Transcripts For CNBC Squawk Box 20170502

Tell us volatility is back, but were not seeing it. This morning the vix is trading at 10. It marked the second time this year that the vix traded below 10. Overnight in asia, take a look and youll see the nikkei was up by 0. 7 . Hang seng was up by a third of a percent. The shanghai was down by a third of a percentage point. In europe, some of the early trading, things are relatively calm. Ftse up by a half percentage point. Modest gains for the cac and dax. Among the top stories, big news out of hollywood. The Writers Guild of america reaching a tentative agreement with the alliance of Motion Picture and Television Producers avoiding a Writers Strike. They reached an agreement just after midnight. The Writers Guild had threatened to strike today if an agreement was not in place. Infosys making a big bet on america. The Company Announcing it will create 10,000 jobs here in the United States of the next two years. Those jobs will focus on the cloud, Artificial Intelligence and big data. They plan on opening four new facilities in the u. S. With the next one by summer, august of 2017. Higher oil prices helped boost bps earnings. They reported earnings of 7 cents a share on revenues of 55 billion. Lets tell you whats on the agenda. Another beg round of names reporting resultses before the bell. Conoco phillips, mastercard, merck and pfizer. After the bell closes today, we have apple. Well talk to an analyst about what to expect from apple. The fed kicking off a twoday policy meeting. The central bank expected to hold rates steady, but investors looking to find out when and if they will hike next. The fed statement will be out at about 2 00 p. M. Tomorrow. In washington, house panel will be holding a hearing today to examine Consumer Airline issues. In co this comes in the wake of a viral video showing a United Airline passenger being dragged off the flight. Oscar munoz from united will be in the hot seat along with others. United settled that case, but it took quite awhile in doing that. As a result it stirred things up. Well see how this plays out. See if congress does anything. On monday, Warren Buffett will be joining us for three hours, live from the annual Berkshire Hathaway meeting in omaha. Berkshire is the largest owner in many of these airlines. Also also be joined by Charlie Munger and bill gates for the 8 00 hour. That is monday at 00 a. M. Eastern. In other washington news, President Trump says he is considering breaking up the nations biggest banks. Its a promise he made on the campaign trail but put it on the back burner. Major averages slipped and rebounded on the news, while government bonds hit the highs of the day. Bank stocks dipped and then rallied with investors taking a winwin view that breaking open the banks would offer smaller firms opportunities. When that headline crossed, you saw the Immediate Reaction t lost a half percent on the s p financials. But time stopped within the corner offices of wall street at the same time. The algos did this, but within big wall street, there was a freak out moment. Until they went back and looked at it and realized this is not something he was intending to roll out or talk about. We heard some of these issues already from steve mnuchin. I dont think he does it. If you really think about it, if youre trying to goose the economy f thats the prism with which you look at the world, by default you would slow down the economy in the shortterm during whatever transition if you didnt think banks were lending when doddfrank was getting announced, the same thing will happen on the flip side. President trump went on to say after that that we are looking at making sure the banks lend again in that same interview, within moments he said were looking at some of these issues but also want to make sure the banks lend. Its important to understand other people, democrats most notably, put this forth as well, it didnt get support. So how is it going to poass at all . You need congressional action to do this. Im not sure the administration is 100 behind this. Only brought up when asked. No other time. About 100 Community Bankers were at the white house yesterday. This was on the brain, if you will. They were also talking befo abi two tiered system regulating banks, but in his head that may be his version of glag seeingssl 2. 0. We will talk with more about this with barney frank at 7 30 a. M. Eastern. The white house touting the bill as a win for the government. Eamon javers joins us now. He was hanging out on the lawn there yesterday. Eamon . Thats right. In fact at that briefing you mentioned with sean spicer i asked sean spicer directly does the president favor breaking up the big banks . Spicer gave me a longwinded answer that did not say yes or no. It said the president talked about this glasssteagall 2. 0 on the campaign trail. He said hes been in consultation with steve enough be and others and that the white house doesnt have anything to roll out at this time. My sense is this is not on the front burner, this is not imminent or a plan they have to roll out, but its dramatic when you have the president of the United States talking about the idea of breaking up the big banks at all. Especially a president who comes from the political right and thats something that is an idea thats more societies yassociat Elizabeth Warren and political left. But theres a weird populism thing that dovetails, where you could see a political deal around that idea but nothing like the ground work you would have to lay has been laid for that. Mick mulvaney laying out the administrations case for why the spending deal is a good deal for the Trump Administration. Here are his bullet points that he made yesterday with reporters. He said the budget deal gives 1 21 billion for defense including 9 billion for ready chb readyness. He said theres no money for a new border wall, but got money for maintenance on the existing wall. They expect the president will sign this later this week on thursday or friday. And then there was this moment yesterday at the Milkin Institute conference in beverly hills, california. Wilbur ross speaking before a crowd of financiers talking about the strike on syria that donald trump took. The moment at maralago when donald trump informed the chinese president , xi jinping saying this happened, it was in lieu of afterdinner entertainment. The thing was it didnt cost the president to have that entertainment. That being widely seen as a gaffe by wilbur ross to refer to a military strike as afterdinner entertain the. That will get some attention today as will the president s call later today with vladimir putin. A lot going on in washington. Foot in mouth. We know wilbur. Im going to im going to generously say foot in mouth. He has a sense of humor. I will leave it there. But on just to put a fine point on this issue of glasssteagall 2. 0, that weve been tossing around here, you talked to spicer yesterday. You hear gary cohn talking about things, and when you talked about the idea of Elizabeth Warren on one end, the administration on the other, how do you see his view about it . What do you think that he that is inspiring him to do it . Garr cohy cohn specifically . The great irony here is if you had a former president of Goldman Sachs being viewed skeptically by the left as a bankster, but heres a guy arguing for breaking up the big banks. Ultimately i dont know what gary cohn is pushing behind the scenes. I cant put him on either side. But there is a push pull inside the Trump Administration between the Establishment Republicans who would not be inclined to take on that idea. And some of the populists who would say, look, ultimately if we have to bail out the big banks when they get in trouble, they do not believe doddfrank solves the problem of too big to fail, and if we have to bail out these banks, lets make the cost smaller. Also you could see it as a pro jobs argument, if you break up the banks, all the efficiencies and economies in scale they have by being so big, they will have to lay off people, there will be a jobs implication if you have ten citi banks instead of one. Eamon, yesterday wenanke ot. , he said there is a specific area in doddfrank, section 2 or title 2 title 2, the living will issue that explains how to break up a bank. If doddfrank is repealed, and that is taken away, his point was there would be nothing taking care of that. Its odd to talk about repealing doddfrank and breaking up big banks at the same time. Maybe theres parts of each that you wanted to take and consider. This is a question thats never been fully resolved bisince 200. Under doddfrank you would have the living will provision, the banks with have to spell out what to do. Ultimately the criticism from the Trump Administration of doddfrank is that it didnt solve too big to fail. In fact the banks got bigger rather than smaller after doddfrank. The argument being ultimately its a safety net and lets make the banks smaller so when they go under they dont bring down the rest of the system. I asked tim geithner about that in 2011. There was talk about breaking up the big banks that year. His point was you shouldnt lock at the size of the banks, you should look at the interconnectedness of them in the Financial System and thats the problem. Well see if the Trump Administration lands there. Eamon javers, thank you, sir. You bet. The markets have a lot to digest this week between earnings, the fomc meeting, april jobs report and all these headlines out of washington. Is it time to buy in may and stay and play . Joining us is eric knudson, and bruce kasman, chief economist from jpmorgan. Welcome to both of you. Eric, lets talk first about these headlines out of washington from the president yesterday. Lets talk about the big banks, potentially breaking it up, not just that headline but the idea that on any given day you could have Something Like this royaling the markets. What does that mean in terms of investing . Should mean volatility will go up, but we have not seen that. The key for us is looking longer term. We tend to invest with a 12month horizon, that allows us to look past the shrtd chop. Weve been saying volatility will rise that has not been the case. We saw a little bout in late march, now its being priced out as the major geopolitical risks recede. The French Election that gone pro europe last week. We think that will be finalized sunday. Even with the Trump Administration uncertainty, things are not plague out to the fears of major antitrade, major if youre looking at this longer term, is all this just noise . Theres a lot of noise. You have to distinguish the signals, and twl ahere are only few, but the signals from the noise. The signals are that the Global Economy is in a cyclical upswing. You see it less so in the u. S. Theres enough data to tell us things are moving forward, but in europe strong evidence of growth. Pmis, business confidence, still a strong monetary stimulus environment in our Global Allocation Fund we have been taking gains from s p 500 large cap stocks, moving into european equities, emerging markets, japanese equities. Bruce, lets talk about the u. S. Economy. We got that weaker than anticipated gdp number. First quarter stunk for many years going back. What do you think is happening in the economy . First of all, it is a bit of a puzzle the First Quarter gdp number. Its ban per seen a persistent thats been followed through stronger news and in the First Quarter, labor markets were solid, manufacturing picked up. Our core view is that the u. S. Economy is a 2 animal right now, in a world that the global story is really what matters. How much improvement were seeing prodab ablybroadly there. We think well rebound in the second quarter. We got a disappointing consumption number yesterday. We think the auto sales number will show pick up into april and payrolls on friday will show solid news. I think the economy is on sound footing. The u. S. Is the center of attention on politics and policy but not whats happening in the Global Economy. We heard this idea that other areas may be seeing more growth, other markets may be a better place to play. Youre basically saying your growth protections are telling you the same thing . No doubt. Were seeing a broad fading of disinflationary drags that head meernlg mark held emerging markets down and thats a fullfledged support for global growth. I think we accelerated sharply into the start of the year. We think well consolidate here in the next few months. So you wont be seeing consistent upside surprises. But well see solid growth. If the u. S. Does what we expect, rebounding off of that puzzling First Quarter, theres a reason to think theres e. This is a solid economy. Just a lot of noise around what i think will be relatively Little Signal on u. S. Policy or european politics. Eric, is the set up of the markets, are they concerning in that when the vix is so low it draws ctas into being long equities . It almost feels like thats whats happening now. When you have a vix below 10, you have the markets at record highs or within a percent or two of record highs, with valuations where they are, the leadership is very narrow in terms of the largest stocks and the stock market leading the way, how you are feel being this market overall . It feels like its set up for a spike in volatility. The nature of shocks are that you cant see them in advance and people are pricing out the known concerns that everybody has been worried about. We think the next surprise could be the fed raising in june. We think one thing not priced in the markets are only pricing in two hikes this year and fewer two hikes in the next 12 months which is out of line with the fed dots, despite all the evidence that chair yellen is determined to normalize rates. We talked about the concerns around the Financial System. What is more important that when there is a shock that the fed has dry powder to act. We think that the rising rates will help certain sectors. Where you are more finely priced, you could get some hit there. We could take our marginal exposure and Smaller Company stocks where we think theyll benefit from whatever tax reform comes through, which really is not priced in the markets yet. Thanks for being here. Coming up, apple set to post results after the bell today. Well tell you what apple could do with its 2 250 billion cash. Squawk box will be right back. welcome back to squawk box. Apple releasing results after the bell today. Analysts will be watching for iphones sales growth, comments from co tim cook about the tech giants 2 250 billion cash pile which was the story of the morning yesterday. We will make it the story of the morning today as well. Dan arnst will help us break down what could be on that buying list along with what you are expecting this afternoon. Right. So when you take a step back, what is fascinating is apple is up 26 year to date, 60 in the last year, but still trades at a discount to the market. Under 16 time s earnings, the market is still at 1 time8 time. I never like on apple getting to a market multiple let alone a premium. But 18 times earnings around 130, 30 a share in net cash. So theres room for upside but they need to have growth. So the bar is reasonably well. Analysts are looking for 5 Revenue Growth this quarter. Only about 2 iphone growth. So, they need to hit those numbers. The stock is not trading on what will happen this afternoon. The stock is trading on what will happen next fall. Precisely. It wont even be this fiscal year. The phone comes out the last week of september. Most of that is hit into the december and march quarter of next year. Its really fiscal 18 that were talking about. Even then, all the excitement about the iphone 8, their tenth anniversary phone, the expectations are not that big. Im looking at numbers from all the different banks, 5 , 7 growth for the ix phone. Its not that demanding. So im on every gossip and tech gadget site, you can go to those sites, too. Boy genius and the like. You have seen anything that exciting about this next phone . Heres the beauty as a product guy. The two things that really matter for apple, the two things that apple and the iphone need for growth are installed base and replacement rate it doesnt matter if its an old l. E. D. Screen or an lcd screen that is better. The camera doesnt matter. A better battery everyone always asks for. They have between 650 million and 700 Million People around the world with an active iphone connecting to apple every day. If that replacement rate was just 3 years, 215, 245 million phones. You dont think if you want to goose growth the only time weve seen the growth sort of outside growth is when they changed the size of the screen. Most of that well, we had much higher growth rate before that. But most of that growth came from china where there was an appetite for larger green e. Scre screens, and that is just when you were getting 3g and 4g in china. You dont think it matters whats in the phone. I dont think it matters. Thats kind of sad. People will replace their phones no matter what. It doesnt matter if its a camera or an old screen . The people in china, that bought the 6, theyre sitting on a 3yearold phone. Sorkin is sitting on a 3yearold phone, too. I am, too. Im waiting for this. I waiting for something magical to happen. I want the better camera. I was in a meeting with a big bank, they had come back from china. One thing that is interesting is that theres new stickers you can buy to make the bottom of your phone look like you have the iphone 7, because the form factor is literally the same. So you cant demonstrate you bought the latest phone. So bingo. They just have to look a bit different. You can say i have the latest phone. When you put it down on the table or go to dinner. It doesnt matter. Every phone is a little bit better. But it just matters when you hit that point in time if you could have tim cooks attention for 30 seconds what would yyou tell him to do with the cash . I like what youre doing with the cash. Which is what . Nothing. Nothing. 12 billion a year in buybacks, dividends, and i have a great return on the stock. I think theyre taking a balanced approach. But tim did say on the last call that size is not necessary lay restriction. That he gave all the speculators a little bit of hope that maybe they spend a little bit more money. So tell him what you want him to buy. I think for them, the way he presented it is that its really about fit and strategy. So its it sounds like youre saying apple is not a growth stock anymore. I think theyll grow 16 next year. But when the market is growing 5 and youre trading it at a discount to the market, youre theres really nothing not to like. The other thing thats fascinating is the bears have really receded to the sidelines. Thats true. I want them to come back. Every time the bears have a big story, its a phenomenal time to buy apple. Theyre playing you out. Okay. Nice to see you. Good to see you. When we come back, the gop pushing for a vote to repeal and replace obama care. Freedom caucus member Morgan Griffith supports the bill. Congressman griffith will join us next to explain. Whether its connecting one of the worlds most innovative campuses. Or bringing wifi to 65,000 fans. Businesses count on communication, and communication counts on centurylink. Welcome back. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning, everybody. Welcome back. This is squawk box live at the nasdaq in times square. Lets look at the u. S. Equity futures. Things have been slightly higher. A mixed day yesterday for the markets. The nasdaq did set another new record. This morning the nasdaq is indicated up by 8 points. Dow futures looking like theyd open up by 10 points. S p indicated up by 1 point. Another big week in washington with republicans pushing healthcare reform, tax reform and the bill to fund the government. Joining us now is representative Morgan Griffith of energy, also member of the Energy Committee and the Freedom Caucus. Welcome. Thank you. Good to be with you. Let me ask you about healthcare, do you have the votes in the house for it to pass . I dont think the votes are there yet, were inching closer. I doubt it will be this week from my feel of the way things are going. But we will get it done in the next week or so. Latest wall street journal survey indicates 19 House Republicans oppose the bill now. The gop can only lose 22. Thats a tight margin. How do you feel about those numbers . The numbers are certainly indicative of how this is a tough process. And how were trying to work through it itit. Its a tight rope for everyone to walk, but were doing the best we can. Were required to do a kabuki dance in a straitjacket just to get a bill over there, but i cant control the senate. In terms of the spending bill, theres certain things the president had to give up which were hallmarks of his company, funding for the defunding the epa, and youre saying you may not have the votes. Is this a loss because the democrats are calling this a victory. I dont understand why we negotiated away some items in the budget if the idea was to push health care through, why we would negotiate away things the democrats wanted when we should be working with with republicans on those issues. If we were going to get democratic votes on the bill, thats a different story. They said none of them will vote for the healthcare bill. Im not sure i understand what the strategy was. Around here sometimes things work out in the end, you dont see it coming. Well have to wait and see. Within the gop, what are the major sticking points now . I think that spending is up. There is no indication of a willingness to Start Building the wall. Theres money for security on the southern border. No wall money. Sanctuary cities are left alone. Planned parenthood is still funded. And for healthcare . For healthcare, its a question of is it conservative enough for some members and does it do enough for others . So, you know, were very close. But close is not good enough. So were still trying to figure out ways more votes can be added to the column of yes. My belief is that this is a better bill than what we have currently in law. Therefore we need to move forward and then continue to reform in the next year or two after we get this bill off the table and over to the senate and get something passed. So youre voting for it, but im curious, because it seems like the republicans worse enemy are republicans at this point. What is it . What are the specific issues within the bill that is dividing or not enabling you to get enough votes to bring this to a vote . Let me say this. The real problem here is that democrats will not negotiate on any item at all. Theyre not willing to discuss it. They said they wont vote for it maybe once we passed it but you guys dont have enough votes. The republicans dont have enough votes. Even if the democrats are not willing to negotiate, republicans dont seem to be able to negotiate to get some unity within the party. Theres all kinds of negotiating going on. People are talking every day. Meetings are occurring all the time to try to figure out how we can hit that sweet spot. When you try to undo something as completely complicated as the obamacare packpackage, its not easy. You have to make sure everybody has something to take home and talk about and were close, but not there yet. I think thats the point. Even within republican ranks, its hard to find cohesion on such a bill. Trying to put this together, even if you pass it through the house, is there any way that the senate will pick it up as well . Will the whole thing get ripped up and you have to start from scratch . The senate will change it to some extent. Well ha well have to see what they do once they get it we just have to get it over there. We have to make sure we have nerf memb enough members get it to the floor of the house. The preexisting conditions is the issue de jour, theres debate out there about whether it will be covered. I dont think theres question that it does. You get down to one narrow issue, if someone does not have insurance and they suddenly have a preexisting condition, do they have to pay more just in the first year for insurance than they would otherwise have to pay . Thats the issue. Its not about preexisting conditions in general. Its about people who have preexisting conditions who do not maintain Health Insurance. For some reason find themselves without Health Insurance for more than 64 days, then coming back into the marketplace do they have to pay more for one year . Thats the question mark. And how do we deal with that and how much money do we put in there to try to deal with that. Thats the only issue currently related to preexisting conditions. And i agree with the president. We want to make sure those folks are taken care of. Congressman, thanks for joining us. Thank you. Congressman Morgan Griffith. The broad principles in the white house plan for tax reform mirroring the changes the kansas governor, Sam Brownback champion when he took office five years ago. Ylan mui joinsto peek e. The bir the passthrough rate on Small Businesses. Right now its literally zero. Thats good for a Third Generation Manufacturing Business that makes food proc s processing equipment. Theyve been able to reinvest 8 18 million back into new technology and new jobs. Kansas governor Sam Brownback said there is a lesson there for the white house. Im hopeful Going Forward people like President Trump, that are looking at this, i hope theyll do it, the Small Business tax cuts, thats a key place to get growth. I think it needs to be it needs to be tightened in on the target. That flip side is that its really expensive. The state is facing a 1 1. 4 billion budget shortfall over the next two years. The impact on schools is turning a local entrepreneur against these tax cuts, even though they benefit his business. Weve shifted too far towards cuts and not enough in investment in the future. Its my hope we right that ship. Now the movement to repeal these tax cuts is growing. So what happens here in kansas could drive the debate back in washington. Over to you. Ylan, so we understand, i know were hearing from businesses, theyre talking about it as somewhat i dont know if theyre talking about it as a success, i would think every policy person i know thinks this is one of the grandest values. You have the Credit Rating downgraded, you have the spending cuts, you have what is called a propetual budget crisis. Who is saying this is a good thing . Theres a split between the Business Community here in kansas. So the Kansas State Chamber of commerce is backing this. Farmers are backing this. Agricultural community is backing this because so many Small Businesses, Family Business can take advantage of this however there are some businesses, local chambers of commerce, the Kansas City Chamber of commerce, theyre the ones in the Business Community are saying maybe this is not a good idea. Its more important to invest in the longterm. Matt condon said he is having trouble recruiting workers to come to kansas because when workers do, they budget the school system, she the shortfalls, and theyre not sure they want to send their kids there. So theres an impact of drawing people to the state. Ylan, thank you. Coming up, well talk to barney frank to react to President Trumps comments yesterday that he would consider breaking up the big banks. And its Small Business week in america, Linda Mcmahon will join us on the squawk set. And another shakeup at fox news. Well talk about the future of the network with Michael Wolff. Stay tuned, youre watching squawk box on cnbc. Its been ov 100 years since thfirst stock index was created, benchmark for average. Since yet a lot of people still build portfolios withtrategies that just trke the bencarks. But investing isnt about build achieving avere. Its aut achieving goa. And invesco believes doinghat today requires the art anexpertise of highconviction vesting. Translation . Believes doinghat today requires why invest iaverage . Sed car, welcome back to squawk box. Right now its time for the executive edge. The u. S. State department has issued a travel alert for all of europe saying that u. S. Citizens should be aware of a continued threat of terrorist attacks throughout the continent. The state department cited recent incidents in france, russia, sweden and the United Kingdom and said the Islamic State and al qaeda have the ability to plan and executed terrorist attacks in europe. Bitcoin jumping to a record high and a spike in Global Trading volume especially in japan. In global news, the mexican and u. S. Governments agreed to extend the deadline for negotiations over a solutioner agreement until june 5th. The news comes amid heightened tensions between the two countries. Mexico is due to ship about onethird of imported supplies this year. When we return, 3d prints is getting faster and cheaper. Well be joined by the ceo of desk top metal, the Company Unveiling a new system that can replace parts of Companies Supply chains. As we head to a break, a quick check of whats happening in the european market. Things are higher across the board. The ftse and cac up 0. 4 . 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Com ok welcome back. We have dow components out with earnings. Starting with merck. Merck came out with numbers that beat expectations on the bottom and top lines. Earnings are an adjusted 88 cents a share. Street was looking for 83 cents a share. Sales of 9. 3 billion, versus 9. 2 billion expectations. Some of the sales lines looking through, remicade down. Animal health sales were up by 13 . The guidance that the company now saying its even adjusted number of 3. 76 to 3. 88 a share. Street was at 3. 81. So the high end is a little bit higher than had been anticipated before. But again that stock right now looks like it was up by about 2 . Now we should take a look at pfizer numbers. Pfizer did beat on the bottom line. 69 cents versus 67 cents the street was looking for. The revenue line was just a little bit lighter than had been expected. 12. 8 billion versus the 13 billion the street was anticipating. Pfizer saying it sees earnings of 2. 50 to 2. 60 for the full year. The streets estimates right in the middle of that at 2. 55. Okay. We are going to change topics for just a moment. I love stories like this. These startup stories are great. A new 3d printing company, its not so new just yet but a Company Called desk top medal is out with a new printer that it says is 100 times faster than anything before it at a fraction of the price. The tech is being used by caterpillar and bmw and could eliminate the need for parts suppliers. Joining us founder and ceo of desk top metal. Youre going to put parts suppliers oud of business . Parts suppliers are our customers as well. What happens is you can now take parts that would have been made out of or some would have made out of hundreds of parts and consolidate them into a single component. Lets just show what you showed me. This is a metal pedal right here. Right. For bmw . Thats correct. For a formula one car. All made out ofits printed. Yes, it was out of a very High Performance alloy. And its much lighter because its a honeycomb sort of design so its not solid. But its metal, its not plastic . You can feel it. Its amazing. So this is two here we go. What do you have here . What we have here is the way that people have made pooarts f probably thousands of years, which is molds. This is a cast part from caterpillar. Right. What you have here is a stainless part that was printed. Right. That replaces this, and one of our customers, caterpillar has warehouses with millions of parts. And they have a brand promise of keeping machines in the field for 30 years. So when they need to do service or support, now they can print the parts instead of have so this gets rid of the vac try or the warehouse. All the tooling thats required to actually because we can print it, theres no tooling. How much does a printer like this cost . So the we have two systems. The prototyping system allows you to print parts in an office starts at 50,000. And then we have a Production System for high volume throughpart that starts around 360,000. How quickly can you print one of these relative to the way theyre currently made . In the Production System you can make hundreds of these per hour. I mean the bigger implication for manufacturing is that you can actually test things, correct . Instead of actually making the mold i mean it used to be a very laborious process in order to put together a jet engine, for instance. Here you can actually 3d print something and adjust it right away and print a new part, and so that Development Time line is compromised greatly. Oh, yes. You go from prototype into production and you can do a short run. This is cheaper than casting up to 100,000 units. Can you then do a short run and do another short run. In the short term is this being used as a prototyping system or do you see this as people using this for production . For the past 20 years, the first 20 years of the industry was mainly prototyping. And that will continue to grow. But now you can start to do it for production. And thats a huge deal. Think of all the parts that are in shapes going all over the world. Going through tariffs, and youll just send a digital file and print it. Why can you now do it on fullscale production . Whats changed . Its a new process thats 100 times faster and uses materials that are much lower cost. Closer to raw material cost. The prior generation of processors which used lasers give an example in terms of what the cost would be for a manufacturer whos going to make that, for example. Whats the difference at this point . Yeah, so, here youd need to spend money on a tool. Amortize your tool over a run of 10,000 how much would the tool cost, for example . If its a large run it could be a 100,000 tool. A 100,000 tool. And then youre going to amortize that down so each one is going to ultimately cost what . The cost of the metal is not that much but you have all the labor to do it. Where here the cost of the metal is not that much and a robot does it for you. And it can do this part. And then next morning does a different part. And how big a part can you actually make on this thing . And the reason im asking is im starting to think about what all the parts that are in a car. There are little parts many big parts. I think the next five years it will be parts that are roughly this size and then eventually bigger systems. Were showing a video while youre talking. So why dont you put the camera back on him and show us the size of what youre talking about. Yeah, so, i think our first mass Production Systems are 14 inches by 14 inches by 14 inches. What does that part look like . On example of something. Roughly, a little over a foot on each dimension. The complexity of the parts, theyve increased over the past five or six years. I went to a 3d printing factory that printed parts for jet engines, for ge. Yeah. And they showed me parts that had mechanisms that were basically hinges and it was all one piece out of the machine. There was no assembly required. I mean, how much has that advanced since then . Huge. So ge is one of our investors. Together with so, and you can actually do assembly. So you can consolidate lots of parts into a big assembly and have moving hinges and parts inside. Theres no other way to make these parts other than 3d printing. As engineering gets more sophisticated you couldnt make it by hand if you wanted to. Final question. Sure. Im thinking of the losers in this. All the people youre competing against. Do they end up trying to buy you when this is all over . How does this work . We want to build a big company. I think this is a long arc. Right. Its one day in every office where theres engineers theres going to be machines so they can do their prototyping and then in the factory theyre just going to make the parts this way. So okay. Thank you. Appreciate it. Very cool. Coming up, bank stocks slumped briefly yesterday after President Trump said he would consider breaking up the big banks. We will talk Financial Regulation with former congressman barney frank straight ahead. [weather reporter] governor has declared a Winter Weather emergency. Announcer soon, Insurance Companies wont pay for damages, that is, not if they can help prevent damages from happening in the first place. At cognizant, were turning the industry known for processing claims, io one focused on prevention with predictive analytics. Helping them proactively protect the things that matter most. Get read because were helping leading Companies Lead with digital. Big pharma. The fed and financials in focus as the markets get ready for the opening bell on wall street. What you should be watching and where you can make money coming up. President trump says he is considering breaking up big banks. Former congressman barney frank was the coauthor of a bill that brought Sweeping Change to wall street. He will join us to talk about what change should mean for the industry. And giving Small Business a boost. Fda boss Linda Mcmahon will join us to talk about the president s plan to keep the engine in the economy running. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning, welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square im Andrew Ross Sorkin along with becky quick and melissa lee who is hanging out with us this morning. Joe is out today. Take a look at the futures right now. See how things are setting themselves up before the market open. Were going to show you that chart. As we show you that chart. There it is. There it is. Dow looks like it would open up about 16. 5 points higher. Nasdaq up about 7. 5 points. And the s p 500 up about 1. 5 for now. It is day one of the twoday fed policy meeting which should tell you no change in Interest Rates expected this time around when the policy statement is issued tomorrow afternoon. As always investors will be examining that statement, however, to see how the fed feels about the pace of future rate hikes. Also a hollywood Writers Strike appears to have been averted. The Writers Guild reaching a tentative agreement with Hollywood Studios after talks extended past the deadline. And united boss munoz has a hearing on capitol hill today appearing before the Transportation Committee talking about a recent incident in which a passenger was dragged off a united flight. The Hearing Centers on Airline Customer service and how it can be improved. I imagine some congressmen may be dragging him through the proverbial mud, if you will, today as well. Good clips to send home, that for sure. At minimum there will be some theater. Stocks on the move, dow component merck reporting quarterly profit of 88 cents a share, five cents above estimates. Revenue beating forecasts. Merck raising the full year outlook. That stock is popping in the premarket up 1. 5 . A mixed quarter for rival drugmaker pfizer. It earned 69 cents a share for the First Quarter. Two cents above estimates. But revenue missed street forecasts. That stock up just fractionally. An adjusted it 2. 71 per share for the First Quarter beating estimates of 2. 37. Revenue also beating forecasts with the insurer saying the year got off to a sol it standard. Aetna did report an overall loss related to the termination of its deal to urge with humana. That stock higher by a third of a percent. As the fed gets set to kick off its policy meeting joining us is Jeremy Dearen and bill irving, Portfolio Manager in the fixed Income Division at fidelity investments. Great to have you with us. Jeremy i will start off with you. Market devaluations, record highs, are you putting fresh money to work . Is that what youre telling people to do . We are. We think were still in a bull market and this is confirmed by the strongest earnings season weve seen in six years. We have about twothirds of s p 500 have reported earnings. Earnings are going to be up about 14 yearonyear. This confirms that the bull market is intact. That especially given the fact that the spread between stock valuations and bond valuations is still attractive. Largely because of the very low bond yields. But still at 20 times trailing earnings and 17. 5 times forward earnings valuations dont seem stretched to us and we dont think that theyre going to limit nearterm gains. Bill, when are yields going to go higher . I think the Federal Reserve is still on track to raise Interest Rates two more times this year. My best guess would be in june and september. I think were seeing more confidence from the fed. Almost across the board. Than weve seen any time since the financial crisis. The yield curve is going to rise, longer rates i think its an open question. Over the next five years, i think its quite likely well hit zero again. I dont know if you ever look at the vix. When you take a look at the volatility index at low, do you think selloff in bonds should be more pronounced . I think it is remarkable how low implied volatility is both in the stock market and in the bond market. And also yield spreads. You know, high yield Corporate Bonds, Mortgage Backed securities, theyre all fairly tight. Were recommending that investors build up some dry powder and look for a better entry point. Bill did you just say you think rates are going to hit zero again in the next five years . I think that theres a decent chance that we will rehit the zero lower because you think were going to go into a recession and the fed will react . I think that the probability is decent given that theres still such a small cushion between where Interest Rates are right now, and where zero is. Whats going to send this back . Well, its not clear exactly what will do it. But certainly one open question is how is it going to proceed . Is the fed lets their Balance Sheet run down . I mean they had a 4. 5 trillion Balance Sheet next year. I would guess that theyre going to let 300 billion of it run off as those excess reserves leave the system. What is going to be the Market Reaction . Meaning that you cant you dont think the fed will be able to raise rates as quickly because they have to deal with the Balance Sheet . Its an unknown. And i think that there is a decent scenario that its harder for them to unwind their Balance Sheet. Than they think it will be. Harder meaning the market will react badly . Market will react badly. And as a result that will keep them from being able to raise rates. As they grew their Balance Sheet risk assets did very well. Right. As they shrink their Balance Sheet its certainly a risk that the opposite could happen. Do you think thats youre bullish on the market so you obviously dont think thats the scenario. I dont think that the fed is going to be very aggressive in terms of raising rates. I think this is going to be a very slow and pragmatic tightening cycle. Weve had three rate hikes in the past year and a half. We are looking for two more rate hikes this year and when the fed starts to shrink its Balance Sheet i think its going to do at a very slow and tempered pace and really look to see how the markets react. Keep in mind when the fed was buying bonds during qe3 they were buying up to 85 billion a month. Were thinking theyre probably going to start to let the Balance Sheet run off at something around a 15 to 20 billion a month pace be very telegraph this in advance, and then see how the markets react. Theyll you guys may not be in a different position. What bills saying is that, look, odds are in the next five years well run into some sort of trouble. The fed will need to expand things. If we havent raised rates very quickly, if we havent run down the Balance Sheet very quickly, it doesnt leave a whole lot of room. Do we wind back up at zero percent from . I doubt we find back at zero. Were looking athe a couple rate hikes this year, a few next year and should see the end rate closer to 2 and that gives us some room to lower rates in an economic downturn. Plus i think an economic downturn in the next one to two years seems exceedingly unlikely given the growth momentum in the economy today. Given how deliberately and slowly theyre going to let their Balance Sheet unwind, and that takes longer for rates to normalize and gives more opportunity for something bad to happen and for us to rehit the lower balance. Given your outlook how do you invest to reflect that . As i said, weve taken a more cautious stance right now. Were using this as an opportunity to get closer to our benchmarks, which generally which last year we had, you know, Corporate Bonds did very well. We had a big overweight to Corporate Bonds. Bringing that down, buying more treasuries. Treasuries would do well in that scenario. Also just closer to home and gives us dry powder if we get some event that shock spreads wider. Maybe, you know, i dont know exactly what that will be. But, were just being patient. Where are you investing right now, jeremy . Are financials under the scenario in which theres going to be tightening going on, whether it be because of Balance Sheet maneuvers or through actual raising of rates, do you like financials here . We do. Weve been overweight financials since before the election. We continue to be overweight glass spiegel and all that . I dont think thats as big a concern. I think the primary driver is going to be where rates go. The relative performance of the financialses have the market has been highly correlated with the ten year treasury yield. I think ten year treasury yields are biased higher here at a rate of just 2. 30 today. I dont think were going to see a dramatic backup in rates but a little uptick in longterm rates. More dramatic uptick in shortterm rates plus a general long recovery for earnings. Last year was difficult for financial earnings in the First Quarter on track to be up close to 20 . Bill, how concerned should we be about student loan defaults in auto loans . Well i think, you know, Student Loans is an interesting case because its been credit has been so available in the student loan market. Coincidentally the price to go to college keeps rising at a rate far in excess of the general Consumer Price index. And i think those two go hand in hand. Easy Lending Conditions lead to rising prices. And weve seen this play out before. Remember, you know, the financial crisis of 2008 and home price is an easy lending there. So i think the thing to keep an eye on is, in the longterm, i think right now thats all that Student Loan Debt is preventing people from, you know, buying a house. Because theyre sadled with so much debt. If there were at some point in the future relief on that student debt i think it could lead to an increase in homeow r ownership and that could be very positive for the economy. You say all this stuff with a smile. Youre predicting like a crash we could look at another recession coming on. I got to listen to you very closely Student Loans would be helpful for the economy. Good thing you say it with a smile. Oh, my gosh bill and jeremy, thank you. Earnings crossing the tape this hour Konica Phillips missing the mark. Analysts had been looking for earnings of a penny a share. That stock is higher by almost a percent. Coming up, the copresident of fox news bill shine parting ways with the cable news giant in scandals at the network. Details and what it means for the future of the network is next. And Linda Mcmahon says regulations are stifling Small Business. It is her job in the Trump Administration to spur Small Business growth. Stay tuned youre watching squawk box on cnbc. The comft in knowing where ings are head. Beusas we liveonger. Anmarks continueo rise and fall. Price is one thing you ne in retirement to help protect what yve earn a ensure it lasts. Introducing brightfinancial. A new company establis yve earn a e metlife lasts. Totalko your advis about a brhter financial future. The power of 100 of the world p compie power of a proven 15ytrack record. The poweof an etf. The power of qqq. The king we puin, poweurliesportfoo at powerares q. Befo invting nsid the Funds Investment objtives, risks,haesnd expses. Call 8009830903 for the prospectus containinghis informatn. Re it cally. Distribuby invesco distritorsnc. Containinghis informatn. Re it cally. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Welcome back to squawk box. Look at the futures right now and we have seen markets indicated higher all morning lock. The s p looking at about two points. Dow looking at 16. 5. Nasdaq looking to add on to its record close 8 points looks like the gain at the open here. Lets take a look at some stocks to watch today. Barry dillers iac is buying angies list. The deal values the Consumer Review website operator at about half a billion dollars. Iac will combine angies list with its Digital Home Services marketplace business, which is called home adviser. And create a publicly traded Company Called angie home services. Angies list shares up by 41 . Advanced microdevices matching estimates in the latest quarter but the shares were under some pressure down by 12. 5 after some disappointing growth margin forecasts. Even though they raised their profit forecast for the year, its the the issue that theyre looking on Profit Margins that really hit the stock hard. And Tenant Health care posting smaller than expected adjusted loss. The Company Announcing a deal to sell its acute Care Hospitals and related facilities in houston to hca holdings. Tenet also says that all of its Hospital Centers and physicians will be phased back and to ensure humanas network starting next month. As a result that stock is up by 15 . Okay. Bitcoin jumping to a record high. Analysts pointing to a spike in Global Trading volume, especially from japan. Theres been a greater interest in the crypto currency from longterm investors who may have also helped trigger that rally. In washington today a house panel will be holding a hearing to examine Consumer Airline issues. This comes in the wake of the viral video showing a United Airlines passenger being cragged off a flight. That case has since been settled. But it was unsettling enough to make Congress Weigh in on this. Uniteds Ceo Oscar Munoz will be in the hot seat along with high level executives from American Airlines and from alaska air. And on this point we have a programming note for you. On monday, Warren Buffett will be joining us for three hours. Following the annual Berkshire Hathaway meeting in omaha. Berkshire hathaway is now the largest owner of many of these airline stocks. Well be talking to them about this issue and much, much more. Also be joined by berkshires vice chairman Charlie Munger and microsoft cofounder bill gates for the 8 00 hour. All starts monday 6 00 a. M. Eastern time right here on squawk box. When we come back, President Trump says that he is considering breaking up wall street banks. Could a new version of glass steagall be on its way . Well ask former congressman barney frank in just a little bit. In the meantime check out how the financials have performed since President Trump was elected. Take a look at that stock chart all the way back to november 9th. Up by about 18 . Squawk box will be right back. Time now todays after lack trivia question mrdiaz mple procedure re ju goi to ne alinsion here, thenreon gin and remove yr 7 rvetet. Myettetjust gall de you dont ha. Aflac payi youash, so you might ha to sehat swttmore funny jui. Just to cover your rent. But papa gave. Tha. Car. What do you wish youad . Afla ohh, i le inthat. Th canhkeep your festylee you lohealthy with to. Afla th ciits whexpedia. Nd up. You lohealthy with to. Everything in ace, soou can travel the worlbetterer apparently, i kept her up all night. She said the future freaks her out how come no one likes me, jim . Intel just think of everything intels doing right now with Artificial Intelligence. And pretty soon ai is going to help executives like her see trends to stay ahead of her competition. No more sleepless nights. Were going to be friends im sorry about this. Dont be embarrassed of me, jim. Im getting excited about this we know the future. Were going to be friends because were building it. This week is national Small Business week and kate rogers is hitting the road to highlight some different entrepreneurs and their contribution to the Entrepreneurial Ecosystem this year. She is in chicago with more on the force of the great entrepreneur. Good morning. Hey, andrew, good morning to you. Well, chicago immigrant entrepreneur eduardo rodriguez, hes part of a growing demographic in this country, in fact the Kauffman Foundation says last year immigrant entrepreneurs were more than twice as likely as native american citizens to launch new businesses. Rodriguez, hes been at it for years. He launched his company which imports mexican treats and candies from his home country. He launched in 1995 shortly after nafta was put into place and says that his hard work has paid off over the years because now he has a chain of four locations across the city. I am grateful that i have had this opportunity to do this in the United States. I know it takes a lot of work and it takes a lot of sacrifice. But after all, when you go to the final balance, the reason that you came over anyway from wherever you come from. As the debate over immigration policy rages on nationwide, chicago mayor rahm emanuel is not backing down, even with threats from the Trump Administration to pull federal funding from sanctuary cities like chicago. Emanuel says part of the reason why is that immigrants are true job creators. Dont tell me youre proSmall Business but youre antiimmigrant. Inconsistent. They dont work together. I dont think its in the interests of the city to be threatened. Id rather have a partnership with the federal government. But no mayor could ever back away from the values of tolerance, openness, and opportunity. And for good reason the Kauffman Foundation does point out that nearly onethird of all new businesses in this country were created by nonamerican citizens. So immigrant entrepreneurs last year alone and in chicago in this metro area there are 110,000 Small Business entrepreneurs in this city alone guys. Pretty stunning fact. Back over to you. Okay. Thank you for that report, kate. Were going to have a lot more on the state of Small Business when we hear from sba administrator Linda Mcmahon. We have a lot of questions for her about what she can do to help spur the growth of Small Businesses. When we return, will President Trump bring back some version of glass steagall . Glass steagall 2. 0 . Were going to discuss that with the coauthor of the doddfrank wall street reform, former congressman barney frank will be joining us after the break. Right now, though, as we head to a break take a look at the u. S. Equity futures. Futures have been higher all morning long. We have two dow components that have reported both pfizer and merck and when i last looked both of those stocks were trading higher. Looks like dow futures are indicated up by 16. 5 points. S p futures up by close to 2. The nasdaq up by 7. 5 after closing at a record level yesterday. Stick around. Squawk box will be right back. Good morning on this tuesday morning, welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square. Sot some stories front and center. Morgan stanley the latest wall street firm to announce it is lowering commissions. It is capping commissions for brokers at 2. 5 of a trades value for stocks, etfs and annuities. Greece has now reached a deal with its lenders on a variety of reforms that will unlock new cash to repay upcoming debt obligations. That news helping to push greek Government Debt yields to their lowest since october 2014. Also President Trump reportedly preparing to replace a top banking regulator. The wall street journal reporting this morning that comptroller of the cushionsy thomas curry could soon be out and that the change could happen this week. The comptroller of the currency is the chief regulator of federally chartered banks. We talked about the impact of legislation and we talk then the impact of regulation and things you can do on your own that have huge impact without meeting even just a light touch on enforcement is deregulation in effect. Exactly. President trump announcing yesterday that he has signed an executive order creating a new technology council. The councils goal is to transfer and modernize the u. S. Governments Information Technology systems. Around 20 ceos of Tech Companies are expected to attend meetings at the white house in early june. Chris ladell will be the director of trumps new American Technology counter the former cfo at microsoft and general motors. An apple insider reporting that several major Tech Companies have quietly killed their apple watch apps. Google, amazon and ebay reportedly removed support for their watch apps and Software Updates that were rolled out at the end of april. The Companies Announced they were pulling the apps and the removals have gone largely unnoticed. Suggesting the apps werent widely used. I should also tell you, theres some other speculation out there today that apples next big product is going to be a competitor to the apple echo im sorry, the amazon echo. That they may be coming out with some kind of and google. Like a google home device or an echo alexa device. Obviously i imagine using siri. I was going to say siri being the common thread. Its a serious, horrible actual Voice Recognition. I mean that seems like to be a major problem with having a device where youre vocally giving orders or requesting information, and its a Voice Recognition technology is not good. Then the whole experience would be terrible. There are two things going on. Okay. One is that the echo and the home have better microphones than your phone does. Ah. Okay. All right. Thats a huge thing. The microphones matter. The second piece is siri tries to do a lot. Perhaps too much. I think one of the reasons that people like the echo is even when it doesnt know the answer it just tells you, i cant do this. And you only ask it things that you know its capable of doing. Which is different than siri. Siri is sort of apologist im saying siri sort of started with this idea that they were going to be able to answer any question. Google will stop you. I ask google questions and it says i dont do that yet. I think its a very important trade for anybody we like that in people, too. I do not know. Right. All right. In earnings news this morning, bp topping estimates by a penny as Higher Oil Prices helped boost the companys bottom line. The oil giant reporting earnings of 7 cents a share in its First Quarter on revenue of 55. 8 billion dollars. The shares this morning are up by 1. 6 . And Konica Phillips missing the mark. The oil giant posting a loss of two cents a share. Analysts had been looking for earnings of a penny a share. President trump announcing his intention to examine reviving the glass steagall act which separated consumer and Investment Banking businesses. Joining us right now to talk about the fate of bank reform is barney frank the former congressman of massachusetts and the coauthor of doddfrank the wall street reform and Consumer Protection act. And congressman thank you for being here this morning. Glad to. We have heard the comments from the president yesterday. It may not have been something he was intending to announce but it did catch the markets by surprise when he said he was looking at the revival of glass steagall. We heard rumblings from the administration about this before but it was the first time the president really said this. What did you think when you heard those comments . That the continued incoherence of policymaking at the highest levels in the Trump Administration is an ongoing problem. Maybe this is one more thing thats more complicated than he thought about. You know, its a perfectly legitimate argument to have. But hes gone for months now talking about things that are different. And it just leads, i think, everybody uncertain. The House Republicans on the committee House Republicans Financial Services committee have just put out a proposal that goes very much in another direction. It has never traditionally been much Congressional Republican support for glasssteagall. Theres been some. The key issue is this, glasssteagall should not be seen. Its a very legitimate policy debate to have but it is not a substitute for bad regulation. Banks had the right to make the mortgages with glasssteagall. There were no standards that said you cant lend money to people who cant pay your back. Secondly, the whole derivative, unregulated deriffive trading, again that would have been perfectly legal under glasssteagall. Just remember we close with this, Lehman Brothers failed and then aig needs to be bailed out. Neither one of those would have been affected by glasssteagall. So, yes, its a good debate to have. But the notion that its a substitute for regulating bad subprime mortgages, putting derivative trading in a more market oriented focus, that would be a grave mistake. Barney, i think people are coming at this from two different sides. Theres one side thats talking about this in a regulatory from a regulatory perspective. I think the Trump Administration to some degree is talking about this from a growth perspective, which is to say that if you could effectively divide these firms and unleash the Investment Banking side, which has been ultimately corralled by the regulation that maybe you would grow the economy. Do you buy that argument . No. First of all, its interesting, todays wall street which i was reading as i was waiting to come on talks about how Goldman Sachs has gone big into the lending business. Yes. And so it would cut off that source of loans. You would tell Goldman Sachs no get out of the lending business. But secondly the implicit in your question is that you would separate Investment Banking from Retail Banking and not regulate. And heres the flaw in that. It is true that the initial impulse to regulate banks was that they got deposit insurance and you wanted to protect deposit insurance fund. But in 2008, we had a crisis triggered by aig that didnt affect the deposit insurance fund. You had an Insurance Company that started selling an obscure until then form of derivative called credit default slots there were 170 billion in debt beyond what they could pay off. Thats were the Bush Administration stepped in and bailed them out. The problem is if you simply impose glasssteagall and then remove the regulations, as the question suggests, and i dont mean you, but thats the rationale for it, nothing stops the then investment banks like aig from incurring debt in derivatives they cant pay off. One of the most important things we did in the bill was to say, not that you cant do these derivative tradings. We dont ban it. We said do it in the market, put them on exchanges where possible. Right. Make sure you have the margin and capital to back them up. So allowing investment banks to go in to a unregulated sort of set of rules the way they had before is very risky. Barney, on both the right and the left there are pockets that believe the banks are still too big. That too big to fail is not dead. Where do you come down on that argument . Well, first of all, ive been struck because i ask everybody who makes that argument how big is too big . You know, Lehman Brothers, which the failure of Lehman Brothers in 2008, remember, triggered the crisis. Thats what led the Bush Administration, hang paulsen and ben bernanke whom i respect a great deal to say weve got to change things, we cant live with this. Lehman brothers was i think 700 billion dollars. If the argument is we cant allow any institution to be so big if it was going to default on its debts it would cause systemic problems, everybody would have to be less than 700 billion. That would be ee norm housley earth shaking and i think for that reason literally nobody, not senator sanders, not Neel Kashkari would give me even an approximate number. Secondly i think theres a flaw in that. The problem is not when banks are too big, its when their indebtedness is too big. Thats the issue. Part of what we did in the bill was to put in rules requiring capital and other things, getting rid of some of the riskier behavior where what we said you want to take a risk, okay, but youve got to stand behind the risk. No more of you taking the risk and not have any skin in the game. What we try to do is reduce the indebtedness. But finally, what we say in this bill, ben bernanke felt he had to bail out aig. No Federal Reserve chairman of the future could do that. We made what he did in that situation illegal. I dont say it as a criticism. He had no options, i believe. But we have given him some options. If an aig came into the federal government now and said, we cant pay our debts and were going to cause this great problem, they would be put out of business, first of all. They fail. Barney but theres no such thing as too big to fail. Because of your law this is what the president had to say. I have so many friends of mine who had nice businesses, they cant borrow money he says, they just cant get any money because the banks just wont let them borrow because of the rules and regulations of your bill, sir. Is that right . Two no on two grounds. First of all, again, the wall street im preaching to the wall street journal today its my text. In their first major article about how goldman has gone into the lending business i read the following. Goldmans lending push comes as the Financial System is awash in capital. And demand for new loans is starting to flag. So the wall street journal in a reporting article says no, somethings wrong. Theres plenty of capital. The reason there may be a current drop in loans, and its been not recent, is that theres secondly front page of the wall street journal talking about tom curry who is going to be replaced by the single most Important Bank regulator the comptroller of the currency and says he has used his foes harangue large banks about risky lending, antiMoney Laundering systems, Community Reinvestment, and other matters. So hes got three things. Risky loans, antiMoney Laundering and community investment. 9 last two, Money Laundering and Community Reinvestment are not in the bill thats referred to by the names of me and chris. The fact is that much of what bothers even the small banks came not from us, but from efforts to stop Money Laundering, to stop funding for terrorism, to stop funding for drug. And i you look at this, so in terms of what we did, i need to know specifically, what does he want . Does he want more securitization without having any responsibility when you take loans and then sell them . Does he want to make it easier to make bad subprime loans . I dont know what specifics he this could be restricting lending. I think you think there are some regulations that go too far, too . Havent you said that youre in favor of banks under 10 billion being exempted from the volcker rule . Yes. But i would say this. First of all, it does not mean that there is less lending in the economy, as mr. Trump mistakenly thinks. Maybe he thinks it was Andrew Jacksons fault. Well hear about that i suppose in a subsequent tweet. The point is that there has been some migration of loans from the Smaller Banks to the larger banks. The loans get made. So its not a problem with the economy. And i have learned that some of the Smaller Banks are spending too much money, because they are worried about compliance. So i do think that the volcker rule should not apply. I didnt think it would to banks under 10 billion. And i think i would explore, and im open to a debate on saying that Smaller Banks would be exempt from the rules against subprime lending if theyre willing to make loans in their immediate area and keep them on portfolio. That i agree to. I hope youll come back soon to talk more about this, sir. Sure. Thank you for your time. Coming up, the copresident of fox news parting ways with the cable news giant amid scandals at the network. Details and what it means for the future next. And then Linda Mcmahon says regulations are stifling Small Business. It is her job in the Trump Administration to help spur Small Business growth. Well hear her agenda in just a few minutes. Stay tuned. Youre watching squawk box on cnbc. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. 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 to squawk box. Fox news dealing with another high profile departure following long time host bill orileys exit last month. Bill shine is officially out. Joining us now to break it down, Sarah Ellison, a special correspondent at vanity fair. Good morning to you, sarah. Good morning. Help us understand whats taking place here. And in terms of the palace intrigue, has james and lock ran murdoch reveiled over Rupert Murdoch . I would say if you looked at half of what happened with bill shine leaving that is the james and lockman sort of force for change inside of the Company Inside of fox news. Rupert murdoch ran this company in one very particular way for a long time. It was to prop up people like bill oreilly, bill shine and roger ailes, all of whom have left the company. These people arent necessarily they havent changed in any kind of dramatic way. What has changed is the management atop 21st century fox. Now James Murdoch is the ceo and he has a very different idea about how he wants things to go from what his father used to do. Whats interesting is that the moment that bill shine left the company, another key ailes deputy, suzanne scott, was elevated. So it sort of shows you the schizophrenia thats going on inside that company right now. And is your expectation they will ultimately bring in outsiders . Because thus far for the most part a lot of people have left, but as you just said, people inside, insiders, have continued to move up. Well, they brought in a new cfo, and a new head of Human Resources. Now those are jobs that arent particularly public facing. They could be significant internally. But, for example, the new Human Resources executive that came from ge, in fact, its people inside feel that these some of these people dont know really what theyre getting into. Fox has a very particular culture, and its hard to get to know it. And certainly these outsiders havent yet gotten their feet wet. Fox has been a profit machine for 21st century fox. Absolutely. And of course the big question is whether by losing both the talent on air and the talent behind them that they put that in jeopardy. Your take . Well, ive been talking to competitors of fox news and they think that fox news sort of has a stranglehold on this particular audience. Which is an ageing, male audience that is i mean fox has got a very particular political stance, especially now under Rupert Murdoch. Theres something about the way the fox formula that doesnt rely particularly on individual talent. And i say that only because when megan kelly left, earlier this year, everyone was placing for a big ratings drop and Tucker Carlson came in and kind of maintained those ratings and even improved them. I mean at a certain point you have to wonder can you take everyone out and will things will the ratings still hold up . But so far we havent seen any signs of weakness in ratings over there. Well have to keep an eye on that. Unless the sons have different plans for the network, sarah. I mean there are some others out there saying that the sons secretly are embarrassed by the political slant that fox news has, and would like to bring it into the 21st century, so to speak, 21st century fox, and maybe change the political leaning of the channel. I think that they know that they dont want to give up the market position that fox news has. Its an incredibly successful cable network. They wanted, certainly james and laughlin tried very, very hard to keep megyn kelly who was one of their stars. They failed to do that largely because of the way that she well for a variety of reasons, but she also was feuding with bill oreilly who was in fact the networks biggest star who left in his own Sexual Harassment scandal not long ago. So i think that they do have an idea of what they want the place to be but theyre not stupid enough to want to change the market position of what their father created with roger ailes. And so i think theyre stuck a little bit. They want to have a culture change. Yes they are, ive heard they are sort of embarrassed by some of what is on fox news. They certainly dont have the same kind of relationship that their father did with the talent at fox news but they also want the profits. They dont want to drive the company that they inherited from their father into the ground and fox news is a big part of that, possibly a bigger part of that than they would like it to be. Certainly this is a distraction from other things they want to get done like the deal for sky but thats the company that theyre running right now. Sarah, ive also heard rumblings about other potential startups that would take the people who have left and compete from the right to steal that audience. Right. Yes well certainly fox news right now, the atmosphere, and the market in right wing news and right leaning news is very vibrant right now. You have breitbart has become a force that no one could have really possibly anticipated prior to the election. Info wars and other names that we normally dont talk about on your air are certainly now sort of things to be reckoned with. I think that fox is sort of feeling the heat a little bit. Theyve become, again, very much competitors on all sides, talk about them as being sort of state television now, very, very much in line with the Trump Administration. I think that certainly Rupert Murdoch is thinking of that, and james and laughlin are thinking of that. At the same time, the audience that fox has, theyre not really going for over the top options. Theyre not young, millennials who are trying a new format. These are people who are really tied to their cable channels and their cable watching habits and i think that its harder than it seems to chip away at foxs dominance. Thats not to say that its impossible. There was some discussion about getting the quote unquote old band back together, being ailes, o oreilly and bill shrine. Whats the chance you see that happen and see sean hannity on twitter making noises about his displeasure about all of this . He has a contract from my understand just from your reporting and others through 2020. But if you brought that band back together, if you will, in an ott product either with another brand like a breitbart or on their own how formidable could it be . Well, i mean im sure people are looking at that right now, im sure some, you know, enterprising investment banker is examining that very possibility as we speak. I think it could be those are big names. I mean we have some of the biggest names in cable news at fox news. Sean hannity, he said that if bill shine left it would be the end of fox news as we know it. And thats a very powerful statement. The murdochs sort of called his bluff. Whether or not he stays im hearing that hes more likely to stay, and hes very loyal to the place. But it does hang over the entire network as sort of the sword of damocles. Who is going to leave neck . Ten seconds, does it change the sky deal . Does this pave the way sky deal gets done . Shine maybe. Maybe. I mean they certainly dont want to lose that because a bunch of sexual harassers are still hanging around the network. Thank you, sarah. Thank you. Coming up Small Business administrator Linda Mcmahon is our guest as we head to break lets take a look at futures at this hour. Also major averages pointing to higher opens today. I sneeze. There goes my sensitive bladder. Sound familiar . Then youll love this. Always discreet. Incredible protection. In a pad this thin. I didnt think it would work. But the super absorbent core turns liquid to gel for incredible protection. So i know im wearing it. But no one else will. Always discreet. Ive discovered incredible. Bladder leak underwear that hugs every curve. Cant tell im wearing it. Can you . Always discreet underwear. For bladder leaks. Welcome back, everybody, President Trump had no direct government experience before taking office. Instead, he had decades of business experience, and that is perhaps why Small Business optimism jumped in december and has stayed elevated ever since. Now Small Businesses are going to be front and center for the next severalization as sunday kicks off this years Small Business week. For more on this we are joined by the head of the u. S. Small Business Administration Linda Mcmahon. Maam, thank you very much for being here. Thank you. What a treat to be here. Lets talk about Small Business because optimism did soar. It skyrocketed as soon as they learned that donald trump was going to be the president. It has stayed there. Why why is that a good thing to have happened . And why should they feel like their confidence should stay there . Well, certainly, that did happen. Over the past three or four years weve seen startups and businesses decline. And so now there is this renewed optimism, that coming back, they think theyre, you know, President Trump when he was campaigning, has been a candidate, talked about tax reform. Talked about Regulatory Reform. So when he was elected, you know, that optimism really did flow through and you saw many more startups again. And so that is part of what i want to do at sba. I want to continue to revitalize. You know, that spirit of entrepreneurship. And you can feel it. Its palpable. In talking to Small Businesses. The confidence soared but now we need to see things actually happen. I know regulation has started to be rolled back. Thats something the white house can do without help from congress. But when it gets to things like tax reform its a little stickier. Actually getting these things through. Were seeing that kind of process take place. Do you have a time line on what you expect for any of these things . And how would you say an important level of regulation versus tax reform . How much of these things matter, whats going to be the real issue . Well i think the immediate relief in terms of my talking with Small Businesses, really around the country, is Regulatory Reform. The tax reform is going to be great. Especially if it goes through with the 15 , and that can be passed through to, you know, llcs, thats going to be terrific. But immediately, the Regulatory Reform rollback really does help Small Businesses. Its not necessarily any particular reform or any particular regulation. Its just the stacks and piles of regulations that they have to comply with. A Small Business owner is typically the ceo. But also could also be the janitor. So youre trying to get everything done and wear that hat and its really difficult then to comply with all of the regulations. And that really does suppress business. Are you seeing the actual hiring amongst Small Businesses, and lending taking out loans . Are you seeing that increase . I mean, we its one thing to have these animal spirits out there and its another thing to actually see it result in something and already we know in the First Quarter commercial industrial loans lending was down. And so we didnt really see it in the numbers necessarily. Well, on sba Loan Portfolio is up about 9. 5 right now. Is that a quarter . Over last year. Over last year. Same time. So, thats a really good indicator for us. That were having more and more Small Business owners come and talk to sba, seek their loans. You know, sba does things other than guarantee loans. I think its as important, its the counseling and the mentoring, government contracting, and an sba also as part of disaster relief. So the tornadoes and floods and everything that come through, thats a division of sba as well. So its a big todo. The president just yesterday mentioned this idea of bringing back glasssteagall perhaps in part to grow the economy in terms of separating commercial and Investment Banking and maybe with the idea that it would actually create more loans. Have you had a conversation with him about that at all . Ive not. Ive not had any discussions about glasssteagall. Weve really been focusing on, you know, driving Regulatory Reform, tax reform, and counseling and mentoring our Small Businesses. We have a combined resources of our womens business centers, our score centers, our Entrepreneurial Development centers, about 1,000 of them around the country and last year we, you know, we saw about 76,000 new businesses start and that was just amazing. And a lot of the folks who come in have a good idea about how to start this because they dont know how to put together their Business Plan or get their marketing going. And they dont know how to access capital. So its a full program. And this week, you know, honoring all of our 29 Small Businesses, you know, around the country is really awesome with national Small Business week. So we kicked it off sunday. We had the Vice President and a ivanka join us yesterday for an awards luncheon. There are things going in washington. Im going to be going to indianapolis and dallas and fresno after i leave new york today. So really touching so many Small Businesses around the country. Mrs. Mcmahon we hope youll come back after that tour and tell us a little bit about what you learned. Id love to do that. Thank you for having us. Helping us celebrate national Small Business tour week. We want to go on the tour with you. Come conaboard. We love Small Businesses. Appreciate it. Coming up when we return, Trump Campaign adviser and former newcorps ceo dan dimicco is going to join us. Were going to talk trade, the economy and much more. And john yarmuth is going to talk to us about congress lastminute spending deal and tax reform. Tures going to be a nightmare does nobody like the future . Cmon, the future. He obviously doesnt know intel is helping power Autonomous Cars and the 5g network they connect to. With this, wont happen in the future. Thanks, jim. Theres some napkins in the glovebox. Okay, but why would i need a napkin . You could have just told me a bump was coming. We know the future. Because were building it. Its your glass of willpower that helps keep cravings. Far, far away. Feel less hungry with the natural fiber in clinically. Proven meta appetite control. From metamucil. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Earning central. The nasdaq set to open at a record high again as wall street counts down to the big report to watch after the bell. Apple. One of indias largest tech firms takes a cue from President Trump and makes a bet on america. First on cnbc interview with the ceo straight ahead. Plus from the sky to capitol hill united Ceo Oscar Munoz on the hot seat following outrage over a passenger being dragged off a flight. The final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning, welcome back to squawk box right here on cnbc. Were live at the Nasdaq Marketsite in times square im Andrew Ross Sorkin along with becky quick and melissa lee. Joes off today. Take a look at the futures right now ahead of the market open. Dow looks like it would open up about 15. 5 points higher. Nasdaq higher as well up about 9 points and the s p 500 up about 2 points. Lets show you the 10year note right about now weve been talking about the 10year note and bonds this morning as well, 2. 334 is where we are at the moment. Among todays top stories, the fed kicks off its twoday policy meeting today. The central bank is expected to hold Interest Rates steady, but investors will be looking for hints that the economy is on track for a hike in june. The feds statement will be out at 2 00 p. M. Eastern time tomorrow. In washington, the Trump Administration reportedly plans to replace top banking regulator thomas curry. That is according to the wall street journal. Curry was appointed as comptroller of the currency by president obama for a five year term which expired in april. The comptroller overseas hundreds of Bank Supervisors stationed inside large financial firms. And one of indias Largest Technology firms is bringing 10,000 jobs to the United States. We spoke to the ceo of infosys. Good morning, becky. Another International Firm feeling the pressure to get in President Trumps good graces. The iconic firm infosys pledging to hire 10,000 American Workers over the next few years. This follows criticism from lawmakers over infosys, and indias broader i. T. Sector accusing these firms of abusing the h1b visa program and stealing u. S. Jobs. I spoke with the ceo of infosys who told me a shift away from these visa programs has already begun. More and more as we look at the future we have to decrease the dependency on visas, and increase the development and bringing together of local talent. And that is something that weve been working on for the last couple, 2 1 2 years. The indian tech giants plan to bring jobs to america marks a sharp turn in the companys growth strategy, which has centered around offering outsourcing and Consulting Services to u. S. Clients at a low rate by leveraging indian talent. Infosys bet on america includes four tech hubs that will train American Workers in Technology Services like cloud, Artificial Intelligence and big data. The first one will be built in indiana. The Vice President s home state. Todays announcement is seen as a win for the white house, and it also sets up potentially an encouraging backdrop to President Trumps meeting with indian Prime Minister Narendra Mody in washington, d. C. Which im told could take place this summer. Infosys not doing a whole lot today but still down about 4 since the election. Becky . Seema, thank you. Is this an entirely new move for infosys . As you pointed out i think of infosys as really taking these jobs, making sure theyre leveraging cheaper indian talent for these things. Is this the first time theyd be building plants or centers like this here . They have been slowly hiring u. S. Workers. This is i would say the biggest launch of this beggar plan to expand into the west, counter the reform that might take place on h1bs and really try to hire american talent. All right. Thank you. Two dow components out with earnings this morning merck reporting quarterly profit of 88 cents a share, five cents above estimates revenue also beat forecasts. But the company also raising its full year outlook. That stock is now down by a quarter of a percent. It was a mixed quarter for pfizer. The company beat on the bottom line but revenue missed street forecasts. That stock is now down 1. 1 . Other earnings news coach reporting a profit of 46 cents a share for its latest quarter. Thats two cents above estimates. The hand bag and accessories maker helped by a drop in discounting activity and that stock seeing a pop of almost 6 at this hour. And republicans on the hill urging President Trump to take a step back from trade after putting nafta on the chopping block. Heres what commerce secretary wilbur ross had to say about the trade agreement on cnbc. Nafta is an ancient treaty. Its decades old. Neither our economy nor the mexican nor the canadian economy are remotely similar to what they were back when the deal was done. Theres nothing in it really about the digital economy. Theres relatively little in it about the service economy. And in the sections that it does address, some of those are also clearly obsolete. Joining us right now, former new kor ceo dan dimicco who also served as economic adviser to the Trump Campaign. Good morning to you. Good morning. Was it the right thing for the Trump Administration to back off on getting out of nafta . Or would have you gone all the way . Ive got to put that in the category of fake news, andrew. All throughout the campaign, and i was involved on the trade side of things, as an adviser he was very clear. We cannot continue with nafta the way it is. We want to renegotiate it but if we cant get a deal favorable to making America Great again, then we will leave. But its always been negotiations have always been part of the conversation. The rhetoric has been strong at times. At most times, and it still is today. And he just did an interview the other day where he just repeated that. Said listen, if we cant get the deal thats best for america and American Workers, we will walk from nafta. Just to clarify, youre referring to what being fake news . The fact that hes changed his position and backed away from walking away from nafta . He has not backed away from it. And it never was intention to immediately back away from it. His intention all along was to negotiate. And negotiations fail he would back away from it. Fair enough. You could make the argument, by the way, that striving and discussing it the way he did actually gave him negotiating leverage which is to say that once there of news that did emerge that he was even thinking about walking away from nafta it forced everybody to the table. Well he got two phone calls that night. I mean, so you can take it from there. Fair enough. Help us with this. Theres also a lot of talk about steel in the United States, using u. S. Steel, but also the idea that a number of u. S. Companies who said that ultimately they think they need to bring in steel from, and import steel. How do you think about that right now . Well, thats just more of the, you know, chicken little the sky is falling. The Steel Industry in the United States is running at 75 of utilization or less. Theres plenty of steel for pipelines. Theres plenty of steel to go into pipes. And that will not be an issue. Now, there may be some issues in areas that include valving, and fittings. And but the made in america steel, use america steel stuff, only applies if you can do it here and get it here. And if there are things that cant be gotten here right away, then theyll have an exception to that. But i will add i will add one thing to that. The whole plan all along, on what the president is putting forward, is to create an environment in this country where the companies who make those fittings, and make those valves, will want to reinvest and 3wi8d those facilities here in the United States, and bring jobs back here. Thats the whole intention of the fivepoint economic plan. His trade reform. His tax reform. Et cetera. And nobody can say that jobs arent going to come back. Because theyre coming back all the time. Thats what i was going to ask. Are you seeing evidence yet of Companies Making those investments thus far . Yes. Or is there something is there another domino drop in terms of that they need to see Something Else happen . Well, listen, trump has set the stage in his first 100 days for the successful implementation of his fivepoint economic plan. Hes also set the stage for successful trade negotiations, and trade actions. Hes done that by walking away from tpp. Hes done that by instituting two 32 cases begun steel, one aluminum with more to come. Hes appointed very, very tough negotiators with bob lighthouser and wilbur ross and neater navarr navarro. Hes done everything he said hes going to do, set it up for success. 100 days is 100 days. I was part of the transition effort and our plan all along was you have 100 day milestone, a 200 day and a oneyear and hes right on track. Hes laid the groundwork and set the stage for everything from obamacare repeal, to immigration reform, to trade reform, and tax and economic reform. Dan, just to go back to the little bit of sparring that were seeing right now between the steel companies, that definitely want to see steel being used, American Steel being used, and some of the Pipeline Companies that would like to be able to have the freedom to do other things, youre right, President Trump has come out very strongly in favor of trade and made in america. Is it your contention, though, that even though he has been behind a lot of the transcontinental pipelines companies, too, that if push comes to shove those Pipeline Companies have been wanting to have freedoms not to use American Steel, if push comes to shove hes going to stay with his promises to the American Steel companies . Absolutely. Its not just the American Steel companies, the workers that put in an office that are represented by the manufacturing community, that includes the Steel Industry, and the welders, and make the pipe, and so on. He absolutely will adhere to it. And listen, i personally sat down, in the last two weeks, along with the ceo of nucor, with a Pipeline Company, who had those concerns and by the time we were done having lunch they were very comfortable with the fact that the u. S. Steel industry and nucor in particular could meet their needs on steel for pipe and theres certainly plenty of capacity to do that. Dan is National Security a real concern when it comes to whether or not we use steel imports . And if so, because if it is, one would imagine that anything that was built with imported steel might have to be reviewed. If youve got a pipeline, you think theres National Security concern about imported steel, that pipeline should be reviewed, no . Well, listen, if the pipeline is gotten to the point like the transatlantic continental one did, or the trans whats the correct name for it the one from cana canada, i apologize, but the the Keystone Pipeline . Yeah the Keystone Pipeline. The steel was already bought. All right. Now theres 200 miles of pipeline that still needs to have the steel bought for, and theres already been a commitment from the Pipeline Company to buy americanmade steel and americanmade pipe for that 200 miles. Everything Going Forward, the president is very clear on. You will use americanmade steel and pipes will be manufacturing from that steel in the United States. However, there may be certain things like i mentioned before, fittings and valves that have to come from outside until that capacity can be built here. When you set the incentive system up to improve our global preparedness it will happen. Just like the Car Companies came here with the japanese and the germans. And Everything Else thats coming to this country from outside investment, it will happen, and those are all good things. Dan, real quick, one of the last pieces of the conversation that people have been having about taxes these days is the b. A. T. , border adjustment tax, whether it will come back. Some members of the house are still hoping to put it on the table. Where do you land on that . Listen we have a huge disadvantage from a manufacturing standpoint in the United States in competing with the world. The value added tax is something that the wto allows all countries in the world to use, and get and use it in a way that it acts as a subsidy on exports from those countries and a tariff on imports from countries basically to the United States. Were the only country in the world that really doesnt have a value added tax system. We have an income tax system and the wto will not allow us to rebate that the way they do the vat tax. With mexico in particular border adjustable tax is important because they have a vat tax of 16 . And that, again, acts as a subsidy for their exports and a tariff on our imports. That needs to go. That needs to go in one way or another, and a b. A. T. Can do that. Fair enough, dan. Great to see you, sir. My pleasure, andrew. Thanks. As we head to break we just got earnings out from mastercard earnings of 1. 01 a share six cents above estimates revenue also exceeding forecasts. If it opens up here this would be at least a new 52 week high for this stock. The fed kicking off its policy meeting today but First Exclusive results from cnbcs fed survey. Well tell you what the nations Top Economists and Money Managers say about the next rate hike. Plus the viral video that sparked global outrage is back in focus today. The united Ceo Oscar Munoz and other executives are heading for the him for what is sure to be a heated laerg. Well tell you what is at stake and later another shakeup at Fox News Media guru michael wolf says the real question is can the murdochs save themselves . Hell explain. Youre watching squawk box on cnbc. Kevin, meet your father. Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond James Financial Advisor can do for you. Because when you really, really want to be there. But you cant. cheering at cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready. Because were helping leading Companies Lead with digital. Welcome back to squawk box everyone. Its been a busy morning for earnings. Aetna earning 2. 71 per share for the First Quarter. That beats the streets estimates of 2. 37. Revenue beating forecast with the insurer saying that the year got off to a solid start. Aetna did report an overall loss. However, it related to the termination of its deal to merge with humana. That stock is up by 42 cents. Hotel operator hilton came in ten cents above estimates with revenue also exceeding forecasts. The company also raised its fullyear forecast as customers booked more rooms at higher prices. So what does the street expect from the fed tomorrow . Results from the fed survey are in. Steve liesman joins us with the results. Good morning, thank you. No surprises about what the fed will announce tomorrow. 98 of our respondents see no change in Interest Rates. But there is debate and division about the outlet for fed policy later this year including how its going to unwind that 4. 4 trillion balance. 42 top Money Managers, investment strategists and professional economists. We did it april 27th to the 29th. And 98 expect the fed to stay on hold this week. 65 are looking for the next rate hike in june. 53 say three rate hikes in 2017. And theres a debate the rest are at two or around four and 71 say the Balance Sheet will decline by january 2018. The remainder say it happens by june. Thats quite a bit earlier than some had expected in the prior survey. Take a look at the outlook for rates. A lot of stability in this. What you see here is where our survey is and where the fed is, in their forecast. The average fed official. 1. 4 for the end of this year. 2. 2 for 2018. 3 for 2019 and the long run also being 3 . What is the next screen . This is where theres a lot of division. You were talking about this in the last hour. Is the fed going to stop hiking rates when it cuts the Balance Sheet . 4343 with 15 in the middle. Then we asked an interest question which is how do you gauge all of this . How much is a quarter point rate hike. The average is 300 billion. So were going to 300 billion is the equivalent to a quarter point. My guess is that number to the economy in terms of in terms of the effect. Effective tightening. What is the equivalent of a quarter point hike and they said 300 billion dollars. My guess is that would go up. So as the amount of of Balance Sheet decline goes up as a merge of the Balance Sheet well see as having more of an impact on the economy. Right now continuously adjusts. Right. One more thing i want to show you, 72 expect the fed to taper the reinvestments. Now which is a way of rolling off the balance. How do you do it . They have all this principle comes due. What the fed is likely to do according to this survey, they will say this month were going to not buy back 20 . Not reinvest. Right. And do that over time. Its a more steady way of kind of getting rid of the Balance Sheet instead of saying were either selling, or were dumping all of it as it rolls off. And if i might whats important about this discussion as complicated as it is, it shows why the Balance Sheet is a really tricky thing. The fed has to communicate all this. Im sitting there telling you trying to understand or explain the market expectation for this. Theres a lot of moving parts. How much Balance Sheet rolloff is equal to how much Interest Rate . How do you do this . The fed is going to, i know right now theyre trying to figure out the plan. Not only the right plan for the economy, but how to communicate that plan in a way that the market can expect. But per month in terms of how much will be wound down, how much is that expected to be . Im just trying to figure out if 305 billion is going to be a quarter of a point. Right. Then how many months will it take to reach ive heard estimates from 20 to 40. Is what ive heard. Billion dollars like a full year. Ten months. You know the markets better than i do. The market doesnt say, oh, theyre rolling off 20 billion this week. Theyre going to say okay the fed is going to roll off 200 billion this year and thats what it will price in. Very quickly. We had a guest in the last hour who suggested that well be looking at Interest Rates at zero again sometime in the next five years he thinks because were going to get into a rescission, and we wont have raised rates far enough to give us much ammunition. So as a result he thinks well wind up back at zero. This is the expectation. Ben bernanke has talked about this yesterday. Talked about it in a lot of his commentary. The expectation of the Economic Community right now is that zero is a more likely phenomenon than it ever was. I believe there was one study that said you can expect zero Something Like 40 of the time. So zero more likely than 5 . Lets think about why thats true. If bern quietal are correct that the funds rate is going up to a lower rate than previously, if our top is lower than it ever was, movements down toward zero two steps forward one step back. Exactly. So the fed is thinking about this is why the fed may want to run with a slightly higher Balance Sheet. They want to have more flexibility in that. This is the future for your children. More zeros, and maybe more qe as well. 234e6r getting out of this. Its a were never getting out of this. Think about weve got to its the real rate that economists think matter. And thats why bernanke said yesterday not quite as stimulative. You think the nominal rate subtract inflation and thats the rate that matters. You just lost me. Well come back and do the whole rate look. Thanks steve. Oscar munoz is among Airline Executives who will be testifying today before congress after a series of controversies including this viral video that sparked global outrage. Not this one. One where theyre dragging the guy off. Were going to tell you what to expect from that hearing right after the break. Welcome back to squawk box everybody. On the same day that some of the nations top Airline Executives head to capitol hill to face tough questions, yeah, this video has emerged. It shows a fight breaking out between two Airline Passengers just before a flight was set to take off from tokyo to los angeles. That is a really long time to sit next to somebody after this fight. Today in washington, the house Transportation Committee will call on united Ceo Oscar Munoz and other executives to try and testify on the industry and whats been happening. Phil lebeau joins us from the nations capital. And phil, as tough as that video is, at least there are no airline employees involved in that one. Right, right. And becky its going to be a very long day for united Ceo Oscar Munoz. And understandable, because he is going to be blasted by members of congress who are going to say, look, lets look at this video again of dr. David dao being dragged off a united flight about three weeks ago. We should point out oscar munoz may be the most high profile executive who will appear on capitol hill today. Yes hell apologize again. Hell talk about changing the culture at united. But other Airline Executives will be there as well and we will see other videos of incidents where there have been altercations between passengers and flight crews on different flights. This is another example last week where a Flight Attendant got into it with a passenger. Step away from the criticism. Because we know theres going to be plenty of that. The real question is will anything change . Will there be more regulation for the airlines . I wouldnt expect it. Here is the transportation secretary yesterday talking about what should be done with the airlines. The airlines have a responsibility to remedy the situation. Which i believe they are. Number two, we have made we want to let the traveling public know what their rights are so theres actually a passenger bill of rights which we have focused on the department of transportations website. Theres your answer. If the Transportation Department is not looking to add any more regulations, guys, whether its to stop overlooking, whether its to add other rules for the airlines, this is basically a dog and pony show on capitol hill unless we see members of Congress Actually introduce legislation it will be interesting to see what they have to say today and yes there will be plenty of criticism and everybody will say airlines are terrible, blah, blah, blah. Look at whether or not there will actually be anything put forth or brought forth by members of congress over the next several months. Phil, you bring up a really interesting point. It wouldnt surprise me if there was actual legislation that was brought forth by some of these individual congressmen. We had joe crawly here on our set talking about it saying its probably the only area you would say bipartisan support on both sides of the aisle. Sure. Because everybody has a horror story about the airlines. Right. For oscar munoz it wasnt the video that shocked me with this latest united stuff, it was the response kind of saying he was a belligerent passenger and doubling down on it. Thats what shockinged me. When you see the video its like wow, we need to reconsider our policies. Now united has done that. Dealt ha to has reconsidered some of their policies. And so has southwest. Southwest says its no longer going to do overbooking. There are going to be some changes from some of the individual airlines. Ill be curious to see whether or not there actually is legislation that is introduced. Its easy to say it should happen. Its far different to see that it actually will the airlines have done their best to change their own policies before having them changed for them. Well see how that all works out today. Yep. Going to be fun to watch. It will be. On a programming note by the waymon day Warren Buffetts going to be joining us live for three hours. Berkshire hathaway of course is the largest owner of many of these airline companies. Well get his thoughts on all of this. Were going to be there for the annual meeting. Warren buffett will be joining us live on monday after the meeting. Well be joined by scharly munger and bill gates from 8 00 to 9 00. The countdown to the april jobs report is on. Aprils employment growth is expected to bounce back. Joining us now to break down the pay check Small Business job index paychex president ceo. What are you seeing in the latest reading and does it jog what were seeing in terms of Small Business optimism . Optimism has decreased a little bit. Weve seen the same thing in the jobs index. Weve given up some of the gains that we saw in the first part of 2017 and were down about 0. 3 on the job growth rate from last year. So job growth is down just a little bit. How about wage growth . Are we seeing that improve . The paychex ihs index added wages this month and so were going to report on that every month. Wages are up about 2. 7 now over last year and right through 2015 we only grew about 2 . So this has been accelerating and if you take the last three months, and annualize that its close to 3 . So wages are up, could be full employment is driving, you know, a little bit scarcer resource and they have to raise wages and some of the minimum wages are kicking in, as well. What have you seen in terms of this particular Small Business index versus what we see for the jobs report . The monthly jobs report . Well its tied out very well. Its correlated very well with bls and i think we were able to, you know, able to show that jobs are decreasing a little bit. We showed that last month it went down a little. And now were down over last year a little bit. The other interesting thing is that there are a lot of parttime jobs. As a percentage of jobs that have been added over the last year were seeing more part time, and theyre at a wage rate around 16 an hour on average versus 27 for fulltime wages. Why do you think parttime jobs are on the rise . Well, i think because Small Businesses are a little more cautious. What were finding now is increased uncertainty. We did a survey of President Trumps 100 days and we saw that uncertainty is still up pretty good right now. I think the optimism that we saw at the beginning has faded a little bit. As Health Care Reform has kind of in and out. And tax reform, and one of the big issues with growth is uncertainty. Do i hire or not . And ill hire more part time than full. So its a showme it is. Showme situation right now. Very much so. When you look at tax reform and health care, which do you think of those two proposals, those two legislative moves are more important to Small Businesses in terms of hiring . Its very close. In the survey we saw very close, how they ranked it, was jobs, you know, job creation. Any policy for job creation then Health Care Reform and tax reform as the most important to Small Business. I think tax reform probably has the biggest impact on Small Business. Health care reform thats a direct link to lyring. Weve heard that Small Businesses dont want to hire because of what they have to at least full time. Correct. Because of what they have to do with that. With health care. Now whats happened as they had health care in place many Small Businesses theyre finding theyre reluctant to give it up because it attracts and retains employees so theyre finding id like some change with it. I think its actually but they dont want it gone. Most the majority want it replaced, improved, but not necessarily repealed totally. For some reason health care and tax dont happen this year you expect that job growth will go down . I think its all about the level of certainty. So if they feel like they know its not going to happen for another year, jobs may pick back up. If they know something is going to happen, at least they can plan better. When they cant plan, Small Businesses in particular are much more cautious about hiring. All right. Marty, thanks for stopping by. Good to see you. Coming up next, a busy week in washington. Were going to Talk Health Care and fax reform with the budget committees Ranking Member. Congressman john yarmuth is going to join us when we return. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Good morning. Welcome back to squawk box right here on cnbc live at the Nasdaq Marketsite in times square. Hollywood writers struck a tentative contract agreement with the studios. The two sides continued negotiations past last nights deadline successfully averting the first Writers Strike in ten years. Now the new agreement course a threeyear period. Separately the white house continues to seek a quick vote on Health Care Reform top aides are predicting a vote this week although President Trump himself says hes not setting a deadline. Its still unclear whether an overhauled version would have enough votes to pass in the house. A couple of guests this morning suggest we might not get it this week. Apple reports Quarterly Earnings after the closing bell. Expected 2. 02 on revenue of over 53 billion. The company also expects to say cash levels have exceeded 250 billion mark. Health care is in focus this week. A vote on reform is predicted to maybe come this week. Joining us right now is congressman john yarmuth the Ranking Member of the budget committee. Sir, thanks for being with us this morning. Good morning. Happy Kentucky Derby week. Oh, thats right. Its coming up on saturday. Getting retddy for it. Lets talk a little bit about health care. What do you hear in terms of where the republicans stand on a vote count . Do you expect it will happen this week . I dont expect it at all. Actually what i hear from my republican colleagues here is that theyre nowhere closer to having the votes than they were three weeks ago. So, you know, one whip count this morning had 21 against, 9 leaning against, and 57 unclear. That doesnt sound to me like theyre anywhere close to it. Weve heard from several of the Freedom Caucus members that they would now support it when they hadnt before. Is it because the changes in the plan that have appeased them have irritated some who are maybe more middle of the road . I think thats part of it. I think the other part of it is that the underlying legislation is the same legislation that had 17 popular approval just a few weeks ago. It cuts 880 billion out of medicaid block grants into the states that would leave 24 Million People without insurance. Raise premiums for older americans, so, the changes theyve made basically provide some flexibility to the states. But its flexibility to actually reduce coverage and i dont think that would be enough to change most peoples decision. You know, congressman, we just spoke with someone telling us about a survey of Small Business people that theyd been talking to. And one of the changes that has happened is, yes, Small Business people, Small Business owners want to see changes in the health care legislation. They Like Health Care because it has provided them with some ability to lure talent, which is different than we had originally heard out of Small Businesses that didnt want to be saddled with this at all. I think that explains the problem. A lot of people want changes to the legislation thats out there but it has become more popular than obamacare ever was when president obama was in office. Exactly. Is there anything that would lure you to work with the republicans to try and fix some of the big problems that do exist with obamacare or is this the type of thing where nobodys going to work with anybody else and well cut off our nose to spite our face . No, actually. I and many of my democratic colleagues have talked for years about being willing to work with republicans to improve the law. One of the things ive suggested is why dont you just propose to eliminate the employer mandate. Thats something i think youd probably get some bipartisan support for. It really doesnt seem for Small Businesses you mean . For Small Businesses. It would be seen, i think, as both a positive for workers, and for the Small Business owners. And pose five for Small Business owners. How is it positive for workers . Because a lot of owners are thinking they may have to play around with hourly workers hours. Theyve seen cuts in their hours so they stay below the threshold. Again, theres probably some black of hiring being done because owners are afraid to go over the overall minimum employment threshold. So i think it could be seen as a plusplus for both sides of the Labor Management equation. And again i think that would be something that theres not an official Party Position but i think there would be a number of democrats who could support that. Thats interesting. And it certainly comes at it from a perspective that our viewers would be interested in hearing what it means for business owners, what it means for employees, too. Why dont we talk a little bit about funding the government. We have kind of written off this whole shut down the government thing assuming that the bill that stands now will be approved and signed by the end of this week. Is that your guess . Are we correct in thinking that the Government Shutdown is not going to happen between now and september . Oh, i think thats guaranteed. This bill will have very significant democratic support, and as you know, i dont know how many republicans will be voting for it. I suppose a substantial number, but it will be an overwhelming vote in favor of that. I think the most important thing about it is other than keeping the government open is that it sets the framework for the budget debate for 2018. Which were about to begin. And i think theyre very positive signs from my perspective. Because if you remember, the president requested 30 billion for this interim measure, this fivemonth measure, 30 billion in added defense spending and cuts of 18 billion in nondefense discretionary or domestic spending. The actual final result was 15 million extra for defense. And 9 billion more for defense spending i mean for nondefense spending. So, you know i think when the president asked for 54 billion increase in defense and 54 billion in cuts in nondefense spending for next year, i think thats off the table for sure now and people understand what the dynamics of that discussion will be. Because the dynamics wont change. Any talk about a budget deficit Reduction Plan is kind of out the window because we do end up spending more on what both parties want to spend more on. I think thats probably right. And you know, we everyone knows that the real deficit reduction has to come from mandatory spending and thats a tough one. The entitlement promise. Yeah, medicare and medicaid and those things and nobodys willing to tackle that right now. The president said thats off the table. So there we are. Congressman want to thank you for your time today. Thank you very much. Appreciate it. Coming up, another fox news executive getting the boot. Columnist Michael Wolff is going to tell us why he thinks the focus of the shakeup should be on the murdochs and what it means for the future of 21st century fox. Well talk about that story when squawk box returns. Hey. Pass please. Im here to fix the elevator. Nothings wrong with the elevator. Right. But you want to fix it. Right. So who sent you . New guy. What new guy . Watson. My analysis of sensor and Maintenance Data indicates elevator 3 will malfunction in 2 days. Ere you. You still need a pass. Our 18 year old wase army in an accident. 98. When i call usaa it was that voice asking me, is your daughter ok . Thats where felt relief. Were the rivera family, and we will be with usaa for life. We cut the price of trad togi. And at4. 95, you can trade with a cle advantage. Fidelity, whersmarter investors will always be. Check on shares of apple. After the closing bell reporting earnings, its now sitting just short of its record high. It had been showing some momentum. 147. 23 is the level we had seen earlier in the session. Again earnings after the bell today. More off camera news at fox these days. Fox news copresident bill shine resigning from his post following multiple harassment suits filed against the network. We should note not against him. Joining us Michael Wolff, columnist at the hollywood reporter. We talked to Sarah Ellison this morning. What does this mean for fox . How big a shift is this . Or not . Let me just say i think Sarah Ellison has no idea what shes talking about. I mean, i read what she said, and i believe she says everything goes on fox, you know, this is all good. This is all bad. Shes not here to defend herself so that may not be fair to do. Thats why i do it. Because its not fair. Fox is finished. The fox that we have known for 20 years is over. This represents a sort of cable blip. Were entering an entirely new era. It is not going to be the understand, you know, fox has been a this incredibly successful product of how talent integrates with its audience. This unique chemistry. Okay all that chemistry is gone because all those people are gone. So we are just left with a with a network that has a has has a significant penetration but no reason for people now to really watch it. Megyn kelly was the Tipping Point . That was the Tipping Point. And we will definitely lose sean hannity. If not if not today, if not in days, in months. So weve lost all of the leadership of the network. I understand he has a contract for several years, possibly to 2020. He is a key man he has a key man provision . And he can get out . Any time. Walk, yes. And so you think he walks, and you think that the current stable, what were seeing with the ratings that Tucker Carlson has been able to pull in are not sustainable . Completely not sustainable. I mean, the whole all of those ratings are happen because because bill oreilly at 8 00. I mean you just have a falloff of his audience across across the night. So now you start with a lower baseline. I mean you still have a business there. Its not going to be less than cnns business. Certainly not less than msnbcs business. Does it remain a conservative channel . I think there will be other conservative channels, other conservative voices coming in to this into this mix. This is a wideopen opportunity now for everybody. For who . Anyone who wants to come speak to this audience. Do you see cnn or msnbc or any of the no. I certainly dont. I see you know, they may try to pick off segments. Right. But theyre not going to change their identity. This is an identity issue. The the audience out there responds to okay i have a different question a singular message. Was this the right decision or the wrong decision for the Murdoch Family to make . I think it was the wrong decision from the shareholders point of view. View. I mean i think this is going to cost them an enormous amount of money. It was the decision, the murdoch sons wanted. Do you buy the argument they needed to do this for moral reasons but business reasons in the sky deal and all the other businesses related to 21st century fox. You hear from the company fox saying that because of these issues there were people who otherwise didnt want to do business with the parent. Well i think in the end, certainly in the short term, medium term, medium longterm, 21st century fox will make significantly less money because fox news will make significantly less money and its represented about 20 of the bottom line. Longterm what the murdochs hope for is they dont want a murdoch company. They dont want it tainted by murdoch politics and ideology and vulgarity. James was very happy to get rid of news of the world when he got rid of, when he was instrumental in getting rid of that. We have to run but what is the relationship now between james, lachlan and rupert. Theyre family and they squabble like all families. They love each other. However, but james wants to run this company, and so he would like rupert to exit, and he would like his brother to go off to the side. There you go. Michael wolffnever holding back. Thats what we love about him. I want him back. Im here for you. Thank you very much. Ill bringalson next times. That should be interesting. She just talks to james. When we return jim cramers top stories. Up 11 points, dow looking at 22. 5, s p looking to add 3 at the open. Well be right back. This is e nenew rk. Were blding w rporllacro t t st. New roads and bridges. New mass trait new new wer taendly vironm. Andarn t esd. Ny. Gpsto grow sinf tomorr today loli investg apprch. The r of smart wer your clients portfolio th powershares. Before invting, nsid the funds investme objectives, risks, charges and expense call 89830 fothprospects contning this information. Read it carefully. Diributed by invesco stbutors inc. I cat waitththfriends,ation. That colge experiee th i had. The dependence. Ansince plann for it,ation. That sde dis theneee th i had. Perice, im gladadhell miss welcome back. Jim cramer is in san francisco, and he joins us right now more, and jim, you had that great interview with Mark Benihoff he laid out his ideas for job creation, talking technology and we spoke with sima modi about jobs and emphasis theyre trying to create in america, 10,000 jobs to create new centers. I want to let you run with what you see happening with technology created jobs. What do you think is going on . Theres a little defensiveness because a lot of people feel if you look at your iphone, you see all those apps and you know whats happening is they are taking out jobs, people are somewhat frigid. We can educate people from the ground up and have them be the people who come up with the next apps. Its vital. The educational system is not producing enough in the country to take the jobs. This is a conversation we get bits and pieces of. This is the type of thing we need to talk with again and again because these are not quick fixes. Western talking longer term solutions. This gives real hope for the future of jobs in america. Sxwlu couldnt be more right. Marks plan to have 5 million new jobs created bay prentisships, you can only do it for plumbing, electric, no, what theyre saying it avital we come up with ways to teach people code, teach people how to be able to take these jobs that are left after the automation. As soon as i say i want to dig deeper into this Important News they play us the music to play us out but thank you for playing the interview. See you back in a few minutes. Ov herr here no whtht me t somebody wilgeit. Ogarki mafromhe b2 to thng b21,rt. Eam noop grumman amantage a turbulent worlde d welog afew eameo jo us. Noop grumman amantage a turbulent worlde idr. Eycneely a some day you mit be cag men gy farmer. Gyivereycneely a some day you mit be givenvrsvemo value c the pri oo d at95, you adad with aleardvantage. Fidelity, ere smter stororwi aaybe make sure you join us tom owe, squawk on the street begins right now. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla at the new york stock exchange. Jim cramer is at one market in san francisco, david faber at the Milliken Institute global conference in beverly hills. Auto sales earnings, the twoday fed meeting begins as futures are a little to the positive side. Europe gets back to work. Pmi sixyear highs, tenyear yields near 2. 33. The president a series of