks of these companies. Well, in certain respects it has. Maybe not this particular year but i remember what jamie dimon said jpmorgan would be a 100 when it was 40 and now its 115 forget stocks for a minute you really cant get a better environment for banking than you have now one of the major competitors going down the tubes deutsche bank, gone. The last European Bank that was even providing a modicum of competition for the wall street banks. Not gone in full, well Investment Bankings in general. Look, if you want to have a premiere service from an invest bank now youre looking to the american banks and its been that way a while Interest Rates being incredibly low is great for people who lend money. People who borrow money. The economy is relatively strong it feels strong. So theres not a whole lot of competiti competition. Regulation is winding down from what it had been to me this is like a golden age of wall street Investment Banking. So i think youll see Great Results because of all that. What do you say to the people who look at the direct listing, spotify more recently slack, and say, you know what this is bad news for wall street look, i mean, ive written about that i think its thats why im asking about it. Right a niche product still. If you dont need capital and have a vcbacked company that, vc wants to sell as much stock as it possibly wants, then why not do it . Yes, it affects the fees that wall street gets fees are much lower, more advisory fees than underwriting fees, a big difference yes. That would affect you dont think this become as model people raise more money in private markets, go public for cheap as humanly possible and then, by the way, maybe raise again once public, again at a cheaper rate look, if youre the wee company, airbnb, great invest investor, consumer company, if you need the capital, why youre going public, thats why youre going to a bank to get an underwrited deal then you need the capital. Thats not going to change. Speaks to a larger point in terms of the compression of fees on wall street overall and may not be from direct listing as a major force, but thats one symptom of it, and more compression of fees elsewhere in asset management, in even the spreads on trades. I mean, everything is being compressed now how can this actually be a golden age when its nowhere near the way banks make money one instance, compression of fees correct. On the margins, i would say. On the other hand, raw material. How they make money. Which is capital that cash is basically free. And then theres no competition. What they can do with that cash is severely limited compared to prior to the financial crisis in terms of it being a golden age is it relative relative to what . Golden age implies a great time i dont see how it gets much better lehmans gone, bairs gone deutsche more or less gone from competitive pricing banking. These guys have a clear path to anything they want to do at this point. M a from the u. S. Banks from the big u. S. Banks . Now regulators are going to start allowing some m a, i think. Over ten years time has come for that too jamie dimon said the other day, one more in me wants to do another big deal. Who do you think hes going to buy well, i dont know who. Who would he be allowed to buy i dont really know. Hell figure it out. A couple quickies who takes over wells fargo already in the job. Alan parker. Already done . Done. Original intention . No, but turn him down or some people turned him down but hes a great choice. Hes the great choice for right now personally, i think. Former head moving himself to stabilize the ship sort of the right legal mind for the moment they need, i think. Talk about the twitter spat between the former ceo and Bernie Sanders do we have the tweets . Show what happened over the weekend or late last week, and put some of these tweets up on the screen, if we can. As we wait for them. Theyre coming im told theyre coming. Were going to wait patiently. Here we go dont know why senator sanders picks on a retiree like me i think hes always looked down on me because he grew up in a fancier neighborhood in brooklyn flip that around i think we have the next one as well this is from bernie. Actually my concern has to do with the fact that you had no problem getting bailed out by working americans while youve been picking on them by advocating for cudding medicare, medicaid and social security, to which, mr. Blankfein respond, thats not true. Didnt know i was against all of those necessary and wellestablished programs. We have more in common two selfmade millionaires from brooklyn who lean a bit to the left whats going on here typical lloyd classic lloyd. Hes devilish, a great sense of humor, trying to have a little tongue and cheek fun with bernie. Could he do this if still ceo of goldman absolutely not. Could David Solomon do it absolutely not. But hes not in in his retirement and in his dotage and having fun with another senior citizen. Do you think bernie appreciates the real question i actually have. Because in many ways Lloyd Blankfein supports a lot of the policy bernie supports, not all of them. Be straight here. Especially when it coming to the banks. Is bernie pushing too much. Lloyd in his typical way was having some fun. Summer doldrums. Probably sitting on the beach having a little fun and bernie took the bait and so its true that lloyd is a guy who by the way moved from the south bronx to East New York and brooklyn for a better life, to what extent do you think the other ceos still in place will be annoyed with lloyd about this . Because at the moment even in democratic primary were not saying that much focus on wall street and the banks and other areas . This will pass bu the news cycle is so fast im sure they would prefer to stay below the radar screen. Loving the fact they are not the focus of anybodys attention now. Jamie dimon an outspoken bank ceo weighs in on political issues, et cetera. Do you think that helps or hurts his constituents do you think a bank ceo should do more or less of that . Ive always thought there should be more leadership on wall street. That jamie dimon and lloyd or David Solomon should take more of a leadership role addressing issues of inequality, bank regulation, other issues that affect us on a daytodays basis and they prefer to stay below the radar screen by and large. Its healthy i like to hear from bank ceos. Lloyd has a great sense of humor. I dont mind that. Im sure David Solomon wishes he would stay out in the hamptons and be quiet. Youve written a book if youre in the hamptons and on the beach, should be reading what inspired you do write this . One. Friends is pretty famous, we should mention or was. Yes one was john f. Kennedy jr. I went to and jove with. Four of my friends from andover and wanted a way to remember them because id noticed, no surprise, that they had died young and tragically well before theyre time i also want a reporting challenge. You know, just like with bear stearns or the duke of crosscase for Goldman Sachs trying to figure out what happened to those firms. I wanted to know what happened to my friends. They werent here to talk to so i had to triangulate around them and i lost touch with them i would see john occasionally in new york typical fashion, after high school you lose touch. No social media back in the 70s and noticed they died young and tragically and wanted to know what happened. Incredible reporting challenge imagine talking to the widow of some easy of these guys, never met them having them explain stories of what happened to their husbands was incredible, really. Go out and get that book. By the way, presell your next book working 0en a new book no words for the weary. Ge the rise and fall of General Electric and what happened in the jack welch and jim immotz era. And another book . Rise and fall or does it end with the rise and fall treading water at the moment. You know its unclear i think investors are quite wary of ge at the hoemoment too many other great things. More of a show me, im from missouri stock. We appreciate you being here this morning. Thank you. Ge, by the way, got downgraded this morning by ubs down premarket. A check on this mornings top stories. China posted its slowest Economic Growth in 27 years during Second Quarter chinese economy grew at 6. 2 pressured by ongoing trade war earlier President Trump weighed in on twitter writing chinas Second Quarter growth slowest. Wanting to leave china for nontariffed countries trump continues saying china wishes it had not broken the original deal with the u. S. In the first place. The wall street journal says boeings grounded 737 max planes are unlikely to be ready to carry passengers until 2020 because of the time it will take to develop and certify and train pilots on the changes. The report says boeing executives and regulators expanded their safety analyses to cover a growing list of safety issues. And the remnants of the storm that hit the gulf coast this weekend as hurricane bary are moving north and could cause dangerous flas floods across the region and the Mississippi Valley sunday the storm shut almost three quarters of crude Oil Production in the u. S. Regulated areas of the gulf of mexico. And Gilead Sciences deepening ties with biotech firm galapagos with an investment joining us with a special guest. That special guest is gileads ceo first interview since taking over the company. Thanks for having me. Great to be here. A big deal as a signal how you envision your stad yi playing out at gilead. What should investors take about this deal as you see the future of the company thrilled to workings cured help t hepatitis c and turned hiv into a chronic illness. One of my priorities, expand the portfolio at gilead. I think this collaboration announced is exactly in line with what we need. Its a collaboration with, you know, one of the leading biotech economies in europe allowing us to collaborate, have significant investments and have an exclusive right to everything that comes out of this Innovative Company for the next ten years. Of course, you came gilead from where you spent your entire career roches big collaboration was with gen tech. Particularly when trying to enhance science and engage some of the very best scientists, having this independence making sure galapagos has their independence is the best way to make sure the scientists stay with the company, work fast, move fast. These are hard deals to do because end of the day they require trust. They require alignment of following the science and transformational medicines, and also requires trust at the ceo level and im happy weve established that relationship between galapagos and gilead. Is this a blueprint how you see collaborating with companies as opposed to doing the outright purchase of a company . A couple years back you purchased a Company Analysts say you overpaid for it. Whether it was a great aq acquisition or paid off . Do you see that as a way to go as opposed to m a . No sweet spot bringing in a medicine with what you do best, acquisition might be the right way to go when you have a longterm nature of independent collaborations. You know, were a u. S. Based Research Company predominantly galapagos gives a network into european science, and keeping that independent is really important. On the kite deal, as you know, when i came in i decided to keep that, of course, under the gilead umbrella, full support for that but made it a separate business unit. Recently we hired a ceo. Its a pioneering new technology in medicine that is right in the sweet spot of gilead because were talking about cures. Curing for patients with devastating blood disorders, but i want kite to be focused on staying on the cutting edge of science for the cell therapy and oncology. A big deal, big transformative deal is not off the table . Investors like the fact you have about 30 billion in cash on the Balance Sheet and dont like the fact you have 30 billion in cash on the Balance Sheet because theyre afraid of a bad acquisition. In general these large mergers and acquisitions have destroyed value instead of increasing value so i think its smarter to take a look at increasing innovation through different mechanisms and you get a sense for that with this collaboration with what the team and i have done here today. Well see more i think of keeping the bar really high on science. Making sure transformational medicines make a massive difference for patients. And well find the right structure to make it work in each case. On the structure side, because theres 30 billion. Some say burning a hole in your pocket what do you do with it long term capital Employment Strategy hasnt changed most importantly put it to work at r d our life blood continue to support our portfolio and to look at ways to return money to shareholders we want to make sure its smart. Just because you have money in your pocket doesnt mean you should spend it immediately. Amen. Not going to get a disagreement from me on that end. All right hearing we are out of time, dan have to have you back to talk about a lot more including everything going on with drug prices thanks for having me. Thank you. Thank you, dan. Thank you, meg. Coming up, the week ahead in markets after a quick break we dig into whether earnings season can keep the bull running or signal a slowdown ahead. Plus the latest on another big potential staff change at the white house. Stay tuned youre watching squawk box on youre watching squawk box on cnbc youre watching squawk box on cnbc be able to pull from reservation platforms built 20 years ago. And also be able to use apps to book superpersonalized trips on shiny new phones from the future. Plus, i need freedom to move my workloads wherever, whenever but manage it all from right here. And thats the cloud i want. Simple, right . Expect more from your cloud. Ibm cloud. People know aflac. Aflac 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 im not really a, i thought wall street guy. Ns. 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 is it to carry cargo. He or to carry on a legacy . . Its show of strength. Or its sign of intelligence . On the mercedes of your midsummer dreams at the mercedesbenz summer event, going on now. Lease the gla 250 suv for just 329 a month at the mercedesbenz summer event. Mercedesbenz. The best or nothing. Welcome back to squawk box. News this morning on another possible shakeup to President Trumps cabinet. Get to Kayla Tausche with the details and a big scoop overnight. Good morning to you. Reporter good morning, andrew President Trump is again weighing replacing commerce secretary wilbur ross now that the legal battle to include a question about citizenship on the 2020 census is over. Administration officials and outside white house advisers tell cnbc and nbc news the Commerce Department oversees the Census Bureau and finalizing the 2020 census was described by multiple sources at the last major item on ross todo list second ross traveled to wisconsin with President Trump friday and the two have a longstanding friendship part of the reason ross avoided the president s firing line before, but in this two and a half years running commerce the president has been frustrated by ross negotiations with china, questionable Financial Disclosures and insensitive comments an financial needs of federal workers that the secretary made here on squawk box. Its unclear who would be tapped to replace ross. One name that came up ray washburn the texas developer and restaurateur who ran the overseas private corporation until february aides and advisers say secretary ross departure could come as soon as late summer. In a statement, ross work continues and shepherded the department into a new era. Melissa . Hmm. Hey there one quick question, kayla. To say, if Something Like this happens does this change the dynamic at all around huawei and how some of the, these trade issues will be implemented and National Security issues and these licenses effectively getting granted or not reporter well see one thing to watch for as well, not only if secretary ross leaves also what happened to john bolton, the National Security adviser the nsc has been coleading the huawei issue with the department of commerce. Certainly he would be a hawk on that issue and would continue pressing forward with this huawei issue, even though the president signaled his willingness to dial back some of the restrictions there, and you could also see a fight from congress as well theres a lot of legislation simmering that could tie the president s hands here see if any of that actually makes its way to the floor great thank you. We are under an hour to opening bell on wall street to talk markets ahead of the first trading day of the week, bring in chief investment strategist at Capital Wealth Planning great to see you this weekic cans off a big stretch of earnings. How do we set up going in . Well, we put out a special trading wire after the close last monday, because we had a lot of people that were worried we were going to go into a crash. Basically what we said is that despite the dow dive of 116 points, that all of this was, a consolidation. Such action in a nontrending market is highly bullish, and you know, you saw the market trade out over 3000 after that so i think earnings have been discounted too much. I think expectations have been lowered too much so i think theyre going to come in better than the lowered expectations and the markets even though overbought in the short term and a very shortterm sale signal on july 11th well consolidate and trade higher. And saying about the preannouncements going in the quarter. High majority of companies in the s p preannounced same time, confident in terms what the companies will be able to say about Third Quarter and beyond seems like thats where th stress is when it comes to Investor Outlook i think thats exactly right. However, i think the economy is going it reaccelerate to a stronger footing as we get into the back half of the year. And i think the markets are going to my year end price target is 3200 on the s p 500 and ive not varied from that. Do you want to stick with leadership, namely technology . Within tech are there subsectors you like more than others . I like old tech the intels of the world, the microsofts of the world. I cant get my hands around the valuation metrics at google. I leave those to the guy that tom ohalloran. You like financial, you save beat on the top and bottom line. Conference call in an hour and ten minutes or so. Do you think it sets up for a good Bank Earnings season . I do. I think the yield curve is starting to steepen. The banks are cheap and my daddy used to tell me good things tend to happen to cheap stocks. Why do you want to be in energy it is a pretty bummed out sector at this point, jeff. Thats exactly why i want to be in it, the midstream partnerships are the cheapest they have been in 20 years they pay an 8 in aggregate distribution, 70 of which is tax deferred for american shareholders and i think that they dont have that much Price Sensitivity to crude oil they own the pipes and the storage, so theyre, like, toll takers. Yeah. So the optimism going to the second half, jeff, and the reacceleration in growth, if powell stays put, if we dont get a trade deal, is your optimism still in tact yeah, i think so. I think china need us more than we need china. Were winning the trade tariff tiff with china. Looks look we settled with canada and mexico. Things look pretty good. All right were going to leave it there, jeff, thanks good it see you. Always a pleasure. Down to the new york stock exchange, visit with our friend jim cramer good morning, sir. Good morning, guys. How are you doing . Good to see you lets start with citi. What is your take . I like citi we have to back out the trade web. Thats just an annuity that will keep growing, great ipo. I think the efficiency ratio is rather remarkable, much bett et thought than when mike was on mad money. They took more money in. Thats not as consequential. Credit cards, much better than i thought expected all the trading, all the Investment Banking, had already been discounted. The buyback increased, just keep taking in shares, raised dividend well below well above tangible book value. Why not keep buying, i like the stock . I got two quickies for you. One, boeing, if this max situation extends out through 2020, what does it mean to the stock . I think the stock can lose a little bit there is a buyer of boeing underneath i got to tell you, i dont know who the buyers are they never stop. They obviously are just such bulls. Only thing that does help here, american seems to benefit because southwest has more max if they keep saying we wont fly the max, southwest keeps losing. But ive got to tell you, if i can find the buyer of boeing, i say why dont you walk away and see where it goes . Last one for you, i dont know if there is a stock to play here, i dont know if you saw peter teal going after google or alphabet over the weekend, sort of remarkable, hes effectively suggesting that there is moles, security moles inside the company that are sending stuff to china. I have to go to wilf. Is phil brick there. I need to know, what kind of who do they have what fifth column do they have and compare this to britain . I have no idea, jim and similar to your point, i dont know has to back it up. Has to come out and show why hes gone as far as using that work. I dont call this treason. I dont know. Well have to wait and see. All right last question here, gilead, what did you make of the deal . I dont know if you caught dan i thought you asked all the right questions. I like what galapagos has. This is a strategy they have to do because the gilead, i do think that galapagos, they have the ra drug that people think, if they here is my big problem with gilead. You still have no reason to buy gilead other than on i prefer what glaxo is doing with Ovarian Cancer i think thats a better do and much more important and glaxo is going to be working. Are you buying anything on this amazon prime day, two days, shall i say . The trade every trader is long so if they dont just say, listen, we have done more business than walmart will do this year, that stock sells off midweek. You want to know what jim is actually going to purchase. I want to know if hes going to get a discount, yeah. My daughters going to spain for a year shes going to teach third grade english i got to read up on everything franco and im not talking im not just i got to learn spain is that paperback, hardback or kindle for you . You know, im a paperback, im a beach reader, andrew, very important, im a beach reader, big time. Okay. Only way to keep those people away from me so i can focus. I may get you a kindle and ziploc bag for the beach see people do that ill take that. I think thats what i need. Ive been worried about the sand all along. You can just not drop it in the sea. You can just not drop it in the sea. I know he people who have the ziploc bag anyway, jim, great to see you. I need wilf to identify who is the British Intelligence double agent in google get that for me. They have a big European Business i know you can get this. You have sources. Over under on wilbur ross, on the job in september well, how long is that acosta been there the labor no, hes gone once you have been leaked, youre gone. Im watching the ecig doc im against killing people you may differ im against killing great documentary on tonight at 10 00 eastern the con, i dont know, remember, some people said, listen, we got to find out the positives in death im still struggling okay. Jim, well see you in a couple of minutes appreciate it. Dont miss our interview on squawk with Johnson Johnson cfo, that will happen tomorrow after the dow mpencoont reports Second Quarter earnings. Stay tuned youre watching squawk on cnbc 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. Welcome back a quick final check on the markets. Dow looks like it will open up higher in half an hour from now. Nasdaq looking to open higher as well call it 18 points for now. The s p 500 looks like it will open up about five points higher want to make sure you join us tomorrow thank you, guys, for being with us pleasure. Pleasure. Squawk on the street begins right now. Good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber. Citi looking good, plenty else this week with powell on deck. Tech companies on the hill soft china gdp number getting the president s attention. Europe is green and oil is up a quarter this morning road map begins with wall streets record run, stocks poised for renewed gains of the open a