Transcripts For CNBC Squawk On The Street 20140627

Fever helping the companys earns, but could momentum be up . Ag space, dupont, shares lower in the premarket after the company cut the outlook. A 9 billion settlement is expected to be announced monday, and now new reports say the france bank is looking to sell off billions in bombs. Listing on the big board listing at baba. What could be thee largest u. S. Tech ipo . First up, nike earning 78 cents a share beating forecasts. Dow components citing strong sales in regions like north america and europe benefits from a marketing push ahead of the world cup soccer tournament. Revenue up 11 in every region except for japan, and i love this, soccer, or global futbol revenue up 21, marketing costs up 10. There was a dig at rival, adidas, dominating the soccer business, thats its roots, nike entered in the late 1990s. We are the best brand in the wor, and numbers show they are taking market share in western europe, futures orders, everybody looks for on nike, a good indication of whats to come, up double digits in western europe, up double digits in north america. Whats disappointing is emerging markets. Nike is firing on all cylinders, a lot of upgrades and raising price targets to the 90 per share level. Well talk more about nooike rit now. Lets bring in paul with morning star. Is that a correct assessment that nike is doing well, gaining share when it comes to europe and soccer and keeping its core running in basketball business very much going strong . Yeah, thats whats really amaze is that theyve been able to grow running, which is their oldest business, basketball, where they got 95 market share in the united states, growing businesses that people said they could never grow before. On top of that, the comment was interesting about the digs on soccer or global futbol. They said our leadership position in running, basketball, and football, a dig on adidas in the commentary. They didnt give specifics on the world cup other than the fact they are spending big time. Costs up more than 20 over the quarter. Adidas had record soccer rev news for the year. Nike was not specific. What do you expect . They do that. They give tidbits of numbers to the press. Adidas has a run up and more sportswear, more equipment in soccer, but nike is taking share in actual, quote, soccer boots as nay say that europe. You dont wear them on the street, they are cleats. They call them boots. Speaking of which, i read this morning athletes wear more nike cleats than any other brand combined. Anyone at least in futbol, paul, whos competitive with these guys now or is this truly a mote business . Yeah, you know, puma is an ageold soccer brand, but they are repositions themselves to get back to sports, you know, sports branding. They are a distant third. You know, the irony in this whole thing is the way both Companies Grow is by growing the market, and i think the excitement around the tournament is higher than usual and market grows. Paul, i have a couple left field questions for you. Of the two, which do you think is more likely possibly to buy lulu lemon, given that for adidas, thats 260 outlets across america. Its not nike. They are killing it in women. Their product is doing fantastic. On top of that, adidas has a retail strategy so if anyone in there it would be adidas. I dont know why they need the brand. Okay, what about the nikes Digital Strategy . Tim cook, ceo of apple, sat on nikes board now for nine years at a time when apple is clearly laump i launching wearable technology. Pulling back on hardware, focusing on software. Is there a tire there specific to nike with apple down the line . What do you think might happen . Yeah, thats a great question, and i think something is going to happen. I think back in the back of parkers mind, the back of managements mind at nike, what they want to do is own the connection to the customer, and they see digital information, training, performance, whether its social media, they want to connect to the customer whenever theres a branding experience, so its not clear how that hook ups going to happen, but definitely they are talking to apple about that, and definitely the growth theyve seen in direct consumer its more from digital than in stores, and i think thats going to drive a future. I thought it was interesting, palm, to hear mark parker open the Conference Call yesterday saying digital is our priority. I do want to ask you, though, about the stock. Its under performed. The stock, before this morning, down more than 2 for the year under performing other members. Why is it held back . Does this earnings give it momentum to make it positive for the year and to out perform given . Yeah, thats another important point. They had runups going into the world cup, typically spend a lot of money so the shipments are ahead of the cup. Theres a hangover, but now the futures orders are up so it looks like the momentums going to continue. I want to point out, though, were valuing investors, look at cash flows. Theyd have to perform at a low to mid teens rate for five years for you to justify the current stock price, so i think theres a little bit of upside, but, you know, its not going to run up like it did last year so thats why were on the sidelines right here. Or under armour, up in the last year. Thank you for the perspective. Up 3 right now in the premarket. Moving from one dow component to another, dupont cutting the Current Quarter and full year earnings forecast due to slower than expected sales in the agriculture and performance chemical unites. Whats interesting here is because of the harsh winter, farmers delay purchases and write downs on seed inventory, whether or not that was destroyed by the bad weather, i actually dont know, i dont have color on that. There is irony with the performance chemical unit, theres spun off from dupont, as you know, david, its too volatile because of pigments in tooth paste and pigments in sunscreen is down, but now its in the core of the business, due to the weather. Corn prices in north america lower, and, again, as you point out, the short fall here, if you want to call it that, is coming from weakness in agriculture. Also, i know there was, i think, a jpmorgan note that mentioned they cut cap x below previous guidance there. I have not seen that specifically from the company, but interesting in a larger take away given expectations that they are the growth in the expansion of the economy, particularly, perhaps, in the second half. In contrast to what monsano had this week, lowering the profit end of the profit forecast on better than expected profit in the soybean business. Interesting to watch those two. Yeah. You mentioned the cap x thing, people are pinning their hopes on for the year, and again, the notion q1 is excused, why would q 12 be weak . Raising questions and an important stock to watch. Selling billions of euros and bonds next week, in conjunction with the announ announcement next weex settling with u. S. Authorities paying up to 9 billion, expecting to plead guilty of charges against u. S. Sanctions, trading money on behalf of sudan customers to countries prohibited by the united states. Not a good week for banks in regime, its been a rough few days. Really, seriously, maybe you can help us with this, david. The New York Times suggest they will be banned from processing dollar payments. I dont know you should remember at the time sudan was accused much genocide, and thats why they were banning this. They outsourced that to another bank, the dollar transfer. Thats core, i imagine it certainly hurts the franchise. Theres a great focus on charging them criminally without putting them out of business. We know that. Weve seen the reporting on it. I have not done independent reporting on it, simon, but nevertheless people are trying to figure out what the damage will be beyond roughly 9 billion fine they will be paying. To the point carl made earlier, look at a bank whose franchise, even as we speak, harmed, it is barclays after the accusation from the authorities they basically lied to clients in promoting High Frequency traders and the dark pools. They have the second largest on the street, and we saw yesterday a number of their clients, deutsche bank, bernsteins, actually, i think, disconnecting from the dark pool. Physically disconnecting. I got the reports in the morning on the show as we watched barclays stock sink, and a bit of a rebound today. Theres problems with the nyse and nasdaq, caused the dark pool to falter as technology dealt with it. Hemorrhaging, staff, and 7,000 redundancies, a bad week down 8 . The question now is, who is next . If they investigate pools. What they managed to do here is get insiders in barclays telling tales. And the old emails. Youd think by this point you dont put anything incriminating in an email, but they do. And chat rooms. On a lighter note, score one for the big board, alibaba listing here at the New York Stock Exchange. We have what could be the largest tech ipo, and we have a live interview with orrin hatch, the irs scandal among the issues they are talking about today. Well see if the dow can get back on track. Ewere headed for the second weekly loss. More squawk on the street live from post nine in a minute. L. And the incredible rush. Of the mercedesbenz youve always wanted. But you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end soon. Share your summer moments in your mercedesbenz with us. The big board has won the battle for alibaba, the chinese ecommerce giant decided to trade here, the Ticker Symbol is baba. They had a challenge handling big ipos, but expected to debut later this summer. Perhaps, the first week of august when i am planning on being off. If you could push it one week, guys, that would be helpful if not into september. August 8th, though, 8 is a lucky number. And baba is 8. Thats similar to fafa that means prosperity. Yeah, in china, if you are texting goodbye to someone, you put 88 because it sounds like byebye. We are happy the listing will be here for our own purposes. The focus is going to be on ali baba and the quarter about to end. A quart yet to be reported, obviously, by the company. We did get the first calendar quarter of this year recently in an amended filing, and they reacted negatively. They sold shares of yahoo if you recall, down sharply on that. Well see if history holds, and, in fact, the next quarter actually proves to be a stronger quarter, the expectation is we will likely see it when they do start the road show. That is expect eed towards the d of july. Its not a guarantee, but investors hope to see it to get a good a judgment on the company as near term as they can in terms of how the growth rate is progressing. Do we get to meet jack marvin . We will if hes down here. Ringing the bell parole. Thats one of the appeals, i would think, when they are choosing the New York Stock Exchange, you know, to ring the opening bell. Its historic. Significant. I thought the gopro bell ringing was historic. A nice selfie. History may well be made here, could be the largest initial Public Offering of all time. With the facebook debacle, give it to the nasdaq, even if you clean up your act. Actually, nasdaq, of all the ipos, they have more than the nyse. They raised more capital with the tech deals, but the horse race is interesting, and as menlow said yesterday, its the concentration in the silos that is giving people pause. Its not well distribute. The offerings will not equal what baba brings to the market. The tax whether they do something tax efficiently here is unclear. Certainly many expect what remains at yahoo as much as 12 of alibaba and tax firgtly, tax, and that will be a key question. We could have 23 billion. Well see. Well do a lot of reporting and discussion of this between now and the ipo date. What do you sell to make room . Its a lot, a big number. The New York Stock Exchange and fees, and in terms of the technology ipos, traditionally nasdaq business, the New York Stock Exchange in the lead with tech, 20 to 16. The nasdaq is better at attracting the chinese ipos including jb. Com. Right. Speaking of ipos, michaels is returning market after being taken private in 2006. They have the low end of the projected range, and theyll trade on the nasdaq under the Ticker Symbol mik. Well talk with the ceo at 11 00 a. M. Eastern time asking about the level of debt, in which this case has given people worry. Private equity, of course, always amazed at the number of skews they have in there. You have been in it, with two girls cramer im sure has. Unbelievable. Taken private at 6 million and to the market at 3. 5 . Not the way its supposed to work. Im surprised with the rainbow loom bracelet kit. I didnt know that was important to the company. Thats the big hit. Its the primary driver of the 4 sales rise recently. I have not been in a michaels since high school, but scrapbooking is a popular activity. You moved to the big city. You can get lost in there. Its a retail irgs po. Last we saw was the Container Store that popped on the open, but steadily declined since then. Exactly. Talking to art cashin, what do watch as we enter one of the final trading sessions of the month, and a lot more on squawk on the street, were back in a minute. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Just about seven minutes to the opening bell, lets bring in art cashin, director of floor operations at ubs. Art, you had told us this week tends to be negative following the june expiration, and im told by a technician, go back 15 years on the s p, and last two days of june have been positive three times. Yeah. History has not been in our favor. Yeah, at the rate were going, this will be the 22ennd year ou of 25 its been down. Well try to pull together. A little quizzical here. The yield on the 10year looks like its getting set to test the 2. 5 level. Well see where equities move. What about liquidity . You can move things easily, seems to me, a quiet time of year. Plus, we have a lot of ipos and secondaries soaking up demand. And you got a major russell rebalancing going on, covering several trillion dollars in overall assets, with estimates of 40 million worth of rewaiting done today. Youre right. Things a illliquid. Volume light, under 600 million yesterday. Things can move rather rapidly as we learned yesterday. Yes. What about the ipo, any signs of frothiness in the market . Not yet, but close. You remember we were crowded in the ipo area a month or two back, things got a little messy, so i think you watch for both the number, and you watch for the reaction after, the followthrough after the opening trade. Not frothy yet, but worth watching. The point on the rebalancing, not just the russell of course, but the end the month, end of the quarter. For pension funds, you have to rebalance because equities have done so well, they will have sold or need to sell 14 billion of equities. Im assuming thats not just today. That may have happened over previous sessions, and it may be why we fell yesterday. When we thought it was about bullard. It was a contributing factor. The bond market did not sell off. That should have happen if it was all about rates. I think there was a combination of things, but strong rumors, simon, that at least one or two large holders had begun shifting out of assets, equity assets, and thats adding pressure, and youre right, its a factor of between now and monday evening. Finally, dupont today, weak, having your doubts . I am concerned, and ive expressed this opinion before that record profit mar gygins w revert to the mean, and this quarter may show signs of that. Have a good weekend. Good luck to the ice cubes. They dont stand a chance. The opening bell a few moments away. [ male announcer ] what if a Small Company became big business overnight . Like, really big. Then expanded . Or their new product tanked . Or not . What if they embrace new technology instead . Imagine a companys future with the future of trading. Company profile. A Research Tool on thinkorswim. From td ameritrade. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in 60 seconds. You already know what a nutty week its been. For a moment yesterday, dow, with a triple digital intraday climb, managed to get back a little bit and close down only 21. For the month, it has 128 points before going into the red. Could be a horse race in the last two sessions. And that would be the fifth month in a row of gains for u. S. Equities. Everyones watching the market. Some of the cop consumption data this week not incredibly encouraging. Dupont lowering guidance for the quarter and the year. Thats going to add to some of the bullish bearish actions today, and thats why the premarket was weaker. The s p at the top of your screen. And the opening bell down here at the big board. Tcp international, an manufacturer of Lighting Technologies celebrating its ipo that happened yesterday. At the nasdaq, michaels, specialty retailer of arts and crafts celebrating its ipo today, and well talk with the ceo on squawk alley at 11 00 a. M. Eastern time. Moving on this news, david, taking 8. 5 stake, discussion on whether or not they would split in two companies, and apparently, wisconsin has strong antita antitakeover laws. That is important in terms of where a company is incorporated when you want to toss the board and go to a approximaty fight. In this case, a wellworn path, spin off the food business for two pure play companies for the quarter. This is a company with a food business and a crane business. Even, perhaps, somebody not familiar with the company say thats not the great synergy between the two, thats what relational says at this points and wants to separate them into two strong independent companies, which, of course, it believes will enable them to do lot better in terms of growth on both sides and return a good deal of potential upside to shareholders. Well see. The stock is reacting. Relational can take quite a long time with these things, but has been successful. Succeeding in getting a company to essentially pull its shareholders and decide to move to split. Its been active in be aerospace, also splitting. Emerson, talk about tech and biotech all the time, but oldschool manufacturing is busy. Without a doubt. I continue to think well see not just subsidiary sales like the one youre potentially referring there to with emerson, but, of course, a lot more consolidation, drum beat on tax inversions as well. Shares of verizon this morning, thats not down very much, but you may have noted one of the lead stories this morning, the German Government is essentially saying byebye to verizon as one of the key suppliers of telecommunications and wireless services. Because of the fallout from the Edward Snowden revelations and the nsa. This is not significant, but something to watch, will result in an incredible loss of business. Investers are taking it in stride, but it came up a lot when we were in when i was reporting on whether at t would make a move on vodafone, and one of the reasons it withdrew from the European Market as a place to conceivably consolidate, come here for the direct jp tv deal, the snowden revelations, nas, and germany saying, no thank you, verizon. People have not been able to pin point how much the contract was worth and whether or not its the only one. Who wins . Thats interesting. Deutsche telecom . All the european carriers will trumpet their ability. Privacy the issue across the board whether its facebook or google, we have to continue to think about this, what it means to the business models. More than privacy, isnt it . Talking about setting their own internet structures, and the bulkization of the internet as a result. We dont want the americans to have this sort of access to what we do on a daily basis. Broke right before the world cup game yesterday, u. S. Versus germany, we know how that turned out. Green mountain is not moving. Upgrade from hole to a buy. Gross margins increasing. Targets 140, a big mover on the s p. Has been of the year, the biggest stand out in terms of the gainers. They have a few catalysts coming up to point to, including the release this fall of the keurig 2. 0, they lost a few patents, but their partnership that they started with cocacola, could bring other brands as well, but they are starting work, a factory on manufacturing, a new product for athome carbonation drinks. We mentioned nike, michaels, finish line, finl, 27 beats by 7 cents, a growing presence in macys, which we know is a powerful platform for a lot of retailer, and thats one of the big gainers this morning at the open as well, up 6 in premarket. Dollar general, an announcement, the ceo, chairman and ceo, informed the board that he wants to retire and will may 30th, 2015. Hes well thought of as is overall the execution at Dollar General as compared to one of the competitorss, family dollar, and the significant stake is pushing to sell the likely candidate to buy, of course, is Dollar General, although theres nothing going on at this point tweak the two Companies Based on phone calls i made, okay, a week or so old, but i dont think anything at this point. Nonetheless, this at least has to be considered in light of that whole scenario under which there would be consolidation among the dollar stores. Increased sales by 80 since 2008, no mean feat. Thats short four or five years, doubling the sales in that period of time. I like how Courtney Reagan writes another vacancy. How many retail ceos need to be hired now . There is not a long list of names. There are a lot, and family dollar, i believe, still looking for a coo as well, so even within the dollar store chains, theres executive jobs available. I think you need a Corporate Jet with one of those, dont you . I wouldnt know. I wouldnt know. Im not allowed to ride on those. Intel hanging on to a three handle, upgraded over at bernstein. Its worth watching as well. Gopro, you know, we did so much yesterday on the ipo, thats adding another, what, i think its up to 33 here now, which is going to be almost a 6 gain. People beginning to have more conversations about the valuation after pricing at 24. Yeah, how do you value a company that is consumer electronics, positioning itself as a media company, not making money yet. What is the evalweigh at this point up to, 4 billion for gopro . Yeah. Its called a picture perfect debut. I dont know if you saw this picture this morning, at the ipo hes a happy man. He owns a lot of the shares. They are lucky they have the images to go with the work they do, and they make Great Television and they get a lot of television, helping them, did not harm them with the order flow seen yesterday and again today. With that, dows down 14. Bob is on the floor. Good morning. Good morning. Industrials and energy on the weak side. They had a tough week. Energy is a big, big Market Leader throughout the month and down for the week about 1. 5 . Watch that. The ipo tsunami is continuing, however, its a mixed picture. The big winner today right now, so far, a carve out, operate wind and Solar Energy Projects priced at 25, high enof the range, 23 to 25, indications of 31 to 35. Energy is hot. People are looking for new energy products, and many offer very, very attractive yields. Thats a winner. Mixed picture, though, on the nasdaq, michaels priced at 17, that was the low end, 17 to 19. That should open at 7 30. We had mobile ad network, they are pricing low. That will open at 10 00 on the nasdaq. I told you days ago, 18 ipos pricing, and five biotech ipos failed to price this week. Many are small and dont have a lot of big, Big Companies behind them that are underwriters, but five failed the price, and another one today, a farmland company, failed to price. I anticipate and talk is they will price next week. The fact they were scheduled this week and have not seen them yet is interesting. Not everything is really working in the market. Talking about kb homes, a sec disappointment to me in the home billing space, orders up 5 , beating on the top and bottom line and on track to beat their 2014 goals. Stock is trading up, but 5 order growth . Thats disappointing. This happened yesterday with lenar at 8 growth. Stocks are not moving as well as last year. This is figuring into the russell reconstitution. Notice how i moved that . Russell is today. Once a year, russ of indexes rebalance at the close today, and this is the day to do it. A lot of lists passed aaround. Theres 5 trillion in the russell. Thats important. Theres move around. Politics here because theyve had to get involved in the whole domicile question. So, for example, Liberty Global being removed, they are in the u. K. , removed from the mussel, and tyco is added, was removed because it was in switzerland, but the position of the russell is if the companys revenue comes from the united states, its classified there even headquartered elsewhere. Its tricky to figure out, get involved in the politics of how to do this because, well, they have to make a decision on that. Theres one. One thing more interesting is growth in value, 5 lot of interesting changes happening, primarily because the growth index had bad performers this year. A lot of retailers were considered Growth Stocks growing earnings. Well, the earnings have fallen apart in the last year, and the stocks had terrible performances, Bed Bath Beyond. They play the style indexes, and the retailers are going out. On the other hand, a wllot of companies with value, bargain names like energy stocks, airline stocks, have had great years so far because earnings have suddenly accelerated. The value names will be put in growth categories, and people play growth versus value off, and its interesting to see whats going on in that particular space. Again, that will be at the close here. Right now, next tier ya is a winner today. Back to you. Thank you very much, bob. Meanwhile, the ten year yield is stronger. Rick santelli, good morning. Good morning, yes. Very important levels, orderly trade in treasuries, and very much biassed in two years, flattening yield curves and wellbid treasury prices. Look at the chart of tens. Does not look that aggressive in how much activity you get. Open to a twoday chart, you see weve stacked back down, maybe the best way to look at this is to consider were down two and a half basis points on the day, ten for the week, and fives are down six on the week. There you go. Theres the thereflattening in action. The last day was in may as you see on the chart. Yield curves, its important. The flattening yield curve is a surprise. So is the upside. The surprises are linked in the street, didnt look for either of those. As a matter of fact, steepening in higher rate was was the watch word from thanksgiving to new years eve of last yearme menye. The fives to tens hovering two year flat, and we know the rest, but tens and twos responding. Thats a month to date, a big move down to 205, a oneyear tight, a oneyear flat for the trade. Boon yieldings, go back a year to find lower yield us because they are close to flirting with the 120 level. Dollaryen has not correlated like it did in the year. However, it is really following the treasury complex a lot more than at one point it was leading it, and you see its moving at this point, and its following rates, and the last chart i think is super important, pound against the dollar. We know mark carney is together with the perception of what may happen in the u. S. Regarding our central bank. Heres a chart of the poup versus dollar and realize were very close to a fiveyear high on their currency versus ours. Carl, back to you. Rick, thank you so much. Up next, whats it like to work for jeff basos . Hear what the former amazon executives told david. A taste of what youll see in this weekends cnbcs original documentary, amazon rising. Michaels going public today, and we have a live interview with the ceo coming up on squawk alley at 11 00 a. M. Eastern time. About speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. Fame, makes a man take things over fame, lets him loose, hard to swallow fame, puts you there where things are hollow the evolution of luxury continues. The next generation 2015 escalade. Fame means keeping seven billion ctransactions flowing. G, and when weather hits, its data mayhem. But airlines running hp endtoend solutions are always calm during a storm. So if your business deals with the unexpected, hp big data and Cloud Solutions make sure you always know whats coming and are ready for it. Make it matter. We are talking amazon today, premiering this sunday, and dont miss it. In the public, many know him as a seemingly friendly every map, but according to former amazon executives, behind closed doors, hes a demanding boss and little mercy for the mediocre. I spoke with two former executives who said if you were an amazon manager preparing for a meeting with bezos, you better be ready or else. Rothman and miller says he not only invited confrontation, but he demanded it and woe to anyone who did not measure up. I remember one person said to me, oh, my god, i was praying i would have a heart attack so this would stop. That bad . Just a meeting where they had not been prepared, and i remember at one point he said, i dont know if this is sheer stupid di or gross incompetence or both. Yeah. Of course, its not unknown for a founder and ceo, certainly of the type that bezos is to drive his employees. You know, we spoke to many executives on and off camera, and they described time as the most difficult time of their career, but also the most rewarding in part because they are challenged, but they are also begin leeway to do things and a boss who is willing to change his mind if the data takes him there. Hes hyperrational in many ways, is mr. Bezos. I was going to say, i mean, theres a few chapters for the company, right . There was the initial stage, all getting to know them. Which do you think is the most interesting so far . Frankly, i think right now is the most interesting time, and not just saying that because of the documentary coming up. You know, i think were starting to see public per seception of amazon change a bit, and people love the service, 240 million customers. Im sure each of us at the desk use it. That being said, and we go into this, of course, as you might expect, warehouse worth, Third Party Merchants who said, wait a second, amazons competing against me, and the book battle going on, all can sort of change somewhat a perception, not necessarily impacting sales, at least not yet. Its interest to see the impact of amazon, the disruptor, how Many Companies are afraid of amazon . What happened with the book business, the retail business, and some of the grocers are looking at the amazon fresh and potential threat from that, and walmart is trying to chase them on the ecommerce strategy. I wonder what success rate they have, so many directions now and who should be most worried. They are not afraid to try and fail. Bezos has not been chases it in any way or be afraid if we were by the stock market. The shares fell, but up overall 15,000 since the ipo hes not afraid of risks, and, in fact, pushes people to do that. Certain thing dont work, praps the phone wont work, but they are there ready to challenge anybody and incumbents like an anal or sam jp sung. For more on bezos and inside look of the king of retail, tune into amazon rising, and, again, you have a couple days, its sunday, 9 00 p. M. Eastern and pacific. Looking forward to it, david. Thank you. Are the kids staying up . I dont know, i have not asked them. The second half of this year, what could be key now for retail . Heres what to watch in retail in the second half. The two biggest retail spending events are still ahead of us. Back to school and holiday. Good news is most retailers expect a stronger close to the year, but the bad news is they are up against tougher comparables. Another week of back to School Shopping season in the teen seg tor with money going to entertainment anticipation sports. Susan anderson says the shopper is ready to upkate the wardrobe after spending on home and autorelated purchases all last year. Thats your second half retail outlook. Retail mood to the american consumer. Details on sentiment when squawk on the street comes right back. Ime the moment is ri. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. 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Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Welcome back to squawk on the street, we are seconds away from the final read of university of Michigan Sentiment survey for june. The mid read came in at 81. 5. 8 2. 5 is the number. How does that stack up . Well, look at the may final. May final was 8 is 1 1 81. 9, and it is below the recent High Water Mark in april at 84. 1 6789 market in buy mode with treasuries, and that with a friday in front of the weekend may be something to Pay Attention to, especially at the end of such a significant month end quarter. Carl, back to you. All right, rick, thank you very much. The sentiment numbers, whether its michigan or conference board, people trying to square postcrisis highs in confidence with consumption thats a little bit disappointing. Its to the what people say in the survey, but what they do. Lacking too. We saw that yesterday at large, personal spending down, up to 0. 2 , and strip out inflation, bigger dynamic for the economy. At 70 of the economy, consumer spending, this is important as we get retail earnings. Earnings season kicks off july 8th. We got a bunch of them, Bed Bath Beyond with a share of problems. Will be interesting to watch. They were to get out the deep freeze, weather better, forecasting higher, gdp forecasts higher issue and after yesterday, goldman sachs, other firms too brought down gdp forecasts. Will be weird to get claims and jobs on thursday of next week because of the holiday. On thursday. When we come back, Pulitzer Prize winning columnist jooum stuart, and we are live with an exclusive with senator orrin hatch when squawk on the street continues. Huh. Fifteen minutes could save you fifteen percent or more on car insurance. Mmmhmmm. Everybody knows that. Well, did you know that old macdonald was a really bad speller . Your word is. Cow. Cow. Cow. C. O. W. E. I. E. I. O. [buzzer] dangnabbit. Geico. Fifteen minutes could save you fifteen percent or more. This is kathleen. Setting up the perfect wedding day begins with arthritis pain and two pills. Afternoon arrives and feeling good, but her knee pain returns. Thats two more pills. The evenings event brings laughter, joy, and more pain. When jamie says. Whats that like six pills today . Yeah. I can take 2 aleve for all day relief. Really, and. And thats it. This is kathleen. For my arthritis pain, i now choose aleve. Get all day arthritis pain relief with an easyopen cap. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Welcome back, we begin with the markets in the red for a second straight day, dow and s p moving lower, and Consumer Sentiment beat expectations. Could that turn things around . Need a hero . Gopro second day as a public company, what would be the largest ipo ever, alibaba coming, and michaels trading at any moment. Ipo fever is back. Housing home run . Results from a slew of positive data pushing stocks higher. Coming to the end of the first half of the year, what should you Investment Strategy be the next six months . Joining us now is kevin karen, Portfolio Manager with the private client group, and chief economist where rbs. Welcome to the program, and thank you for joining us on a friday morning. Good morning. Kevin, every has seen the way weve tracked higher than many peoples expectations on the equity market, particularly over the last six weeks to two months. What happens in the second half of the year . How should people structure their investments . All right, well, i would look to move to places where we have maybe a little bit less love in the market than weve had recently. We look at places like emerging markets, for example. The last few years they under performed, but we expect improvement in the fundamental data in emerging markets andle data is better than it had been. Those trades make sense. I wouldnt extrapolate out the last quarter or two years for that matter and assume it goes on forever. Weve gone a long time without a 10 correction, and the market is at a point where, perhaps, were due for what i call a healthy correction. Im cautious. Take money off the places where you are over valued. For example, look at emerging markets, energy would be another sector to look where you could find relative evaluation play, and the potential for improvement in the next three months. Kevin, be honest about it. People watching at home now are loathed to go into emerging markets, not sure they really understand whats going on there, and they get hit with shocks from left field, and are you suggesting that the u. S. Equity market is really not the place to be to the extent that it drives people elsewhere, or the margin not the best bet . Well, im not saying that. Im just looking around the world, and im looking for value. We have been through a fiveyear bull market, particularly here in the united states, so you look around, you try to find pockets of value as any good Value Investor would, and youre remiss to overlook the fact that emerging markets, where the worlds population lives, the growth is faster, an at least from a long term perspective, looks relatively better priced, three, four, five years ago, people tripped over themselves to invest, pouring all kinds of money into emerging markets at much higher prices. Today, you cant give it away. As a valued investor, thats the case to look at emerging markets even though it doesnt feel good. Michelle, your focus on the economy, hard to ignore the bond market rights now, 250 for a 10year treasury yield, and demand for u. S. Corporate debt, monsanto sold 4. 5 million worth of bonds. Is it fundamentals . The fundamentals dont threaten it. I mean, most people after the 2. 9 contraction in the First Quarter looking to rebound around 3 in the Second Quarterment im not that strong. First half of the year, the economy will not have grown maybe have contracted a bit. That overstates the weakness. I dont think the underlying economy is that soft, but particularly, fundamentals, they are not challenging yield levels, and we are focused on the fact at the low levels, 10year treasury yields are attractive, higher than yields in other countries around the world. Cheap on an international basis, and i think that continues to, you know, fuel demand for u. S. Treasuries what looks to be incredibly low levels. Michelle, as an economist, what can you tell us about the stock market . The allegation, the concern that came again from art cashin of ubs earlier that we were going to peak out on Profit Margins at some point, the record levels of earnings have to be eroded to revert to the mean, whether thats because youre going to get debt more expensive for companies, loading up on very, very cheap debt, and thats flattened margins or waging might rise . Yesterday, although the spending data was poor in this country, we did see wages beginning to keep up again. Do you think now the Profit Margins are at risk at these record levels . You know, weve been hearing that, and it hasnt really born out to be proven theyve got to move lower from here. I mean, i will just step back and say, you know, the question i get most often is are we at the levels in the equity market because of fed liquidity . I just point out that, you know, fundamentals are for u. S. Corporations are very strong. We got profits as a percent of gdp at record high levels. We have Balance Sheets strong. Companies cut costs and are able to make money even in an environment where growth is only growing at best close to tren, so i do think the fundamentals, you know, continue to be supportive for the equity market. Whether or not were going to get a pull back, move higher, im not precise like a strategist, but i dont think equities are only here, you know, because of liquidity and, again, the profit margin story keeps coming up, but, you know, it just doesnt seem to bear out because of the position that Companies Put themselves in, given the cost cutting done in the downturn. Amazing to watch, kevin, yes, a down day. Volatility at a record low. Volumes are super low. This is the most hated bull market. It is stunning to watch record after record with a wall of worry growing. We talk about the concerns. You talk about the concerns. Equity flows are negative. Can you afford not to be in this stock market . In the stock market, did you say . Yeah, yeah. Essentially, theres a lot of money thats going into the stock market, youre absolutely right. Mutual fund flows, for example, picked up from where they were a couple years ago, but i do think there is a fundamental case to be made. I think when you look at what happened a few years ago in terms of the financial crisis, we fell into a very deep hole. Were still rebuilding, still coming out of that. I do know we had a slip in gdp in the First Quarter, but that seems to be turning around. Ultimately, its about growth in the economy. When you look around the world, you see the world economys grow. I think the u. S. Economys going to grow this year, u. S. Economy grows next year. We are becoming more productive. All of these things are positive, but i cant get away from the fact that when you look at spreads in the bond market, hook at prices, spreads are tight. Theres areas in the stock market that are rich to us, look at equities, look in the portfolio, buts expectation for return Going Forward from here is while better than bonds, lower than it has been. I think you just need to have a realistic expectation about returns from here Going Forward. And have the guts to go abroad, kevin, the point you made at the start of the interview. Exactly. Good to see you both. Have great weekends. Same to you. Well, the dow is lower right now, but one of the stocks that is gaining in the Dow Jones Industrial average would be nike after blowing away estimates yesterday in terms of earnings per share driven by continued strong sales growth. The stock actually up only 1. 8 , up 3 in the premarket, but down for the year. Go through the highlights of the nikes report, they are driven by strength in the categories like running and basketball and also making end roads in soccer. The global brand president of nike got back to the world cup in tra cibrazil, never seen suc enthusiasm. Spending big. What happens after the world cup . They have a spending pipeline, foot ware releases, what they do with digital, with apparel, growing market share in places like western europe seeing orders up 22 for nike. Thats certainly a big gain and big win against adidas struggling in its home market. China a focus for investors in the report, up 6 , analysts looked for 2 . Nike had trouble with china. Brand loyalty different in china than other parts of the world. Not just futures orders. Margins up, average sells price up. We talked about sneakers, how much more expensive can they make a shoe . Apparently more as they add innovation and people respond. As someone who bought nike sneakers the other day, its the other way around. They can hold the prices steady, but bring the manufacturing costs down. They are doing both. The shoe i bought has no tongue at all, its a mold. I wish i wore them today. Completely molded, and its quite clearly a much cheaper sneaker. What shoe do you get . Sounds like back to the future. How much was it . Just over a hundred dollars. Was is the climate . I have no idea. It was cheep. It did not cost much to manufacture. Fits the foot well. They continue to come out. This is nike, adidas territory, they are both doing this and control 70 of the market, and under armour is interesting. If you look at the scanner data from neilson, they are capturing market share. Nike in apparel . I watched the buying pattern of my son, all under armour all the time. If they can afford it, the kids go for under armour. Whats interesting is womens ware. They talked about this on the Conference Call, 12 gains last year in womens ware suggesting they are taking share from lulu lemon suffering right now. Thats not too difficult, at least for now. Fascinating company to watch. Dont make holes in your yoga pants, i guess. Dow down 46, lets go to dom chu. Market flash, green mountain, leaders in s p this morning, up nearly 3 . Upped the rate from a hold to a buy on expectations of strong sales and Profit Growth this year and next. The shares have a banner year, 65 since january, and more room to grow, slapping a 140 per share price target on the stock, carl. Back to you. Thanks a lot. When we come back, gopro popping, alibaba coming to the board, and jim stewart coming. Well talk about all those names and more in a moment. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. Female announcer when you see this truck, female announcer it means another neighbor is going to sleep better tonight because they went to sleep trains ticket to tempurpedic event. Choose from a huge selection of tempurpedic models, including the new tempurchoice with headtotoe customization. Plus, get 36 months interestfree financing, two free pillows, and free sameday delivery. Are you next . Announcer but dont wait. Sleep trains ticket to tempurpedic is ending soon. Your ticket to a better nights sleep been one the busiest week for ipos in 15 years, gopro, michaels going public on the nasdaq today and alibaba will debut here on the nyse. We want to get more from jim stewart, a cnbc contributor and Pulitzer Prize winner as you know. Happy friday. Happy friday to you, happy to be here. In march, got crowded, took a toll on the market overall. Where is your head on this right now . Were not seeing crazy earnings, high valuations kind of thing, but a healthy sign of the the Capital Formation process is coming along nicely this summerment companies, i mean, what a great time to raise money either in the debt markets or in the equity markets. Its really been fantastic. It does as i said before, it makes me nervous when things are there calm and easy that theres something on the who ryes horiz. History tells us. The gopro story, and you looked at the price and say, its hyped. Isnt there a bit of you that went, im not sure . Yeah, yes, thats true, and you know, look, its been investors have not been skeptical lately. I dont know if anybodys noticed, but the time ink spin off, everybody thought was just, you know, frankly a loser, has actually done quite well since it went public, which i thought was an interesting contrary thing. Its not been that long. In the media, oh, my god its not a victory yet. Again, i think in the background here there is some, you know, inflation percolating this week. They are talking about raising Interest Rates. I go around and talk to people, and i said, you know, raising Interest Rates in 2015, and then its like somewhere over the distance horizon. There is an argument, actually, a former fed member should raise rates because at the moment, they are paralyzing everybody with the view that nothings better. If you normalize the curve, Business Investment picked up if they thought there was inflation tomorrow or tomorrow would be better. Well, janet yellen doesnt tell you tomorrow will be better. Well, i think they have been as transparent as you can with raising rate. I think people are not believing that because of the talk of employment, oh, they push it, they dont care about inflation, that sort has been creeping into the thinking, and they care about wages and the employment situation. I dont know that thats the issue. I think it must be frustrating for the fed. They say things, and then the markets just dont react the way you would expect. I just want to ask you quickly before we move on from the ipo conversation. It looks like the average return on the first day of trading is at 27 for 2014 at least from the tech ipos, and ten out of 13 of the names rose more than 10 on the first day. Do you see sort of distinction between the enthusiasm for ipos and the general Market Sentiment right now, and how unusual is that . Well, interesting statistic. 27 is not that high. I mean, i think that in the norm around, like, maybe 10 or 15 . Bankers say what they want is 10 to 15, thats a very healthy, wellpriced ipo, so 27 does not sound out of line. Its the hundred, the 200, the 300 that looks like a crazy market. They are taking it in stride. They always want to under price a little bit to provide motive to take the risk in an ipo. Its kind of good. You mentioned inflation. You were talking to me during the break how thats very little institutional memory about what inflation feels like and looks like in the country. I talk to a lot of investors and bring up the subject of inflation or rising Interest Rate environment, what strategy . I get blank stares, like, what . I really dont remember that. I have to go back and research. A lot of guys in the early 30 s who dont know it, period. Bond traders on wall street lived with a seven year basically no Interest Rate environment. I remember inflation. Means you get a pay raise every year. If you are lucky. To the point it actually resets everything as it always used to be, you know, house prices rise, mortgages worthless, slightly wealthier, you know, sovereign debt paid down, treasury market easier to afford. Thats the normal way for decades we ran. 3 inflation was good for us for a very, very long time. Well, 2 to 3 inflation is not a bad thing. That is the target of the banks, that is a healthy environment. 5 , 8 what did it get up to in the 70s . It was way up there. Thats not where we are. No, no, nowhere near that, i agree. Its hard to control, and Central Banks it is hard to control. Nothing like this, move it up to 2, put the brakes on, stay at. Were not far from 2. That would be fine, but does it go to 3 . Its not happening, not trying to sell panic, but be aware its happened in the past. Theres no guarantee it will never happen again, and people act like its unheard of, its never going to happen. Unrelated note, your column this weekend looks at lord brown, bp, interesting cultural corporate story. I interviewed him last week. Wrote a book describing that tortured life led as a gay ceo of a company. What i found surprising is hes the first person ever at a fortune 500 or ftse 100 company to publicly acknowledge that hes gay, and after all those advances in gay civil rights, youd think ceos especially are measured by objective criteria, financial performance. We have not had, you know, profootball players on television acknowledging they are gay look at the marriage at the state level. What i explore in the column, his experience as a model is why would this be in the corporate world . What does this mean . I just found it fascinating. Of course, there are gay ceos in major companies, and i reached out to them. I got extremely cool reception, not one would allow to be named. I think tim cook is open about the fact hes gay at the head of apple, isnt he . Oh, dear, was that an error . Wow. I think you just i thought he was open about it. I dont want to comment about anybody who might or might not be. 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Every single thing that happens here is a result of data . Absolutely, maximizing profit for every single pixel. Reporter do they measure, whether i click off, and weather it matters on how quickly a page comes up . Absolutely. When i was at amazon, we looked at this, and when when they were shopping, if it was a tenth of a second slower, we lost 1 of the revenue, even a tenth a second longer cost 1 of the sales. We analyzed that very, very deeply. All about data. Theyve got plenty of it. Michaels, by the way, just opened for trading this morning. Thats not what you typically want to see. Public offerings. The low en. You dont want to break syndicate. They had a lot of debt. That was the concern going in. Its funny, we were in a market for ipos not long ago where deleveraging exercises, raising money to a certain extent to deleverage, was not well received, and the last year, they are open to more or less anything. This is 3. 7 billion in debt, and they were going to pay down debt. Thats the way its drawn up in private equity land, but you dont draw it up sending six to take it public at 3. 5. It depends the degree to which theyve been able to conve convert debt into shares into equity, now valuele to the company of the thats not the story of where they made the money. Its not on that price. It is not, although, typically, we can look at the ipos from socalled financial sponsors and see theres been a great benefit construed to them. That said, sometimes they take dividends, but i dont believe that to be the case here, over time. Not to mention, of course, using leverage to buy the companies when they take them private, and thats why you get multiples of the actual equities they put into the companies as oppose to saying, all right, six minus 37 or 37 at 6. David blackstone collected a dividend last year. Oh, did they . I have to take a closer look at the documents. More importantly, they own 80 of the company. This is the potential for an exit strategy in the same way of blackstone took the lodging interests public to have a Second Degree offering further down p line. Of course, youll sell down the line, and with blackstone conceivabl conceivably, what you have to do, exit investments and get out of the fund. You raise money, a seven to ten year life maybe, as much as that, and you want to start returning it. This, i can guarantee you, not one of the better investments. Carl, its a profitable company, posting growth, has over a thousand stores and calls itself the biggest arts and cra retailer in the united states. Not like an amazon. Depends what youre into. The first retail ipo since the Container Store. Weve not had a lot of proxies for retail exits for a while. Aside from market capsize, thats why you Pay Attention to how michaels is received. At any rate, fascinating story that amazon does not have told often, and bezos will be interesting. Thank you. We look at any number of facets, the driving force behind the company, and as you heard as well, sort of their use of data, Third Party Merchants, so many things to talk about with the fascinating company, and join us 9 00 on sunday. I want to know if it knows who i am and log and raises prices as a result. It does not. Would be surprising if you were on an apple, part of the higher part of the market and accused of doing that in the past . There are questions to that, but to our knowledge, again, theres algorithms for everything, scraping the web for prices to compare, and you can see things change price if you click on them. According who pays to be there. Your home page, should you use it, updates to what you might want to buy, but ive not ascertained they raise prices for you. Just simon. Yes, heres simon, jack up the prices. He pays anything, he doesnt know what things cost. Thats true. Lets go to dominic chu. Im on your side, simon. Not all news good today, wells fargo dropping their neutral to out perform rating based on googles entrance into the domain registry business, and wells fargo dropped a price target for the range on shares by just a little bit 51 a share. Down towards session lows, off by 3. 5 . Back to you. Thank you, kb homes moving higher on the beat, swinging profits, and new home sales rising. Where the market is heading for housing coming up begin everything weve seen this week, lenar, and the data. Ukraine signing an agreement with the e. U. , and russia vowing serious consequences. We are live for you in brussels. Check on the markets, losses across the board, and nasdaq positive, fractional moves, which is what weve been acustomed to during the month. Well be right back on squawk on the street. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. It can help your business save money. My mom works at ge. False. The truth is when you compare our Fastest Internet to the fastest dsl from the phone company, comcast business gives you more for your money. Why pay more for less . Call today for a low price on speeds up to 150mbps. And find out more about our twoyear price guarantee. Comcast business. Built for business. Ukraine signed a landmark trade deal today to behind itself closer to the European Union in clear rebuke to russian efforts to block the country from turning westward. We are in brussels where the deal was signed. Julia, its not just ukraine, but other countries as well, isnt it . Reporter absolutely, but the focus now given the situation in the east of ukraine is where we are really looking right now, and, of course, this comes at a time where we already had grave threats from russia, grave consequences as a result of signing the deal at a time when were trying to negotiate a peace deal in the region. Weve had the ukrainian president come out today and say theres going to be four conditions for that piece that moscow and the rebels in the east have to meet by monday or else, and when i spoke to the president , i asked him, what happens if russia doesnt meet those conditions by that date . I think the cease fire expired, and ukraine will defend ourselves with the old methods we have in our disposal. Talking military engagement . Including military. We cannot accept the ukrainian soldiers are killing, the check points captured, and the tanks, artillery system are going to ukraine, and im a person of peace, and i use every chance to keep the peace in ukraine, but if this Peace Initiative is rejected by russian or others, we shall defend our country. This is very simple. Reporter leaders willing to meet at any point in the next few days to step up sanctions on russia. Theres a sense were meeting john kerry and you guys in piling on pressure in russia. The question is, is Vladimir Putin listening. Deadline tuesday. Back to you. Thank you very much. Watching home builder stocks because they are mixed this morning. We had better than expected Second Quarter profit and revenue announced by kb home before the bell, improved results yesterday, and better housing results from earlier in the week. Jack, given everything from the week, can we confirm that housing is back on the up after a brief hiccup earlier in the year . Yeah, consider housing in recovery, and i think investors lost confidence in the space earlier in the year when the mortgage volumes fell off, but this is slow and steady, and builders are showing that, and the other thing i think is happening because were tight supply of existing homes for sale, the buildings are taking market share of the total housing pie because you can build a new home, move right in, and existing inventory is tight. Recoverys in tact, but the trajectory is less steep than people maybe had thought. Glad you brought up the dynamic of existing home sales and new home sales because the theme of the housing recovery is its new for home sales to keep up with existing when it comes to competing on price with the amount of foreclosures in the system. Is that changing . I think its changing, what shows its changing is National Home prices are up 10 to 12 in the last year depending what service you point to, but new home prices are up 12 to 15. Afp, average sale prices of the homes sold by lenar and kb are in the mid to higher teens, better Pricing Power pointing to the availability and preference differential. Yeah, jack, how long do you think that continues, though . How long can they push Prices Higher as the volume comes back . We see that now albeit from the levels ticking up, and as volume ticks up, it brings the prices down, some acceleration, but at a much slower pace. Yeah, affordability is something to Pay Attention to. You cant talk price without talking Interest Rates, and so far Interest Rates held in well. I think we are probably through more of the price appreciation in new home sales numbers. I think the numbers will probably tear back some and move from a midteens to a high to mid single number in the next year. Thats in our models. People will push back. Builders manage pace versus price and not giving stuff away for free or incentivizing, and if people begin to hit the pause button on price appreciation, they have to change the equation a little bit. Its natural to think that number, the price increases will moderate but remain positive. Jack, what weve seen in the housing recovery is a divergence at the high end and low end, the inequality them. The high end, high priced homes sell much better than at the low end. Who does that benefit with your coverage universe in the terms of the names of the Home Builders . Thats a theme pervasive throughout the market, and the entry level buyer under pressure, and mortgage dollars are not flowing to them, the best name to play on the high end is toll brothers, but the people dont have a morning, they are cash bay uyers and mov on to retiring, and builders like horton built out a new branch with higher end home called emerald brothers, and the builders are definitely going to the demand, and the high end buyer. Thank you for joining us last moment on kb homes up a percent. Jack of the financial group. Thank you for having me. Another 20 up for gopro. Another 6. 47, of course, after closing up 31 yesterday on the first day of trading. That is in the middle of the session and for no apparent reason that we can see, just tacked on another fifth to its market cap. Well keep a close eye on gpro, which as the Washington Post today said had a picture perfect debut. Who knew. Enthuse yam for action camera. An interview with orrin hatch, Ranking Member of the Senate Finance committee, thats with Rick Santelli, and we are outside boston in massachusetts with another exclusive that im envious of, morgan. Reporter were at panera, going hightech, a new mobile app, selfordering kiosks, and we have been testing it out all morning. Well tell you more about that after the break. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. But were not in the business of naming names. The Volkswagen Passat is heads above the competition, the fact is, it comes standard with an engine thats been called the benchmark of its class. Really, guys, i thought. It also has more rear legroom than other midsize sedans. And the Volkswagen Passat has a lower starting price than. Much better. Vo hurry in and lease the 2014 passat s for 199 a month. Visit vwdealer. Com today. Four years and 42 million worth of technology, we are in a panera in massachusetts looking at a fundamental shift in fast food, or fast casual strupts. We are seeing this in fast foods, so paneras are trying to change the way it works. This is a sweeping digitalization of the companys north american stores, looking to implement this across the board by 2016, took four years and 42 million to develop, as you mentioned, and this is what is involved, a mobile app to order on the go, and pickup without interacting with anyone. Theres instore kiosks to order and pay and the food is brought to the table for you and huge kitchen overhaul to make it more efficient. They say this improves service and cuts down on mistakes and in test stores like this one, the Company Finds guests ordering for themselves are likely to modify and add more to the orders pushing checks higher. Comparable sales in a cafe like this one versus a nonpaner 2. 0 cover faye, high single digits, higher than the other caves. We are very pleased with the results. Reporter they are not the only chain going hightech. Selfordering at applebees, and mcdonalds is experimenting, and dominos and papa johns have been investing heavily in mobile, so panera says this is not going to cut into their labor force. They will not let anyone go as they roll out the process, and, actually, analysts say it could increase labor costs implementing this at all of the stores. That might be one reason why investers are not too impressed yet, stock down 15 so far this year and consensus from analysts is a hold. Back to you. All right, Morgan Brennan in massachusetts. A first look at cutting edge innovation this friday morning. Cameras gained access to the first even brand of hotel in connecticut. New from intercontinental, focusing on health and wealth wellness. Theres training equipment in each guest room, plus eucalyptus linnes and revitalizing showers, and gyms have spin and yoga classes and community runs. Theres a focus on healthied fu. Grabandgo options with clear nutrition labeling. They are aiming to persuade 500 owners to sign up for the even brand in the area, d. C. , san francisco, portland, seattle, and l. A. At the moment, theres four they own themselves, set them up and paying for it to get the brand right, to persuade hotel owners this attracts customers in the future, but health and wellness is a huge force now throughout leisure and entertainment. Whats the price . When you have that, you have ultra Luxury Hotels where they cater to that kind of crowd and very expensive. This is much further down, much, much further down. Thats interesting. Select service, at the same level of la quinta, not luxury, but not economy. Affordable, interesting tend in hotels. After the break, Rick Santelli with u. S. Senator orrin hatch. Looking at markets, we are down in the dow 15 points, cutting earlier losses, nasdaq up slightly on the last trading day of the week heading out to the end of the month. Fifth straight month of gains for u. S. Stocks. Were on pace. Well be right back. Here. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. But you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end soon. Share your summer moments in your mercedesbenz with us. You wouldnt have it she any other way. Our toes. 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Id like to welcome our very special guest exclusive interview with senator orrin hatch. Ic taking the time this morning, senator. Nice to be here, rick. I want to reed somethiad som the president when the scandal first broke. This is pretty straightforward. If, in fact, irs personnel engaged in the kind of practices reported on and were intentionally targeting conservative groups, then that is outrageous. And there is no place for it. And they have to be held fully accountable, because the irs is an independent agency, requires absolute integrity, and people have to have confidence that they are applying the laws in a nonpartisan way. You should feel that way regardless of party. Senator, my first question is do you believe that according to the litmus test outlined by the president that it has been followed . That we have seen congress or the administration interrogating or questioning the irs as to the standards first dictated by the president 13 months ago . I dont believe it for a second. All the evidence is otherwise. To all of a sudden find after a year of asking for the emails from lois lerner, to find that her computer had crashed containing all the Important Information or emails between 2009 and 2011 it wasnt only hers. Was it, senator . It happened to coincidentally involve six other staffers . Worse than that. Because hers crashed. Then they took it and said they tried to get what they could out of it, but then destroyed it. So we have no chance of looking at it, and doing anything more. Then just monday, a week ago, we met with the commissioner and three of his staff people, and not one mention about the other Six Computers that may have crashed, and at least one computer that was very important, because it was to the chief of staff to mr. Miller, acting commissioner, who basically was fired. So were it looks very suspicious. It looks terrible. Were probably not ever going to get, be able to get the emails between 2009 and 2011. The critical times, and they didnt even have the courtesy of telling us about it. It was like they felt like the media would ignore it and they can just get away with this. Its absolutely terrible. All right. You know, theres so many areas. It seems as though ive seen this group of names in many publications. Most recent a june 19th oped by kimberly straussal in the wall street journal. Im summarize. Brought up four senators names that keep reappearing and reappearing and reappearing. Dick durbin, senator cummings, with regard to their staff and them, interacting via email through the irs. They talk about senator schumer making sheechs weve seen transcripts of, they werent happy with citizens united, werent happy with the power of the Tea Party Groups and wanted to stop it and carl levin as well, his staff. If the emails were destroyed, what about the counterparty emails to some of the very people in the senate that seem to have no outrage . We havent been able to get total cooperation in this matter. I have to say that chairman widen, the chairman of the finance committee has been very good at trying to get to the bottom of this. On the other hand, face it, this is a mess. Seems suspicious. When jp, month han a 6 billion error, boy, oh, boy, they all know, senator carl levin, they know how to do an investigation, extract the find, get to the bottom of it. Why is not immunity thus far offered to lois lerner . Makes no sense. Does anybody on the hill really want to know the answer, senator . Doggone right we want to know the answer and moist st of what do know is covered by 6103, so i cant really talk about it, but i was ready to put out our report, a bipartisan report with minority and majority views and then all of a sudden this happened and its apparent we cant finish that report right away and we have to get to the bottom of some of these things but some well never get to the bottom of because the computers were destroyed. First we learned of it 2013, lois lerner, a plant in the audience, admitting so much. To think its the president or your leader in the senate seems to be more loudly dissatisfied in extreme in his vocabulary with the Tea Party Groups than with the terrorists. Whats wrong with the senate . The senate is being poorly run at this time. Since last july, very few votes. Less than 12 votes, i believe, and on republican amendsments, democrats have had up until just this week, 7 votes. Since last july. In the greatest deliberative body in the world. They have just shut it down. Its awful. And ive got to say, theres no real desire on many in the media to really get into these stories about the irs, and yet its a very, very important area. Keep in mind touches everybodys life. Senator, were out of time but i want to so thank you for coming on and i like the letter that you sent to the commissioner, regarding some of these questions, memorialize it. Were going to invite you back when we get more information from the new commissioner. Thank you again, senator. Keep pouring it on, because youre doing whats right. Thank you, sir. You bet. Back to you. Thank you very much, rick. With the dow down 18, lets take a quick break. Squawk alley coming up on cnbc. Financial noise financial noise financial noise when folks think about wthey think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. 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