Transcripts For CNBC Squawk On The Street 20130703

globe, and europe in the red with the political crisis, and the coalition and in total disarray and as becky said, 10-year cracking for first time since december. and in hong kong, china misses another print in services pmi. >> and we are watching closely the situation in cairo. thousands of protesters gathering there still and we are less than two hours a wway from the deadline that the military gave egyptian president morsi to comply with the demands. the egyptian military is expected to speak as early as 10:30 eastern and we will get a live report from cairo later on and of course, any headlines as they come. >> and this morning futures pointing to the lower open as markets in europe and asia takes the hits. stocks closed at 1:00 eastern time, and 2:00 close for the cash bond market, and it is interesting, because the data is not bad on the jobs front, and we will get the services pmi and the subcomponent at 10:00, but if you can't trade tomorrow knowing everything else that is going on around the world, how low do you want to be at 1:00? >> how many people want positions ahead of the jobs report and looking at what has happened since the may 22nd and the bernanke comments about the tapering and stronger, and it is quite a gamble i would think even if the data is strong to say, well, i want to trade that and have positions open going into that. >> it is a difficult period to hide anywhere and as you know, today, we see the geopolitical risks, and we are talking about europe and portugal for the first time in a while as we see the bond yields approach or exceed 8% briefly with the turmoil there, and not the mention that greece is back again. and again, these things come and go and the crisis in europe over to a larger extent and we have seen the markets down in spain sharply today. and we are revisiting them as the commodities are down. gold down. oil has been up, and it is a difficult period in which to make the long term investing decisions. >> the oil piece is interesting, because the dollar has been rallying and gotten a bid here, and yet the oil prices are climbing and not just on the bren, but the uti, and it is starting to tighten now. >> yes, tighten as a result. we are getting stuff from curbing to the east coast in terms of refining it, and don't forget, you see the pictures from egypt and that is unsettling people. you hear conversiations about te suez canal and you expect it to go on. >> it is a coupe? we don't know. the military is not specific, but the deadline is in the next couple of hours, and we will keep an eye on cairo and see if there is a large scale change in the political structure there. of course, the military wants a constitutional change, and new elections, and we will see. morsi is defiant in the comments yesterday afternoon. let's bring in bert white, chief investment officer, and michelle picard, and happy fourth to you in advance. michelle, there is so much going on around the world, i wonder, does this adp number give us hope that jobs will take the lion's share of the attention in a good way friday? >> well, you are right, i think that is going to be the focus. let's face it most of us are coming in to deal with that report, and then after an hour or so, hopefully, you know, things will quiet down. and then i think that the bigger issue, so many of the issues will be dealt with as things are going to unfold early in the week and the weekend. >> and it is the second month that the number has grown and tend to undershoot the les, right? >> well, it is not a consistent trend. it has not been terribly reliable as we look at the pattern. when i look at the adp, and as you said the best of the year, but the numbers have not changed that much, and that is the same message from the claim state as well. stepping back, we don't see much of a change in recent months and underlying labor market conditions that. explains why ourselves just like the consensus all expect another employment report friday to show that the changes in payrolls are just really not holding around recent levels. >> bert, as the chief investment officer at lpl, what do you do with the event of a friday's jobs report looming, and do you hold the boat to hope it is not rocked too much or look for an opportunity and then regroup monday? >> well, so, i think that you need to stay neutral as long as the market's gear is neutral, and face it neutral is the worst gear to be in. really, that is where we have been. look at edadp, 188 and assumingt is right, and take out 10,000 for the government jobs and that is 178, and that is where we were last month and the average last year, and the average the last two years, so nothing is accelerating and nothing is deceleratin decelerating, and we are in neutral. >> what do you mean stay neutral? what does that mean? >> don't be overweight or underweight risk either. we are trying to get closer to the benchmarks and the neutral positions. don't take too many risks one way or another. we don't know how the market is go ing the behave not only with with what the number is going to be and how is the market going to interpret it? is good news good news or good news bad news? we want to stay neutral while the market's gear is in neutral and when you see the gear change accelerating or decelerating, risk reverse or forward, that is when you take the risk position. >> and michelle, the apps will be buried, but purchase and re-fis down year over year for the first time in a year and a half. i wonder if this 30-year fix is scaring people off, because the hope is to get people to move. >> you are right, carl. i was looking at that, and trying to figure tout rise in the interest rates and the mortgage rates may dam penn tpe acti activity, but stepping back, the purchase rate has not changed much, but that is a sign that on the purchase side, the backup in the rates may be getting people to move in quickly before the rates go higher, but you are right, re-fi activity is down sharp sharply. the good news is that there is not a lot of the cash out re-fi activity bolt stering the spending so that is not going to suggest a real negative economic impact, and at this point, we are watching the purchases number for a sign that the backup in mortgage rates may undermine the pace of recovery in housing activity. >> yes, the 30-year fixed is 4.58 and that is a full percentage point in two months. >> one of the biggest increases, carl, in terms of the percent that we have ever had in that period of time. >> and michelle, thank you so much for your time and great to talk to you and have a fantastic holiday, and burt, to you, as well. >> thank you. we have big news in health care in a significant setback for president obama's affordable care act, the administration announced yesterday that the laws mandate that larger employees cover the workers has been delayed one year until 2015. that decision postpones it beyond the mid-year elections. chief correspondent john harwood from nbc joins us with more. john? >> well, david, this is a setback for the administration, and not necessarily a blow to the core of the law which is the individual mandate, and those exchanges which they have to get up and running later this year, but it is an acknowledgment that this is a very difficult complex enterprise to implement with lots of players, business, individuals, state governments, federal apparatus, and to that degree, it probably will harm confidence a little bit that the law, itself, is going to be successfully implemented as zeke emanuel and other administration allies have pointed out on the air this morning, that it affected a fairly small number of companies, and, you know, 6% or so of the large companies. 94% of companies with more than 50 workers are the ones affected by the panenalty and the mandat already offer coverage without any penalty, but this raises a question about what is going to happen with the others and does the cost of the exchanges go up, because more people need subsidies and they lose a little bit of the administration or the business contribution to revenue. but i think that the revenue aspect of this is secondary. the deficit implications are secondary to the notion that this huge complicated thing is going to be difficult to make it work. >> john, kelly here. it seems though that now it is unclear for some of the exchanges and some of the states to be able to know whether everyone who is supposed to be enrolling in the exchanges is, because now there is an uncertainty with who is covered on the employer side. and so whether even though the actual companies have an effect that is small, and there is a giant question mark over the pieces that are to be implemented until that justice piece moves forward now. >> well, it is a question mark, kelly. it is not a giant question mark, but we do know that the workers at the companies not affected by the mandate can go into the exchanges. they don't have unsern certaint. now it is true that it is a difficult challenge and immense challenge. this is the huge question mark i'm watching is how successful is the administration going to be at getting the people who don't now have insurance or have insurance on the individual marketplace who may get different insurance through the exchanges how effectively are they going to reach out to touch those people? some people will have their, as we have discussed before, some healthy people, especially men, will have some insurance premium rate increases, and others will have decreases, and that is the culture change that is largest facing the administration right now, getting those exchanges working, and especially in the states that don't establish them themselves, and getting the people enrolled in them. >> john, a lot of the people have bought hospital stocks, and provider stocks and drug stocks on the hope that, on the hope that this would draw a lot of people into the system. would you argue that trade is now in danger? other parts of this legislation that could fall? >> i wouldn't think that it is in danger. remember, a whole lot of the coverage expansion comes are from the medicaid expansion. you are talking about 16 million people added, because they are going to be covered under new eligibility rules for medicaid. you are going to have the people on the exchanges and so depending upon how sensitive they are to incremental movements, i would not think that it is going to cause that fundamental calculation to be much different. >> john, certainly a big step for the administration in a trading of political problems as the washington post says today. thanks a lot. >> yes, that is right. >> and apple making a fashionable hiring decision, and find out what tim cook thinks that the former ceo eve st. laurent can bring to the table. and also, apple gaining a comeback gaining more than 5% and finally time to buy at 420? 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[ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ apple making a fashion statement with the latest hire. the company bringing on the former ceo of eve st. laurent as the vice president of special projects and his name is paul denieve and he worked at apple in the '90s as a sales and marketing manager in europe. and john, first, give me the reaction to this hire? >> well, it seems brilliant and believe it or not, david, i'm not a fashion expert and my wife will confirm that for sure, and i have done a little looking into this research. st. laurent has had a couple of strong years with revenue up 30% profits and a lot more than that, and it is interesting what paul will bring. in the fashion world he is used to working with a visionary design ear at the center of the fashionhouse who can certainly at certain times shake it up with product, and then being able to translate that into sales through marketing, communicating to the public why they should want this thing. he's been good at that. tim cook at d-11 talked about wearables being the future and spurring another wave of buying in tech and consumer interest. so, deneve is coming in if perhaps apple is going into the wearables, and as we expect, and he is going to be used to working with somebody like a johnny yooif to translate that vision for something that people are going to wear on the bodies, but hopefully something that is going to have the luxury appeal, because that is where apple has tended to take the brand. it is going to be interesting to see what role he takes on, and i would not be surprised if the role is more specific, and if they announce an actual product and bring him in a less defined role, but he is something that they have not had before. >> well, special projects gives them at lot of latitude in responsibilities that he takes on. where are we when it comes to the wearables and where are we in terms of expectations, john, that we will see a real product? >> well, i think that the question is when, and not so much if. tim cook talked about google glass 11 and he said he did not like the bulk of it and he said that people don't buy glasses unless they have to. and he thought about it, and thought about the purpose of such a device would be, and talked about the nike fuel band which he wears and how so many of the devices they are wearing are single function, and nobody has done a multifunction device yet. but clearly concern with how this is going to look. because of the things that we wear on our bodies kind of communicate something about us, more than the things that we take out of the pockets, take out of our bags, and apple is tending to play into the take out of the pocket and the bag thing, and on your body is a different arena and need somebody thinking that way. >> well, it does say a lot about you and people do assume things that given the device that you are carrying and there is a psychic element to it, right, john? >> yes, but you can keep the device in the pocket. it does not announce something about you the minute that you walk into the room and that is what tim cook seemed to be cueing into when he talked about the challenges in wearables. google glass and i see people walking around especially san francisco with these things on. it is not the high fashion crowd. this is not something that someone who cares a lot about their appearance is necessarily go going to put on. apple wants to play to that crowd. >> all right. thank you, john. >> all right. when we come back, how do you set up the portfolio in light of all of the news and the jobs number friday and the one and only art cashin sitting there at post 9 to tell us what he thinks next. one more look at the futures as we are off of the lows and the highs of the morning. we are back in a second. 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[ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. with everything going on around the world, we need all of the help we can get. turning to art cashin, the director of floor operations for ubs, and happy fourth, art. between portugal, china, egypt and our own data, there is a lot to work with today, and what's the major cause of the concern? >> well, i think that the major cause of the concern grows in egypt. it had been not fully paramount, and yesterday portugal took over, and it had been greece and portugal and now it is primarily portugal. you will see the euro moving around yesterday. they followed the dollar index, the dxy and the stock market followed them around like pavlov's dog, and this morning, we did the same thing. the dollar was firmer, and futures were lower. and now it has flattened out and maybe in fact down a tick or two, and we have come back. i'm concerned about egypt in the sense that it may spill off into the suez. that is why you are seeing the oil moving higher, and the concern is that if the canal gets blocked or disrupted, shipments may get cutback and that means something to the oil area. >> still, it is surprising, and perhaps more to the point that both the dollar is up this morning and oil prices are rallying, and it is not just brent, but wti and a lot of people are going to get sticker shock at the gas pump. >> well, i don't know fit will move that fast, but we say it goes up like a rocket and comes down like a feather. i think that you run some real risk here. and it is going to depend on somebody takes control of the can canal, who is it and what do they want to do about it and how long does it look like things are changing. you move away from brent to wti, because you will find some shipment from here out. it used to be that we are the big user, but now it is a possibility that we are a supplie supplier. >> we saw it in the trade, david, as well. >> not surprised with portugal and greece again, but how fixated on the reports of the past and how worried in general are our markets wrong to do so, art? different this time? >> well, the reason it could be different is that there is some talk that whatever the resolutions are to greece and portugal, will they be a kind of cypriot resolution, and be a bail-in? will the depositors and others pay a price? if that happens, then the concern is that it is europe-wide and maybe world-wide as money rushes from to get out of the risk play and get somewhere else. >> we are at 816 a few times and what level to hold above before going back to new lows? >> well, my pencil is not as sharp as you guys, but for david's statement about making the fashion comments, i still talk out of a shoe, but i -- >> well, it is a shoe phone. >> i miss that show, maxwell smart. >> and the number on the resistance is the 1564, 26, and the e key area to hold is 1598 and 1600 and you get below that, then bears are back in control. >> it is familiar territory and feel like we were having this discussion a couple of weeks ago and the same levels. >> it is familiar territory and that is why breaking out of it is important and you won't be as relaxed. >> well, everybody is relaxed and i try to say that you have a fifth on the fourth and it will work out fine. >> okay. i will get started on that shortly, art cashin. thank you for join g ing us. the bell is about to ring on a holiday shortened trading day, but we have more "squawk on the street" straight ahead. ♪ ♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪ the all-new 2014 lexus is. it's your move. 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[ coyote howls ] how about no more surprises? now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science. it's just common sense. from td ameritrade. you are watching cnbc "squawk on the street" live from the financial capital of the world, the opening bell in 90 seconds as we kick off a shortened trading session ahead of the 4th of july holiday tomorrow. stocks here and the nasdaq will close at 1:00 eastern time, and we will take our show through 12:00 noon and then hand off immediately to the "closing ebel" so you won't get the power lub lunch or the street signs. >> you can go online. >> and they are setting up outside i noticed, a nice "closing bell" outdoors. >> as always ahead of the holiday, look out for bad news because a lot of the companies like to put out the negative release s s if they have news t share before as everybody else is heading out on to the highway. >> well, the s.e.c. is open regular hours and may take advantage of the 5:00 p.m. >> and we know that the earnings season is around the corner with alcoa and today, jpmorgan chase does cut it to neutral from overweight to reflecting. they have said they are trying to cut the costs and downstream, and in tend, it is all about aluminum prices. >> it is hard to overcome to significant slide in aluminum itself. >> and the supply situation that jim has talked about and everybody has been talking about it, and i don't know who sees it this way as any bellwether for the rest of the season. >> right. the target is $9 for december 2014, and talk about dead money for the next 18 months in jpmorgan's view. let's get a look at the opening bell. there it is. there is a look at the s&p 500 at the top of the screen. at the big board trust advisers celebrating the launch of the first trust intermediate duration prepared income fund, and at the nasdaq, the war council in honor of july 4th. when you look around the world, it is a great reminder to realize how lucky we are to live in this country. >> and reminded as well when you spend time abroad and working ov overseas and the countries and the challenges they face, and grow up taking it for granted in the post-cold war era and it is a reminder how unique and special things can be on our shores. >> unbelievable. it is nice to sort of recap what you brought the viewers yesterday on dell, david. put it into context the week that dell has had and the week that icahn has had. >> yes, listen, for me, it is a fascinating situation which is why i like to report on it, of course. and yesterday, we did bring up the significant idea that there is a real chance that he could lose the july 18th vote. a lot of especially iss if it goes against him. we don't want to prejudge iss, but looking at the people who were presenting on behalf of dell and the committee and in terms of the 1365 leverage buyout, and we will keep an eye on the stock, but there was a lot of follow-on reporting from my competitors as the day goes on, but much of what we said yesterday, we will see if mr. dell raises the bid at a sufficient level to secure enough backing so that he can win that july 18th vote, and most importantly perhaps the backing of mr. icahn and get a voting agreement with icahn to insure that the vote goes his way or does he stand a chance to lose control of the company. the july 18th vote is to go into the no-man's-land where you will have a come pe tpetition betwee and his recap plan and what it will be even if michael has one. don't forget he will own 75% of the dell company should he secede, but silver lake will not go any higher on their bid and if i had a dollar for every time i heard that, i wouldn't be sitting here. >> yes, right. >> i would be on the beach already. >> is there anything similar between the strategy dell has chosen and the strategy that charlie ergen chosen and a much different battle. i mean, if they both end up losers in the chapters. >> well, you know, there's some similariti similarities, sure, but the question will be what happens in the case of ergen, he has already lost, and lost sprint and clearwire and we have not been certain what his motivation was, and he has enormous amount of spec and he needs to commercialize the spectrum, and he has time to do so, but he needs money to do so. so i will tell you as i look at the summer ahead, the couple of months that we have until we get back to the fall, mr. ergen and what he will choose to do is a key thing. continue to watch cable consolidation, and again, a story i first brought you that has not advanced much except that everybody is talking about it, and these are key things, and the dell deal particularly if it should get voted down on july 18th. >> and best buy today, a couple of upgrades on the stock earlier in the week today, and goldman reinstating coverage with a buy, and the price target is 34, 12-month, and it is the number one gainer on the s&p. >> and some catalyst here. >> this is after gary ballmer upgraded it at credit suisse. >> yes. >> and i want to take a look at the new york times which is not up much, but 1% this morning and lizard moves it to a neutral. and what i found interesting about the report, itself, is that the first data points they p provide, the first two have nothing to do with selling more subscriptions or anything else. it's higher rates, improved pension funding, and they have a great opportunity to buy back what they have leased in their headquarters building, and a sale/lease buyback to purchase 21 floors from a below market, and they can benefit from the arbitrage. >> a pension fund with a newspaper attached. >> we will have more plays in the general publishing area, and new york times and news corp. of course, and "time" magazine as well, with a spinoff with a new ceo coming in, and so there is going to be opportunities if you believe that there is any hope to start or opportunities to short the heck out of them, too. >> and can i mention briefly, because we are following the obama care ruling or the change last night and today looking at the health cares and the hospital stocks in particular, and hca and i want to show it if we can down better than 3%, and lot of the people are watching the hospitals, because they have liked this story based on the admissi admissions thes, and the positive trends with the lift from obama care, and people are moving out of that trade and the related hospital names this morning, and we want to keep an eye on it throughout the day. >> and pandora is giving a little bit bit back. they are putting together the best eight sessions since going public, and giving back 8% now, and talking about apples, and things regarding the wearables, but radio is a big name, and pandora is one of the names that the bulls have said have held the leadership position give ten co competition. >> yes, and spottify, and all of the other services, aim surprised they have done so well. >> and overall the dow is down 50 and keeping a close look at the 1600 level on the s&p and that is an important level for the bulls to hold. meantime, josh lipton is on the floor seeing what else is moving. >> well, carl, no slow day for the market. lots of news and data overseas and the geopolitical risk and we continue the watch egypt closely, and the growth worries dominating the headlines. beginning in china the intrabank rates are normalizing, but china is reporting a decline in the official sector, and that is causing an index to slip. in portugal, continue political drama and two ministers resign, and that is the worst day there in three years and so certainly something for the ecb to talk about in the meeting tomorrow. here in the u.s., more data and information for the traders to think about to gauge the next steps. the initial jobless claims remain below 350,000. and the next data is going to hit in 20 minute where is the employment component is going to be focus there. . that as we get closer to the jobs report friday. kelly, back to you. >> thank you, josh. we go shifting to the bonds, and the dollar, and rick santelli joining us from the cme group in chicago. >> thank you. happy birthday, america. pay attention, because we are moving fast. if you look at the intraday chart of 10s, you can see coming down in the time zone, and the adp strength pushed us close up to unchange and the two-day chart paints the picture. we continue to lose the higher yield momentum but not by much. a lot of talk of what is going on and whether it is cypress or greece or portugal, and there are issues going on that we have to pay attention to, so look at the intraday 10-years and first of all looking at portugal briefly 8%. these are the highest yields since november. the following countries are still below 5%, but still follow the trend whether you are looking at italy, whether you look at spain. you can see that these countries also had similar moves to the upside in yield, and this is something that you need to pay attention to. when it comes to the aforementioned dollar index, it is not lost on the trader house the dollar commodities seem to differentiate their effects of a strong dollar based on the energy lines that we have talked about it on cnbc. if you are looking at the intraday dollar index, it is losing some momentum, and remember to many traders it is a holiday market, and maybe taking a little bit off, and seems like this is the flight to safety vehicle the last several days, but a two-day chart clearly shows you the highs there, and there was a lot of strength there, and by the way, yesterday was close to a five-week high close on the dollar index. carl, back to you. >> all right, rick. we will see you in a few. rick santelli. now over to the nasdaq. and seema is there. >> well, carl, massive unrest in egypt and waiting for the u.s. jobs report on friday. stocks are on the move, and look at apple, because they are in talks to secure a tv content agreement with time warner, and seeing the shares of apple moving on the day. apple as you were mentioned hired former ceo eaves saint laurent hired paul deneve for special projects. and now tumbler in june was bought by yahoo to buy video mobile app maker qwiki. and here is a part eduardo salverin led the first round of fund-raising for qwiki. and now after reporting dismal earnings last friday, the stock is now trading back to the lowest level since november of 2012 for blackberry. and quick check on the tech stocks as a whole are faring slower on the day, and seems like abbreviated but a volatile trading while we await the jobs report, and the situation overseas as well, kelly. >> and the brutal period for blackberry, an meanwhile, apple is bringing on a new executive for special projects, and that stock has bp on the rise in recent days, and is a turn around finally in sight? we will ask that ahead of the program and the egyptian president has less than two hours to reach an agreement for the people, and we will get the latest from cairo with the latest. we are back after a quick break. well, it is officially beach season, so why not grab the rays in style by packing up all of your needs in the cnbc tote bag. signed by the entire "squawk on the street" gang. it can be yours if you can guess friday's nonpharm number. and yes, you have to be 18 years of age to enter. for all of the official rules and details go to squawk@cnbc.com. you have until 8:30 a.m. eastern friday morning. good luck. competition tomorrow requires challenging your business inside and out today. at cognizant, our flexible, collaborative approach helps forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. 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[ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ protests are continuing in egypt today. we less than two hours that the deadline that the military gave the egyptian president mohamed morsi to comply with the demands. the military is expected to speak at 10:30 a.m. and yousef is in cairo with the latest. in respect to the time line, yousef, what can you tell us? >> well, kelly, you are right. that is when the deadline expires later on this afternoon, but the military never said it would make an announcement, but we know that the deadline expires, and we will have to wait to see what happens after that. we might have to wait for several hours, because people are streaming into different parts of the city. i mean, iconic destinations in cairo like tahrir square in anticipation of the expiration, and the possible announcement from the military. it was a very tense past 18 hours or so. first off, the prime minister, the president and the head of the army did have a meeting. we don't know what was discussed and then later at midnight, the president makes a speech, a defiant speech basically rebuff ing the army's call to engage in any real constructive dialogue. upping the stakes. i mean, we have seen that the rhetoric is getting much, much sharper as well, and the violence, kelly, it is not abating either. overnight, clashes claimed the lives of 20 people, and the tensions remain. remember, that the people out there in the squares and the other parts of the still city and the country are millions and not people who oppose the president, but some of the supporters and some of them are willing to die for their president. that is exactly what people are worried about here in the country, and the united states is watching this of course very, very carefully. they find themselves in a predicament, because morsi is the country's first freely elected leader in a free and fair election, and that is something that the president brought out several times in the speech that he has an element of legitimacy, and in effect, it would be a military coup, and how would the united states respond to a military coup and what would it mean for the track record of promoting democracy in this part of the world. egypt is the arab's most populous country and also important market with 85 million people, and important sectors there, and the investor sentiment, the market is slightly below the line in today's trade. we will have to wait to see what comes out in the next few hours. carl? >> and we know that the next few hours are doing to be critical. thank you, yousef. we will come back to you soon. >> amid that news, crude has cracked $100 for the first time since september and then some. sharon epperson at the nymex for that. >> and it is critical for crude oil prices as well in the next few hours as we have an inventory report coming out from the energy department and a bullish report on the oil that also contributed to the rise in crude oil prices above that $100/barrel mark. much of the attention of the traders is focused on egypt and with the deadline looming, we are looking at the prices continuing to rise and since we have seen the escalation of the tensions of egypt over the weekend and last weekend we have seen a significant rise in wti and brent crude with wti leading the way up some 6% in the past week, and brent crude up 3%. the issue here, and what is at stake, and what is at risk is really 2.5 million per day of oil that is either sent to via pipeline or shipped across the suez canal. that is what the tradition energy says is most important to the trading community, and while we could perhaps see that group then around africa to get to the mediterranean and then to europ europe, it is still more oil than what was lost during the libyan crisis that we saw two years ago. the result is not only higher prices for crude oil, but refined products as well. the petroleum complex is higher across the board, and 10:30 a.m. is an important time for the oil traders to watch. it is not only the time that the military is reportedly going to make a statement in egypt, but also the time that we will get the oil inventory report from the government. back to you. >> therrisharon, a quick questi because it seems to be inventory specific or something specific to drive this upi, and what do you expect the market reaction to be, well, the brent oil is pricing, but as you point out, we are seeing much more of a wti and happening all week. >> yes, it in terms of forecasting of what we will see, and the tighter supplies in the third quarter, and what we will see with demand, but keep in mind as we are seeing more of the oil flowing from the middle of the continent to get out of the bottlenecked area. we are seeing the u.s. oil price acting more like a global benchmark, so maybe in coming months that price reacting just as brent would reakts to global developments, and that is what the traders are watching right now. the dynamics are change as they are always in the oil industry. >> sharon, on the retail gas, and it is ironic to be talking about this on the same week where the retail price was the lowest since january, and how quickly would this feed into the pump as we all know it? >> well, talking to opus analyst tom kleiza who is with gas buddy.com made some interesting comments this morning saying that actually we are looking at the high levels of gas inventories and all localized for what consumers are paying at the gas pump. we may see a slow climb higher in the gasoline price, but not a spik spike. it is not going to necessarily follow the spike that we have seen in the oil price over the last several days, because of the inventory levels that we are seeing in many places around the country. and maybe it is some welcomed news to those who are on the road for the next couple of weeks. sharon epperson watching the story on oil there. we go the mary thompson now. >> we are looking at the shares of chipotle, and it is a gain of 5.65 and these are the reasons for the upgrade. first they expect that the company's earnings prospects are good right now and cite the recent pullback in the company's shares as a reason to buy. they put a 430 price target on the share of the restaurant trade and once again chipotle up 1. 1.6%. back to you, carl. >> okay. thank you, mary. a blow to the obama health care law, and the employer mandate pushed back a year to 2015, and we will tell you the impact on businesses across the country, and insight of former continental ceo gordon bethune in a moment. ences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time. [ 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. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] on an unusually news-filled market day before the holiday, take a look at some of the s&p losers there, and some othem involving the big cyclicals like cummins. and some stocks are having a despicable morning. and the return of the minions. [ speaking foreign language ] >> "despicable me" is playing in theaters and steve carell and krist kristin weig. it is getting high praise. and the washington post called the lone ranger movie "the wild, wild mess." >> and most of them bombed, but not "despicable me" and it is getting strong notices. >> and sandra bull loocbullock e melissa mccarthy and they call it the chick flik cop mo i havid is this happening? >> well sh, i keep having that my ear. >> it is not from the exchange flow, so no worries down here. >> and the health care, is one of the sectors behaving badly in light of the affordable care act. >> eyeing some hospitals in particular, and health management are down almost 2%, and looking at hca down almost 4% earlier today. they are off of the lows now at hca and down 3. so there is a confluence of better data, better signs in terms of the hospitals admissions and rates that people liked about this particular story, and some air coming out of the sales this morning. >> and thc which is tenant, and consolidation is a key to the investors' approach to the sector, and tentative to the deal last week, and hma is under fire with glenview financial capital announced the nine-board member, and there is a consolidation that could happen as soon sas they get the s.e.c. approval. and larry robibins has been a guest right here. >> yes, and how much does this obama decision happen? >> well, it is a perhaps delay it, and there is a bit of an effect. >> gap in the story. >> and health care from year-to-date, and the only thing that has performed better of the ten sectors is consumer discretiona discretionary, and health care up 19.2%. >> and we asked if health care was the newest growth sector and biotech is the largest performer, and a spade of deals, david, so the trouble with health care is that you have to define what you are talking about anymore and the regard of the biggest insurers and aetna and those others are happening as united health said it is pulling out of california and so anybody looking for the optionality on the exchanges saw it as a big red flag. >> we will see in the next few months if the em floiier s -- employers are holding back. >> well sh, the adp numbers did show that. there were encouraging signs. >> yes. we will get unemployment subcomponent, too. and as millions of americans hit the road for the holiday, new data that the drivers are using less gas. we will explain after the break. geico's defensive driver,ke 13. good student and multi-policy discounts could save you hundreds of dollus. engineer: uh geico's discounts could save you hundreds of "doll-ars." it sounds like you're saying "dollus." dollus. engineeif you could accentuate the "r" sound of "dollars." are...are... are... engineer: are... arrrrrr. arrrrr. someone bring me an eye patch, i feel like a bloomin' pirate. geico. fifteen minutes could save you fifteen percent or more on car insurance. honestly, i feel like i nailed that. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. 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[ male announcer ] this is betsy. her long day of pick ups and drop offs begins with arthritis pain... and a choice. take up to 6 tylenol in a day or just 2 aleve for all day relief. all aboard. ♪ ♪ ♪ ♪ [ male announcer ] the all-new 2014 lexus is. this is your move. welcome back to "squawk on the street." june read for nonmanufacturing disappointing at 52.2. still above 50, and we were expecting closer to 54 to 54.2, the last time we were at these levels 52.2, i will cipher out the list of history here, it look looks to me like i'm going back quite a ways. going back second page, and looks to me like it might be february of 2010. february of 2010 defined a lower read than 52.2, and if we look at the employment index ahead of friday's big number, this is the opposite of other ism readings and this is moving up from 50.1 to 54.7 and new orders moved exactly the opposite from 56 down to 50.8. so there is a little bit for everybody here. if you want to keep it simple, disappointing, but still above 50. carl. back to you. >> all right. rick, thank you for that. rick santelli, the stocks had been trying to work off of the low in advance of the numbers and losing ground right now. steve liesman is back in the head quarters with a deeper dive on the data and a closer look ahead to friday. steve? >> well, i'm interested in the market, carl, because it is one of the classic tests of whether the market sees good news as good news or bad news as good news, because of what it does for the fed. there it is down 12 points, and here, we are down a little bit after that number came back from where we were, and there is the nasdaq coming back up again. we will see how the market react s. we have had four data points, and two better than expected and i like the employment component of this being up. there are the reports of 188 and adp and looking for 160. and the jobless claims down 5,000 from the prior week, but the trade deficit is up unexpected $5 billion and you can see the decline in exports that perhaps reflects the weakening global economy, and that be the concern is. whereas imports the rate of increase was down from the prior month, but still up. so it looks like if you look at the trade report or at least for that month, it was domestic demand okay, but foreign demand looks like it took it on the chin. here's the outlook for the all important jobs report tomorrow. looking for 160,000. i'm not seeing, guys, too many changes from the payroll, from the adp report in the payroll forecast and we will let it settle and let the economists mull it over, but it is ticking down to 7%, and perhaps lower because of the prior month, and a it was 7.75, and we will look at the work week and the average hourly pay, and that is two important signs for the health of the job market, kelly. but on the index here, the ism came out with new orders which is what collapsed here. from 56 in may to 50 in june and that does not bode well, kelly, for the coming months when it comes to the service sector. >> yes, people will be digging through the report. thank you very much, steve, for that, and let's look at the market reak shction for some of conflicting data reports as we await the jobs report friday. we will bring in the ceo of tanglewood management, and david loi with amareriprize financial. and david, starting with you, in terms of the shorter term strategy reaction here with loft the talk about whether we wanted to take this news, better news on the job front which we did see in terms of that improvement in the services and the employment part of the ism employment data services as indeed, good news, a san diego the mark -- and is the market going to move if it sees better than expected jobs news? >> well, the market wants stronger than expected news, but at the same time what i expect to happen, and the market thinks is not the same thing, so it is a tricky question. this market seem ts to be stuck between exexpectations of faster economic activity in the second half on one hand and the threat of the fed on the other. but in the short run, we are not getting stronger news except for maybe out of the labor markets in the near term, so this market is stuck in a trading range until there is a clearer picture. so we are treading water here. >> john, what do you do from the longer term point of view, and lot of the clients that you speak to who are investing over a period of decades here, you on the one hand have stronger signs maybe for the jobs report friday and on the other hand that trade report means that the second quarter gdp figures may be 1% if that. >> well, you need the whole array of economic data and just like steve liesman said, two up, two down. if you look at the year as a whole so far, you can see that the characteristics of the new normal continue. we have a fairly steady eddie economy. i like to look at the six-month moving averages of the things like the jobs and the total employment, total hours worked. and when you look at the six-month averages, you will see a steady economy which is actually good news, because it is showing that the economy can take the one-two punch early in the year from the higher tax rates and the fiscal cliff, and the sequester outlays and yet we have been able to maintain the economy at least to the rate of last year. >> david, in terms of the merging market equities and yesterday citi comes out with the note to say don't wait for the catalyst, because there is enough value out there already. are you that bold aside from what happened around the world last night? not y >> not yet. i'm intrigued over the invaluations i shall say over the last couple of months, butv capital flight has run its course. i would be cautious and not completely out of the markets, carl, by any means, because i would need some exposure, but to feel more confident i need to know how the fed reacts and the global reaction it 'm not there yet. >> and john, value in terms of a discount down the road because of effects of geopolitics like in cairo or more unintended consequences from the various central banks? >> well, clearly, if you are looking at investing, you have to say that this year, the clear win ser u.s. stocks in the horse race of asset classes, they are the thoroughbred, and everybody else is a plow horse. u.s. stocks are so far ahead. there are reasons for this. the u.s. stocks earnings are the primary driver, and they are growing which is not true around the world. we have a unique attribution, and record buybacks this year, which means that the earnings per share per investor are increasing strongly. then you talk about the come competition, and particularly in europe, you know, that has to be suspect, because they are not moving ahead. they are not resolving the economic issues and as we can see from portugal today, they are still having trouble with the political cohesion, and when you extend that to emerging markets and see the troubles from india, china and now going to brazil, and turkey, and if you include egypt in that, it means that the investors should be and should maintain an overweight in u.s. stocks. >> we have heard that echoed. goldman this week saying that it wants in the clients investors to move away from the stocks with the heavy exposure to the emerging markets to ones that are more safe back home. appropriate message on independence day, john and david. have a great holiday. >> thank you. >> thank you. don't forget to try to nail the number, because this month we are giving away a signed tote bag. so to submit go to squawk street at the twitter handle, and e-mail the number. the worst thing is when they do guess it right on the money and they don't use the hashtag. >> yes, it happened last month. we have priority to people who if there is a tie, it is whoever puts it in first. >> so, right, lisa? earliest guess. >> yes, you can guess more than once. >> and this tote bag is particularly good at this time of the year. it is high quality, and so you do want to participate. >> i see a future for him in informercials. >> as opposed to the t-shirts and things, there is a really nice -- and i mean, it has a zipper. it closes, and you won't get sand in it. think about participating. >> and then if you need to clean it, he can sell you oxiclean as well to take out the stains. >> well, there is more. well, there is more. mary thompson is back at head quarters with a quick market flash. mary? >> well, barkleys is having the long term party credit risk cut from a to a-plus at standard and poors and the reason is that concerns about the outlook for the investment banking model of european banks because of uncertain market conditions and more importantly, because of the uncertainty about the regulatory environment there, and you can see the shares moving lower in today's session. one bank that was excluded from the downgrade we should note is the swis bank uds. >> and what does the health care law mean for health care providers? we will have allen miller next to weigh in on that. and the egyptian military to make an announcement ahead of the deadline for president morsi to reach a deal. we will bring you all of the headlines. here is a quick look at the vector of egypt still under pressure, but holding up better than you might think. bjorn earns unlimited rewards for his small business. take these bags to room 12 please. 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bulldog: that cloud reminds me... radio: the tempur-pedic cloud collection-- bulldog: that's it! radio: now with 48 months interest-free financing-- basset hound: free financing? radio: or get a queen-size sealy gel memory foam mattress for just $497. bulldog: that's a ringer of a deal! radio: mattress discounters' 4th of july sale ends sunday. ♪ mattress discounters health care stocks are slightly underperforming in the market today, and the white house announced yesterday eving that it is delaying a key component of the affordable health act for a year. bertha coombs is following it for us at the -- bertha, are they going after the employer side here? >> well, they are going after the employer side and doing it because the employers have intense about this decision. obama administration delaying the decision that companies of 50 or more workers offer health care or be subject to a fine. they said that the new rules would be onerous for the new administration to enforce. and there could be a fine if they receive a delay on the exchanges, but they say it is inevitable. >> well, mechanically the exchanges were not ready, and we weren't ready and they weren't ready and ready in time for this take off in october when the exchanges start to enroll people, and in january when the exchanges are supposed to open up their door. >> front line does not think that businesses will pull back on the plans to offer the insurance necessarily, because a lot of them are far along, but he agrees with the american benefit council that says that the delay will provide some businesses with breathing room and help to minimize the disare rupgs under the law. the administration says that it is not as potential game changer as the individual mandate. the insurers today are down on the news. goldman sachs said they did not see much material change for the insurers because of the delay. but chris riggs says there could be a possible opportunity for the hospitals to offer leaner benefits for a year than they are required to under the affordable health care act which includes four hospitals like universal health, the issue of mental health, because that is now included in the essential mental health benefits, and some may have to hold off on things like that, carl. >> fascinating story, bertha qume, who has been on top of it since the beginning. and joining us now is the ceo of one of the largest management companies of universal health services. alan miller, thank you for calling in. you were skeptical if this would happen at all, and you said that implementation by january, and you said good luck buddy. you can't be surprised. >> no, "em not surpri shgno, i'. it makes you wonder if the people who put this together have ever run anything, because it could not possibly happen. and max baucus who is one of the architects said it looks like it is going to be a train wreck. so it is half a wreck. >> does it mean that the rest of the aca is truly coming off of the rails, alan, and how do you implement the rest of it and delay the key mandate by a year? >> well, i think that the delay is a very good idea, because the exchanges are not fully in place, and in fact, even in pennsylvania, they are still voting whether to increase medicaid or not, and that has never been fully resolved. seeing that the united, and the big insurance companies have said that they will not stay in california, so it is up in the air. it is complicated with 2700 pages of regulation. >> allan, where does this leave consolidation, because we look at the hospital stocks, and what about your company and the s sector more broadly? >> well, we are located in vicinities that need hospitals and need our hospitals. our facilities are there. we are functioning, and we have been functioning all along, and we anticipate that at some point we may get a pickup of business, and a pickup in business, but it is not having a deleterious effect on us, and we will be there a year from now, too. >> and alan, the shares are down 3.5%, and are you thinking that the investors are missing something or a right to take seriously what this delay means? >> well, you know, most stocks go off in the summer anyway. good buying opportunity. i don't follow the market week by week. we have a strong company, and a strong industry. there is tremendous demand for mental health that is not being served generally, so i don't think that this has a tremendous impact, and plus the people who invest money go by a quarter basis, they are nervous folks. >> mr. miller, i think that you can hear me and hopefully we can still hear you, something else that has been driving your industry of course is consolidation, and i'd love to get your thoughts of will united health services, universal health services, excuse me, play a role in the consolidation and how do you view it? >> well, i think that the stronger companies, and we are certainly one of them without question, and the stronger companies have opportunities to absorb and merge with the weaker ones having more problems. so i think that this is going to be a continuing opportunity. >> with that, i think that we did lose the cell signal, but you can't certainly ask for a better point of view than somebody in the middle of it. thank you, alan miller and your time as we take stock of what is happening with the aca. and no doubt, that apple has had a rough couple of months a, but is the rally for sure? one of our guests says that it can go down as much as 43%. will somebody from the fashion industry help? and plus, the latest from cairo as the egypt military is going to make an announcement. we will go straight to cairo. i made you something, too. ♪ see you next summer. ♪ [ male announcer ] get exceptional values on the highest quality cars at the summer of audi sales event. ♪ at the summer of audi sales event. the world is changing faster than ever, creating new opportunities for those who stand ready to seize them. in a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, our flexible, collaborative approach helps forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. to support strong bones. and the brand most recommended by... my doctor. my gynecologist. my pharmacist. citracal. citracal. [ female announcer ] you trust your doctor. doctors trust citracal. let's get over to mary thompson for a quick market fla flash. >> pepsi is down more than the rival coca-cola, and the center for environment health found that some of pepsi's signature soft drinks sold outside of the state of north carolina contains a caramel coating that carries a carcinogen, and worrisome degree of carcinogen. california passed a ban on the coloring and coke and pepsi said they would take it out of the drinks nationally. coca cola has said it has done, so and pepsi is in the process of doing so. then all companies will be in compliance by 2014, but nevertheless, the news is putting pressure on the stock. pepsico down 1.14, and coca-cola down .12. and company apple is bringing on the incoming vice president paul deneve of eaves yves saint laurent. good morning, guys and happy fourth of july. mr. trainer, let me begin with, because i think that we have talked about the 2:40 target befo -- 2.40 target before, and the share shares to move down, you would have to see a much bigger erosion in the base, and do you think that it is going to happen? >> i think that it is happening and we see it coming. apple cannot control the margin s of the valuations they have had in the past. the new handset makers and the tablet makers are coming out of the woodwork and attacking the competitive advantage that apple used to have everyday. it is only getting worse. and you know, as i said last time when we first talked about this, carl, unless they can come up with a new great revolutionary product which i don't see coming, i think that the returns on the capital of company will revert back to normal level which implies a price of $240 or so. >> channing, earlier in the week, one of the bull cases on apple is that the smartphone wars as we know it is sort of phase one of this whole battle. phase two is getting the smartphone chipsets into cars and appliances and televisions and into watches. is that where you are coming from? >> yeah. i think that apple has a lot of innovation still left in the tank. the last, and we will concede that the last six months have been very difficult for applapp. we have opinion in an information dearth and we are starting to get past it. to get to 240, you need to see a complete collapse in gross margin margins which have been pressured but with the new products and the cost curve, we will settle out in the high 30s, but to get to that price point, you would have to see the margins collapse, and we don't see that. look at the loyalty of apple customers. they are loile ya, and the stock price has treaded water here, but everyone is looking for the fall of the new releases of the products and the services are gaining steam. i think that you are right, carl, there are opportunities out there. all over the place with apple that have not been touched yet. >> channing -- >> yes? >> just to jump in here, i'm curious if you can maybe walk us through the valuation story as well. because david was laying out the case if you look at the return on investment here, apple should be trading like microsoft, and bulls will say that on the p.e. ratio, they are incredibly cheap including the cash, and what do you think that the market is focused on here as you mentioned the gross margins? >> well, if you see a gross margin below 35 and trending downware, then the stock is a $300 stock, but we don't see it. we see the gross margins stabilizing in the 37% or 38% range and maybe highhigher, but management has laid out they expect them to be higher, and the estimates have been taken down, and think about 10 multiple, 10 p.e., it is trading significantly to stocks like sep, and ibm, and we think that the growth of apple is much higher than the peers. so it is a high multiple. >> david, the focus is an important one, but at what point does the market choose that one as well? >> well, i think that it takes time perhaps and so many people are looking at the rear-view mirror, and if you look there, the profits are substantial, but the companies cannot maintain the return of capital in that way for a sustained period of time. it is a around s&p which 240 implies, so it is more difficult to get people to focus on the future than the past, and so it is clear that apple will have a return that is closer to level. >> channing and david, thank you, both. we have to leave it there. have a great holiday. there are live pictures from cairo, and we rex ekt ping a message from the egyptian military, and we are keeping a close eye on oil. and crude is back up to $100 a barrel on the wti measure, and that could be an important way to play the crude wave. we will be right back. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection and because usaa's commitment to serve military members, veterans, and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. ♪ [ male announcer ] some things are designed to draw crowds. ♪ ♪ others are designed to leave them behind. ♪ the all-new 2014 lexus is. it's your move. welcome back to "squawk on the street." i'm sharon epperson with breaking news from the energy department on oil inventories, and a big slide and a big surprise to the market as oil supplies fell in the last week by 10 million barrels, more than 10 million barrels and in fact, we are looking at the decline of 10.3 million barrels to be exact according to the energy department. we are looking at the oil prices rallying as a result up over tlr 2 on the session and approaching the high of the session which was above $102 a barrel. meanwhile, we are looking at gasoline supplies in the last week that fell by 1.7 million barrels and gasoline supplies fell by 1.7 million, and dislate supplies fell by 4 million barrels. and now they were anticipating an increase in both the gas and the distillate supply. we saw a decline three times as much as what plate services was anticipating. we heard from the american petroleum institute last night and they saw in the past 9 million barrel decline, but the u.s. energy report is a 10 million barrel slide in crude oil inventors in the past week, which underscores, carl, the flow of oil coming out of the middle part of the country, as we are seeing more refineries restart operations, and the bp refinery is one of the key ones leading to the fact that we are seeing a decline to the crude oil supplies. back to you. >> thank you, sharon epperson. the egyptian army is expected to make an announcement any minute in cairo, and yousef gamal el-din is joining us. >> we could see it all come to the extent that we saw in the last two or three days of protest. it gains momentum toward midnight, and we have news coming out of the state television. they are saying that the armed forces who were the ones who initially put the 48-hour dead line are meeting with the leaders from the political scene and the religious scene and national leaders as well. that is coming out of state television that the meetings are going on now, and we did expect some last minute political maneuvering and as far as we understand the current cabinet and the muslim brotherhood are not part of this process, and they added that a statement will be issued at the conclusion of that meeting which may not be exactly when the deadline expires, but we do expect something to come out shortly thereafter. in any case the people are waiting for the announcement. also, we have a tweet from the british prime ster wminister wh that the level of violence is appalling. and that we should look at governing by consent. the tensions are very, very high. you might think it is a celebratory atmosphere in tahrir square, but there are competing rallies supporting the incumbent president, and the confrontations and clashes as we draw close to the deadline are still very, very real. >> yousef, thank you for that. we are waiting to see if we are hearing any statements at the moment. we will continue to follow the story as soon as we have any detail on it. let's look at how the events in egypt could affect the markets. sterling smith is an analyst with citigroup, and sterling, we have been talk about the fact that wti prices are higher than brent which would suggest a complacency in the market or is wti behaving more like a global benchmark? >> well, wti is returning as a global benchmark and the production of shale oil has brought the united states back up into a bigger player in the world. right now, a rally based on the nervousness, and every time something happens in the middle east, they have to build in risk premium, and egypt is not that biggest player in the market, and there is fear of contagion spread i spreading to other countries and if it lands in a producing country, then could see a whole new market. and we are watching the consumption move up and trade at $100 a barrel will bring in funds and speculative money, and driving the markets to maybe as high as $107. >> sterling, can you explain why the prices in the u.s. are so high, and why they haven't moved? a role here of investors piling into the space because it is stable. if you were to look at the asset classes year to date, it is one of the more stable ones and again at a time when the bond yields have been moving around the dollar has been moving around and certainly looking at the growth trajectory here is. >> well, what we are seeing here is better consumption, and the fact that the oil we are using costs a lot more the take out of the ground, and we are moving the new shale industry to bring the oil in, and that is going to naturally push the prices higher. as far as the investors jumping in, we have seen the commodity outflows speaking out of the index funds and things like that that normally drive the prices up. investors in the commodity market have to play the chips effectively and more of a traders' market than in the past six or eight years so with that, just because something is stable does not mean you want the buy it. there are more opportunities to be made short gold or short grains in the rally than it is being in something stable, because stable money in the energy market is money that is going nowhere. >> interesting poin. also the spread between wti and brent has narrowed so much. any chance here despite everything that we are seeing, and kind of to the point of the role that egypt plays, and could we see a price per barrel of u.s. crude rise above the global benchmark. >> it is entirely conceivable, and especially if we see the robust driving season and the summer driving season in the midwest which has been flat, because the weather has not been cooperating and the next two weeks, that is going to change, and if we see more people hitting the road that is going to push demand and lift the wti prices. >> fascinating point, and reminder that stronger demand here does carry the side effect of higher oil prices. any risk or talk on the trading floors there that the prices are so high that it will cause its own collapse? >> i don't think that we have reached that point yet. right now we have partially a politically driven situation which puts a lot of tension in the market, and until the situation in egypt sees a little bit more resolution, i don't think that we are really looking at the risk of prices dropping, but when we do finally hit the capitulation point, and resolve, prices will drorngs and drop very, very quickly. >> until that happens, sterling. we keep coming back to the question about retail gas prices here in the country, and obviously, a very soft trigger pressure point for the american consumer. our correspondent sharon epperson argues because of the inventory situation, it is unlikely to see a sharp spike at the retail front. do you agree? >> i don't think that we will see a sharp spike immediately, because they take a little time to move through the pipeline, but if there is continued trade at $100, crude oil has been at $110 for the last week or so, and that is a 10% rise, and here in chicago, that will filter in, and our gas is $4.50 a gallon and so we could be looking at $5 a gallon there in chicago, and probably $4 to $4.10 there in new york. >> what will make brent pop here? >> you need some sort of political problem to spill over to a producing company or something to interfere with the supply chain. if you see one of those two things, that can drive brent high higher. wti is in the lead and nothing will usurp it right now. >> fascinating stuff. sterling smith from citi. thank you for joining us, sir. >> thank you. when we come back another casualty of the rising rates. mortgage apps falling. and are hopes off a housing recovery over already? we will keep an eye in egypt at tahrir square and on the developments as they happen there. we are back in a moment. 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[ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ mortgage apps slid last week as the mortgage rate continues to rise. diana olick is not on set with us here today, but what is going on with the latest application figures? >> well, when rates go up, the mortgage applications go down and simple as that. look we saw a spike in activity last week, and that meant that the re-fis got really hit pretty hard. the applications to refinance fell 16% from a week ago and seasonally adjusted to the lowest levels since july of 2011. the refinances make up 60% of all mortgage applications down from the 80% range when the rates were rock bottom. the re-fis put the money in borrow's pockets and fuel home renovations, and keep struggling homeowners out of default. personal applications fell, but not so hard, only down 3%, because affordability is strong. also some potential buyers on the fence of a purchase may have j jumped in afraid that the rates will goo higher and price them out for good. now, going from the 3.5% to 4.5% may not sound like much, but the fact that it happened so fast, and consumers were used to throw rate, and for those who did not lock in, their average monthly payment went up 15% but with fewer re-fis banks are looking for more business and more eager to lend. >> there are some science that it -- are some signs that they are loosening for people with the best credit history, and we don't know what next year will have on the mortgage e credit. >> most people expect it to stay around 4.5 to 5.0 and continue to go higher, but again, they are fluctuating day to day, but we won't see the record lows any time soon. back to you guys. >> thank you, diana olick. over to mary thompson on a market flash that might ring some bells. >> this is johnson and johnson and a lot of people familiar with the company, and the shares are down 9.5%, and this is in the wake of china launching a probe of foreign makers of infant formula and alleging a price fixing operation. in the wake of this wells fargo cut the rating on the stock to market performance and lowering the price projection to mead johnson. and goldman removing it from the stock list, and went to neutral. again, it is down 9.5%. carl, back to you. >> yes. looking at the live shot of cairo, and the deadline for the army has essentially passed and president morsi rejecting that deal, and we are keeping an eye on egypt as it could change at any moment. here is how the egyptian markets are faring this morning. well, it is officially beach season. so why not grab those rays in style by packing up all of your needs in this cnbc tote bag signed by the entire "squawk on the street" gang. it can be yours if you can guess friday's nonpharm number. go to #nail the number. you have to be at least 18 years of age to enter. sorry, kid. you have until 8:39 a.m. eastern friday morning. good luck. well, did you know some owls aren't that wise? don't forget i'm having brunch with meghan tomorrow. who? meghan, my coworker. who? seriously? you've met her like three times. who? 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[ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. thshe makes a nifty livingn sleeping on mattresses pioneered the internet of everything. by engineers whose singluar devotion is not stopping until they have given her the best sleep of her life. that's not greta. save up to $500 on the tempur-ergo set plus visit tempurpedic.com for details about our 0% apr financing with up to 5 years to pay. welcome back. when it comes to m&a activities the numbers are in for first half and given the lack of merger mondays or tuesdays or wednesdays or thursdays or fridays for that matter the numbers wither not good coming to merger and asset activity. the stock prices have very often gone up, and sometimes quite sharply. there you see it. m&a buying for the first half of 2013 and this is flglobally 13. ahead of last year, and we have few big deals. and, of course, when the year started we had heinz, we had virgin media. we also saw the lbo of dell in there and people got quite excited. of course, what was behind heinz, well, warren but fet, who can make decisions without having to worry about his shareholders. john malone, same thing. these are guys who can make a decision one day when they wake up and do it. but otherwise ceos who are dealing with their boards who are in their jobs perhaps for a shorter and shorter amount of time may simply not be willing in this environment to take the risk of a large deal that could transform their company and perhaps not for the better. when you're looking at a six-year time line or seven, why rock the boat? that seems to be a key reason why we've continued to not see the activity perhaps what we might have expected with those incredibly low rates to borrow money to do deals. private equity accounted for 16% of global volume. there it's been all about exits, hasn't it, for the first half of the year? rather than entrance. yes, we have seen it here and there. kkr announcing it's going toway ste buy steinway. activism, that we've seen a lot of. sometimes that takes the form of stopping a deal in its tracks. one has to wonder given we only have a couple months left in this year where you could get something in the pipeline and get it announced before year end. it's not going to be a great year. i bet you you start to hear talk of layoffs when it comes to m&a if that activity level continues. >> by the way, that steinway deal, $438 million. ouch. >> exactly. but -- >> high barriers to entry. you can't just start a piano business. >> you cannot. >> i guess it just tells you as well the deals we're talking about this week are so small. what's going on out there? >> we haven't seen the kind of deals that ignite a market. onyx this week helped for a day, but that general tone that can really be refreshed by a very vibrant m&a market has not been there despite a very strong equity market for the first half. >> there's been a little more activity in new york. look at what's happening in asia-pacific and how many firms have tried to double down to find it go quiet. >> especially emerging markets is also going to dampen it. >> good point about the play whose can make things happen on their own and not beholden to a board. rick santelli with the santelli exchange today. rick? >> thanks, carl. we had some very interesting data today. i was impressed with the adp jobs. listen, it isn't perfect but it's definitely improving and it shows there is life in hiring outside of the government. as far as the trade deficit data, it will subtract from gdp. however, imports being so strong gives me hope that much of what ails the u.s. can be, well, it still keep us in the game running pretty well even though we need to get to a sprint and maybe last but not least, the service sector headline number at a 3.5 year low. the biggest part of the economy, that is a bit worrisome. as for aca, affordable care act, you never want to hear words like onerous. with one-sixth of the economy in terms of size of this program at stake, we need to get it right. we cover business on cnbc. can you only imagine if a tech company right now announced that they had a new phone and here are the rules. if you want to know how it works, you have to buy it, and we're going to start taking money out of your paycheck before you can use it, and we're going to have people that are going to be monitoring whether you buy it or not, and these people, well, we can't really trust them either because they have broken rules and possibly some laws. this is not a good thing. if it's onerous on the roll out, i just can't even imagine how everybody is going to feel once we're knee-deep into it. i remember when i used to be on the sell side of this business. we had a saying, underpromise and over deliver. wow. think about that one. listen, happy birthday, america. 237 years, 237 great years. and all i can think of is i am so proud of the movement in the country to pay more attention and read the declaration of independence and the constitution. i'm extremely proud of them and people that label them as extreme need to be extremely careful of my favorite day is the fourth of july. watch out for people whose favorite day is april 15th. happy birthday, america. back to you, carl and kelly. >> is anyone's favorite day april 15th? >> not mine. >> if you find someone, let us know. >> exactly. let us know if you love april 15th. we continue to keep an eye on the situation in egypt. the egyptian military reportedly meeting with political groups right now. we'll get more details on the ground after a short break. ness. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we'll get more details on the eo those who challenge the present. ♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪ the all-new 2014 lexus is. it's your move. vietnam in 1972. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection and because usaa's commitment to serve military members, veterans, and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. you probably know we're reaching a critical point in the showdown between the military in egypt and president morsi. morsi refusing to step down telling the military not to, in his words, take sides as the deadline nears. and then we have reuters over the last couple sessions -- this is dow jones, morsi refuses to step down. offers a consensus government as a way out of the crisis. hard to know what exactly that means. does that mean new elections? does that mean somehow incorporating the military into his own administration? we don't know. >> the trouble comes as well when he sets his own red lines that then inhibit further negotiations. that's one reason why we're watching to see how much room there is available for compromise. >> we keep talking about the affect not so much on the markets. the egyptian market we don't watch closely. it's only a handful of players who play that game. the effect on equities here has not been material. you could argue it really is more about brent and about west texas intermediate. >> even the effect on oil prices has not been material. traders say they're watching for signs of unrest to spread to oil-producing nations. obviously the suez canal will always be a concern point but, again, that's one reason why you're not seeing more of a reaction. the real question becomes you have to watch this and have to wonder again about the impact across the region more broadly. >> meanwhile, the pictures out of tahrir square continue. richard engel telling nbc news that crowds have been pouring into the square and what is clearly one of the largest extended protests that country has ever seen in its history. >> these are just extraordinary pictures considering the size of the crowds and what's happening. >> but again morsi, the embattled president, stating he has no intention of stepping down ahead of that ultimatum which expires essentially in the next few seconds. >> people should know if they're wondering why the egyptian market is holding up as well as it has been today is because it's been hammered the last 6 to 12 months. from the time this current administration took office, it's been nothing but trouble for egypt. the egx 30, we can hear the chanting getting louder from the clouds. >> in the meantime, we will get to the 11, david. we will see you on friday. >> you will. you may see me in the 11 as well. we want to do a little follow up on lin n energy so you will see me prior to friday. >> very nice. >> i won't be too far. >> dow is down 9. here is what you missed earlier this morning. >> welcome to "squawk on the street." here is what's happened so far. >> by 2015 and 2016 most of those bumps will be ironed out and i think we'll be well on our way to having a system that works really well for most people to buy insurance. >> up 188,000, a bit more than expected. >> 175, that's what we've been getting on average for the past two years. that's what we got last month. so this would suggest that nothing has changed. the job market is still remarkably stable. >> at the end of the day what we want to do is stay neutral while the market's gear is in neutral. once you see that gear change whether it be accelerating or decelebrating, reverse or forward, that's where you could take risk positions. >> the concern is if the canal gets blocked or disrupted, shipments may get cut back and that may mean something for the oil area. >> i'm not surprised. it's very complicated, and it just makes you wonder whether people that put these things together have ever really run anything. >> i don't think because something is stable means you necessarily want to buy it. there's more opportunities to be made being short gold or maybe being short grains in a rally than it is just being in something stable because stable money in an energy market is really money that's going nowhere. >> good wednesday morning. we're live at post 9 of the new york stock exchange on a shortened session for the markets but certainly no shortage of news. the dow really close to the flat line up 1.8 points. s&p is down about 4.5. and the nasdaq up about 2. but clearly between the economic data we're getting today, the data we've seen in china overnight, portugal's sovereign debt crisis rearing its head again, and, of course, the tower moul in the middle east. a lot to watch. >> speaking now to the crisis in egypt, we're waiting for a statement from the egyptian military on the future of the government and president mohamed morsi. yousef joins us from cairo. we have heard a lot of chanting and conflicting reports in the last minutes. what's happening now? >> reporter: well, kelly, what we understand from state television is they're still involved in meetings. the armed forces is meeting with representatives from the political scene, from the religious scene, and national leaders as the output described it, but perhaps more importantly the president put out a facebook statement on its official page and making it clear that it's very dangerous to undermine legitimacy. again, reiterating the positions he's made and he's kept in the laps few days. so no change on that front, but he did appear to be more open to dialogue and to engaging with the opposition. now, what is not clear is how responsive the opposition is or has been in the last few minutes as this is a developing story and what could come of it. this is separate from the meetings we're seeing between the army and the other leaders, and that is exactly the political maneuvering that we were talking about as we get past this deadline. the crowds are waiting in tahrir square and across egyptian, waiting for a statement from the army. will the army still consider any move from the presidency or is it already too late? so again, this is another twist in what is already a very complicated roller coaster with very, very serious ramifications. either decision you could have a positive outcome where you do have a reconciliation and a power sharing government or it could get really bad where the incumbent government of the muslim brotherhood becomes an outcast and that could lead to clashes and conflict and really swell the numbers in the violence we're seeing on the streets. very, very dramatic set of developments. we'll keep you posted. >> yousef, thank you very much for that. we'll be back with more as we follow the story. joining us on the cnbc newsline now from chi low is the north africa correspondent with "the financial times." thank you very much for your time in the middle of what's such a fast-moving story. yousef just outlined a couple of options here, reconciliation, power sharing with the military, or morsi refuses to leave. any sense as to what we might be looking at? >> i don't think we're any clearer in terms of what's going to happen. the one thing that is xler is morsi and his allies in the muslim brotherhood have really raised the stakes at this point. they are refusing to budge, and the message that they're sending very clearly to the military and other forces is that if you want a coup, you're going to have to do a real coup. you're going to have to roll the tanks in the streets and come and arrest us. it's been the rhetoric now for 48 hours coming from the president and his allies. this is, you know, really a challenge to those who want him ousted. it puts the u.s. in a very tough position, and it's as you have been pointing out, wreaking havoc on the markets which are very, very dependent on the suez and other aspects of the egyptian economy for stability. >> borzou, we have heard another leader in a middle eastern country refuse to go and i'm referring to syria. if morsi refuses to go, what is the response going to be? >> in terms of the syrian government, what the response is going to be? >> i'm sorry, no, no. i know this is about egypt specifically. what would the response be from the military in that case? >> it puts them in a real bind because on the one hand they would like morsi to just step away, and they're going to be in a tough situation to roll those tanks into the streets, to do a real coup d'etat. the americans will not like that. the obama administration will not want to see abrams tanks approaching the presidential palace and ordering morsi to get out, come out with his hands up. it doesn't look good. it's not very good for optics, and it's a fact that president morsi was an elected president in an election that was hailed by the international community, closely observed, and this would undermine much of the rhetoric of the obama administration. >> as well, can you tell us, we're looking at these crowds. what is the composition of these crowds and when we hear the chants, do you have a sense of what they are saying? what are they pushing for? are we looking at one group of people in tahrir square and others elsewhere or is this a very mixed crowd? >>. >> the chant is the people want the downfall of the regime. they want the regime of mohamed morsi out. it's the same chant of the revolution 2 1/2 years ago, and a major component of these protests are these people from the revolution 2 1/2 years ago. there's also what i would call poes, p'd off egyptians who are outraged by the economic collapse of the last year, the decline in services, decline in institutions under morsi's government, and they're just there because they're very angry and frustrated with the situation. and there's a third component which are elements of mubarak's regime. they are very clearly in those protests and to some extent perhaps directing them, taking a sort of substantial role in organizing them. this is a very unwieldy alliance. if morsi goes, it's going to be tough to create any kind of consensus among this very unwieldy alliance. >> you say he has upped the stakes and clearly when he says he's prepared to give his life, we know what you're referring to. at this point do you believe that his departure is inevitable? >> anything in this part of the world, but if i had to bet on it, i would say, yeah, he can't rule anymore. the country is at an utter standstill. you know, business has come to a complete halt. the banks today closed three hours early. the stock market is closed. the businesses are shuttered. people are afraid. this cannot continue in this particular situation. the momentum is with the protesters. the crowds are not getting any smaller as the days go on, and so there's no possible way given the current configuration for him to remain in power. >> and what is the mechanism in this case so other countries can call snap elections, for example, when confidence is loss in a government? is there any mechanism for that kind of transition of affairs in egypt? >> well, here is the thing. i mean, egypt has a constitution that was approved in a referendum last year, and what the opposition is proposing is completely outside of that framework. so, you know, there is no mechanism for him to be recalled in that sense. if he were to resign under the current constitution, he would hand the keys other to the head of the upper chamber of parliament who happens to be another muslim brotherhood guy from morsi's hometown, from the president's hometown. so i don't think that would resolve anything. so they're going to have to go probably to some sort of extra constitutional mechanism unless morsi resigns and signs on to some constitutional amendment or change that would make the whole thing fair and square and legal. >> and finally, we are past these deadlines now. how significant is that with each passing minute? what happens? what does this delay mean? >> i think it puts pressure on both parties, the major parties, the military and the president, to sort of gather their forces, to secure their alliances ahead of the unknown, but no one is quite sure what's going to happen. i also issue a caveat about deadlines. egypt is famous for people not paying attention to deadlines and appointments and so on. >> a lot of people would say that the opportunity at this point is past anyhow. borzou, really appreciate your time following this story for us this morning. north africa correspondent for "the financial times." there's more uncertainty around the globe. is it time to worry about you're again as well. a bank downgrade and fears over a collapse of portugal's government is leading to a sell-off across the con tin ept. we'll tell what you to watch for. first, rick santelli is keeping an high on health care today. rick? >> well, we're keeping an eye on just about everything that may have an impact on the market, and the biggest conversation without a doubt these days is the great rotation. we're going to talk to a man that monitors the flows of what is or may not be a great rotation and, of course, that's chuck biedermann of trim tabs. you want to be there bottom of the hour. happy birthday, america. in a s. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. this is greta. she works in quality control. she makes a nifty living sleeping on mattresses pioneered by engineers whose singluar devotion is not stopping until they have given her the best sleep of her life. that's not greta. save up to $500 on the tempur-ergo collection and get your best sleep possible. visit tempurpedic.com to find a store near you. live picture of cairo this morning as the deadline has passed between the military and morsi, the president, but the embattled president still refusing to step down and now proposing a consensus government as a way out of the country's crisis. that's according to a statement by his office on facebook being reported widely by a lot of news wires this morning. >> we'll follow that story for you this morning. lots of news for markets to dige digest. let's bring in noah blackstein and john. good morning. >> good morning. >> can't help but ask just looking at those pictures there, noah, how significant unrest in egypt specifically across the middle east more broadly or is it further north in europe that we should be focused on today? >> you know, i think that what we've really started to begin to see is almost a bit of a decoupling of the american market with what's going on in the middle east. you know, i think that -- and what's going on in portugal today. i'm surprised to see the strength and resilience of the u.s. market today. hopefully that means things are becoming less correlated than they were. >> we've hit a high on the dow today. is this a sign of complacency for you? >> you know, i'm not sure. i think you're beginning to see the emergence of a domestic oil story in the united states which every day lessens the united states' reliance on the middle east and the middle east oil and there's certainly no shortage of supply right now and so i think what you're witnessing across the middle east is a continuation of the arab spring which we have been living with for some time. it's not new news right now. >> john, a lot of investors reporting money in emerging markets, in frontier markets if you want to call them that, but badly burned by what's happening in egypt. is this issue though specific to those investors at least in terms of the impact across global markets in your view? >> well, i think the impact from global markets is slowdown and is negative. from brazil you have got a hot spot developing in turkey. obviously your other guest mentioned portugal, those interest rates popping up, spain, 26% unemployment. china going sub 4% on gdp. you have a slowdown globally. >> sub 4%? >> i think we go sub 4% in china, and i think if you look at the u.s., look at gdp, 1.8% last week. we haven't seen a back-to-back 3% in years. so i think that you have a global slowdown, and on that note i'd like to say, you know, our view is that bernanke will not get off qe3 anytime soon. he's in the untenable position of feeding an alligator with bread crumbs. i don't think he can just stop, particularly in light of the slow growth globally. >> noah, is it possible for us to have tepid job growth here, right, a pretty good housing market, the things that are going right to the degree they're going right, and still have that offset of new sovereign debt in europe, what we're looking at in cairo right now? can all those things be essentially put to the side? >> i think what we're looking at in the united states and what we're looking at in europe and what we're seeing in china is really a residential real estate crisis. i think the united states is the furthest along since 2008 through this residential real estate crisis. spain and these other countries, you're looking at the collapse of the financial system really was predicated on too much money to developers and a bubble in real estate. i think the u.s. was the first one in and the first one out. and that really matters. the recovery in housing is real, but as those prices continue to appreciate, the number one source of jobs in the united states is small business, like it or not. and the number one source of financing for small business in the united states are mortgages. and so as those people who are under water can now use their home not only to refinance but to use it to borrow again to start new businesses and hire people, it matters. so i think the single most important thing to the u.s. economy really is residential real estate. i'm not trying to down play any of these other things, but i really do believe real estate should be your main focus when looking at the u.s. economy. >> well, that's certainly consistent with the reaction in markets at least so far today. noah and john, thank you for your time this morning. >> have a happy july 4th. >> happy july 4th to you guys as well. >> amazing to waven the juxtaposition of this live positions and the dow which is now more than 100 points off the session low up 43. >> i mentioned at the end of the our 10:00 show we did want to take a look at shares of linn energy, also a company that's acquiring or may acquire berry petroleum for the purposes of a deal that was announced back in late february. why are we telling you about it now? that tells the story. this is about a ground stock. i'm not going to get into the fundamental differences that those on the short side see with those who are on the long side, but there are some big personalities on both sides. yesterday you may know the news was the s.e.c. said or in fact the company disclosed there was an informal inquiry by the s.e.c. into so-called accounting irregularities. that follows a piece in barron's recently that discussed accounting at the company and clearly we know the s.e.c. reads barron's. where it goes from here is very much unclear, but one thing that is clear is this has significantly hurt shares of linn and lnco which for purposes of the acquisition that was announced back in february is the acquiring entity. 1.25 shares of lnco for each share of berry. take a look at both of those stocks if we can put them up for you. while lnco is also down sharply, berry is no longer going down. why? well, you can do the math yourself. people think the deal is not going to either happen or certainly going to be restructured in a very significant way. hence, the spread is more or less blown out -- or i should say is gone when you apply what you get for that ratio. it would require a shareholder vote. clearly at this point you're not going to get that vote. where it goes from here remains unclear. many say the fundamental value ofr by is around this current level of $40 and if we can look at bry and lnco, you will see what i am talking about. so we'll be keeping an eye on that, but talked earlier about the dearth of deals. this is one that conceivably could go by the wayside. again, that informal inquiry certainly is triggering sells on the part of many who perhaps had been long these stocks previously. i will not get into the -- >> come on. >> no. i learned from long experience having done a lot of work on these battleground stocks, carl, it simply is not worth the time and effort, particularly these days because things get so nasty in terms of e-mail and twitter, not to mention phone calls. i'll leave others for that. i'm getting too old for that. >> absolutely. the sidelines of communication are obviously open if you're on twitter. this is trending on various sites like stock twits. it's a controversial name. there are a lot of them right now. >> there certainly are. quickly, i misspoke earlier, the steinway deal is kohlberg and company. they have been separated for many years. >> thanks, david. big delay for a wee pakey p the health care plan. keeping our eyes on egypt. the pictures just incredible. fireworks, cheers. we'll bring you any new headlines as they come and we're back in a minute. ♪ [ cows moo ] [ sizzling ] more rain... 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[ marge ] fithe fun way, from phillips'. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ you're looking at live pictures now of cairo where egypt's president mohamed morsi has vowed to stay in office despite the ultimatum give to him by the military. we have now passed a couple of deadlines. conflicting reports about what is happening. the kinds of communication between morsi and the military. but the two sides still appear to be far apart. the crowds are gathering. we have been listening to the chants all morning. it's astonishing just to look at the size of the turnout we're seeing here in cairo. >> keep a very close eye on that. i can guarantee you that. in the meantime back home the obama administration delaying the employer mandate of the affordable care act for one year after complaints from businesses about reporting requirements for employers with 50 or more full-time workers. joining us to weigh is gordon the former ceo of continental airlines and a cnbc contribute. great to have you back. happy fourth. >> happy fourth to you. >> 40u67 how much of a sigh of relief is it to small business? >> you don't take an uncertainty off the table it's always a relief to business, whether it's big or small. i think it's a positive thing given there are a number of hr departments across the world not know wag their obligations really were going to be. >> any idea to what degree? we'll see if the data changes here, at least the trajectory of the economic data, the jobs data, but do you believe that small businesses were intentionally restraining hiring because they didn't want to cross that 50 threshold? >> there may be a couple of guys doing that. i mean, you would understand if they did. things that drive your business are the economics, not necessarily the tax treatment, but certainly there were one or two maybe that were gaming that 50 number. >> you know, now the question, gordon, is whether or not there are more dominos to fall? whether you can delay this part of it, implement the rest. if the gop smells blood, what's your read on that? >> i think it's a positive thing, carl, that if you don't know where you're going, any road will get through so they stop because they're not ready to implement it. they gave business the respite is asked for. we'll let the clouds clear in the next 18 months. it doesn't say there won't be another delay on some aspect but i think this is a positive step. >> gordon, the essence of this law and it's success hinges on getting young, healthy people to sign up so they can bring down costs for everyone, but that appears to be part of the problem here. that it's expensive to get the word out, that education is part of the problem. so it's not just about operationally setting up these exchanges and what goes along with them but fundamentally how do you get these young people to sign up? what would you say? what would you recommend? what should we try? >> well, kelly, that's the dill limb ma. there's a huge public out there that don't know and won't obey the law, so they are subject to penalty or taxes. and getting them informed and to comply is going to be a challenge. it's like changing the speed laws to 55 and making everybody go 55. that's pretty difficult to do. >> gordon, while i have you here, i can't not ask you about crude. it's up more than $2. back above $100. we all know what a great run the airline sector has had all year long. because in part some of these costs were under control. is that about to change? >> well, crude still is the driver on the expense ledger in the airline business. when you see it happen, they have got to either reduce capacity or increase yields. the best way to do it is probably to pare back on the capacity and i think that's in the days ahead. it's going to happen. >> even tougher to get a seat right in time for the heart of summer. >> and this time of year if you missed your flight, you've probably missed a holiday, that's for sure. >> gordon, it's great to have you. have a great holiday. >> thanks, carl. you, too. bye. the bells are about to sound across europe. we've held up okay in the u.s. despite what's been a difficult session. we've been watching portugal closely. we'll see if the close lets up some pressure on stocks here when we come back. plus, egypt's affect on oil trading. you're looking at live pictures of cairo. we're following the situation there very closely and we will be right back. ♪ ♪ [ male announcer ] some things are designed to draw crowds. ♪ ♪ others are designed to leave them behind. ♪ the all-new 2014 lexus is. it's your move. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. the european markets are closing now. >> markets have just closed across continental europe. it was another tough trading session largely in the red with the exception of russia and strong pressure across the periphery. portuguese shares having one of their worst days in years down better than 5%. there was some positive economic data here in the u.s. helping to give a lift towards the end of the session, but again concerns about the future of the government in portugal is one of the things that's got investors on both sides of the atlantic worried. take a look at the major bourses. the ftse down better than 1%. even germany's dax off almost 1%. italy holding up relatively better but it's that portugal psi 20 down 5.3%. all stocks in the index traded lowers. fort geese banks were some of the biggest decliners and tensions remain hi in greece after international lenders gave that country three days to deliver on conditions for its international bailout on tuesday. the situation remains tense. >> let's bring in josh lipton with a look at what else is moving at the big board. >> carl, lots of data for traders and investors to think over today. it's been mixed. adp, you saw top estimates. june ism services disappointed. those still above 50. you can see the blue chips tacking on about 38 right now. let's get to some movers. we'll start with auto nation, credit suisse upgrades this to outperform. talking about meaningful earnings upside. says valuation is still attractive. price target is 53 on that one. best buy, goldman reinstates as a buy talking about improving financial discipline. their price target is $34. that stock up nearly 150% this year. on the other hand, alcoa, which will kick off earnings season shortly, jpmorgan down grades to neutral, cuts estimates. that's on lower aluminum price forecast. the hospital stocks, news today, this crucial rule delayed for obama's health care law. the analysts i was talking to were saying the number of people affected here is really pretty small. they were calling this a hit to sentiment more than anything but you can see those names lower in today's trade. guys, back to you. >> all right. thank you, josh. over to rick santelli taking a look at something that's been hugely important in the last couple months, rick, and that that's -- >> i would like to welcome one of my favorite guest chuck biderman of trim tabs. i'm basically going to wind you up and let you go and here is what i want you to enlighten viewers on. the great rotation, is it occurring, did it occur briefly, did it occur at all, and what do we have to look forward to with regard to past, present, and future flows, whether it's equities or fixed income? take it away! >> back may 22nd when the cop-o ever all central bank cop-o's said i'm going to stop providing the ultimate drug free money to you addicts, the markets panicked. we saw massive outflows from bond funds, emerging markets, from gold. there was massive amounts of selling, and even the fed's mouthpiece couldn't stem the tide, and so last week don sent his cop-os to the streets to tell the drug users, hey, you're going to get your free money, we're going to keep printing that free money. stop worrying, be happy, stop worrying. for the last four days we've seen inflows into bond funds, emerging markets, gold, everything is getting money now whereas for the five weeks from may 22nd to june 26th there were outflows. >> now, in terms of the inflows you're describing, do you think this is just a kind of averaging, a mean reverting of capital flows, or do you think this is the beginning of investors once burned not twice shy if the carry trade and the leverage trade is back in vogue, they forget quickly the last three or four weeks? >> as long as it seems like the fed is going to keep creating $85 billion of new money every month with which to buy financial assets, it seems like times will be good for the financial markets. however, does ben bernanke want to end his term with free money giveaway wblowing up the bigges equity bubble ever? i think he wants to start the process to get out before he leaves office, and if that's so, then in the fall we're going to see tapering when the market first suspects tapering, all the good news will disappear past being any guide to the future. >> yesterday i did a segment called the markets don't do taper. what i meant by that is tape ser a gradual aspect. markets in my experience never do anything gradual. let's say we get a number of 400,000 on friday, a, or lets say, b, we get a number of zero on friday, tell me in both cases how you think flows and markets may react. >> obviously the market initial would be a drop on the 400,000 and, you know, a modest strength or a dip and then rebound a little on the no growth. we're estimating, by the way, 182, and that was our number that we reported yesterday for june jobs, 182,000. there's a slight pick up. 0% interest rates has to help housing and autos. anybody can get an auto loan -- >> listen, chuck, we have 20 seconds left on america's birthday eve. listen, i want to ask you a question, what is the best performing actively managed etf right now. >> trim tab's float tab eft. we're outperforming all dividend funds, insider selling funds, any actively -- >> i guess monitoring flows can be a profitable endeavor. thanks for taking the time to be our guest today. carl and gang, back to you. >> rick, thank you so much. egypt in turmoil. massive protests trying to topple president morsi. a lot of conflicting reports at this hour. we'll go live on the ground when we come right back. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades >> rick, thank you so much. when you open an account. chalky... not chalky. temporary... 24 hour. lots of tablets... one pill. you decide. prevent acid with prevacid 24hr. mine was earned in djibouti, africa. 2004. vietnam in 1972. 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[ male announcer ] usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection and because usaa's commitment to serve military members, veterans, and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. back to egypt now. you are looking at live pictures of cairo. huge crowds gathering in the square and protesters demanding president mohamed morsi step down. he has been defiant of those demands and of the military so far. yousef joins us from cairo with more. >> reporter: i don't know if you can hear it, but there are chants going on in the background as protesters start streaming into tahrir square not too far away from our vantage point and a few minutes ago a military helicopter passed over very, very close to us. again, we've seen these hovering over the capital over and over again, and keeping a close eye on the turnout. people are on the streets and they are protesting, demanding that president mohamed morsi step down. perhaps for the moment they just want to know what the statement will be from the army. what is the conclusion of that meeting with the different leaders? what would the road map look like? what role would the incumbent government of morsi play and the muslim brotherhood led government. the official page of the president, just an hour ago, it shows you the political maneuvering going on at the last second that may have been the reason it was dragged on. they say they are open to talking to the opposition saying that they would be looking to possibly get a prime minister based on consensus and, again, bringing more people from different parts of the political sphere. but, again, still stopping short of saying that they would budge or step down to meet the demands of the people as the army may put it in some case. you can hear a chopper passing over me now. to meet the demands of those people. we'll just have to wait and see what materializes from these meetings, but again from both sides, the military and the presidency last-minute moves. we'll have to see who wins this showdown and what ramifications it will have for the protesters in the streets because, remember, it's not just opponents that are down there. it's also the supporters. >> and yousef, just to be clear as well, in prior cases when we've seen protesters in tahrir square, it's been to some degree isolated to tahrir square. is there a sense now however that the turnout has not only shut down cairo but is affecting egypt more broadly? we're hearing reports banks have already closed, lots of businesses as well. >> reporter: well, absolutely. these are precautions that they have taken and they sent out messages clarifying such. the private banks made it clear the working hours had changed. they're doing it based on the experience of what happened 2 1/2 years ago when there was a lot of looting and disorder and chaos on the streets after basically security almost completely collapsed when they withdrew to leave protesters to their own. but, again, just to pick up on the point of that uncertainty and the developing story, it's just so much momentum here in the streets. there are quite a few choppers hovering over above me, and the sense is that something has to come out of this meeting to really be able to bring the country together. if it doesn't, it could easily fall apart. other parts of the country are affected. people are no the just coming on the streets in tahrir square. that may be the footage you're seeing, but they're out in alexandria, they're out in port asyed. the protests have been dominated by those opposing the president but there are still a considerable number of people who support president morrissey and the muslim brotherhood movement. this may drag on for a little more but probably nobody is going to go home or going to sleep before they hear from the army. >> that's an important point, yousef, because we take those cheers as a sign of something. we're also hungry for information, and it's not a uniform group in the square. so you might be hearing cheers or seeing fireworks, but that may or may not mean that the president has in any way stepped down or conceded this showdown with the military. yousef, we'll come back to you i'm sure not too long from now. yousef is there for us in eye cairo. >> it is off the highs of the session but traders are getting little rest. the protesters standing firm there. traders have been watching carefully all the developments coming out of egypt. we're looking at oil prices above $100 a barrel. one trader pointed out, one thing the military does have control of, that's the suez canal. while there is concern among some we could see a disruption of oil flows through the suez canal, others say they don't believe that that is a great concern because of the military control. keep in mind what is at risk here is about 2.5 million barrels of oil shipped or sent via pipeline to the suez canal. there are two key choke points traders are concerned about. one is the suez canal. the other is the suez mediterranean pipeline. they will be watching those flows very carefully and developments around these choke points very carefully. they're also, of course, watching what is happening here in the u.s. because that is having an impact on the u.s. oil price as well, and we did get the report that we brought to you live from the energy department earlier today showing a big decline in crude supplies. the biggest we've seen all year and in total we've seen about 15 million barrel drop in crude and petroleum supplies overall just in the past week. so there's a lot of concern that we're going to see tighter supplies going into the third quarter here in the third quarter and that that could also lead to higher oil prices. we're seeing a great deal of volume of wti and in june it surpass wad we're seeing in the brent volume. so while we look at the two global bench marx for crude oil we are seeing them both reacting to the geopolitical events in egypt and traders are watching elsewhere in the middle east as well. back to you. >> sharon, thank you for that. you can see from the bottom of your screen, we're trying to be as judicious with these headlines as we can possibly be because there's a lot of conflicting information regarding morsi's whereabouts. we're not going with any of that yet. reuters is reporting according to a morsi aide that no military coup can succeed without considerable bloodshed. again, sort of heightening the stakes. no one -- we are not leaning toward a discussion of compromise, a discussion of reforms. every additional headline seems to suggest that the showdown is going to be even more and more violent. >> as yousef said, it seems to be a hardening of positions. the opportunity for there to be some sort of compromise between the military and the president seems to be cast in doubt with each further headline we get. we'll have more on that in a moment. we're going to take a short break following the latest situation out of cairo. huh...anybody? 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(announcer) scottrade. awarded five-stars from smartmoney magazine. fast moving events in egypt. you are looking at pictures of tahrir square in cairo. thousands and thousands of people there, both supporters of the president and, of course, those protesting against him. joining us now on the cnbc newsline is the middle eastern african director with the eurasia group. can you respond to the developments and the potential for there not to be any agreement between morsi and the military? >> i think as time progresses the likelihood of a compromise, of a negotiated settlement, is increasingly low. both sides have hardened their position and issued ult may it ups and now the question becomes which of the two sides has more power to back up their threat. >> and if you don't mind speaking up a little bit so weak hear you over the crowds. can you give us a sense of the importance of this event? is it egypt, the middle east more broadly? what are the pressure points here beyond just what we're seeing in tahrir square? >> if we think back to two years ago, the events that took place in egypt really had an influence on the rest of the region. people in the arab world very closely watched developments in egypt. you know, if we look at sort of the domino effect of the protests that began in bahrain and syria and yemen and other countries, all of those took place after what we saw in egypt. so egypt does play an outsized role in regional politics. i think in the immediate term though, the implications of this aren are largely domestic. >> i would be curious to know why. a lot of people are worried not just because of the near-term dilemma but the precedent. it's one thing to have a dictator overthrown by a coup by protesters, by gatherings in a square, but to have an elected official overthrown by those same elements some argue sets an extremely dangerous precedent not just for egypt but for the entire middle east. >> sure, absolutely. but that also depends on what side of the fence you're on in egypt. i mean, opponents of president morsi will say, yes, he was elected democratically. however, the manner in which he has ruled since he has been elected is extremely authoritarian or had become exceedingly authoritarian. so it's a big debate in egypt about whether or not this would be a blow to democracy or if the military is trying to reset the calculus in order to get a path to democratization. if you're a morsi supporter, that sounds like a bunch of nonsense. if you're a morsi opponent, it sounds like a better deal at this point. >> what do you think the people want? the people who are pushing for his ouster, what do they want? >> it's a fairly heterogeneous group of people that want morsi out. i think they're at this point united in their desire to see morsi gone, but among the anti-morsi coalition, there are liberals, there are leftists, there are some islamists, and there are people who are allied with the former regime of mubarak. so it's a fairly diverse heterogeneous group of people, and that's why i think if, indeed, the military does oust morsi, if they force him out, one of the risks going forward is this coalition will begin to splipter and you will start to see divisions. >> we have seen that in other countries as well thank you so much for your time this morning. calling in. these are the latest pictures out of cairo. we will have more on the situation when we come back. stay with us. 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we don't know at this point. >> one way to watch this is to keep an eye on the price of brent oil. it had taken this relatively well. egypt is not a major oil producer but it is a choke point for a lot of the world's oil supplies. brent is now up 3.5% over the past week. if we can look at an intraday chart it will give us a better sense. >> and finally, probably an appropriate note to end on, west texas, crude is up $1.77 off the highs of the session but the point has been made during the show this morning, don't expect to see it at the purp at least in the near term because the states have a nice cushion of a lot of inventory in terms of retail gasoline which is good if you're heading into the summer driving season. that does it for us on an "squawk on the street." have a terrific fourth of july. we're going to send it over to "the closing bell" on this holiday shortened trading day. thank you, carl. hi, everybody. welcome to a special edition of the closing bell. it is summer on the street as the stock market closes at 1:00 p.m. today ahead of the july 4th holiday. i'm maria bartiromo coming to you today outside the new york stock exchange. boy, is it hot out here. >> how hot is it, maria? i'm bill griffeth inside the new york stock exchange where it's air conditioned. it's very cool and nice in here. but we're watching some very key developments around the world that are having an impact o

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