Transcripts For CNBC Squawk 20240704

Surprise profit and Record Services revenue, but says weakness in pc and ipad could continue to drag down sales. And amazon shares rallying after reporting blowout profits beating on sales and the company issuing optimistic guidance as well interesting internals in the jobs report this morning 187,000. Unemployment, 3. 5 average Hourly Earnings, a touch hot, but the workweek shrank, mike, so total weekly pay, below expectations i think it all nets out to consistent with a slowing but still tight labor market and a relatively soft landing for the economy. You did have those downward revisions, so decelerating but also lower Unemployment Rate implies just not a huge supply of idle workers to draw from here the main market kind of bank shot on this is what does it mean for treasury yields thats been the story all week you have had longer term yields really going higher, not much because of repricing what the fed is going to do, but just in general, a lot of dynamics pushing in that direction. A lot of things happening. Anyway, the yields have cooled off at least right now theyre at the top end of their range, back to the fall, october, november. Yeah, as Rick Santelli pointed out when we did get that jobs report hitting the tape earlier, treasury yields, largely unchanged. If anything, down slightly, at least the tenyear yield right now, and youre seeing that give lift to equities here. I realize small gains premarket, but in a week where were down and we saw some larger moves, some of the largest moves, daily moves for the s p, for example, that weve seen in a couple months, i realize we havent seen very big moves in the last couple months, its certainly notable. Theres been a little bit of a break in the calm. Momentum has flagged, clearly. We came out of july running very hot. Everyone agreeing were probably going to have to cool off seasonally i think the question is, were down 2. 5, 3 from the highs in a week, thats nothing, basically, in terms of pullback, but we did have a similar, very stunted pullback in june into july, so it would be the absolutely perfect bullish scenario if everyone bought this very shallow dip. I think its a lot to ask. You have to see many things move together at once because aside from the seasonal effect, you have overbought conditions in some areas and then just the earnings reaction. Earnings have been good, well above expectations consistent with the idea that earnings have troughed in the Second Quarter but the ones that are missing are getting punished hard. The ones that are beating are not really getting rewarded that much it shows you that the market kind of got to that spot before we heard the results does it do anything to help visibility through august . I mean, cramers knock yesterday was that no real catalyst until jackson hole mersk is warning about lowered container demand ecb says euro zone inflation has peaked maybe they pause in september. It helps a little bit i do think that we have another jobs report before the actual fed meeting. You are going to get inflation yeah. Cpi next week. I think thats what youre looking toward again, we have to remind everybody that the fed right now, its not looking at secondary indicators and drivers of inflation and what the they want the numbers to cooperate on the actual inflation print, and so nothings going to supercede what they tell us. Yeah. Theres a note out from evercore this morning, basically talking about this move that weve seen in yields, and pointing to what it calls catalyzed selloff in both september, october of 2022 and the idea that stocks had to digest what weve seen happen here in february, march of 2023, just as we were getting all the svb and Bank Collapse drama and that even the fact that we are moving into a very seasonably, at least when september is concerned, weak time of the year, that you could potentially start to see a little bit of that pullback that weve been talking about and a number of strategists have come on and said we might be due for at these levels anyway so its going to be one to watch. Without a doubt yields above 4 have not been easily digested. Its not as if it needs anything in particular in terms of how far down stocks would have to go the fact that its been a very muddled storyline behind the selloff in longer term bonds doesnt necessarily help yeah, we got the fitch downgrade, but global yields are going up, and they werent telling us anything we didnt know, but did it focus people on the coming supply thats going to be out there in treasurys, and then of course, just had people positioned for an ever steeper inverted yield curve and then once that goes in the other direction, people have to kind of unwind. So, i think theres a lot of mechanical effects as well as, hey, the premise of Recession Risk is being taken out of the market even b of a today putting soft landing on the cover of one of their reports you mentioned the fitch downgrade, and mikes been pretty consistent in arguing this week that it has happened and its something that Steve Schwartzman and blackstone talked about with becky quick this morning were running huge deficits now. On the numbers, you can understand why they did it on the other hand, as jamie said, because jamies always opinionated, i must say, you know, the u. S. Is the u. S. We are the reserve currency. We do defend a large part of the world, including people who have aaas, and when theres a crisis in the world, they buy our securities now, that doesnt last forever if you dont keep some discipline interesting comment in light of the attention thats being paid to tenyear, 4. 25 , lets say, and ackmans view of the longbonded 5. 5 , theres no doubt about it i mean, however you slice it, and however we got here, real yields are higher than they were that should be a restraint on the economy. It should be a little bit of a headsup about, you know, just exactly how much could the economy sustain if they continue to go higher so, all of it is relevant in terms of the conversation. I just dont know that you had the confidence to say theyre going to break out from here the highest levels we have had just about, except for last so october, except for the Global Financial crisis also, again, i keep pointing out, the nasdaq is at nasdaq 100 is at 15,300 or Something Like that. We were there in september of 2021 with the tenyear at 1. 5 so, we could talk all about what it means, where the yields are it doesnt necessarily compute to where stocks have to trade or where valuations have to settle. But it does speak to the fact we have seen a lot of multiple expansion this year, even in a quarter where we have Earnings Seasons that are considered to be troughing here. Not as negative as everybody expected, but still negative were trading off 2024 numbers, in that way markets trying to look ahead. Speaking of which, earnings last night were busy, lets get to apple beating expectations from earnings and sales as you know, the Third Straight quarter of falling sales ceo tim cook telling cnbc, as you can see from the data, the u. S. Did better than the previous quarter if you look at the u. S. , the acceleration is good or the acceleration that we saw, were glad that it accelerated but the smartphone industry is tough in the u. S. Right now upside in services and mac, but wearables, ipad, iphone, all a little bit light. I thought it was interesting that the numbers missed estimates for north america, but you did see that strength or more strength than had been expected for china as well where its been a rockier recovery, road to recovery, there. So, that was certainly interesting, and it did seem like on the call there was a more subdued tone, if you will, on this notion, now, that perhaps youre going to see another revenue decline, potentially, or at least a flat revenue number, despite that iphone 15, which if you were to see a decline, would be four straight quarters. We havent seen that in Something Like 20 years for apple. Its not easy to collect 400 billion in global revenue, which is what any Revenue Growth for apple would be if we got to that level it is interesting how you can see how the stock has performed in this very linear uptrend, until very recently when its flattened out a little bit, compared to whats happened to the reported or projected earnings growth. It really is not the story of today. Its not really even the story of the rest of the year. If a lot of chatter, new iphone cycles, gives us something to look ahead to. Theres another big picture case that is often made, which is, yep, services i mean, 6 growth, nice, but nothing special, and in a world that nominal growth is growing gdp that fast. As that becomes a bigger piece of the pie, its a bigger margin its a higher valuation contributor to the overall company, so in a way, the margins of the company are migrating higher just because thats the fastergrowing piece. You mentioned the iphone cycle. Among the analyst reaction today is citi with a 90day positive catalyst watch and their argument is if you look at the stocks performance since 2016, between the june Quarter Report and September Iphone announcements, outperforms the s p every year, they argue, by an average of 8 so, well see if history repeats itself no, its true youd like to maybe go back and look at which years the stock was already up 47 going into that period, but theres no doubt about it that you have a general kind of tide higher where were getting to the new releases and overall, wall street still remains overwhelmingly bullish on this name lets stick with apple lets bring in cowens apple analyst, chris he has, speaking of, an outperform rating on apple, price target of 220 per share want to get your thoughts on what we heard from the Management Team last night and what that means in terms of buying opportunity right now for the stock. Morgan, thanks for having me. I think the biggest delta would be in terms of the guidance, heading into the print, you know, the june numbers came in largely in line. Earnings are slightly better looking into september, i would say were about looking at one person year over year growth based on the implied guidance, its more like down one person year over year growth so thats not a big deal in the grand scheme of things, but i guess given the stock runup, it was enough to dampen some enthusiasm but in the long term, nothing is changing services growing high margin. Strong cash flow generation, so not much to complain those strong margins, the fact that services, record revenue, continues to be a growing piece of broader pie here, is services enough to justify a growing valuation . Yes and no. So, the way i look at is i think services does help increase the valuation, because its a high margin business with high Growth Potential which is modeled about midteen growth, 13 growth year over year in september thats helped. The flipside is that many people tend to forget that the resilience of iphone most people view iphone as a pure hardware, and the pushback from bears is its a hardware, its a commodity, should be trading in the low to mid teens. The flipside is that iphone is a very, extremely important sticky business with a very Large Installed base look at analog Companies Like analog chips, they trade in the low to mid 20s, so why shouldnt the hardware business or the iphone trade in that that way, you get a blended multiple we got some commentary on a. I. And Machine Learning as well i think those are being viewed as Core Technologies by tim cook, et cetera, at apple. At what point does this become meaningful to the story from a monetizable standpoint yeah, i think, you know, i think its still very early stages i mentioned this in the past, too, that theres already new engines built into the chip, the custom silicon from apple, which has the capabilities, et cetera, so i think youre going to start seeing this become more important. I think theyre laying the groundwork today this thing is going to be significant in the next six to nine months . Probably not could it be a year down the road possibly all right thanks for joining us. Thank you still a lot more to come this morning were going to wraek down amazons blowout quarters. Shares are surging in the premarket. Take a look at the premarket, in fact, and well get to the other names, booking holdings, airbnb, some auto news, some news on robinhood, the networks, obviously, and studios in light of the recent labor strike a lot more squawk on the street is straight ahead. Orate. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. vo Verizon Small Business days are coming. From august 7th to the 13th. Now is the time to partner with our experts. Get started today with verizon business. Its your business. Its your verizon. Amazon is rallying on these strong q2 results. Biggest earnings beat since 2020 upbeat revenue guidance with the current period also giving the stock a boost today. This is Ceo Andy Jassy on the call last night. We still see several ways in which we can be more efficient in the structure, and we believe well improve productivity further. Weve also reevaluated virtually every part of our Fulfillment Network this past year as the additional structural changes we can make that provide future upside good margin news shows some of those cost cuts finally kicking in its funny to watch the analysts move collectively from about the 150 target range to about 175 or 180 in some cases. This is the company and this is the cycle with amazon where they make massive investments and maybe they pull back or sort of rejigger and recalibrate those investments, and then they reap what theyve sown and it seems like theyre in that part of the cycle where they are beginning to reap what they have sown over the last couple years. Theres no doubt that thats the suggestion from here the market has kind of sought that out and thought we were there a couple times in the last year or so, and thats why i think there was a bit of reservist skepticism, carl, in terms of the sort of surface level bullishness, 90 buy ratings on amazon. Any sense that they really are serious about trying to be disciplined on cost, the operating income guide for the Current Quarter was well above expectations, but you know, morgan heard me drone about this 16 hours ago i always love to talk about how their operating income Guidance Range is 3 billion. Were a third of the way through the quarter. They want to send the message were not managing to the number we never manage to the number. But what we know now is that is how much might fall to the bottom line. And thats an upside its funny how we look to them for guidance and radar on the consumer, and they did say consumers are looking for value, at least in north america retail, but in the end, it continues to be about aws and the beat there on revenue and just the sheer size of that unit which i think 12month revenue is bigger than almost all s p companies. Yeah. Just to put that in perspective with that stat right there i mean, ecommerce did come in better than expected paid unit growth accelerated to 9 year over year, and that was better than the 8 we did see in q1, but to your point, aws, up 12 . They talked a lot about stabilization and this idea that customers are starting to shift from cost optimization to new workload deployment and speaking to all the a. I. Offerings as part of that mix and what thats going to mean for future demand. The annual growth rate. You can get to more confidence that it has bottomed we can go up from there or hold that and its similar to what i was saying about apple and the Services Side growing faster than the rest. The bull case, weve been hearing on amazon is, when aws is clearly the biggest growth driver, certainly of the valuation, and the highest margin business, the entire company, therefore, has better economics over time. That being said, i dont think they want, you know, to run the ecommerce business as a logisticsheavy, satisfy the customer at any cost, no margin left for shareholders. And you know, this quarter suggests thats not what theyre after ap after. No, but it was interesting when andy jassy sat down with john ford, because he said when they run the Logistics Network to be faster and deliver faster for customers, that that actually tends to be more lucrative to them, which i thought was very interesting and kind of counterintuitive in terms of that conversation where amazon is concerned, i just also thought it was interesting that we had strong cloud results from microsoft we had strong cloud results from google there had been this sense that maybe theyre continuing to take market share, and then we get a number that was better than expected and some good commentary from aws too. Perhaps just going back to the a. I. Piece of the puzzle, this speaks to, despite uncertain macroeconomic environments, that you are shifting or seeing the shift in terms of a new secular growth story for customers and what theyre going to do and what theyre going to need for cloud. Microsoft inld indicated up five bucks this morning so i think youre seeing stuff reallocated but its maybe not a dog fight, zero sum game at the moment which is interesting. Fortinet is a different story in a sense, given the focus on cyber, but the billings missed there and the guidances allow on billings for fortinet is going to bring that name down almost 20 and some of the other cyber names with it. Software, not a homogenous story by any means this morning. Thats interesting too, because cybersecurity and the spend on that, especially as the world becomes more and more digitized, has been, again, seen as another secular growth story, so the fact that youre seeing these results come in weaker than expected is part of the reason were seeing the stock get hammered as hard as you are. Still to come, acting u. S. Labor secretary julie su joins us first on cnbc to break down todays jobs report and just getting a check on the futures this morning as well three things indicated to open a little bit higher. Particularly the nasdaq, as that big move in amazon this morning powers the markets stay with us we got more squawk on the street when we return technology lets autonomous vacuums work continuously around the house, but when your team has to work seamlessly around the world. You need more than technology. You need cdw who can help transform your organization with built for performance lenovo thinkpads. 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With your hearing, if you start having a little trouble, youre concerned that its going to cost you money. To this day i only paid what i had to pay for the device. When i go back everything is covered. Theres so much youre missing by not having hearing aids. Well find you a hearing aid that fits your lifestyle and budget at one of our over fifteen hundred locations. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Check out the top gainers opt s p this morning despite the concerns about travel, booking holdings going to open up better than 11 that, plus airbnb, adding to a lot of travel news today well get to that after the break. N sting bell coming up iju about five and a half minutes. Announcer the opening bell is brought to you by nuveen. Are people starting to go to a lower star rating . Were not seeing that. Are people going for a length of stay thats shorter than the past not seeing that either so, we really arent seeing any signs of slowdown right now, and im just that people are spending their money on travel that was bookings ceo glenn holder on squawk earlier were in this environment where real wage growth is a big dynamic for the consumer maybe they dont have to choose. Not yet they certainly dont prioritizing travel was a global story with booking they have the exposure to nonu. S. Markets and thats come roaring back and explains some of the differentiation this stock had a really sharp little break from an alltime high, 5 or 6 off the 3,000 level. Now its taking it back there. Weve been bracing for this idea that whether its airlines or other areas of services, are getting exhausted, but not yet seeing it in the numbers but i would actually counter on that one, and i would say, because youre seeing so much international and crossborder travel, not only americans going to places like europe but also china as weve seen the reopening happening there, thats where youre seeing the strength this quarter, and by the way, not just in the travel names but in the mastercards and visas of the world too it is the more domesticallyoriented airlines, for example, that have talked about softness in their numbers in terms of travel here in the country. So, there has been this shift, and it does feel like its a next chapter, if you will, or maybe a later chapter in the travel Revenge Travel story by the way, airbnb reporting last night as well, some deceleration which, i think, perhaps speaks to that too and room rates coming down in hotels it does seem as if its cresting, maybe, but its not something where it seems like people are strapped. No. Thats right. Airbnb beat on ebitda. Beat on revenue. But nights booked, up 11 with a slight miss, and host hotels yesterday did talk about great outbound, Great International outbound away from the u. S. , not getting reciprocal inbound, from especially asia pacific, and maybe lodging is the first to crack. Well see. As opposed to air travel lets get the opening bell here. At the big board today, it is uscf investments, celebrating its electrification and sustainable Battery Metals etf at the nasdaq, an Investment Management and Insurance Holding company. Lets see if the bulls can make a move back above 4,500 today. We are getting some relief, mike, at least for the moment, on yields with that tenyear back to 4. 16 that was right after the jobs report i think it was much more about not that it was a weak number but people were bracing for upside surprise, just because of that wild adp figure. Now its two months in a row where theyre vastly diverging we did see downward revisions in the jobs number for previous months, so just takes the edge of the yield story 4,500, maybe almost surprisingly, has been sticky this week. I would have thought maybe we try below there. But yesterday, didnt spend much time below well see if thats a bigger driver here in terms of, you know, amazon, 8 move, its going to be a huge help. Looking Consumer Discretionary up 3 today. You know what thats about actually, closer to 10 for amazon, yeah amazon, you got booking as well showing strength, and actually, energy which has been just roaring back you have crude at breakout levels here. You are gasoline at eightmonth highs as well. The heat wave, weve seen, in recent weeks has only helped to fuel those price increases, and then youve got opec plus meeting this morning and continuing with those production cuts yeah. No doubt i mean, i think b of a has a bunch of this rubric of what is it going to take to keep the market supported here, and one of them is, will the commodity rebound start to nudge expectations higher in a way crude is looking at six weeks up, about 18 move over that time and the b of a note does mention commodities off of the oneyear low. Iron, up 40 sugar, up 38 . Gasoline, up 35 crude, up 22 . So, is that going to be the spoiler where we were wringing so Much Good Energy out of disinflation, deflation in some places, in commodities youre definitely not in the danger zone in terms of where the absolute levels of those commodities are, or where they even have been in the last couple years, but its going to, i think, reinforce the focus on the core Inflation Numbers but longer term yields do not ignore Energy Prices and headline Inflation Expectations going higher so, thats the play. Commodities, and i think the other area to look at when youre looking at smh and the key Technical Levels of that right now, as well as the fact that chip stocks, which have had just a riproaring year and are economically sensitive as well, much like commodities, also seem to be losing momentum here its been a mixed picture, i think, in terms of earnings there too. Well, for sure. And certainly, the response to earnings i mean, the amd selloff after what arguably were pretty ontarget numbers and just an unwillingness to really give them a lot more credit in advance for some of the a. I. Stuff. Nvidia, i mean, it has, at most, like a high singledigits pullback, but it hasnt really been powering higher as much in the last couple weeks. Some reaction to some consumer news weve gotten over the last couple of days. I did notice wayfair, which had that monster move yesterday. Today, barclays goes to 85. Stevens goes to 105 i dont know how pressured can the consumer be if theyre buying furniture and delivering some profits finally to way fair at this level . On overtime, we had gxos ceo on, on the heels of that companys earnings, and you talk about logistics and brokerage, thats what that company does. And one of the things he talked about was green shoots, maybe a bottoming out in the freight market, which has been in, quote, unquote, recession for the last couple months plus, but also the fact that theyre seeing green shoots in retail and ecommerce and there are signs that thats coming back to life too, which, by the way, we heard from the ceo of cfx a couple weeks ago as well with things like domestic intermodal. So, perhaps to your point, some signs that, yes, people are still spending on services and things like travel, but maybe a little bit more despite or i guess in the wake of this inventory destocking weve seen on goods some normalization, i think, is the way people have been phrasing it. If you looked at the longterm charts of goods consumption, its so overshot vastly, and then weve gone sideways from there, down and sideways, so were still consuming plenty, relative to prepandemic levels. So, i dont think its necessarily the case that we were expecting multiple years of that inventory rationalization watch crypto today. Theres a bunch of news regarding resolute in the u. S. , and then coinbase today. Ebitda beats, revenue beats, but they do guide light on q3 subrevenue. More interestingly, they are continuing to comment on their battle with regulators, and some commentary sees a bipartisan pathway to some regulation regarding crypto over the medium term for better or worse, coinbase is really the company that stood up with some regulation, future regulation in mind, and now that it is engaged in this legal battle with the s. E. C. , it is kind of forging the path forward in terms of the regulatory environment, the legal precedent around what trading and cryptocurrencies and the classification of cryptocurrencies is going to look like, and that got my attention to the commentary that in the u. S. , were seeing a path toward bipartisan communication. This has been seen as the thing thats going to be the overhang on the stock yet maybe not so much. The industry and even really the regulators have wanted congress to try and, you know, essentially break this and say, lets have something solid on paper that says we heard from the bitcoin maximalist like mike on the show earlier too. Clarity is what although, coinbase, also, dealing with severely lower transaction volumes, theres a little bit more of a kind of take rate was higher and the retail, but that was sort of a mixed situation, and you have robinhood this week, as well as coinbase, just and block as well, this is down pretty big on those numbers, all talking about, we got to get smart on cost and reducing the footprint, and its happening with things like robinhood which, frankly, are sub scale if you look at the Business Model theyre getting smart about costs because the growth isnt getting them to the profitable spot we should mention amazon. Awfully close to a oneyear high this morning, which is going to reflect on the mega cap tech names. Although, i am curious, mike, on your thoughts on industrials, because earlier, it was about caterpillar, ingersol rand today its ford with a q2 beat, stocks up higher and they guide 10 . Industrials seem to be hitting the sweet spot that weve talked about and anticipated in terms of price increases, topline increases, keeping pace against cost and supply chain now those things are starting to normalize and reap the benefits. And the fact that we have kind of a capex boom in multiple parts of the economy yes, you have secular spending you have these fiscal packages you have reshoring and near shoring, and all of that does seem to be a tailwind thats going to last for the coming years, really. Meantime, the u. S. Did add 187,000 jobs in july, slightly less than the 200,000 expected unemployment ticks down to 3. 5 . Joining us from this morning from the white house is julie su, acting u. S. Secretary of labor. Madam secretary, good to have you. Thanks for joining us. Thank you so much good morning just your thoughts about the deceleration here and whether its happening in an environment where the labor market can stay resilient or not right, so, this is an example of what slow and steady growth looks like, right . Weve seen now over 13. 4 million jobs added since the president came into office this is a number that reflects that we are continuing to grow jobs at the same time that we continue to see historically low Unemployment Rates this is still less than 4 for the longest stretch since the 1960s. Its been over a year and a half of such low Unemployment Rates at the same time that we continue to see very high Labor Force Participation rate, especially among prime age workers, ages 25 to 54 altogether, a strong report and sign of good, strong, steady growth and the, you know, why president bidens economic policies are working for the country. You mentioned labor force, 62. 6 was in line, but the market really would love to see a 63 handle we havent really gotten that in a couple of years, and im wondering whether you think theres the ingredients for a significant portion of labor to return to the supply so, we have seen workers return to the labor market, not only at prepandemic rates but above prepandemic rates back in 2008, you know, after that great recession, it took ten years to return to this level, so weve seen a return. Weve seen return across communities. Women were devastated during covid, have come back at record numbers. And timat this point, i think t what its going to take to further increase Labor Force Participation is going to be addressing some of the structural issues that goes out of the labor market. Things like child care, affordable, Reliable Care that is that impacts the womens ability to participate in labor markets. But short of that, weve definitely seen people return to work its clear that workers want to work, that they feel confident about their prospects in the labor market, that people are leaving jobs for better jobs and all of these things continue to be signs of a good, Strong Economy. Average Hourly Earnings those roads point toward 4 annual pace here we know the fed has been in a tightening cycle, looking to bring inflation down also note the administration has this bidenomics approach of working from the middle out. Whats your response to that number and the fact that wages do continue to stronger and potentially continue to contribute to that higher inflation rate right thanks for saying that for president biden, the economic plan, bidenomics, relies on this idea that we can build an economy that leaves no one behind that working from the middle and the bottom up rather than the top down is a most solid way to build a strong, resilient economy, in which everyone gets their fair chance. Part of this has been real wage growth and what were seeing with that is Consumer Spending, which has also been really key to this economic recovery. People feeling confident enough to do things when you look at this jobs report, people are going back to normal, doing things like going to get their haircut, going to the nail salon those are sectors in which we have seen some growth in the last month, and theyre signs that when you increase wages, especially for the lower and middle income groups, that that is both an equity issue but also a Strong Economy issue madam secretary, just to follow along those lines, when you look at polls and theres dissatisfaction with the economy seeming to focus mostly on inflation and how much prices have risen in recent years, how do you think the very tight labor market plays into that, if, in fact, thats considered to be part of the input to higher prices . Well, so, were also seeing inflation rates slow were seeing that prices are lower now than they were a year ago, significantly, whether thats in things like gas or your basic groceries and i think thats a combination of workers having more wages that are outpacing inflation, that were giving them more buying power, and the tight labor market you mentioned, which is that workers can make more demands in the workplace. They can choose jobs that have the conditions that are we think about as being part of a good job, good wages, security, upward mobility, benefits, security and retirement. Those kinds of things are all part of what the president says when he says he wants to build an economy in which workers do well, and when workers do well, employers prosper and america is stronger what does that mean in terms of some of the labor strikes that we have seen take place, whether its u. P. S. And teamsters, where theyve just struck a tentative deal and now those workers will vote on it. Whether its the writers and the actors or perhaps more pressingly, at least for wall street standpoint, the negotiations that are taking place between the uaw and the big three automakers where the unions making, quote, unquote, to use its own words, audacious wage and benefit demands and you have the likes of gm countering and saying this is going to threaten theirability to do whats right for the longterm benefit of the team. How are you navigating that . What is the role that youre playing in some of these negotiations we have seen that the u. P. S. And teamsters reached a tent tich agreement we often see that collective bargaining process is not always pretty as its going through people say things during the process, but as weve seen in a couple of very highprofile, big examples, the collective bargaining process works so, the u. P. S. And teamsters, tentative agreement, affecting 340 how to working people. On the west coast, 29 ports, affecting 22 how to workers also reached a tentative agreement and for uaw, that conversation, theyre still at the bargaining table and trying to resolve and a lot of these are tough issues. Theyre grappling with things like workers have worked through a pandemic Many Employers have seen record profits, and those Union Employers coming together to try to figure out what is a what does a good job look like . How are we going to do right by working people, build a stronger industry, things over the longterm, all of those things are happening at the bargaining table, and we are seeing good results. The president believes, as i do, in the collective bargaining process. That includes the right of workers to exercise all the rights they have in that space, and the examples that we have seen have resolved demonstrate that process what is the role that you yourself as acting labor secretary and the administration, what is the role that you are playing how active are you in this especially with Something Like the uaw where the Sticking Point is going to be this shift to evs where maybe perhaps not as many people are needed longer term to put those cars together . The president s economic plan is based on a belief that we can both do right by our climate, address the climate crisis, and create good jobs in our communities. And these kinds of transitions also do they create issues that require some amount of planning and change. Thats partly what the collective bargaining process allows is for people to come together to address that kind of change we get involved if our involvement can be productive, if it can be helpful weve seen situations in which that is the case weve also seen times in which, to trust the process means to allow the parties to do what they know how to do best, which is to resolve their issues together at the table. We brought you on to talk about the jobs number, but the uaw negotiations are so key. Does the white house eventually have to comment on whether or not a 40 pay hike over four years is constructive or feasible or responsible . Well, i think the only people who can decide whether a contract is fair is the members, the workers themselves but as we have seen, in examples so far, this white house, this administration, the most proworker, prounion administration in history as the president says, respect the process and respect the ability of parties to come together to resolve them for the uaw, they are fairly early on in their negotiations, and weve seen, in examples, that we can get involved and be productive in the right situations, and know when to stay out and let the parties figure it out themselves that deadline is coming up. Im sure well talk more about it in the coming weeks julie su, acting labor secretary, thank you so much for your time. Meantime, markets getting a little bounce here dow is up almost 200 weve talked about some of the relief were getting in fixed income, dollars down as were back below 102 little bit of an unclenching of some of those concerns that we did have there, and its a little bit mixed on the nasdaq side its kind of a 50 50 day there but its being obscured by big moves higher in amazon banks been a strong point this week, and theyre essentially shown again that the market has tended to rotate rather than back off across the board, and so theyre firmed up a little bit today, but i think the bigger point is that they have participated to some degree with, as yields have gone higher theyve responded well as others have said. You know, utilities and things like that have really crashed. And were having this conversation about markets higher, despite the fact that apple is lower its down about 2 right now its just slipped back below that 3 trillion market cap level this morning almost as if its not a bellwether which i love to say. That is where i was going to go, because i know i asked you this yesterday on overtime, this idea of, as goes apple, so goes the market. Should have trusted you case in point, not happening. No, i should have trusted you. The only thing i want to get on the record is tupperware. And iep as icahn cuts the dividend in half hinding berg says theyre still short, down almost 30 big movers big sort of story stock movers around the edges as well. As we go to break, lets get the bond report. As we said, yields are lower in the wake of the jobs number today. After the week we have had, obviously, its going to give some relief to the bulls, but the dow up 190 4,530. Dont go anywhere. Progress toward global net zero will take big thinking put into even bigger action. It starts with us developing and deploying Carbon Capture and storage to help lower our carbon intensity. While also developing partnerships to create worldclass storage hubs to help other industries, like cement, reduce their emissions too. Innovating toward Lower Carbon Solutions today, while helping others do the same for the future. Thats energy in progress. Well, s p might be higher right now but these are the biggest laggards on the index. Fortnet after a disappointing earnings, stock down about 25 youve got other cyber names Like Palo Alto Networks trading lower and resmed, and the s llings cycle down 7 awe were back in 2. I did have hearing aids from another company. I was just frustrated. I almost gave up. With miracle ear its all about service. Theyre personable. Theyre friendly. Im very happy with them. We provide you with a free lifetime of aftercare. Meaning free checkups, cleanings, and adjustments. I see someone new. Someone happy. Its really made a difference. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. Welcome back check out shares of another big mover this morning Icahn Enterprises, down about 26, 37 right now. Dom chu is tracking the action. Not just off the worst levels of the session, but to your point its not just cutting it, its slashing it by half icahn enterprising announcing its normal distribution would be 1 a quarter, down from the 2 that typically happens this is, by the way, the first time that firm has cut its Dividend Payments going back to 2011 the stock reaction to the downside is forcible to the tune of that 28 drop were seeing on heavier than typical volume and traded over 1. 28 million shares on average over the last couple weeks. Trades up 700,000 shares there are those pointing out a cut in the dividend payout was not out of the realm of reason given the allegations made months ago by short seller Hindenburg Research which accused Icahn Enterprises of operating what they call a ponzilike structure to fund and make those Dividend Payments now hindenburg claimed that Icahn Enterprises was over valued with it that Dividend Payment structure and that that payment structure was not sustainable. Also alleging that carl icahn had used shares in the company as collateral to take out personal loans icahn has restructured many of those loans and has called the hindenburg claims misleading overall. If you take a look, carl, at the way things are shaping up right now, this is a very big name in the world of hedge funds ill point out that icahn has said that theyre going to return back to the Core Competencies and strength in terms of managing money and activism and those strategies. Well see how these shake out. Interesting to see him get a taste of the medicine hes been doing outdolling out for years. Tupperware up 50 in todays trade a day after the Company Announced a debt restructuring deal another cautionary tale, some say in shorting. For sure. I mean, the setup was that a minimal equity value going into this period when it starteded to bounce it was in noncompliance with some credit agreements or at risk of not making those payments they have had problems with reporting their formal financials a lot of issues got resolved here in part very, very and paid off in the short term. Were going to check in with goldmans jan hatzius and the jobs number and what it may mean for the fed. Were off the session highs but dow up 120 back in 2. Five. Its happening, isnt it . Four. Three. Two. One. Good friday morning. Welcome to another hour of squawk on the street. Im Carl Quintanilla with Morgan Brennan and mike santoli live at post nine of the New York Stock Exchange david and sara have the morning off. Markets enjoying a bounce to finish the week although it has been challenging in the wake of the downgrade earlier today. The number gives us solace as yields come back and we get gains on the major indices. 30 minutes into the trading session three movers that were watching outside of apple an amazon, on line names red fin and open doordash slumping giving disappointing guidance warning on the Conference Call quote sales volume near rock bottom. Redfin down 21 . Fortnet one of the biggest laggards on the s p 500 this morning lowering guidance amid a delay in deals due to Macro Economic uncertainty shares of the Cyber Security are under pressure in sympathy on those numbers. Finally watch ev maker fisker today. Those losses came in smaller than expected despite delays due to the suv but the company did cut its fullyear Production Guidance and those shares down 6. 5 right now job growth coming in a bit weaker than expected for july while the Unemployment Rate fell to fresh lows of 3. 5 , close to a 50 plus year low lets bring in Steve Liesman with his take on the data and whats means for the market. Im interested in your take but calling this a split decision on the jobs report. The weakening of the payrolls with downward revisions to prior months but the Unemployment Rate down rivalling the 50year low before the pandemic and all of this may be i think just fine with the market that was hoping for a number not too hot, not too cold but perfect nonfarm pay rolls 187 against 200 i call that a wash and take it by the way with a grain of salt because massive seasonal adjustments are involved in july the downward of 50,000, two month it ticking down. Labor force Participation Rate 62. 6 . Unchanged. Average Hourly Earnings a bit hotter than expected, 0. 4 and the year over year rate jumps up to 4. 4 where were the jobs . Influx in private education. A lot of seasonal in that. Health services was up big, financial activities up, construction also defying expectations lee sure not adding the way its been it had been the source of strength temporary help a potential indicator of weakness. It has been falling since october of 2022. Fed funds future seeing this as positive for the fed is done argument the problems with the september hike to 13 for november to 30 . Both a couple points down from where they were before the jobs data the takeaway here i think is the job market is cooling as the fed hopes, but stronger wage gains and a low Unemployment Rate could mean the central bankers is going to be wary sounding what you might call the all clear signal. Absolutely. Split decisions. We are at a point where the deceleration on the top line of monthly payroll growth is going to be chalked up to we cant find workers as opposed to demand for labor flagging a lot. Its going to trouble the fed a little bit more as you might know and perhaps kind of but tressing that idea is the cant find the workers thing is buttressed by the idea you have higher wages what do you need to get the workers. You need to boost wages. The offset to that and something ive been thinking about as the productivity numbers productivity i was going to ask you. Morgan, want to ask the question or give the answer. Give me the answer. Okay. The answer is, if productivity is indeed higher and thats a big debate and we have to dig into these numbers a little bit more, then those wage gains are less concerning to the Federal Reserve because theyre not inflationary the way the fed looks at it, very simple bit of math is, the inflation rate plus productivity can equal the job the wage gains. If they do, that is seen as the noninflationary equation there. You a i love that you brought that up because it was literally the question i was going to ask you, steve. Heres the next question im going to ask you, why arent more people in the workforce when we have seen wages steadily increase i mean, i wish i knew the answer to that i was looking at the Participation Rate numbers this morning after the data came out, theyre doing well with the prime age work 25 to 54. Above 55 and the numbers start to come down and as ive read several experts on the job market what theyre telling me is, its not just them leaving the workforce, its that theres this normal blowback of people who retire and come back into work and they are not coming back to work. We dont know the reason for this other countries do a better job, i think, at making the work place accessible and amenable and attractive to older workers. Maybe were not doing as good a job in the United States one component of that, maybe people did well in their savings and investing in their house and they have no reason to come back to work. Its something we want to think about because as you know, we do have problems in our demographics, problems with our workforce and if we want to grow we have to have workers and we have to make them productive so that has to do with immigration and also has to do with the 55 and older crowd. Its not in the prime age workforce. Well said steve, thanks. Steve liesman this morning lets get to Apple Services Division Revenue up 8 from a year ago, alltime high thanks to over billion paid subs, but the company did see a decline in sales dan ives, wedbush security analyst from 220 to 230. I think aggressive relative to the rest of the street what are you seeing and are you worried this phone cycle might not be as strong as priors my view, services, that uptick, thats the key to the story and key to the valuation were going to see double digits in the Services Side going to 2024, when we look at iphone 15 we think its going to be a mini super cycle. Look at the guidance exfx, take that out, i thought it was strong and i think that really is the drum roll into this iphone 15 cycle and china thats the hearts and lungs of this growth story it was strong. Mac and ipad as weak i view that as noise were buyers here. Whats your reflection on the price action today i think its what weve seen for the year the doubters continue to yell fire in a crowded theater on apple, talk about valuation, but theyre not seeing the Bigger Picture in my opinion. The services rerate, which i think is worth 1. 4 to 1. 5 trillion the gross margin story, which is jawdropping from cupertino and what i believe is now 25 of the install base has not upgraded their iphone in four plus years. We see 3. 5 trillion market cap. Yeah. I mean, you talked about the recovery in china, dan what about some of the softness weve seen in north america. What do you make of that and is there any reason to be had across the sector . Yeah. I think that continues to sort of be a headwind that weve seen not just for apple but smartphone industry, but i think it all comes down to iphone 15 that is what i view as a seminole release for apple thats really going to be a catalyst, especially in the u. S. , where you even have 30, 35 that have not upgraded their iphone in four plus years. I think thats why cook, being a bit cautious because of some of the macro, but if you look at what i think the most important thing, gross margins, iphone, services in china, those were all checked and i come out of this more bullish than 24 hours ago. I want to shift gears and get your thoughts on amazon. I can remember sitting with you on the day that microsoft and alphabet reported their earnings and you were like these two companies are taking market share from amazon. Do you feel that way after the aws numbers we got last night . I mean, thats the flex of muscles of jassy there were share gains we saw so when microsoft and google, but for amazon, this is a massive Inflection Point that weve seen in the last year execution extremely impressive this is something for the amazon bulls theyre getting as well as what youre seeing in terms of the sum of the parts starting to play out, take a step back, big tech earnings, strong. I mean to me i think really big tech despite some of these price actions, solidifies our thesis that a new tech bull market has begun despite, you know, the haters continuing to hate. Yeah. I mean, i dont know, dan, to what degree can you make the case that there are a tremendous number of haters around this group . You know what i mean its hard to find it really in the sell consensus, no short in apple, probably shouldnt be based on how it performed, and its on a yeartodate basis. Mike, i think institutionally many have been bearish on the rally. Many thought we would be seeing apple sub100. That was the call. I think what everyone is sort of in my opinion its about the a. I. Gold rush i think this is going to revolutionize tech you talked about earlier in the show, everyone looking right now 2024 numbers thats the key and thats where bears will come out of hibernation mode on days like today and say apple is over valued i think this is a stock that is on that march towards the next growth selling apple here and big tech would be like leaving the super bowl at half time. Although, dan, im seeing commentary this morning that basically argues amazon between apple and amazon, amazon has the cleaner pathway, the brighter runway to Revenue Growth and wonder whether or not you think it draws retail interest away from apple in the next few months yeah. Look for right now, this is the time for amazon to shine i mean, jassy with all the criticism including, you know, yours truly, this was a huge, huge quarter for them and you can see some of that i dont necessarily view it as mutually exclusive i think big tech right now is really in the start of whats going to be the fourth industrial revolution, strong get stronger and i think from a. I. To cloud, especially what were seeing across cloud and enterprise, i think we look out in the next six to nine months and this is a new tech bull market that has begun. All right dan ives, thanks for joining us. Shares of apple down 3 . But on the flip side, shares of amazon those are popping deirdre bosa has been tracking the action shes going to join us with the breakdown of what we did see in the quarter. Hi. Morgan, what did dan ives say, this is amazons time to shine. I think you were showing a chart of apple versus amazon over the last few years if we can pull that back up you can see amazon has been a major under performer in terms of the other mega cap and in apple but the growth has come back, investors happy there was double digit top line growth of 11 this quarter after it had spent so heavily over the last few years and that hurt its profitability. Here you have it apple up 70 over the last few years. Sorry this is year to date amazon has outperformed year to date over the longer term an under performer because they have been spending so much to rebuild and expand its Logistics Network now its reaping the rewards better margins in terms of the core business. Have a listen to what andy jassy talked about, about efficiencies. We still see several ways in which we can be more efficient in the structure and we believe well improve productivity further. Weve also reevaluated virtually every part of our Fulfillment Network this past year and see additional structural changes to make to provide future upside. Reevaluated virtually every part of their Fulfillment Network. That is a gigantic undertaking for a company as large for Fulfillment Network as large as amazon and as a bonus, you talked about this with dan ives, aws the growth rate stabilizing what investors wanted to see because this is the profit engine of the company. Yeah. And i feel like aws always gets attention every quarter for amazon because it is so profitable, but the ecommerce the strength that we saw in that unit to your point and what that means in terms of the contribution to an operating income for the Current Quarter, with the guidance that is better than the street expectations too, is incredibly notable the other thing that got my attention was advising its continuing to fire on all cylinders. 10 billion in the quarter. This is a pretty massive achievement for a company that just a few years ago we werent really talking about it as a player in the advertising space, but it has really broken that duopoly weve seen between google and facebook or meta and come out of nowhere. This is an interesting model because it has so much firstparty data that shields amazon as advertising business to what others are doing in the space like apple when it put in the privacy controls that hit meta and google to a lesser extent. That wont hit amazon as much. They talked about how a. I. Is sort of going through generative a. I. In particular is being built or thought of in every different Business Model you can see the effects of that in advertising amazon talked about that theres just so many businesses on the bearish side, i would add, some could find fault with the grocery Business Amazon has been here for a very long time and made a move to allow some nonprime members access, more access, to the grocery proposition. We know this is an area that is costing amazon a lot and that it has been experimenting in for many years, the whole foods acquisition, but its line of fresh stores, so perhaps on the downside, but again, the margins Getting Better on ecommerce, stabilization in the cloud business, that helps some of these other moonshot projects that amazon is undertaking. Some of the tone of the commentary, the morning after the results has been able andy jassys performance on the call, people giving him high grades for it, suggesting there was a little bit of a need out there among investors to get some sense of urgency, some idea that theres, you know, some clarity about strategy on margin, on, you know, articulating the a. I. Opportunity, and things like that thats such a good point. Only a few minutes into that call i remarked to my producer, jassy is pretty fiery today, and he was really just he seemed in control and when you think ability how long amazon didnt even have a ceo calling in to that earnings call, jeff bezos didnt do that for years, and andy jassy had this quite a long preamble, which amazon used go straight to q a he came out and talked about margins and talked about what some were saying about generative a. I. , made a pitch on amazons model more of a layered approach he seemed more fiery than weve seen him in the past. All right deirdre bosa, thank you. As we head to break, here is our road map for the rest of the hour goldmans chief economist jan hatzius joins us to discuss and weigh in on the latest jobs report. A tale of two travel names the latest earnings from booking and expedia are signaling about those stocks and the consumer. And home prices hitting another record high. New data on how much of your income will now go towards paying a monthly mortgage. Big show still ahead as weve lost some of the opening gains 4506 dont go away. fan 1 there ya go thats what im talkin about josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. Welcome back to squawk on the street. It has been a volatile week, yield surging, the nasdaq down 2 , despite todays gain joining us is Morgan Stanley Wealth Management chief investment officer, lisa, great to have you on, on a day where after the jobs report, the top line number, came in softer than expected weve seen that 10year yield tick lower but it has been just a dramatic move over the last couple of weeks. What does that mean for stocks from here . Well, look, our best guess is that the fed is going have a hard time with these numbers i know that the market has been obsessed with the speedy recovery and headline cpi, but todays wage numbers on a total miss in the number of jobs created, i dont think its going to give the fed a lot of encouragement that core of inflation is going to move down any time soon, and i think when you put that together with some of the other factors that have emerged over the last week, whether its the size of u. S. Treasury issuance, the fitch downgrade, whether its, you know, the pressure on global bond yields and the bank of japan lifting yield curve control, all of that is speaking to the potential for rates to be higher for longer and as we know, the United States stock market has shrugged that idea off all year at some point, i do think valuations matter. One of the things were pointing out to folks is, look, even if you want to be really optimistic about next years earnings, 250, lets say, which is well above the published consensus, you put a 19 multiple, one turn lower than thecurrent 20, youre basically at 4750 roughly. Which isnt that far away from where we are its an upside to the stock market of 5 to 6 in the next year that feels and smells an awful lot of what i can get in a three month treasury right now. Okay. What does an investor do then . How would you be counseling clients right now . So our fundamental positioning is that if you want to be in the stock market because you believe the soft landing thesis and reacceleration in the economy, do it with more valueoriented parts of the market, industrial, cyclicals, financials, Consumer Discretionary names and real estate names and the like. If you want to sit in fixed income and get paid to wait as we said, we think youre going to have reasonably competitive returns if they only even if they only come from coupon we love ideas outside the United States right. So whether its owning some japanese stocks, owning emerging markets stocks, those are ideas and we like holding commodities here again, against all the brouhaha about how great tech earnings are, all of the folks who think inflation is over, dont seem to notice that commodity indices have backed up by double digits in the last three weeks. Ultimately, that is going to touch headline inflation of course we can dismiss headline inflation next month if we dont like the message and go back to looking at the core, but todays wage numbers suggest core may be flat again. Lisa, it certainly does kind of make sense on paper as you say, you can actually get paid pretty well in high quality fixed income right here, you dont have to take the valuation risk in the economy, but it would have been an equally plausible case seven months ago coming in. It feels like a lot of people were satisfied with that idea of just staying in cash or high grade bonds and at this point, given what the stock market has done, you seem to be suggesting people have the mood to chase it or theyre getting more comfortable with the fundamentals based on how the market has behaved is that the way clients are postured in your view . Right now, if you look at sentiment and positioning, particularly, you know, in the private wealth channel, we kind of have maximum bullishness. Weve begun to see some pretty aggressive flows in the last, you know, two months into stocks and so, you know, i do think that the mood is poised to shift here as some of these upside surprises kind of get fully priced out and the risk becomes asymmetric of the next data point may actually not be a million. Great to get your thoughts today. Thanks for joining us. Thank you. 4514 and the russell and transports turned negative. Travel trade next expedia seeing some gains after the latest results say what we know about the stocks and the consumer were back in a couple minutes number of travel names on the move as investors look for signs of consumer fatigue, domestically and abroad. Seema moody joins us now with more hi, seema. Take a look at booking now hitting an alltime high with over 60 of sales outside the u. S. The companys continued efforts to expand in Key International markets is paying off. Ceo glenn fogel making growth in asia a top priority over the past two years with partnerships and investments in chinas trip. Com and raid hailing company didi exposure is around 30 but growing, the company did pull out of under performing markets last year. As the ceo shared with us yesterday on this show, its europe and other countries to capitalize on crossborder travel while brian chesky last night recognizing the opportunity to go international saying, quote, airbnb is under penetrated in most countries around the world guys a key question now is whether travelers will revert back to Domestic Travel postlabor day or stick to traveling outside the u. S. For the Winter Holiday right now the latest data we have from hopper shows san juan, puerto rico and mexico are high on the list. Not going to europe but international, a little bit closer to home here in the u. S. , these are the weekly average daily rates in maui, los angeles and miami and see rates continue to drop according to costar which analyst says could pressure margins for the Online Travel operators and the hotels as well guys yeah. Seema, its so many really kind of mixed signals we saw what happened with the cruise line last week. The Domestic Versus International travel demand story is, obviously, playing out. Are we really seeing a path of genuine softness domestically . In other words, are we going to enjoy this comeback in travel internationally and then thats going to run its course and the markets brace for consumers maxing out on the appetite we were having a discussion earlier on the desk . I think its a great question and one were trying to figure out. The forward booking data we have from the Big Companies suggests that International Travel will remain very popular going into the holidays, especially for the chinese outbound traveler as they spend more time going to europe were waiting to see when they come to europe 2024 is the prediction at this point. How strong can this market remain if we continue to see Interest Rates higher. At what point do we as far as to see rates continuing to fall and the pressure thats putting not just on Hotel Operators but Vacation Rental owners as well ive been speaking to hosts who have been saying they cannot charge as much as they could last summer. That eats into their bottom line as well. Yeah. Data points have been all over the map this week after yesterday. Still to come, payrolls did see their smallest gain in 2 1 2 years in july. Talk about what that means with jan hatzius in a moment. Check out shares of Icahn Enterprises as we said, cutting its dividend in half thats the first reduction since be 2011. Carl icahn saying our returns have been overwhelmed by our overly bearish view of the Market Going Forward we intend to stick to our knitting and focus on our activist strategy stay with us lfish allergy. One prawn. Very good. Did i say chicken wrong . Tired of people not listening to what you want . Its truffle season ah thats okay. Never enough truffles. How much are they . Its a lot. Oh okay im good, that its like a priceless piece of art. Enjoy. Or when they sell you what they want . Yeah. The more we understand you, the better we can help you. Thats what u. S. Bank is for. Huge relief. Yeah. Welcome back with your cnbc news update a bipartisan congressional delegation toured the halls of Marjory Stoneman Douglas High School in florida before its set to be demolished a reenactment of the shootings that killed 17 will take place today as part of a civil lawsuit in the shooting. The delegation expected to use the experience to make new policy proposals forschool safety. A russian warship apparently suffered serious damage in an overnight drone attack russia claimed it thwarted the attack but a video online appears to show the ship towed back to port the incident seems to signify a recent effort by ukraine to strike strategic targets inside russia using drones as key battlefield counteroffensive struggles to make break through. And the nonprofit that oversees advanced placement course work in the u. S. , is encouraging florida schools to drop ap Psychology College board Officials Say said the States Education banned the course the school board claims theres no such ban. Guys, ill send it back it to you. Thanks. The fed for some seems sticking to its current policy rate through year end after the jobs number comes in weaker than expected again marking the smallest level of job growth since december of 2020 joining us at post nine is chief economist head of Global Investment research jan hatzius. Great to have you back. Great to be on. A couple misses in a row. Couple months below 200 k. In a period of negative revisions. Is this ship turning i think it is flowing towards the more sustainable pace of job growth were not going to see 200,000 or even 180,000 new jobs for months in a longterm sort of equilibrium situation, right thats not the demographic trend. There needs to be a gradual deceleration and the fact that that deceleration is benign i think is visible in indicators like jobless claims which continue to be low and the Unemployment Rate has been at 3. 5 for well over a year at this point i would view this as a benign deceleration. On wage growth should we be looking at it with kinder eyes in light of workweek shrinking or productivity data this week the wage number was an upside surprise and i would say its true that in 2023, while we seen some deceleration, its been gradual deceleration the average of the earnings numbers have been the weakest of the major indicators of wages, so theres an aspect of convergence here that average Hourly Earnings have been firmer and the employment cost index surprised on the downside so these things are converging to some degree. Overall, i think wage growth is decelerating and needs to decelerate further for thatto be consistent with 2 inflation in the long term. How does this set us up for cpi next week and inflation readings beyond then gasoline and other Commodity Prices jump higher in recent weeks . The help on the disinflation from Commodity Prices that is pretty clearly behind us well probably get a bit of a boost from gasoline prices in coming months. The fed is more focused on core inflation, core inflation looks like its going to be pretty soft, not just in the last report but also in the next couple reports two very tangible reasons, lower use car prices and for deceleration in rents. Looks to me that the overall message from the inflation reports over the next you couple months is going to be encouraging. You will hear folks who have been anticipating a recession and continue to see the risk of that by mid next year say that this path of job growth is also compatible with the deceleration towards zero this could be getting towards sustainable levels or not. Whats going to make the difference there we have the atlanta fed real gdp tracking numbers at 3. 9 who knows if that persists how does the job market feed into the economy its true that we dont know whats going to happen and whatever weve seen in the past is compatible with a wide range of outcomes. That said, i think theres enough support to grow, to keep it in positive territory 3. 9 on the high side i think, i dont think well be close to 3. 9 in the third quarter, but there is support for the economy. Number one, real disposable personal Income Growth is pretty solid, the wage numbers are helping on that, the fact that Price Inflation has been slowing a lot more quickly than Wage Inflation is helpful for income and i think the drag from higher i dont think its going to be as large as in late 2022 when you can see that in the housing numbers, for example. So the real wage environment were in now is that going to drive retail sales and Consumer Spend in the last quarter and a half i think its helpful. I dont expect very strong Consumer Spending growth i think there are a lot of puts and takes on Consumer Spending and something in the sort of 2 range still seems about right. And thats effectively where weve been for a long time theres some ups and downs its i think reasonably solid but not buoyant. Whats tapping on the brakes . Student loans . Is it excess savings is it having bought and gone too, too many places on the goods sign we have seen a lot of strength a lot of it was very high the level of real goods spending is high i think the trend there is probably in a negative direction still and i do think the student loan repayments, you know, are going to weigh on real Income Growth and consumption. Theres been such a busy week we started the week with the senior loan officer survey looking at bank credit from the fed, and it shows its continuing to tighten. I wonder if weve seen what its going to take for us to see the full impacts of that and how that factors into your forecasts over the coming months i think the tightening of lending standards is part and parcel of the monetary tightening, the fact that fed has hiked the funds rate over 500 basis points and that is percolating into the economy i think there is still a drag on real gdp growth from monetary tightening however, i think the drag on the growth rate is less now than it was, you know, two or three quarters ago its still negative and its a reason for expecting only moderate growth, but its not as negative as it was late last year or in the middle of last year when the fed was doing 75 basis points a meeting. Is there anything that you think were going to look back on to draw from this period in terms of a rethink of structural relationships . Whether it is labor market and how it feeds into inflation or whether its the Interest Rate sensitivity of the economy in certain ways and, i dont know, are we going to hear anything like that in jackson hole . I think the main thing is that were going to look back and say this was a very different business cycle, that the covid cycle is fundamentally different from a cycle thats driven by, you know, things like asset bubbles or more financial forces that cause, you know, ups and downs in the economy. This was a massive downturn in 2020 and weve been and then a lot of imbalance as you came out of the covid downturn and weve been repairing that since then and thats the reason why weve said this doesnt have to mean a recession, even though the fed is tightening Monetary Policy a lot theres a lot of improvement that is occurring basically because the economy is normalizing. Finally, jan, weve asked everyone this week their thoughts about the downgrade out of fitch you wrote about it earlier in the week saying it didnt break any news but does it drive policy going into an Election Year i wouldnt really expect major policy changes on the back of it. I mean, i wouldnt have expected major policy changes in the run up to an election either way for me, the pain thing was that it didnt break any news as you say. It is a view on the u. S. Credit worthiness, but it doesnt force any holders of treasuries to sell, and so from my perspective, it didnt it wasnt likely to have a major impact i dont think its the major driver for the selloff in the treasury market. I think there are other forces for example, spillovers from japan that i think are probably more important. All right thats the point mike has been making all week long have a great weekend great to see you as always. Thank you for having me. Coming up, amazon returning to double digit Revenue Growth while cloud sales continue to slow where wall street stands on the stock from here with shares up 10 right now. As we head to break, check out two Software Names moving opposite directions post results. You have Cyber Security name fortnet plunging down 24 , but cloudflare is rallying up 13 . Well talk to the ceo of cloudflare on closing bell overtime. It was a beat and raise for that company at 4 00 p. Ete rback after this break. Amazon blowing past Second Quarter estimates with cost cutting and a resurgence in cloud driving the business and also notable grocery expansion, retail margins, ad services and a. I. Improvements all of them ongoing. Were joined by John Blackledge who raised his price target to 165, maintains an outperform rating good to see you. What it thread would you pull on first to say that either the story has changed or we got confirmation of some improvement in amazon . I think one was aws revenue beat, so they came in at 12 top line growth. We had 9. 5 . I think the buy side was right around there they beat there. The bigger part of it was management said aws revenue stabilized during the quarter, the cost optimization subsided and customers are moving new workloads to the cloud they will start to lap the cost optimization in three q last year and we raised aws forecast and think aws revenue troughs in 2 q, i think everyone thought 3q, so we expect it accelerating aws revenue in 3q, 4 q into 2024, and so that was a really big one. That was probably the biggest thing going into it. And then management was also very bullish and constructive around the gen a. I. Strategy and the customer pipeline. Customer pipeline in aws. What about on the retail side of the business seems like the focus is on some cost discipline and kind of reaping the benefits of recent investments and regionalization of delivery . Yeah. They crushed the margin, right that was led by the aws beat and advertising beat but the math that we do is say they crushed they did 7. 7 billion in 2 q, back out aws operating income, back out advertising and 40 margin and the rest of the biz which is a proxy for the retail business, ecommerce business, was a negative 2 billion. Last year it was negative 6 billion on the same map. It got better. You had the head count cuts, Inflationary Pressure subsiding, supply chain energy costs, fx subsiding and just generally other cost initiatives one of the biggest unlocks that stamped this beat it is really positive Going Forward is like you mentioned the fulfillment. They went to aregional fulfillment model. Eight regions of the u. S. Versus Prior National network and they delivered 76 of units within region this was the first quarter, 76 of units delivered in region, much higher than the prior year. We have that for the next three quarters theres a lot of positive things driving the margins. This is definitely a big one going into the regional fulfillment. Just to take it to that piece of the puzzle a little bit further. How much of this strength in ecommerce is amazon specific versus maybe indicative of a broader trend were seeingp when you think about ebay earnings or wayfair where we saw numbers and a stock response that was much stronger than expected yeah. Its a they said they on the consumer side they are seeing positive macro indicators, number one i would say its also amazon specific. Out fastest delivery speeds they deliver 1. 8 billion units same day or next day, thus far in 23 over 50 of units delivered to prime members are seeing next day, and they said importantly, we talked about this for many years, the shipping speed drives much higher Conversion Rates what are they doing . Theyre going to step on the gas and theyre going to double sameday delivery stations in the coming years so shipping speeds with only going to get faster. I would say the consumer is better, but the shipping speeds at this scale are really powerful for amazon. Market embracing it looking pretty closely at last august highs, above 144 in amazon john, thanks very much thank you still ahead this morning, a surge in sports betting. Draftkings rallying on the back of its earnings. Stock up almost 200 on the year Jason Robbins will join us in the next hour to break down those nuer ngonyere. Mbs. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Evs deserves a great deal. Thats why comcast business is launching the mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 49. 99 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Welcome back to squawk on the street. Lets get to diana olick with the latest after a brief drop last year, home prices have been rising for several months and hit record highs in 60 of u. S. Markets, according to an exclusive new report from black knight their National Home price index hit a new high in june of 0. 67 month to month and a bigger annual gain than in may and nearly every average market saw gains month to month this is why affordability is at a 37year low. As a comparison, a current homeowner, most of whom carry rates in the 3 to 4 range, they need just 21 of the Median Household Income to make that average monthly mortgage payment, thats principal and interest Prospective Home Buyers are looking at paying more than 36 of their income on that payment thanks to higher home prices and higher Interest Rates. Oh, by the way, the 30year fixed hit 7. 2 yesterday and its been rising all week. So, home price growth has made homeowners wealthier again home equity levels are back to within 3 of last years peaks total equity hit over 16 trillion with tapable equity, the amount you can take out and still leave 20 equity in the home and rising to 10. 5 trillion under 200,000 per homeowner while theyre not taking it out a lot, rates as they have in the past, it speaks to potential Consumer Spending Going Forward. Diana, ive heard that case made by people looking at the macro picture and saying, okay, maybe the consumer is getting a little bit tired here, but there are resources. Savings is being run down. We could have a home equity withdrawal party the way maybe we did 15 or so years ago. What are the Current Trends, though, for refinance volumes and things like that in terms of an indication of whether consumers are interested in doing that right now the well, the Current Trends are still pretty low the reason for that is because nobody wants to do a cash out refinance. In that case he would be trading your 3 current rate for a 7 rate just to take the cash out then you talk about home equity lines of credit, home equity loans, like a second mortgage. They are rising a little bit but not as much as you might think and definitely not like we saw in the refi boom in 2006 when everybody was getting money for free basically heloc rates are high and you pay a higher Interest Rate on those loans. It is there for the taking should rates pull back, people might start thinking about that second loan more. Well see once those offers start showing up in the mail, then you know things have changed. Thank you, diana thank you for being with us. Mike, well see you later today, 6 00 p. M. Eastern. I hope so, yeah. Whats the story. New cnbc special. Thats right. 6 00 friday with josh brown called taking stock but given josh is there im going to call it taking stock and giving attitude nobody does it better that will be exciting, 6 00 p. M. Eastern. Thats squawk on the street. Well be back as we reproach session highs. Dow up 200 this is cynthia suarez, cfo of gogo foodco. , an Online Food Delivery service. Business was steady, until. Gogofoodco. Go check it out. Whaatt . overnight, users tripled. Which meant hiring 20 new employees and buying 20 new laptops. So she used her American Express business card, which gives her more membership rewards points on her business purchases. Somebody ordered some laptops . Cynthia suarez. Cfo. Mvp. Built for cynthias business. Built for your business. Amex business. This thing, its making me get an ice bath again. What do you mean . These straps are mindblowing they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. And you are . Im an investor. In invesco qqq, a fund that gives me access to. Nasdaq 100 innovations like. Wearable training optimization tech. Uh, how long are you. Im done. Im okay. The first time your sales reached 100k with godaddy was also the first time your profits left you speechless. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com good friday morning. Im Carl Quintanilla with Julia Boorstin this morning an earnings triple play draftking soars as it hikes its outlook. Microchip down warning of International Headwinds and striker gaining double digits. All three ceos with us. Today is all about a a, apple and amazon on the back of earnings well have a breakdown. Nonfarm payrolls revised lower for the sixth straight month suggesting the slowdown may finally be here. Is the fedin