Transcripts For CNBC Squawk On The Street 20130528

rally overnight in asia and shanghai, hong kong and europe een markets are following suit and a lot of green arrows across the board over there as well. our road map begins with the markets. the market set to rally this morning and the dow shooting for its 20th tuesday gain in a row. will the trend continue this. >> after the driller re-affirms its forecast. find out if you should be a buyer of the little blue box. >> valiant and astrazeneca making acquisition and faber will run through those details. >> we have more trouble for a cruise industry. a royal caribbean cruise ship catching fire at sea as it sails through the bahamas. is the cruise industry ever going get it together? >> concerns the fed might taper the bond-buying program sooner rather than later. futures up pretty sharply as the bank of japan and the ecb indicate more stimulus not off the table. the dow has yet to post a three-day losing streak so far this year. guy, the dow is up 63% of all trading sessions so far this year. if that trend were to continue it would be the biggest percentage of days up since 1900. >> that's amazing. >> what did we learn last week? as soon as there's any dip into the market the buyers are piling in. it's the kind of activity that goes back to the point jim's been making for's couple of weeks. you see a healthy correction in order to shake things out. it's not happening. >> not as of yet, at least. >> again, a little bit of weakness, i believe. >> it started out weak. we would come into the asian session last week and it still goes down as one of the most unusual andsome-looking declines we've seen, but people aren't that worried about it and then they look to that weakness coming into the week. you could have played that either way and you could have focused on the comments out of japan saying we don't achieve the kind of inflation we hit later this year or the more dovish comments and the markets indicate which way they want to go. >> a lot of data in the shortened week. we'll get confidence numbers and richmond fed revised q-1 gdp later in the week and the chicago pmi as they roll over to june. i want to bring in a couple of cnbc, and btig and joe lavorgna, chief u.s. economist. both at post 9, good to see you both. i hope you had a good, long weekend. you had a note talking about whether or not what we've seen so far this year is warranted or not. where did you come down? >> the whole conversation is that equity markets around the world are having issue with the fed suggesting that they'll taper sooner rather than later. something both joe and i agree on is that they're not going to taper in june. part of the reason we're having weakness is not necessarily due to the federal reserve, but rather the boj showing some level of hesitancy or at least satisfaction with what's with happened. the second boj members and the economy members over there said well, maybe things have gone far enough and that's when you started to see a correction in markets. it's a question of whether this is going to work, but whether they are committed to following through. >> joe? >> i agree. >> he has a lot to say. i agree with everything that dan said. they're not going to taper in june. the boj is a big player in this market. they're either doing it in relative sizes bigger than the fed's. having said that, as the summer months progress the economy will be better than people think. the gdp revisions and the july, i believe that's the most important economic report of the year and we'll revise gdp back to 29 and in august we could be sitting here with an economy that looks better and the fed tapers in september which has been our view. >> when you talk to investors out there it's not either/or. there's this idea that okay, if they step off the gas it doesn't mean they'll step off the brake. there's a little divergence between what joe and i would agree with. whether they would buy 75 billion or $65 billion worth of assets. sentiment can take equity valuations anywhere. mathematically should the stock market pay 10% because they should buy more than 835 billion. at end of the day what matters for equities in terms of forward valuations is the expected path for interest rates. there are tw things going here. one is buying bonds and one is raising interest rates and the latter is not happening any time soon. >> if it suggests that we are moving from the point that what we saw in the 10, 11 and 12 so we saw rick orisk off moves broadly. people say you know what? maybe they'll taper and we can handle that. a lot of the sectors most sensitive to higher rates and if you look at it today, it will be decide lead below 2%. >> i would like to see them look at more than 3% because the economy is healthier, earnings are better and y rates are important, but they're so low relative to where they should be that we can easily withstand a 2% ten-year rather than a 2% ten year. >> can the equity market withstand that? we sit here so often and talk about the impact of cheap money on this market. you see it everywhere. >> if you take a look at equity performance. >> clearly. >> since late '09, the earnings growth has exceeded the price performance of equities. they've not gone up. >> it started to a little bit. >> here's the thing. if joe's right that the economy's going to pick up then ultimately valuations should expand. one thing that we know over the last three years is every guy that's come on the show is if i just normalized the p-e ratio the s&p 500 should be at 1900, never explaining why that should happen and if you make the case. >> the cover of the journal is about the energy boom how they're all fighting amongst themselves now because we have our own game going on and a couple of big stories about housing values and vacation homes still has some room to run and usa today argues. earnings estimates for 14 are no longer coming down. is that true? i believe so. having said that, the fed has revamped the housing market. it will look similar to what they did with the dow where the dow -- where the s&p in 2000, we crashed and fell by half and we were at 1500 and change. we wound up having a substantial housing correction as kay shiller eludes to. >> and on the valuation front for equities. everyone talks about how it's traded to a discount on its multiple. valuations almost never trade at the average. there are always one, two standard deviations and getting to fair value that it might be the case based on averages and there's nothing to say that we're not going blow past that, and the multiples is to have high inflation. >> i just want to mention the 10.9% year on year increase i believe is the highest annual increase since april 2006. the pace of the increases in home prices is certainly consistent with the boom era which is surprising, but i wonder again going back to the point about what the fed does in response here, we're talking in response of the leadership transition potentially. how much more important is it that dan think about larry summers coming in to succeed the bernank? >> we are still well below for dallas and denver, well below the peaks, not that the peaks were the right valuation. >> one of those markets moved up, but not as much as so many others. >> with respect to the federal reserve larry summers is obviously perfectly qualified to be federal reserve chair. one of the reasons janet yellin gets spoken of so forcefully in terms of this position is she was just approved. in terms of the confirmation process it's not really that difficult. i would like to sea larry summers get nominated if only because the nerd in me would find this fascinating for television. >> the congress, as well. >> one of the points brought up to rebutt the ft nerd. he said women wouldn't be good at mathematics. and he would be in the chair. >> he didn't quite say that. >> we're talking about a statement that was taken out of context a ga zillion times. >> i'll tell you what i'm worried about is the two of them are agreeing and they're relatively constructive and that's under any scenario. >> it's fine now and it will be fine if they start to tighten. >> this will come back where the yields are. the yields are so darn low that equities biaset class and the fundamentals are getting better. >> very quickly. something i was talking about in terms of capitulation because there are a number of wall street firms that raised their price target for the second time. the fed and global central banks have done a good job of not just whitewashing the bears and even like myself the moderate bulls find ourselves playing catch-up with the sustained low interest rate environment and when we look back on this period it it will be characterized in my opinion by one overriding theme and that's the constant underestimation of ben bernanke's seriousness of what he was going to do ask what he is doing. >> well said. we might say the same thing about the boj later on. remember, low interest rates do not mean loose monetary policy. they mean policy's too tight. >> good stuff. good way to start the week. joe and dan. >> we have m & a news. canada, tech neck c nickly, at . the price tag 8.7 billion, it's about half debt. valiant says the deal will strengthen the opthalmic medications and contact lenses and lens care products. it's been an acquisitive company. we say canada, but it has a bermuda-based tax rate and it comes back to this debate that we've started to have lately about the advantage conferred to those dumps that have the lower tax rates and valiant has used that and a strategy of cutting out companies cutting out their rnd to great impact. in this deal alone they're talking about $800 million of cost savings for a business in which they have very few overlaps. they have a small opthalmic business. most of those are coming as a result of a tax rate that they will now have. >> days after tim cook's testimony. that's craze. >> it's such a great point and look at what's happening in response. they're being rewarded by shareholders. shares are up 10% today. so if their duty is to their shareholders, what have they done? they rallied 10% on a deal that as you say almost hits the wrong notes for all of the things that we as citizens are worried about. >> corporate tax rates and don't forget, these guys were in the hunt for activis. they're all over the map for what they're willing to acquire. they've looked for bausch & lomb which has been in the private portfolio of warburg pincus, and now they move from that to activis. it just shows their willingness to do deals at valiant. to your point they've been able to use a rising stock price to help them. in this case they're actually paying cash because warburg doesn't want valiant paper and they'll get bridge equity from goldman sachs. goldman will pay some debt and that will be repaid quickly by an equity offering by 1.5 to 2 billion. valiant doesn't even have an adviser on this deal which is interesting also for us deal geeks, but, you know, this is again, warner chill cot last week with activis. and it's for tax purposes and there it is again and you start to wonder in this business, particularly, do you need to have an offshore tax refuge to compete? >> at age 7, it is the fourth largest ever of a u.s. health care company, is that -- that's amazing, isn't it? >> half debt because -- by the way, big home run for warburg pincus and most of the debt taken on and taken the company private some years ago. >> we have cody with rumblings. we have hulu in the mix. >> a little bit going on. i'm not ready to go there yet. not the merger monday thing, but in terms of corporate confidence to make some deals that are material. >> yes. >> some activity, without a doubt. we are well below what we would have anticipated when we came out of the gates this year and seeing some very big deals and expecting that it would unleash those animal spirits. that hasn't happened andy will tell you in speaking to investors during the course of every week there doesn't feel like there's a lot of big stuff out there. we'll see. i'll probably be proved wrong, but tough to get to the finish line. >> in this kind of market, as well. >> if they see rates rising and money getting more expensive. if they think we better make our move. the sellers are watching a bull market that is like, why should i sell now when the stock price can be 10% higher in three weeks? >> that becomes an issue very often. >> memorial day, of course, over. the summer will get started and it will be hot in new york this week. how much will we see business travel heat up? we'll talk about it with kayak ceo and co-founder steve hafner which was acquired by priceline. we'll see what they plan to ask the apple ceo tonight. this one looks like a nice open, up 137. a lot more squawk on the street live from post 9 on a tuesday when we return. 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[ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab. year. no need to tell you about the tuesday statistic, up 19 straight. this would be number 20 in a row, and with some oomph, up 143, the implied open while the marks were well on a tear while you were asleep. >> and shares of tiffany are rising pre-market. luxury goods retailer posting first quarter earnings of 70 cents a share. that was well above the street forecast that were lowered after tiffany had issued a profit warning back in march. revenues also beat forecasts of same-store sales up 8% in q1 and interesting to look at some of the strength here. japan in particular, constant currency net sales although they were saying the weaker yen might impact the rest of the year and that was part of the reason why they didn't raise it. >> 21%% comp in japan. 21 and this was after they had warned for q1. the big joke on the wires is never mind the proif the warning because we didn't need it right. you lower the bar and it's easier to clear it, but this would have been a solid quarter for tiffany ask sales of silver jewelry is still a little bit weak. one thing that was interesting is we leave now into the upscale retailer, we get michael kors tomorrow and movado. we saw such a weakness with the teen retailers. abercrombie and aeropostale getting hammered. how much can we talk as kro the board about it or will it be a story of upscale strength and lower income weakness? foo it sounds like that's been the way the story has been going with walmart and target not hitting their targets given the warnings season. although with tiffany, if you can actually have same-store sales up in europe you're doing something right. >> it's not a huge number, but nonetheless. >> average transaction up 6%. they're gaining some share at the high end and losing some at the low end which makes you wonder bifurcation of economies. the rich getting richer and the not so rich doing anything at all and the wages up 1%, maybe. 18-month high. >> even when they came out with the profit warning they've basically been climbing and 2 to 1 relative to the s&p 500. what surprises me, even with some of the slowdown in china that we've seen is the company exposed to asia whether they're buying the new york flagship and yet not a lot of concern there. >> ahead of the tape theired, beware, tiffany shares got smoked. >> it's a tough call, okay? it's not an easy feat. >> that's -- yeah. >> it always goes the way you don't want to. it's like a batting average. if you're batting 300, you're doing okay. that's what we used to tell ourselves. >> netflix is on a run-up. it's resurrected kelly's favorite show "arrested development" and what did people make of the first episodes over the weekend? we'll take one more look at futures before we get the opening bell in eight and a half minutes. "squawk on the street" is coming right back. what's in your ear? oooo! a quarter! check for more! well, i guess i can double check... my watch! 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[ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell set to ring in 30 seconds. we continue to shake our heads at the string of tuesdays that have been positive. at this point it elicits snickers and giggles because it makes no sense. >> it's funny. 20 in a row. the shorting monday and the long tuesday play is where most of the gains have been for the year believe it or know. let's take a look at the opening bell and at the s&p at the top of the screen. chambers street properties celebrating its listing. big cheers for those guys down here. velocity shares are the monetary receipts etfs. all right. so with that, 101 days without a three-day losing streak. we talked about tiffany before the bell. rcl, royal caribbean will have a tougher slide today, although the tape's obviously in its favor broadly, but this fire onboard the grandeur of the seas at 2:50 in the morning and they turned the boat around back to baltimore and over 2,000 guests onboard and 700 crew members and the 20th fire on the cruise ship in the past 15 months. >> so we're up for 20 tuesdays and we've had 20 fires on a cruise ship. carnival at this point has lagged the s&p 500. easy to do. they're down about 15% year to date. royal caribbean was outperforming. so the question now becomes if this appears more systemic and not isolated to any one-liner, does the industry in general does it drag down performance or do they have to come back in as we've been seeing in this case with vouchers and deals to get people on the cruise ships that hurt margins going forward. >> we had a discussion of pricing after the costa concordia and it was followed up by another -- what was the one in the gulf? >> you can't keep them straight anymore. >> that was obviously out there for days. look at what's moving this morning. interesting to note, shares of general motors having a good initial boost here, up almost 4% if we can show that to you, as well. gm now above that ipo price, of course, where it was taken public by the government and woe also know that the u.s., and they're not telling us when they'll be done or if they'll be done and they are dribbling down, the dribble strategy of the remainder of the stake. >> it's the third biggest gain or the s&p! >> did they lose a rival? are the electric cars seen as a rival here although you can turn to tesla saying it's doing so well and clearly, that's not the story. gm may benefit from china, china which we haven't talked about late last week, those were interesting statements to where they're moving more to stimulate demand in the country. >> right. i can't say a market economy, but a number of different reforms that may take place there, very interesting to watch the new leadership and what they choose to do. part of the business is in china. the journal today looks at the success derivative housing plight. the new trade in vogue is ford, right? this is the f-150 play and sherwin-williams and ford's right on the top of the list. you have louisiana pa si-pacifi pulte. >> there are stories online about bidding wars for property. this may be one way if you think that some of the obvious candidates are overbid here, do you then turn and look at the autos and auto financing we know has been strong. default rates never increase as much as other consumer loans during the crisis and subprime auto lending has been the story and subprime is back in the auto space and that all will be feeding into it. >> jefferies does upgrade the stock from buy to hold and it calls it the best restructuring play in the sector, like pfizer it may spin off some units. i know it's an enormous company, but i did talk about the fact that it was discussed in activis circles for that reason, carl. pfizer has done well with the spin-off of -- thank you, with zoeitis and the consumer division at merck that there was thought that you could create value and not clear that that is going to happen, but at least for jeffrey's part they pointed on ut an upgrade in the stock this morning. >> keep an eye on apple today. oppenheimer is up with the note, it's up 1% talking what they're calling in sort of technical bullish reversal because of the broad market's weakness last week in which apple held up. tim cook did speak tonight at all things d. d-11 if you're looking for hash tags today. we'll talk to them when they're up at 11:40 eastern and then the tax strategy and michael wolf in "usa today" about how they'll be remembered longer term for their legal strategy than technology, but that's a longer term picture. >> why is tim cook so happy? that was the headline, i think the times it was over the weekend because the tenor of his testimony before ng can, he did seem relaxed and did seem confident. he did not seem like an embattled ceo and that discussion will be interesting. >> drx is up wefl%. >> is it up that much? >> i hadn't taken a look. talking about tax rates with vrx up sharply. i come up to the $800 million in cost savings in the press release and they realize by 2014. you look at the revenues from bausch & lomb. that's 25% of revenues and by the way, there aren't a lot of overlaps. will they close down some things? yeah, but i would assume that bausch & lomb has been running pretty lean to begin with. so a lot of that cost savings has to be from the respected decroes in tax rate as a result of it becoming a bermuda-based company and it was valiant that a yeared biovail and a canadian company, but it did have a bermuda tax regime as well which it adopted. >> one of the levels here to watch. we're about 150 points up on the dow 14452 is the level and that puts you us only above the all-time intraday high that we hit on may 25th -- i'm sorry, may 22nd. the closing high was 15487 so we're not far off of that. for the s&p intraday high, and we're now at about 1668. if we close here we'll be just about in line with the all-time closing high. >> you're talking 19, 20 handles on the s&p. 16.87 sounds like an intraday high from a couple of years ago because it only took a day or so for us to lose 50 handles and we've gained some of it back. finally yahoo. their bid for hulu is in the 600 to $800 million range and of course, we have marisa meyer on last week. we asked her after tumblr, is there an appetite for more? her response is we have to take a breath. that is not a denial and they have other things on the hot seat. she did understand indicate that we're done for them. it's not a lot for them 600 billion. 1.1 billion here. not that it's hulu and there are a number of bidders for disney. >> and comcast, as well. will a bidding war push it up to the $800 million price range and this goes fwak to when it lost out as karen swisher was relaying to google last minute for youtube. what would youtube be like today for yahoo both itself and for the company and do they look now at a issuing ushg lu as another play into that and if so, do the rivals try to bid out the price or elbow them out? >> stars, i don't know if you saw this friday night. berkshire taking a 5% stake in stars. we were thinking the shows that were on stars. "boss" with kelsey grammar, "spartac "spartacus." >> i remember that, yeah. >> starzz since it was spun off, it has been a takeover candidate and it wasn't that long ago, and we'll see what happens, but that's what you will continually hear when it comes to starz, but one with would have to believe it is a consolidation play. >> i can see the control room struggling for the symbol because we haven't shown the chart just yet. >> they're surprising overseas so they may not necessarily be big here, but you go to britain and everyone is watching "spartacus." really? >> it is popular. >> let's get to josh lipton who is in for bob pisani on vacation. hi, josh. >> back to work and it is risk on today. remember last week all of those worries about the fed, the tapering and china. not today. your seeing the dow here up triple digits at the open. analysts and traders, and one they say japanese stocks enjoying the rebound and government officials and they'll take further action if government debt yields prove to be a problem and they're vigilant about overheating and asset prices and traders saying the good vibe bleeding into europe and italian stocks higher, spanish stocks higher. here in the u.s., of course, the key data point were home prices better than expected and we'll be watching those home would abouters and those stocks have been absolute monsters and housing analysts say what the key to moving higher is the margin expansion and they benefit from increased demand and the luxury goods space, that's if tiffany reports better than expected sales, and saw gains in all regions and same-store sales, and that was an emprufment from the holiday season quarter. i spoke to scott redl earning r of t3 live and he said if the bears have any hope of prices, that is the level. scott is going to be watching. kelly, become to you. >> you will right. let's shift to my favorite, bonds and the dollar. rick santelli is back from vacation. he is at the cme group in chicago. great to see you, rick. >> thank you. great to be back. you know, interest rates have had an aggressive month to date. if you look at how may has affected rates, was there a period, of course, when we were seeing stocks, questions about taper moving up and price down in yield along with what we saw in the equity markets but isn't true. look at this chart of five-year note yields. boy, we haven't seen these levels above 90. 92 basis points right now in about 13 months. last april, april of 2012, if we look at ten-year on the day we could see they're up, but they've got some turbo thrusters because there have been comments out of europe, comments out of officials in the bank of japan and ongoing issues after ben bernanke and all of the questionses about the taper last week. it seems as though you can look at the data and find other things whether it's durable or kay schiller and there's this ongoing problem that liquidity will never stop in our life times. look at jgbs. they're moving up, and it's been a long time since we've seen 90 basis points and this is what the fixed income traders think, if you're going to see a rapid rise in interest rates it's the jgb you want to pay attention to. how has all of this affected the dollar index? as you see, we've tapered off a bit, but the dollar index just last week made a stretch and many are continuing to monitor not only the dollar yen and the euro yen, but especially trying to monitor how the yen will be impacted eventually by some of these rising rates. carl, back to you. >> that's good to have you back, rick. we'll talk to you a little bit later on. let's get a closer look at commodities. sharon epierson. >> we are looking at equities around the globe and that's having an impact on oil prices as well. look at where we are with nymex futures and we have seen a lot of traders and money managers get long in terms of the wt icon tract in the last week and it's in the highest level in terms of the speculative length that we've seen in more than a year. is it the brent crude contract which is up $2 and it's testing the 50-day moving average for the first time since february and the long positions there are at the highest level that we've seen since february. they're watching the civil war in syria escalating and they're paying attention to the fact e r iran has put out missile launchers with the presidential elections and on friday there is an opec meeting and there is some view out there that perhaps we can see a reduction in production and some opec members in light of the boom in production that we're having here in the u.s. and perhaps a way to lift oil prices that may be seen as under pressure because of all of the production here in the shale areas and keep in mind when you look at the gold contract, that's where we're losing ground. we're looking at gold prices that are lower on the session after the best week we've seen since mid-april last week and j.p. morgan is slashing the forecast for 2013 for gold saying they've seen gold prices average 1595 an ounce for theier. back to you. >> it's the biggest up open for the s&p since january 2nd, just to give you a sense of how good this gap open has been. when we come back, high times for a high-end retailers, tiffany rallying on upbeat earnings. should you bet on more sparkle ahead for that stock. as we go to break, take a look at the early movers. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. do you want the long or short answer? 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>> reit now we're neutral. our price target may be a little bit stale here. this is obvious ly outperformane on this quarter. there are still some issue asks weakness in the americas that silver mix and diamond mix issue, but, you know, we're neutral, but obviously the shares have run up quite nicely in recent weeks and today. >> right. so how do you respond to that when you look across the board at what they're saying. the company didn't raise their own projections, but their shares are 81 right now. >> yeah. you know, i think all of the stocks have run, certainly. tiffany has run for some specific reasons and i think there's been some m & a activity in the jewelry sector. there has also been some large owners stepping up and buying significant stakes in tiffany. so there are some company-specific reasons that it's trading ahead of fundamentals and i certainly understand why some people are buying it here. we remain neutral. >> okay. what surprised you most about the report this morning? >> i think one of the biggest surprises was the performance of the japanese business. the economy in japan has been pretty weak and its up 21% comparable sales in japan was phenomenal. >> was that on the constant currency basis? because it seems as though the japanese sales and the prospect of those being dragged lower is one of the reasons why they're staying steadier or even cautious on the rest of the year. >> clearly the weaker yen does play into it and when you look on a reported basis sales were lower because they get translated back to dollars, but if the japanese government is successful in stimulating that economy this could be a business that could be very, very powerful for tiffany. >> where do you think the shares go from here? we are above your price target which is $75, but having looked through the earnings report, what kind of momentum is there for further names? >> look, we think there's tremendous momentum and the high from consumers continue to heal and we'll revow our price target today. >> liz, they warn for q1 and then they blow it out and they're not changing their guidance for the year and it just smells a little funny, doesn't it? >> i wonder whether you think whether they think they have very little visibility at this point? >> you know, i think they need to remain cautious and conservative in their guidance and they had a rough go of it where they had to bring it several times and investors wanted to see them be conservative and tho appropriate. they were recognizing that there were things that boosted performance in the first quarter that maybe they can't count on for the balance of the year that pull forward in the blue book, vent and some of the pre-buying in japan before the prices went up. so i think it's their right to stay cautious and be conservative in the guidance and hopefully they don't need to bring guidance down again for quite some time. >> you don't want to repeat that pattern. any idea, what do you make of this notion that they're focusing more on the high end and losing some of the low end and implications for the stock? >> clearly the high end has been a tremendous focus for them over the past couple of years and you can see that reflected in the day's results and what i think you will see going forward is they'll have the entry on the price point items and new products on the movie launches. the high has been a focus, but we think the lower end can pick up toward the balance of the year. >> china demand has been such an important driver in the past and a worry spot. last word to you then here. given that we've seen signs of a chinese economy slowing, why is it that we haven't had more for tiffany's performance. >> the chinese consumer still demands the aspirational and luxury names. tiffany is an iconic brand and it's 175, and the business is small enough that it can continue to grow in china and that will be a powerful growth for them. >> tiffany shares now up 5%. a little bit off their highs and not the same for the broader market, though, carl. >> thanks, guys. >> when we come back, what can we expect from tim cook tonight? cara swisher and walt mossberg will join us with the apple ceo this evening. as we go to break, we'll take a look at the s&p losers of which there are not many because the s&p is up 20 points to 1669. ideas, goals, appetite for risk. you can't say 'one size fits all'. it doesn't. that's crazy. we're all totally different. ishares core. etf building blocks for your personalized portfolio. find out why 9 out of 10 large professional investors oose iares for their etfs. ishareby blackrock. ll 1-8-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. 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[ male announcer ] open an account and get a $150 amazon.com gift card. call 1-888-280-0149 now. optionsxpress by charles schwab. >> take a look there at shares of general mores. earlier when we first started trading this morning we noticed this. i did want to add perhaps a fact to why it may be going up. auto news reporting gm may shut down for one week in the truck and suv plants. we learned ford and chrysler had reduced their usual summer shutdowns. in fact, it's going to be a busy sumner detroit where they've been more accustomed to time off. unclear whether that is the main move behind what is the main reason what is a significant move up. we didn't know gm although many people arc summed that. auto sales would exceed 15 million given what seems like a strong market. >> that's been a strong market to get over, that's for sure. >> speaking of gm take a look at the dow 30. the dow has been up for 19 consecutive tuesdays and today it would make it 20, another record. previous record of 15 was logged back in 1927 and as of this moment just about the dow was looking at its biggest gain since february 27th, just to put a period of how strong the open has been and we're only about half an hour in and it brynns us to this morning's squawk on the tweet. enoughal read pep it's 20 tuesdays in a row. what is the deal with tuesdays? tweet us @squawkstreet and we'll get your responses throughout the morning and it gets talked about all of the time. there must be something to it. why tuesday? >> i maintain it's a random occurrence that materiels us about the strength of the market and the depth and breadth of the rally. maybe i'm missing something. >> when you don't want to go into a weekend long. remember when europe was in shambles? >> i would like nate silver to weigh in on this. someone who can look at statistics and psychology and give me an answer. >> we need imperical data. meantime, simon is here to tell us what's coming up at 10:00. >> to be really honest for you, we're re-booking our guest for the next 60 minutes because the strength of the rally has taken many people by surprise, is it another major cry for the market? we'll have the ceo and co-founder of kayak on the show. recently, of course, sold out to priceline for $1.8 million. a busy tuesday morning. see you in a minute. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. 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[ static warbles ] [ telephone ringing ] now a waiting room is just a room. lets you talk face-to-face and share whatever's on your screen. blackberry z10 with bbm video. built to keep you moving. see it in action at blackberry.com/z10 >> welcome back to "squawk on the street." rick santelli here, may consumer confidence surging 76.2, well greater than the 71 to 72 area we were expecting and boy, you need to go back a long way to find a higher number. looks like by my read about february of '08. now it wasn't all terrific news, but richmond fed isn't going to weigh in at the same weight class as consumer confidence, but nonetheless, may richmond manufacturing index coming in down two which is actually less than a down four to down five we were expecting. very quickly, let's show an intraday chart of ten-year note yields. 207 it now joins the five-year note and the highest yields, should we close here since april of last year, since april of 2012. carl, back to you. >> thank you very much for that. the markets digesting all those numbers and holding on to its gains, obviously, if you are just joining us and waking up out west it's the biggest open for the s&p since the beginning of the year, january 2nd. a biggest gain for the dow since the end of february and the nasdaq is trying to keep their -- michelle meyer, senior u.s. economist with b of a merrill lynch and art hogan is managing director of lazard capital markets and a good morning for you to join us, guys. good morning. >> good morning. we have the dow up almost 200. what are you thinking? >> we have a marketplace here that seems different than it did last wednesday and one of the things you have to contemplate is what's really changed and what's with really change side the perception of what we learned on wednesday. we learned that the fed at some point in time will taper their quantitative easing and i don't think that's new. we spent the long weekend digesting that and the fed's data dependent and they're probably not going do it any time soon and that might be good news and that might be that the economy is doing better enough that they'll step back from the 85 billion a month in purchases. the dow is up 200. michelle, we just got the confidence number of the week. we'll get an important revision to gdp later in the week, as well. >> is the market reflecting a real upturn in the recovery? >> the sentiment figures have been quite encouraging. the conference board number we just got out back to pretty much pre-recession levels and the university of michigan we had seen last week which got us back to summer 2007 levels. this is actually a pretty decisive turn in consumer confidence, and i think it very much relates to what we're seeing in terms of equity markets. the stock market reaching new record highs. i think that does a lot to boost confidence. the home price data we've seen this morning, prices up 10% on the year, consumers are starting to feel a lot better and while this is happening the asset price a proesh yaying, we are seeing jobless claims continue to come down. so it's a pretty good combination that's helping to boost confidence. >> let me just come become on the point you made about the fed and what many people are assuming you have mooing forward. i'm not so sure that it's about the timing of the fed and that maybe they would delay tapering. it's a reinterpretation of the tapering to be good as deutsche bank put it in an inflexion point which would suggest buying cyclical value. in effect, if the fed does taper, some people believe that is the trigger to buy. >> that's a very good point. when you think about it it, think about it this way, simply stated. i think the point that you're making that should be clear is when the fed realizes they need less aggressive monetary policy. we need less medicine for patients getting better which the fed is dictating policy on and whether that's in september after a series of monthly jobs creation numbers in the 200s that it's time to start to pull back on the throttle a little bit and i think that will be good news and the rotation from defensive to cyclical will be well on their way from that juncture, as well. >> michelle, can i raise one interesting dichotomy which is between the consumer sectors gathering strength and yet the industrial side of the equation doesn't necessarily seem to be -- great observation, kelly. i think that's certainly a trend we see and, woo we've even seen it with the fed data. i think part of that has been a slowdown in global growth which is impacting our production figures, but in terms of domestic demand and the fact that consumer spending has been robust despite notable income cuts as a result of fiscal constraint. i think the domestic economy is doing well even though on the production saturday we are seeing a slowdown as a ruffle slow are, global growth. i think as we look ahead the key factors will still be the labor mark. what to we see in terms of result and he hit on something not. the fed will not premature he tight know or remove a combination. they do want to see stronger job growth and that's what mr. bernanke made clear in his testimony. it's very data happened diddent. >> right. if we get more data like this it could fall toward their taper camp. there was an interesting chart in the weekend with the consumer savings rate which the savings rate was extremely low even by u.s. standards and people got hit by the fiscal cliff a little bit and spent perhaps more of their income or is that a sign to you that going forward we'll need to see those income games kick in in order to keep things going? >> the job in the savings rate because consumers didn't want to react to the income cuts and they wanted to smooth out their spending and it was somewhat reasonable given the wealth gains that we've seen. you're absolutely right. you can't continue to finance spending simply by reducing savings given that we're already at a low level and i think it comes back to jobs. we need to see job creation and income creation and we need to see a broad-based improvement in consumer spend coming ultimately is driven by income gains in addition to wealth appreciation. so this is kind of the kick-start of the consumer. i think it needs to be followed through with the strongest business sector and actually seeing hiring. >> a lot of people waking up, looking at the mark wondering, a, what's going on, b, what's going on if i'm invested the way i want to be. >> answer that question. how being would you characterize the level of partes pagz in the shorts rid now. have they thrown in the towel or not? >> you talk about participation in the market. if you talk about the retail investor and there are a lot of investors that haven't gotten back into the market since 2009 and in large part had you missed the 100 move? absolutely. if you're one of the investors that got out of the market because you were afraid of the fiscal cliff and things of that nature and you look at this market and you say we've had a significant run and the most we pulled back was 3% and the s&p 500 in 2013. you have to look at multiples, and i think if you look at multiples in the long term, and the improving economy and the marketplace. if you're trading something south of 15, and south of 14 teams for next year, multiples are still attractive and just make sure you're not investing in something like a bond investor and be focused on that. think about what will play out over the next 12 to 24 months which will be much more cyclical in nature. so you want to look at technology. you don't want to look at utilities. >> do you believe that higher rates in general pose a threat to the market? are we in one of those areas where both can rise in tandem? >> i certainly don't think that the ten-year yield going above 2% will go anywhere with the equity markets. we talk about that being the magic line in the sand of some sort. i think if you were to normalize rates in treasurys called 3.5% to 4% and you might have competition in asset allocation, but in the zone that we're in right now if you talk about seeing ten-year rates rise from 2% to 4%, that's a normalization. i don't think you're going draw equity investors back in the bond market with 2.5ers on % or coupon. >> is that where we're headed? 3%? >> i don't think it's the first half of '14 event and we should exit with a 3% to 3.5% rate on the ten-year for sure and it would improve the health of the economy ask getting the largest consumers of treasurys out of the marketplace. >> michelle, if that happens, if we see rates start to rise and i think it's been your house view that actually that's not going happen, how significant is it for the economy? can we handle that kind of event? >> i think it depends on why the rate's rising. if it's an increase in interest rateses because the economy is indeed doing better then, yes, we can handle it and it's a healthy sign that the fed is beginning to tighten an environment of a supportive economy. if interest rates are rising for exogenous reasons and some sort of external shock and the markets start to lose some faith in the ability for the fed to exit in an appropriate manner then it's a lot more painful for the economy. so it's very much dependent on why are interest rates rising. if it's a function of the normal turn in the economy i think it's very healthy. >> okay. michelle, art, thank you very much for both of you. 212 is where we stand now. >> indeed. as we're talking the ten-year yield has hit the highest level of the year so far now at 208. >> that is something to keep an eye on. something else that we're watching this morning, there is some activity in the old merger and acquisition arena. certainly the biggest news is canada, but valiant pharmaceuticalal, with bausch & lomb from warburg pincus u of course, the private equity firm. 4.2 billion is debt and that will be refinanced. the deal will trekken its offerings and it doesn't have a large business here. what i find so interesting about this deal and by the way, valiant shares skyrocketing and they have been up as much as half's percent and 10.5% gain for the company shares. much of that is simply coming from a lower tax rut as a result of bermuda paying that tax rate because they don't is a large opthalmic business. this is an equity run business so it has been run fairly lean to begin with with and they take out rnd and as that advantage tax rate, 25% of revenues is not something we tip beingly see with the cost savings. valiant getting financing from goldman sachs, it will do 1.5 billion to 2 billion worth of the stock. it's making money because the stock is going 11% higher and it's going valiant's way. it was a lot lower not long ago. it has been a very strong performer. kelly? >> that's right. amazing today, up 11%, but on a day when things are up across the board and as our friend dave lutz pointed out, the ten-year yield is above the 2013 projected dividend yield and that's for the first time this year. we'll see how things continue to shake out and the sunshine's state's latest challenge. this time it's having too much money. what will california do with its unexpected surplus? what effect might it have on muni bonds? we'll take you live out to the west coast next. plus, it's another day, and another worry for the cruise line industry. one of royal caribbean's shapes catching fire this weekend. will this be the nail in the coffin for the cruise industry? we'll be right back. 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[ female announcer ] when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ if you're just waking up we are seeing the best gain for the dow since january 2 n, up almost 200 points. s&p is up 22 points and they began with kay schiller, the best since '06 and the best since 2008. so a lot of things going right for the bulls today. in the meantime, ever had the problem of having too much money? one state does. it's the golden state's budget surplus. our own mary thompson is live in san jose, california is live with more. hi, mary. >> after facing a deficit of $60 billion, california's flush. the state's budgets are estimated to be between $1.2 and $4.4 billion. behind that what we have is, of course, it's not the only, i should say state that seems to be flush with cash. the national association of state budget officers actually says a significant majority of states will have a surplus this year when most of those fiscal years end on june 30th. and the improved picture attributed to a better economy and a stronger stock market which drives tax receipts from the upper income taxpayers. also erarlier forecasts may hav been impacted by the surprise factor and likely the income pushed forward in 2012 in order to avoid paying higher taxes in 2013. this one-time event raises questions about the sustainability of the improved outlook. for example, connecticut which rejected the budget surplus this year is cutting revenue projections for fiscal 2014 and 2015, suggesting continued nervousness about the economy. of course, the extra cash is also triggering sparring within state legislatures about what to do with it. should they restore funding to programs cut during the downturn and possibly push through income tax cuts. states need to be judicious about spending the extra money and should avoid putting it into ongoing personal as the funding could be going on as the revenue stream is better off. they use capital infrastructure programs and putting it in a rainy day fund or to put it into underfunded pension funds. politicians may not heed that advice. if they're up for reelection they may want the extra money used to ways to benefit voters rather than the long-term health of their states. we'll have to watch that. >> the fact that this is happening under governor brown's watch is giving fiscal hawks heart attacks. >> i'm sure there's a lot of chatter going about that, but again, the states have been aggressive about a lot of spending cuts again and they've benefited tremendously from an improved economy and the improved stock market and also with that money being pushed forward into 2012, the income tax, i should say being pushed forward into 2012. that helps him. they have to be cautious here because this revenue may not be sustainable. >> unbelievable. imagine seeing that a couple of years ago when they thought california was going to be the next greece. >> no one thought that was possible. >> and this goes into the 60-minute segment with the people that piled out of munis. >> i thought that might come up. >> it's inevitable because a call that big and it really shook and you talk to people in the muni industry to this day. it's an extremely influential platform for people to say maybe this isn't worth it and it's been such a great performing asset class. >> the highlight is in 2020. >> a lot of people use that as a great buying opportunity for muni bonds. that was one of the great buying points for the municipals. >> absolutely. >> and it is fascinating how quickly the budgets have turned around. >> now you're seeing wealth versiones perform a debt and you are still getting a better yield and certainly in a savings account. 2,000 passengers from royal caribbean's cruise ship that boarded in the bahamas will arrive in baltimore on 11 charter boats today. the national transportation safety board are investigating the cause of the fire that broke out in the early hours of yesterday morning on the grandeur of the seas. passengers were ordered to grab their flotationis dwooes and report to muster stations. the blaze took two hours to extinguish with passengers remaining at their emergency post for two hours. despite to damage to the rear of the ship, no one was injured and royal caribbean says it never lost power and was able to sail itself into the bahamas yesterday afternoon albeit with no air conditioning and the reliance of bottled water. this is the second time this year that a fire at sea has forced a ship or cruise to be abandoned. this is royal caribbean. the big string of events we had was from mickey arison's carnival. they learned from their miss takes on social media. their executives were on port when the passengers were off. >> they have well outperformed carnival this year. >> let's not forget last tuesday we had a profit warning from carnival because it is strong slash its prices in order to fill its ships. >> you see the outperformance with royal caribbean and don't forget norwegian and the yellow line is spiking up there. is carnival a buying opportunity? a lot of people threw in the towel on carnival last week because the view now is it going to take much longer to, quote, turn the ship around. >> now the additional pressure, so instead of rivals i.e., royal caribbean, being able to benefit from that? that's the question, do they benefit or does it put pressure across the industry on pricing and margins? >> the channel checks that you're getting through on both those two rivals show that they did have pricing power and they never had higher margins and probably better being booing capacity anyway. so they're much further out in front. the question is does the stock market overreflect that at this stage? >> right. right. >> all i know is kernin made fun on the cruise. three words you don't want to hear. go back to baltimore. >> come on! what's so bad about baltimore? >> great town. >> the s&p closing in on a 25-point gain. again, the best -- if not -- maybe not quite the best gain of the year going back to january 2nd and pretty darn close. the ten-year seeing a major play and highest yield in the ten year since the beginning of the year for sure at 210. a lot of people saying if we haven't refied maybe it's time you in. >> that is a move to keep an eye on, it really is. we talked so often about reaching that 2% only to come back down to 1.6, a move that you don't talk about that often. >> it's different this time. >> what's different this time? >> i now think the four most dangerous words or five is that it's more different this time given everything that's happened. back to the point about the ten-year. if you look at the sell-off even when people were worried last week, what we didn't see was the 2011-2010 risk off move in markets where they felt there wasn't enough momentum to support the fed pulling away. now what you look at is okay, the fed might pull away, but we're responding to better data by bidding up stocks and the sectors reflect this in the s&p as well. >> greg argues today that the fact that the yields are higher make it look less like a fed-induced stock bubble. that you're reacting to something more meaty than quantitative index. >> up .5%. it's positioning at such extended levels into such extended market, does that argue for some kind of technical correction? >> anyway, heck of a day shaping up. when we come back, bank of america's head of equities savita subramannian. and kay schiller, they're growing at the fastest rate in 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[ static warbles ] >> about an hour into trading. 7:32 on the west coast, 10:32 on wall street. consumer confidence index rising to its highest level in five years, up more than seven points in may to a better than expected reading of 76.2. all 30 dow stocks are in the green this morning and tiffany is the biggest gainer on the s&p. up 5% to new 52-week highs. the high-end retailer's first quarter results did beat wall street forecasts. >> markets are staging a pretty big rally this morning. we are up 215 points on the dow catching plenty of people by surprise as we are looking at our biggest gain since february 27. the gains are broadcast across the nasdaq and s&p as well. kevin curran joins us now for more on the action we're seeing. good morning. >> good morning, kelly. >> so what do you think it is about today in particular that has us at these highs and is this the time for people to get exposure? >> well, we've been, a, we've seen overnight there's very little negative news and nothing to put a damp or the rally. when we came into the day we saw good numbers in the case of kay schiller and we saw consumer confidence better and coming in this morning there was a positive tone to the tape and there were some comments last night regarding monetary policy in japan made by an adviser to shinzo abe and provided a positive bias to the tape this morning that carried through as the morning has progressed with the good economic data that we saw today. >> sure, but it's interesting because on the one hand we came into the session talking about how the prospect of more accommodation that was driving markets and then as we move to the u.s. session, it was the prospect of less of the fact that the economy is fundamentally showing some strength. >> yes. it's nice to see. we've had a very good rally in the markets over the last six months or so. about a 20% rally in the dow and annualize that, and that would be a 40% gain and add significantly to wealth, folks have seen an improvement in the value of their portfolios and that's translated into more spending and more confidence. ultimately, it helps the economy through the wealth effect channel, but we also recognize that the mark has had a very sharp gain in a very short period of time. confidence -- sentiment is very bullish and in terms of our short-term point of view it wouldn't be at all surprising to see a bit of a pullback, but that doesn't change us from being bullish on the long-term outlook. >> let me just emphasize that, kevin. i'm looking at a chart of the s&p year to date which is up now 17%. the stock markets can't keep doing that, can they? or can it? can it rally through at this sort of pace through the end of the year? >> i think it's doubtful with without a pullback. if you look at where we are, just look thea the last six-month period of time, we've had a very sharp move and if you went back and analyzed the last 40 years or so data that we have, when you get a market with so much heat underneath it from a short-term perspective, we have a better chance of a pullback from a 30 or 60-daytime frame, but that doesn't mean that the bull market is over and it does mean if you have a portfolio where you made good gains it might be a time to look at the valuations and decide is this security offering me the value that i want to make and maybe make some substitutions if necessary. >> what about the role of time in this, kevin because what seems to be happening is people are lengthening their time horizons as to what they're looking at. does that mean that you can bring forward the gains that you would have, not just on the multiple expansion, but buying into value, for example, because you think the fed is at an inflexion point? >> could you bring forward the gains for 18 months into the end of the year because money moves so fast now and people can anticipate so far out without a crisis? >> i think what you're pointing at is that there are fewer dates on the calendar that represent impediment. a year or two ago we were always looking around the corner where is the next eurozone finance minister's meeting and that would include consternation and so on and so forth. there isn't a lot of that on the calendar and when you look at the debt ceiling debate and no major dates on the calendar and no timeline, per se so investors are lengthening their time horizon which is the way you should be looking at investments, particularly if you're an equity investor because after all, question, itties, they do have -- you're discounting years and years of earnings and profits. so i think that's the right way for the markets to be, and if you just look at valuations and they're reasonable. they're not stretched, but we have moved pretty far, pretty fast. >> where do you stand with the markets and you still see 1600 which is well below where we are today. wh what's your own view? we look at a 12-month basis and we think of a 1700 and a 1725 number is reasonable being looking out 12 months from where we are today? >> and that implies what for earnings because we're starting to see earningsest the mas move higher. we've seen the multiple expand already and how do you build towards that view? >> we're looking at -- our expectation is for less robust growth than the overall market. the market is looking for 10% to 15% growth. we think a 5% to 7% growth makes more sense given the fact that we're dialing at deficits at the federal level, but that said, the multiple is not excessive. we're not looking at 20 or 25 times earnings. so we think once you add in a dividend, you can get a reasonably decent rush out of equities. >> we're starting to see the dividend names under pressure as they compete with that treasury yield. thanks so much for your time this morning. 1700 is your level. so let's take a look at some of the levels that we are at today. the s&p 500 is sitting at 1671 and the dow at 15914 and the name in the red is procter & gamble. granted, it's only slightly low .2 of 1%. p & g sitting this one out. >> it rallied strongly at the end of last week. >> it had a great day after the management changeover, on a day when you see this, maybe it's something else. >> coming up on the program, what can you expect from tim cook tonight? cara swisher will join us and walt mossberg ahead of apple's ceo talking to them this evening. plus steve hafner, ceo and co-fonder of kayak. what did the memorial day weekend tell him about an important industry for the economy? mine was earned in djibouti, africa. 2004. vietnam in 1972. [ all ] fort benning, georgia in 1999. 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>> yeah. we don't really have a dog in that fight at kayak because we search the other travel websites and display that information on our website. what we have seen is that average fares in the u.s. tend to be increasing and that's a function of relatively strong demand as well as airline consolidation. also the average daily rate for hotel rooms seems to be going up in single digits in the u.s. and that's a function of usually strong demand. it was not so long ago that you ipoed at the nasdaq and now priceline is buying you ought. you always said you were a technology company. can you explain in layman's terms what you bring to priceline? >> sure. first of all, what we bring to priceline is a great brand and a great audience. consumers use kayak because we provide them with a better travel answer. we search the travel websites and we have more airlines, more hotels and rental cars than any other individual site. as people use kayak, they become loyal any they keep using it. for priceline the major synergies are major access to a brand and travel service and to an audience and they can help expand worldwide. the issue for many people watching you now is that they realize that they're no longer neutral in showing people the playing field of what's on offer because you are owned by one of those, if not -- priceline has many brands and many brands that appear to compete against each other at any one time. how do you maintain your neutrality or are you saying we're not neutral anymore? >> i don't think consumers use kayak because of who owns this. we've gone from privately held to now a subsidiary of priceline. consumers use us because of the value of the services we provide. we've been the best place to plan and book travel. we provide a comprehensive choice. that's not going to change under priceline's stewardship. we have a record of acquisitions independently and i suspect we'll be no different. >> steve, we've been talking about the theme of consumer bifurcation that it's the higher end who is holding in while the lower end struggles a little bit. are you seeing that pattern at all across your sights? we're a mass market brand. we're doing requests for travel indication. we're not seeing any changes in their behavior. are you seeing changes where we're seeing a stronger housing market and how that's affecting vacations at all? >> i think what you're seeing is more consumers are wary of price increases and are looking for deals and are being more flexible with their timing. as i mentioned before, average airfares are up in the u.s. as are average hotel rates. so for the consumers who have flexibility and are willing to trade weekends for different dates or willing to go to vegas or orlando instead of more expensive locals, there are deals still to be found. >> what about you, steve? what are you going to do now? with the acquisition, i think you have a 6% steak, so your steak was worth -- and when do you intend to do? i intend to stay at kayak as long as he will let me stay here who is my new boss. we want kayak to be the number one place worldwide to book and plan your travel, and we've got a lot of growing to do. >> okay. we'll watch with interest. steve, nice to see you again. thank you for joining us. co-founder of kayak selling out to priceline. thank you. >> the market's hanging on to those gains. take a look at the banks, helping to lead the charge. goldman taking us back to levels we haven't seen since april. also on the list, b of a, citi, morgan stanley and j.p. morgan. >> people like the financials. if you want to participate, now that you see moefr a cyclical recovery, this could be how. we have seen the steep yield curve has helped banks restore some of their profitability. >> rising rates are good. >> rising rates are good and the interest margin would be positively impacted by a higher rate. >> up income, particularly the regionals. >> up next in the program, besides stocks rising we also have interest rates on the move as we just discussed. rick santelli will give us his take back from vacation, live from chicago. later tim cook is sitting down to answer questions of the all things digital d-11 conference tonight having been on capitol hill last week. we'll talk to the people who will being can those questions a little later on. as we head into the break, it is -- look at this s&p heat map. wow! phenomenal open. 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[ male announcer ] here's to a life less routine. ♪ and it's un, deux, trois, quatre ♪ ♪ give me some more of that [ male announcer ] the more connected, athletic, seductive lexus rx. ♪ je t'adore, je t'adore, je t'adore ♪ ♪ ♪ s'il vous plait [ male announcer ] this is the pursuit of perfection. tens of thousands of dollars in hidden fees on their 401(k)s?! go to e-trade and roll over your old 401(k)s to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments. e-trade. less for us. more for you. welcome back to "squawk on the street." i'm glad to be doing tuesday's rendition of the santelli exchange. it couldn't be a more appropriate day. and it couldn't be more lodged in my wheel house. as i look up at the grand boards at the cme group floor in chicago i see a 211-year-old on our tenure. i see 96 basis points on a five year. yes, 96 points. we see a ten year jgb getting ever closer to 1%. the first thing one would have to think of is much of what has been going on has been bankrolled by savers. the money savers normally get the thumb on the scale by the federal reserve. managing rates lower a lot of the fuel whether for bubbles or backing in by creating the quote/unquote wow factor producing all of the liquidity that has floated many shifts. the question mark is will savers ultimately benefit? because rising rates deserve the play. they deserve an investment that may be less risky because the appetite isn't for risks. but this is really the question. when we talk about exits we all want to talk about what is going on with stocks. and justifiably so. especially after looking at the n dex. we can talk about it until we're blue in face. there's no practical experience. the reason they're looking at fixed income versus stoxs should any cracks in exit occur and specifically the geography of the focus is obvious. and i think the poster child to pull all this together has to be tesla. now let's forget about the fact that it's probably a niche market and mr. musk is doing a terrific job, but bubbles are bubbles. we pointed to how it's benefitting from the headlights on. it has more to do with issues like tax credits or climate credits. the reason it's the poster child is because we all know that if the thumb is on the scale by the fed, two things can happen. three really. they don't change any course. they modify and purchase less and all this is back to the idea that the economy is improving. but how would higher rates affect the economy? all the capital has moved into areas it would have never moved into without being drowned by liquidity are going to be potentially at risk. even housing. we all know single family is more beneficial if you're a gdp follower. we all know about corporations and rentals. in the end all of these markets that we think are bubblicious, the real test will be if the fed loses control, even with the current holdings and treasury, what will that do to the economy, will it make it so you back into prosperity? i don't know. but there's a lot of people in the fed building right now looking at the 211 yield and scratching their heads a bit. back to you, carl. >> nicely said. thank you for that, rick santelli. we want to bring our attention to this call by moody's making a bold call on the banks. they will stable from negative. they've been negative since 2008, reflecting in their words continued improvement in the operating environment, reduced downside of risks. they say u.s. banks are now better positioned to face any future economic downturn. with that you can see a lot of the banks are higher as they have been for most of the morning. >> and they're saying the most likely reason is they would be a protracted flaking of underwriting standards. so we are back firmly in the environment where the concern is more about underwriting quality. >> yes, as david has been mentioning the past few days. tweet time. the dow, as you know, shooting for the 20th up tuesday in a row. our question is, what's up with tuesdays? tweet us. we'll get your answers later on. hey, what's going on here? do you want the long or the short answer? long i guess. chevy is having a great-deal- on-the-2013-silverado- but-you-better-hurry- because-we-don't-want-to-see- a-grown-man-cry-spectacular! what's the short answer? nice. 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and tim cook is set to speak at all things digital conference. we'll talk to people who will be putting the questions to him. that's live a little bit later. our focus of the morning is the markets. the dow is holding onto triple-digit gains. we were up 200 points this morning. she has a year on s&p target of 1600, which is well below the levels we're looking at now. good morning to you both. >> hi. how are you? >> great. let's start with you just because sitting at or reitera reiterating the 1600 call is pretty out of consensus at the moment where it's 1668 on the s&p 500 so what do you think happens here between now and 1600? >> sure. it's tough to call a point in time target. i think what is more important this year is we do start to see a real transition of leadership that we started to see at this point already. so far in may we've seen a big rotation out of defensives and i think this continues through year end. i think while the easy money was made, the way is to focus on the undervalued cyclical growth options that are trading at pretty depressed multiples. >> right. we're starting to see that with the performance of financials among other sectors this morning. are you surprised generally the fact that we're seeing this happen under the surface with people moving perhaps from the higher moving napes with cyclical ones. is it from a broader selloff? >> i'm not surprised by this rotation. at this point with some signs of a broader economic recovery, we have good housing data, good consumer confidence numbers. real positive economic surprises in the u.s. what we are starting to see is what we normally see. a rotation out of stocks into much more earnings-driven stocks in the market. so this makes sense to me. >> david, where do you guys think we go from here? >> well, look. it's nice to come in on a day where the marketing have been on and i'm just blowing the market forward. i believe that. is there a chance of a near-term pullback? absolutely. the past six months, who is winning the game? they've thrown out their traditional ways of evaluating the market, how it's going to trade. the they stood behind the fed. they took the philosophy of buying any dips. the traders have done very, very well. so what are traders thinking right now? what is the main part of their focus? we are starting to see improving economic data come through. we saw some this morning. the tapering effect is a big concern on their minds. the fed is going to do that in a very thoughtful way. and i think the risk tolerance in general for investors is definitely picking up its head. >> yeah, you're joining us on an interesting day. >> we're just a few points away from where we were when ber nane spoke. some are arguing that this rally has a little more heft. it's not just some easy money qe bubble. is there something wrong with that notion? >> no, i don't think so. >> yeah, i don't think so there's anything wrong with that notion at all. in fact, i think what's been reharkable is that the s&p 500 has continued to post new corporate earnings highs and yet the market has been lost in the trading range. there is room for upside. sentiment is still fairly bearish. the only reason we're not more optimistic on equities is the most recent earning season, the warning sign that we saw, and we're waiting to see how this unfolds, is there was really a lack of top line growth, and i think that's keeping us a little more concerned. but in terms of earnings growth, we don't see any reason the market can't move higher from here. >> david, one thing we've been hearing from folks is that the trading desks are getting leery of these levels and the portfolio managers are calling and saying i still have too much cash. you guys are killing me. i wonder if that conflict is still going on. if you ever saw that at all during this entire run up. >> that's true. that's very interesting. i just talked to some of our options guys. in the past couple of weeks normally we see trading at a premium default. but we've seen that sort of spread narrow a bit. we've seen a lot more call buying on the desk and hedge funds getting in to essentially chase the market. and a lot of performance pick up there. the hedge funds are in the market buying calls and they're trying to catch up. so under normal circumstances you may look and say that's a very negative sign. right now under the circumstances we're in, people can look at that in a positive way. they can look from the perspective that people, investors are starting to really underthe filsties of fed. the filsties of tapering. how that's going to have an effect on the market. and realizing the the worst case position is to be underinvested. the worst case scenario is to be way underinvested and have the market continue to run. my personal take and the conversations i've had with traders as indicated to me the fed will be very thoughtful on the way they pull back qe. it's going to be a process that's going to be coupled with very much improving economic data. and we're probably going to continue to grind higher. >> and people who weren't involve fld the beginning of a year have a lot of catching up to do come june. thank you for your thoughts both this morning. >> thank you. >> meantime, some movers in today's rally are the luxury retailers. first quarter results that beat the street after the profit warning. the company is reaffirming the fiscal 2013 earnings forecast. ooel get another read on luxury tomorrow when michael kors reports but in the meantime, courtney reagan, cnbc contributor joining us from london. courtney. you and i were talking about the comps before 7:00 a.m. this morning. what do we make of them? >> it's so interesting, right, carl? we've seen these on the maps. japan really strong. but we need to consider that the prices the there are also going to increase in the near future. i think japanese consumers are being smart. if they want the nikkea, theybuy kind small or large is impressive in europe right now. surprising the company themselves because they did warning. and i don't think any would do that if they didn't need to. >> stacy, is this the surprise of the year and your universe? >> it was a big sur prize today. if you look at the geeing a fis, the two-year same store sales number, it accelerated across the board. but there's also price ines kroos going on. if you look at the north america number in the united states t comps are up about 3%. the company said internally that was a bit below expectations. so even though they blew away the quarter, they're maintaining guidance for the rest of the year because they're still worried about the u.s. consumers. what is the rest here for retailers reporting this week, the likes of kors. is it a tiffany's specific story? >> we've heard from macy's, talk about bloomingdale's. it's a mixed picture here. very strong in april. so if you look at tiffany, the expectations were low here and last year they took down guidance almost every quarter. the street is looking at the stock and saying better than expected here. and it's fine with us if this company is taking the approach. but business is certainly picking up at the high end of the jewelry category. yeah, which could make you a little nervous about what kors may say tomorrow. >> possibly. kors is so strong in accessories but as not high end at tiffany's. you can't be everything to everyone. and perhaps this is an inflection point for tiffany. we got to push the high end. it's very hard to win on both sides all the time. sometimes you have to pick which one you are going to target. but those have been almost unbelievable every quarter. are you sure that comp was that strong? it's almost hard to believe when those can recollect, ors numbers come in. >> that will be the story tomorrow with kors. i think the comps will be strong. and i'm seeing out of stock in the really bright colors. it's all about the price point at kors. they are taking share from coach. it's an accessible luxury play that's really working here. >> important to focus on the reason why they are not selling more is an inventory shortage. that would be interesting compared to the past. kwhen we come back this morning as the dow holds on to this the gains, off the highs, we'll talk to one strategist calling for a pullback. for a while it looks like he may have been right. first, rick santelli is watching the markets as well. hey, rick. >> hi, this is going to be the guest. what we're talking about now is what we're going to talk about in ten minutes. we talk about if the fed loses control of interest hate rates. now we're going to talk about neighbor a magic bullet is there. a lack of good collateral. what does that mean? 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(announcer) scottrade. voted "best investment services company." let's get another check on the financial this morning. changing the outlook to sthabl for the industry, saying the economy is improving. gold man is leading the way up 2.5% there. pretty much everyone is participating. consumer confidence to housing which is going to support mortgage. you can see the reaction across the sector there. >> meantime, want to get back to the big market rally. our nx guest and his team predicted a pullback of 8% to 10%. the chief equity strategist at s&p capital iq joins us this morning. sam, good to see you again. >> good to talk with you, carl. >> sounds like we have a riddle on our hands here. you are going to meet with your technicians to see what comes next. what do you make of the pullback that we had and how to make up for most of it? >> it reminds me of an old song. is that all there is? if you blink it you miss it. the worry went as quickly as the worry over cyprus. but it's really a matter f time before we end up with some sort of a decline of 5% or more. we had declines of 5 bank account to 20% on average every year since world war ii, and so it's really not such a brave call to say that we're going to have another one. >> do you think still last week was in your words part of a topping process that you think could last to the third quarter? you want to be more specific? >> sure, our chief technician is pointing to areas that he believes were in a topping pattern right now. the only difficulty is we're not sure which topping pattern is being developed. like a double top head and shoulders, that sort of thing, to help then figure out how far down we actually go. work that i've done looking at history offers a bit of a clue that says if we have advanced more than 20% from the end of the prior pullback, then history tends to be indicate that we end up falling into at pullback, rather than something more severe, like a correction or a new bear market. in some ways you wonder, well, why bother calling for something like this at all when it's really going to represent a nice buying opportunity once it's done? >> yeah, so you're referring to last november, the subsequent rally, up more than 20%. so you're saying that we're more likely to fall into something potentially deeper than we saw before? >> no, that the opposite is true, that sometimes people have been asking me, well, sam, we went up the so strongly up 23% since the mid-november low. as a result, we have to fall into something deeper when we do stumble, and my historical work says no, the opposite is true. we tend to only slip to another pullback of 5% to 10%, rather than something deeper. for those people who are bullish for the longer term, this is an additional encouragement. >> how unusual has this year been given the strength of the rally that we've seen? >> not as unusual as you think. 26 times that the market was up in january and february. february is the second worst performing month of the year. and in all 26 times since world war ii the market was up for the full year on a total return basis, 26 times with the average total return being 24%. so we're actually pretty much on target, and as you can also imply that the four quarters of the year an on average most of the months of the year end up performing better in the years when we have a very strong start. >> sam, do you have any theorys to why tuesdays are as strong as they are? >> no, just because nobody likes mondays, i guess. it's just one of the historical anomalies that are fun. but once wen we get our first trip up. the old moody blues did talk about tuesday afternoon. >> yes, they did. sam, always great to have you. >> bit of foreshadowing, perhaps? find out what tech insiders will ask tim cook when we talk to the two people who will conduct the interview. we'll ask him the questions. we'll talk to them in just a couple of minutes. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at ducktherapy.com. chalky... not chalky. temporary... 24 hour. lots of tablets... one pill. you decide. prevent acid with prevacid 24hr. let's get the santelli exchange for a tuesday. he is back and tan. >> i wish the camera could have been rolling the last ten minutes. we're going wild down here. ira and i have one thing in common. we don't care what the future is and we hope the fed the thread the needle. but what's important to us is trying to bring the future to what we are accurately. to that end, so far, thing seem to be working out. the key issue in my opinion is when i see a five-year note, we went to the 70s to 1% extremely quickly. if they thread this needle, one of the key issues will be will they lose control of interest rates? one argument is that you need good collateral. you need good things to hold. there's only so many pieces of boons or oats or treasuries to go around. will that save the date and keep interest rates from moving up too quickly? >> you know, rick, that is the biggest question now. but with that comes the issues of the velocity of money. if there's a high velocity of money, there's a problem. >> now, when you say there's money, we're referring to the balancing sheet, are we not? >> right. three billion plus in the system. >> that's just here. and we heard bernanke talk about rolling off. when the coupon payments come in, he lets them ride off the balance sheet. >> and that's okay, as long as there's not a high velocity of money. right now there's not and that's a problem. you look at the numbers and they are not there. >> and that's always the argument. don't worry, don't worry. don't worry. >> and i don't want to get too deep into that. when we think about this, the fed can control this. and then the role as a regulator can come into play. then if you go to a very high level capital where they're going to shove it down the throats of the too big to fail banks by really strict collateral requirements. >> and this is the cool part, people. so we've had the banks basically as managed in many ways as interest rates. so what you are saying is if there is this panic that could occur where everybody wants to blow out of treasuries because rates are going up, they will close all the barge ways by the banks they already have under their thumbs to prevent them from, in essence, flooding the the market with the good collateral they are holding. >> correct. so we don't know this. and they make this seem like it's a given. >> you know what i hear? i hear more control. we continue in some ways. are we really fixing something? are we just nationalizing more? >> well, that's exactly right. we don't know. as you and i talked about to make it easy for the viewers. the real test will be can we get it back? so we never want to hear we have an interest rate problem. >> correct. >> back to you. >> just a few minutes left now. we'll have the close and the details on the impact right here in the u.s. when we come back. two minutes to go. but there ars i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ do you want the long or the short answer? long i guess. chevy is having a great-deal- on-the-2013-silverado- but-you-better-hurry- because-we-don't-want-to-see- a-grown-man-cry-spectacular! what's the short answer? nice. 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[ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. the european markets are closing now. >> let's bring in simon to recap where we stand after a strong day in europe. >> yes, you'll see europe is up the same as the united states is up. but arguably if not completely for the same reasons. you have a core members of the european central bank and you have the pros tect pekt that tomorrow the politicians will say, okay, let's just ease up on the fiscal austerity as well. and it's interesting that you have seen thes panics rise. this is after the governing council gave an interview to the representative from austria in which he was talking about the immediate to make liquidity more available to the united states. stimulating the asset backed securities markets and cutting the discount required to post that sort of instrument as collateral of the ecb. so these guys have bolted higher during the course of the session. so the automotive workers are doing very well. i suspect that's more shore covering. that may have something to do with the fact that the chinese are part of the takeover. but a number of the air ways -- certainly, this is british air ways doing very well. on the political front, the french and germans and italians were pushing forward with an idea of how they may cut youth unemployment in the eurozone that stands at 23%. but as far as the political act is concerned, the bigger issue is tomorrow. there are more times to to the reports as well. or maybe it's already factored into what we have. back to you. >> france's numbers were the worst in five years. >> but what is interesting is you get the position of the two sides in the currency market. so the euro is lower and likely to fall. free markets balancing out. >> absolutely. >> let's get to josh lip on the. >> hey, josh. >> hey. a big risk on day here. remember the fed tapering china. you're seeing a lot of green. still up triple digits. home prices you saw better than expected. you guys were talking about consumer confidence, better than expected. also traders down here will tell you maybe it's just as simple. if you're up that would be 20 consecutive tuesdays in which we would see gains. dow is now up some 1600 points on tuesdays this year. now if you look under the hood and see what sectors are moving us right now. the financials, movies changing the outlook on the u.s. banking system has changed from negative. on the downside, the utilities. we have seen the rotations. and also rising interest rates. bad news for the capital intensive sectors like utilities. all right. some say wft. some say -- we'll leave it there. let's get get a check with energy and commodities. >> hey, kelly. the strength that we're seeing is definitely trickling over to what we're seeing in the oil market as well. we are looking at the energy complex. we have a crew testing the 50-day average. natural gas is one commodity on the decline after reaching a four-week high earlier today. we do have the options expiration and that happens today. and futures expire tomorrow. so that may be adding to some of the volatility that we're seeing. as far as metals, keep you eye on palladium. that's the best performer by far in the metal department. there's still wage disputes in south africa. that is a factor with the undersupplied market that some traders are saying is the reason for the upside that we're seeing in palladium. >> back to this you. >> isn't palladium and autos as well? >> yeah. >> participating in the rally. thank you so much, sharon. coming up next, tim cook has conquered capitol hill. how will he do in a room full of insider silicone value insiders. we'll ask what she plans to ask him. first a quick check on markets. the dow is holding onto tripl triple-digit gains. with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. i've always had to keep my eye on her... but, i didn't always watch out for myself. with so much noise about health care... i tuned it all out. with unitedhealthcare, i get information that matters... my individual health profile. not random statistics. they even reward me for addressing my health risks. so i'm doing fine... but she's still going to give me a heart attack. we're more than 78,000 people looking out for more than 70 million americans. that's health in numbers. unitedhealthcare. but i see a world bursting with opportunity,ople nervous. with ideas, with ambition. i'm thinking about china, brazil, india. the world's a big place. i want to be a part of it. ishares international etfs. emerging markets and single countries. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs, with a dynamically tuned suspension and adjustable drive modes. because the ultimate expression of power is control. this is the pursuit of perfection. because the ultimate expression of power is control. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. coming up next on the half. we're hunting for value as the rally rolls on. what are your best buys right now? and forget the builders. plus, tim cook is back in the spot like again today. carl, kelly, see you in about 20 minutes or so. >> sounds good, scott. all things kicking off today. the keynote speaker is apple ceo tim cook. but before they speak to cook, they're talking to us. our coexecutive directors of all things geek. good morning to you both. >> hi. >> let's start with you. tim cook was there last year. sfwl what do you wan to hear from him tonight? >> i think what we want to hear is what most -- whether they are investors or customers or fans want to hear from him. kind of what have you done for them lately. this is a company that has changed the world a number of times. people have high expectations for what they are going to do next. where is the television? what about multiple iphones. there's a lot of questions that we want to ask tim. >> go ahead, kara, sorry. >> it's been that tough year for tim cook this year. it will be interesting to see how you react. so there's no horrible thing that happened to him. >> we're not going to attack him on taxes and then say we loved apple. >> that was some interesting color out of the politicians last week, guys. he has made news before at d-conferences. you must have some knowledge as if you're going to get thek to break news, what it's going to be about. do you have any idea of what he is going to say. >> we have a deal with our peekers. we've been doing this for 11 years. we don't give them the questions. usually they don't tell us if they have surprises what they are going to say. however, we are realistic people. apple is not going to announce big new products at our conference versus their own events. and so last year he gave very interesting directional hits, and i think we'll get some of that tonight. i hope we will. but i would caution your viewers that i would be very surprised if he reached in his pocket and pulled out the next whatever at our conference as opposed to his thing. >> we try not to beat it out of people but we will be tough in the questioning. i wonder, does that play into all with hearing from the ceo? people yourself included are more interested and more curious at this point? >> you know, you never know what interview is going to be great. last year larry ellison turned out to be a terrific interview. we have a lot of people. everybody has really been in the news. and sort of the changes on facebook. we have ben dil verman who runs pinterest. he has a lot of interesting issues and challenges ahead of him. we have barry diller who is trying to change broadcast tv. >> and below market share. so we have a lot of different people and topics to talk about. >> and another topic, of course, in the news, kara, is the news about yahoo. and just so quickly after the acquisition of tumblr, now you're saying hulu is next. >> yes, exactly. this coo of yahoo!. they made a bid sit, which we broke news about this week. then we broke the price this weekend. from 600 to $800 million. so she's quite active. we hope to have her on a future day. >> we talked to her last week. i wonder how much you think they can have on their plate at one time absorbing 1.1 billion is one thing. to add another 800 is something else. when is it too much? >> well, she's working on other acquisitions, too. i think she is very quickly trying to reinvigorate yahoo!. it's a tough job to incorporate that all together. cisco kept buying companies one after the next. i think she is trying to create excitement around the company. it's certainly been in the news. everyone has been talking about it. it's a question if they can increase growth and engagement. that's the real story. >> how different today would youtube be and how different would yahoo! be if they beat out google for the acquisition on years back? >> with overture or hulo? >> how different would yahoo! be if they came out with youtube and stead of google. >> they may have bundled. goggle sort of stole it out from under yahoo! which was very close to acquiring it. and then really be aggressive about it. could the executives have done something at yahoo! or would it become a myspace, who knows? . zbl i think google for the early years let them run youtube with out a lot of interference, which is a smart thing to do. and a lot of decisions are critical. what are you more excited about? google glass or an apple i-watch? >> well -- >> he is going to wear them together. >> i think i'm excited about wearables. both of them are examples of wearables. we haven't seen any apple i-watch. but this is a process a process. this is going to take a while before they find the right groove. find the right uses. we have a demo of another company doing glasses. they do a different sort of thing. so there's a lot of experimentation. and i really do think this is going to be a solid part of the future of tech. but we're really, really in the beginning of the first stages of this. ea don't know the form, the function, the utility, the fund, whatever it is that these things will bring. in. we have a ways to go. >> to put one more period on the apple interview tonight. you know, obviously you mentioned the tough year. we all know what's happened to the stock. does something seem different about the period in between new products, about the way arrivals have come online? is this anything out of the ordinary gien what you know about the lifetime of the company? >> well, first of all, we're not going to talk too much about the stock. we are going to talk about it a little. but i think the stock will follow whatever successes or failures that they have? >> but, yeah, you lose steef jobs. even though tim cook is there, you can't replace steve jobs. so the company goes through a transition. and that probably has slowed things down. and they've made a lot of people are optimistic about in a move taking johnny, the great hardware designer and put them in charge of software. he's in the process of redesigning the ios operating system. you know, that appropriate has changed their product cycle a little bit, for one time. but even under jobs they moved from a year to 15 months. they were points they had to slow down different projects to move engineers to other projects. so these things have happened before in their history. they have flops a couple of times under steve jobs and still came out great. >> and one thing is they have rivals now that are very aggressive. confident rivals, finally. so that's the big issue. so they have a different environment to operate in. >> yeah, it seems they are getting so much of the user's market share. thank you so much. we'll keep an eye out for the d-11 conference as it kicks off in california. >> she looks like she could fly a plane out of there with those aviators on. the dow is up 166. but clearly more than 1%. when we come back, the one and only will join us onset to tell us what he thinks of this rally and what he thinks of today. back in a minute. ♪ ♪ ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold styling, unsurpassed luxury and nearly 1,000 improvements. the redesigned 2013 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. nchts markets are still in relatively rally mode. our floor director, art, is here with us. seems like the b & j got away with a close call. when the yields began to rise in the face of their aggressive ease shunting, people started to get nervous. then when it lapped over to their stock market, they went through wild and wooly -- they had moved equivalent to 1300 points in the dow. and i think all of the markets became somewhat transfixed and said, wait a minute, every hedge fund we know is over there play shunting that game if it starts to come apart what will happen. and it was still volatile but much less compressed. i think you are see shunting a sigh of relief and saw all of europe was up before the data came out here or futures were very strong. so i think it happening in tokyo is some of it does that take some of the shine off of it sn if you believe in calendar folklore, the final weekend of the month as a bias to the upside and it's terrific tuesday again. >> we know hedge funds were behind coming into the month. >> no question about it. even standard funds are behind the curve here. i forget who it was, but you had a guest on earlier who very aptly said they are out looking for leverage and buying options now. >> right. i think that was kevin koran there. >> maybe it was the head of sales at cala. >> oh, right. >> point well taken. we'll get a lot of good data this week. someone earlier suggested the key one division to gdp, maybe the most important number of the year. >> i'm not sure the most important number of the year, but it will certainly be significant. people are going to hone in on it. the other thing is payrolls, and that will swell to great importance here. >> that will dictate where we are now with markets with indexes than almost the fed because we knew they would be data dependent. the jobs report told us there was real strength there. >> and everybody who sold in may found they couldn't go away. they have gone astray and now they have to do better. >> ten-year, i'm not sure where it is now, i think i saw it at 2.10, maybe higher than that now. >> that's a bit worrisome. we'll see if the reller in tokyo continues do. the yields stabilize. if they start to inch up further, people are going to look. the great fear here is that if people truly become convinced that the fed is going to change course or adapt to what's going on, then it's going to be student body right. everybody's going to race to get out of bond market and do something different. and at what point do yields go high enough to begin to be counter productive, to have the stock market say, wait a minute, you can get great earnings at low yields but the yields are not as low as we need. >> right. >> crossing over that important line today. >> that's the topic of debate, unless we get a soft payrolls number, probably for the several months, art, thank you so much. and please keep your tweets coming this morning. as we mentioned, the dow has been up 19 consecutive tuesdays and today could make it a nice round 20. does it mean anything? that's what we are asking here, tweet us @squawkstreet. we'll read some of your answers next. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ do you want the long or short answer? long i guess. chevy is having a big -- huge, in fact -- event. the-great-deals-on-our-most- fuel-efficient-line-up-ever- for-just-a-very-short-time-so- you-better-hurry-extravaganza! so what's the short answer? awesome. [ male announcer ] the chevy memorial day sale. now, get $500 memorial day cash for a total cash allowance of $2,500 on a 2013 chevy malibu. hurry. offer ends june 3rd! lets you jump backwards and forwards in time to capture the perfect shot. blackberry z10 with time shift. built to keep you moving. see it in action at blackberry.com/z10 the dow has been up for 19 consecutive tuesdays and today could make that 20. we've got about 150 points to cushion us there. yet another new record, by the way. the previous record of 15 consecutive higher tuesdays was logged back in 1927 for those of you who like to compare us with periods in the past. that brings us to this morning's squawk on the tweet. 20 days in a row, really, what's the deal with tuesdays? bret tweets, it's the wimpy rally, i will gladly pay you tuesday for a hamburger today. which carl informs me is a popeye reference. >> you didn't know the moody blues earlier, but you did know the tuesdays earlier? a special programming note, we are joined by netflix ceo reid hastings, a cnbc exclusive. look at the stock, by the way n a market up 154, it is bucking the trend down more than 5%. of course, it is the single biggest gainer in the s&p so far this year, which you already know, i'm sure, has more than doubled. and did you watch, the big question, of course, did you watch "arrested development" on sunday morning? >> i did not. i wonder if that's telling, to some extent, that as much as i love the series, i almost felt like with some of the innovation things they are doing, was i really going to enjoy it? and by the way, i don't have netflix. so i guess i'm not one of those that can watch. >> we signed up for hbo to watch the liberace movie. >> what did youty? >> it was great. let's get back to the halftime. carl, thanks. welcome to "the halftime show." we have four hours until the close. take a look at the dow up 145, off the best levels, but nonetheless we have a strong day going. there's the s&p and the nasdaq higher as well. here's what we are following on the half. center stage after schooling congress on taxes, apple boss tim cook goes all in on all things d. is the stock set for a technical breakout? and one of the best ways to play the housing reyofry. but first, the rally resumes

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