Transcripts For CNBC Closing Bell 20170718

Chipotle today its a new problem but its an old problem. The stock sinking on news a restaurant in virginia closed after a number of customers became severely ill after eating there. Well tell you where it is i guess i just did, and how chipotle is handling that issue coming up. Lets start with the financials weighing on the dow. Goldman sachs the biggest loser after its Earnings Report out this morning wilfred frost is here to break that down for us. Goldman sachs failed to navigate the market as they aspired following another good quarter in the markets and currencies business. Heres their show Martin Chavez. The primary driver for the declines sequentially are year on year. Was lower client activity with all the drivers that we that we discussed, lower volatility, less dispersion, less opportunity. Commodities is a story of challenges on all fronts, and there was lower client activity and also a difficult marketmaking environment. This was the worst ever quarter for commodities since the company went public. Its also the Second Quarter in a row of significantly worse trading than peers and equity markets have been slipping since 2009 it, therefore, dominated the Earnings Call but ceo Martin Chavez did not settle analyst minds. The result being investors are unsure whether this is cyclical or structural regardless of small beats in other business lines. Bank of america delivered solid numbers. They are grinding out better Net Interest Income as expenses and efficiency slowly improve. A little behind estimates. Trading was soft and unlike gaks not worse that be peers. Both stocks down Goldman Sachs the clear underperformer of the sector guys are they Still Closing their commodities trading business i think that was just up for consideration. I mean, i asked this on the media call to Martin Chavez because the fact that they have remained committed across the tracing sphere is something weighing on their performance. I say are you considered to all these long term. Yes. Thats what they have done over the long term by offering all of these services we get the clients in the long term and thats what they still want. Clearly its hurt them the last couple of quarters having the broad exposure. Let me ask you first about that big drop in fixed income. Getting a lot of focus, much worse and also a sore spot for them in the First Quarter. What more can you said about that performance analysts literally 70 of the questions on the call were about this broadly speaking on the fic, so the fixed income and currencies and credit, it was suggested it was just, you know, a cyclical issue. It was an issue of lower client volumes. The commodities is the one they really highlighted more than lower climb volumes and alsothe commodities they had to hold on their books changing in prices so sort of a positioning issue, but two quarters in a row its a big question plus, slowly slipping market share since 2009 is it a structural issue we saw a definitive answer on that. Weve got to move on, but also they say a bigger change than even what happened with u. S. Regulation since the financial crisis or the new european rules that go into effect in january. The method two rules coming in effect in january is what youre referring to. He was sort of asked about that as aspecific issue what to focus on is the word scale. Its an expensive thing for the industry to impose new rules on research and sales trading issues, but this actually is an area where Goldman Sachs in a relative sense could do better than others because they have the scale and stayed stuck in that business so its a cost relative to the rest of their business it wont be as big but it will be a big cost for the industry. Er in regulation that seems to figure the big players over the small, what do you know. Net effects, deregulation could come through you wouldnt say the industry is in a re regulation phase but thats a small niche share thats coming in in january. Thanks, will. Good to see you netflix shares, hitting an alltime high after reporting Strong Revenue hand guidance with its earnings last night shares up 14 . Joorts be hasulia boorstin has whats going to drive their growth. Not just strong growth of driver numbers in q2 its the fact that the Company Projected stronger than expected revenues in q3 thats really driving shares whats behind their addition of 5. 2 million new subscribeers its a ton of original content including 14 series and 13 comedy specials added in the quarter and Ceo Reed Hastings says theres plenty more room to grow, especially overseas. Were expanding a lot in india and japan and figuring it out market by market asia is very unique and very large so we see a huge opportunity fours over the next couple of years, all of us spending more time there and investingor. Hasting digs missed competition from the likes of amazon, especially since amazon and netflix invest in growing companies such as germany. Amazons super successful around the world if you look at u. S. With prime, you know, incredibly successful. It just doesnt seem to take away from us, so i wouldnt characterize it as us versus amazon in germany. Even though netflix upped its negative Free Cash Flow forecast, between 2. 5 billion for this year, analysts are more bullish than ever against the stock. A number of analysts you go their price targets today. Kell de, back over to you. I think was thinking about this had we lately have been playing this game of every time amazon announces a new initiative we look at the companies its going to affect. The meal kit, blue apron sinking and Grocery Stores go down when they buy whole foods and so forth. This is the one company that hasnt suffered from amazon getting into Television Production and video streaming netflix has not missed a beat through that all. Thats right. We have to remember that netflix was up against a bunch of competitors since day one. At first they were trying to be like hbo and then we saw amazon try to be like netflix and hulu and invest in more original content so Reed Hastings thinks there isnt going to be one player in this space it will be like cable channels where you may subscribe to a bunch of these the services, amazon prime, netflix and hulu as well as you try to get all the different types of exclusive content thats out there the fact that they are investing in original exclusive content means you cant get what netflix is doing on amazon. 91 emmy nominations, thats getting it done on netflix thank you, julia see you later. Lets get to our closing bell exchange. Dow 150 points, down just 58 and joining us to talk about this day on wall street our guests starting with Rick Santelli. Nod just the equity market but today were seeing yields go lower. Were below 2. 30 on the tenyear, gold has gone up and that dollar continues to decline precipitously. Whats going on here well, listen, Interest Rates are interesting, but it is a bit of a drip, drip. Were at 2. 13 about six weeks ago, and when hi look at gold, you know, i see numbers that are, you know, yeah, its pretty decent size, but you hit the gold when you talk Foreign Exchange came with charts prepared. If you lock at the euro versus the dollar, highest level since august of 2015 and ill tell you the exact date, august 24th. One day it was higher than it was now. To find another day that its higher against now against the greenback you basically have to go to january 2015 now ill give you a threeyear chart and you can really see how significant this is. This is a big area if youre a chart, doesnt mean it will all happen in a linear fashion every day, but this bottom that weve established for like two years is now at the bottom, and were moving higher. This is a move that you want to Pay Attention to it affects Interest Rates, it affects exports, imports this is the crown jewel of what every strategist ought to be paying attention to in trading markets. The dollar, by the way, is down i think, michael, 6 , 7 on the year. Yeah. Look at oil, for example. One of the things i was looking at earlier today said wed be at under 45 a barrel still if not for wti and its making all the commodities look better by comparison and probably a lot of equities look bert, too. Absolutely. And i think the starting gun on that trade was really after testimony last week where it was acknowledged the cpi was dormant. We saw the stock market accelerate and saw the tenyear come down. On the tenyear weve got a very, very low cpi so the steepness of the curve is actually intact and were seeing resilience in the stock market weve had setbacks, health care whiff and wobbly Bank Earnings and were seeing resilience and the noteworthy thing to think about, recent new highs in the indexes and recent new lows on the vix is generally a good sign so i think that we may have a sleepy august and earnings season is a proving ground, but, you know, i think weve got some Solid Foundation here. Whats your read from the Trading Floor . Nothing percentagewise. That gets your attention but well come back here. A lot of it was the financials people started to see that, and i think there was a lot of residual selloff based on the financials being a little weaker goldman hasnt rallied much but some of the other stocks have rallied a little bit back and thats helped the markets somewhat you know, its this is a rotational thing that were seeing, and when thebanks drop the text pop, and it goes the other way as well. You know, when the techs drop the banks pop, so its its a jockeying between the two indices right now. Thats all were really league is with this health bill not coming together, how are traders thinking through this . Well, we think tax gets done or infrastructure, or do you start to just write down the possibility of all of that have . Have to wait to see what the legislators say. If they say theres not theres not going to be reform which weve already seen now will they repeal it all together and where do we go from there . You know, youve got to remember, youve got to be careful what you wish for. You know, sometimes they wish for certain things and they dont really understand what the residual effect is going and the residual effect we dont know so that scares me a little bit but overall i like that sector as well. Very quickly before we go, lets make this meaningful to investors. How do you play health care right now, do you think . Good question like the insurers on the pride of said, med tech and others are pretty positive. If youre concerned what happens legislationwise you stay away from the more governmentinvolved insurers and the hospitals. Those are the question marks and i do think that the whiff today sort of reduces the probability of the agenda that the market has to deal with that. All right gentlemen, thank you appreciate it all. See you later. More than 45 minutes to go and quite a comeback for the dow down 62 points the s p turned positive, barely and the nasdaq up 25 and the russell down 4. Banks go lower and tech goes higher. And chipotle the worst stock in the s p today. Yes. More on that, and its been a wild day in washington as you just heard the senate pulling its obamacare replacement bill and the house unveiling its budget proposal. Up next, a look at what that means for the president s agenda and for your money. Plus, ibm highlights a busy day of earnings after the bell dow components cfo will break down the results right before he gets to the Conference Call coming up next hour here. And we want to hear from you. Reach out to the show on facebook, twitter or reach out to us on email, closingbell nbc will be unii. Com youre watching cnbc, first in Business World wilde welcome back lets check some earningsrelated movers starting with Lockheed Martin which beat on the top and bottom line and raised its 2017 guidance for sales, profit and earnings stocks down a little bit drugmaker novartis beat earnings revenue and was in line with forecasts the company cites a continued forecast on key Growth Drivers that stock up 1. 5 Charles Schwab earnings in loin with forecasts and both on revenue. The stock is down a fraction though shares of United Health lower. The insurer said its withdrawal from the obamacare individual market combined with Health Insurance tax deferral reduced Second Quarter revenue and the stock is fractionally higher mobile Telecom Ericsson lowered its forecast and that stock getting clobbered down 16 and finally mote cycle maker harley david, Ticker Symbol hog, with it stock down 5 today. And Senate Republicans do not have enough vote for a straight repeal of obamacare, that after the latest bill to replace the law was pulled Kayla Tausche has more on what may be next now. Kayla in. Were trying to read the tea leaves from Senate Majority leader Mitch Mcconnell who after a lunch with all republican senators that just ended said hell be moving forward with a vote on the repeal in the near future we just simply do not 50 senators who can agree on what ought to replace the existing law. What we do have is a vote that many of us made two years ago at a time when the president of the United States would not sign the legislation. Reporter that was in 2015 when the senate vote on a full repeal at the time senator Susan Collins was the only republican currently serving to vote o, but now senators from West Virginia and alaska have joined her and other republicans in addition to mcconnell, like rand paul, are pointing to that voting record to ramp up pressure i think those republicans who promised to repeal obamacare ought to vote the same way they voteded in 2015. If youre not willing to vote the same way you voted in 2015, then you need to go pack home and need to explain to republicans why youre no longer for repealing obamacare. Reporter theres still a lot of republicans, even if they are not outright nos on the fence, and it could be a conflicted vote the cbo in january estimated that a full repeal would see 32 million fewer people insured and that premiums would double over ten years. That will be a tough vote for some republicans to swallow. Guys this is probably not knowable, but do we know, do they still plan to delay their august recession, and what do they do then do they plan to work on tax reform whats the plan now i wonder. Reporter no word on what happens to recess, whether they will go forward with that twoweek delay, bill, but im told that senators had been hoping to take up a raise in the debt ceiling before recess, so perhaps if they put this to bed sooner they would have more time to tackle that, but it does sound like leader mcconnell wants to at least put a vote on the record for the full repeal and put his members on the record in doing so and still they did that once before, kay. [ laughter ] thats whats so interesting about it when the stakes were so low, when obama was president and never going to sign the thing into law, they had no problem getting everybody on board for that vote and now is he still going to hold that if they dont get all the numbers . Reporter well, it seems like he wants to make an example of members in his party its something that the president was lastiamonting whee said ive been hearing for seven years when we had plans to repeal and replace obamacare and when asked interestingly about whether the president blamed senator mcconnell for this stalled republican agenda, he said no. Interestingly hes not losing faith with the Senate Majority leader despite the fact that hes visibly frustrateded that there doesnt appear to be agreement on this. Thank you busy day for the senate and also the howth house. Health care is not the only topic hot in washington. The budget and the battle over raising the debt ceiling is getting a lot of traction. Ylan mui has more on that story. Reporter the house revealed a budget that balances over the next decade including 203 billion in cuts to mandatory spending programs like medicare and like food stamps, and that is drawing fire from moderate republicans, but the gop right now is under pressure to get something done sometime this year the budget is important not just for funding the government but also because it creates the legislative vehicle that republicans need to pass tax reform without democratic support. Earlier today house ways and means chairman kevin brady tweeted republicans will be moving forward on tax reform regardless of what happens on health care. Now in addition to all of this, lawmakers still need to reach consensus to raise the debt limit. Treasury secretary Steven Mnuchin has called on members of congress to raise the debt ceiling before they leave for august recess in a clean bil with no strings attached, but still no consensus on capitol hill for exactly how to move forward. Unlikely that lawmakers will meet the time line that mnuchin laid out however, what we do know is republicans and democrats will have to Work Together to get that done. Kentucky representative john yarmuth who is a Ranking Member said hes willing to vote for a debt ceiling increase, guys, as long as theres no poison pill attached back over to you. And we havent yet heard mnuchin has talked about some of the emergency funding measures that would be put in place, but how does this all work whats the more important thing to watch is they try to get this bill passed, raise the debt kreeshlgs and i think they have to fund the government still, t too. Reporter so the debt ceiling looks like it will be separate from any budget consideration or budget measures, but i think that were still a far ways away from the actual deadline for the debt ceiling the cbo put the deadline as midoctober. Mnuchin says its sometime in september, so there is still time for lawmakers to come together, to reach a deal on this, but as we have seen with the Health Care Bill, things can fall apart at the very last minute. All right ylan, thank you. Ylan mui what a busy day over there. Yeah. And weve had a pretty busy day on wall street as well a lot of earnings coming out and the market responding accordingly. 38 minutes left in the trading session. The dow well off the lows of the day, down 150 points but now down just 58 chipotle falling on new reports of safety concerns at one of the restaurants in the chain weve got details and the potential impact for investors in just a moment. And amazons acquisition of whole foods is raising antitrust concerns in washington coming up well hear from one lawmaker worried about how the ayitusill impact competition st wh and the wolf huffed and puffed. Like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. 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Welcome back with two of the major averages in negative territory, Dicks Sporting Goods is shutting down its chelsea collective those stores will close on august 6th and the Company Plans to redirect women back to the main Dicks Sporting Goods stores for fashion shares are down 2. 5 . Pittsburgh and sterling, virginia, thats where the ch t chipotle is, virginia. Chairs of chipotle are getting hit harder on news of the store closing in sterling, virginia, after multiple reports of customers getting ill. Memories still fresh from the 2015 e. Coli outbreaks that caused the stock to lose half of it value, and sales have only recently started to recover, and thats thanks to pretty low comparables a year ago a report started circulated of customers getting sick after eating at that virginia chipotle restaurant that you just mentioned, and in a statement to cnbc chipotle saying that they are aware of the illnesses being isolated to a single restaurant in serling, virginia the reported symptoms they say are consistent with norovirus which chipotle says does not come from their food supply and the restaurant will reopen hater on today its been an interesting 18 months for the chain besides the e. Coli outbreaks they have suffered a credit card hack, remember back in march the coceo stepped down in september while getting a new investor bill ackman and the good news is they have the late and new menu additions like queso and dessert and thats generating a lot of buzz from their customers thinking theres something new to try at chipotle guys. Susan, the store says it thinks it was norovirus which is not its own fault, right thats what chipotle is saying. It doesnt come from their food supply, from what they have checked, their checks and balances are fine to them saying this is basically an isolated event and still looking into it, but its only, and they mentioned this very carefully, its contained to certainly virginia and that one restaurant only. Right but, still, this is just weird it just keeps happening to chipotle and nobody else even if its not associated with their food this time, its its happened again. They have had to close a store because customers get sick. Right. Im not here to promote those conspiracy theories, but, i dont know. The shorts. Yes. Exactly. You know. Youre right, because there have been multiple reports. Before the november 2015 outbreaks where they had to close dozens of west coast locations and then the norovirus at boston college, you know, before that, even as soon as the summer of 2015 they already had numerous reports of norovirus and e. Coli outbreaks but also if you talk to a lot of the people in the industry, you know, some of these reports of these small outbreaks that are isolated and very local, they dont get reported in the media, but because i would say the damage image of chipotle that we keep bringing this up if its only one restaurant and one town in one state. The only time i hear of norovirus is when people get sick on a cruise ship. Exactly. Gets publicized for that, and as she mentioned they will be extremely sensitive any time chipotle is involved and you wonder if the fed are, too now they have a chance to see if theres any other common factor. Something to keep a ceo up nights susan, thank you the store was in pittsburgh and tysons corner, virginia thanks to the gang, dicks division of the Chelsea Stores that they closed there, west of washington i knew it was somewhere west there. Okay. We consider that Northern Virginia still. Yes. When youre from reason western virginia anyhow, time now for a cnbc news update and Michelle Carusocabrera. Hey, kelly, heres whats happening at this hour separatists in Eastern Ukraine proclaiming a new state that aspires to control the new areas they control and also the rest of the country, and the surprise announce of donetsk casting doubt on the crease fire there and venezuela is reviewing its relationship with the u. S. The election members of a new controversial cons to usual assembly will take place as planned on july 30th the duke and duchess of cambridge continuing to draw big crowds in poland thousands turn to see Prince William and kate arrive at a Central Market square. The two with their children in tow are making a goodwill visit. Listen to this the prize money of the british open will be paid out in u. S. Dollars for the first time total purse of 10. 25 million with 1. 8 million going to the winner is the highest ever for golfs oldest major tournament thats the cnbc news update at this hour. Bill, i dont think thats related to brexit. I dont know. I think it is to some degree. They have always had their own currencies. Yeah, i know. Thank you very much. Michelle see you later. Weve got 29 minutes left in the trading session with the dow down 59, but the nasdaq is hitting had an intraday high today right now. Weve got a member of silver bear capital with us right now banks are down today and text are up and vice versa. Eighth day for the text and the nasdaq has a nice run going. Nasdaq has lagged the other major averages in hitting new alltime highs, the dow, s p and russell have been there and now they are playing catchup. They are, up 25 for the year over year. They have had a nice little run now, thats for sure. Do you like tech here i do. Those fabled f. A. N. G. Stocks and that whole category. I like the whole market. Did you see the fdic parc market do you like financials here . I think banks will have a good quarter goldman got knocked because of trading but the numbers were great and i think youll see good numbers throughout the financials ibm to report tonight. Ibm, i mean, you know, you look at netflix, for instance, netflix, 5. 2 million subscribers, a millennium play and Younger Generation and seeing that with ebay later on ibm, mainframes, desk tops, people dont use them. All these tablets, everybody has tab letds a tablets and ibm never caught up to the tablet race. Well see how the numbers look after the close. Dow is down 63 points. At the lows this morning it was down about 150 so weve come back a ways and the s p slightly positive and its not chipotle but Harley Davidson that is negative and amazons deal with whole foods is raising questions in washington and a member of the trump antitrust committee tells us why hes calling for a hearing and td america is here to break down the online companys earnings and how fees across the industry are impacting its bottom line. Stay with us to keep our community safe. Before you do any project big or small, pg e will come out and mark your gas and electric lines so you dont hit them when you dig. Call 811 before you dig, and make sure that you and your neighbors are safe. 811 is available to any business our or homeownerfe. To make sure that you identify where your utilities are if you are gonna do any kind of excavation no matter how small or large before you dig, call 811. Keep yourself safe. Perhaps some new antitrust concerns for the amazonwhole foods deal democratic congressman david ses leone called on the antitrust subcommittee to hold an oversight hearing on the proposed 13 billion deal and the congressman joins us now how are you, sir how are you whats the case for the consumer harm here i think this is a very important transaction and amazon is really the gatekeeper to ecommerce nearly half of the households in america are amazon prime customers and 80 of the American People shop onryan so this is an opportunity to understand what are the implications of this transaction . We generally rely on consumer welfare that is price and competition, and antitrust analysis but its an opportunity to see do our existing antitrust laws do the job for the American People should we start looking amount pact on labor, whats the impact on suppliers and will amazon have an unfour advantage, so its really an opportunity to understand what are the implications of this transaction and what will it mean for consumers . What will it mean for jobs is it a chance to kind of research our antitrust law, and so i think really im calling on the committee for a hearing so we can really educate ourselves and understand and think about what the implications might be a couple of points you make in your letter, congressman. You fear that this could impede innovation and maybe lead to higher prices, particularly in the grocery field. Two things analysts have said that this could actually spur more innovation by competitors as they try and deal with this growing behemoth that is amazon out there, and, number two, in the food business, lets face t. Margins are so slim anyway that they cant afford to raise prices much more if anything, whole foods has been the leader in raising prices, but they have had to cut back as well yeah. I think we dont know what the impact is on innovation. I mean, one can imagine if amazon were to begin their own grocery product they may be encouraged to innovate on themselves as opposed to buying another company and sort of foregoing their own innovation and we just dont know what we do know is this is a really large impact on our economy in terms of the number of people who use amazon to do their purchasing this will be a deep kind of commitment into the retail space as it relates to food and groceries. That i think has the potential to have a impact as i said, we need to think about what is it its impact on jobs, in the face of automation, and this is an opportunity for the committee to education ourselves and to really hear from experts, but what might the implications be and to determine do we need to do some updateing . Our antitrust laws wren acted almost more than 100 years ago in the context of railroad monopolies and maybe in the face of automation and this new economy, the digital economy, that we need to do refreshing of our antitrust statutes and its a great opportunity to have that conversation. Congressman, look, if you look at share of grocery that hamson and whole foods have, even together its tiny for this country. Is your case, okay, just because this might lose some jobs, labor union jobs, whatever the case, you mentioned suppliers and labor being a huge piece of that, that youre going to look at now blocking these deals from that perspective no, no, no. My letter doesnt clearly suggest were going to block it. I dont take any position on the acquisition or merger at all this is an important transaction and the antitrust committee needs to make sure that the laws are working for our American People and economy this is an opportunity to have a hearing to understand the impact on labor and the impact on communities, whether or not they will give an unfair advantage to amazon with suppliers that might lead to a spike in prices. Congress doesnt have a role to stop mergers and acquisitions but need to make sure the laws are working right consistent with the 21st century economy so my letter is very careful not to say im against this in any way. This is an important occasion to have a hearing, to understand kind of our changing economy, what the implications of this transaction might be, and to educated ourselves and then to contemplate whether or not we need to make some changes to our current antitrust architecture. Im curious the impact all of this could have in your district you have a district there. One of the two districts in rhode island you have one whole foods you have no Fulfillment Centers by amazon, but your state does collect 35 million in retail sales taxes from amazon starting this year. Are you looking to maybe improve the relationship with those two companies as part of this whole thing . I mean, look im proud im trying to understand your motivation as well. Look, im a proud customer of amazon thats really not point. The point is just to really understand look, people have a lot of anxiety about the creeping monopolies and mega mergers that are giving consumers less and less power in the marketplace, and i think that those are real concerns, so this is a hearing to give us an opportunity to examine some of those important issues, to understand what the implications are, the kind of growing and rapid pace of automation and what the impact will be on communities, on labor, demand, on prices. Right. Again, i think, you know, we should never be afraid to study things and reflect on them and listen to experts on important issues, and thats what the letter intends to do cop convenient a hearing of our committee so we can begin to really start thinking about what are the implications of this transaction and are our antitrust laws working in such a way that protects our economy and consumersance and should we start thinking about not just consumer welfare but labor implications and jobs and those kinds of things these are companies that have flourished because consumers have flocked to them this is not railroads where you have to pick either one or the other, and you can only do one amazon is successful because its built a competitive mode that people want to be a part of they feel like its giving them great value. I heard someone the ore day saying we should look at part of the ftc saying if they are driving prize down too much. It sounds like people are looking at this as to come up with a reason to block it. The letter doesnt suggest in any way we should glock. Okay. It simply says this is an important transaction. We should study it carefully and understand the implications and should understand the implications on jobs, on competition, on the marketplace and what its impact will be on consumers. I think the point of it is we ought to be understanding whether or not this kind of transaction and the kind of what is happening in the marketplace as a result of automation and with amazon being such a predominant gateway to ecommerce, whether or not we should at least understand what the implications are, on labor, on prices, and whether or not antitrust laws are working. They are hiring a lot of people for those warehouses. We should be thoughtful and reflective and learn from it and understand and make a determination as to whether or not our antitrust laws need to be researched in any way we should never be afraid of learning and studying these things. I guess you can understand our misunderstanding on all of this since youre a Ranking Member of the subcommittee on antitrust law. If you read the letter carefully i take great pains to say, look, im not taking a position against it in any way lets recognize the kind of complications that could arise and the serious size of this transaction and be thoughtful about it and learn. David cicilline, democrat of rhode island. Thanks for having me. Speaking of congress, Lamar Alexander who chairs the Health Committee in the senate has just said hes going to set hearings in the next few weeks on how to stabilize the individual Insurance Market. Yes. This is going to be a huge fight. Isnt that interesting. And a lot at stake whether they bailout quote, unquote, obamacare now or not. Well see. Thats moving the market. Take a look across some of the Health Insurers and hospitals. The dow is still down 5. A lot of the selloff, particularly this morning, sparked by the news that the senates effort to repeal and replace obamacare has collapsed. Russell down a quarter president and s p and nasdaq are higher one Biotech Company received fda approval for a Breast Cancer drug details on that next. And on the heels of td ameritrades earnings well ask tim hockey about the ongoing atmmission fee wars and if ths affecting new client growth stay with us baby crying fly me to the moon elegant music and let me play bell rings welcome back td shares are higher after reporting quarterly net revenue. That was partly because of new account growth and asset inflows from new and existing clients. Profits did decline as the Company Adjusted to lower trading commissions. The Online Brokerage Firm cut its Commission Fees back in march. Down to 6. 95, not as low as fidelity and Charles Schwab. A first on cnbc intervup that we welcome back president and ceo tim hockey who is ringing the closing bell at the nasdaq today. Tim, good to see you welcome back. Good to see you, too. Thanks for having me. Quick assessment of the quarter and how it went for you. Were pretty thrilled with it the Stock Performance was great today and as we said it was a good allaround performance. We had spectacular performance on our institutional side and we actually have opened up more accounts by the end of the Third Quarter than we did all of last year and 2017 is off to a spectacular start and almost finished, i guess you cut your commissions at the beginning of the quarter do you think that helped what impact did that have . It was actually in the last quarter. Whats fascinating is we had a 44cent quarter, and if you actually look at the fully bakedin price change this quarter versus the same quarter last year offset by the uptick in revenue increase we got as a result of the trading, then there was only a one cent eps impact of that price change year over year. We almost just grew right through it tim, recently etrade was getting some coverage about looking for direction and trying to figure out where its growth is going to come from, so whats going to drive its growth Going Forward . For you guys, is there an opportunity to kind of bring etrade under the fold i know scott trade is still something that youre working on integrating fully, but especially as commissions are going down is it important to have big and bigger scale in this business . As you say, kelly, were clearly very fully invested making sure our scott integration goes well. We havent closed on that yet. That will happen in the next few weeks and then a lot of work to do between now and then. Look, our objective sheer to make sure that we take the scale that we have which is going to be very significant. We have over 1 trillion in assets and over 10 million accounts thats a lot of scale and then we can take that scale and make sure were reinvesting back in organic growth for our clients and making sure were doing everything we can to make it a better and better experience for them. I i dont want to keep harping on the pricing, but that is clearly what the industry is all about right now. I just think about weve had some Retail Investors on our show here who happened to trade with merrill edge, and they point out that if they maintain a certain balance they get their first x number of trades for free each month. I think its 10 trades or 30 trades or Something Like that. I mean, how much lower can you guys go and still remain profitable when a lot of these companies are coming in clearly just trying to gain market share and pick up new accounts well, first of all, theres been free offers in the marketplace for decades now, and so theres different ways to compete, and we believe that were going to be the best of the decline experience, the brest of high tech and high touch. At these price points theres a big difference now between where we were 42 years ago and the price change that allowed for our entire industry to be created. Thats when the price per trade was literally hundreds of dollars, very different and now when were actually talking 5, 6, 7 price is important but our clients enjoy all the ait digital features they get so they get good value for money. All right tim, thank you appreciate your time. Thanks for having me. Let you get ready to go ring the nasdaq closing bell. Thanks, thanks for having me. Tim hockey of td ameritrade. Puma biotech is getting a pop today after good news from the food and Drug Administration meg tyrell is here. The fda approved the cancer drug a few days ahead of schedule the approval was widely expected following a favorable vote from an Advisory Committee at the end of may the drug is approved for people with a specific kind of Breast Cancer who have undergone surgery and preach with another kind, herceptin. That will may be 40,000 women in the United States each year. Puma hasnt yet disclosed its price not market but analysts say it could be more than 7,000 to 10,000 a month, in line with other branded cancer medicines however, there has been some criticism over the magnitude of benefit that the drug showed in Clinical Trials which is sure to spur debate whenever the price is announced and theres heavy takeover speculation around the drug and ceo Alan Auerbach sold his last cancer drug back in 1999 for 1 billion . I mean, did the impact of Genetic Research were only at the beginning stages of this, arent we, and the impact its going to have in medicine . Absolutely. Genetics has change the the way we diagnose cancer and parse different patients and one of the questions for this drug is patients would be segmented based on some characteristics of their tumors and part of the reason the stock is up so much is they werent segmented in that way so this is a broader approval than some might have expected for puma. And an 8 rally as well. Thanks, guys. Seven minutes left in the trading session. The dow is down 62 points. Well come back with the closing countdown already. After the bell, we get a bunch of earnings, ibm, among, csx, united. Were going to break down ibms result with chief Financial Officer Martin Schroeter thats next on closing bell. [music playing] across the country, we walk. Carrying flowers that signify why we want to end alzheimers disease. But what if, one day, there was a white flower for alzheimers first survivor . What if there were millions of them . Join us for the Alzheimers Association walk to end alzheimers. Register today at alz. Org walk. Rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. upbeat dance music dance music abruptly stopping dance music starting then stopping music stops bell rings the nasdaq just hit a fresh intraday high, and its on track to close at a record high if it stays up here. Bertha coombs,y what behind todays gains . A lot of the usual suspects we notch the intraday thanks in part to the f. A. N. G. Stocks and netflix is really the key factor here, that fresh alltime high for netflix following Strong Subscriber growth and a huge surge today, but facebook, amazon, also hitting alltime highs today. Apple not really a big contributor, but it has turned positive combined, those stocks today account for about twothirds of the nasdaq 100 gains other allto imhighs contain paypal and also seeing their hasbro, adobe and priceline, all the usual suspects, bill back to you. Yes, they are thank you, bertha, very much so theres the nasdaq story. The dow story, the financials, the drag there on the open this morning we were down as much as 150 points on the industrial average, but we have since come back Goldman Sachs has been the big dural. Let me highlight not just the dow but the dollar that continues lower. As Rick Santelli was pointing out, pointing out yields moving lower but real the continued decline of the dollar is getting a lot of traders attention. The dollar indexed peaked at 1. 03 earlier this year were now trading in the 94 range so a huge decline for the dollar against the major currencies rights now. As rick was pointing out, maybe were seeing a bottom in the euro as it pertains to the dollars. Goldman sachs, the drag for the dow, the biggest decliner on the industrial average today with the disappointing earnings, especially on its trading revenue for bonds and in commodities. On the other side of the trade though, netflix with the record gain in subscribers and not just other in the United States but overseas and that stock up sharply in todays trade now at 183, trading in alltime high territory bob pisani, we get ready for earnings tonight ibm, where expectations are not all that high but weve got two important components in the transports, united and csx. Remember, ibm missed expectations, top and bottom line last quarter. They are trying to get in the higher growth segments like the cloud. They have been struggling to do that watson the big showpiece and tiny part of their revenues, dont really break it out. I think thats going to be the big issue for them overall i want to point out with the bank numbers down today were getting loan growth thats fairly anemic. 1 for the year. Thats really the bigger issue than the trading revenues for some of the banks. Well see what the big regionals report when they start reporting tomorrow. Thank you, bob. We go out with a decline of 52 points on the dow, but get ready for the earnings from ibm. Well talk to the chief executive officer before he talks to analysts and more earnings as well coming up on the second hour of closing bell with kelly evans and co. See you tomorrow, kell thank you, bill, and welcome to closing bell, everybody im kelly evans. We do have a record high close on wall street, and its the nasdaq, giving about a quarter percent gain here. Thats enough to do it after hitting an intraday high as we mentioned. Closed higher by nearly half a percent on the bell. 6344 the s p 500 half by just a half to 24660 that should be a new record for the broad index. The s p paced higher the nasdaq paced higher by netflix which had a super strong day. Up about 14 after its earnings gain last night. Meantime, the dow industrials closed lower by about a quarter percent. Goldman such a big price component and the russell 2000 down a quarter percent to 1427 now its going to be a busy hour for earnings more headed our way and more looking at ibm results and susan li has results from csx and phil lebeau with United Continental what that joins us joining me is michael santoli, stephanie link is here, cnbc contributor from tiaa investments and david katz from matrix asset advisers checks in as well. Michael, before these start flying at us what do you think generally about the market a rebound today. If you look at the dow, you can paint a sad story and look at the nasdaq and it was a new high. The markets continue to refusal to follow through on the downside have the efforts to kind of sell it off you can argue its an overdue time for a pullback, but you never get that next wave of selling that causes concern, and its still this one where banks are weak, text are strong so something picks up the slack today was very much about the mega cap stocks, specifically the Growth Stocks like in the nasdaq 100. You were calling netflix like the odd man out which it has opinion. It doesnt match up specifically well across a lot of different fronts with the rest of f. A. N. G. Still lumped in there. Still one of these very longterm growth stories but we can get into the differences as long as it does as well as it has this year with everybody else it will get painted with the same brush this morning it was in large part due to the senate not passing its health bill. It took the stocks down in asia and europe and flattened the dollar, Interest Rates they had a pretty big reaction. Definitely a negative tone, as soon as we all woke up. And in your case 3 00, 3 30. 4 00 and 4 01 on the treadmill. Rates fell pretty quickly so youre at 2 26 on the tenyear and the dollar falls, as you mentioned. So it was a negative tone to start. Bank earnings, bank of america and goldman. Mixed results, and i can give you the positives and negatives on both because i do think there are. The response of bank of america seemed to be not bad and look at the return on tangible equity and for goldman it was kind of like, okay, theres problems, but theres also some good spots. I really think that it was kind of they were both mixed. I think bank of america was better than goldman, but i think goldmans expectations were much lower than bank of america everybody has been piling into bank of america on the rate trade. Had a very good quarter. The one issue was a surprise on the downside, and the fact that they guided the Third Quarter higher, that actually alleviated concerns goldman it was nec neglecttic fic. Who knew there would be a bad negative fic number and did really bad on equities when you have fic down 40 and your overall trading is down 17, your equity component did very nicely. Thats true. Puts and takes no doubt and with the tenyear and negative sentiment this morning from the macro, it was just hard to get past that in these two names of the sector today. Fair enough get you in just one bhoemt breaking news in the Biotech Sector meg tirrell joins us whats happening over there, meg . Highly anticipated data coming out from vertexs pharmaceutical on their drug combinations to treat Cystic Fibrosis they look to be surpassing what analysts were looking for here theres a key measure of lung function and how well the three drug combos improve breathing for Cystic Fibrosis. Improve breathing by 9. 6 Percentage Points and 12 Percentage Points. Now, just to put that into context in a preview nye michael yee said microsoft was looking for 2. 5 Percentage Points and were seeing over 9 for Vertex Pharmaceuticals that stock has been halted and well look for to open at 4 20 looking to extend treatment to 90 of patients other. Back to you, kelly vertex has been one of the best performing stocks in the s p this year. I was reading someone describe how its revolutionized Cystic Fibrosis treatment are you saying this opens up yet more opportunity for them . They have really been working for decades to expand Treatment Options for cf patients. The first to get approval for the drug that targeted the underlying cause of the disease, genetic disease, and had to go piece meal to extend Treatment Options this would reach almost 990 of patients these are midstage studies and still need to take the regimens, whichever they are choose, into a pivotal trial but this is a pretty big moment for cf. Meg, thank you. Meg tirrell there on vertex. Earnings are starting to come at us and lets get to csx. Looks like a beat there. Susan . Solid results and solid volume right now trading higher, csx shares lets start with top line because thats really driving the growth and productivity gains and also helping in the corner in terms of top line a both there. Bottom line, 64 cents adjusted coming out ahead of analyst adjustments. Calling for 59 cents and they have also topped up their share, repurchase Program Totaling 1. 5 billion so in the quarter they will buy half a billion more in total shares its really been in recovery from last year where commodities, you know, fell off a cliff so they werent shipping as much coal, natural gas and the like but it locks like 2017 has been a year recovery for csx and intermodal as well and thats cargo ships and shipping that they have been doing more of in the quarter. Back to you. All right susan, csx shares up about 2 on that news. David, i dont know about you, but this is one of my favorite stories. Hunter harrison coming in. You know, hes a canadian national, canadian pacific, already making some major changes at csx what do you think about the quarter . The quarter from the headlines looks good its a beat on both the top and bottom line. We think a ceo can make tremendous difference. He owes obviously just gotten there so he didnt have a significant stake in that difference what we would also point out this has been one of the hottest stocks in the market not technology in the past year and the stock is up very substantially and sells at 23 times earnings and while we expect very good things from a business side we think its pretty richly priced for a railroad so if you own it enjoy the ride but we dont think were expecting the same type of thing to happen in the next six months as the last six months. Michael, when you have, what, a 25 pop on the day. Immediately revalued when the ceo came in there. Honestly, this is potentially going tonight story of a fair number of Companies Reporting this quarter just because you obviously have had a lot of sectors had a good run, decent expectations built into the stocks, and you need to see how they come in rell i have to what are pretty optimistic expectations looking at ibm, moving 1 to the downside and looks like a revenue miss deirdre . Youre right, kelly, a miss on the top line and a beat on the bottom line. Eps coming in at 2. 97 that is better than the 2. 74 the street was expecting revenue though, falling short. 19. 3 billion versus 19. 5 billion that was expected, and that makes this the 21st straight quarter that ibm has notched declining Revenue Growth ibm fulfilling its fullyear guidance at 13. 80 per share. Some analysts over the last few days suggested that ibm should cut its fullyear guidance but ibm reaffirming it it nodes a strong second half in order to reach that 13. 880 per share. Bigger pick tower here and bob pisani was alluding to this earlier. Ibm tons struggle in its transformation its legacy business continues to slow while its trying to grow its higher margin next gen including Cloud Computing and revenue groueff to 8. 1 billion, and thats down from the doubledigit growth rate we saw in the First Quarter shares are down, now they appear to be about flat for ibm as investors digest this, and well be on the call later as well. Appreciate that just looking through the results here as well as she mentioned, guys, theres a lot built into the back half expectations ibm ceo Martin Schroeter will join us slowly, a first on cnbc interview, to talk about these numbers coming up. What do you guys think at first blush . I think reaffirming back half guidances is a net positive. Maybe the market is taking comfort there, but its the same story. Its a struggle to kind of piflt towards the growth areas very low tax rate again and more financial, you know, maneuver with 1. 4 billion in buybacks from the quarter so it seems, again, like a similar refrain. Well see if the stock is washed out because its real he not too many friends on the street. Its pretty washed out and pretty underowned from the Portfolio Manager side, the buy side of things the story is kind of the same. The large Legacy Technology companies, they have such trouble getting past the legacy and having people focus on the Growth Initiative so i totally applaud them focusing on the Strategic Imperatives and growing cloud and growing analytics and growing all the right things, but other part of that business, the legacy part, is just too big to overcome, it so it takes a while is what im trying to say. Oracle navigate it had. I was going to ask you about oracle. Microsoft navigated it. It can happen but it takes a very long time. Oracle might be a closer to home example of this what will would ibms numbers have to show to focus on that growth to say well give you credit for whats happening or is it okay that they are shrinking the business while this happened . Oracle got the top line growth to start but didnt get the margins to back it up. You didnt get the operating leverage and investors were frustrated they had to keep investing heavily so you didnt see the bottom line on the huge operating potential and then the last two quarters oracle started to show the operating level and thats when you get a better multiple and some price and so on ibm is cheap in you want to say that, and they are going to transition theres some positive here, too, but i think it will just take some time. Oracle made a lot of acquisitions along the way, too. Thissy were always kind of importing something in terms of something fresh, whether that was good or bad all the time you cant really say. Ive also thought about ibm somebody could come and look at the company and say theres a big chunk of of this company that looks like accensure who trades at 20 times earning is any piece of ibm worth 20 times, but the street is not looking at it this way. David, how are you looking at it the in. If youre looking at ibm you need a longerterm view, and you have to be expecting a single rather than had a home run one of the least Exciting Technology companies, but their well through the transition. They are earning money and buying stock back and paying a 3. 2 yield so we think a year from now the stock could be about 15 higher and two years from now 25 higher and youre getting yield to boot. The stock has sold off almost every Earnings Call for the last eight quarters no High Expectations for tomorrow and once it happens we think the stock will drift higher as the year progresses and we think the earnings quarter was in line with expectations and well ahead and a lot of analyst were looking to cut numbers today and happily they didnt do that. What would watson say if we asked him . What do you think of the quarter . Focus on the currency, probably a big benefit for these guys. Should be a big benefit. A 7 in just the dollar this year i know we often look at this on a Constant Currency basis but i wonder how much that has to do with the market rally period. I think the multinationals benefitted from them and one reason why industrials held in so well. One of the leading groups to date despite the fact that oil has fallen the Dollar Benefit is really a help thats definitely a theme for the multinationals. Emerging market stocks were up all day on the weak dollar. On the other hand, when it comes to ibm, that makes a revenue miss all that much worse if you didnt have a dollar headwind. Csx, talking about shipments of physical goods and should be a little less affected maybe it helps on the margin, i dont know. Maybe it does a little bit in an effort to try to trade the intermodal business but to me its mostly about commodity volumes and operational improvement at the company. Csx was a very Bloated Company so theres a lot they can do on the operating ratio and Hunter Harrison has certainly proven he can get returns at some of these companies. Mega. Yeah, the fact that their shares are up another 3 on top of what weve already seen this year, thats quite a high bar to clear. Yeah. Weve had csx and ibm now report and will shortly get united airlines. When you look at the market today, stephanie, and assess the opportunities out there, whats most compelling to you right now . I kind of want to see if f. A. N. G. Can continue to lead. Netflix was obviously the stock du jour and brought all the Growth Stocks, back to the growth trades led by f. A. N. G. And im curious to see if the high expectation stocks can continue to run. They are secular winners so i get why they are running are, but very had had a nice, nice move year to date so its interesting to see if people continue to rotate back. 30 Revenue Growth at netflix. David what, but, same question where do you see the opportunity . Were on the other side of the coin we think the back half of the year will be radically different than the first half. We think value tech will do a lot better than growth tech. Think there will be rotation of things that have been less exciting wed be looking for some of the first half dogs with good longterm prospects as the place to make better money were expecting volatility and expect the hottest stocks could have pullbacks and some of the dogs and highest yielding stocks havent done a lot, like a verizon or ge, were expecting much Better Things in the back half of the year. All right david, thanks for joining us. Thanks. David katz. Stephanie links will stick around for the united earnings to come out. Earnings will keep rolling and so will the show expert analysis, secretary quart Quarter Results from united and if passengers booked other airlines after the incident of david dao being dragged off the airplane youre watching cnbc, first in miss worlddewi welcome back earnings for United Continental are now out. Lets get straight over to phil lebeau with those numbers. Phil bottom line from the airline, first off with earnings per share. The estimate is 67 a share and it came in at 275, eight cents above consensus and revenue slightly better than expected. The street was expecting 9. 97 billion. Available seat miles one of the key metrix in the Airline Industry already guided to be around 2 united boosted pram. Operating of 13. 2 and the company is changing some of its aircraft delivery plans. Most notable, the company is converting an order for 137 maxes from boeing and converting that into 737 max 10s which are the stretch version of the 737 much more capable with greater passenger capacity, so thats the latest from united a beat on the top and bottom lines. Dont forget, guys, well have oscar munoz exclusively tomorrow on squawk box to not only talk about the Second Quarter which was the best and worst of times for this airline given everything that happened and also its outlook for the remainder of 2017 and well talk about the aircraft delivery plans as well. Back to you. Phil, stay with us for just a moment want to get stephanies reaction on this. A lot of Times Companies give us a lot of data intra quarter and we just got updated data a couple weeks ago on prasm which is in line and the margins looks like they are in line with the guidance of 12. 5 to 13 . Right. Looks like its pretty in line stocks have had a nice run though, right . Hi wonder if maybe people take profits and i want to see what the revenue beat was was it actually Airline Travel or actually the nonairline piece which people dont pay as much for that kind of a beat, if you will. Absolutely h. One other thing to keep in mind and one reason why youve seen united stock run as much it is a has relative to some of the other airlines is the expectation that with its margins at about 13 , 13. 5 , what did it come in at 13. 1 for the quarter and compare that to a delta which is up in the 18, 18. 5 range. Right. The belief is they have a gap that they can grow into, and thats why many people are paying up for united right now the expectation that they will increase those margins relative to their competitors. Any sign, phil, that the whole saga with david dao and the resulting attention on any kind of passenger skirmish or anything that united has down wrong is affecting the business in. Hasnt affect it had nermts of t of saying im not going to book on united. They may not be happy and make side jokes or make comments getting on some of the flights, but they have used this as an incident where oscar munoz has said we need to do better. As a result you noticed last week they talked about they were going to be piloting a new Software System where in advance of flights that are traditionally overbooked, not only are they going to have fewer overbookings, but they are going to be reaching out to frequent flyers and saying, you know what, miss evans, that flight youre taking from new york to chicago on wednesday at 5 00, its likely going to be overbooked would you like to take a different flight and heres some of the options for you and compensation available that will program is just starting to be inactualitied well talk to oscar munoz about that tomorrow. One of many steps the company is taking to say, look, we can do better when it comes to customer service. I love it. Clearly, what happened in april was a low point for the airline. We see the shares down 2. 5 what do you make of that response i just would say its a test of what i was saying before which is we kind of thought we would have pretty good quarters. The guidance on margins for the Third Quarters look in line but 12 to 14. 5 , its not in precision right there, but i think its a reflex sell of the news. Most interesting, most people were gravitating towards airlines and away from rails so i wonder if you can see that rotation. Youre seeing it after hours, thats for sure. I hope so. And the big question ultimately is how much does this airline cycle have to go if you have years to go. Its all really too cheap. If not, they are cheap for a seen fair point. Phil lebeau bringing us the united earnings. Shares of vertex after just reopening, how are they looking . Opening up 26 after highly anticipated data in Cystic Fibrosis the company has been looking to expand Treatment Options to more patients and they need a triple combinations of drugs, just reporting come in way ahead of expectations the stock improved the measure of lung function by more than 9 Percentage Points across the three drugs it setted, up to 12 percentage drugs on the best performing one efficacywise they were looking for at least a 2. 5 improvement they already have two Cystic Fibrosis drugs on the market and with those they have only been able to treat half the people with Cystic Fibrosis because of the gentic mutations that drive the disease. They need the triple combination to expand Treatment Options to 90 of patients with Cystic Fibrosis al big Business Opportunity and, of course, a big medical opportunity for patients who have been waiting for treatment here, kelly. Vertex up 26 on this news their call starts at 5 and well bring you more when we can. Does this mean that people will start looking at other biotechs, too, and remembering that you can have incredible results . Thats what i was about to say. You hit it right on the head the biotech had a nice little pop a couple of weeks ago and its kind of settled out here and the ibb has kind of pulled back and i wonder if now that we have the health care kind of noise, like no news on that front, dont have to worry so much and then you have good data points on biotech, you dont have to worry about price. That combination is not a bad one and some of the stocks are so cheap and have so much cash and this great data today i think is just going to support this group. Vertex up 25 after hours so well see how this feeds through into tomorrow. Meantime, breaking news on bp, Jackie Deangelis, the birthday girl, whats happening there reporter hi there, kelly bp sending out a press release today talking about the evaluation of an ipo for an mlp. Giving us some details here saying the strategy is to grow the midstream business, the assets that would be included in that mlp would be crude oil, natural gas, Refined Products and product pipelines. They would be coming from the midwest region and also on the u. S. Gulf coast. If bp ultimately decides to do this, the company is saying it would be called bp mid stream partners they would file that Registration Statement with the s. E. C. In the second half of the year to get that process going if they were actually, you know, went through with it, completed the ipo, it would own the general partner of the mlp basically putting this into context for you, why its important is its giving investors other options to invest in some of the companys assets rather than the company itself and, remember, investors tend to like mlps because they offer Tax Advantages as well this. Would put it in a little bit of a different category, a little bit of different investment competition as well, kelly back over to you. Degree move, jackie thank you. Our Jackie Deangelis stephanie, thank you as well. Thank you. For joining us. A lot of earnings after hours. Stephanie link. Thats been called a solution for everything to everything for aviation to basketball, she said ibms watson musthave marketing solution up next well ask ceo Martin Schroeter if martin is as good as the television ads. And will the senate vote r fo a bill that simply repeals obamacare . Well have and more on the Health Care Reform bill coming up roven 15year track record. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Welcome back its time for a cnbc news update with Michelle Carusocabrera hi again, michelle. Hey, kelly. Heres whats happening at this hour prosecutors in ohio have decided not to retry a Cincinnati Police officer on murder charges for a third time officer ray tensings previous trials ended in deadlock he was charged for fatally shooting ununarmed black man during a traffic stop in 2015. Republican lawmakers in texas poised to push their conservative agenda through a special session. Topping the list of priorities, a transgender bathroom bill which Governor Greg Abbott advocates. He also wants to see an Immigration Law which would allow police to randomly ask people about their immigration status. The fbi warning parents about privacy risks from internetconnected toys. The socalled smart toys can contain sensors, data storage, even speech recognition that could disclose personal information. They advise consumers to examine toy company user agreement disclosures. The bank of england unveiling its first plastic tenpound note, and it features author jane austen on the 200th anniversary of her death a first run of new notes called tenors have been printed thats the cnbc news update at this hour. Back to you, kelly. Michelle, i just learned that jane austen i guess was pressed back inher day to write something more ambitious, a historical romans, and she said this is what im going to do and im going to stick to it words to live by. And proved to be very successful. Oh, my gosh, thats amazing. Ibm reporting section quarter earnings the stock reversed afford emerge a little bit higher. Joining us is ceo Martin Schroeter. Welcome. Good afternoon, kelly thank you. So theres been quite a divergence between your earnings and revenue. Its your seventh straight earnings beat and for the last 16 of 20 quarters youve had a revenue miss why is that . Is this the reflection of i use the term financial gregg but the share of buybacks and emphasis there on returning capital. Do you think that trend is going to continue for some time here well, the way we think about it in our highvalue model, kelly, were always trying to find the profit pools that exist in enterprise i. T. , so as we shift our business to go move towards those profit pools you see what i think we saw going from first to Second Quarter, for instance, which was we added a billion dollars of growth profit in the quarter and took only 1 billion of revenue incrementally from first to Second Quarter and when we think about the enterprise profit pools which is what we focus, we move towards though, not just trying to find revenue its easy to get revenue in an enterprise space its finding the profit that were focused on. Well, speaking of the revenue numbers, i guess, thats what im looking at here. Looking at the growth rate for the new parts of the business, the cloud and so forth, last quarter was like 6 a 0 some percent and this quarter its 32 excluding fx why the discrepancy there . In the quarter we saw, again, leading ent prize moving to the ibm cloud Like American Airlines and bombardier and lloyds bank and the reason they moved to the cloud is they are really looking for our expertise in bringing both their private, their onpremise data giving their access to the capabilities of a public crowd where we have things like watson that they can take advantage of, but they need to know that their data is going to be not only secure but the insights and their ai models that they are building to help them get insight out of their data, they need to know that thats going to be theirs, so these enterprises moved to the ibm cloud knowing we have great tools and we have a business mod they will will protect their insights and their models and then, you know, we still do think its kind of early in the cloud evolution here we had for the last 12 months 15 bill crop of cloud revenue and even with 15 billion which puts us at the forefront here we still think its pretty early so a lot of growth left to happen in the cloud and a lot of this obviously comes in and as a service model. Speaking of watson, this is the first time weve seen you since another member was on the show heres what he had to say about watson take a listen. Watson is a joke, just to be completely honest. The company that are advancing Machine Learning in ai dont brand it with a character named after a sherlock homes character. Its collecting enormous amounts of data. Martin, im sure theres, you know, a lot that you guys want to say there whats your response to these accusations . Well, i mean, its a few things one, i think he stepped back away from a lot of that, but i guess i would say a couple of things hes a competitor so who wouldnt be out disparaging competitors. You know, we have watson deployed now watson has seen and helped 40,000 doctors and patients Work Together i dont think 40,000 patients and doctors and that relationship i would classify as a joke watson is deployed, and weve talked a bit about this already earlier in the year, deployed in h r block and h r block grew market share and posted the highest profit they have historically so watson is deployed the epicenter, if you will, of ai, its not necessarily its not new york or Silicon Valley or in boston its a global phenomenon, so when we look at watson, you know, 80 of the hospitals in which watson is operating today are outside the u. S. , sand so if you have sort of a narrow definition of both geographically or a fairo definition of what you might be able to do with ai, you might reach a different conclusion again, youve got to underscore this he does compete with us so im not exactly sure i would expect him to be saying nice things and since hes even bringing us up he must be feeling something if he were dismissionive of us we wouldnt bring us up. Maybe were getting to his clients already or getting to a place in the market where people are starting to see how effective this can be. Let me ask you about mainframes which is a word i havent said in a very long time, maybe ever, but this is extremely important to you guys especially when we look at the guidance that you just reaffirmed for the back half of the year what kind of Growth Opportunities are there . Yeah. So, you know, the mainframe announcement yesterday is probably probably the biggest mainframe announcement 15 years ago we announced it would run linux and weve seen an increase in the usage of linux because it gave clients a way to work in the then new world which was opensource operating systems. What will we announced yesterday was, again, the most important probably in 15 years, is really to address what i think are probably some of the biggest issues facing the csuite today. When had you think about the problem that enterprises have with encrypting data it slows things down. Its expensive and why so little of it is encrypted once you, by the way, encrypt your data its useless to the bad guys so it certainly changes their fundamental operating so they change their enterprises to lock down data, not just differently. All the time all data means theres no human intervention so theres no ability for even an insider to steal your data. Yeah. Or to hack your data, so it has had a big, big advantage in security it also has now Machine Learning the other big element of where were headed, security is a big issue and Machine Learning is a big issue and weve built the mainframe to do Machine Learning in line so can you do realtime fraud detection as owe tossed to having to take all those data and records and even subset and move them into a different system mainframe does it in line so its ability to process the kinds of transactions and the volume of transactions that our clients use is right there with them and then it has processing advantages obviously its a bit faster and importantly it has new Software Pricing models. Yeah. Well, look it has new Software Pricing models that allow new workloads to come on as well. Its focused my mind on mainframe, thats for sure martin, thanks for joining us. I know you have a lot more to do really appreciate your time. Thanks, kelly. Martin schroeter is the cfo of ibm. More news on Oil Inventories here. Oil prices dropped about 30 cents. Sort of settling down a little bit more this is after the api data came out. Let me give you the numbers. Weve got a surprise building crude Oil Inventories of 1. 6 million barrels. We were looking for a drawdown of 3 million which would be in line with seasonal patterns, so the crude number is definitely a surprise to the market the gasoline number is whats keeping us held up in positive territory here it was a draw of about 5. 5 million barrels, and that was far morethan expected so right now the two numbers balancing each other out and what it tells you without knowing more from the actual findings of this report, that theres an imbalance somewhere. Now, these numbers over the last month or so have been moving crude prize around investors are really focused on them than this summer has been different than what weve seen in years past as production is rising here in the United States d o10 30 may or may not confirm this thats what to watch for back over to you. Jackie, thank you Jackie Deangelis. Meantime, disappointed is how President Trump felt over the failure of the gop to pass a new Health Care Bill whats the plan now . Live to the Nations Capital for the latest and Hampton Creek has disrupted the food world by creating a mayonnaise without eggs and now its trying to operate without a rpatcoore layer of management. Thats in todays fast take coming up. It starts a chain reaction. Thats heard throughout the connected Business World. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. To keep our community safe. Before you do any project big or small, pg e will come out and mark your gas and electric lines so you dont hit them when you dig. Call 811 before you dig, and make sure that you and your neighbors are safe. 811 is available to any business our or homeownerfe. To make sure that you identify where your utilities are if you are gonna do any kind of excavation no matter how small or large before you dig, call 811. Keep yourself safe. Welcome back it was a back start but relatively strong finish on wall street the 1. 5point gain for the s p and the gape for the nasdaq are good for the highs of those averages the dow weighed down but goldmans selloff after earnings this morning, down 55 and the russell down 4 checking on earnings movers after hours. Three big ones, ibm, csx and united ibm lower by 2 and csx higher and United Continental is down by 3. 5 . President trump is urging lawmakers to let obamacare fail after republicans could not get the votes for a straight repole of the Affordable Care act Kayla Tausche joins us with the very latest. Reporter tough talk from President Trump who is expressing frustration today with the lack of progress by Senate Republicans to move a repeal and replace effort or even a standalone repeal to a vote for seven years ive been hearing repeal and replace from congress, and ive been hearing it loud and strong and then when we finally get a chance to repeal and replace they dont take advantage of it, so thats disappointing. Reporter Senate Majority leader Mitch Mcconnell appearing though to least door open for a nearterm repeal with two years then to procure a replacement program. Its pretty clear that there are not 50 republicans at the moment to vote for a replacement for obamacare. Consequently sometime in the near future well have a vote on repealing obamacare, essentially the same vote that we had in 2015. Reporter no mention of the three republican senators who propose that they would not vote for such a repeal. He seems to be pointing though to the voting record from two years ago during which just up republican senator voted no, and he could add pressure to a handful of lawmakers who are nos or are undecided no clear agreement between the white house and lawmakers over how or even whether to prop up the Insurance Market senator Lamar Alexander, who chairs the senate Health Committee and was at the president owes dinner table last night, has announced hearings next week to discuss strategies to stabilize it. What the White House Spokesperson Sarah Sanders says i dont think the white house has to take any action for obamacare to collapse. The game of political hot potato continuing with minority leader Chuck Schumer saying if it fails, trump and conservatives are on the hook, but they say if it fails, kelly, it would be the fault of democrats. Yeah. Kayla, meantime, is anybody talking now about moving on to tax reform terry haines says he thinks this makes odds of an aggressive tax reform less likely. Reporter interestingly theres a lot of reporting that tax reform is something the white house is committed to and has found some Common Ground and compromise on with principles over on the capitol hill side but the debt ceiling and budget are going to be nearer term obstacles for that effort, so, kelly, even if they do a united front on that, there are still other items on the todo list between now and then. All right kayla, thank you Kayla Tausche in washington. Forget Consumer Staples, you know, shampoo. Who need it, enterprise staples, software those are the new musthaves key details and names to own in that space and turning into more of a beast than beauty as disney finds itself in hotwater over certain effects in its live action blockbuster what that could mean for profits coming in das sttoyfa take. Youre watching cnbc, first in Business Worldwide jack knocked over a candlestick, onto the shag carpeting. And his pants ignited into flames, causing him to stop, drop and roll. Luckily jack recently had geico help him with renters insurance. Because all his belongings went up in flames. Jack got full replacement and now has new pants he ordered from banana republic. Visit geico. Com and see how affordable renters insurance can be. International and Global Equities at aerial investments thanks for joining us at post nine glad to be here. What does that mean exactly in. It Means Companies is what barely able they are not able to cover their interest expense. Most companies cannot refinance their debt thats a big problem and these are companies that cant even make the contract coup op, let alone ever repay their debt. How do they still exist. Interest rates are so low, so low, as we all know, that you can stretch it out for a very long time. This concept started in japan which was a first country to have low Interest Rates. First one to be called. And a zombie. You remain the freeze came on then and now weve had it go around the world in the u. S. , for example. A lot of Energy Companies are Zombie Companies they can not make good on the interest coupons with the oil prices so low. In europe youd be surprised to know here a stalwart like pearson which publishes magazines and textbooks, they are not able to make the interest expense because a lot of Companies Went into an acquisition spree funded by on e furnished by debt and now the piper has to get paid. The credit market is very generous right now almost any company can get financing. Theres been an argument that the existence of zombie firms like this has restrained the usual kind of dynamism of companies. Exactly is that a long term problem its a near term problem not just a long term problem the dead wood has to be cleared in order to make way for new companies. So its a really big problem and i think that as we have a normalization of Interest Rates which in the u. S. Were on the path of and will get exported to the rest of the world well see this emerge. The thing to keep in mind while investing avoid the zombie funds. They look like they are alive but they are dead. You think one of the pillars of strength could be enterprise staples. We talk about staples, what are the household things you cant live without what can we really not live without . Maybe an iphone. We first and foremost Pay Attention to risk before we Pay Attention returns. People feel they are not taking earnings risk. What you are taking is valuation risks. They are so expensive. So we are contrarians. We look where nobody else is looking. We hit upon this idea in the enterprise world what is the must have . And thats software. You cant do without software. In the enterprise staple market we came upon Companies Like microsoft, like s p. I would argue even an accetnua is an enterprise staple because today Going Digital is not a luxury its a necessity. So software has become a necessity and in that sense its an enterprise staple mike, you talked about this we talked about it in the context the sector they are all lumped together or called Consumer Staples in that category when you have high valuations and look at the struggles of proctor and gamble. Theres a false sense of security in fact many with high dividend yields thats a signal for a lot of investors that must be safe. I think the old era, conventional wisdom has been very wrong people used to Value Companies with Pricing Power look what happened to gillette they tried to raise prices and they just couldnt they lost market share on the other hand, companies who lower prices are ones we gravitated towards its a new world you said if gillette was still a Standalone Company we would have had gillette friday but we didnt have that. That helped mask what happened there. Is this an amazon force as well . Do we bring them in the discussion they are the opposite of the old model of raise, raise prices no. This is the notion of inflation versus deflation deflation is about prices lowering over time so its a reset because of whats happening in the world economy, its a slower growth, deflationary trends, and i think as more and more technology comes, you know, democata arc d itself and why those shares reversed analysts say it comes down to guidance csx calling for 25 adjusted growth on the back half of 2017 so that implies growth and estimates at 1. 12 a piece for each share estimates are calling for 1. 20. They were coming up a bit short when it comes to guidance. Back to you. Highprofile foods start up Hampton Creeks by lower weng oterol but they are lorin some other fronts. Thats todays fast takes right after this new new york. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov welcome back calpers may go it alone. The reputation is a difficult client its interesting in the sense that calpers has a 9 allocation its not a top ten or even a top 20 private equity firm why they think they would have a competitive advantage in a crowded market for the canadian markets they have a wealth of people. Yeah. Look i think it makes sense to directly own some businesses, you know, firms like tiaa. But to play the private equity firm to save on fees disney is slapped with a lawsuit over those visual effects that transformed man into beauty and the beast. They have used these visual effects in other big budget films making this a big deal could be. Its hard to decipher whether this is just a dispute between the company that claims it is its technology and the vendor. Thats where the dispute lies. They are saying disney should have known even if it didnt that these were not necessarily in the clear in terms of intellectual reporting they are not going to get them, you cant unsee the movie. Is a check have to be written . Some kind of a settlement. Remember Hampton Creek . Its entire board quick. Over conflicts with the ceo and after multiple earlier allegations of corporate wrongdoing when is the last time you saw an entire board quit i can recall one. Instead of planet of the apps as silicon drama real live one silicon board drama are off the charts boards are so important in the private economy. Venture capital guys wielding their power. Again, are these people on the board, are they actually helping with the governance of the company or are they people sign on to a cool concept that looks good in this case they say lone wolvesed wolves advise the company. Its not clear to me the world was crying out for this product. I do like i tried to make it myself. You beat the egg its very hard a chef friend said there are certain things you dont have to go beyond store bought im relieved to hear it that does it foreclosing bell today. Fast money begins right now. Fast money starts right now. Live from the nasdaq markets im melissa lee. Former pimco ceo and chief economic adviser mohamed elevatorerian is here a about yoburrito blowout and moments ago ibm, united airlines, csx all on the move. Well bring you the very