Transcripts For CNBC Squawk Box 20240714

On this afternoon. In asia, the nikkei was down the hang seng was up 0. 23 for european markets, the dax is slightly lower you see slight gains for the cac, the ftse 100, stocks in italy and in spain look at the Treasury Department. The tenyear is yielding 2. 090 . We have a very busy day going on in the markets. From wall street to washington, lets get you through the squawk planner. On the earnings front, three big banks on the docket starting with jpmorgan that will come at about 6 45 a. M we have Goldman Sachs coming in with its earnings. Those should be announced around 7 30 wells fargo earnings should cross the tape at 8 00 a. M Johnson Johnson will also report at 6 50 a. M. Eastern time well bring you a first on cnbc interview with the cfo right after that report. On the data front, we will be getting june retail sales, import and export prices as well that all hits at 8 30 a. M. The other big event on the planner is big tech is back in washington today the house judiciary subcommittee on antitrust holding its second hearing on Online Platforms and market power this is focused on innovation and entrepreneurship this is part of a bipartisan investigation into digital monopolies we will hear from executives from apple, facebook, google, amazon, all scheduled to attend the hearings which will also include a panel of antitrust experts including some that favor breaking up the companies. Another topic will be the ftcs expected 5 billion fine agains facebook for privacy violations. Other major hearings on the hill this morning all about facebook and its planned libra Digital Currency we heard from Steven Mnuchin yesterday, he shared his concern over the digital coin. The Treasury Department has expressed very serious concerns that libra could be misused by money launderers and terrorist financiers we will not allow Digital Asset Service Providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities later in the show, we have the majority leader on, and he wrote an interesting piece he said if you can view your mail we cant imagine someone opening and tampering with mail, knowing everything that is going on with your mail. Would you allow that if it was stamps were free all of us would say, uh, no. Charge me whatever it is 39 cents . I dont know it doesnt say anymore that would be a big no so how is this different its a bit different, but we all sort of got in this position maybe not willingly and completely knowingly about how much of our privacy certainly not thinking it through. And what concerns me as a parent is watching your kids give away so much privacy, have so much of their life posted online and knowing they have to live with that through job interviews and if in return like the Postal Service could say, i see youre going over to europe heres a couple of hotels we think might be nice. This is a great restaurant over there. Does that make it okay no. And the other concerns about what happens in terms of illicit uses is valid. If you talk to Law Enforcement officers they will tell you every single ransom or crypto now youre into crypto. Every demand comes in for ransom being paid in bitcoin. Leader mccarthy talks about blockchain being an answer to this where will we get the power . If everything is blockchain, its so power hungry me theres two issues, separate issues. The bitcoin or libra thing is an interesting issue and separate from bitcoin i dont think the rest of america shares your concerns because they havent thought about it or because they have nothing interesting going on in their lives . Im not sure. We talk about it on tv all the time you can read about it. Lawmakers are making an issue of it, yet it hasnt changed the behavior of people by the way, people accept television in large part because in many places its free with advertising or they pay for cable and take away thats a completely different thing. I understand, but people have made strange whether you think theyre strange or not, tradeoffs all the time about what theyre getting email is one of those things but privacy, giving away your privacy, you dont know what youve done until youre in a real problem with it the real question is whether you think the real problem has emerged. Its all an erosion the same idea with Insurance Companies that want to track your every move. Right now they offer it as an incentive, you get a lower fee if you get it, but eventually it will happen that you have to pay more because you wont do it you werent here for Contessa Brewer i was thats why ive been mentioning it and zuckerberg, 5 billion thats it . You take a debit card . He might do that himself you mean a libra card thats it hes like laughing we made 4 trillion stealing privacy. 5 billion we can come up with. Its a fair question. I dont know what the answer is. I dont know what youre willing to give away, what youre not. Certainly we werent aware of what we were giving away as it started. Do you know any of these anti trust experts that want to break up i do. They can make a real case for that i dont think its a good case i dont think it answers the problem. Thats in your dna, is it not . Antitrust type stuff it is in my dna sorkin senior its what the sorkin family has talked about at dinner tables my entire life. That explains so much but in this instance its not a solution to me if you think theres a problem whether its with privacy, breaking them up is not the solution i would agree with that. Treasury secretary Steven Mnuchin is throwing cold water on the idea of a looming Government Shutdown. I dont see a Government Shutdown looming again, thats not an issue until the end of september i have no expectation that there will be a golvernment shutdown. His comments come after the latest proposal to raise the debt ceiling before the Summer Congress recess. Pelosi said raising the dell ceiling on its own without a budget compromise is not a solution the dow is down 14 points after closing at a new record yesterday. When we come back, amazons sales holiday and the competition from other retailers. Right now as we head to break, lets look at the biggest premarket winners and losers in the dow. Johnson johnson leading the way. Well get earnings in just a bit. 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 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. It is day two of amazons prime day and other retail giants are looking for a piece of the action. Brian mcmillon yesterday speaking about keeping up with amazon we fell behind and have been playing catch up and have been doing a number of things to accelerate that progress joining us now to talk about amazons holiday is Courtney Reagan were now halfway through that 48hour prime day event amazon said worldwide sellers predominantly small and mediumsized businesses saw the biggest 24hour sales day in amazon history amazon says it has sold millions of alexaenabled devices including the Fire Tv Stick and the echo dot nerd wallet said prices were lower than 2018 prices for those devices. Other deals were instapot, the life straw water filter and crest whitening strips while this is the longest prime day yet, data suggests that this years prime day sales got off to a slower start on amazon. Com than the previous two years. Because it began at 3 00 a. M. Eastern time most folks are sleeping instead of 3 00 p. M. Like last year and 9 00 p. M. In 2017. Price blink says based on page views from the start of prime day, 3 00 a. M. Monday through midnight, at walmart. Com people were interested in the instapot, the google home pad mini and at best buy, the highest page views went to the play station, apple ipad 128 gig and the tcl e75inc 4kt tv. Courtney, thank you did you do your shopping yet i dont need anything. I bought an instapot and never opened it i learned my lesson. I have not learned my lesson. I dont need anything but i couldnt avoid the deals yesterday. For more lets bring in daniel flax from newberger bourbon and michael grant. Daniel, big day for them will it pay off . Will it make a difference on the bottom line . I think whats going on is that if you look at the prime membership, each year amazon makes it more and more valuable. So we now are seeing a shift to oneday shipping there are options to get goods delivered in your car and in your house theres more content so while the day in and of itself we think will drive sales, we see this as a bigger story towards an extension and expansion of the prime offering, which ultimately makes the amazon platform and the ecosystem with alexa going into more and more Third Party Devices become more valuable, which is ultimately whats critical to creating shareholder value. Michael, i was talking to people behind the scenes who have access to data. They said in terms of ad costs, the units sold, media budgets, allocated product units, it was all up twice as much as it was yesterday. They are definitely making this a bigger and bigger deal what do you think in terms of the bottom line and what daniel was talking about with this impact of luring in more prime members . I agree with what daniel said the Financial Impact is modest when you think about the context of an entire he year, the Holiday Season but when you think about, you know, whats going on at amazon, which is growth is slowing as growth slows, its important to make sure your customer lifetime value is as high as can be by really locking in consumers into the prime flywheel and the offering bundle that amazon has, it helps them elongate the relationship they have with each individual household how much money do you think theyre pulling forward into sales today . Or how much of this is additional money being spent i think its a combination. Theres a bit more, as becky was saying, you go online, you see things, theres impulse purchases. Mine was impulse purchases. Apple stuff was 30 plus percent off yesterday that never happen happens. Thats right. But for many people as they see the benefits of the prime membership, this will attract them to join then theyll see over the coming years the prime membership will become more and more valuable. Does it mean they can continue to ram up the price for a prime membership if theyre adding value, i think they can the cost to create content, all of those are rising. If you look at amazons profit margins, they have zone theyre able to balance growing increasing price where appropriate. For many goods they do cut price. Marketplace question. One thing that happens, if youre on their marketplace, you have to lower your price to match amazon in some cases amazon is losing money on products, so you have these other retailers who are quite upset about these. Are they forced to do it or do they have to to compete have to to compete. Its not walmart who is upset about this, but people who are partners of amazon so theres an interesting phenomenon taking place where you have people who are supposed to be in business with amazon and their partners effectively taking losses to help support the prime membership what do you think of that . What do you think that will mean longterm . To me this marketplace issue, youre talking about whats happening in washington today, thats where things get complicated. I think its a balance. In the Retail Industry there are periods around the holidays, around prime day now where there will be some losses. But you do see greater volumes that can ultimately lead to profitability. I would expect retailers and those Third Party Providers to continue to be attracted to amazons mralplatform its a balance between compete and cooperate. If those Third Party Sellers are finding value in being on the plat form, i wou platform, i would expect the growth of those business to continue what does walmart do about this Doug Mcmillon saying were behind walmart will always be behind because amazon has a distribution flywheel happening. Theyre better at delivering things at the whole ecommerce ma part of it walmart saying they can use stores as Distribution Centers theres a difference between an Amazon Distribution Center as opposed to a repail location where consumers are coming through. Its super important that ama n amazons not really brand friendly when you look at the categories they have underperformed in, retail and home, where brand is a little more important, they have not been able to really crack the code there as much as they have with more commodity high Velocity Products thats an important strategic issue for amazon Going Forward. Coming up, dow transmoports have been lagging, but one stock getting a boost on earnings. Well have a rundown of todays big movers after the break when it comes to your customers expectations, theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. I cant tell you anything about myself. As someone in cool. Witness protection, but believe me, im not your average consumer. Thats why i switched to Liberty Mutual. They customized my Car Insurance, so i only pay for what i need. And as a man, uh, or a woman with very specific needs that i cant tell you about say cheese. Mr. Landry . Oh no. Hi mr. Landry [ grunting ] Liberty Mutual customizes your Car Insurance so you only pay for what you need. Liberty. Liberty. Liberty. Liberty. Welcome back shares of jb hunt are surging. The trucking giant reported a big miss on Second Quarter earnings and revenue was in line analysts at citi and stevens putting out a note saying if it wasnt for a onetime pretax charge profits would have topped forecasts. Volumes fell 8 largely due to weakness in its eastern network. On the Earnings Call, the company says they expect volume to improve in the second half of the year some other stocks to watch today. Shares of bayer are higher in germany after a u. S. Judge cut the damages awarded to a california man who blamed its roundup weed killer for his cancer the judge says evidence supports punitive damages, but he reduced the amount to 20 million from 75 million you can see the stock is up by 1. 5 tesla is changing its pricing and its lineup once again. The company is killing the standard versions of the model s and the model x. That means the model s starts at 80,000, and the model x at 85,000. Tesla is cutting the price on the model 3 by 2,000. Prologis is buying Industrial Property trust for 4 billion including debt that deal includes more than 200 properties expanding the companys position in southern california, san francisco, chicago, atlanta, dallas, seattle and new jersey coming up a big morning. We are expecting earnings from two dow components well get jpmorgan and Johnson Johnson, and thats just in the next 30 minutes. We have more coming up after that well hear from Goldman Sachs and so many more plus well talk about this, a bit of a controversy that peter thiel is starting. Peter thiel doubling down on accusations of treason against google we will show you his comments and talk about them after the break. As we head to break a look at the s p 500 winners and losers through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. No matter what you trade, at fidelity its my special friend, antonio. His luxurious fur calms my nerves when im worried about moving into our new apartment. Why dont we just ask geico for help with renters insurance . I didnt know geico helps with renters insurance. Yeah, and we could save a bunch too. Antonio fetch computer antonio . Ill get it. Get to know geico and see how much you could save on renters insurance. Welcome back youre watching squawk box live from the Nasdaq Market site in times square. Good morning u. S. Equity features at this hour paired their losses in half theyre down 10 points so far this morning the s p and the nasdaq are now green. That would be a new high territory. Peter thiel doubling down on his attack against google. Heres what he said last night on fox news. The weird fact that is indisputable is that google is working with china and not the u. S. With their ai technology. Why is that first because they have to. Management has a decision of either letting this software go out the front door or figuring it will get stolen any way and go out the back door first answer is they have to and theres a broad base of google employees who are idealically super left wing, woke, and think china is better than the u. S google denies thiels claims saying we do not work with the Chinese Military this came up over the weekend. We had a debate at the table yesterday about does he have proof that google or people at google are working with china. I want to show you how this conversation evolved he started up with this in november at the deal book conference when he talked about china and the role that google was playing or not playing with the u. S. Military. Take a look. Theres something really bizarre about if youre a cutting edge leader on ai like google of not supporting the u. S. Military. The inconsistency would be that, you know, in every other context the google statement is always that theyre the cutting edge of ai, way ahead of everyone else then we heard the opposite today. The issue is he sort of ramped up the rhetoric, whether he knows or not behind this some example of some i imagine citizg for google and delivering this back thats the implication the question is should this be investigated does he nknow more than we know theres a huge competition going on with ai, deep learning, theres google, facebook, microsoft. So whats going on here . I have to imagine if hes making these accusations as forcefully as he is though on fox i think he tempered what he said over the weekend, maybe theres Something Else we dont know yet. Part of it is the relationship with any of the chinese universities and it gets back to the similar situation with huawei. Is it set up so the Chinese Government and the communist party has access to any of the information or any of the things happening there. I cant imagine google at an institutional level think theyre helping china at all they were the First American company to get blocked and said they dont want to be in china how many concessions have they made to the Chinese Government very little. What about in terms of censorship on a relative basis to a company like apple, they made virtual no concessions theyre not trying to theyre not trying to create a service for china that way when you talk about who has made concessions for china, the entire cloud on your iphone is now the actual servers are living in china and that was you call it a concession or that was the law that china has created. Google doesnt want to do that it doesnt exist if you know what im saying. So when you talk about who is making the concessions, thats not to say that i think everybody is making concessions. I think google is making the least concessions. Any way, well see what is behind all of this coming up, a lot more on todays big tech hearings on capitol hill maybe these questions will come up, including the first of two days of testimony on Digital Currency and we will hear from jpmorgan, Johnson Johnson in just the next couple of minutes do not change the channel. Well have instant reaction when the numbers cross. U. S. Equity futures are firming up you will see right now that s p futures are indicated up by a half point nasdaq futures up by 3 points. The dow fut chooures down by 12 points all three major averages hit new highs yesterday. That happened towards the close. We are awaiting Quarterly Results from jpmorgan and from Johnson Johnson. Well bring you those numbers as soon as they cross the tape. Johnson johnson up by over a dollar ahead of that Jpmorgan Chase down by 20 cents. The Senate Banking Committee Going to take up the topic of facebooks pro poposed Digital Currency libra ylan mui has the details theres not a lot of love for libra in washington. Both republicans and democrats on the committee have been skeptical of facebooks new cryptocurrency they will focus on privacy and others say giant companies should not have power over infrastructure also not a fan, Steven Mnuchin he set the tone yesterday when he called libra a potential threat to national security. We dont want bad actors usi using cryptocurrencies thats our number one issue. To a large extent these cryptocurrencies have been dominated by illicit activities and spenculation well make sure the general public knows what theyre investing in and theyre proper disclosures. Mnuchin said facebook still has a lot of work to do to convince him and other regulators that libra will be ready to launch in 2020. The Company Prepared for this line of criticism. In his written ted david marcus said that the next year will be an open process subject to Regulatory Oversight and review. And that we know we need to take the time to get this right guys, he struck a humble tone in that prepared testimony, but he is going to be facing a tough crowd. Back over to you okay. Ylan mui, its fascinating joe, have you changed your view on bitcoin at all because of this bitcoin doesnt have this problem, doesnt i dont think it does at all. The only issue s you saw what happened to the price of bitcoin, the interesting thing is if you one of the reasons it rose in value was because everyone thought there will be billions of electronic wallets all these Facebook User also have, theyll get interested in crypto and theyll realize that bitcoin is probably a better value. But if nobody gets engaged, what does that do i much harder to talk about all these things in reference to bitcoin, all the regulation that youre talking about we have Johnson Johnson hitting. Looks like a beat on the top and bottom line for Johnson Johnson. Earnings per share coming in at 2. 58 versus the estimate of 2. 46 revenue 20. 20. 56 billion versu the estimate of 20. 20. 29 billin they raised their fullyear guidance for sales but not earnings sales they see at 80 80. 8 billi to 81 81. 6 billion. Thats about 4 400 million highe than forecast. Just about in line with the estimate for the mid point there of 81. 81. 23 billion they say theyre raising the Sales Guidance due to the strength of the business but not raising that adjusted eps, keeping that the same for the fullyear. Well ask cfo joe wolk that in a couple minutes when he joins us on air stay tuned for that. Okay. Just getting back to that for a second, the thing that youre going to hear again and again and again is nefarious activities are much easier to conduct. On any of these you will never get around that in looking at the way advocates talk about it, its like so is cash theres ways of getting around there are ways to make it easier, but thats not enough of a reason. And its going to be hard once the genie is out of the bottle, you cant put it back in the bottle the issue is whether you can create some kind there is technology and protocols being built around bitcoin and probably libra that would control the onramps in terms of custody and money flow in the u. S. , youll have to use a potentially regulated marketplace where you will end up buying the coin, they can track it you have a wallet yet you have a number . I had a wallet for a long time can i give yours out . My coinbase wallet. Just so if people want to tip me they want to send you a tip send me bitcoin can i have them send it to you you collect it for me . Then give it over no one will know were doing this no, because nobody is watching no, because its all anonymous and eponymous. I think it is kind of both theres an argument about that theres a chapter in my book well open you up a coinbase or one other wallet. Jpmorgan, this is going for us this will be in dollars probably their earnings thats expected to cross the reinnyine now. Well bring you the numbers and instant reaction its just 4. 95 per online u. S. Equity trade. Like. A business borrowing solution to help get a little more space with a lot less mom. Or home insight, to search for a new house within your budget. Because, they really need their space. Pnc make today the day. Were awaiting numbers from jpmorgan Johnson Johnson profit came in better than the street was expecting. Revenue also stronger, 25. 6 billion versus 22. 9 billion the street was looking for the company is raising its fullyear Sales Guidance it sees somewhere between 80. 8 to 81 81. 6 billion in sales earlier it was looking for 81. 4 to 81 81. 2 billion. As mike was talking about, thats an increase of 4 400 million. Alex gorski making reference to the strong pipeline. We will talk to an executive from Johnson Johnson in a few minutes. What day was that friday. Crushed. That was the concerns about the potential investigation that is out there the federal investigation, looking into bloomberg reported that the doj has opened a criminal investigation into what j j said about cancer risks for its talc products. They said their products do not cause cancer how is your thompson doing today . Its up and running good. So it wasnt earlier 282 for jpmorgan. If its clean, its versus 250. 28. 8 billion. In line with 29. 9 billion was the street number. Stock at this point is responding positively to that news its up 1. 52 so many different metrics that marty mosby better be talking about here Net Interest Income, 14. 5 billion. Noninterest revenue, 15 billion. 16 return on common equity. Trading revenue have not seen trading should be out any second provision for credit losses, 1. 15 jamie dimon says he continues to see positive momentum in the u. S. Consumer. What else . No. Thats the main thing. 16 return on equity is the high for the cycle and the high for the industry in terms of big banks. The stock has been a little bit subdued for enthusiasm citi group was a favorite for the analysts people are more luke warm on jpmorgan because its not quite as cheap it has a premium because its been the best operateder out there. Looks like a beat in that context, people didnt have High Expectations for jpmorgan we look at revenue on a majnaged basis. A beat on the top and bottom reaction to jpmorgan results from marty mosby we already had some comments from mike santoli. Whats the highlighted for y fo marty . Two things. Some tax things as well when you look at the actual two things thats driving this beat, its really being stronger with revenues which is important. If we can create Revenue Growth on top capital deployment, you really have a really good combination from these large cap banks. Secondly, the credit costs were relatively low so much lower than expected and lower than what we even had last quarter. So, you know, again, the economy is doing well. Credit costs are staying low and were seeing some Revenue Growth, which is a really good combination for the profitability levels continuing to improve through the year. So where should this trade in terms of book if book the Second Quarter end book value is 73. 77. 73. 77 is that about right for a tier yes what we look at is tangible book value and we look at the premium to tangible book value right now theyre trading two times tangible book value. Thats 59. Yes when you compare that to citigroup, theyre right at tangible book value. So the profitability were seeing at jpmorgan, the high quality that you had the continuation of them being able to find some revenue, probably gain some market share here is what gives them twice the premium to the tangible book value in what were seeing in companies that are finding their way or still in the turn around, the recovery from the last financial crisis and downturn. That sort of explains, i think, why in general people dont necessarily see as much up side for jpmorgan. The rest the math works so well if you have stock trading around book value or less and you got permission to buy back billions of dollars of stock, thats just an easy story to tell in terms of why it should accrue. Marty, the boosted 23 cents by income tax benefits how much do you take out of the beat of that how much did you know about . So when you look at it, we were expecting 2. 50 they were coming in here in the 2. 80s so, yes, youre going to take out about 23 cents of that favorable and youre going to leave the left with about 7 cents of an earnings beat. Yeah. I mean, you almost dont want a jpmorgan to beat by 32 to beat by 20 in a quarter because its probably a one off. Its probably some weird trading swing or Something Like that. Especially if youre an analyst because it means that, too you have most of the metrics out there. You know the market share, what the markets did. You know dick gabosovich was talking yesterday about you can expect to see more m a. Do you think that makes sense . Yeah. He was talking on a smaller scale. Not among the smaller institutions theyre completely hemmed in. They buy a lot of fin tech stuff. Absolutely. Without a doubt. So the sort of peripheral businesses to core banking is where theyll do it. In terms of institutions, slam two institutions together, cut out the costs and rationalize, i guess it should happen on the smaller scale. You would expect it to happen already. You were hanging out with dick gasovovich. How do you know that . He was on closing bell. Because i read things. You were sleeping it was like a does anyone hear a tree in an i had no idea what went on with we were talking like we all knew about your debate on squawk box. The viewers do. The viewers who are with us every day, they do you were not one of them yesterday. No. I know. I definitely was not, but i did dvr it i plan on revisiting that. Im sorry to have missed all last week of your thing. Did you i have no idea what you were saying. You were on a different time zone. I was what else . What else we got i think were going to tell marty to hang out for the future goldman could beat by 23 and we wouldnt well, thats what i was going to one thing we asked marty, we have citi, you have these numbers. Can you extrapolate out at all more broadly about the banking business is citi such a unique player and is jpmorgan on the other end of the world such a unique player that theres actually not much to extrapolate for everybody else actually, no. Theres some really good things to extrapolate here. One is everybodys worried last year we worried about credit, right . When we were here we had this big discount in bank stocks it was all about whether or not credit costs were going to start rising this year, and they havent at all when you had that six or seven cents that we talked about earnings beat, what were saying about jpmorgan, five of that is related to provision being lower. Credit costs are staying lower thats kind of moved on. Now what were looking at is whats going on with Net Interest Margin. Whats going to happen if the fed begins to lower shortterm Interest Rates and the market is anxious about that thats the kind of the next shoe to drop is are we going to be able to get through that Pressure Point and if we start to see like were seeing here Net Interest Margin with probably a little bit of pull back but yet net interest pull back still continuing to plot ahead positively, then youve got the capitol story with generally stable to, you know, slightly rising net income thats across the board for the banks and thats the combination of were looking forward to see that last 15 up side in the back half of this year as we move past the fed story and whats happening with shortterm Interest Rates. Thank you marty and mike, it sounds like a bad radio show doesnt it doesnt have to be a bad one. Sounds like a good combination. Or those little candies what are those mike and ikes. Mike and ikes. Thank you both youre going to be around . Hanging around. Yeah, you have to basically all right. Good our game and you too, marty, who doesnt have to. Coming up when we return, more on jpmorgans earnings. And the cfo will join us on cnbc to break down the quarter. Our squawk newsmaker of the morning is House Minority leader Kevin Mccarthy unfortunately he who will tell us why blockchain is the future youre watching squawk box on cnbc well. If you run a business, it means a lot. 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 . Earnings season is finally here jpmorgan, Johnson Johnson and others reporting this morning. We break down the results and hear from j js cfo. Tech under fire. Peter teo waving the red floag o china. That story and a preview of the big antitrust hearing is coming up. Plus, a hard look at Libra Treasury secretary Steven Mnuchin has serious concerns when it comes to facebooks Digital Currency does it pose a threat to our economy. Were going to debate that as this second hour of squawk box begins right now. Live from the beating heart of new york. This is squawk box. Good morning. Welcome back to squawk box on cnbc im joe kernen along with becky quick and Andrew Ross Sorkin its the summer. How long are you here . Im here next week. Im out tuesday end of the summer you and me, baby no, im here all of us together. I heard for the rest of the year were only together like twice. Is that not true maybe they just were telling me that. Im here until the last two weeks of august. Im here. Im not. Youre not . No, at the end of august. Im here for the end of august well megs here. Glad we can all sort that through. U. S. Equity i miss your vacation calendar. I want to see yours please because i still have time left u. S. Equity futures are down 20. We have to unfortunately in our job we need to we need to organize around each others schedules. Exactly were not truly free. You dont feel free no, were not truly free. I think a union might solve some of these problems. Oh, please. Oh, boy oh, boy. Oh, boy. Worlds smallest violin is playing. We get we get time off but you cant really use it. Lets talk about vacation later. So youre not with me okay, thanks, colleagues. Heres whats making headlines at this hour. Comrades. We have a very big morning on our hands. Bank earnings. We have already heard from j. P. Morgan chase earnings of 2. 82. Thats above the consensus of 2. 53. That did include a tax benefit the number still coming out above forecasts. Later this hour Quarterly Results from Goldman Sachs at the top of the next hour were going to be hearing from wells fargo. That number across the tape, youre looking at jpmorgan stock off just slightly. Between citi and jpmorgan off im just saying it was up initially. It was up initially people didnt know if it was a clean number or what was going on there. Big morning for economic numbers. Were going to be getting june retail sales we get import prices at 8 30 eastern time later we get figures on Industrial Production and home builder sentiment. We should tell you that tesla is dropping the lowest priced version of model s and model x cars from the lineup this is in order to simplify that lineup. Its lowered the starting price of the model 3 sedan to just under 39,000. Of course the price tag they desperately want to get that car to is ultimately 35,000 dow component Johnson Johnson are reporting results just moments ago meg tirrell joins us. It was a beat on both the top and bottom lines coming in at 2. 58 ahead of the 2. 46 estimate and the revenue also ahead 20. 56 billion versus 20. 29 billion what well talk about with the cfo, joe wool coming up, is that they raised their Sales Guidance but not their eps numbers. Well talk about whats going on with the stock friday getting the big hit from the report on the criminal investigation how j j communicated around the talcum powders. In talcum. In, in wolk. I want him to be wolk. Just call him that because we all want to be wolk. I mean, thats someone who is, so wolk. Wolk. All right in fact, lets bring in gentleman right now. Johnson johnson cfo joseph wolk for more on the companys quarter. Hes a member of the cnbc global cfo council. Thanks for being with us this morning. Meg just set it up you raised your Sales Guidance, not the earnings per share Sales Guidance alex gorsky made some comments that its the pipeline and Strong Company guidance Strong Company pipeline that hes using for this guidance tell us a little bit about that. Good morning, becky its a pleasure to be here and discuss the results with you we did take up our top line guidance given the first half strength given our pharmaceutical unit where the pipeline continues were bringing new medicines to patients in need, extending the package inserts on some of the products that have been successful to date we are seeing trending prices in consumer medical devices were encouraged by the first half and that caused us to raise guidance for the second half that portends well for 2020 and beyond if you think about how we came into this year facing biosimilar and generic competition in our pharmaceutical units specifically, we were looking at 3 to 3. 5 billion. Weve held up a little bit better than that most companies would be talking about contraction with that type of headwind. Were able to talk about growth, which is based on the strength of our pipeline. Why not raise your earnings per share guidance as well so if you look at our Earnings Growth this year, when were maintaining it its two times the rate of sales growth we think thats very healthy and we look to the long term so this gives us a great opportunity to invest in our portfolio, to either accelerate, fortify or even add to our pipeline Going Forward so that we do solidify not just the next six months but many, many more years to come. Meaning that you could use this for mergers and acquisitions investment in our current pipeline as well as adding to our existing pipeline. We want to make sure theres a strategic right to win we have to have a scientific expertise, commercial capability that makes sense were always on the lookout to add to our portfolio in a meaningful way. It declined 2. 2 operationally whereas overseas it increased u. S. Pharma was down is that what drove u. S. Declining . Is that driven by drug pricing pressure or whats going on in the u. S. Two factors at play the generic and biosimilar were experiencing that mostly in the u. S again, we think thats still very Strong Performance given the size of our portfolio, but the growth that we do have, as you know, is driven by volume for transformational medicines and not price. We had 6 price declines in 2018 were seeing the same thing through the first half of 2019 at this point. So, again, we think that bodes very well that our products are being received well in the marketplace by physicians and patients and were not relying on price so give us your response to the report that came out on friday that affected j j stock driving it down 5 that was 15 billion at one point in market cap that got erased on this report. You said it wasnt new news. You disclosed the subpoena what is your response to this report from bloomberg that the department of justice has opened a criminal investigation yeah, so, you know, given that its a tough question i feel i need to say the product is safe. Its been proven so and validated by not just Johnson Johnson but by many respected agencies, government agencies, institutions for many, many decades now. With respect to the report on friday, i would say its not new news we disclosed it. Its in our sec filing back in february and the surprise, if anything, was the fact that it was considered news. Were complying fully and cooperating fully with the department of justice. Its an astute organization. Im sure once they go through the facts theyll come to the same conclusions that the Company Acted responsibly and the company is safe. You are dealing with a lot of different lawsuits, thousands of lawsuits around the country on this and yet youre sort of battling those one by one. I understand you have set aside some legal funds dedicated to the talcum powder outcomes. Weve set aside 190 million. That is not related to any settlement or liability payments, that is related specifically to costs to defend ourselves. All right can you tell us what youre setting aside beyond that for things that could come in the future yeah. At this point, meg, if you look at the talca litigation, when we lost on an original verdict, weve prevailed on appeal. We continue to think that thats the right path for us right now. There will be times, as a cfo i consider costs as a potential settlement opportunity but our over arching strategy is to continue to defend ourselves for this product when the facts are so overwhelmingly on our side. You had a plaintiff on your panel. This is big business for attorneys. They target big businesses in hopes of a large legal settlement much of that payment goes to the plaintiffs attorneys. Joseph, what about the situation with the opioids do you consider that the same sort of framework . Its a little bit different but its the same type of framework, i guess is a good way to put it, becky if you think about the oklahoma case we readily admit theres an Opioid Epidemic that needs to be solved, but here the facts dont align to this claim that the state is making, the facts being that Johnson Johnson products based on oklahoma own medicaid reimbursement records were less than 1 related to Johnson Johnson products products that were designed to prevent abuse and have proven to do so. Even the plaintiffs attorneys as i understand it throughout the case have said many, many times, this is not about johnson and johnsons products, its about them being an epidemic. Lets talk about your pipeline the new drug you have for depression resistant treatments that have been out there in the past what have you seen in the early commercialization . Were very thrilled it will be meaningful for the business were more excited for the patients who will benefit from this treatment resistant depression hasnt had anything new in terms of treatment in over 30 years. Its the leading cause of suicide. Were seeing great uptake. Its administered by the patient themselves but under the supervision of a clinic. Theres a process of certifying those clinics. We have 1600 clinics certified here within the u. S. And were looking at the benefits it can provide to patients of treatment resistant depression and their families. Is that a different mode of action than the typical antidepressant . Its internasal delivery with very limited side effects and what we love about it, joe, with the typical treatments that were out there to date, it would take two to three months to see whether it was effective or not. Here were seeing positive benefits within sometimes hours but certainly within days. So theres a whole Patient Population what is this is the standard mode still ssris it is. They dont respond to any of them or some for a while and then stop . Im not that familiar with it. Yeah. So the indication for treatment resistant depression they have failed two ssris if you will over a period of time they may see some benefit for a while but its not sustaining and sometimes they dont see any help at all. You relaunched your baby line in the past few years. How is that relaunch going its going well, meg. If you look at the major countries in which we relaunched last year, were seeing strong close to double digit consumption growth so theres inventory fluctuations that are impacting some of the report results but were very pleased that were hitting the right chord with millennial moms and dads. As you look to build out your pipeline, any part of your business, not drugs, what are you looking at potential m a were looking at all parts of the business and we always do. Were very excited about what we can add in our pharmaceutical pipeline earlier this year we added a compound for genex, cd 70 which will hopefully treat aml and mbs down the road. Were extremely excited about the medical device segment and where we invest it in ros health thats in digital robotics surgery. Thats one of the highest growth areas and were very pleased not just with the capabilities well get but the extra case were bringing over to that team well be able to provide digital surgery over to the area, whether thats bronk does skoe pis, orthopaedics and general surgery. Joseph, thank you for your time today its good seeing you meg, thank you thank you, becky. He really is wolk. Wolk. Has anyone ever made that zmeks. Ive only tried to get my daughters to convince myself that i was wolk. Other than that, no. You are wolk. Thats your name you are wolk thats perfect i wish i mean, to be you know, theres just no question you dont even have to ask it. Thats your middle name joe wolk kernen. Kind of now, i think, with bitcoin. Coming up, thanks, joe, a red flag for regulators. The billionaire peter teal doubling down on his attacks against google comments and preview of his testimony where theyll be testifying straight ahead. As we head to break, we were talking about a look at jpmorgan and stock is now down 1. 5 wells fargo set to report in less than an hour. Well be right back. Moving is hard. No kidding. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Welcome back to squawk box. The futures this morning have been a little bit lower. We have a couple of dow components the dow futures indicated down by 13. We had seen them bounce a little bit lower. S p futures down by 2 and this is coming after all three set new records. News out from key corp they have discovered fraudulent activity by a business customer. It is looking into just how much the fraud will cost the bank they put that amount up to 90 million. Coming up, facebooks Digital Currency encounters its first government challenge well preview todays hearing on the cryptocurrency questions about design, privacy and the impact on the economy will be answer erreed the earnings parade has started. Should the stock market be where it is based on some of these numbers and a forecast of the numbers. Well run through the early reports and talk mkeart expectations squawk box will be right back. To the extent that facebook can do this correctly and can have a payment system, you know, correctly with proper aml, thats fine. They got a lot of work to do to convince us to get to that place. That was treasury secretary Steven Mnuchin expressing his concerns about facebooks push into cryptocurrency. Later this morning, david marcus is going to testify in front of the Senate Banking committee and reaffirm the tech giants commitment he says to working with regulatorregulators marcus says i expect that this will be the broadest, most extensive and careful prelaunch oversight by regulators in fin techs history joining us is one of those regulators senator pat toomey hes a member of the Senate Banking committee. He will be asking the questions. Whats the one if you could only get one question off, senator, what would it be . Oh, well i havent narrowed it down that much yet, andrew. I am very curious about what the ultimate business motive is for facebook here. It sounds like theyre suggesting that its not about getting what i assume would be ultimately very valuable data through libra. So if thats not the real motivator, what is thats a big question for me one of them. Your feeling, your gut reaction right now, sort of question mark in the marketplace about whether libra will be allowed ultimately to go forward. Whats your feeling . So i ive got a gut feeling it probably will i think there are legitimate concerns that can be addressed i think, for instance, the digital wallet vehicles that are the entry point for consumers and anybody using the currency like libra, i assume that all of the regulations that apply to any other Financial Institution would apply there as well, and thats really a very extensive, proven system of protecting privacy and data you know, the aml issues i think would apply there as well. I think facebook gets that so so you effectively think though libra this Libra Organization though becomes a bank, becomes a chartered bank i dont know that it becomes a chartered bank thats a fair question, right . Unlike other Digital Currencies, this is backed by a basket of currencies so theres this intermeadation role. Its very different from traditional deposit taking and lending. Thats a fair question i dont know the answer to that yet. Where do you stand on bitcoin and how it differs from this so what strikes me as one of the obvious huge differences, right, bitcoin is fascinating to me but i dont think its yet become a practical medium of exchange, probably mostly because its been incredibly volatile something as volatile as that, that really detracts from its ability to be a meaningful, usable currency. Well, libra is meant to solve that problem by having it tied explicitly to a basket of currency so if you have the security and the ease and low cost of transactions of a Digital Currency, which i think they intend to, when you combine it with the stability of a shall we say an established mature fiat currency, then maybe you do actually have a currency that can be adopted broadly i think thats the intriguing difference sounds like a debit card. Do you consider cryptocurrency is a threat to the Global Banking system . One of the things thats been fascinating over all of these years is fiat currency, countries have had a monopoly over currency, right right right. Efforts like this potentially could up end that. Yeah, and i think thats something we really need to think through. I will say, its a huge advantage to the United States that we are the dominant worlds reserve currency thats a big advantage to us in many ways. I think we are a long, long way from a Digital Currency being a threat to that, but who knows. Adoption rates could be quite quick if theres a real major break through. As i say, i think so far on the Digital Currencies the volatilitys precluded that kind of ubiquitous use. Libra seems to be meant to solve that problem. Senator, you sound pretty calm, cool, collected about all of this. It sounds like you havent entirely decided what you think. We have had people on both sides. Usually i expect somebody to be a huge proponent or a huge opponent when it comes to these things youve heard such tough talk coming from the administration what do you think actually plays o you the . So i dont know one thing i will say is financial innovation can be a very good thing. I mean, if you ask me, i think its still extremely expensive to execute ordinary Payment Transactions just a Credit Card Company i mean, the fees on the credit card, aside from im not talking about high interest loans. Just the execution over a percent, could be over 2 thats a lot of money to move money. And so it seems to me that maybe there could be some innovation in this space that would provide security and that would dramatically lower the cost of transactions those would be good things right. So i dont want to presume in advance that weve got to prevent the development of some new innovation. The volatility of bitcoin is because it actually has inherent value. Libra has no inherent value other than the dollars or the basket of currency that its based on so of course its going to be volatile because its a fledgling and have you noticed that bitcoins actually already out there and being used and viable and no regulators have had a chance to say, no, youre not going to do this. Its totally different, and the volatility as it becomes more accepted will probably go down to the point, but at least it hasnt here. Libra has no inherent value. So i think of it differently, joe. I mean, bitcoin has inherent value of scarcity, but it doesnt have any other inherent value that im aware of. Whereas, the libra is actually backed by a commodity of currency its only the value the distributed ledger system is the inherent value and theres zero transaction costs around the world to use it so that what is that worth . It usually costs 3 or 4 so it has its own value. Okay. Fine, but libra can replicate that. Wait. Whether its 2,000 or 20,000 at least it has theres costs to create it as well. My point is, that can be replicated that can be replicated and it if that is the sole source of that and scarcity are the sole sources of value, i could envision it might remain volatile maybe not. I dont know how this all plays out. I think its an exciting innovation we ought not try to strangle it. How concerned are you that facebook is the innovator . Is that the back drop . The big challenge for facebook, an objective matter, theyre probably going to be able to comply with the reg gu la to Regulatory Regime the other big question i have given that you, like i, would love to reduce the friction and costs of transactions, you talked about credit cards, for example, you basically have 100 companies all getting together, including by the way master card and visa and paypal that are part of this yeah. Yeah. And what does that say you know, i know theres a Big Conversation about raking up big tech, but when you have 100 Massive Companies all getting together around one idea, is that a good thing or a bad thing for society . Yeah, i honestly, andrew, its a very good question but i dont think we know the answer to that yet. I think its too soon to know. And the flip side is, how much do you think todays conversation is going to really be about privacy in some of the digital issues that have confronted facebook . So i think most of it will, right . I think thats the big concern i think among legislators thats where theres a feeling that weve got to protect our constituents from misuse or other you know, other problems with their data and obviously have been problems here lets remember, of course, the problems occur all across our society. Every big institution is a target of breaches there have been successful breaches unfortunately in industry, government, academia so its an ongoing challenge. Okay. Senator, were going to leave the conversation there we have Goldman Sachs just out with its earnings. Were going to get to that right now. Appreciate your time. Goldman sachs is out the company now tweets its release. If you want to put it on the twitter and run with it, its 5. 81 a share versus the 4. 89 that the street was expecting. Revenue at 9. 46 billion versus 8. 28 billion that the street was looking for. David solomon chairman and chief executive officer making statements saying theyre encouraged by the results for the first half of the year they continue to invest in new businesses and growth as a way to serve the broader clients raising their Quarterly Dividend to 1. 25 a share, too. Mike, just what weve seen so far. Yeah. I mean, i want to see exactly what the margin of the beat came from i know there was going to be potentially some gains from sales of an investment, but it seems obviously like it continues the story with the other banks, which is essentially no negative surprises certainly. 11. 1 return on equity i believe it was which is essentially the same as it was through year to date so its obviously still, you know, not quite posting the same kind of profits as jpmorgan but it looks it looks like its relatively clean a little bit of a decline in banking revenue. We knew that was going to be soft. Net revenue for investment banking, 1. 8 million. That was 9 lower than a year ago. It was 3 higher than the First Quarter. Within that Financial Advisory was down by 3 in the Second Quarter. They said that was an industry wide decrease seen with completed mergers and acquisitions institutional client services, net revenue. 3 lower than a year ago and 4 lower than the First Quarter investing and lending, 2. 53 billion for the First Quarter and 16 higher than a year ago marty mosby is standing by and watching this. Marty, what do you think of these numbers . Well, goldman was our favorite Money Center Bank coming into this earnings season they had the reputational issues last year which took a high Quality Institution and began to create it and its trading around a tangible value which is like citigroup this cut is the Inflection Point where we expected an earnings beat of a pretty meaningful one, which were seeing we had a little bit more in revenue which is probably coming from some of the gains out of the investing and lending area with the market going up in the past quarter we also expected to see a little bit in expense savings which will reflect them coming out from under the pressures that they had over the last year as well. What would you tell people to do with the stock right now, marty . Yeah, we think that this is a turn around story thats at its Inflection Point it is amongst the Money Center Banks that were seeing with jpmorgan earlier or with citigroup yesterday. Goldman will be the one that we would favor over the back half of this year. All right we would be buying it at this point. Lets take a look at it we now have three dow components that have been reporting Goldman Sachs with the better than expected earnings is up over a dollar. Thats a gain of a half of a percent which is helping the dow which has turned positive, its 7. 8 above fair value, headed up to 10 above fair value j. P. Chase, that dow component down 1. 5 even though jpmorgan was better than expected it came in at 2. 82 over the 2. 50 it was expecting Johnson Johnson, the other dow component is indicated higher after it came in with 2. 58 versus 2. 46 the street was expecting and beat in terms of revenue and raised the Sales Guidance by 4. 5 million mike, weve been talking about how this is going to be the guide that tells us whether stocks are overpriced. What do you think . So far it looks like the companies are pretty consistently beating its pretty early. The question is has the market already kind of gotten there i dont think entirely thats not a tremendous surprise and the market is unwilling to put much of a multiple on that outperformance in one quarter. Book values up for goldman 2. 1 . So is tangible book. Its trading around the book value. How come jpmorgan is off by 1. 5 this morning . Again, the concern is the interest in i. I. And jpmorgan is pulling down the guidance on Net Interest Income. So theyre probably on the call going to talk about the fed cuts and the impact that it has what happens is that you actually have with these Money Center Banks, a yield curve does matter when we went inverted, this he have assets on their Balance Sheet on the longer end of the curve funded short and their trading accounts and that. Well see more pressure there like we saw yesterday with citigroup. When we get into the super regional groups well see a little bit better traction in terms of loan growth in terms of what they can do on the deposit side. What are you building in . Cut of 25 basis points, 50 basis points no cut we have 25 basis points in july and another 25 in the back end of the year. With inflation coming in, that gives them an opportunity to begin to pull back but we think thats all that we have in store. Its not a precipitous drop going into the downturn in the economy. This is a yield curve given what we have with the International Rates is a earth haved and an anomaly and they would like to get the short rates in line with the long rates of the curve. Mike, what do you think about inflation because you can say inflation doesnt look to be a problem but if you look at the cleveland fed or atlanta fed, theyve seen some pretty high inflation numbers. Yeah. The way i think about it is the economy is producing roughly as much inflation with the fed funds at 2 . It hasnt changed much its been stable if your arg zbumt, yeah, its been stable. No central bank has been successful in creating inflation. Whats a quarter point or half point going to do . One thing i would point out, this mornings Merrill Lynch Global Fund Managers survey, 1 of people said inflation has up side risk. So i dont think you can see the makings of it. I clearly think the investors are not positioned for an up side surprise to inflation put it that way. Gentlemen, thank you both mike, its been great having you here this morning. Marty, thank you for running us through the numbers as they hit. Its been great seeing you. When we come back, a run through of the morning Market Movers lets take a look at the equity. Dow is up 10 points and s p is there up by 1 point and nasdaq up by 5 points w ghe of the major averages hit nehis once again yesterday Johnson Johnson is a baby company. But were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. From the day youre born pnc bank has technology to help a pnc business line of credit, because sometimes inner peace requires a little external soundproofing. Or pnc total auto. A place online to easily find and finance the right car for you. And your passengers. Or pnc home insight, to search for a new house within your budget. Hopefully with a grass yard. Pnc make today the day. Shares of Dominos Pizza are falling this morning the company thought 2. 19 was okay 17 cents above estimates revenue was well below estimates at dominos u. S. Comparable store sales increase of 3 missed the forecast as well, but it was on a pretty good comeback trail, dominos, in recent years. Although the high for the stock is 3. 05. 5. 5 drop this morning all right. Now that earnings season is kicked off, what should markets be expecting in the coming weeks . Well be right back tk t at after a quick break dear tech, dear tech, lets talk. We have a pretty good relationship. Youve done a lot of good for the world. But i feel like you have the potential to do so much more. Are you working for all of us, or just a few of us . Can we build ai without bias . Ai that fights bias . Ai that helps us see the bias in ourselves . We need tech that helps people understand each other. That understands my business. Dear tech, dear tech, dear tech, dear tech, lets champion data rights as human rights. Lets use blockchain to help reduce poverty. Lets develop new solutions with the help of quantum technology. Lets show girls that stem isnt just a boys club. Lets make a difference in peoples lives. Lets do it all. Together. Lets expect more from technology. Lets put smart to work. All right. Now that earnings season has kicked off what should the market be expecting in the coming weeks. Manny, this is different this time around. Why is it so quiet in your world with earnings season kicking off . Yes thats the question. Where is the volatility . What really stands out to us right now is how little volatility is being priced into the Options Market with stocks going into earnings. And that i would say is not really a reflection of what the earnings estimate is supposed to be but rather driven by the fact that investors are not expecting stocks to move on earnings so the average stock volatility going to earnings for this quarter is lower than last five quarters the option market essentially saying this quarters earnings will be extremely boring, that stocks are not going to move on the numbers and we disagree. We think if anything this quarter is actually more important than usual given that it will give us a first glimpse into how companies are navigating recent tariff increases, oil price selloff, Global Growth selloff, et cetera that is what stands out. You would think unless the fed is somehow involved again for no reason right. At this point, so, you know, if everything is better than what you can get in fixed income, then thats why earnings dont matter, right . Right. This is the fed again i would say at this point i would argue that the fed cut is expected in the july meeting its fully priced in by the market so to me what will take us higher is earnings. But theres plenty of liquidity still. For sure. Absolutely. Globally. Yeah. Yeah it makes you wonder whether with the you cant tell whos naked under the tide when it goes out you see hes not wearing a suit nobody knows now liquidity is up to our nose. Well see i think this quarter, i think stocks will move on earnings i think certainly more to more than what is currently priced. Chris, you have been managing this, its kind of a Small Cap Fund what are you up to are you beating the market this year i think were up about 29 so russell is up about 16, 17, so were having a good year why do you say small caps that you focused on havent done as well as large caps well, i think weve been seeing the global slowdown where small caps need a little bit more acceleration in that area theyve also been more impacted by the tariffs and exposure to china where we do a lot of Technology Investing thats supply chain. What happened with huawei back in the spring was very meaningful. 29 is not good enough for you . Youre greedy. Investors want to know what im doing today, not yesterday. Value is in small caps even though you manage that kind of return so far . Yeah, no. Weve seen m a come back to the space. Thats been helpful in a handful of cases were halfway through the summer which is a tough time seasonally for small caps for the earnings season thats coming up, i dont think were too focused on what they did in the last quarter because theres a lot of headlines and noise its what are you going to be looking for projections coming out and beginning to look in 2020 if you look at the sell side. Your particular situation given how successful youve been thus far, how much have you taken off the table . We took quite a bit off in may. Last time i was more defensive and we saw a significant pull back in the early days of june where we deployed capital. You didnt go back in we did go back in we cant sit on too much cash but we still sit on a cash position now where we think we would be deploying in earnings season on any dislocations in names that weve been doing diligence on. Im down in rio on that train i started taking two years ago every year youre still hitchhiking in south jersey since you still are new haven. You went backwards. Chris, thank you manny, thank you we have to go. For some reason. Its a three hour show. Lots to talk about. In fact, when we come back, big tech back under fire as executives from facebook, apple, google, amazon and more head back to capitol hill well talk about big tech after this break. We are awaiting results still from wells fargo those numbers and market quawboaw just minutes ay sk x will be right back. Ents,n follow an index, but which ones target your goals . Its not about quantity. Its about quality. No trendy stuff. I want etfs backed by research. Is it built for the longterm . My reputation depends on it. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. You should be mad at airports. Excuse me, where is gate 87 . You should be mad at nonseasoned travelers. And they took my toothpaste away. And you should be mad at people who take unnecessary risks. How dare you, hes my emotional support snake. But youre not mad, because you have e trade, whose tech helps you understand the risk and reward potential on an options trade its a paste. Its not liquid or a gel. And even explore whatif scenarios. Wheres gate 87 . Dont get mad. Get e trade and start trading today. 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. President trump just tweeting billionaire tech investor peter thiel believes google should be investigated for treason. He accuses google of working with the Chinese Government. I dont know what that is. Anyway, a great guy. Great and brilliant guy who knows this subject better than anyone the Trump Administration will take a look. Now trump loves peter thiel, im sure, because peter was the only guy in the entire state of california that was a trump supporter. Anyway, check out the shares of google less than 1 at this point some of its already in stock. I guess we knew this was happening already. Negative already. More when it comes to all of this investigation and whats going to happen in the regulatory front. Lets bring ed lee, New York Times. John stowell, economist there. Want to bring you into this conversation about privacy, about tech lets talk about peter thiel right now and what this means. Peter thiel has not offered evidence and being shot across the bow. He came out over the weekend saying google was working with the chinese. Its sort of an ironic thing to say in large part because google was one of the first Tech Companies to effectively say, you know what actually, on a principle basis we dont want to do business with the chinese maybe we should try to think about well work with them to figure out how we can. But then so far havent. Right. What do you think this is about . It sounds like that theres something he knows something that the rest of us dont. If he does, he should be all in on it. The other context, he has close ties to facebook. On the board. On the board of facebook. Its the one between facebook and google, this long standing rivalry, theyre nowhere near china. Youre not suggesting that Mark Zuckerberg is whispering in his ear saying go out there and tell the world its google and china . No, im not suggesting that at all because i dont know that for a fact but thats the context. Jo john, what do you think of this thats been the news of the day. Its been expedient to take the Tech Companies out in the political environment. Theres been no evidence behind it and like is there no evidence behind it or no evidence that we know of that we know of nothing public that we can comment and speculate on theres more to come if the tweet storms beginning but just not enough information to really understand whats behind it. Lets just sort of widen the aperture for a second. Theres testimony going on in washington today david marcus is going to be testifying lots of questions about broader antitrust questions about these big Tech Companies we talked to pat toomey on libra and one of the things that was so interesting was he said sort of his gut reaction was that this kind of thing will go forward so my kind of thought was if Something Like that is going to go forward, all of this conversation were having around privacy. I know theres lots of concerns, i know theyre legitimate, that maybe nothing is really actually its like take your pick. Which ones are you going to be concerned about . Which ones arent you going to be concerned about anything facebook does, libra, that sort of all of the social media sort of political plays thats happening, theyre a hot potato, right . Theyre a lightning rod. That was bad timing. The idea is its going to happen eventually i dont know why they didnt wait longer especially with the fcc fight coming down. It seems like they havent been strategic. Senator toomey is right. Its a pretty smart nuanced take this is going to happen in some form or other. Lets embrace it and tackle it now instead of pushing it aside. Jochn, based on what youve written. I dont want to put words in your mouth, but you are on the other side of this debate . You think real regulation is coming on libra . Not necessarily on libra but big tech across the board. This is a moving target they continue to evolve. Marketplaces are changing. Their participation in the market is changing and that means the dynamics behind whether theyre blocking or inhibiting competitive behavior or innovation are they . In some cases weve seen obviously google has been slapped for this i think its a hard case to make today because i think a lot of consumers and a lot of people in the marketplace would say theyve made access easier and there arent prices for their products but over time more companies could come out and will come out to say, a, theyve blocked our access to the marketplace so theres been unfair practices or john but i think the answer to the question is its very hard t see today that there is a compelling antitrust case to be made across the board to break up these four or five big Tech Companies. John, i dont know if you can see it ed can see it. Youve got a list of the big faang stocks on the screen who is most in jeopardy right now . Of regulatory scrutiny that would have a meaningful i think facebook. Thats the first one listed there. I think theyve got the biggest hurdle. More than google given what the president is saying now . More than apple with some of the issues that i think facebooks ambition is sort of naked ambition around all of these different projects is attracting scrutiny. Its the day of the week. It could be Amazon Amazon has made a lot of enemies. There are a lot of complaints about theyre blocking access to the marketplace, unfair picking of winners and losers when it comes to their marketplace. Okay. Day of the week its whats been tweeted lately and which politician wants to pick on whom. We have to leave the conversation there it will continue though. Thank you very much, guys. Still to come, the stagecoach is ready to roll. Wells fargo results are next by the way, here are the futures right now. Take a look at whats been happening after weve already heard from three dow components. Dow futures picked up. We were in negative territory down by 25 points. This morning at 6 00 a. M were indicated up by 35 points. S p futures up by 2, the nasdaq up by 3 and squawk box will be back [ dogs barking ] what about him . Lets do it. [ sniffing ] come on. This summer, add a new member to the family. Hurry into the mercedesbenz summer event today for exceptional offers. Lease the glc 300 suv for just 419 a month at the mercedesbenz summer event. Going on now. A big morning for banking. Results already out from jpmorgan and Goldman Sachs next up, wells fargo. The pressure on tesla as the company strives to hit production goals, a new cnbc report details manufacturing short cuts and is blockchain a doubleedged sword this hour well ask House Minority leader Kevin Mccarthy why hes such a fan of the technology and also if that extends to facebooks proposed Digital Currency the final hour of squawk box begins right now live from the most powerful city in the world, new york. This is squawk box. Oh, good morning welcome back to squawk box here on cnbc live from the Nasdaq Market site im joe kernen along with becky quick and Andrew Ross Sorkin futures in the positive territory. They moved the arrow down 20 to 30 with dow components we have wells fargo out with 1. 30, which is 15 cents above estimates if thats a clean number looks like revenue is almost exactly in line. Higher. 20. 6 versus 20. 9 or am i looking at yeah, thats current. Thats june. The march was 21. 6 yeah, so that is thats about 700 million ahead if thats the number that i dont see any items that are in here. That looks like thats probably a clear number some comments. Remember, theres an interim ceo there. He made some comments that are basically just taking a look at the company, nothing broadly, that looks at the industry al parker. John shrewsbury, the cfo just said their credit quality remains solid. They are looking at yeah, these are all just comments about the company, a lot of things we already know about some of these issues after weve seen from some of the other banks this morning, jpmorgan had numbers better than expected the stock has been trading lower. One analyst said the net income guidance was maybe what the street is focusing on as you start thinking about the potential for fed cuts and what that will mean for some of these big banks where Interest Rates really do matter on some of these issues, too. Kind of udge after all was said and done for wells fargo. Its a turn around situation obviously with all of the right still an interim ceo whos there. Reputational damage buffet sticks up with him there all along. Yeah okay. Lets separately move to the other big topic of the morning facebooks Digital Currency project libra is set to come under congressional scrutiny it will happen today ylan mui is here good morning to you. Andrew, this is the room where the Senate Hearing will take place in just about two hours time. Ive got to tell you, facebook is going to be in front of a tough crowd today. Both republicans and democrats have been skeptical of the new cryptocurrency expect chairman mike crepo to talk about data privacy and protection Ranking Member has warned that giant companies should not have power over our Public Sector clearly treasury secretary Steven Mnuchin is not a fan after warning yesterday that libra could be a threat to our national security. I think there is a preference on both parties to the extent we can agree on the debt ceiling and a budget deal, that that is the first choice and i think were getting closer. Reporter mnuchin said he is concerned about the Illicit Activity and use of cryptocurrencies in those type of financial crimes. He said that facebook still has a lot of work do to convince him and other regulators that libra will be ready to launch in 2020. Now the company does seem to be prepared for this line of criticism. David marcus who is the lead on libra for facebook, he will be testifying from this chair later on this morning and in his prepared remarks he said that the next year will be an open process subject to Regulatory Oversight and review and that we know we need to take the time to get this right guys, just a reminder that today is only day one of two tomorrow facebook will be before the House Financial Services committee and chair woman Maxine Waters has been drafting a bill that would prevent facebook from launching libra altogether back over to you. Ylan, thanks. Lets get to our squawk newsmaker. House minority leader Kevin Mccarthy has a new op ed out in the New York Times titled dont count on government to protect your privacy. I have to tell you, i was shocked at what your what the answer is because its its kind of the opposite of what this whole hearing is about today sort of. Not necessarily, but you think not only is blockchain a viable and an Important Technology but it could be the cure not the disease itself for what people are talking about to these privacy issues thats staggering to me. I guess its because youre from california and maybe you understand this stuff. No, blockchain gives you a great deal amount of security. My concern is the answers that im hearing from washington are really what i heard during doddfrank its simplistic. Break the companies up they do nothing to protect my privacy or create a regulator that make them a utility that take away all innovation when you think about it, and i leave in that editorial something that tom siebold and i were talking about what if the Postal Service allowed you to mail for free but they could read your letters and send you advertise am. That is how g mail was created google says they no longer read your emails but they allowed third parties to do it people dont understand where their privacy is going when im on facebook, im not the customer, im the product. Facebook is free because they sell your data to make money now they want to get into the business and theyre not bitcoin in this libra. Theyre not decentralized. What im really looking for in this hearing is how and when will libra actually become decentralized. And companies have to pay 10 million to get into this libra and theres only a few select . So a Small Business couldnt get in so then youre concerned about competition. Is it really an open and free market is this a venmo or is this going to be a bitcoin . These are questions and its right that washington asks these questions of where were going. Youre preaching to the choir saying all of the things its not decentralized. No. I dont see what good it is it sets you up to have someone in charge. The 10 million youre talking about, they keep the fluid on that its a retread of everything that bitcoin was created to sort of be an alternative to. Im surprised that a republican sitting on a in a powerful position is making the case for really i think youre making the case for blockchain and bitcoin, leader. Look, i like bitcoin. Is it where it needs to be no but the real thing i like about bitcoin is blockchain. I like the security. You understand it. Yeah. It took me a while to figure out exactly what the and you know what got me there what . When i saw what libra was i was like this is everything that bitcoin has, that gives it value and makes it powerful and attractive and really generationally changing, i think, is not evident to me in libra. In fact, its even worse because it puts yes. Mark zuckerberg and all those autocrats in charge of even more, which is the opposite of what were looking for. The real concern i have with any of these Tech Companies is about anticompetitiveness does somebody else have the ability to come up you know the company that really should have been amazon was sears. They had every ability they sold you from a house to clothing they had a catalog they didnt compete. They didnt go forward can somebody else compete with amazon can somebody else compete with google these are anticompetitive thats the concern i have. Let me just ask you one bigger sort of larger crypto question because sure. Bitcoins price has moved in large part because of this idea that libra will ultimately be successful. In many ways the one benefit of libra over a bitcoin is that there is somebody in a company at least or companies that you can go to when your libra is stolen or something bad happens and ostensibly it gets adjudicated and that potentially depending how this is regulated it will be harder for thieves and other people who are trying to do bad things in terms of to use a currency like that that ultimately might be regulated in terms of not just custodial accounts but might be able to be more trackable bitcoin, one of the great benefits is it can cross borders. The flip side is it can cross borders and you might not know it. Youre making my case when you think about that what youre saying when you look at libra, if youre already a big, powerful company that you can pay 10 million, you can enter this and youre going to take away all competition. So you can only use uber you can only go to one certain bank you can only use facebook. Theyre taking the big powerful company seeing something move up when it comes to bitcoin and saying, we better get ahead of the curve. Lets notmake it decentralized lets let the public believe theyre part of that lets use blockchain and theyll take what i look at and what i buy and make nobody else enter this market because really what you want, you want competition i want to see competition and somebody else able to rise up. I want to see decentralization because libra concerns me that theyre going to control the market. But the issue that im wrestling with is decentralization i love the idea of decentralization except for the fact that as you know the u. S. Has had a monopoly on money, or at least its own currency for so long decentralization takes away that monopoly, which may be a great thing and takes away the control the country may want on the flip side you have, as you said, companies coming together including, by the way, the Credit Card Companies. The Credit Card Companies are going to get behind this which concerns me. As being the middleman what does blockchain do . Take away the middleman. Any time you make capital more efficient, yeah, it will make it more efficient thats why the companies are getting involved in it im really concerned about the dollar but also when you look to the future, we should be ahead of it. You shouldnt be afraid of technology but you should understand it in a greater sense and how can we prepare that tomorrow is better than today . Thats why we should have these. Seeing a Government Official speaking positively in any context because you do lose control yeah. Which is very powerful with currency thats why i initially when President Trump said some negative things about bitcoin, i said, what do you want what do you expect of course hes going to. Thats why im surprised i think i could talk to him for 10, 15 minutes and i think i could get him to understand its not what he thinks i think you could, too obviously you havent. Ill tell you the one thing im worried about. If youre using blockchain for everything, its going to be like 180 degrees outside because of the Carbon Footprint and all of the power that it takes to use that arent you worried about i dont know if youre a Carbon Footprint worried guy. Im eating just i just eat mud now. I dont eat if you are concerned about that, you should be very happy about living in america. Were lowering our c o2 unlike china, india, france. No, ive got it you know what i mean it would be very power intensive. Every innovation will get better and more efficient. Every innovation this is the first this technology is the first and second version its true about the question that you asked about bitcoin but bitcoin could actually take that protection to actually give that assurance to somebody if something is stolen. What facebook is doing, you cant argue against facebook theyre trying to keep a monopoly theyre trying to keep a control. They went to their biggest customers and theyve got a base to start with of millions of people on a platform and lets control another element of what theyre doing. Why . They see where bitcoin and blockchain is going. They want to get out in front of you. Leader, you dont think theyre trying to solve the inherent challenges that bitcoin presents they are he prre probably to see look, bitcoin has a future maybe its so many decades ahead of us. What if they can use a small version of it. What i think theyre doing is taking venmo and putting a new version on it and trying to add a blockchain to it at the same point because aback wouldnt be in it. You have a twitter account. Get ready because whats your twitter handle youre going to get memes. I have memes where im like mows sis rising into the heaven. Im at gop leader youre going to get that. gopleader. Youre going to get that youre at least in stage four. Youre not quite an evangelist yet but i think youre a believer in bitcoin, arent you . Yes the more i study blockchain, the protection that it provides and when im looking a the the rest of the world, yes, we want our currency to be the strongest, but when you look at technology and where its going and you think about china and these other countries and what theyre trying to do, we cannot keep our heads in the sand. How can we be more secure . How can we leader, heres the issue. Im as you know a big fan of bitcoin. How does he know that the folks at the fbi or the nsa or the cia, they would tell you that actually bitcoin presents a real challenge. It does. Possibly much more than libra to be honest with you. Nkts it does it gives a challenge i can do that in Something Else. The states have legalized marijuana and we dont allow them into the Banking System brings a big challenge because theyre using dollars. These are challenges that we have thats why we can solve these problems. Im one during, now i think there might be Something Like you because youre very smart and you still went into politics youre way too smart to be doing what youre doing right now. Thank you for being there anyway, leader im he glad. Im happy there. I dont think any of my teachers or professors say that. Now i dont understand it its like, holy smoke. I mean, i watch these guys on the finance committee when theyre talking and its mind boggling youre going to get a lot of were going to tweet this out. I think you actually your quote was i like bitcoin did you hear that . Yes. That may be what we tweet out. Anyways, thank you minority leader. Thank you. I almost said majority leader aim im living in the past. Were going to get back there. You know im living in the past. You said it. I know, i am. Like jethro tull thank you. When we come back, the pressure to roduce tesla is fighting a prolonged war against other automakers for auto share and its making strides. A new report is detailing problems on a California Assembly line. What does the new information mean for customers and investors . Well dig into it when squawk box comes right back. Why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at td ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom mad skills. Education to take your trading to the next level. Only with td ameritrade. 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, everybody. A new cnbc article is detailing short falls. Phil lebeau has the detail. Reporter this is part of a long investigation that has been conducted basically looking into the manufacturing process in the outdoor tent that has received so much attention at tesla talking with a handful of workers at that tent and theyve detailed and provided some pictures of shoddy workmenship to say the least, including electrical tape holding in brackets some nuts not being applied in certain areas and also outlining how the conditions there, not always the best, especially when the wildfires were going on in california all of this was in an effort to increase model 3 production. And, remember, this has been the focus for tesla as you take a look at model 3 deliveries this has been the focus for more than a year. Yes, its overall deliveries, but really model 3 the mass market vehicle. They needed to hit at least 74,000 that was the estimate on the street in the Second Quarter they came in at 77,550 teslas response they call these anecdotes misleading going on to say dedicated inspection teams track every car throughout every shop in the Assembly Line and every vehicle is then subjected to an additional Quality Control process towards the end of the line and all of this happens before a vehicle leaves the factory and is delivered to a customer did you take a look at shares of tesla . Remember, this Company Reports its q2 financials next week. This is in the next month. Its been a heck of a run and at one point go back six weeks, it was down in the 180 range. One last note about why this story is important if you look at Consumer Reports, if you look at other third party sources, independent that track reliability of vehicles, the reviews on the model 3 are not good in fact, Consumer Reports latest reliability guidelines have them in the bottom half of auto brands. The editors at Consumer Reports say it best look, theres a lot of efforts with the model 3 and thats what this gets at in terms of increasing production. Phil lebeau, thanks coming up, can ebay, walmart and target steal amazons thunder. The Online Retail giant racks up prime day sales facing fresh competition from rivals offering deals of their own were going to ask the top analysts if peak prime day is something weve already seen or if amazon can keep grabbing market share stay tedun, youre watching squawk box on cnbc l normalcy is restored. Wed been working for days on a site in a storm devastated area. A family pulled up. It was a mom and her kids. Everything they had had been washed away. The only thing that brought any kind of solace was the ability to hand her a device so she could call her family and let them know that she was okay. vo there for you when it matters most. Join us and get up to 650 when you switch. Thats verizon. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Welcome back to squawk box, everybody. Weve been watching the futures this morning, and after hearing from three dow components, youre going to see right now that the dow futures are indicated up by about 25 points even after the dow, the s p 500 and the nasdaq all set records last night in trading. S p 500 up by 2 points and nasdaq up by 5 points. Johnson johnson reporting Second Quarter earnings up above expectations the dow reported adjusted profit, 258 a share. 12 cents better than estimates revenue beat forecasts and j j raised the Sales Outlook the cfo told us in the last hour its results leave us in the solid position for future quarters growth this year, were maintaining it its two times the rate of sales growth we think thats very healthy and we look to the long term so this gives us a great opportunity to invest in our portfolio, to accelerate, fortify or add to our pipeline Going Forward so that we do solidify not just the next six months but many, many more years to come. Not a whole lot happening in the shares you can take another look up 29 cents at 135 down big on friday down 6 points. The news came out in the middle of the day. We have a headline, some news coming out of key corp its reported fraudulent activity the current estimates put the amount at about 90 million. The stock off 2. 5 cant imagine its all related to that news well keep our eyes on it. Breaking retail sales data well bring you the report as it comes out and break down the numbers and what it means for business, the economy and the feds latest deliberations, of course, on Interest Rates. Whats going to happen ts hi month. Squawk returns right after this whwanted to get away who used expedia to book the Vacation Rental that led to the ride which took them to the place where they discovered that sometimes a little down time can lift you right up. Flights, hotels, cars, activities, Vacation Rentals. Expedia. Everything you need to go. Welcome back to squawk box on cnbc. We are live from the Nasdaq Market site in times square. In fact, were just seconds away from the latest retail sales and import price data. Weve been watching the futures this morning dow futures indicated up by 17 points they had been down by 23 or 25 points we have heard from three dow components, two of them helping things out right now even though all three of them beat earnings expectations s p is up by a point and a half. Nasdaq indicated up by about four banks have been out today. Weve heard from goldman pmorgao j. P. Morgan chase down even though it beat on the top and bottom line. Part is concern for future fed, rate cuts and what that would mean Rick Santelli is standing by at the cme in chicago rick, take it away. Reporter a litany of data points import prices for the month of june down. 9 thats a bit more than down half a percent to down. 6 expecting strip out petroleum, down. 4 thats also double what we were expecting. Year over year down 2 thats actually on the light side but sequentially follows minus 1. 1. Lets look at the other side export prices. Export price month over month down. 7. Year over year down 1. 6. So all these numbers are bigger drops and maybe they go to the notion of how disinflationary pressure seems to be accompanying many of these trade infractions. The money ball number, retail sales for the month of june, up. 4 double expectations. Strip out autos, guess what, still outperforming. 4 strip out autos and gags, up. 7. If we look at the control number, up. 7. Thats a whopper and last look at. 5 control number ends up at. 6 some subtle changes in the last look,. 1 a nice over performance there and its immediately reflected in yields. We pop up to 2. 11 and 2. 62 on tens and 30s respectively. We have a dollar index with a rare up day. Its up 1 3 of a percent and its up more we see preopening he cequities about the same as they were. The dow futures at least this number sets off the stage for more ongoing debate as many try to handicap exactly how much slowing is being drawn into the u. S. Economy from global forces. Andrew, back to you. Thank you, sir. Thank you, rick. Stick around we dont want you to go anywhere we want to get over to Steve Liesman who joins us with more steve . Reporter yeah. Somebody forgot to tell the consumer about the inevitable slowdown here. We were looking for a much weaker number here let me get rid of the thing that actually depressed it, which is gasoline station sales that, of course, will come out when they adjust this data for inflation. Gasoline station sales were down 2. 6 why . The price fell that may come up in any event, we do get rid of that thats where rick rightly cited. 0. 4 if you take out autos. The only other real big negative is Department Store sales which, you know, Department Stores have their issues down 1. 1 . But then we look at the nonstore retailers, which includes the internet and thats up 0. 6 to 0. 8. You have the shift to Department Stores and to the internet that keeps, keeps, keeps going on nonstore retailer number is up ive got the line right here only 13 year over year. So there you go. Lets do the bottom line on this, which is very simple we had a relatively modest below 2 number for Second Quarter gdp. Still data coming in still adjusting the forecast, guys i think that number is going to get up closer to 2, maybe even above 2 with this number there is a tale of two parts of the economy. The industrial part of the economy looks to be slowing. The consumer part, i guess they thought was going to slow more but it really isnt. Youve got pretty solid income, pretty solid wage gains. Consumers when they have money in their pocket, they spend it thats exactly what they appear to have done this past month andrew appreciate that very, very much, steve. Thank you very much. This is a nice little segue to talk about amazons prime day as it rolls into day two and the consumer whats going on. Rivals trying to keep pace with their own. Joining us to talk about the competition spend is the managing director of key Bank Partners good morning nkts good morning. Im going to ask you about one question on amazon and then the competitors. How much do you look at amazon prime day and say this is new money being spent and how much is being pulled forward . Thats one of the questions weve been asking the last 48 dollars. A big component is new spending some might be back to School Spending but theyre creating excitement trying to introduce new products its another example how amazon can continue to take share in retail. In terms of new prime memberships as a function of this thats obviously a big component of what they focused on its probably less important than it has been in previous prime days. You think this is more of loyalty lets prevent churn play or is this more of lets actually attract new customers to the prime program certainly a little bit of both but i think theyre trying to create churn. They had music this year it reinforces to that prime customer that this is the best value in retail today. Do you thinkpeople are buying prime right now for the Video Service or for the shipping predominantly for shipping but increasing as they add more value to video, more exclusive content, movie over time its another component of why you would never cancel your prime membership. How do you think of amazon relative to walmart and target one of the things walmart and target successfully identified is this is a time when they have shopping on the mind thats all due to amazon theyre leaning into the stores which is a differentiator versus amazon i think the three ofthem have created what will be a successful event. What do you make of the numbers we were hearing from both from rick and steve in terms of the strength of the consumer and how maybe they didnt get the message that things were supposed to be slowing down the consumer is in great shape. You have unemployment very low you have strong wage gains probably whats important is companies havent really taken up pricing as a result of tariffs. You havent felt the negative impact of that this is an ideal time for the consumer. Tech question for you weve been having a big discussion happening in washington right now about whether these companies are broken up, whether theres competitive issues do you think the other guys, walmart, home depot, best buy, target are going to be talking to the doj, ftc, everybody else and try to gang up on amazon do you think thats where this is going next . I would think behind closed doors theyre ring fencing behind amazon. Whether or not they remain successful, that remains to be seen they want to compete with amazon and the other thing. Do you think that the push back or the push back against amazon is coming from the big guys or do you think its coming from the smaller either manufacturer or retailer whos trying to use amazon as a platform but now thinks that amazon isnt a platform for them but its a competition. Its coming from all angles those in dc are responsive to the small consumer. As you analyze amazon and how much that company is worth, how do you factor in, how do you model out this dc piece of it . Its certainly something thats a bit of a head wind in the business if you could buy amazon, walmart or target, you only get one, what do you do . Today i think target has incredible value. Target . Target does theyve made some incredible in roads with their product the stock is the least expensive among the three of them. We think that theyve finally fixed this online business. Okay. We will take that. Ed, thank you for coming in this morning. Thanks. Appreciate it. Coming up, three big banks rolling out results this morning. Jpmorgans Conference Call is happeng ghnoinrit w. Well bring you the highlights next y single day. But what does changing whats possible mean anyway . Well. If you run a business, it means a lot. 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 . Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Welcome back to squawk box. Take a look at the futures were now a little under an hour away from the market open. Show you how things look like they will open right now about higher 16 points higher. Nasdaq up marginally s p 500 up marginally as well as weve had a slew of earnings reports and other data coming in this morning joe . Jpmorgan Earnings Call is underway after this mornings Second Quarter results the release of those lets get an update now from cnbcs wilfred frost wilfred, this is the its the most wonderful time of the year for you, i know that. It is. It is and i can see it on your face. Youre its hard to even suppress your excitement. Genuinely it is let me summarize this morning. The key thing for banks has been stronger and jpmorgan is trading lower. Margin, soft, 2. 9 citi was soft but they were able to reiterate the full year net interest guidance. Jpmorgan cut theirs from 500 million. The new cfo jenn phepszak said theres one rate cut but it could be worse if theres more than one a reserve release and gains from the trade web ipo. Wells fargo, kind of similar also saw net interest and margin disappoint that was on the fee income their provisions looked fine Goldman Sachs trading higher in part because it is more tilted to fee income than Net Interest Income that beat spread across multiple divisions especially equity trading which was up 6 year over year. Investing in lending business and that contained their one off exposure to the trade web ipo. The bottom line exposure to u. S. Rates is bad this quarter. Exposure to markets is less bad than feared. Thats why the regional banks index is down even more than jpmorgan and wells fargo, why Goldman Sachs is higher with Morgan Stanley higher ahead of their results in two days time. Wolf, excellent explanation lets bring back marty mosby from Vining Sparks also for more on this mornings earnings season. Mike santoli is back, too. Guys, youve had a little time to look through it marty, you told us last time around it was the Net Interest Income you were concerned about cutting exposure anything else that you think this might tell us about the other banks and what we should be watching for the rest of this earnings season . Well, what we will make sure of is, you know, were seeing the pressure in i. I. And we havent had the fed cut rates. Its not the short term rates moving lower key eighting the pressure this is the aisle end of rising Interest Rates and funding costs moving higher. Were about to get some relief from that as the fed cuts rates and were about to see the inverted fed curve invert and that will take a negative away all in all what were going to see is in i. I. Not Net Interest Margin but in i. I. Its growing with a capital story on the back end. Share counts are going down 6, 7, some instances 10 which is a really strong catalyst for these banks. Mike, what do you think the backdrop for the bull case lets say on banks is that this particular quarter probably shouldnt be that big a swing factor because theyre so cheap relative to the market theyre buying back so much stock. They yield 3 . Its a Bigger Picture sector story that they are under appreciated. I dont think these numbers do anything to argue against that in fact, if anything the strong retail sales number is kind of your reason to think that the banks potentially have gotten too cheap, meaning did we over anticipate a down turn in the economy . The consumer is strong jamie dimon talking about that now. That should be all good inputs the question is will the market hear it . Is the market going to continue to penalize this group for being no growth, just all about Balance Sheet, financial engineering. Marty look, banks may not be what they once were but theres some great news that weve seen and some great performance by some of these companies, including jpmorgan which is trading down by 1. 7 . The back drop when mike talked about the eke 24078 mico growth, when you go down like Goldman Sachs, everything was favorable, investing in lending. Fixed income was the only thing we saw some weak income there. Returns continue to stay flat to move higher. Your eps is growing. Theres a fundamental strength behind the story credit costs remain low. Really what we have to do is fight back what were going to see a little bit of which is margin compression this quarter. Thats going to invigorate that story a little bit more. We have to see the fed cut in july and see that numbers will still hang in there and profitability wont be as negatively impacted as anticipated right now. Thats where towards the back end of the year the banks can outperform again. Marty, which of these stocks would you buy right now . Goldmans the one we talked about and the kind of money center side. When we look at the super regional banks, what we want to see is those banks that are kind of restructuring so we talked about going into earnings or banks that weve seen like regents bank or zions or you roll into even like First Horizon who reported well this morning. Also we look for a High Quality Bank Like M T Bank is a really good safety net for those who want to have some protection if things were to deteriorate those are the ones we want to look at the market is over anticipating impacts that arent going to happen. As they change their overall business mix theyve solidified and dont have much pressure when short term rates go down. Theyll outperform like we said in the back half of the year. Mike, were bumping up against new highs and trading higher look, pretty greed cursor for what to expect. The markets holding those highs right now. I think right now you could sort of make the case that, you know, were up 20 year to date. Weve priced in a lot of the good stuff that we anticipate including probably a july rate cut. Again, the bull case is that people dont really believe it that much. People have been kind of taken by surprise that the strength and maybe feel by the way, yesterday Trading Volume really low. Volatility has really drained away from this market. That can be, you know, just kind of a market that kind of goes in the direction of least resistance which right now is to drift higher earnings estimates i mean, earnings reports are always going to try to trap index level volatility. In the brief pull backs the market has had in this year, do you know how many times people have calculated the market cap losses due to the tariffs . Thats been one exercise, yeah, sure i heard five trillion, eight trillion so just being where we are right now with the tariffs doesnt i mean, you say its the fed. 5 trillion in market cap has been cost by the no, im talking about when it was down people are quick to say that was a horrible move, weve lost 5 trillion trump, how do you say this to investors . Right the same person has said it five or six times. Now were at new highs so is it because of the fed or what do you attribute it to . Im saying that obviously the tariffs are still on. Its about everything you know what im saying. The best rallies in this bull market have calmed when a bad thing that we were anticipating didnt happen. Tariffs are still on its just that theres a truce. But the truce is has helped the market enormously the tariffs are still on and were still in the middle of the trade you were pretty worried about the tariffs. I wasnt talking about you specifically if we were down 10 . The biggest risk of the tariffs was a nasty hard landing. We still might have that and all the fed, too. Its not about the cost and friction, just the chinese. Just the way we report it. Mike, thank you marty, thank for being with us, too. Thanks for having me. Also be sure not to miss a first on cnbc interview this afternoon with wells fargo cfo john sh shrewsberry. Jim cramer joins us now tired of asking you about what new highs mean, jim. Thats something that every time you come on im asking you about new highs. Youve got a new story well, i just think this Goldman Sachs quarter was really better than expected i think invest banking was a force. The recurring revenue was incredibly strong. Were going to a model that i think can really be get a price ratio. They were the lowest pe coming into this group. Changeable bulk is over 200. Theyve started to return a lot of capital thats the one i feel the best about today. I have to say i do like citi i think its terrific. The most important one is j. B. Hunt witold you that, look, trucking is very good. You put trucking good with what Steve Liesman said this morning about retail good with all the credit card numbers i see from every single company, although i cant believe how big this apple card is going to be with goldman. You say, you know what, the industrial not great and we have to decide how much the industrial economy matters to the fed i think it is significant enough they can still cut rates what about faang . Where should we worry or should we worry theyre picking at faang. I think marcus has a good libra story. Both democrats and republicans, not so great i think peter keel can make a lot of noise for google. You call someone treasonous, you dont just walk away from that amazon, it may be so good that people may be angry at it. Netflix did well, a positive report about how theyre going to have much better setups faang is not it. Cant play faang last time on mad money, faang is the most toxic right now and we have to play through it marcus does a good job as a rich person, i could go to goldman and put together libra. But how about as a poor person forget about it. This is about en banc. They position this totally wrong. Marcus better come through with what i just said change the dialogue, talk about how rich people can have libra, how about poor people . Why he doesnt say that is because hes from pay pal, not from goldman. And i know youre saying that you think all the companies are toxic, google is long considered a value play for some people, given where its stock has traded you then see the president you see the president this morning saying that he wants to look into what peter teals talking about. Thats the problem. I think google is going to have the the best upside surprise. You call someone treason are they the rosenbergs . Treason is a high crime. Used a lot in the last year i heard it used an awful lot, especially on twitter. Im not crazy about someone saying somebody is treasonous. But peter thiel has enough money to say whatever he wants thats a hard charge maybe they dont have the right controls, but treason. I was trying to figure out how to make any sense of it. If you kind of use it through the same lens of huawei, saying we dont know of any times it has been abused yet, but the way it is designed and the way the Chinese Government has to have all control, and able to be able to get into these things, trying to back it up that way, maybe. It is in the charter. If you are a communist company, you have to work for the communist government but my biggest problem here is this does he i want him to name names hes senator mccarthy now. How many card carrying Chinese Communists work at google . I dont want it to come from 57 like the manchurian candidate. Treason, the word how many times treason was used during the russian collusion story, thousands. I know. Thats when you start using it were going senator mccarthy, i would like to know, i want names. Which people in it is the state department in the 50s. Congressman carriamccarthy o. The other guy was unavailable. Do we need army thiel hearings where is welsh i know where roy cohn is. How is the outlook for these companies. Is it more important than the results themselves i think the outlook is good i think the fed still cuts i havent seen any really bad numbers. The weakest is jpmorgan. They have a very good yield. I like a lot of jpmorgan it is worst in show. Versus citi. Wells fargo, they have a ceo, it would be helpful i find companies that are run by ceos, theyre better than companies that dont have ceos just my predilection i want names if peter thiel names names, i want to know who who does he know works for the Chinese Communist party, because if you Say Something is treason, i want i would like to have thiel hearings and i want to a house on american activities committee. If thats the way were going, you know, bring it on. Thats not the finest hour of this country all right well see you in just a couple ofminutes. Five minutes or so until squawk on the street. And dont miss jims exclusive interview with the ceo of Dominos Pizza, coming up tonight on mad money at 6 00 eastern. Ritch allison, the stock down after a miss on revenues 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. Welcome back to squawk box. Media news, sources telling cnbc that cbs and viacom set august 8th as an internal deadline for reaching a merger agreement. It could be announced before or after that date, but theyre aiming to try to get this done for august 8th, which is also the date that both companies are scheduled to post Quarterly Results. That makes a lot of sense. Companies are said to be leaving price out of deal discussions until other issues including leadership are resolved. This is has been an ongoing saga for quite some time and but i think the expectation is has always been eventually they will merge. The question is when tesla is changing its pricing and its lineup once again. The company is cutting prices on the model s, the model x and model 3. Separately tesla employees say they were pressured. That stock off by 1. 5 . House minority leader Kevin Mccarthy, not the one that cramer was talking about, that was senator mccarthy, joining us on squawk box earlier this hour, he had this to say about bitcoin. I like bitcoin. Is it where it needs to be no the real thing i like when it comes to bitcoin is blockchain i like the security. I want government to actually start using blockchain that was a freudian slip. Almost said i want the government to start using bitcoin. That would be something. So interesting that because of the advent of libra, it created this attention and the point of people changing their minds, where everybody was on bitcoin a month ago, some people now, it is fascinating what happened here. Sometimes you dont realize what you have until you see life is relative, right final check on markets after a very big earnings day this morning. We had wells fargo, Goldman Sachs, Johnson Johnson ragt n right now, the dow would open off a point, everything is down just marginally, nasdaq off three points, s p 500 off as well but literally we could call all of this show you whats going on in europe real quick, we flip the board around youll be seeing a picture there of green arrows across the board. Some marginal, some not. Thats about all we have for today. We have a big show tomorrow. Make sure you join us tomorrow, squawk on the street begins right now. Two sides of the coin to choose from two sides of the coin im getting weary which one should i choose good tuesday morning. Welcome to squawk on the street. Futures pretty flat on day two of Bank Earnings mixed results from goldman and jpm. Big day on the hill as facebook testifies on libra the fed chair is in France Europe is steady ten year yield back to 212 as retail sales beat across the board. Road map begins with big banks in focus, goldman and jpm delivering beats