Transcripts For CNBC Squawk On The Street 20240712

Hear from mike roman later on today, july has been very good i think you will continue to get a positive from housing, this horton number is the number people should be focusing on because it was stellar you will get a lot of people talking about how there is a lot of good news in anything involving personal fun, polaris, but just were just in such dim tidings when it comes to aero space thats what im focused on greg hayes, 2023, oh, my. You were just talking about that and then iata, the International Air transport association is saying 2024 for precovid traffic levels they also point out that airlines are adding capacity, jim, ahead of demand which is coming back slower than they thought. Personal travel, people want toful tra, we know that. Great Conference Call by American Express on friday about what people want to do, but the Business Travelers is where they make all the money and the Business Traveler is zooming they just arent going i dont know what its going to take to bring them back. And that is going to be a very important theme, tomorrow is boeing this was a great industry for america. I mean, it was probably what we were leading in and now without customers its really difficult. Citi puts a tactical sell on American Airlines with an 11 price target guys, it is 11. I dont know citi is kind of a funny piece. But you can see, for instance, shopify, fwagoldman sachs does a piece. The amount of ecommerce and what its done to brick and mortar, david, we are seeing a wholesale shift not just digitization but the way people lead their lives and the way business wait until we get to the fall when you talk about college. None of these patterns can be you cant shoehorn in the way we look at stocks they just dont add up no. I mean, weve said in any number of industries things that might have taken years have been accelerated to a period of months in terms of transfo transformati transformation, but to the extent that, jim, its also, as you said, things that were really unsure exactly how theyre going to look when they come back, like work, where were still sort of just wondering what the modern workplace is going to look like and how many people are actually going to be there and what impact thats going to have. But, yeah, i think it seems more and more likely we may look back at this period as having been a seminole change in behavior to a certain extent and the points youve been making since early on thats going to result in Certain Companies doing particularly well and quite a few others suffering. Look, i had scour solutions on last night, liam griffin, they had an amazing quarter. They are probably if you want to play 5g to the best way. Hes talking about how everything is just going to be crystal clear, you can get it wherever you want, its going to be great, you will be at the beach and i kept thinking about zoom and what zoom is going to of course, theres webex and we have teams from microsoft, but zoom may make it so that someone could say who is a cfo i saw you traveled i see you traveled first class to a conference. I dont want that ever again because were making too much money. I want you to zoom it and we can i hope you dont have to gloom baseball, i mean, given covid, but i do feel that zoom has wrecked one of the great back bones of america, which is going from here to there for businesspeople carl, its never going to be the same ever. Jim, we know. And stopping for breakfast on your way is a big piece of that. Were watching mcdonalds where breakfast is obviously in focus. U. S. Comps down 8. 7, down a little better than we thought, june down 2. 3. Improving every month of the quarter, jim, and they are going to make a big push in the second half its pretty clear. I didnt understand why that stock was down because i think that what matters is in the end they had a number that in many ways was better than chipotle at the end of the quarter and theyre doing big drive through and its not hurting them that much that theyve taken out some tables that was a decent quarter. 3m was a decent quarter because july was good, but everybody is skeptical because you keep thinking, wait a second, its too good to be true. Everything seems too good to be true given the fact of what we have i had leader mccarthy on last night and theyre talking about to go a package. Theres going to be a package and the package keeps the ball in the air until the vaccines. I think a lot of us are beginning to think, wait a second, the vaccines, can we get a little more skeptical . How does mo derna, nice insider sales there last night, how does moderna said, hey, october how do you get 30,000 people and figure out that the placebo didnt do better than the real i mean, have it by election . By the election . Can we be a little more skeptical about whats going on with vaccines please okay. I will be more skeptical i think a lot of people, though, jim, are still focused on next year as a realistic time frame in terms of vaccines being widely available, dont you . Yes, i agree. Maybe we will get to some point where manufacturing begins on even what might be an fda approved vaccine by the end of the year, but to really be able to administer the doses that are going to be needed across the board. And there are so many other things, i mean, by the way, transporting vaccines is apparently not as easy as it might appear in some ways, you have this Antivaxxer Movement in this country so you do wonder how many people will refuse to take a vaccine there are people who are going to be concerned that it has been rushed in some way for political reasons and so perhaps may not deem it as safe as otherwise would be so there are going to be plenty of things surrounding it, but, man, do we need it as soon as possible. Carl, really stirring interview by Andrew Sorkin with bill gates where he basically just says testing is a joke. We find out so late that you cant do anything anyway he portrayed a country i felt in disarray when it comes to this i still keep thinking about the miami marlins, they come to philadelphia from a state thats a hot spot, 11 of them have covid. I mean, and the phillies, we will wait a couple days and then theyre fine i mean, are you kidding me if you were next to one who had covid, you dont wait a couple days and come back so, i mean, Major League Baseball the commissioner is saying, hey, dont worry about it everyone has this dont worry about it attitude. Im worried about it because the july recovery is fragile, carl manfred did say it was not a nightmare scenario yet there are certain levels at which mlb would start to get very concerned about the longevity of the season. I think we have some sound of what manfred said. We talked about the situation. I think most of the owners realize that we built protocols anticipating that we would have positive tests at some point during the season. That the protocols were built in order to allow us to continue to play through those positives and i think there was support for the notion that we believe that the protocols are adequate to keep our players safe. I dont put this in the nightmare category i mean, obviously, we dont want any player to get exposed. Its not a positive thing, but i dont see it as a nightmare. We built the protocols to allow us to continue to play thats why we have the expanded rosters, thats why we have the pool of additional players and we think we can keep people safe and continue to play david, it does raise the question if this is happening in a few dozen clubhouses and if testing is as troubled as gates said this morning on squawk. I mean, what does that mean for School Reopenings . Is that why google says july for returning to the office . Thats a great question, carl, and i think its a key one that many of us, certainly parents who have either college age or any age kids in school are wondering about. Whats a college dorm going to look like if this is the case there and, again, back to testing. If testing is an important part of your overall protocol, are you going to be able to get results quickly enough to take people who need to be quarantined in some fashion and continue, not to mention how teachers are going to feel about all of that if, in fact, we do see outbreaks or parents so many uncertainties, so difficult to plan for at this point it would seem, but baseball does become in a sense a reflection of a lot of those fears which is one reason why were watching it closely, not just because, of course, were baseball fans. By the way, guys, i did tweet this morning, it is worth mentioning of course on our continued focus on special purpose acquisition corporations, billy bean the noted general manager for many years of course of the oakland athletics, featured in money ball, did start a spac with jerry cardinelli, underwritten by goldman sachs, 500 million and it is going to targe businesses that are specific to well, as you might imagine, sports and data areas, although not necessarily because they cant say ahead of time what their exactly going to go after, but i did think that was interesting. Mr. Bean if he does have some time on his hands will certainly be able to focus on his spac. I think that that could be something that would be a very look, draftkings is a love thing, robin hood crowd will completely adore that robin hood crowd reeling from tony sag nellys sell of tesla robin hood owned tesla, i dont know how theyre going to handle it to go back to the College Situation i cannot believe david, have you looked at how many different schools have many different rules and the schools are all i mean, i think that your kid has to be looking at what the rules are at some schools versus others. Some schools are basically not taking this thing serious at all and other schools youre out with a couple of tests. Its all over the place, though, in terms of the reopening protocols as well. Many schools are doing only freshman and seniors on campus, many schools are doing remote but people will be allowed on campus but they will be in their dorms in some fashion. Some are bringing everybody back, others are starting early and ending early theres no one size fits all approach or there is no one approach here that we can talk about, jim, but, listen, you know, we focus on it not just because its a personal concern, but also because this has a huge impact on the overall economy when you think about towns and cities that are relying on students returning and so many of the businesses that rely on them as well its yet another important component of the Overall Economic picture that may not be able to come back to full robust capacity because of the virus. I totally agree carl, one of the things that im watching, watching closely, obviously i had leader mccarthy on yesterday, talk being 200 extra for unemployment and obviously Speaker Pelosi wants 600 but thats going to be the key number because we have the is 1200, with he give that to people and we get, say, 400 in unemployment, it keeps the ball in the air and thats what has to happen because the stuff that were seeing in the papers about all the different protocols and have no idea whats happening and kind of just all its just a menagerie we have no idea whats happening. I feel like we still havent beaten this thing at all, other countries, sweden i mentioned was having a problem, sweden is back to having very few people, obviously asia better than we are. I think this could be a freeforall in september. At least we will have some money in our pockets but its going to be a freeforall and that is not inspiring for the Companies Like 3m that are saying, hey, listen, july has gotten better right right. Goldman is out this morning, they say we do believe congress will enact a package larger than what the republicans have proposed despite the late start, the odds are high we will get it before the august recess although mcconnell, guys, as you know, is facing resistance not just from within, Senate Republicans themselves, but from pelosi who talked about this proposal last night. If they are not even getting to the fundamentals of food and rent and economic survival, theyre not really ready to have a serious negotiation, however, we will continue, we will read what they put forth. Well, i dont know. Jim, sort of an echo of what she told you the other night. Leader mccarthy said they care more about cannabis than they care about things like food and i dont think thats true i think that theres actually more Common Ground i think leader mccarthy and secretary mnuchin are republicans that want to get a deal done and its a pleasure to see i was blasting on twitter for talking about how it would be great to see consensus. Are we really that bad a country that if someone wants consensus that person is now an outlier . Thats what you need to be able to get the money in peoples pockets. Were listening to a lot of companies, phil lebeau has dave calhoun tomorrow we will have to listen to him talk about i dont know, does he have to lay off more people because the orders are not that good i think that we have tony sag netty on halftime today, tesla has been one of the brightest stars of this market im saying this is one difficult week and we are going to have to start lowering expectations about how this country is going to come out of this within the next three months because i just dont see it a magic wand waving from here to the election. David, you know that the that its a flash point, moderna has become absolutely the football of this election they will give you october really really or is it how much Insider Selling they can do between lets see, monthly plan, you can do im sorry to be so part on those promotional guys. Thats all right. You are not a believer but youve pointed out many times theyre promotional. In terms of vaccine we want to focus on pfizers earnings which i know we will get to as well a bit more after the break a lot of ceos coming up including 3m and ben could you seer we will talk to both of them in the next couple hours we will cover a bunch of the earnings we have not gotten to, harley, raytheon, horton, as we said also earlier tesla downgraded bernstein to sell, goldman is up shopify. Back in a minute experience the adventure of a bigger world in a highly capable lexus suv. At the golden opportunity sales event. Get zero percent financing on all 2020 lexus models. Experience amazing at your lexus dealer. On all 2020 lexus models. Pampers the 1 pediatrician recommended brand, helps keep baby skin dry healthy so every touch is as comforting as the first pampers. The 1 pediatrician recommended brand right now, switch to tmobile and get four lines of unlimited for just 25 bucks a line. With access to americas largest 5g included. Thats right. Unlimited and nationwide 5g for the whole family for just 25 bucks a line. Only at tmobile. 11 1 2 minutes to go before we get an opening bell on this tuesday. Apple is the focus on todays mad dash. There is an excellent piece by Deutsche Bank today that encapsulates a lot of my thinking stocks have run up so much that it makes it difficult or you should be nervous, that word nervous was mentioned in the piece with an underline by Deutsche Bank of how high a bar it is going into this quarter. Apple talking about some delays, i know when i had solutions on last night its not clear when a 5g they cant mention apples name but not clear when apple has a 5g you might have a situation where you have 12, maybe we want to wait for the 5g. It is a piece that tells me that stocks have come so far, david, that unless things are perfect the stock is going to go down. You know we have a thursday night where we have apple and we have facebook and we have google and amazon its going to be a jumble. A lot of people will sell things they shouldnt, maybe buy things they shouldnt i am wary of apple apple i say own it dont trade it but this piece confirms what im worried about is that its pure multiple expansion thats given the stock. Multiple expansion drove stocks in 1999. I dont think they are the same, i dont like to comparison, but a piece is a noteworthy piece. Interesting youve made a similar point on microsoft, again, the second largest market cap out there. I was right i reported a great number, people suddenly found things they didnt like obviously theres azure, minor slow down, 52 to 50 and we have to find out whether that is thomas curry at google cloud picking up share or whether its Amazon Web Services rolling over everybody as theyve continued to do. I think we have to be aware and i think people are just coming into the market in which there are many that its entirely possible that a company could report a good quarter and the stock could still go down. There are a lot of people who have come in who believe that stocks only go up, as someone who has watched the market for a long time, david, is that true no, that has not been my experience there is a period of time when that, in fact, is not the case and often theres a lot of pain associated with those periods of time. We just want people to be aware. We are not looking for the market to go down, we dont want it to go down, but it has at times gone down. Worth noting for the people who just got in since may and havent even had a couple back to back days of down no, it is absolutely worth noting and its certainly a highly unusual time in so many ways were going to take a quick break. Of course, dont forget we are going to be joined by the ceo of Reckitt Benckiser, maker of lieu sole, mucinex, many other consumer products, we will get a check in from him when suite comes right back major indices coming off their first positive session in three and although futures are weak s p still ton track for its best july in seven years, needs only a few more points to make it the best july in ten years. Squawk on the street is back in a moment. Reckitt benckiser. This selenite grey is so pretty isnt it . Wow. Jim could you pop the hood for us . There she is. Turbocharged, right . Yes it is. Jim, could you uh kick the tires . Oh yes. Can you change the color inside the car . Oh sure. How about blue . Thats more cyan but. Jump in the back seat, jim. Act like my kids. How much longer . Exactly how they sound. Its got massaging seats too, right . Oh yeahhhhh. Oh yeahhhhh. Visit the mercedesbenz summer event or shop online at participating dealers. Get 0 apr financing up to 36 months on select new and certified preowned models. Announcer the opening bell is brought to you by nuveen. A leader in income, alternatives and responsible investing. Im enthused about all the vaccines that the u. S. Has funded, there is the first wave which is about five and then theres the second wave which are cheaper, could be more effective, but, you know, they have to wait because they didnt get done as quickly. So youre just going to hear, you know, various phase threes will start, you know, the Johnson Johnson vaccine is a particularly good lowcost vaccine, the astrazenecas and moderna are two of the first to get out there. Thats bill gates on a vaccine earlier this meaning on squawk he mention its j j which did launch trials in the u. S. , now pfizer and biotech choosing their candidate. Interesting that pfizer did not pick the covid19 vaccine that they had talked about before, its a large study of a virus im reading from stat aimed at securing but its not the one from which we were released earlier this month. J j giving no timeline which i think is a lot better. People have to go forth and some are going to get covid and some are not and we have to make sure there are enough instances of contact that we dont decide, hey, the placebo is doing better than the vaccine i do think that thats why you dont want to shotgun this, you really have to be like j j and lower the expectations theres an atlantic piece this morning which just says we have to stop thinking that the vaccine is the be all and end all. I do feel that thats whats happened in the stock market in particular i think pfizer knows how to bring a drug, they are total pros, they are not promotional i like what they said. I think that bill gates is absolutely right that the Astrazeneca Oxford vaccine is very good. A lot of good opportunities here, but i just dont want everyone to get ahead of themselves david, the reason im doing that is that i just feel like that the Political Climate there are a lot of people who feel that this must happen now i want the best vaccine, not the fastest vaccine. Of course and the most effective vaccine without a doubt, but to your point, jim, i mean, ive made this point many times, there are antivirals out there. We talk about remdesivir, but you really dont want to be in a position where you have to get remdesivir because typically you will be in the hospital, its going to be infused, but there are antivirals, ive been following one closely licensed by merck that are moving forward for phase two trials that could really change the trajectory of the virus so we do need to keep that in mind. Antibodies is another way, we have not heard from regeneron which i regard as rather strange. Youre right, merck is this friday those are hopeful for me i want a spray that you can take it. They are. I want to make it so its less likely there are too many people i follow ontwitter who say, listen, its just a problem for people who are 55. Triage a couple generations and say thats fine . What is this logans run its logans run google it, people, logans run. Twothirds of our show get taken out here thats no good i dont think even carl wants to be alone yeah, theres the opening bell carl, i will let you take it away do want to get to talking about the pfizer numbers as well. If you guys leave me im out of here, i will tell you that. Theres the opening bell, jim, overnight the president did retweet a post that argued hydroxychloroquine was being suppressed to keep deaths high in this country. Yeah. So that the economy could be shut down ahead of the election. I mean, does that shake your faith in whatever news we get out of any agency . High droks color queen, thats a sorry that wont died look, we know that there was a couple studies that were good, there have been articles which say, look, there is just an exaggeration about what happens in terms of heart problems for people who take lupus. I just dont believe that its in anybodys interest to have more people die. If there is a medicine that works, you know, this is a hippocratic not hypocritical oath, i just think that, i dont know, i mean i know that the science, the new england journal of medicine has completely let us down. They hadsome article about som guy saying, listen, dont add masks, then they add an addendum where they say youve got to wear masks the science has been bad, the stuff out of china has been bad. I mean, everything there has been a not straight story about anything yet and so i come back and say we just know very little about what works and what doesnt and its july and its a little embarrassing. What bill gates said about the meaninglessness of the tests, how about that how about we have Companies Like quest and lab corps they cant get theyre overwhelmed yes. We are overwhelmed in fighting this thing and what do we get we get kodak getting a big contract to make pills. We are going to talk about that jim, were going to talk about that in a minute lets say on this topic, 3m we will be talking to mike roman, they are talking about a new rapid mist with michigt. Pfizer is up its so interesting the new world jim has been talking b mike roman of course the next hour this new world of zoom there are no pharmaceutical salesmen in the u. S. Who are able to meet with doctors and thats been the case for some time. Yes and thats how theyre sold. National markets pfizer says are able to meet with Health Care Professionals for most of the quarter but u. S. Unable to meet in person with doctors for nearly all of the quarter. Yet theyre still selling but perhaps not as much as they might have thought given you cant get your car and drive to a Doctors Office if youre selling prescription drugs. I was shocked, my wife was a salesperson for medisis for years and she sold dermatology products and one of the things that i learned is its one of those businesses, not timeshares, but its like it, it doesnt move unless its sold you are so right, david. It is very difficult to sell products, particularly for elective products, elective surgery. I have centine on tonight. 40 down elective surgeries. Industries have changed, salespeople, salespeople have found themselves in every profession using zoom and its just not a great way to do business carl, you need estee lauder because of the problem of the breakout with the mask first you have the breakout with the mask, then you have the really ugly kind of thing you got with zoom. In the end who wants to do business with you . You look like a freak show. This is an extension of your ulta salon thesis from the precovid era, jim, you still have to look good, especially now on camera. Im scrubbing and scrubbing, carl, doesnt matter. As were talking, jim, the fed with the announcement that they are extending the lending facilities which were scheduled to expire at the end of september to december 31, not a terrible surprise, i guess there is a ton of facilities that are applicable here, but it is a sign that were going to have to make this bridge maybe longer than the fed initially anticipated. Well, good for them when we look at whats going on with horton, we know that it has been a dramatic positive, the housing industry is 10 of this country, punches above its weight the fed is doing its job if you are in favor of employment i say that because i think that the country is very split on, you know, some people actually dont want things to be good because there is an election this year, but horton is up 3. Against that i would look at labcorp. Labcorp being up 4 is not a good sign, it means that they are making a fortune off testing and that the testing is going to continue to be tight i would like to see labcorp down because the federal government has decided to get in the testing business itself and not have a laissezfaire attitude with a couple Companies Dominating it. By the way, who gets quick testing . Maybe people from the mets and phillies quick testing is the province of people who play pro sports and really rich people and that is just thats a sham. Its just terrible how many times are they going to test Football Players . Do you think they wait ten days . Do you think they wait ten days . Unless they have the bye week. Jim, the argument other countries have test and trace and we have test and wait. Thats sort of the argument from a lot of skeptics right now. Yeah. Steve liesman has more on this fed lending extension steve . Carl, yeah, you provided very much the context that i was going to provide which is here is the Federal Reserve settling in for maybe a little bit more of the long haul with these things we started off this thing thinking, hey, this was going to be something quick, a vshaped recovery, now the fed and i think others coming to the realization that the economy is going to need assistance for longer i will read you what the fed wrote in this press release, the threemonth extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the covid19 pandemic so all of these 13, 3 facilities, the pvc, money market fund, Paycheck Protection Program that the fed buys the loans from, two were already longer but all of them will now be available through december 31st and it allows people to think it will be around for a while. Its something we can plan on using if niec using if needed, carl. Steve, thank you for that jim, back to your point im sorry, back to your point on housing. Washington post had an incredible piece yesterday looking at how the pandemic has exacerbated inequalities if you own a house you are doing incredibly well if you want to make money on it if you rent youre worried about being homeless in a matter of months and hortons backlog way above expectations, revenue just blew it out. Yeah. You know who talks about this more than anyone and talks about it extensively is greg hayes from raytheon, the stock is going from up to down in part because they made their number off of cost cuts his company has always been committed to education his company is really his company is a throw back. Theyve been focused theyve provided the most scholarships other than the u. S. Government he talks about inequality and has always addressed the inequality on the call we now get a lot of calls that address inequality its almost like they say we realize things are bad things have been bad for a long time greg hayes uses a term called institutional racism and what a delight that is to have someone use the real terms about whats going on his call will be interesting he always addresses its going on now, it started at 8 30, but he always addresses the issue headon. It is terrific to hear someone recognize the inequalities in the country and try to do something about it i dont want to be on a sole box about this, but it does annoy me that a lot of companies suddenly woke up to this when Many Companies figured this out ahead of time. Greg hayes always tells it like it is which is one reason why we love having him on as a guest as well. A couple quick things to hit before we get to Reckitt Benckiser this morning were talking housing right now. Rocket mortgage filed an s1. I spoke about this company a few weeks ago, dan gilbert company, quicken loans but Rocket Mortgage is the name i mean, 150 million shares will be priced between 20 and 22, this will be the biggest deal of the year, midpoint 3. 15 billion will be issued thats a 40 billion plus market value for Rocket Mortgage. A company in the Second Quarter did a well billion and a half in income just think about that for a second. Wow. That, again, goes to the point on whats going on with housing right now and where rates are. Is there going to be jay farner yes yes. Everybody loves this guy. Jay farner is unbelievable. He called me once i said, i dont know, wells may have a better record. This he do have the lowest default, that company, the complex that dan runs has the lowest default ratio of any lending institution. Now, i was mistakenly i mistakenly said something about a bank that was better and they got ahold of me in about, i dont know, about an hour and gave me they really schooled me i like to be schooled. Anyone who thinks ive got it wrong just call me, i will change my mind i thought that Rocket Mortgage did not have the stringent rules. I was totally wrong. Theyre fantastic lenders. Yeah. Carl, i have to tell you a lot its as much about financial services, technology. Right right and the growth there so we are going to keep a close eye on that. Its, i think, next week its going to be hitting the public markets. Finally, jim, you mentioned kodak briefly, this is not the kodak we grew up with, this has been repurposed as a Company Gearing up to produce ingredients for generic drugs. Why am i mentioning it its a 100 million Market Company before the opening this morning but its now about three or four times that after the administration gives it a 765 million loan, government loan under the defense production act, this is the first of its kind, the purpose is to help expedite the Domestic Production of these ingredients because so many of them come from china but east man kodak, this buy George Garfunkel bought 11 million shares at 250 recently. I saw that. Good timing. Sophisticated investors, gso, blackstone, they sold at that level. This is high, high speculation just because they got a 765 million loan i think we have your pal navarro talking about it, jim. Want to take a listen . He has been death by china drugs. Were going to fly up this afternoon to the Kodak Corporation in rochester, new york, visit a facility which was absolutely made to assist america in bringing back its pharmaceutical supply chains and medicines to u. S. Soil what we have today is a 760 million loan, fully collateralized, so minimal risk to the taxpayer, which is going to allow this country over time to be able to produce a full 25 of the active pharmaceutical ingredients that are necessary to make our generic medicines. David, lets call this as it is maybe it will be a seminole moment, jim, for this company, but, please, please, be careful out there. This is just ridiculous. This is a navarro spac. Did you know navarro had a spac . No. Its a navarro spac what else can you call it . There you go. Mylan, they do that business. I dont know. I think way too much comes from china way too much i do think that Eastman Kodak they used to own Sterling Drug maybe they remembered Sterling Drug its going to create some jobs in rochester so thats good. We like that. The red wings, are they holding them up yet . Are they called up because the pandemic i dont know. All right weve got to take a quick break. Reckitt benckiser will be on the other side of this we will get an update on lysol and, oh, a lot of other things welcome back to suite. As promised lets length in laxman narasimnhan ceo of Reckitt Benckiser. Reported earnings, had their Conference Call. Joined us to talk about lysol and some other things as well in the not for profit area. Good to have you after earnings this morning, laxman let me start off with your guidance you did get some questions on the call about why not more . Why not have, in fact, increased your medium and longterm growth expectations given where you see the business right now and you said, well, im confident but at the same time dont want to get ahead of ourselves what did you mean when you said dont want to get ahead of ourselves . Look, we have had a strong start. Lysol detol exceptional performance, strong hygiene sensitivity, tailwind with ecommerce, big growth, 60 growth in the first half of the year, we have had good sales because of nesting at home and a couple tail winds with social distancing as well as with pantry unloading strategy is taking hold, culture and purpose of flight for the company is taking hold, were building the business for the long term. Going to take some upside and reinvest it in the business but taking up guidance at this point in time for the future in an era of real uncertainty feels premature to me. I dont want to get us out ahead of ourselves we need to do the right thing and build the business for the long term. A lot of people focused of course on, as you point out, the sale of products such as lysol for hygiene, for combating the virus, you have had partnerships, a new one announced with delta there have been mounting studies of late, laxman, that indicate that its not impossible to catch the virus from a surface, but it is highly unlikely. The primary if not really almost the soul way that the virus is transmitted is through the air does that make you think, perhaps, a lot of this is hygiene theater and at some point its going to come to an end . Theres no question that aerosol transmission is important, but it doesnt exclude the fact that there is a chance for this to also transmit from the surface, weve seen that in various places so we fully think that this is something just staying high jen nick, ensuring that you are practicing high jen nick practices is quite important sir im sorry, david, go ahead. Jim, go ahead no, jim, go ahead. Please. I wanted to thank you for sending me some airborne you sent me a couple bottles of airborne i wanted to know whether those were the only two bottles. Have you gotten to the point where you can fulfill the demand of your products because i know when i see these arrangements youre making with airlines and doing some terrific things to try to keep everybody at peace, basically, i am concerned that youre out of product. Jim, we are investing heavily in ensuring that our capacity goes up. In fact, we had announced in february an expansion of 2 billion pounds of an investment in the business. Were taking that investment level up, including investment in additional capacity if you look at the growth of lysol in the u. S. Its grown over 70 i dont think there is a lot of people who can really scale up supply in order to meet 70 growth and demand overnight. We are, in fact, making exactly those arrangements with a combination of cold packers as well as investments we are making in our lines in order to meet the demand, including the gummies that you like. Well, laxman, thats perfect. Thats what were worried about. Ive been trying to figure out about the extensions of what you can do in terms of the lysol brand and working with business. For instance, i have otis tonight on mad money, i would love to see otis partner with you because when i get in an elevator it is one of the places i truly fear are there many places that need to partner with you in order to be able to figure out how to make people not nervous about doing something . Jim, our brands are a trust mark and some of the partners that weve already announced have done independent studies and consumers are told us a bra trust mark for them. Were in conversations with many of these verticals that yo mentioned. We announced a few and we will certainly announce more but its clearly exactly what youre saying consumers are anxious. They need a trust mark lysol and detol are the best trust marks out there in the disinfection space i want to talk about the business itself. You came in with the expectation of increasing margin youve done that at least over the last year, first half of 2019, 23. 6 , 90 basis point improvement to where you are right now, 24. 5. I think that includes 69 Million Pounds in covid related costs. Can you keep doing it or where are you in terms of margin improvement, when you look at the future and when you look at what the Product Portfolio is and your expectations are . The longterm value on the stock is in our ability to deliver growth what we have talked about in february when i came in and announcement our future strategy was our focus was on ensuring we would be a mid Single Digits Growth Company and delivering growth in terms of eps growth. Our focus is on that, and we are in fact investing in the business, both this year and next year, in terms of you know, investments and capacity, investments in commercial muscle, investments in r d and innovation, in orderer us to set the business for longterm growth so the focus is on that. The margin is up, but the reality is that as you look at it, we are investing in a business particularly from now to next year in order to set the business up to hit a mid20s margin in the mid20s. All right, and finally, one bit of good news we may be getting here is the expectation that the flu season is going to be less than anticipated in part because of all the things people are doing in terms of hygiene. How is that going to impact your business we are prepared for, now he, a flu season of any intensity. You are correct in saying that if you look at a southern hemisphere, the earlier returns of that, you know, the flu season is going to be milder we are prepared. Our supply chain did have some issues in the middle of the year last year. We have worked very hard to fix it, and have gotten much closer to our customers in terms of how we do this sowere ready for the flu season, whichever way it turns out. We appreciate you taking some time with us and look forward to seeing you go enin the future. Thank you. Thank you, jim and david. Much appreciated shares of 3m at a twoweek low as the Company Misses by a penny. Revenue was light. Guidance remains withdrawn july they say up month to date were back in a moment bigger wd in a highlyconnected lexus vehicle at the golden opportunity sales event. Lease the 2020 es 350 for 359 a month for 36 months. Experience amazing at your lexus dealer. A little weakness in faang this morning despite the fact that deutsche goes to a street high 1975 on alphabet, and jeffries says that amazon will meet or beat when they report on thursday, thats one reason the nasdaq though is down ouabt 0. 8. Were back in a minute riding an all terrain vehicle, look at that, polaris, despite the fact they had some manufacturing issues, it is on fire, because we love the Great Outdoors during a pandemic it is something we saw from campus world and the rvs now and from the atvs. Conference call from harley will continue from benefit from interest in auto activities postcovid people looking for things to do, not go to a big party with a deejay where youre all clustered together watching the chain smokers, not what youre supposed to do harley talking about exiting some international markets, might be why some of the shares are down the Great Outdoors. How about tonight otis elevator, why i mentioned to lysol, i find elevators to me are frightening right now and centene, we have to find out about testing. Tell me that youre afraid when an elevator opens and three people on it hey, ill take the next one. Not because of the surfaces and not because of the surfaces. Look at this one from honeywell. Looks like sprm, do you like this it has the filter. Get them on amazon this is the game plan, all right . Look at that. Honeywell, of course. We will see you at 6 00 i love a good mask. Mad money on cnbc stay away from me and let me wear my mask and were all good. See you tonight, jim. Good tuesday morning, everybody. Welcome to squawk on the street. Im Carl Quintanilla with david faber and leslie picker. Consumer confidence, get to rick reporter Consumer Confidence for the month of july expected up around 95 to 96, a bit of a disappointment 92. 6 and if we look at the present situation it moved from 86 and change up to 94. 2, and if we look at expectations, this one really lost some ground from 106 all the way down to 91. 5 the headline at 92. 6, well of course its reversal of last time, rebounded up to 98, so we want to be a bit careful here, 85 was the april low a sixyear low. Lets move to richmond fed also a july number, this number is coming in at ten, twice expectations and it is the best level since january, when we were at 20 and the low water mark was minus 53, of course that was in april. Leslie picker, back to you thanks, rick. Starting to see those confidence levels trickle into earnings so bob pisani is with us to break down whats going on on a busy day, during a busy week for earnings season. Bob, what is going on . Well, leslie, were about a third of the way through earnings season and its a complicated picture. There are some winners evolving, emerging all the work from home plays, Sherwin Williams had a great number overall they raised guidance in a quarter few people are getting it the home blrps are killing it. D. R. Horton had a big increase in orders, the same with mdc but these are the exceptions no guidance from a lot of the industrials, thats really an issue here, 3m missed, didnt give any guidance. Xerox didnt give any guidance, raytheon didnt give any guidance, neither did harley and they had an unexpected loss. Mcdonalds a modest miss as well theres two stories emerging one story is the reopening is going slower than people were anticipating a month or two ago. Xerox said this essentially today. The continued uncertainty around the spread and resurgence of the virus has changed our prior expectation for an Inflection Point following the Second Quarter we now expect a slower pace of gradual recovery in the second half of the year. So theres one story, reopenings going slower and yet the bulls are maintaining the Second Quarter was the bottom, and the numbers are Getting Better and they have some support the earnings estimates for the Third Quarter on the s p are Getting Better they were down 25 a few days ago, now only down 23 its rare for the numbers to go up in the middle of an earnings quarter. There is some support for the idea the Second Quarter was the bottom if you dont believe that, head to mcdonalds this morning, essentially said that things are tough but i believe that the Second Quarter represents th trough in our performance as mcdonalds has learned to adjust our operations in this new environment. The two stories competing for attention, one the reopening is not going that smoothly and second maybe not going so smoothly but the Second Quarter was the bottom and slowly, things are Getting Better. Thats the competition for the story ideas. Guys, back to you. All right, bob, thank you very much. We want to dive a little bit deep near mcdonalds as bob was talking about, shares are down second worst performing dow component of the morning, second to 3m on that miss on the bottom line, although they did see better than expected u. S. Comps. David palmer is senior managing director of offercorps isi joins us this morning, has an outperform good to see you as always, good morning. Good morning, carl, thank you. Everybodys looking at komco but youre more interested in costs sounds like. Well, Going Forward, these guys are going to have better cost outlook but yes, in that quarter they certainly spend a lot of money on sg a and some was prespending on the advertising. The major story is how things evolve for their International Business the u. S. Business is already getting back on track to some degree with the exception of breakfasts made or headwind but what intrigues us is probably the next thing to look around the corner at, is that International Business mostly europe, will they be gaining share in the future . Europe i guess were framing this according to what c camchinski is saying, europe is opening at a faster pace and more ripe for share gains. Is that the take yes, and a lot of this comes down to format and the format of competition. In the u. S. , the fact these guys are back up slightly in july is still slightly below where the chain fast Food Industry is in terms of drivethrough units theres a lot of them out there that are up. The format is robust, socially distant in europe, mcdonalds has about a third of its business precovid was from drivethrough. 70 plus of its orders were from the counter in europe precovid so thats a brutal starting point and also brutal fort competition for mcdonalds Going Forward theres a lot of share to be gained not only the drivethrough sales for mcdonalds builds back up, but also a lot of these other stores the competition fades away they dont, they fail to reopen and left with more share to be gained in some of the cities in europe interesting he did say they have what he called a sizeable marketing war chest to invest in the second half, couple hundred million dollars. I wonder what do you expect the Marketing Strategy is going to be in the second half, if in fact youre looking for sg a to come in . Theyre holding off a good bit on the stuff this was supposed to be the year of breakfast innovation and chicken innovation i think theyre holding off on the premium chicken for the u. S. What theyre doing now is cranking that drivethrough and keeping the menu simple, so theyre going to be trying to reignite that breakfast day to symptom degree and also marketing to their favorites, the core people want whats familiar these days, and obviously a pretty stressful year of 2020, and so i think theyre going to be advertising to that they kicked in 160 million in this first half of the year but the advertising spending it self was way down, so they prefunded a lot of marketing weight into the second half. What do you think a weaker dollar might mean for mcdonalds moving forward its a big deal for this stock. The multinationals have had to fight the tape in terms of their earnings revisions for a long time, and as we know, there was a golden era during parts of the 2000s where mcdonalds earnings revisions were positive for most of that decade and it was a beautiful time for the stock and so you know, inflation often goes hand in hand with that, and you know this is a franchise Business Model these guys do not mind inflation. They do not mind a weak dollar that is a great cocktail for the earnings of stocks so we start to see a global reflation trade. This stock along with some of those blue chip cbg companies would participate in that. Finally, david, relative to wendys and dpz and papas, where does mcdonalds rate, given some of the extraordinary kompz we ha comps weve gotten from a few other players . Its great to be a meal oriented player like the pizza guys you certainly see it with chicken, chickfila in a private world or kfc, popeyes from restaurant brands, theyre doing monster comps because they have a huge check growth at dinner mcdonalds has to fight the breakfast decline rate, major doubledigit declines, 8plus point drag to mcdonalds comps alone is breakfast longer term, this thing will do well internationals could be a slower buildup so thats what makes us rank behind a more domestic oriented earnings revision story and casual dining will have serious earnings Going Forward so within the world of casual dining and darden would rank higher and wendys has more earnings in the near term but longterm mcdonalds does deserve the premium it gets as being a shared gainer that should slowly get out of this from europe and u. S. Breakfast umhum. Finally, we got to go, david, but before we get into starbucks tonight, are you feeling, you got an itchy trigger finger on starbucks in front of the print . Yes, well, starbucks is doing everything it can, especially coffee is a tough zone right now. We heard from the big breakfast player in mcdonalds, it was tough to be in the morning day part starbucks was down 75 the last time they checked in with us late may their on premise business was down. Their comps were probably down over 20 mid20s probably in june so its a slower road back for starbucks and thats a problem that the good news is for them that they have net earnings where they want them, and so the earnings are modestly set by the street and them, but we are in line on that stock because the slow climate theyre having on sales. Right david, great insight as always we love turning to you on restaurants. Thanks again see you later. Thanks for having me. Ces has been con seanceled. Julia boorstin has more. Big news on the Consumer Electronics show in las vegas every year, it will be an all digital experience the organization saying theyre no longer going to have an inperson component and theyre going to try to figure out how to have a digital gathering of thought leaders from media and technology from across the world. I think its going to be really interesting to see how they figure this out leslie, because this is an important time for Tech Companies to unveil new gadgets and talk about the future roadmap for what their technologies will look like and important time for the Advertising Industry to come and look at new ways that they could reach consumers and start negotiating deals with clients that are sort of concluded around the up fronts that happen in may so a very important meeting both for tech and Advertising Industry, now moving untirely online back over to you julia, thank you. Julia boorstin i dont know how you do it, digital ces, not sure how that works. Shares of 3m down about 5 take a look, see for yourself. There it is, yes, after reporting earnings well have mike roman on the other side of the break, ceo its time for our etf spotlight. Looking at the health care spdr ticker xlv rising today up about 0. 1 , and up over the last three months pfizer giving it a lift on the dow components quarterly ayituss. St wh these last three months, i have been wondering about the future in many ways. Im not the only one going through this. Some of my dearest friends, their businesses are still closed. Theres always peaks and valleys. Even through this pandemic, were all in a valley at this moment. But the one thing you can always know is that theres a peak on the way. Welcome back. We are getting mike roman ready for air, given he just got off the companys Conference Call at 3m the stock is down about 5 im told mr. Roman is ready. Organic sales were down about 13 , adjusted earnings per share of 1. 78 for 3m, and mike, i want to bring in now, i think youre ready and let me start sort of on the outlook if i can. Your cfo talking about it on the Conference Call saying you do expect to see a Global Economic activity stronger in the Third Quarter than the Second Quarter. I know there are people here in the United States at least who are a bit concerned about whether that will be the case. What gives you the confidence it will yes, david, you know, we come off of another Strong Performance in the Second Quarter, in a challenging economic environment, and as monish talked about, were seeing q3 improving outlook versus q2. Thats coming through our july sales trends weve seen improvements across our businesses, across geographies, really early days, and a lot of uncertainty and were watching it, like everybody else, day to day, month to month, but im encouraged by those early sales trends showing that were seeing a pickup in some of the end markets so hard hit during covid, some of the areas like elective procedures in Health Care Starting to improve and broader industrial, automotive getting sequentially a little better, less bad in terms of rates. Those trends are encouraging us to see it through that lens at this time. Yes well you did have your adjusted ebitda margin up for the quarter. Now youve been cutting costs. I remember the last time we spoke i think you unveiled the 400 million year over year reduction in costs do you think you need to take even more costs out of the business or are you comfortable with where you are right now in terms of your expense load, mike well, it was very important part of that Strong Performance in the Second Quarter was Cost Management it was across the board and the Company Really taking stock of what we were saying and the outlook you saw, the organic sales declines in the quarter, so taking, adjusting our costs in the face of that was really important and that was broadbased. A lot of that was i would say temporary and not a lot of restructuring actions in it. It was really managing our costs against those slower end markets. As we move in to Third Quarter, well continue that discipline and we are going to be ready to act in face of whatever we see coming, but at the same time, as the economies improve and sales trends improve, we expect to invest more in that growth, and so there will be some of those i would say those temporary costs that will start to come back, but that cost discipline is going to be an important part of delivering and we talked about an incremental improvement in margins coming from q2 to q3 that Cost Management will continue tobe very important that hallmark of solid margins, strong cash flow and i would say managing our Balance Sheet, were going to continue that as we go through the Third Quarter. Yes, and you did reduce net debt by 1. 7 billion, about 10 in the Second Quarter. Mike, let me turn to the pandemic, given the various products that you have to deal with it. Of course, we talk a lot about you in the past about respirators. Let me come to you about testing. a huge issue in this country, particularly our inability to receive test results in a timely manner you announced the dlabration with collaboration with mit and diagnostic test that aspires to make testing faster. What can you tell us where you are in the development of that, when you conceivably could see it to market and how quickly it would be able to deliver accurate results david, this is another example when i talk about fighting the pandemic from all angles we launched a collaboration with mit earl wiy in the outbreak of covid in the u. S. To look at taking advantage of 3m technology, combined with the capabilities in technology at mit to develop that faster, easier to use, lower cost test and we worked together to get to a point where the National Institutes of health is sponsoring us as we move ahead we have work to do to demonstrate the performance of this capability, but its an exciting opportunity to do just what you talked about, be able to meet that demand for a large number of tests, frequent testing, fast response, low cost, make it widely available, so its something where were in the middle of working on the really to prove it out with mit, a great partner, and then we will be ready to scale as we can demonstrate that it really is a solution that we need. Any time line for us in terms of when you expect to know more work to do right now we are ready, the strength that 3m brings is the manufacturing, the ability to scale so well quickly scale once we have a proven solution. So its no time frame yet but we get that solution proven, well scale quickly. Mike, you said that youre on track to produce about 2 billion n95 respirators by the end of 2020 if there is an uptick in the wave, do you believe thats enough supply and inventory to combat the crisis . Leslie, youre talking about really halfway through the year we produced and delivered 800 million deployablely, 400 million in the u. S the 2 billion number represents a step up in production rates as we go through the rest of the year were adding capacity. We added capacity here at the end of the Second Quarter. Were working with the department of defense to add additional capacity in the second half. Right now, the demand for n95 respirators outstrips our ability to meet the demand and industry we are working to catch up to that so that 2 billion will be a total year number, at a run rate of 2. 5 billion by the end of the year we continue to step into it doing everything we can to ramp up that capacity and the industry is looking to do that as well. So weve got to get ahead of the nearterm demand and at the same time build enough capacity for any possible further outbreaks i want to switch gears and ask you about pfas bloombergs Litigation Team estimates the total reliability of chemicals that seeped into the water supply between 9 billion and 10 billion. You have he taken charges related to cleanup with regard to the issues in the past. Can you give us sense on what your anticipation will be with regard to the total liability for ppas leslie, we are proactively managing pfas. Theres multiple dimensions to that and one of that is the liability and the uncertainty around that, and thats something that we are working to help with our investors and i would say our stake holders broadly, helping that uncertainty, but its just not possible at this point to really estimate the impact of pfas more broadly. Weve taken reserves where we can make a probable and estimated view of whats going on, around where we historically manufactured and proposed pfas taking the steps to resolve that including remediation. It will take time to get a better view and in the meantime theres a lot of things that we are focused on, one is working in support of the epas Management Plan around pfas. Theres more to come were being as transparent as we can. We have a clearinghouse for all the research around testing and measuring and remediation and also continuing to update information on what we face in pfas, everything from the remediation work to the litigation so were going to try to help that uncertainty, as we go forward. Mike, do you think that the concern about liability, and not just pfas, i know a judge ruled against some key 3m defense that you are offering and an earplug lawsuit about faulty ear plugs for the military do you think that liability issue overall mitigates against your stock price moving particularly higher . Well i think theres that uncertainty we were just talking about with pfas, certainly something that is a concern for investors, so that is out there. The other litigation that youre talking about, theres a number of other litigation issues that we face, some of them have been something that weve been managing for some time its something that goes along with the Product Development and sales that we have around the world. In the case of the combat arms, thats something where we have had a Strong Partnership we really believe in supporting the brave men and women of the military, and we continue to work with them to support them we dont believe our combat arms ear plugs were defective and caused the injuries that were talked about, but thats something we have to manage as we move ahead, and it is another litigation issue that we face, but we are managing very proactively. All right, lets talk about managing this economy. Back to school is important for your company as well of course given the stationary, all the supplies that you may provide. Theres a lot of concern that kids are not going to be back in the classroom. How much of an impact will that have on your business, if in fact we see a lot of students not actually in class . David, you get a sense of it as we came through Second Quarter. You can see our consumer business, our retail businesses. We saw strengths in areas like Home Improvement we saw strengths in cleaning products and disinfecting products we saw weakness in our stationary office, partly because of the Remote Working but a big part of it as schools shut down for the remainder of the year you can see that potentially having some impact if schools dont reopen as they come into the fall now our Retail Partners and our teams, were preparing for back to school, and we are scaling up and getting ready for that theres another one of those situations in the middle of covid that were taking almost day to day, really how is this going to play out . How much demand will we see . I think we are hoping and expecting to see some improvement from what we saw at the end of Second Quarter, but it remains to be seen as the markets recover. Finally, lets just quickly hit on the rest of the world china as well. I know youve said some positive things or at least on the call i think it may have been your cfo said some positive things about a recovery there what are you seeing globally well, globally, talk around the world is i would say consistent as we came through Second Quarter we saw emea, europe, middle east, africa in the u. S. , contributing to the Second Quarter. Asia was down but china was up china was up 3 in the quarter, starting to show the signs of reopening their economy, and we saw broadbased contribution to that, electronics, transportation, general industrial, our consumer businesses all contributing. Health care may be lagging a little bit, even in china, the electric procedures were coming back slower, so its maybe an example of how economies will start to reopen and were watching that in each of the geographies, looking at what we will see coming in to Third Quarter and as i mentioned, early days in july, were seeing low Single Digits growth broadly and its really contributing from all those geographies, improving sequentially from Second Quarter to Third Quarter, early days of july all right, mike, always great to get your take on things, given the tie versity of products you provide around the world. Thank you. Mike roman, chairman and ceo of 3m thank you, david. Lets get to sue herera with an update. Good morning, everybody everybody. Reuters reporting that todays game between the new york yankees and the Philadelphia Phillies has been postponed again as some phillies players await covid test results the largest trade group for airlines say passenger traffic will not recover to prepandemic levels until 2024 and that is a year longer than its previous estimate you can go to cnbc. Com to see how the air freight business is doing during all of this a new nbc News Survey Monkey poll finds 68 of u. S. Adults say they wear a mask every time they leave home, but there are some stark differences along party lines. 86 of democrats say they wear one every time versus only 48 of republicans and in portland, oregon, hundreds of protesters once again faced off with federal agents, flash grenades and tear gas were used to disperse the resistant crowd. Calls for the agents to leave have gotten louder mayors of portland, chicago and three other cities appealed to congress to make it illegal to deploy mill trialsed federal agents to cities that do not want them. You are up to date thats the news update this hour squawk on the street continues after this stocks are overvalued, Steve Liesman has what they said, hey steve. Carl, yeah, they think they are indeed overvalued. Get to that in a second. I want to shore you the outlook of our 41 respondents for the s p 500 and its just not pretty if you look at based on yesterdays close, 3239 and the outlook for the end of the year is below the current level 3174, the average response or forecast for the s p. It does go up a bit in 2021 so thats some good news but just about a 4 increase. This group typically bearish here i will tell you, the economists in this survey have a much lower forecast than the equity people and well get to that difference between the two in the outlooks in a second. Equity guys are 200 points i want to show you the affect over time and what you see is that a lot has been taken out of expectations back in 2019 the expectation was 3. 2 , that fell in 2019 with concern about the economy and the fed being too tight to 2 and 0. 76, for the end of this year about 2. 5 of expectations taken out of the tenyear in the market on this issue of stock prices being too high, 78 say its extremely or somewhat say the stock values are extremely or somewhat high. 20 extremely, 51 or majority of that group saying just somewhat high. 100 of the fed say nothing will happen in tomorrow, nopolicy o change in rates. Next move august 2022 and it would be a hike but thats eight months later than previously fed Balance Sheet growing to 9. 2 trillion, currently 6. 9 and twothirds say theyll be more action coming from the Federal Reserve. Here is some of the differences between the economists, the virus is out of control and investors dont think that is an issue which makes me wonder if they are rational or not. Look at what hank smith says, unlike previous bear markets, there will not be any test of the lows made on march 23 mpbd the enormous monetary and fiscal response delivered extraordinarily quickly. Leslie, tale of two worlds right there, the economists look at the market and say whats going on, equity guys say makes perfect sense to me. Back to you, leslie. Thank you, steve. In the meantime, Senate Republicans have unveiled major parts of their Coronavirus Relief plan including a wage replacement of 70 in extended unemployment benefits. Labor secretary Eugene Scalia joins us on the stimulus initiatives. Thank you, ecretary, for joining us republicans unveiled a 1 trillion plan, it includes reducing the unemployment supplement from 600 weekly to 200 weekly until september and state benefits combined with other stimulus will go down to about 70 of previous wages. With everything kind of down to the wire here, do you think that this is likely to get passed what American People want to know essentially, will they be seeing more money in the future and how much will it be . Leslie, good to be with you yes, the American People will be seeing a substantial additional aid from the federal government during this difficult time as you said, the 6 hub a week benefit which was passed by kng in march expired kng in march agreed it should end at the end of july and so thats happening now the president , the Senate Republicans have stepped forward and said lets continue, a federal supplement on Unemployment Insurance which is very unusual Unemployment Insurance is a state system its funded by contributions by employers, but the federal government stepped in during the great recession, the weekly federal supplement was 25 a week now the president , republicans and the senate are saying lets make it 200 a week until we can transition to what you described which is this 70 wage replacement rate, so that people on unemployment would get 70 of their working wage and a couple quick points on that this concept of wage replacement is fundamental to an Unemployment Insurance system and worker advocates say we shouldnt have wage replacement about 60 to 66 of the wages people had while working but the president , the Senate Republicans have come in and said lets make it 70 during this challenging time. Now that is less than the 00 a week payment but i was pleased to see this morning that House Majority leader steny hoyer acknowledged there was 600 week is paying nearly 70 of people on unemployment more than they got while working and again, so when you look at a wage replacement approach, 600 a week was a substantial payment as we were closing our economy in march, but its not a sustainable approach toward an Unemployment Insurance system. In temples of the stability of the economy, weve seen a spike in coronavirus cases over the last few weeks is it the right time to really be decreasing benefits amid kind of the backdrop of this virus which seems at least in terms of the potential for additional shutdowns in the future nowhere a certainty . Its a good question and let me emphasize first of all that weve made great progress from where we were in march, in a couple of ways we understand the virus better, much more how its transmitted, how to treat it, how to contain it and weve economically been able to progress much farther than people were projecting back then as you know in may and june together we added 7. 5 million jobs we are farther along in a strong recovery than had been projected, but its not time to pull away entirely from federal aid and thats why even though congress had previously agreed the 600 a week should expire, the president is stepping forward and saying lets continue with something very unusual with this 200 a week payment. So unusual to have the federal government joining in funding Unemployment Insurance, and as you know, theres more there are another round of Economic Impact payments, 1,200 per taxpayer, additional substantial support with another 500 for dependents, support for the Paycheck Protection Program, another 190 billion there, and then another 1. 3 billion in worker training and to help dislocated workers so this is another really very substantial package to help americans during a period that remains difficult, even though i think weve certainly come a long way from march. Consumers on the tape now saying that the plan has tax breaks for threemartini lunches but no money for feeding kids. I know the deductions are a piece of this but what is the hope behind deductions for meals and entertainment . Is the expectation people like ourselves will get our corporate cards out again . I believe there is a provision that would provide tax deductibility for meals and of course thats targeted the restaurant sector, that is a sector that we know has been hit harder than others by the virus, and ive certainly heard from Restaurant Owners who think thats one way that they can weather this period. So that kind of a tax credit is about sustaining those businesses, sustaining their workers. There are other tax credits for hiring workers who were laid off as a result of the pandemic to incentivize rehiring of workers and i dont think we should apologize for a moment for tax incentives meant to restore the strength of our businesses, restore jobs what we want is the economy that President Trump had built until the virus came, and that was an economy built in part on tax relief which incentivized job growth and a record economy. Provisions like the one you described are aimed for sustaining businesses and support the workers at those companies. Yes, a record economy certainly with the Unemployment Rate where it was, not necessarily gdp, mr. Secretary i have a question about the wage replacement to the 70 you were describing from the 200 benefit. There was a memo out yesterday from the National Association of state workforce agencies that basically said, given the state of many states computer systems, it can take from eight weeks to 20 weeks to get to a point where they could actually process that, once they get guidance from you. Is that a concern for the department of labor . We can make this work as youre describing, its true. The way that this will function under the senate bill is that for two months, it will be a 200 a week payment and then states will transition at the end of two months to 70 wage replacement approach we surveyed the states the great majority indicated they could get this done within eight weeks. There is a process by which they can apply to the Labor Department for a waiver if theyre not able to achieve it but ill tell you, senator schumer and senator widen of oregon put forward their own proposal a while ago that required more changes by states. It would have fluctuated up and potentially on a monthly basis depending on the Unemployment Rate there are a number of problems with their proposal but states would have made changes more frequently than our approach we looked at it and think this could be done. Another important part of this legislation is more than 1 billion more for states to administer their Unemployment Insurance systems. We know theyve had problems weve tried to help them and 2 billion to build a better system over time, so that among other things, we can reduce fraud on the system, which has been a major concern. Maryland reported a couple weeks ago in part as a result of investigation with us at the Labor Department that about 20 of the claims that they had appeared suspect, and that they believed theyd been defrauded by 500 million, and so introducing more integrity into this unemployment system is important, too, and thats another thing this legislation will do. All right, well well see what happens well be watching closely over the next few days. Secretary scalia, thanks for joining us thanks so much. When we come back, is Major League Baseball season in jeopardy with the postponement from yesterday, the yankees phillies postponed today. What does that mean for the planned restart of other sports this friday . Well talk about that after a quick break, as the markets are off the session lows even with gold soaring in the current climate a top Institutional Investor says its an appropriate hedge upon your port yoel poe. Find more on tradingnation. Cnbc. Com more squawk on the street coming up. For as little as 5, now anyone can own companies in the s p 500, even if their shares cost more. At 5 a slice, you could own Ten Companies for 50 instead of paying thousands. All Commission Free online. Schwab stock slices an easy way to start investing or to give the gift of stock ownership. Schwab. Own your tomorrow. Shares of pfizer and biojen intech rising as they announced phased trials for a potential vaccine. Meg tirrell has more on. Hi, david they are the second group of companies to announce they started this last stage of testing of their covid19 vaccines, after earlier in the day yesterday moderna started its phase three trial. What these phase three trials really are is the last stage of testing before seeking regulatory review. They seek to assess safety and efficacy and they are the largest trials run these ones will be in about 30,000 participants. Half will receive the vaccine, half will get placebo own in terms of success the fda is looking for 15 efficacy. Nobody knows who gets what and they observe the side effects and infections the goal is for there to be half as many in the Vaccine Group as in the Placebo Group in terms of the details of the pfizer and biontech trial, theyll enroll up to 30,000 participants between the ages of 18 and 85. They started last night, dosed the first participant in the United States, and they will do this globally at 120 sites they say if all goes well, they are on track to seek regulatory review as early as october guys, whats really interesting about the news last night is that the candidate they selected of the four they were evaluating is a different one than the one they already presented data on they say that both of the candidates showed favorable immu immunogenecity the immune response in t cell and antibodies this one had a good tolerability profile. They had data in Older Americans between the ages of 65 and 85, which is so important given how hard the disease hits older folks. Well be talking about all of this and more, including the quarter with pfizer Ceo Albert Bourla on the exchange today thats an interview you do not want to miss thank you for sharing that with us thank you with a few colleges offering discounts for distance learning, cnbc has the top schools that provide the students the best return on investment stanford, Harvard University and the university of chicago are among the top private schools, while the university of washington, Baruch College and Purdue University West Lafayette lead the best Public Schools my alma mater did not make the list see if yours did at cnbc. Com makeit. Were back in a moment experience the adventure of a bigger world in a highly capable lexus suv at the golden opportunity sales event. Lease the 2020 nx 300 for 339 a month for 36 months. Experience amazing at your lexus dealer. Airlines trading okay here ahead of boeing tomorrow united, american, southwest, and jet blue a relative under performer. Tomorrow well have an exclue sif with t sieve th twihe ceo, you dont want to miss that. I dont put this in the nightmare category we dont want any player to get exposed. It is not a positive thing but we built theo play thate have a pool of additional players and we think we can keep people safe and continue to play that is the mlb commissioner on the mlb network last night. A lot of concerns about the safety of baseball with us on the impact on this and what it might do to advertising. Thank you for the time, good to see you this morning thank you, good to see you. I wont ask too much about how their handling this inter l internally, but is the season in trouble . Definitely. A look at a lot of major advertisers, and you take anheusan anheuser busch, they decided to reallocate to their nonprofit partners to help covid relief efforts. J. P. Morgan chase said q 3 will be a large decrease in tv ads around sports. We know theyre trying their best to do what they can to bring sports back, and when i look at their aggressive and they want 60 games, and traveling all over the country at the expense of the players. The safety of the athletes should come first. So we dont know what is going to happen. Taking a look at how we connect with the fans that are isolated, quarantine, theyre not having the experiences, so what can we do to create experiences that will help connect fans to games, to their teams, their favorite players without having a live game what is happening is a lot of the ads for tv is going to digital. So some of these players want to opt out. Theyre traveling all over the country and we look at the nhl, major league soccer, and the nba, and they put their athletes in a protected bubble. But with mlbs plan it was so much exposure to so much risk. I think if that is the continued mode of operation they need to look at alternative things to do because who knows what will happen later in the season the argument that baseball by its nature, the physics of the game, some argued its more socially distance than say basketball, but the bubble that the nba is creating more than off sets that . No, im not a doctor. I just look at the facts and what is happening and right now there has been no positive tests there. Major League Baseball has just started and look at what has happen happened if i could say from the commissioners statement, expecting to play with positive players, having players that can step in, we know our athletes are great, but they are human. To think that player is sick and well put in a new one the brands that are trying to be good corporate citizens, and i think that with what the nba, major league soccer, and the nhl are doing their trying to serve the fans and we all want sports to come back as you pointed out, they believe this is be managed well look for more information in the day to come as always, shelly talking about mlb. Welcome to squawk alley on a day when fang is regulartively supportive, john, but there is so much coming up in the week, the fed, big tech hearings, and investors might be sitting on their hands and in front of it facebook in the green barely but the best of the fang names not fairing well i think the big unknown is what comes to the surface in the hearings perception is important here and that is where were going to begin this morning with big tech and the hearings that are happening later on this week the pressure being put on the big four, amazon, apple, facebook, and alphabet ahead of