Transcripts For CNBC Squawk On The Street 20150421

Lets look at crude oil. Well give you the 10year note yield. There it is. Where are we . Wow. 1. 88 . Lets get to our road map. It starts with you heard meg terrell talking about it. Teva ups the ante proposing to buy mylan 82 a share cash and stock. Both shares on the rise. And a parade of dow stocks starting off with earnings this morning. Well cover it all. Ibm seals fall for 12 consecutive quarter. Is the road map now in difficulty . Want to start off with teva as i go back in my pad and look for notes i took some time ago on the possibility of this because it is complex. Lets give you the news itself. You heard it on squawk box. 82 a share in cash and stock. Making an offer to acquire mylan which would create a giant generics business. Both do a lot of their business here in the good old usa. For its part mylan made an unsolicited proposal to acquire perago, an irish company. All these companies being inverted for tax purposes. Thats working through irish takeover law. It is a proposal. We have yet to hear anything defensive. Weve been wondering whether teva might choose to try to acquire mylan. Theres been chatter for months if not years. The culture of the two companies thought to be very very different. Mylan came out on friday in an unusual move and said it had no Interest Income acquired by teva despite the absence of any bid from teva but because of speculation that it made its way into some reporting on the situation. As for what mylan can do here a lot. Its got something called a stick dip. It makes it unvulnerable to a takeover under the netherlands law. The fact is its an unvulnerable poison pill that will enable mylan to avoid being taken over should it choose not to. Teva is going to its shareholders. As they always say, its not hostile to shareholders. We are offering a nice premium. Will be those shareholders we hope will pressure mylan to sit down to the negotiating table. As importantly, it will prevent mylan from getting the necessary vote of its own shareholders were to proceed with its bid to acquire perrigo. Which is down as a result. Never went up based on mylans bid. Because people thought this was a possibility. Possibility, yes. The fact is why didnt teva move before mylan inverted when it required a shareholder vote . Why didnt teva move 8 billion ago before mylan did its inversion and deal with abbott and added a great deal to its own market cap as a result. Its a frenzy david. You know its a frenzy within the sector. All the bankers are looking again and genoa you can do next. I thought it was interesting the statement on friday said we looked at this, there is no cultural fit or sound industrial logic either. That may be in dispute in terms of industrial logic and synergy numbers teva would put out once its done its due diligence. Its an interesting dance and somewhat complex to wrap it up yet again. Teva makes the 82 share a bid for mylan. It cannot follow through unless mylan agrees to come to the negotiating table, hence pressure from its own shareholders is what teva is hoping. Those same shareholders mylan will rely on to approve its bid to acquire perrigo. That may be in question at this point. Who knows . Perhaps you end up with no deals at all. Didnt they bring up antitrust problems as potential block . They did. What is the Corporate Tax rate in israel . Lower. Teva is inverted. They are all benefitting from lower tax rates than we have here in the u. S. That is a key component of this. Its not as though they are competing to buy another company that has that tax rate they all want because, as we know those inversions have been curbed substantially by regulations. I was going to say how big a deal, what is the price . Purchase price is 40 billion . Almost 50. We talked about a number of farms deals this year. This has to be the biggest. This is amongst the largest of those deals. Talking about a Company Almost 500 million shares outstanding. Closer to 40 40 plus. Whatever it is 42. Something like that. Teva stock price is going up. 50 is in stock. Hence the value of it will go up overall, as well. Consolidations. Things moving quickly. A lot of complexity here that well be giving you a lot more. What is the next step . Is mylan going to respond now that there is an official offer on the table. Its unsolicited they dont have to say much of anything. Im sure they will. Typically you do a stop look and listen and you come out and Say Something like we are not interested. In this case we know because they came out friday. Very unusual to put a press release out. They clearly had a feeling something was coming. On to dupont which had earnings out and is in the midst, not of an m a situation but disputed proxy fight over four directors with trian. The Company Reported earnings a bit above expectations when it comes to earnings per share. Nothing of great excitement. Suffering as a result with the strong dollar. That impacted the numbers both in terms of this quarter and the Guidance Range has now come down to the lower end of what is 4 to 4. 20 that had been previously communicated. I did speak to ceo Ellen Coleman on the phone not long ago. She told me we dont see the head wind going away any time soon when it comes to the dollar. Currency. Its going to hit profit in 2015 by 80 cents a share. Dupont of all the Chemical Companies is the most internationally exposed. This is something they cant help. That is hurting a lot of dow members well talk about in a moment. The question is, what does it mean ahead of this big vote . The dollar isnt doing dupont favors, but the underlying numbers here according to Mark Connolly who covered the stock, they are pretty good. He said thank you to nelson peltz. The company was performing and push the cost. They continue to cut costs. Trian is hosting a luncheon today with a lot of dupont investors as it continues to make its case ahead of the may 13th annual meeting in which its directors will be up against those. Dupont, four seats they are seeking in this ongoing battle. Speaking to ellen kullman, she said agriculture and Performance Chemicals continue to be a drag for us. Which are being spun off. Right. She did say we all wish we had spun cam afrnchemours. She pointed to safety and protection and Performance Chemicals as proof points. Proof points of her turnaround. Simon, i asked her about geography. She said a surprising note was hitting europe where strong Public Sector demand particularly for safety and protection talking about things like kevlar actually help the business and was a bit of a surprise on the upside. In fairness to her they are still within the range despite the dollar which is not common at the moment. The earnings range given the cost cuts they are executing on. Nelson peltz would say thats insufficient. If peltz wasnt there, where would you be . And would the stock be further in negative territory . If you look over the last year its underperformed the s p. Down on the yeartodate so far. I think trian will say today earnings are still down 15 year over year. In bulk chemicals. Overall for this company. They are still down 15 . They will claim they brought guidance down for the fourth year in a row. Ellen kullman responds saying its the reason we give a range. We dont believe we have lowered our guidance. Im sure trian will say you did. Its the fourth year in a row. Whos winning . Thats a great question. I asked kullman her thoughts. She said we keep telling our story. She is encouraged by her interaction with investors. That is township cal of what you might hear from a ceo in that situation. I dont know is the answer. Its a tough battle for trian. The Company Stock price has performed fairly well over a period of time. So its hard. Youve got to prove you can point to strength in numbers in the move she is making. They are selling the Dupont Country Club and hotel. That said its hard to imagine these guys are not going to come away with at least one or two board seats. Lets move to where the markets are. Under armour ibm. The major indices within range of records after yesterdays strong run. You saw over 200 points added to the dow. The s p overall, the Broader Market within less than 1 of its record high. Stephen wood is chief Market Strategist with Russell Investments. John manley, equity strategist with wells fargo. Steve, how do you feel earnings season is shaking down . 30 of the s p reporting. I think its going to continue to be weak. The trend is downward. Between weather, dollar its something of a kitchen sink quarter. Companies will use that cover. As we get into third and Fourth Quarter, thats where the earnings traction will be. I think from the broader economy in the United States anyway a lot of the benefits of cheaper oil will ripple through savings and then consumption. From a Growth Perspective and earnings perspective, we think a backend loaded 2015. Do you think it will rise into christmas . We do. The russell 1,000 is up 3 plus yeartodate. We are looking at 6. 5ish for u. S. Equities for 2015. We upgraded last year europe. Average issue for the u. S. Makes sense. Its interesting you chose the russell 3,000 rather than the s p 500 which is a smaller Cross Section of the market more dominated by big multinationals exposed to the dollar and whats happening abroad. Yours is a more domestic buyers call, correct . Well being Russell Investments guy, i think the russell 3,000, russell 1,000 are better indicators of the broad market. We are looking at large cap and small cap. Small cap the russell 2,000 up over 5 yeartodate. That gives us a broader it looks at the dollar as being important. Its going to continue to be important. Thats not the totality of the market. It was worth pointing out. John would you agree . I like international. I think Europe Western Europe will get better. One of the side effects of a strong dollar is a weak euro. Put that with quantitative easing and germans less restrictive, it gets better. I agree second quarters are the bottom and the street gets funny when it discounts earnings. If we get a sense, however bad this is in the next few weeks, this is as bad as its going to get, then the market starts up. We are getting a lot of bottom line beats. Expectations have been lowered so far that these companies are coming out with better earnings per share. Revenue growth is more elusive. With these valuations dont you need toetter growth for sales . You need growth somewhere down the road. Youll get it. To me its always been a race. Do Interest Rates go up before earnings do . Because of the way the fed is and the fed wanted to make sure the economy is Getting Better earnings and revenues will go higher before rates do. Doesnt that become a trap . Nobody knows what is going to happen wnhe fed starts raising rates. Every day some people make calls about potentially being chaotic. Isnt that a trap if you chase equities onto the second half of the year because you think earnings and revenues will rise faster, only to be sucker punched by the fed, potentially . Disagree with me please. That would be bad. Equities have been waiting for me. They havent gone far. For a period of time stocks were down 12 versus the long treasuries. I dont think stocks are way ahead of themselves. Valuations are okay. I think the fed will behave rationally. I worked the chair of the Federal Reserve is at least as smart as i am. She sees all these things going on and will tread very very carefully. Hang on. That depends what she is looking at do. You think she is primarily focused protecting the stock market, treasury market or setting rates that are correct for this economy . I think she is looking at labor markets. Chairman yellen has become a labor economist. Operative point is globally diversified and multiasset strategy. This is a Global Quantitative easing. The europeans clearly want to reproduce to assess what the americans had. This is european japanese chinese are beginning to ease as well. This is a globalful to answer the question though. I think the fed loves the stock market the way a turkey farmer loves his turkeys. As long as we are align with everything its going to be fine. I dont see where we become disaligned in the future. The economy needs encourage here. Theyll move very slowly and raise rates whenever they feel they can do it without tightening policy. John manley from wells fargo, stephen wood from Russell Investments, thank you both. Bird flu outbreaks affecting business at hormel. Well fill you in. Future for Morgan Stanley following its better than expected results. David faber will have a live and exclusive interview with chairman and ceo james gorman. Taking a look at futures. Coming off the best day of stocks in april. Dow set to open 80 points. More squawk on the street. Lot of speculation out there would try and acquire mylan by making an unsolicited offer 82 a share cash and stock. An Israeli Company going after a company domiciled in the netherlands going after a Company Based in ireland. I did say they were all inverted. Teva is just israeli. Pay as lower tax rate. The other two did move from u. S. To other tax jurisdictions. They got the schtickdink. trader vo i search. I research. I dig. And dig some more. Because, for me, the challenge of the search. Is almost as exciting as the thrill of the find. announcer at scottrade, we share your passion for trading. Thats why we rebuilt scottrade elite from the ground up including a proprietary momentum indicator that makes researching sectors and Industries Even easier. Because at scottrade our passion is to power yours. About 7 1 2 minutes before the opening bell. Lets bring in art cashin director of floor operations with ubs. Still greasedece for you . Greece remains in the background. Things calmed down in china. I think its going to be a long drama. I suspect we will play it through the end of this week which is one standard but as i discussed yesterday with simon, the idea that if they default, its not an immediate event. That its a brief honeymoon of a couple of months which you might see a change in governments. That having been said greek bond yields are way back at a big high. Not since weve seen 29 back in 2012, i think. You point out the fact this stock market has been in such a tight range for such a long time. 75 trading days up 0. 7 . How long is it since we had a 2 move . 80 days. What does that mean . Is that a market thats struggling to go higher . Is it the calm before the storm . Are we consolidating to rally . What is going on here . Thats the 64,000 question. 64 million in today s dollar. The point being it does look like the market is somewhat indecisive. Thats exemplified by the fact you get a 20 point move followed by a 120 down move. There is a good deal of indecision out there. Currencies saras favorite thing, will remain a key factor here. Well watch and see how they play into that. Particularly with the greek drama in the background. Strong dollar again. You are starting to see how its rippling across corporate earnings. Interesting to see the follow through from yesterdays bullish momentum. You told us to watch 2100 on the s p. We closed right on the nose. The key thing you want to do is take out the highs from last week. That would be the area of 2112 to 2115. If they can rally through those and rally through them conclusively. We are probably getting out of the zigzag pattern we see. I thought we rallied through those conclusively last week. You rallied to them not through them. And we are just below nasdaq 5,000. Interesting to see Tech Leadership outperforming. There was such great hope for ibm. Rally going great hope for ibm . For the earnings. Really. It was the best performer yesterday for the dow. I did notice the stock was up yesterday. And rally going into the earnings. People believe even if she had difficulty, she could not afford to have truly negative results. You saw that. Revenues were down again. Their revenues have been down four years in a row. To be fair they have divested a number of businesses that make comparisons somewhat difficult. Its not a growth business. She is focused on growing the pie of the growth businesses to a much larger overall. She is the company is the poster child for financial engineering. Theyve been buying back shares. With lower revenues, they can still show higher perngs share. They did buy back a lot fewer shares this last quarter than previously. She is no longer stuck to the road map, so to speak, that her predecessor had and she stuck to for probably way too long. That does give them more flexibility. Great to see you. My pleasure. Art cashin from ubs. The opening bell is minutes away. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. Here at td ameritrade, they work hard. Wow, that was random. Random . No its all about understanding patterns like the mail guy at 3 12 every day or jerry, getting dumped every third tuesday. This happens every third tuesday. We have Pattern Recognition Technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. For all the confidence you need. Td ameritrade. You got this. You are watching cnbc squawk on the street. The opening bell will be ringing in about 30 seconds or so. I turn to you, sara and i think currencies. They figure prominently in earnings season whether its ibm or dupont continues to be a major theme. Four dow members reporting. The effects of the strong dollar. 30 of s p 500 companies are reporting. Light Economic Data heavy on earnings. Keep in mind we are coming off the best session for stocks during the month of april. We are 0. 8 away from the record high. There is the opening bell for this tuesday. Back at hq you can see we are poised for what appears to be a higher open on that broad index. Big board, Innovator Management celebrating the listing of the ibd 50 fund etf. Gull gulfport energy. M a has a place this morning in our markets. Shares of mylan up over 9 . Teva up as well after teva made an unsolicited bid to acquire mylan to create a generics powerhouse the world over. 82 a share. 50 50 cash and stock offer from teva. Mylan as a result of being incorporated in the netherlands has certain provisions that basically allow it to say no and succeed in saying no should it choose not to engage here. Thats the simplest way i can put it. It has to do with dutch takeover law. The presence of the stick dink which are tough to beat. Teva will be able to entertain shareholders of mylan with this strong offer. And get them to perhaps vote down any perrigo deal should that get to a vote. In the shares of mylan, youve got the likes of paulson and senator. Abbott cant vote. They cant force them to do a deal. Abbott is a large shareholder. They sold a unit to abbott and abbott took stock. Abbott doesnt have to vote in favor of a perrigo deal. Harleydavidson is the top loser at the moment of the open. There is a brutality price form within motorcycles. Harley is warning its sales growth isnt going to be 4 to 6 but more 2 to 4 . Sales under a huge amount of pressure here in the United States in particular. Harley down 8 . Under armour. I dont know if you want to pick up that theme there. Another company affected by the strength of the dollar. Even though this company has only 12 total sales coming internationally, its a huge source of strength. Under armour stock has gone up 60 the last 12 months. Its been a moon shot higher priced for High Expectations when it comes to earnings. Revenues did disappoint for under armour. We saw doubledigit Revenue Growth in a lot of segments like foot wear up 41 . Apparel its biggest category up 21 . Revenue of this company, 3. 8 billion. Its a tiny fraction of the size of nike. Everybody always looks at it in competition with the nikes, adidas. Well talk to a citigroup analyst later in the show who says it is a buy. Im reading reports that say yes, maybe a little bit disappointing here when it comes to the numbers. You are seeing that in the stock reaction. This is a Growth Company and continues to post top line growth. Kimberlyclark is strong at the open again. A company in kimberlyclarks zones having issue with the strong dollar. It managed to beat wall street expectations despite i read the fact content is growing for adult incontinence. Saying this is going to be a key market and they are focusing on this in terms of the challenge and growth potential. Whats happened this is the Fastest Growing market in Consumer Products adult incontinence. P g entered this market this year. That has given a little competition to kimberlyclark which was the leader. Weve seen a lot of aggressive marketing from procter and gamble. These results managed to beat expectations despite the stronger dollar. Investors are Rewarding Companies like that, dealing with a lot of International Pressures and challenging macroeconomic environments and putting up good numbers. Art cashin and i briefly discussed ibm. Its worth taking a look at shares after the Company Reported after the bell yesterday. As art referenced it was up yesterday but is up today. Ibm shares you see up not that much. Theyll take it over 1. They are trying to get their Investor Base to focus on growth initiatives, how they will help clients manage Data Security mobile. Total clad revenue was 7. 7 billion over the last 12 months. That is up more than 75 when adjusted and 60 as reported. Thats where they are trying to get people to focus. I did mention they did buy back fewer shares than typically the case 1. 2 billion in buybacks for the quarter. When you think of last year was 13. 7 billion. That run rate is a lot less. Doesnt mean they are going to come in less for the year. She brought up the xforce Threat Exchange where you see mobile hacks in realtime. Shes done an interview with the journal where she was emphasizing that. That could change the perception of what ibm is with other ceos particularly selling the bulk of the products. If you can show or demonstrate in realtime youre on it visually in a way other people cant. Security as we know is a huge issue for so many corporations. The revenue number was not particularly exciting. Would be nice to see her on the show. Shell be back. Verizon under pressure on the dow. Verizon out with results after that interesting announcement about what its doing in television. I did not have a chance to listen in on the call given all the other news and we started our show at 9 00. Subscriber growth was good. 4. 8 growth added 565,000 net retail post pay. They beat on the bottom line but a miss on the top line. There may be Something Else going on there. More people taking the subway than ever in history. Lets not focus on that. Lets talk about the unsolicited bid from teva to acquire mylan. Meg, you know the companies in terms of the product portfolio. Does it make sense to you and culturally theres been this question as to whether youve got a company from west virginia, so to speak, and one from israel. I heard when you get them in a room it doesnt go particularly well. That is the argument mylan made last week when it preamentively addressed the speculation teva was interested in acquiring it. Analysts say thats overblown. They think the two companies have more in common than they may have in cultural differences. Teva has run into cultural issues before. Their ceo, the last guy left after 18 mownths on the job. There are issues to think about. Folks seem to think this deal makes sense. Theyve been prodding teva to do a deal. You see shares up this morning. Mylan, as well. Perrigo that mylan made a bid for, some thought defensively in response to interest from teva. Only down a little bit this morning. Curious to know what people think about that those prospects now. An interesting thing for teva is not just that it would combine with mylan and make this gigantic Generics Company and a lot of synergies, about 2 billion in synergies, clearly people like those. Teva is dealing with generic competition to its own branded multiple sclerosis drug. Mylan is one of the companies that would potentially make a generic competitor to it. Folks thinking teva needs to beef up in response to losing revenue. Well see how this plays out. Mylan clearly not wanting to get awared given its statements last week. The fact teva is going hostile shows it needs to do this deal. Could be very difficult for it to get it done. Given the dutch takeover law and or things associated with it its virtually impossible for them to acquire mylan should it wish not to be acquired. Will the Shareholder Base put pressure on management to sit down and talk despite your reference them coming out before the bid was made. I dont know the answer to that. Well have to wait and see. The likes of paulson and senator in mylan shares are known to get active in that regard. Well have to see whether any of this consolidation takes place, whether it be teva buying mylan or whether none of it happens. If these two get together there are questions of the antitrust these two gigantic Generic Companies getting together. Analysts said they didnt think the divestitures would be as complicated as mylan was implying. Yet to see. As we like to say, early days, but very interesting. Thank you. Lets join bob pisani on the floor with more of whats moving. We are losing altitude here. We were up 70 points at the open. Tech and health care leading. Industrials. Materials and energy on the downside because oil is to the downside today. Big talk is on earnings and the dollar. I want to run through a few companies citing the dollar. Good example would be kimberlyclark. Sales were down 4 but Foreign Exchange rates, they said was 9 of the drop. Even more than the actual sales drop there. They saw forex cutting their profit for the full year 10 , 11 . They reaffirmed their full year guidance. Foreign exchange hurting them by 10 . Talking about harley earlier. Revenues were down year over year. They said largely it was because of the Foreign Exchange problems. Theyve got problems with other things. They are discounting motorcycles heavily. They lowered their full year shipment guidance. Thats why the stock is down so much. New low for them. The same dollar concerns are affecting the broader multiindustry companies that are now reporting. These Companies Sell internationally. A lot of different businesses. A good example is illinois tool works. They do Automotive Parts and food equipment, electronics. They are reducing full year guidance 15 cents to reflect all the Currency Exchange issues. Revenues were light. Dover makes refrigerator and food equipment. Their revenues were 4 lower because of the strong dollar. United technologies would have been seven cents higher if it had not been for the dollar. Regional banks are all reported by now margins loan growth and top line all below expectations. Regional finance was better than everybody else. We need to get better loan growth. We are not seeing it yet again. Back to you. Thank you very much. Lets head up to the nasdaq which yesterday as far as composite was concerned outperformed the rest of the market. Bertha, good morning. It has been outperforming. This is the 12th session this year we have seen the nass yack composite above 5,000. We keep getting higher lows. We havent taken out the high of last march. If we close above 5026 that will be technically strong. It seems to be struggling to get above that number. And take out the alltime high. Today we are getting strength when it comes to chitsps lam research. Upgrading its outlook. That has a lot of the chip equipment makers moving to the up side. Biotechs have been the strong performer. All this consolidation is moving things. Mylan after this bid from teva today is at an alltime high. Bernstein think gilead should make a move for vortex. Though have an ms drug coming out. Gilead with its hepatitisc drug. Bertha coombs. Lets head over to the bond pits. Good morning, sara. You hit on a very key component. Lets start with rates in the yield curve. I always like pairings. Our pairings are yesterday and today. We are popping through the upper end of yesterdays range. This is intraday and we are rangebound, Pay Attention. Further down the curve you go. Look at the 30year. Yes rates popped but they didnt pierce yesterdays top of the range. You are getting a little bit of the short end pushing their yields up a bit. Flattening the curve. Steepening has been the recent move. If you look toward europe and address what saras point was, lets start with the bund. They got with a six handle. They are trading up in yield, down in price just a little bit. Look at the shape of that chart. Look at the shape of the twoday dax. Twoday dollar index. They look similar, dont they . This relationship is on and off near term and historically. Lets swap it out and look at the twoday euro versus dollar. It is a bit weaker. You want to Pay Attention to whether or not it gets a close under 1. 05. All Things Considered as a light theme today. Whether you look at equities or treasuries in a big extent. We move around a lot, but end up in the same parking spot. Back to you. Thank you, rick. Rangebound. Coming up under armour shares falling. Well ask one analyst if the rally is over. David fabers exclusive interview with Morgan Stanley chairman and ceo james gorman. The eclass has 11 intelligent driverassist systems. It recognizes pedestrians and alerts you. Warns you about incoming crosstraffic. Cameras and radar detect dangers you dont. And it can even stop by itself. So in this crash test, one things missing a crash. The 2015 eclass. See your authorized dealer for exceptional offers through mercedesbenz Financial Services. under loud music this is the place. Eir beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. 40 of the streetlights in detroit, at one point, did not work. You had some blocks and you had major thoroughfares and corridors that were just totally pitch black. Those things had to change. We wanted to restore our lighting system in the city. You can have the greatest dreams in the world, but unless you can finance those dreams, it doesnt happen. At the time that the bankruptcy filing was done, the Public Lighting Authority had a hard time of finding a bank. Citi did not run away from the table like some other bankers did. Citi had the strength to help us go to the credit markets and raise the money. Its a brighter day in detroit. People can see better when theyre out doing their tasks, young people are moving back in town the kids are feeling safer while they walk to school. And folks are making investments and the community is moving forward. 40 of the lights were out, but theyre not out for long. Theyre coming back. Under armour shares under heavy speculation after guidance under. Not typical to see under armour at the bottom of the s p list in terms of losers. Did anything fundamentally change for you today . No. Nothing changed at all for us. When the stock trades at this type of valuation, it does take a lot in terms of beating expectations to move the stock. Fundamentally, the brand is still strong. You are seeing great growth in the top line of the business. You are seeing double digit. Kevin plank the ceo talks about the fact theyve been doing this for a number of quarters. Apparel revenue, which is key, up 21 . Foot wear up 21 . What was the disappointing part . I guess if you had to poke holes in it apparel did decelerate from the Fourth Quarter so even though it was up 21 from a sequential basis, that was up 30 last quarter. Only up 20 this quarter. It implies deceleration. They did get impacted by the west coast port strikes and some weather, which probably took a couple of Percentage Points out of the top line. Kate on the Conference Call just now, ken plank the ceo announced that the head of sap america will spearhead their collaboration for connected fitness category. Obviously with reference to the apple watch and everything going on there. A lot of people who have seen kevin plank speak will regard him as a huge asset and innovator. I see in your notes one of the risks you see for the company is he has voting control. When you see him make a move into tech like that, does that concern you its a liability with acquisitions more than perhaps a positive . No. We think its positive. If you look at see what everything nike has been able to do over the last couple of years with their app and their connected fitness, theyve been working on this for years. The acquisitions underto me in order t be compete we think are absolutelyhe right move. What about jordan speatith . Do they have a golf business enough to translate into higher sales . They havent broken out the percentage of golf with sales, but theyve been a huge win for them this year. It elevates the overall brand. Its good for golf business and overall apparel and foot business just to get that exposure from his win at the masters. Thanks for joining us at under armour today. Under heavy selling pressure. Up next hormel and the fallout from bird flu in iowa. Lego meets the robots. Find out why when we talk to bill nye, the science guy. Later on the program, bill nye the science guy will be on squawk on the street. I mispronounced it earlier. Very famous bill nye. And you got it wrong, simon. He has a new project on job growth. Hormel says bird flu outbreak will hurt sales. Take a look at shares of hormel foods down almost 2 today. Thats because the food giant says its turkey sales will take a hit this year down almost 3 due to bird flu and the, quote, significant challenges resulting in its supply chain. 2015 earnings will come in at the lower end of guidance. This announcement comes as the outbreak of avian flu continues to escalate rapidly. Monday the usda confirmed another case at a farm for capacity of 5. 3 million laying hens in iowa. That brings the estimated total number of compromised chicken and turkeys to more than 7 million, closer to 8 million, with cases reported in 12 states including minnesota, arkansas missouri dakotas and wisconsin where Governor Scott walker declared a state of thes emergency to deal with the outbreak there. There have been no human cases detected in the u. S. The usda says there is little risk to human health. As hormel shows there is risk to the poultry industry. So far weve seen china, canada mexico and the eu all ban poultry imports from certain u. S. States and investors have steered clear of the poultry Company Stocks, tyson food Sanderson Farms and pilgrims pride all in the red so far. Also this came up in the fed beige book. Coming up david fabers interview with james gorman. I love making sunday dinners. But when my back hurt, cooking all day. Forget about it. Tylenol was ok, but it was 6 pills a day. But aleve is just 2 pills all day. And now, im back aleve. Theres nothing more romantic than a spontaneous moment. So why pause to take a pill . And why stop what youre doing to find a bathroom . With cialis for daily use, you dont have to plan around either. Its the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. Why pause the moment . Ask your doctor about cialis for daily use. For a free 30tablet trial go to cialis. Com i care deeply about the gulf. I grew up in louisiana. I went to school here. Ive been with bp ever since. Today, i lead a team that sets our Global Safety standards. After the spill we made two commitments. To help the gulf recover and become a safer company. Weve worked hard to honor both. Bp has spent nearly 28 billion dollars so far to help the gulf economy and environment. And five years of Research Shows that the gulf is coming back faster than predicted. Weve toughened Safety Standards too. Including enhanced training. And 24 7 on shore monitoring of our wells drilling in the gulf. And everyone has the power to stop a job at any time if they consider it unsafe. What happened here five years ago changed us. Im proud of the progress weve made both in the gulf and inside bp. Good morning and welcome back to squawk on the street. Im simon hobbs with sara eisen live from post 9 00 here at the new york stock exchange. Carl quintanilla is on assignment and david faber is on the subway on his way to the New York Historical society where he will have an exclusive interview with Morgan Stanley ceo james gorman. Yesterday they came through with results. Today he is live at the fifth annual lgbt out on the street conference they are sponsoring. Thats coming up in about a half hour. You dont want to miss it. Lets look at the markets. Relatively flat over. Yesterday we were able to bounce from fridays losses. Lets get to the road map. Ibm earnings beating the street. Currency woes beating company sales. What to do with that stock today. Blackrocks chief Investment Officer rick rieder joins us. Bill nye teaming up with kids from sylvan to get them into coding and robotics. The dow just slipped into negative territory after yesterdays strong rally. A heavy load of earnings and International Headlines to focus on this morning. Lets get to david rosenberg, chief economist and Market Strategist. Are you greening anything from the earnings reports . Its telling you if p there are problems that it relates to what the u. S. Dollar is doing to the large cap companies. The u. S. Economy, First Quarter we know was soft for a bunch of transitory reasons as was the case last year. Earnings right now, really when you look at the domestic sectors of the economy you strip out the impact of oil, earnings arent that bad at all. How should investors be thinking about the impact of the strong dollar. They can post underlying strength in spite of the head winds . We havent seen the full impact of what the currency has done. It was up 20 trade weighted in a short period of time. The impact of the dollar on earnings is a lagged impact. This will continue the next few quarters. The u. S. Dollar is note going to be a hockey stick going straight up. This is more temporary than permanent. Earnings season is not reflecting some fundamental weakness in the economy. If earnings were reflecting some recessionary pressures, i would concerned. It is temporary. I think it is masking some of the more positive elements happening beneath the surface on the domestic side. Home builders. Housing will be surprising to the high side. The banks are making loans. Many of the comments you made there, the constructive comments you made are note reflective in the price action. The market is in a tight range going back to eight trading days or whatever. When do you think the market will respond to this sort of investment opinions that you are giving there, the analysis you are giving . Im surprised to hear you say that. Let me take financials. And health care which is largely domestic. Youve got Consumer Discretionary which is almost entirely domestic. They are the two best performing sectors of the s p yeartodate. Small cap stocks havent done great but theyve done okay. Small cap stocks are far outperforming what the large caps are doing because the small caps, everything they do well is in their own backyard. Purely domestic. I think the price action is validating the view that you want to plate domestic demand scene more than export scene. Avoid the hits from the dollar. That means playing the parts of the market that are truly domestic in nature. What piqued my interest you mentioned financials in particular which year ta date are down 2 on a market that is flat. Right, but okay thats neither a domestic or necessarily an international play. I think the financials lagged. The point im making is recently if you are going to look at the weekly data from the fed, you find Something Interesting which is that commercial banks are starting to shed their cash reserves starting to run off their mountain of u. S. Treasuries which theyve been buying largely for regulatory capital purposes. They are starting to make loans. That is not going to show up in the Current Quarter in terms of earnings, but could show up in future quarters. Look at total bankwide lending. Its running 11 . I dont think these numbers yet are in the market. Sticking to your bullish views there. David rosenberg on the markets and economies. Always good to join us. Thank you. Coming into ibms earnings the shares rallied but are having difficulty making gains today. Brian white in cantor fitzgerald. You like what you saw. Yes. I think it was a very good quarter. Why would you say that . If you look at eps they gave up side in the quarter. Margins expanded year over year. In Constant Currency sales were flat. If you backed out the fx impact relative to january when they reported last, sales showed a little upside versus the street. Obviously, the ceo is attempting to turn the company around. She is trying to invest in growth areas. As far as larger core business Atlantic Equities believes if you look at the figures, its worsened, consistent with their expectation of a protracted turnaround and in fact potentially Free Cash Flow under pressure. I think nothing has changed in terms of Free Cash Flow guidance for the year. I think thats unchanged. When you look at a Company Going through major transition from the cloud, transitioning from traditional areas to cloud areas. It was very strong. I saw Free Cash Flow for the First Quarter was 1. 1 billion which is approximately 34 below consensus. They only guide for the year. Disappointing on q1 but you assume youll make it up back on the year. Fair enough. Is it too early to say this company is turning around . We had a couple of decent quarters. The stock rallied last night. We had three years of underperformance versus the s p. We underperformed the s p by 77 since the end of 2011. In the last two years its been the worse performer in the dow. Is sentiment so low it can only go higher from here . Thats my view. You look at street ratings, its around the lowest in 20 years. You have a sale cycle, profit cycle bottoming. A couple constructive quarters. Its a transition year. If you are making the bet on ibm, you think they are going to get through the transition. If you think there is more downside you feel the cloud will blow them over. There are a couple of products theyve come out with. Watson health is one where they create this huge cloud everybody will tap into for health data. The other one i find fascinating xforce Threat Exchange which he green lighted. You can see hacking attacks around the world for the first time in realtime. She tells the journal fellow ceos will see the values i do and want on this platform. I wonder if that becomes a talisman within that Services Sector or a distraction . All these areas, under the hood its such a big company. They are investing a lot of money and have great technology. Security is a major focus for ibm as is mobile cloud and social. You hit on a great point. You look at Big Tech Companies struggling as we transition to the cloud. There is nothing under the hood in my view. Ibm, there is a lot under the hood. Patents are the number one award of patents in the u. S. For over 20 years now. Aggressive sending their lawyers out to monetize those patents much to the irritation to others in the field. I was wondering how you can be convinced as an investor in a fastmoving world of technology a company that has more than 300,000 employees can turn itself around and can make progress fast enough to keep up with where the trends are going in a very competitive cloud space and mobile space. Its a great point. I think a lot of these smaller cloud companies, Big Data Companies have had an advantage. They dont have a lot of customers. They dont have a lot of partners. Big Companies Take longer. Its not just ibm. The difference is Great Companies pivot. Great Companies Make the change. Ibm is over 100 years old. In my view it is a great company. Many big Companies Like kodak died. Ibm made it through the transitions. Are you sure . Its still around right . Jenny rometty is the one to do it . Yes. This is a transition year and she has to show she can stabilize the business. Not too long ago ibm had an alltime high. Arguably on international engineering. Divestiture. Margins have expanded significantly over time. So much we could talk about. We have to leave it there. Brian white from cantor fitzgerald. Up next, blackrocks chief Investment Officer rick rieder about where the fed is going. Later, david fabers live exclusive interview with ceo of Morgan Stanley james gorman. Dont miss that. If youre looking for a car that drives you. And takes the wheel right from your very hands. This isnt that car. The first and only car with direct adaptive steering. The 328 horsepower q50 from infiniti. You can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. Massive speculation over when the fed will start to raise Interest Rates. Bill dudley one fed official bracing for rate hikes this year. What should investors make of the analysis they are getting . Joining us Rick Rieder Blackrock chief fundamental officer. The fund recently won an award at the u. S. Investor managers awards. Congratulations. Thank you, sir. What are you telling clients . I think the fed, its time to start moving. We think they will move clearly this year. They discussed many times this year is the time for liftoff. Base case now is probably september. I dont think june is off the table as most people suggested. They are going to be very deliberate in terms of how they do it. Does may 6th become the big flag in the calendar now when next we get an employment report . Is that key . Youve got two payroll numbers coming up that are going to be significant. Two parts to that. Are you going to reverse this march number . If you get another number that confirms march was an aberration, because you had literally 12 to 15 months of strong numbers, thats going to be important. The focus on this average Hourly Earnings number is significant because wages are starting to pick up. When they do raise rates what will the reaction be in the treasury market. I make no apology for repeating this again. The imf said last year warned potentially of 100 basis point move on the 10 year in response to that. Joe lavorgna thinks that might be an understatement of what could happen. Bets for zero Interest Rates are the highest theyve ever been. People talk about what happens historically when the fed moves. You are talking about a funds rate at zero. The fed sitting on 4. 2 trillion assets on their Balance Sheet. You take that with draghi buying 60 billion a month out of the marketplace. When the fed starts moving, its not going to have that Significant Impact on the back end. Will rates drift higher . Sure. You can get the tenyear back 30, 40 basis points no doubt. Isnt it a watershed moment for direction . Does it change a lot of peoples assumptions or not . I think they should be ready to go. I think the data is clearly representative of a fed that can start moving. You have to think about the starting point you are at. This is going to be a different fed. There are three parts who i the fed moves. One is the time they move the other is pace and destination. Pace and destination are more important. They chronicled they are going to are deliberate. First quarter has been soft. There is a tremendous seasonal to the First Quarter. Thats been in place a number of years now. However, you take the payroll dynamics. Numbers i dont think people put enough credence into. Growing average 60,000 for the last 12 months for the last 15 years average has been 50,000 60,000 a month we created. This is good payroll growth and you are starting to get wage pressure. You are seeing average Hourly Earnings pick up. I do want to get you on the spot here for ten year note yield call. 1. 90. Have we seen the bottom . No. I dont think weve seen the bottom. Theres not enough Financial Assets in the world. People talk about when rates can move. I dont think people recognize there is this dearth of income in the world today. I think is there a good chance you can get softer data or get news out of greece that can push you lower than where we are today. Youll be in a range with a Natural Inclination where rates drift higher. You believe treasuries could rally where they are now and yields go lower . Absolutely. Despite the fact the fed could move in june . Absolutely. Put that into context. There is a series of things around the world. Volatility picked up. I argue greece dynamic is not out of theed woods. I think rates will drift higher. In a world of not enough fixed income assets when the population aging requires more that is a hard line to say this is the bottom. What happens to stocks when Interest Rates go higher. You are pointing to a world where the tenyear note yield could go lower. Therefore, equities will be payer higher dividends and income. I think what people underestimate is we are at such historic low yields. Particularly where we are in europe and japan. To create an arbitrage where you can issue and finance yourself and benefit to low rates and what draghi is doing will accrue to the equity side. We think more attractive in europe and japan. We think equities will continue to drift higher led by the international markets. Rick rieder blackrocks chief Investment Officer. When we come back, bill nye the science guy. E financial noise financial noise financial noise financial noise the dow is lagging and nasdaq leading. S p 500 flat 2003 points. Lets get over to chicago. Rick santelli has the santelli exchange. Good morning, sara. I would like to welcome my guest dr. John rutledge. Thanks for taking the time this morning. Great to be here rick. First topic, federal open Market Operations or permanent open Market Operations. We heard of all of those. You have a unique name for fomo. Federal open mouth operations. Its because these days members of the fed go out, they wake up in the morning, practice their speech in the mirror and give a speech and wait for its impact on the markets. Its a terrible terrible thing for a central bank to try and manipulate the market with its words instead of deeds. Close their mouth and go back to work. I couldnt agree more. There are always two sides. The two sides ive noticed the last week or so are strange. You have Central Banks doing what you said. You have cps central planners as in china. Lately, many experts come on our channel and try to differentiate that china cant possibly know how to operate all these lovers but they are all doing the same thing, are they not . The Chinese Central Bank does not have the advantage of a deep bond market. China spent a ton of money during the big recession. Thats going away now. Last weekend they moved down the required reserved followed by bad news the previous friday, of course. I like your notion how you and your letter explained what you see the reserve ratio requirement change ess ass dressing capital inflows and outflows. They view the reserve requirement as their tool for offsetting capital flows. When hot money flowed into china during the quantitative easing days, they raised reserve requirements so money got trapped in the banks and could not turn into credit growth. Now its very clear. Capital flowing out of china anticipating our rising rachlts the central bank has lower requirements to free up reserved to let capital flow out without shrinking domestic credit. That is what they are doing. You see it in the declining r b. You can see it in their small export numbers, all point to capital outflows. In the last 15 seconds, sir, we all know if you are looking at the Global Economy its entirety to grow from 10 potentially under 7 no matter how good other countries think that is a loss of global growth. It is a lower percent gdp. Their economy is much bigger. Explain what you think the growth will look like in china the next 12 months. Chinas growth is larger in dollars than the growth of u. S. Europe and japan all added together. Its going to still be there. Weak spot on growth at the moment is the u. S. With our lousy First Quarter and europe which eventually should come back to growth. I like the european markets and japanese markets, but not the currencies right now. John thank you. Simon hobbs, its all yurs. Its all david fabers next. He will sit down with the ceo of Morgan Stanley for an exclusive interview after the banks better than expected quarterly results. The Technology Changes the design evolves the engineering advances. But the passion to drive a mercedesbenz is something that is common. To every generation of enthusiast. The 2015 dream machines, from mercedesbenz. Todays icons. Tomorrows legends. Visit the dream machine event today for up to 3,500 towards purchase. Good morning, im sue herera. Here is your cnbc update at this hour. Senate reached an agreement to pass the antihuman trafficking bill which has been held up since february. This will pave the way for a vote on Loretta Lynchs nomination for attorney general. Republicans had been holding up the lynch vote until action on the antitrafficking measure was taken. Blue Bell Creameries is pulling all its products from store shelves after two samples of Chocolate Chip Cookie dough tested positive for lysteria bacteria. They distribute their products in 23 states and internationally. An Egyptian Court reached a sentence for Mohamed Morsi to 20 years in prison. He was convicted of killing protesters in 2012. Its the first verdict to be issued against the countrys first freely elected leader. Britains Queen Elizabeth ii is celebrating her 89th birthday. She is the worlds oldest reigning monarch. She reigned on the throne 62 years. Queen victoria was the longest reigning monarch. We wish her a very happy birthday. Back to squawk. The dow is losing ground here down 42. Nasdaq holding up thanks in part to health care. Lets send it over to morgan brennan. Check out shares of shake shack. Those are trading lower today. Stephen nicholas downgraded the stock from buy to hold with a price pargt of 55. That call based on valuation. The restaurant announcing it will open its first california location in l. A. Next year. Nonetheless shares of shake shack down 3 . Back to you. Teva and mylan on the move after finally we got that proposed bid from the Israeli Company. Meg terrell has more on that. We are looking at a bid of 82 a share, teva for mylan. This was anticipated for a while. Mylan coming out with a bid for perrigo earlier this month. Some thought as a defensy move to interest from teva. Folks seem to be looking at this positively. Teva up almost 3 today. Perrigo becomes the questionable party here. It has not responded to mylans interest yet. Just getting analyst reactions today. They are saying the antitrust concerns mylan brought up as a preemptive response to tevas interest may be overblown. Those can potentially be managed through divestitures. Mylan brought up cultural issues that potentially would have with teva. Said it considered this bid for a while but sees those as insurpassable. Saying those can be traversed as well. The problem is that teva is going hostile here. Very questionable path forward for whether it will see success. Back to you. Well wait to see if it responds. Thanks, meg terrell. Morgan stanley shares higher. Yesterday the Company Reported a 60 rise in quarterly profit thanks to higher revenue from trading bonds and equities. This as the company continued to shift its focus to Wealth Management. Here to break down all the details, david fab wereer with Morgan Stanleys chairman and ceo. Thanks. We are at the New York Historical society on 7 th street. James gorman our guest. Why are we here . Why is Morgan Stanley involved with this event . We are the host its out on the street an organization for employees of Financial Services companies who are part of the diverse community, gay lesbian bisexual transgender community. Its our opportunity to host it. Frankly, its a terrific thing to do. Its a little sad we still talking about this in 2015 but this provides a Network Opportunity for these folks. Frankly as leaders, we can learn how to do better with our employees. Were you surprised by the way on this general subject by the outcry from largely Technology Ceos having to do with that law in indiana . It did represent seemingly an interesting point where we heard a lot from corporate america. I dont necessarily remember hearing from you, james. Youve got to take these laws into context. It looks like its being addressed properly. I wasnt surprised. This is 2015. We should be an Inclusive Society for all communities. I thought the outrage at the time was appropriate. Morgan stanley a day after you reported earnings that were quite good by most of the metrics which you are judged. Particularly return on equity. I have to say i think i was on tv saying i dont know theyll ever get above 10 , but you did. You are in good company. I am. Is it sustainable becomes the key question. Is it . We said we would get to 10 and beyond that. That seems a minimum ticket of entry in this business is to meet and exceed your cost to capital. We did at this quarter. Whether we did it every single quarter, im not concerned about. Im concerned about the trajectory. This firm has come three years ago 2 roe, 4 last year 7 . If we are in around 10 this year, that would be terrific. Its sustainable because our Business Model supports that kind of return. I do hear margins were stronger and are as a result because of a comprehension plan in Wealth Management. Im curious about that. To the extent there is being more retained by the firm over time and perhaps those employees may get restive and say his comp went up why isnt mine . Do you run the risk of losing some of your key producers in Wealth Management . I dont think so. The om change were modest referral. I dont think that is a major issue. You are not concerned . Not at all. Is the comp ratio something you are focused on . Things seem to be getting more robust. Do you run the risk there of losing employees . You have to look at it on a fouryear basis. Two major competitors were well below that. We committed to the marketplace. You would see compensation ratios at 40 . Stock price didnt do much of anything yesterday. Were you surprised . Markets arent always rational. Is that what it was . None of the financials traded well. Stocks traded modestly up or modestly down. There was a runup coming into this cycle. The world is still trying to understand how much the regulatory changes change the longterm outlook for the industry. It is a curious question. Most of the results we saw were quite strong. We didnt see that in the marketplace. Is there an unwillingness to pay up . It goes back to your opening question and the word sustainable. First question is terrific but Company Based on mpv future cash flows, not the past. What are the next several quarters and years like . Secondly its valuation. These stocks trading well below book value. This was an industry where the stock traded 2. 5 half you sold and what you bought. Nobody is trading at that lowell yet. Are you telling me we are going to get back to 2 1 2. Well get back to better values. Theres been a lot of volatility. Concerns around greece for example, and the whole Federal Reserve posture on rates. When youve got uncertainty and you have a big blowout in earnings, the question is always going to be how sustainable. Right. I thought yesterday on the call you addressed potential up side opportunity when you talked about how much the e increased and what the opportunities are for the return on that given a lot of things that havent taken place including a rise in rates. We feel terrific. There is one thing how shareholders bought or sold yesterday. Another thing how we feel as an instant substitution. We like our strategy. We clearly believe there is more up side. Thats what we laid out in our sixpoint plan beginning of this year. Thes coming together. We had a nice capital plan approved by the Federal Reserve. Increased our dividend 50 . Increased our buyback. These are all positives. The firms got momentum. Medium long term im very confident. What the market did this week or the next couple of days were up this morning. Do you think investors are waiting to award that to you for the more predictable earnings of Wealth Management being an important part of your business . No question. If you have a large annuityized business they should trade at high multiples. Historically they do. Stand alone companies with those businesses do. They trade at 15 17 times. No question we will over time get a higher multiple. It does seem yesterday in part the results were buoyed by the strength of the old businesses. Equities was very strong. Fixed income currency and commodities was what we think. I dont mean old Morgan Stanley but the Morgan Stanley weve grown up with that perform well. If you look at our trading vie it was flat First Quarter. It wasnt driving up risk. Secondly, these are key client businesses. Our equities and fixed income businesses, Interest Rates, Foreign Exchange credit businesses prime brokerage, cash equities these are key client businesses we are very proud of and want to do well with them. They are being part of the whole Morgan Stanley story. What we have here operating which i described before i think as an aircraft carrier. Wealth and Asset Management gives us the ballast. We saw strong and terrific ballast but real activity in the engine room. Markets were more volatile and more volume. As global economies recover, you get more speed in that engine room. We like the way these two things are working together. You gave an indication yesterday you think you are largely behind the regulatory morass. There will be oneoffs but do you believe effectively that changed in terms of the environment . We are no longer going to hear about huge penalties coming to Morgan Stanley or other competitors we might not have thought you were doing . Sure. Separate regulatory an enforcement. The regulatory architecture is largely in place. The proposals that came out several months ago were one of the last legs. The Federal Reserve is working on a buffer on top of the buffers. That is still going to happen. Resolution plans need to be approved. Once youve got those two things in place i dont know what percent we are at but weve got to be 90 down on regulatory change. An Enforcement Actions are different. Obviously, they have been a continuing number of settlements, including ours, relating to the mortgage securitization meltdown. We are at the tail end of our an Enforcement Actions as we understand them. The industry will go through other actions from Foreign Exchange libor and the like. We havent settle with new york state. Those discussions are ongoing. I expect that will be resolved. What about the oil business . Talking about a separate area but something reported on. Is it for sale . Are you close to potentially concluding a sale . Weve been down this road a couple of times. We had bad luck in we had an agreement to sell it and that ran into problems relating to the sanctions and so on. Lets just say we are fully focused on this. Fully focused. I believe we will get this deal done. Finally your economist take on the world. Interest rates. You expect them to go up this year or the fed to move. Do you believe that to be the case . I do. Listen if you take an economy growing 2 3 banks capitalized, corporate Balance Sheet strong consumers balance streets strong 401 k s have gone up three years in a row, Housing Price recovered, the answer to Interest Rates would not be zero. There is no answer which gives you zero. The simple question is when does the fed feel comfortable. Making that first move of 25 basis points . I believe it will come this year. September . Could be september. Could be early. Could be later. James gorman appreciate your time. Thanks. James gorman chairman and ceo of morgan standly. Back to you. Thank you david. Coming up when hosting company go daddy looking to clean up its image. Well talk to ceo three weeks after its big ipo. Your moms got your back. Your friends have your back. Your dogs definitely got your back. But whos got your back when you need legal help . We do. Were legalzoom, and over the last 10 years, weve helped millions of people protect their families and run their businesses. We have the right people onhand to answer your questions backed by a trusted network of attorneys. So visit us today for legal help you can count on. Legalzoom. Legal help is here. Today, the fast food stock that could be a tasty pick ahead of earnings. Plus we go globe trotting to find the worlds most attractive stock market right now. Catch it on tradingnation. Cnbc. Com. Le announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. Welcome back to squawk on the street. Im kate kelly coming to you from the conference in houston where many of the biggest players came to talk about policies and issues. I came out of discussion with the chief executive of exxon. One of the thought leaders during this market down turn. He said he thinks we are going to be in a period of lower for longer prices. He thinks people need to settle into this different price environment, and its going to last, in his words, a couple of years. That is what exxon is preparing for. He talked about how they are doing that but also focused on changes in policy he thinks are going to be essential. Two key ones lifting restrictions on lng exports, thats liquefied natural gas which there is a huge demand for, and lift on the ban on crude oil exports. A big them we heard yesterday from law makers. Finally, he was asked about the sanctions in russia. He said that the projects he was undertaking at exxon in partnership with have come to a standstill in light of sanctions that would prevent them from proceeding, theyre waiting to see if theres any changes to the sanctions so they can resume their activities when the coast is clear. Back to you. Interesting, kate kelly in houston. Thank you very much. The dow down now 58 points. Take a look at the health care sector. One of the few sector in positive territory as the m a frenzy. Morgan brennan has more back at hq, hi. Tevas proposal to buy milen is lifting health care stocks. Leading all s p sectors. Shares of vertex and gilead. Suggesting that gilead could buy vertex mylan up 8 . The coming up bill nye the science guy has a new venture, teaming up with Sylvan Learning to get kids into robotics and hes live here at post 9 to explain. The promise of the cloud is that every organization has unlimited access to information, no matter where they are. The microsoft cloud gives our team the power to instantly deliver critical information to people, whenever they need it. Here at accuweather we get up to 10 billion Data Requests every day. The cloud allows us to scale up so we can handle that volume. We can help keep people safe and to us that feels really good. Why do we do it . Why do we spend every waking moment, thinking about people . Why are we so committed to keeping you connected . Why combine performance with a conscience . Why innovate for a future without accidents . Why do any of it . Why do all of it . Because if it matters to you its everything to us. The xc60 crossover. From volvo. Lease the well equiped volvo xc60 today. Visit your local volvo showroom for details. Something that got my attention and a lot of chatter on the markets, bill gross tweeting out of january uss capital. The short of a lifetime better than the pound he said in 1993 the only question is timing. Because of course the ecb is involved in qe referring to one of the greatestknown shorts of all time. George soros on the british pound. If the European Central bank has to buy 60 billion euros of qe every month and 18 of it has to be in german bunds, because those are the rules and increasingly german bunds are falling not just negative, but below the level at which the ecb can buy them. The ecb is chasing a smaller and smaller number of bund which is is why theyre rocketing. Its meaningless in a practical sense. Its meaningless to say theyre the short of a generation when the ecb, youve got to believe what the Central Banks say when they tell you what theyre going to do and they commit it in the way they have. 18 of 60 billion is going to go on until september of 2016. They say. Why would you short in the face of that . Why would you fight the ecb . Its meaningless. I dont know necessarily if hes saying it now. But with german bund yeemds at zero and about to go into negative territory. Hes talking about the overvaluation and the fact that its set to snap back in a crazy way when and if the ecb stops. Lets send it over to kayla tauschi. Always happy to be the foil to your arguments. We have a big hour coming up on squawk alley, ibm shares under pressure. Is there a transformation under way . How long will it take . Corporate expert kevin oleary is here to weigh in. An unlikely sponsor for women in tech. The ceo of go daddy, blake irving will join us. And one of the highlights im looking forward to weird al yankovich will talk about the state of the Media Industry hes the guest editor of mad magazine. Joining us on post 9, you wont want to miss it. Object squawk alley. It took tennis legend serena williams, fencing champion Tim Morehouse and the rockettes years to master their craft. But only moments to master paying bills at chase. Com. Depositing checks at the atm and transferring funds on the mobile app. Technology designed for you. So you can easily master the way you bank. E financial noise financial noise financial noise financial noise you can call me shallow. But, i have a wandering eye. I mean, come on. National gives me the control to choose any car in the aisle i want. I could choose you. Or i could choose her if i like her more. And i do. Oh, the silent treatment. Real mature. So you wanna get out of here . Go national. Go like a pro. [ male announcer ] we know theyre out there. You cant always see them. But its our job to find them. The answers. The solutions. The innovations. All waiting to help us build Something Better. Something more amazing. A safer, cleaner brighter future. At boeing, thats what building Something Better is all about. Tnchs has been an earnings circus this morning. Want to show you a few big movers as we look at the dow down nearly 50 points at this hour. Its been a mixed bag, a lot of pressure on earnings because of the strong dollar. Some movers down to the down side. Under armor down 4. 5 . Dupont middle of the proxy battle. Warning about the strong dollar. Verizon, ibm. Since we came into this thing saying it was going to be the worst earnings for six years, the market has held in remarkably well. Good point, analysts were looking for a 4. 5 decline in earnings, the question is are those expectations low enough that companies can continue to beat . Were going to get more earnings after the bell today. Yum brands chipotle. Cocacola out tomorrow. But for now lets send it over to kayla tauschi. Its 11 00 a. M. Here on wall street and squawk alley is live. Good tuesday morning, im kayla tauschi here at post 9, Carl Quintanilla is out. Joining us our own kelly evans decided not to sleep in until noon and join us a little early. One day i thought i could wake up