Transcripts For CNBC Squawk On The Street 20240713

Stocks testing critical levels durab durables, though, were fought good ten year 176 our road map begins with twitter. Tanking as you know. Tesla up big two big movers on this busiest day of the season. Amazon and intel report tonight. Plus the 737 maxes are taking a big hit. The ceo will join us first on cnbc. Beyond bearish bets mount ahead of the companys lock expiration and 3q results. So lets start with two big movers in tech tesla is surging after surprising a quarterly product delivery and cost cuts they expect to deliver more than 360,000 teex e vehicles th vehicles this year ted segal, on a weak revenue guide, despit daus that beat consensus up 17 the buck in the ad product, jim, that kept them from basically getting good data to share with their ad partners, took 3 points off the growth. Very self inticketed wound. Ned segal comes to realize as a cfo the spokesperson for the firm, you know, i come back and i say, look, it is still a must buy if you want to introduce the joker. You want to buy on twitter but they did have seasonality and when you listen to the companies that are like snap, they dont talk about seasonality. Because the growth path is so good so twitters self inflicted wounds how they address privacy issues twitter ad serving not necessarily perfect. Twitter still vital as a buy for advertisers. The thing that i guess made so it that you are not going to see a bounce is he did say the problems will continue in the Fourth Quarter you never want to hear that, because what it says is, you will get gob smacked again so i find twitter even down 6 to be a tough buy i just was kind of flabbergasted that they made so many mistakes, themselves do you think its as critical ad buy given the number of critical outlets coming online this year and next that will be possible ad poet surface. I take twitter when he says you want to know where the joker got the best impressions, it was on twitter i never understand when they say you have to watch twitter because of our president they never do that they never just say you know what twitter is intgrale to trying to figure out things you think about they still dont know how to tell their own story id find their story is far too diffuse versus what we know twitter as being, which is the way the president disseminates information in the way they used to do press conferences, but they dont do that maybe theyre afraid to say, listen, 2004 president s best friend, because hes unpopular in a lot of place, but they dont talk about being a must look they talk about screwing up. Ned was so i felt to say to ned, hey, ned, cmon, snap out of it. You are too down today it wasnt just segal, though, jack dorsey addressed this on the call take a listen. Unfortunately, we had some missteps and bugs in our map ads that increased seasonality in july and august. Despite that we saw strong september results and good advertiser momentum. Our goal in rebuilding our core ad if map Technology Secretaries was to address these sorts of issues and increase engineering agility. Because of this work, we are much better equipped to identify and fix issues we come across today than we were one or two years ago. Stin painful but no longer existential as it was in our past well, i dont want to existential. I mean, im not asking for a camoo or a sarp, im trying to get betterthanexpected numbers. One of the things that bothered me, oh, things you thought was working werent . It was a like a pre mer were not as bad as you think, were going to get better. I didnt know we were buy. When you look at a stock that was done, people were saying, wow, not only did i know they were doing what was badly, they havent fixed what was doing badly. Jack and ned had that feel of a team that you know what, we didnt make the playoffs this year and its early in the season its not for them. Theyre not making the playoffs. Theyre not in the playoffs. And they know it. They know theyre not in the playoffs its always tough. There is no draft choice at the top if it tanked you got to wait a while for the draft. Yes i think look. I want to tell jack the trading deadline is next week, you better come up with something. But it was a quall u call where they gave you very little reasons to own i came away from the call depressed. I came away thinking that i dont know whether i need xanax or lipitol i dont know david if you need a powerful all you need to do is look at tesla to feel differently. That was powered by tesla and cbd. There was a call i got to tell you, ford sounded like tesla and tesla sounded like ford. Tesla was like it was like listening to a call from a real company that made cars and made money. Not only that, they wanted to spend a lot of time on the Energy Business on some solar. Thats interesting to kind of get you excited about that again. How about china, the fastest to grow and put up a factory and hire people . This was a im not saying it was subdued, elon, but it was a guy who makes cars i kind of like, i enjoy him. I enjoy this kind of not wise guy. You enjoy the nontwitter musk in some ways . Yes i mean, look, he gave you. Now, people hate this. People who on twitter to me today, which hey by the way jack now i feel like i shouldnt after listening to your call you know, tesla comes out and basically, you Say Something good about tess larks say, hey, you said it was bad. Now you got me caught in a short. The fact is a lot of people think its hocus pocus i come back and say i look at the indication position and say. 5 billion the most ever they had some actual cash flow i think musk is still very profession promotional. Take this from the call. Now we think its in a good place headed to a great place, weve restored resources to tesla storage, so i think that will be the crazy groat for as far into the future as i can imagine. But he didnt trash negative analysts. No. He was clearly sober in the calls, no doubt about that okay. You tell me. Im not saying that he ever wasnt. He didnt hit sobriety yet. I wasnt, be careful in that conclusion you drew. I didnt. Im talking more cbd oriented, anyway i think thc, remember this, its a fraction cbd you rub on yourself its better people say than icy hot. It was just a regular call thats one of the reasons the stocks so much he wasnt on twitter saying this was the greatest quarter ever. I will make 500,000 cars there was none of that, david, there wasnt the china thing, it turns out if you liked, by the way, like Dan Schullman, if you work with the chinese government, you can do a tremendous amount of business go there was a fair amount of expense control in this quarter. Yeah. Stocks still down for the year this is the first visit back to 300 since february but this would be the best day in what since 2013 you got to look, it was, again, look,ient to be facetious here, gm had an okay quarter now they got to strike when they lose x money a day ford tried to put some lipstick on that one. Tesla is making a lot of cars and selling them there was no deened ma no one is talking deened ma. Remember we said there is no real demand. There are still questions about overall demand they have to hit what 100 something thousand this quarter to get to the low end. Can you say, how about it wasnt a bad quarter can everyone agree with that without a doubt they made money when they werent expected to, they hit their delivery targets talking solely about solar and energy s3 says 75 of the paper profits this year have been wiped out. How about that . Last night a lot is short coming last night. Did you see him on twitter last night did i see who on twitter. Elon muck that was me, remember i simulated him. Ive said i bashed the short, i really crushed them. I thought it was good. Now i know listening to the ned segal moment when no one was watching, but i did it anyway. Theyre watching. There are some out there. There are a lot of people who didnt and theyve made mistakes and tail try to correct them not yet. I thought he was betting going snap snap disappears yes a historical record is that an insider trade if. When we come back, dow getting a lift on earnings beat. We got to get through the airlines and ford and ebay our own parent comcast, of course futures look good as the s p is in within 1 of all time highs dont go away. Obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. 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. Shares of dow, dow chemical rally. The Company Posted lower profits and sales. But it delivered an earnings beat, i think more important you talk about dow as perhaps a play on business bottoming and doing better if 2020 in 2020. Jim is with us do you like my concept this is going up, business bottomed and Going Forward, we will start to see some earnings momentum good morning, jim, thanks for having me. I do think weve seen pmi slow down for the last four consecutive quarters and we saw, obviously, a step down in the oil pricing about this time last year and since then, things have moved down, invent errors are down youve seen some soft the backlog in the industrial sector now. I think we are poised any pull, any kind of a tail wind with all means that we will get a little bit of earnings momentum and margins improvement and tightening of the supply demand balances. What do you think of what you guys are doing in terms of product lines . People say what does it matter but outlook for ethylene, youre then they and outlook for sill urethane and outlook for silicon . Because i sigh signs these are all getting better. Silicon is an area, the consumer is strong silicones show up in a wide variety of products you use. That consumer demand is pulling that chain with ewe have a little weakness in the oxane chain, as we entered 18 bottlenecks in those plants this year, that will continue those earnings, ethylene and polyest lthylene packages is a a strong factor. We were double digits in asia and china this quarter i continue seeing that growing obviously, changing, too, as we move into more circular products and move into plastics, waste and cyanates, consumer is strong they go into still, automotive sectors as well, automotive, especially in china, has been a bit slow so we see any pull of an demand on the automotive side, i think you will see these things take off. I want to talk about obviously the environment and how the alliance is doing on Plastic Waste. I also know you taught us, look, there is ten rivers in the world producing it some of them are in china. You started in india to try to clean things up. Is there anyway that china, which we should talk about as a major source of pollution will place with the cancellations, the caughtback, what is ending up in the Pacific Ocean . The cutback, what is ending up in the Pacific Ocean . China is taking steps back. We seen commitments with products from waste to Energy Conversions and close that in. And the Major Chinese players have joined into the alliance, Plastic Waste is right there with us. Signed on right away most of the large asian players have signed on the alliance is up to 43 companies now over 1. 5 billion committed to go tackle this. And its a full value Chain Solution trying to look at how do we stop the waste from going out to the ocean, but also how do we stop it from going to landfill in the first place . Put a value on that plastic so that people are encouraged to recycle it bring it back into products that you use every day and into other product thats havent been invented yet and to create a closed loop versus the linear economy which throws it away. Jim, im talking about some of the legacy things i was hoping wed see Real Movement on. Cost savings, talking about 7 or 8 million. Anyway that can get more what about kuwait and sadara in it will be the savior of the upside jim to me the sedra seems a light weight, an aal al bo tras albatross around your nic thats good. On the kuwait side, really, meg monoethylene glycol product versus collapsed thats putting the drag, kuwait as a cost producer is good for the long term. Sedara is really about the financing on the projects. It was really heavily loaded with project financing we made a lot of progress in the Third Quarter together with aramco to do some things to get ready to reprofile that debt and as we do this in the Fourth Quarter, well finish the last agreement that will create the project completion date and we will go into the beginning of the year renegotiating the debt with the lenders what that does is it takes ten years of Straight Line depreciation on that full debt on sedara and will stretch it out over a much longer tenor thats really the drag you see on sedara. Its cost projection is good. Its good on ebitda. The Financial Stress we have to address. In this environment thats the right time to get that done. On this question its a little more eth eral you and david they taylor said the amount of energy you need, the amount of resewerss to make them alternative, they make so it plastic they do better for the environment. Could you please explain that to people a lot of people feel thats just impossible we have to manage both the plastics and the plastics waste issue and the carbon and Climate Change issue and their interlinked. So one of the reasons plastics has grown so much is you can make it so strong and so lightweight you can replace much heavier materials and materials to make it easier to produce, glass, metal, paper for example, take fourtofive times as much energy to produce as plastics. Then you are transporting all of that weight over long distances, so you are burning more transportation fall to get it there. The carbon foot print is much more if you replaced all the Plastic Packaging today, waste would increase 25 times. That isnt the direction we want to go we simply need to close the loop on plastics, get it recycled, get it converted back into other materials, into energy, because it has a high energy value and we have a way to do that i think people are trying to make this to be an insurmountable problem it is not, the Plastic Waste in the ocean issue is 8 million tons a year. Thats a manageable number we will tackle that with the alliance and local municipalities to show them how to make this work. Thats what the alliance is all about. Well, i got to salute you, the work with the alliance is real, its not what we call green washing. I know you too are very concerned we get out in the ocean. Ceo at dow chemical, good to see you, sir thank you, jim, good to see you. When we spoke to jerry is kelly last quarter with southwest. He explained his displeasure with the boeing 737 max. Were unhappy its taken so long were in the dark like you are on a number of technical matters. Our pilots are heavily engaged and working with boeing to understand the changes we were anticipating getting 41 more deliveries of the max this year and so our exposure with our route system grows garry kelly will join us after they tack a hit this quarter. We will get to names we have not get yet gotten too, like microsoft, in a moment yeah, thats half the fun of a new house. Seeing what people left behind in the attic. Well, saving on Homeowners Insurance with geicos help was pretty fun too. Ahhhh, its a tiny dancer. They left a ton of stuff up here. Welp, enjoy your house. Nope. No thank you. Geico could help you save on homeowners and renters insurance. Man how can i deliver superior longterm results . It begins with a distinctive approach to managing money. That for over 85 years has focused on keeping confidence up when markets are down. An approach where Portfolio Managers work well independently. And even better together. Who dont just invest, but are personally invested. Can i find a proven approach designed to deliver results . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Got some upbeat reactions to earnings from the likes of microsoft, paypal and southwest. Were going to talk to gary kelly of southwest in a moment first, though, cramers mad dash and the opening bell in fiveandahalf minutes. I am totally blind. And non24 can make me show up too early. Or too late. Or make me feel like im not really there. Talk to your doctor, and call 8442342424. They give us excellent customer otservice, every time. E. Our 18 year old was in an accident. Usaa took care of her car rental, and getting her car towed. All i had to take care of was making sure that my daughter was ok. If i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. Were the gomez family. Were the rivera family. Were the kirby family, and we are usaa members for life. Get your Auto Insurance quote today. Lets squeeze in a mad dash, getting ripe for the opening bell 2. 5 minutes from now. So many different earnings stories, paypal is one you want to feature paypal came in and a 52week low, down 15 in the second, dan shulman delivered a clinic how to make it so you were doing better than anybody expected theyve increased merchants, it went from a head wind to a tail wind for wenmo in september, china, they got approval to buy 70 of a major play on chinese ecommerce and Dan Schullman endedthe call by talking how to do business with the chinese, play with it, deal with the regulators. Do not be a disruptor. Its china, its ali pay, 10 cent you are talking huge players there. I dont know whatter that plan is their plan is to be industrial up pay also ecommerce. There is 500 Million People in ecommerce. He said if you are not in china, you are nowhere. I thought, you know, david, Dan Schullman, i think a lot of people felt after the last quarter he was going to miss he did not miss. He blue it away. He got a lot of money. He got about 30 times adjusted 220 etfs, its growing over 20 . The street estimates is 316 i think it could earn 350. I dont know how expensive it is versus the fit tech group. Shulman, the metrix are really much better. Now hes partnered with everybody. Hes got this American Express deal where you can split a check with venmo there is like a tray of everybodys amx card when you go out to dinner. Not anymore. We appreciate it if you just picked it up, jim. I picked up you know what i used my apple goldman card. Do you have one . No. Why not in. No. Do you have what a magnesious what do you got. I do not leave home without my apple card. Actually, the green card is getting a big redo. Its a big deal. The millennials love it. I happen to love that San Francisco i think its jam. You go to that, david, and the podcast now a gigantic yawn. Who said i was yawning . I was breathing in a lot of air. I will get you a cpac mask. Cleansing breath. Maybe its in honor of the opening bell where we got Precious Metals nova gold, rick partners, providers of Risk Management insights. Jim i did see you thought microsoft was best in show again. Oh my, Satya Nadella, theyre growing. Azure is not growing as fast andy hood is one of the best cfos, look, when you crush it like we are, you are gathering more and more people who are using our products, so we cant maintain that level of growth. But anybody on that rather short call recognizes theyre gaining 2 billion people now not forget that. The actual ios 13s, some people feel this is now better. Wait, what . No, im giving you a hard time, like microsoft versus apple. Yeah. I tell you what i really liked about microsoft is Satya Nadella is basically making deals with everybody so he made a good deal with oracle he made a good deal with vmware. They are really its all about part first you know what, i thought it was a monster quarter, generated a huge amount of cash. Just throw it off. The stocks going to go to its all time high. If not today, it was that perfect a quarter. Their cloud busy grows. Its 11 of the 33 billion if revenue for the quarter i think. Yes, yesterday you spent a lot of time talking ai ai throughout. And the edge, where so much information and data is generated. The ability what is going to be their ability to deal with that at the edge of the network as opposed to sending it back. That was very important it will become more important. That when we talk to ginny rameti and hans vesper. Id be worried about how aggressive satya is. The hybrid Cloud Solution is perfect for them you should listen to amy hood the cfo talking about how much money they are making. They are growing as they are a midrange company. Okay they are not growing as if one of the two Largest Companies in the world. This was a fabulous quarter and the headline writers are so stupid, there is no slowing of growth whatsoever there. If anything i could argue that azure, which has unbelievable Gross Margins is accelerating among all its different partners. You have to be a little more cautious on what hardware the outlook spending on it it hardware is, right these guys are everywhere you have to be i mean linkedin. Heres an acquisition that they made people should be thinking about how big linkedin is. Xbox is still delivering great things the surface is doing okay. But at least its not hurting them but when youre talking about say a company like novartis using their Artificial Intelligence to be able to tailor individual drug needs, i mean, thats extraordinary this company is more like sky net than you thought only becoming more so as ai creeps into everything as satya was saying on the call it was just were in the earliest days of Artificial Intelligence, though. I dont understand wane e when you see a quarter that goes out and stocks go down, things are slowing, thats outrageous please do not trade the headlines. Because in 13 short pages, on that Conference Call, you heard about a company that really is hitting in all cylinders that is really i think that you never hear them, by the way, does anyone say i want them broken up . I mean no one is talking about them being broken up yet they got the best business of any large tech company. 53 growth in azure revenue. How about the revs, the margins . Did you see the margins there . Theyre enormous. A really good job stock is up two. Report card on zuckerbergs performance yesterday. All right so heres my views first of all, he didnt take the bait at any given moment, he could have taken the bait. Second he talked about transparency, empowerment. He gave in on libra, so it should be a dollarbased crypto currency, that was very smart. He blunted that. He was right on script to talk about how the chinese will have ownership if the United States doesnt leave. David, i thought it was a Tour De Force because he did not get rattled. And his hark, i mean we cant say enough about that. We went right to the substance. Im all about appearances david, do judge an ebook by its cover . Im an extraordinarily shallow human being. I thought he was going about whether it was cashmere or bought at tj max i applaud his willingness to continue to pound against a wall thats not going to move in lib practice if were going to talk sar torely sartorily ill move on im not done. They offset the he it from the 737 max. Joining us first on cnb southwest chairman and Ceo Gary Kelly. Its great to have you back. Good morning i got a haircut yesterday, by the way, so. You go look good. Thats the first thing we care about we talked about your last appearance on this show where you were quite candid about your assessment of the max. Are you feeling any better three months later well, yes and no we had missed our assumption, if you will, for how things were going to pan out here in the third and Fourth Quarter but were a lot closer today to a resolution than we were then so, you know, im feeling good about that the faa has reported that they have the final version of the software its in a certification process, so thats a major step forward. Does boeings q4 target for at least the early phase in return to service make sense to you . It does make sense, but i think everything has to go pretty perfectly and at this point its up to the faa. And, obviously, we dont want it returned to service until its ready and there has been a lot of scrutiny and pa lot of hard work that could get it to this point. Were feeling good about the process from here and not, not as confident about time lines. The main thing is we need to get it right when its ready, well get it to work and returned to service gary, its jim. Look, i got to tell you. You always colt on good and bad. This is good i felt that despite what happened with boeing, you kind of had incredible numbers. Whats going on that the numbers turned out so much are we too bearish about the state of flying and travel in america right now . Maybe and thanks for turning to that, jim. Because i did want to brag on our people it was a tremendous quarter. The numbers are quite good the earnings per share is up 13. 9 but for the max, it would have been up over 40 . So theres just a lot for investors to be enthusiastic about and theres nothing bearish about travel right now our travel demand is very, very good a strong unit Revenue Growth were looking at a prospect of unit Revenue Growth again despite a not so great schedule in the Fourth Quarter. Because we have a lot of flights in off peak periods because of the max grounding. And even with that, were looking at a very Strong Revenue environment. So, yeah, i was very pleased and our people did a great job producing a wonderful operation, Customer Feedback has been very high, so, except for the max, Everything Else is just doing very, very well. Gary, what would the pilots want in terms of retraining . Boeing is talking about say a little more than 20 hours plus it said 23, 24 on retraining are your to spend more time because they want people to feel who are they want the passengers to feel more confident about being in this plane . Well, i think thats important. We were going to have to convince not just our own people but our customers that everything is fine and everything is safe and so, well certainly satisfy ourselves. But it doesnt hurt to go to the extra effort just to check and recheck and check again. But, no, our pilots are very comfortable with the training. Weve already done Refresher Training on the max, itself. Of course, there will be additional training required once the airplane is returned to service. So well have plenty of training well have plenty of fawn revenue flights, if you will, before the airplane is actually put back into revenue service. And well be very confident in the airplane before we put a passenger on there gary, the bulls on the street argue that when it does come back, its going to allow your Revenue Management system to really take full flight so to speak. But there are those still worried about unit costs, not so much as southwest as some other carriers that somehow we are in for the first half of 2020, where thats going to be a worry. How do you balance those two things you know one of the things back to jims earlier question about the numbers in the First Quarter is our cost performance. So our costs are performing better than we had budgeted for the year im very proud of our people there. Weve got another really good cost outlook for the Fourth Quarter compared to our budget and i hope all of that extends in the next year i this i the issue for us, not speaking about the industry, the issue for us with next year is just not having certainty on how the max will unfold in terms of our flying there are, we have 34 airplanes. Boeing will owe us another 70 airplanes or you know plus or minus next year and just exactly how those are paced and returned into service is going to be a challenge. And so well have to staff up to be ready for the flights and then, obviously, that wont be optimal if we have more resources than we have airplanes. So all of that is a little bit in play. But by the time we get to the second half of next year, i hope we are back no normal and we should be having very good cost performances so the main cost pressure that we have is with airport costs and all that investment. Everything else, you know, im pretty pleased with the outlook over the next couple years. Gary, when you were here a couple quarters ago, i talked about, i asked you about, what are you going to do at boeing . You said, were going to take that up privately. You subsequently had had the discussions, are you one, let down by the way boeing has acted post the accidents and, two, satisfied that theyve given you enough of a mea culpa you feel you can go into your people and say you know what, ive dealt with boeing, they have been very forthright with me and i think we can repair that relationship or sit irreparable well, jim, i certainly dont think that it is irreparable i stand by my belief that boeing is a Great Company with great people, has done great things for our country and our economy and should have every opportunity to get this behind them, but, you know, i have been very clear, were not happy about our situation. You know, we put our future in the hands of boeing and the max and were grounded and i think that that pretty much sums it up. My focus right now is twofold one is i want to settle with boeing to recover our damages. Number two, i want to get this airplane back into service safely and those are our two focus items. Where we go from here is a question ive also made clear that well address next year as to whether or not the strategy that weve deployed for 48 years is the one that we want for the next 48 years and that is something that our board has asked know look at and you know our team will take a hard look at that. But thats something for later right now, it is lets get this airplane back up in the air safely but your board is asking to take a look at whether or not you should use boeing at your sole supplier . Not new news. Of course. Absolutely and i brought it up. You know, so that is a strategic question in two senses are they the right partner Going Forward . Number one but number two, the wisdom of having one aircraft type are you looking at an airline that is the safest in arguably the safest in the world with boeing equipment in having a sole supplier and every pilot in our airline is expert on 737 so there is sa lot of advantages not just efficiency but safety advantages to being demoted to one aircraft type. Im not saying were going to change him im simply acknowledging that is something that will need to be reviewed and next year will be the time to review that just to be clear, gary, are we talking about diversifying within boeings fleet types, or my grating migrateing to a different manufacture or what do you think herb has said about that well, i know what herb would have said. Because i know what he did say weve always evaluated other aircraft, other aircraft manufacturers and especially when there is new technology that comes on the market weve done that numerous times in my 34 years at Southwest Airlines so next year will be appropriate for us to do that again and, yeah, im primarily talking about diversifying from having a soul supplier. We have no interest in having smaller airplanes, bigger airplanes. We want to stay in the narrow body market. But, again, this isnt new news and its something that i think you all would expect, our investors would expect and certainly our board would expect and we would consider that yeah. Gary, if i could come back to something you mentioned just a few moments ago, which is the potential delivery of as many as 70 planes next year. And the potential for that to sort of, well, how you would pace it, can you explain a bit more behind that in terms of what your expectations are or how you are going to mitigate any potential problems as a result that you seem to allude to from having that many planes suddenly hitting the system . If memory serves me, in other words, we have next year assuming back to service here shortly, we end next year with somewhere around 110 max aircraft and we have 34 currently in our possession so, there are 300 or so or more grounded around the world and this is unprecedented. For boeing, southwest, other airlines, the faa, other International Regulatory agencies to Work Together to return these aircraft physically to service and we have a plan, but we just have to expect that we may have to call some audibles with that plan so we just dont know how many airplanes can be returned in a week and right now we are being conservative with our assumptions. But i think thats the main thing and then, of course, boeing has to build airplanes as well and theyve maintained their Production Capacity at i think they cut it from 52 to 42 a month and, hopefully, that ill sustain that but in order for us to maintain our future flight schedule, theyll need to increase their Production Capacity back, i think, to 52 a month for us to get all of our airplanes so a lot of questions there to work through but right now, based on all our conversations with boeing, our working assumption is that if the airplane is ungrounded in december and, you know, nothing else comes to light, then we should be back where we would have been roughly the middle of next year. And i would be just fine with that right now with all the glaze that weve had so that would be fantastic gary, your airline is found upon one major principle which is that the customer is always right. Well in this case you are the customer when it comes to boeing are you happy with the changes, with the separation of chairman and ceo . Would you like to see a new ceo . Are you happy with dennis bolenberg and the communications he was given you or do you say to yourself we need a clean break or else i am going to go to airbus . Well, again, i go back to were not happy. If their board thinks that splitting the chairman ceo role is the right thing to do thats fine with me. Io enthat i have an opinion on that we work very closely, first, of course, with the commercial unit, which was led by Kevin Mcallister and kevin, in my opinion, did a phenomenal job and inherited you know this mess he was only there a very short time so we have a long relationship with him and i have nothing but thanks, for the way hes been working with us. Stan diehl is someone we know very well and its just indicative of the talent that boeing has stan is a very fine executive and we have a lot of confidence in his leadership. We work less at the corporate level with dennis and, again, you know, i think theres theres no question that there had been a lot of issues that have come to light over the last year so, were not happy. And well be working with them privately to make sure that we address our issues gary, appreciate your time, as always. The stock is up 6 now well see you next time. Okay. Well thank you all for having me you bet. Quick programing note here. On jim, coming up tomorrow night on mad money, American Airlines ceo doug parker. Same questions will come out there from gary kelly. What can i say how much do you love that guy . I like too jesus a little levity cmon serious issue he was very serious about it, actually he kept saying new news. Lebeau says this is as explicit as he has been. Explicit. Okay the haircut was new news obviously southwest with a nice gain as we talk to kelly. The numbers were amazing. I expected a total fiasco. Uh uhuh, not gary. Boeing lower as is the dow. The dow down 34 points s p hanging onto 3,008 when we come back, well talk to the cfo of paypal. Dont go anywhere. On a scale of one to five . Wait. One to five . When it comes to feelings, its more like five million. Theres everything from happy to extremely happy. Theres also angry. Im really angry, clive actually, really angry. Thank you. And seat 36b angry. Youre clive owen. And youre barefoot. Yeah. Theres also apprehension. Regret. Relief. Oh and theres empathy. Ah, i got this in zurich actually, whats the opposite of empathy . But what if your business could understand what your customers are feeling. And then do something about it. You can turn disappointment into gratitude. Clive, you got to try this. I cant im working. Turn problems into opportunities. Thanks drone. Change the future of your business. Change the whole experience. Alright who wants to go again . I do i do i have a really good feeling about this. Time for jim and stop trading. I actually thought 3m would have a little better reaction because i think mike roman is trying to get his hands around the problems but softness in china is still going to matter there are issues involving core businesses that are related. Lets just say health care should be better i Like Health Care overall people just must hav expected something that was like Lamb Research which was the other one that i was going to use which was the best quart last night p fast is something that theyre struggling with and this is this groundwater issue. Im waiting for tusa to come out and lower his market thats the jpmorgan analyst. He must be on vacation but he hasnt said anything bad. No, he hasnt its down 1 . People must figure hes back. They are one of the companies that have cut guidance since last night 11 have cut. Castro was strong but the softness in china, the softness in autos autos, we didnt get to ford another guide cut. Yeah. Ford is trying lets say theyre giving her all she got. Its kind of like scotty in star trek. Star trek, giving her all shes got. All shes got, captain. I didnt see their haircuts, david. Im sorry that i cant be more on point. Keep an eye on that in the future, will you, please apple, microsoft, market cap. Ubs raises says look, it really is on fire and you can own it through to 5g microsoft, amy hood, the most dif few sieve she has ever been and because she is completely flat. Never got to our Parent Company this morning. Its a good quarter but its not really up that much. The day is early. Record broadband ads. 238,000 fewer subscribers to the video product but they only want to keep profitable. Good caller on peacock, arguing its going to get cruising altitude before a lot of other streaming services do. Can i just go back to this Lamb Research for a second this is heavy equipment, semiconductor, china incredibly strong were starting to see a pattern. People didnt expect it. Incredibly strong numbers for paypal in china with that new deal, incredible numbers that were seeing in china for Lamb Research obviously the tesla comments, fastest ever built, ten months china is doing silently some things that are not entirely negative remember on the boeing call you throw in some orders for two 787s and were back in business. I hope the chinese listened to that Conference Call i hope they didnt listen to gary kelly not only did he make no news whatsoever but i had actually never heard that, what he said to me, until i heard it from david, when david asked. In other words, it was news. Come on. It was news. I didnt have a chance to lift my head about whats on tonight. Well find out at 6. I missed the game last night. Nick akins has always does the straight foreand Michael Neidorf will tell us about single pair we got to go to break. With the dow down 65 were back in just a minute. Man can i find an Investment Firm that has a truly longterm view . It begins by being privately owned. With more than 85 years of experience over multiple market cycles. With Portfolio Managers who are encouraged to do whats right over whats popular. Focused on helping me achieve my investors unique goals. Can i find an Investment Firm that gets long term the way i do . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Talk to your advisor or consultant 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. Pacifica ted goin oneighbor yes. Takin it off road Station Wagon . You know its an suv i know for fact your suv does not suck. Why is that . It aint got that vacuum in the back we got to go. Vacuum in the back, hallelujah good thursday morning. Welcome back to sidewaquawk one street. Market tumbling largely due to 3m as we sort our way through the single busiest day. Our road map starts with the busiest day in earnings. Tesla, twitter, microsoft, comcast all on the move. Well dig through the numbers. All smiles for align technology the company is up on its beat. Well talk to the ceo later this hour. And is boeings biggest u. S. Customer considering a change . What Ceo Gary Kelly told us just a few moments ago in the last hour. We mentioned the parade of earnings lets get to bob a good start to the day weve been slowly moving down. The dow is down negative, s p flat but were hovering around the 3,000 mark weve seen lower guidance today and theres a pattern to this. 3 m lower guidance stanley, black and decker reduced its full year profit forecast as well, china here as well ford similar situation, lower than china sales there twitter completely independent weaker revenue guidance overall for twitter. Is there a pattern here . Yeah, there is, with the exception of twitter its very simple here. Youre getting lower earnings and guidance in general if you got exposure to very specific areas, to autos, to industrials and to china if you got all three, youve got a problem. Are we seeing patterns here, yeah these companies have all had similar situations 3m, stanley, black and decker, ford, caterpillar, texas instruments, exposed to autos, industrials or to china, or in some cases, to all three and youve got a problem theres the weak spot in the earnings situation right now nonetheless, were negative for the quarter, Third Quarter, but still improving. This is the pattern we always see for the quarters we started the Third Quarter, estimates were down about 4 overall at the start of the kwa quarter. Right now theyre only about 2. 3 there have been more beats than misses a week ago we were down 3 wee . , revenues have been ready steady. Well probably end the quarter down anywhere from zero to 3 , still expecting 2 or 3 growth in the Fourth Quarter. Q3 earnings, you see the Numbers Holding on i want to point out teslas numbers. The important thing when exceeding 360,000 delivers, model y, summer 2020 this is one of the big short squeezes out there guys, back to you. Thank you we have some data crossing the table on new home sales. New home sales came in at a seasonally adjusted annual liesed rate down 7. 7 month to month because of a huge revision to the august number they were originally at 713,000. They were revised down to 706,000. This is based on signed contracts in september, people out shopping, signing contracts, not the closings which is the existing home sales numbers. These are reactionary to Mortgage Rates they went from 3. 46 on the 30year fixed to 3. 58 , a significant jump and that affected sales there also the median price of a newly built home in september, 299, 0 299,400, down 8. 8 . Its not that the builders are lowering prices, in fact, theyre not lowering prices. Its probably due to a mixed shift that is most of the sales happening on the lower end of the market because of affordability at issue with Mortgage Rates rising in september. This is a pretty big miss for the buildings. The big builders have been reporting a lot of traffic through the homes but will that traffic turn into signed contracts and clearly in september we did see a drop. Back to you guys. Thank you, diana. Turning back to tesla, the company extending its gains after a big earnings beat. That stock up now almost 17 joining us now with more, ceo katherine wood, news Street Research thanks for joining kathy, no one really expected tesla to post a profit in this quarter. They did how did they get there, and do you think that its sustainable . Yes we think theyre getting there because they are in such a nascent market right now that something called wrights law is at work. That says for every cumulative doubling, costs decline a similar percentage rate. In the case of tesla and the Auto Industry generally its been 15 so it made a lot of sense to us that the cost of the model 3 came down by 2,000 per car. Thats right in line with what we expected. Theyre becoming more efficient here but we did see revenue decline in the quarter by about 8 . Is that concerning for a company that really by and large has traded as a Growth Company at this point revenues growth really depends on how the manufacturing facility is stacking up. So its not a big deal whats really important is the fact that they produce less than 100,000 cars profits are down by 40 and their new hybrid car is barely one year old in terms of mass production despite that, the heightened gross margin which is leading the industry and any other car manufacturer will tell you electric is not profitable yet thats where theyre onto something and the street is trying to figure out what it is. In terms of the street, obviously weve seen a huge reaction today with the stock up more than 16 , on pace for its best day since 2013. But youve also got a company with some of the highest Short Interest as a percentage afloat of any company thats out there, about a quarter of tesla stock is out on loan in order to be sold short how much can we read into todays numbers, kathy is this more of just an unwinding of some of the short positions . I think some of the shorts are covering theyre stretching to make a negative case now. Theyre trying to figure out is there some accounting here that has caused this upside surprise. As we dig through the accounting and the numbers generally, if you look at the Revenue Growth yeartodate, 21 . Unit growth up 65 in an Auto Industry that is declining we think total auto sales have peaked so this is quite dramatic and i think the shorts are going to be forced to cover as time goes on. Unit growth is fine but i thought the point was to create a car that they could make some money on, right . They keep getting cheaper and cheaper. What does that do to the longterm model . Their Gross Margins surprised considerably, up more than 300 basis points quarter to quarter. We think and so theyre at about 22. 8 . If you exclude deferred revenue, recognition and credits, its still up 300 basis points to 19. 7 we think that number goes to 30 , could go to 30 in the next year unless tesla chooses to cut prices faster than they have been cutting them. Whats interesting about that is given its lead in battery costs relative to any other electric car manufacturer, every other one will have to if they want to keep up with tesla, will have to sell their electric vehicles at a loss. At the same time theyre losing their internal Combustion Engine driven business. So its quite problematic. Whos closest on their tail now . Volkswagen porsche . Who do you think they see first in the Rearview Mirror i think nobody is close, to be honest. Tesla came to the market seven years ago and today as far as what manufacturers have announced, nothing is matching the 2012 tesla model s the model s of tesla today is actually 40 better than seven years ago. So thats how tesla turns from being like a disruptive innovator seven years ago to actually an industry leader. They have seven years of experience others dont have, and i dont think anyone is close to them. One other thing id add is theres another leg to the story. Its really the most important leg. Its autonomous. We think that tesla will be or is in the pole position to be the autonomous taxi network here in the United States the margins on a transportation as a service business, theyre in the 80s. Why is that the case . Why are they in the pole position correct. So they introduced theyre taking a lead from apples book. Theyve introduced an Artificial Intelligence chip that, according to our analysts, james wang who worked at invidia for nine years, says is four years ahead of any other auto manufacturers chip, ai chip, and he would know that because invidia is i understand. They also have 10 to 12 billion miles worth of real world data that is more than every other auto manufacturer combined by a multiple for example, googles wamo has somewhere in the 15 to 20 million miles of real world data, not simulated. Thats not going to work for Artificial Intelligence. Because theyve got all these cars out there. Absolutely. Pierre, he did seem to want to take some time in the call to focus on the solar business and the Energy Business. We dont talk about them too often except critically of course given the acquisition of solar city and the debt that it brought on a number of years ago to the Balance Sheet is there opportunity there yes so, if you look at where it stands today, they produce by themselves maybe twothirds of the volume of batteries produced five years ago, so they have the largest scale, the most advanced experience in improving battery chemistry and the overall architecture of battery systems. Its important for a battery to get into Energy Storage and its limitless. Thats the reason why we remain excited about this opportunity we tried to organize some events around that theme a year ago and investors were not really interested i think investors really need to understand the car story first and once the car story is well understood, i think well have then they can move on perhaps to start to embrace this. Yeah. With a 530 a share price target which youve had for a while, right . Yes, absolutely thats a oneyear price target thats moving slightly quarter after quarter. Theres still very much time to the price target i think kathy, im very optimistic about the selfdriving for tesla im less optimistic about like the ride sharing, but i think that in five to seven years from now when elect drive trains will become more commoditized, everybody will be able to do it okay tesla will be the only car with the software and the technology, the hardware that allures you to sit behind your wheel and keep a distant eye on whats happening. If they achieve that, they will be producing maybe 2 million cars a year which is equivalent to bmw with twice better margins. If you do the math and you bring that back to today, the 500 price tag makes complete sense just on that story. 530, 80 upside from today. Kathy, pierre, thank you both so much for joining us. When we come back, we got to keep our eyes on twitter shares down 17 . Plus look at whats driving that social media stock lower as they talk about a bug in their add measurement tool. Dow down 83 points now its been reported that theres a cyberattack on business every 39 seconds. Ouch. I dont even want to think about it. Comcast business has a solution. We go beyond fast with a cloudbased Security System that automatically updates, so you always have the latest protection. Phishing. Malware. Risky sites. It can help block all of that. Its one less thing for us to worry about. Comcast business securityedge automatically protects all the devices on your network. Call 18005016000 today. Shares are twitter are down almost 17 , a miss in terms of estimates. The company blaming ad targeting issues for what was a rough quarter. Shares could, quote, bleed over into 2020. Some changes they made, some bugs in the system, leslie, that seemed to impact things in terms of the ability of advertisers to spend as much as they might have wanted to on the platform. It was their mobile application promotion product and they said it contributed to a decline of about three points in terms of a reduction in year over year revenue. So a pretty significant bug for the quarter. The question is how long that lasts. Do they have things under control, is it fixed is the bug fixed ed siegel was an sidewasqua earlier this morning it wasnt completely clear. They talked about some data settings that they said were not optimized in terms of ad measurement, but all together, three points off your Revenue Growth is a big deal we were looking for 15 and got 9. It was a big disappointment. They went public in six years ago. There have been some opportunities to sell them along the way. In fact, very early on. Yes got into the low 70s airlines the other big story we talked to gary kelly of southwest a moment ago but american moving higher after topping estimates despite the max groundings as for southwest, the stock went to 6 or 7 during our conversation when we talked to kelly in the last hour on the max issue and the airlines relationship with boeing which could potentially change one day. Take a listen. Your board is asking to take a look at whether or not you should use boeing as your sole supplier not new news. Of course, absolutely, and i brought it up so its a strategic question in two senses are they the right partner Going Forward, number one, but number two, the wisdom of having one aircraft type. Youre looking at the airline that is the safest arguably the safest in the world with boeing equipment and having a sole supplier and every pilot in our airline is expert in the 737. So theres a lot of advantages, not just efficiency, but just safety advantages to being devoted to one aircraft type im not saying were going to change im simply acknowledging that thats something that will need to be reviewed and next year will be the time to review that. Just to be clear, gary, are we talking about diversifying within boeings fleet types or migrating to a different manufacturer and i wonder what you think herb would have said about all that well, i know what herb would have said because i know what he did say, and weve always evaluated other aircraft, other aircraft manufacturers, and especially when theres new technology that comes on the market weve done that numerous times in my 34 years at Southwest Airlines so next year will be appropriate for us to do that again, and yeah, im primarily talking about diversifying from having a sole supplier. We have no interest in having smaller airplanes, bigger airplanes. We want to stay in the narrow body market, but again, this isnt new news and its something that i think you all would expect, our investors would expect, and certainly our board would expect that we would consider that. Is it new news . For that we turn to phil lebeau. Phil, what do you think . Technically it is not news that they are going to look to potentially diversify away from exclusively flying the 737 however, this is the most explicit i have ever heard gary kelly when it comes to discussing the possibility of southwest eventually some day flying the airbus 320 or 321 neo, whatever it might be. So i think its significant. I think it is a clear sign of just how upset he is, the southwest board is, and really when you talk with southwest employees, theyre not happy with this entire situation with the max, primarily not just that it was grounded but its been this drip, drip, drip, drip about whats been happening, how long its taking to get the max repaired and back in the air look, next year is going to be challenging for them, for southwest, because they have more 737 maxes than any other airline, and bringing that back online both in terms of the ones that they already have that are grounded plus the new deliveries, its going to make for some challenging times yeah, he said, you know, about that very point, phil, hes going to have to call an audible at some point next year. Wasnt completely clear i guess because it lacks clarity in so many ways in terms of how it may impact them but its clear its going to have an impact. It will have an impact, not just for them but for all airlines but southwest will feel it more because they have more maxes both in terms of already in the fleet as well as those that have been ordered guys, this will now bring up the question, next year does southwest look to diversify in one of two ways, do they place an order for airbus models there theres already a long backlog there at airbus but the chance for airbus to put southwest into its customer base, southwest really has been the darling of all the customers that boeing has ever had for them to say, hey, theyre with us now, they would find a way to open up some slots to deliver some a 320s earlier than putting them at the back of the line, or do they order the a 220 which is a narrow body, a little bit smaller but allows them would allow southwest more flexibility, especially for some smaller markets, or does southwest look at other airlines that fly airbus models right now. Spirit, thats a name thats been thrown out there as a potential acquisition target down the road. But theres no doubt gary kelly was very clear with you guys, the most clear ive ever heard him, that they are looking seriously looking, at potentially moving away from just flying the 737 in the future although, phil, when you consider the new training that would be involved, not just for pilots but for mechanics, some argue maybe hes just being a savvy negotiator trying to get a better price on a boeing. Sure, thats a fair argument. Look, the complexity that you run into when you add a second type of aircraft into your fleet, it is significant and it is worth considering the flip side of that argument, carl, is look where they are right now. They were in bed with one manufacturer and one type of airplane, and for years, for years you would hear people say southwest is smarter than everybody else they only fly the 737, they have more efficiency than anyone else well guess what, theyre getting nipped in the you know where right now because they dont have the full compliment of aircraft so they are seeing both sides of the coin in terms of the advantages and disadvantages yeah. He did talk about the cost consequences even when the max does return in terms of getting all of their equipment back into schedule phil, thanks appreciate that. Quick programming note tomorrow on mad money, doug parker of American Airlines, well see what he thinks of the max at this stage. The president with a new tweet, the Federal Reserve is derelict in its duties if it doesnt lower the rate next week and stimulate. Germany and others are getting paid to borrow money fed was way too fast to raise and way too slow to cut well see what the argument is next week given whats happened with retail sales, industrial producti production biggest drop in four months. It took a big drop to get his attention on this today. Oftentimes you see more market volatility anyway, youre right well see next week. When we come back, is the retail wreck overblown rdrooping its new flag ship store today well talk you there when squawk on the street returns if youre on medicare, remember, the annual Enrollment Period is here. The time to choose your medicare coverage. Begins october 15th and ends december 7th. So call unitedhealthcare and take advantage of a wide range of plans with a variety of benefits. Including an aarp Medicare Advantage plan from unitedhealthcare. It can combine medicare parts a and b, which is your hospital and doctor coverage. 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And with renew active, enjoy a free gym membership and up to 115 in rewards for staying active. You can count on our guidance and support to help you get the most out of your plan. We can also help you schedule appointments or find a specialist. Annual enrollment ends december 7th. Start taking advantage of all the benefits. Of the only Medicare Advantage plans with the aarp name. We make it easy to enroll, too. So call unitedhealthcare or go online today. [sfx mnemonic] its time now for our etf spotlight, looking at Energy Ticker xle, now pulling back after seeing some Early Morning gains, concerns over the Oil Demand Outlook beginning to offset yesterdays surprise drop in u. S. Crude, but crude is on pace for a Third Straight positive session in a row hitting over 61 a barrel, its highest level since last month the Broader Energy sector falling. Its now down 11 from a year ago. Nordstrom opening that new Flagship Store in new york city today. Courtney reagan is live from the store with the latest. Reporter hi, good morning to you, carl. It was actually about 20 years ago that nordstrom at least first considered coming to new york but it was seven years ago that they officially started planning for this store and officially opened the doors for the first time today so, this is a really big investment, north of 500 million, the biggest investment the company has ever made. They call it a generational investment they expect it will add about 100 basis points to top line growth which is something it could use. It might remember that full line sales were down about 6 in the first half of the year, but since the company has plans with the store, the landscaper, high end retail, especially in new york, has changed dramatically Neiman Marcus opened its first store at hudson yards. Lord and taylor closed barneys filed for bankruptcy. Saks undergoing a billion dollars of renovation but closing its downtown womens store after two years. Analysts are impressed with what theyve seen here at this store, particularly the services it offers like 24 7 pickup, even Beauty Service like botox, facials and tanning. But in general there is concern about the Department Store sector more broadly and observed sluggish trends so far in the Third Quarter. Nordstrom does say that new york is a 700 million Addressable Market it was already its number one Online Market before it had a store here and it says in general when it opens a new store in a new market, it sees an online sales lift of 20 to 25 . So the plan is for this to really be an anchor of an ecosystem in new york. You know there are already recently opened two new local Service Locations as well as two rack locations and the mens store across the street which opened 18 months ago all of that together is supposed to basically do fulfillment faster and easier, as well as returns. Theyre saying returns are coming back to local stores about 8 days faster which helps it get back into circulation and helps those margins in the end its a big day and a big party here the line was wrapped around the block this morning but well see what ultimately happens with the returns on this generational investment im going to send it back over to you guys. All right, courtney, thank you so much. It sounds like quite a good time over there at that nordstrom opening. Enjoy. Now lets send it over to sue herrera for a news update. Good morning, leslie good morning, everyone a wildfire started last night in simo Sonoma County north of San Francisco. The kincaid fire has grown to nearly 10,000 acres. Wind gusts are fanning those flames evacuations have been ordered and power has been shut off to about 27,000 people. In the United Kingdom police have confirmed 39 people found dead in a truck container in england were chinese Nationals Police say they believe the container went from a port in belgium to england the truck driver has been arrested on suspicion of murder. Protests continued in lebanon for an eighth day with demonstrators blocking roads and calling for the government to step down because of that countrys economic crisis. Hundreds of thousands of people have flooded public squares across the country in the largest protests there in more than 15 years. Here at home, olympian simone biles throwing out the ceremonial first pitch before game two of the world series look at that she did it in style last night with a flip before throwing the strike to the houston catcher. Biles is a houston native. Washington won the game though, taking a 20 lead in the game. Youre up to date. Thats the news update david, ill send it back to you. Thank you, sue. As we go to break here, take a look at shares of paypal they are up sharply as you can see. It was an earnings beat. They got a boost from higher customer traffic by the way, the companys cfo, john rainy, is coming up later squawk alley. Dont want to miss that. Were right back after this. Ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. And who doesnt love going home. Hey. Hey. You must be stevens phone. Now you can take control of your home wifi and get a notification the instant someone new joins your network. Only with xfinity xfi. Download the xfi app today. Dow down almost 100 points stocks reacting to earnings surprises on the upside and downsides of Economic Data here to help make chase of it all, joyce chang and jill kari hall hello, guys, good to see you both. Great to be here. Joyce, you were so early in calling on this global cap ex retrenchment are you seeing any signs now that its beginning to bottom out . The manufacturing numbers are coming in weak and were really focused on the consumer numbers. The consumer data was growing very fast in the first half at 5. 5 and now its down to 2. 5 unemployment also has hit these record lows but were actually seeing more questions about unemployment and consumer Going Forward while the manufacturing still seems to be soft, particularly out of europe. So are you on alert for disappointments in nonfarm or is it too early for that i think its a little bit early for that but what the market is really focused on near term is u. S. China, is there going to be a phase one deal and some of the no deal brexit being off the table. On that point, jill, these tentative agreements, i guess you could argue whether its brexit maybe, phase one, g. M. , you put that together and does that mean the trade may be a positive catalyst for november it could. I think theres still a lot of uncertainty around brexit, around trade, so this is one of the reasons weve been expecting the volatility in the market is here to stay but certainly if we get a mini deal on trade, that could be a positive for risk assets and for some of the multinationals in areas that have been hit harder by trade tensions. Theres been several other positive catalysts earning season has been holding up okay so far the risk as mentioned, a lot of the macro data, especially on the global and manufacturing front, has still been weak, hasnt shown signs of bottoming yet. We think this will be the one negative year over year earnings for the quarter and will cover back into positive territory next year. Usually when you see a negative earnings quarter, it doesnt just last one quarter when you look back historically really looking for some of that data to bottom out. The other thing, joyce, that people are watching is weak volume, 3,000 is the magnetic poll of 3k and new york fed taking repost at 120 i guess is volume and this repost squeeze going to be an issue for a while . Well, every year we see year end closing earlier and earlier and i think you could get another test in december because a lot of the primary dealers will actually be cutting some of their holdings as they report their scores in. We see two more easings still on the cards in october and in december and the purchases resume again its not qe but it basically is making sure that the technicals are in a better position in the marketplace. Jill, you said that misses are getting hurt harder than usual. What do you think that says about Investor Sentiment during this earnings season, and as you mentioned the risks that we do see subsequent negative earnings in the quarters to come . Right usually when misses Companies Miss on earnings and sales theyre underperform we have noticed that misses are getting hit harder than usual this quarter i think investors are not yet willing to look through the miss if they dont become confident in the forward looking outlook so one of the things that we notice going into this earnings season was that while guidance has generally been okay, youve also just had fewer Companies Issuing guidance and issuing forward looking outlooks well get a better sense as we get a broader and broader swath of Companies Reporting over the next week or two into the height of earnings season, but i think that those forward looking outlooks are going to be the focus this quarter and those price reactions definitely show how confident our investors, that we do see that pickup in Earnings Growth next year because expectations to us do seem a bit too high. Consensus is calling for around 10 Earnings Growth next year. Were thinking something more like 6 , but again, a lot of that macro data has yet to bottom out or is just starting to show some early signs of maybe stabilizing. Meanwhile, europe is doing pretty well here stock 600. Testing some interesting resistance is there a chance that if the dollar starts to bend, maybe not break but bend, that the u. S. Dollar denominated asset trade obviously really crowded long could surprise some people i really dont expect that because i think the Bigger Picture question in europe is on growth particularly out of germany and whether they do fiscals. Even though the earnings are coming in better i still think theres talk about do you have inflation risk, the slowdown is actually sharper there much as jill said, earnings are going to come in lower in the u. S. We also think that its going to be more like mid Single Digits Going Forward. I think the Dollar Strength is still based off the growth differential less off the earnings and the growth in europe still is looking problematic. We saw President Trump tweet about 19 minutes ago saying that the fed is derelict of its duties if it doesnt lower the rate joyce, i know that youve been saying that lowering Interest Rates isnt enough in this deglobalization environment. Yeah. Do you agree with that . Lowering Interest Rates is not sufficient its sufficient to prevent a recession but its not bringing back the growth. We do see that 70 of the worlds gdp, you now have monetary easing in place but you havent had the growth come back, so what is it going to take to awake animal spirits theres a lot more talk about fiscal measures needing to be used, particularly in europe and particularly in germany. All right resolution to trade disputes is stronger well, and i think the trade uncertainty has been seen as the key risk to investors so they see something for phrase one but most people think this mini deal is going to be just that, a mini deal, that youve got the structural issues in place and so the market had been looking at this as cyclical. Now they see it as structural so i dont know if thats going to bring back the kind of boost that were talking about with respect to growth. Well learn more maybe at apec, well see in november. Shares of 3 m sinking. The Earnings Call just ended and comments made by ceo mike roman on the Conference Call sending the stock to the lowers of the session, down about 4 and shaving 70 points off the dow. First on china, roman said 3m continues to face softness in the country where organic growth is 9 driven by continued weakness in automotive, electric tro tro tron iks and ex ports. Theyre anticipating that softness in china to persist and it also speaks to the Competitive Pressures that 3m and other industrial players are facing on the ground broadly speaking, asiapacific declined 4 in the Third Quarter. Similar to caterpillar, 3m mentioned the reduction in inventory that its seeing in its channel and admitting that the first year of their fiveyear plan hasnt turned out as anticipated given the slowdown in these key marjtkets certainly a soft patch for what theyre seeing on the ground in china and shares of 3m down 4. 2 , david. Thank you when we come back, all smiles for align technology. The company ceo is going to join us its a cnbc exclusive. More squawk on the street when we return. [spokesman] if youve tried college but never finished, group cheering snhu lets you transfer up to 90 credits toward you bachelors degree. [woman] it doesnt matter how old you are, you can do it, you can finish. [spokesman] finish your degree at snhu. Edu pacifica ted goin oneighbor yes. Takin it off road Station Wagon . You know its an suv i know for fact your suv does not suck. Why is that . It aint got that vacuum in the back we got to go. Vacuum in the back, hallelujah 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. One of wall streets biggest bulls just spotted a cell signal in the market. Fi me ndoron trading nation on cnbc. Com more squawk on the street is coming up. Align technologist are up this morning the company also has now between street estimates on both the beat on street estimates the past four quarters, i tried to say. Were joined by the companys director, president and ceo, joe hogan. Nice to have you this morning, mr. Hogan. Thank you, good to be here. You talk about the portfolio having particular expected or having particularly increased volume in places like asiapacific and latin america why was that the case . Well, asiapacific has always been a strong market for us and china was in question in the second quarter, but we had a very good quarter in china, upper 30 growth rates, good team growth, and weve put about 40 of an additional sales force in china over the last year, changed some of our marketing there. Its done well on the japanese side when you think about whats going on in japan for align right now, our sales are up over 60 , good balance between general practice tigsers and orthodontists. Brazil has been growing over 100 a year over the last three or four years and its becoming important. Its a big market. Theres a lot of interest in dental care in brazil. Just like we see in spain and different parts of europe also, these companies that are very focused on aesthetics. Overall it was a good quarter for us but i like the breadth of the quarter in the sense of overall Global Growth of the company. What do you find is most effective in terms of increasing volumes . Is it as you referred to a change in marketing for example in china, or is it the core of it the relationship with the doctors and continuing to increase those a lot of variables and theres whats nice. Theres many levers you can pull as an example, we have 65,000 doctors globally we asked 6,000 more doctors alone in the Third Quarter we can add sales force and were expanding in International Markets and markets weve been in a while adding sales force. We have a wonderful brand name and accentuating that online and with general broadcast really helps a lot. But id also say technology. Were the Technology Leader in this industry. Weve been in it for 20 years. New products like inadvise align where we can treats patients as young as 7 years old we use Artificial Intelligence to predict eruption in teeth and we can program those in aligners that widens and broadens the market for us too. Thats whats great about this company. There are a lot of levers and depending on where you are, technology, sales force, overall capability from a logistics standpoint, all those things are meaningful from a growth standpoint for align in terms of the competitive environment, joe, you have essentially a twodecadeold mon oply and now were starting to see more upsets in direct to consumer market. That has elicited some concerns from analysts. What do you make of that, especially in light of smile clubs ipo and so far those shares are down about 60 from their ipo price. Is the competitive environment indirect to consumer a real threat to your business right now . I dont consider it a threat at all were the Technology Leaders remember, versus direct to consumer we go with those 65,000 doctors i just talked about. Its in their hands, the patients they understand their patients well and i feel very good about that model what the dtc companies have done, direct to consumer companies, theyve identified this mark that weve talked about for years thats really beyond the wires and brackets market that we entered this marketplace in theyve identified really hundreds of millions of additional patients that would. I feel thats our market i think were best positioned to be able to address that market with our doctor partners, not just in north america but all over the world. But dtc can also offer it cheaper. In terms of increasing volumes, are you concerned that the price point at which youre offering could come under fire as some of the up starts are able to offer things for a little cheaper, especially as Consumer Sentiment shifts a little bit. Thats a really good question from the cheaper standpoint, before and again in the an log process, only one way to move teeth and you moved them together good thing with digital, you can move one at a time or all teeth. You want aesthetic repair, we can deliver that through doctors at a very competitive price. You want full bite correction, a teenager that has certain mal inclusions that are specific, and we can go as high as some higher orthodontic case start costs in the world we have a flexible model based on Digital Technology that can address what that specific patient wants, and do it competitively through doctor base that helps to guarantee an outcome and is a safe way to deliver treatment. I notice in your press release you seem to trumpet relationships with the San Francisco 49ers, carolina hurricanes, the patriots in football as well as raptors, the champions in the nba why is that an important channel for you in terms of marketing . Why do sports teams figure so prominently in your reaching out to customers sports teams changed marketing, embraced the communities around them, fan base much better give us great breadth to touch potential patients and consumers, they identify with those in that brand, combining with invisalign, the best Consumer Brand from an orthodontic standpoint, in conjunction with the sports teams can touch dayin and dayout has been very effective. Were excited about those relationships. Mr. Hogan, appreciate you taking time with us this morning. Thank you. Thank you all right, lets send it to jon fortt with a look whats coming up on squawk alley. Leslie, what a difference a quarter makes. Paypal after earnings is having what could turn out to be its best single day in a year. Were going to talk to the cfo of paypal coming up on squawk alley. Fl obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. The street. Stocks are hovering below the flat line, losing some momentum through the course of the morning so far the s p 500 is hovering around that 3,000 mark, trying to work towards record highs we have weakness in Communication Services sectors as well as energy being offset by a little bit of strength in the technology sector, up almost a full percent thats following a string of strong earnings results. You have paypal and microsoft both pushing that sector higher, but the real standout is a chip maker, Lamb Research, posting better than expected profits and sales, maybe allaying fears about weakness in the Semiconductor Market and sector. Well get another check of chips this afternoon when dell component reports. Intel shares in focus now that lam research is in the books back to you, carl. Thanks for that. A closer look at some movers today, for every lam research theres a 3m, which is weighing heavily on the dow, close to ssn seiolows, down 86. Dont go away. I get it all the time. Have you lost weight . Of course i have ever since i started renting from national. Because national lets me lose the wait at the counter. And choose any car in the aisle. And i dont wait when i return, thanks to drop go. At national, i can lose the wait. And keep it off. Looking good, patrick. I know. vo go national. Go like a pro. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Good morning 8 00 a. M. At twitter headquarters in San Francisco, 11 00 a. 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