Transcripts For CNBC Squawk On The Street 20160425

Economies theyre watching closely. Well get you the latest from the crown prince and go live to saudi arabia. Perrigo ceo joe papa is out, hes heading to valeant. And surprising sales number from the apple watch on its first birthday. Well break those down and get a preview of apples earnings tomorrow. The three major indices in the green for the month the dow leading the pack up. Saudi arabias cabinet approved a plan laying out economic reform priorities for the next decade and a half aiming to reduce the countrys reliance on oil, a partial ipo of the stateowned oil company is part of that plan. The saudi deputy crown prince expects to be valued at more than 2 trillion. And then they argue by 2020, guys, country will not be as dependent on oil as it is today. I question the whole notion of dependence. Because if you go over the slumberje quarter, talks about how theyre really the only country that has swing capacity. No other country in the world has the ability to put out another 2 Million Barrels. So they may be dependent, but, boy, thats the kind of dependence i want. You know . Wow. I wish we were all so dependent. I cant wait to read that s4. The 2 trillion . Yeah. Id be curious to see how much theyre going to divulge. Might be the shortest s4 you ever see. Could be. Were saudi arabia. Here. Yeah, i dont think youre going to get how about governance . Whats the governance over there . Oh, its going to be really strong. Youve never seen governance like that. Shareholder representation, is that what youre saying . I think there may be yeah, could be like the younger state. I read this deal i think fees, fees, fees. And you know what, the heck with disclosure. Theres fees on the line. This could make everybodys quarter. So lets just join in, have no disclosure and make the quarter. Thats what you think the bankers are saying or is that too cynical . No, thats exactly what will happen. None of the bankers are going to care about disclosure. No. I mean, youll do what you have to do to meet the various filing requirements, im sure. Right. But youll have every single Investment Bank in town running after that thing like youve never seen them run. Theyll have a board, annual meetings, things like that. Yes. The crown prince on television over there and says the entire offer is about 5 , i think, of the holding company. And of course a series of subsidiaries below that. They can offer dividend. I mean, honestly, go back over their quarter you cannot believe versus what they say, i know they need to buy a lot more military, stuff, typically hardware from us. They have a bloated deficit because of the amazing social programs they have in terms of the cost. But theyre rich. They are just so rich. And they control the price of oil. There was a piece in the New York Times the other day said saudi arabias strapped by the price of oil. Theyre setting the price of oil. If theyre strapped, why dont they set a new price . They can 2013 Million Barrels a day. Along with what were able to take stock of in terms of earnings so far 167 s p companies, 8 dow names, so far 80 beating on earnings per share, which is above what we thought certainly in the depths of the february lows. Well, went over every major quarter last week. And theres a theme. The theme is firing people. Trying to slim down. I think the jobless rates were incredible. Lowest since 74. These people are getting hired somewhere. Southwest and Southeast Housing is very strong, so people are being put to work there. But, wow, the level of layoffs at the Major Companies is rather extraordinary sfwl yeah, those thinking of halliburton delaying earnings to work out some of these issues. Laid off q1. Norfolk southern, union pacific, these Companies Made their numbers, expenses down 13, what a quarter. Intel, caterpillar. By the way today the journal had a piece on p g and the 10 billion theyre going to save and the question is how you get there because they havent delineated it the way they had the last 10 billion saving program so to speak. That will result in potentially some jobs. Caterpillar call was very good, talked about china being good. I went over that caterpillar call, at one point generally positive this is a quote from the call, europe is much more positive. Even in france. They used that term, even in france. The market went down badly at 4 00 a. M. Because there were some numbers out of germany saying the economys weaker in april. No kidding, the dollar got weaker in april. And the dollar is so important on a headtohead basis. And phillips number disappointing. And microsoft, google, heading into facebook and apple this week. Well, i think theyve derisked facebook to some degree. I dont think facebooks going to be you know, its very interesting there was a piece this morning by the sun king, bob peck over at suntrust talking about snapchat out of nowhere taking share. Michael wolf, fantastic piece this morning in usa today, a mustread his thesis is tv is the new tv. But talking about the kind of ads that these guys get and how theyre not the kind of ads, but google and facebook are getting the lions share. Seemed to be also a backhanded on twitter. Theres a look. Twitters also reporting on tuesday. You can see along with apple. Twitter and apple why does twitter report on a day when apple reports . Remember, apple was going to report a different day but Bill Campbell pushed them to move it for a memorial service. I think that could be an interesting contrast twitter versus apple. Not unlike last week your Southwest Airlines versus american and united. One point americans just saying, listen, we use mainframes mainframes . We cant change pricing. Mainframes . What happened to the cloud . Mainframes . You know what united put on Jim Whitehurst who used to be the ceo of delta who is the head of red hat which is uber cloud. Yeah. Uber cloud. But the American Airlines and united Conference Calls were distinctly suboptimal. Yes. Lets move onto a fascinating story. Of course it broke in part on friday, but its been confirmed this morning. Valeant saying it has named the former ceo of perrigo who resigned yesterday from that company, joe papa, as its new chairman and ceo. Hell succeed michael pearson, they say in early may. Papa expected to join as i said in early may. At perrigo, the companys named John Hendrickson to replace papa as ceo. They also interestingly approved the recommendation of the nominating Governance Committee to withdraw mr. Mark cooks nomination for reelection to the board at the meeting. And theyre separating the roles at perrigo of ceo and chairman and have elected lori sorry if i mispronounced your name to the chairman role. This is stunning for a number of reasons. Not the least of which of course and i know you may have discussed in part on friday is mr. Papas decision to leave perrigo after that brutal fight to defend against mylan, which he successfully did so if you remember convincing his shareholders to actually take a big down trade as opposed to tendering into the mylan offer because the expect better times would be ahead. This is not the better times many expected and i think many of those fully expected mr. Papa would be leading the charge leading, now hes leaving the charge. Now youve also got, jim, a company that says its calendar year 2016 adjusted earnings per share will be between 8. 20 and 8. 60. They say the majority of this change in guidance over february 18th where they reported, where they gave us preliminary guidance is a result of a reduction in pricing expectations in their prescription segment due to industry and Competitive Pressures in the sector. Yeah. This was a disaster this quarter. Remember the bid for mylan was about theres a nice dispari disparity. Not only that, but when i look at perrigo talk about a charge for omega. I went back and looked at the omega purchase. Theyre talking about a huge write down, 3. 8 total billion for that deal and now im questioning what they bought with omega. Well, thats why this mr. Cook he was the guy who ran omega. And hes stepping down from the board of directors or is not being nominated. Theyve delivered no alpha with that omega. Yeah. So there would seem to be Something Interesting going on there with omega and the lack of alpha and mr. Again, im not coucke. If you go over the jnj Conference Call theres a moment where they talk about the share thats coming back from mcneil labs, and pediatric was about 70 . They used to have 70 pediatric share. Were talking about tylenol. Now its up to 46 . You see it going back up basically what im saying is perrigo not only blew it with this omega transaction, but jnj is coming back with a vengeance. Amazing they came back given what happened here, and i am amazed that perrigo, papa is leaving now. The rejection of the mylon bid, this could be a wall of shame situation. Mr. Papa had been a regular guest at mad money. He had been, i know. Im just trying its ill advised. Its ill advised. Wa we havent talked about is valeant, clear positive for this company. Hes taking i would assume hell only take office after they file their 10k which were expecting on the 29th of april or prior to that. Jim has spoken about it, but it was before david and i got to the set. Lets understand this. Heres a man who destroyed a huge amount of value by saying no to the bid. Yeah, saying no to the bid. And hes a savior from valeant. Wow. What a low bar. You know . Low bar. I mean, hes not exactly alex. Although you just said the fact they got someone the fact they got someone is a big deal. If you want to do the math at home it was 75 a share in cash and 2. 3 shares of mylan for each perrigo share. Thats a pretty easy calculation. What that would be worth to perrigo shareholders and what is going to be a sinking price because of the departure and the guidance apparently because of this omega purchase which was not a good one. And the gentleman who ran it and sold it to them is now off the board of directors. But valeants up. And valeant probably should be up, jim, because they have succeeded mr. Pearson with somebody who has been in the industry for a very long time. Yeah, and joe built perrigo and did a great job. You used to be a fan of his. I was a huge fan. You know a huge fan because they made the knockoffs. They got walgreens, cvs, they had everybody. David, they had everybody. But then cold and flu season not that great, that knocks them down. Okay. And also, i mean, this last quarter i think jnj coming back, all im saying was not the appropriate time to leave that company. The question is why would you . Either because, a, you knew things were not going to be easy, which apparently seems to be the case. B, because youre getting so much money even though you are a wealthy man. Right. But joe should be here right now. He should be in the imax seat right now. Fund a foundation until forever joe should be right here in the imax seat. He should be. Defending this. So whats the our friend spencer, zillow. I mean, really. I think you have to make room not in the greg hayes seat. Aint going to happen. I was a big fan of joe. I just think that this does change the dynamic. You know, when you reject the bid, your numbers arent that good, you got the omega, it would have been just a fabulous, hey, see you later, perrigo, right . You can have it mylan and then come to valeant. I bet rob cory at mylan is wondering what went on here. Hes a pleasant fellow. Yes, he is a pleasant fellow actually. Well, i just think its poor timing. And i dont mean to be really down on the guy, but he leaves perrigo in less than optimal financial situation. From that perspective it is i feel like drinking that peptobismol that i buy thats not really peptobismol because it looks just like that. I would be chugging that if i was a perrigo shareholder. Its got the same colors and stuff. I think mr. Coucke who is leaving the board probably is this morning. I do think jnj coming back is a major blow. Anyway, omega, jnj saying no to the mylan bid. In other words, nasty. When we come back, it was a happy birthday for the apple watch. Were going to tell you why ahead of apples earnings out tomorrow. Look at the premarket as we kick off this busy earnings week from 3m, dupont, and more. Ict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle. And it keeps my investments fully mobile. Even when im on the move. Ahhh. And it keeps my investments fully mobile. I could get used to this. Now you can, with the luxuriously transformed 2016 lexus es and es hybrid. E. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Ahead of tomorrows Quarterly Earnings from apple, the apple watch marked its First Anniversary on sunday. And according to the journal analysts estimate about 12 million of the watches were sold in year one. Thats compared with about 6 million iphones sold in that products first year. So estimates of course, but outpacing the iphones first year. And the ipod only did 600,000 units in year one. Whats amazing to me is yes, im wearing mine. Super clear. The batteries, i got to get the battery but the this was supposed to be a bust. Those numbers do not indicate bust. And they can improve in multiple ways. Theres a lot of chatter about how they are going to improve it. Dti they do some wireless more wireless charge, but how can it be a failure if its such a success and make it so its not tied with the apple 5 next year, under what guise . Only apple would it be regarded as a failure. Sure. Because of the size of the existing customer base. Yeah. I mean, i just think the Service Revenues great. I was trying to put together some numbers for prince being there, beyonce, i mean, apple has a lot of things that go right. But people are so critical. The watch is a success. You dont see my bright wing on. Not today. I notice carls wearing his which i have rarely seen sighting of. Second wind. Im definitely coming around to it again. I dont like that band i like that band. Better band than yours. Its a nice band color. I mean, its still black. Yours is black, so im not really sure im married now so it doesnt play the role it used to have. Right. What was that role . [ laughter ] i assume you expect version two to be and ill get that too. You will . Ill immediately trade it in. I like this. I like fitbit too. People say you can have a fitbit. But its not the same. This is different. I have the fashion statement band. I have a lot of information on this thing. I use it as an alarm clock. I wish i could dont have to you know, if you plug it in and you sleep with it and its an alarm clock, then the wire listen, to the point theres been a lot of back and forth between you and i for a long time about this. But the point i think we both made is we have carved out this area and the ecosystem conceivably well broadened and deepened over time. And they will be there. Cramers shirt points out there were people thinking 40 million, 50 million, thats inconceivable. Unless you wear two. I mean, thats crazy. I would be happy with this given the limitations of the watch as currently configured. As currently configured, but at some point it may be a selfsustaining device you dont need your phone with. That could be a different construct. Look at the ipod. I remember when i had to go get the second ipod because my kids wanted a blue and wanted pink. Who knows. Yep. You know, but why write this off . I know the quarters coming and everyones already decided apple is, you know, nothing. I just want to know what you were getting on that before you were married . That was a joke. I was talking about like a younger guy might say, hey, listen, women are impressed. Thats what it was about. No ones been impressed by me in a decade, partner. I know one. She still seems to like you. She doesnt watch the show though. Its our anniversary, you think she knows i said that . No. Well get cramers mad dash and look at the opening market. More squawk on the street from the nyse straight ahead. They say that in life, we shouldnt sweat the small stuff. But when youre building a mercedesbenz, there really is no small stuff. Every decision. Every component. Is an integral part of what makes the 2016 cclass one of our most sophisticated cars ever. Because when youre setting a new benchmark for refinement, it is the small stuff. That makes the biggest impression. The 2016 cclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Oh, man, its monday. Theres jim cramer. Hes about to start his mad dash. David, the hedge funds have been fighting this caterpillar tooth and nail. But goldman today upgrades it from sell to hold. Better tone china. Ive gone over that Conference Call. Ive urged people to listen to the Conference Call of cat because three times they said china was better. Cat is seeing a gain from the recent improvement Commodity Prices and only going to get stronger, i think. And, you know, u. S. Roller billing by the way is coming back. Is it . The state budgets more flush, mentioned going to be a huge Infrastructure Program in this country. The likes of which we havent seen since. Izen eisenhower. Yes. But its china thats encouraging. And i urge people to recognize that this company has been down so long it looks up to me. The Balance Sheet is much better than expected. Dividends in tact, if china turns around, look out above. Joy global you want to mention to. Joy is same, problem is coal. Coal if you listen to you know, coal is still going to be 32 of our baseline. Its still the baseline for a lot of different utilities. So what happens is base utility and its coal, you cant get rid of coal as fast as people would like. Even though coal numbers were so bad from railroads, export coal is bad, joy is last man standing. But coals going away. Dont forget that. Our grandchildren not going to be coal based world. All right. We got the opening bell on this monday just a few minutes away. Stay with us on squawk on the street. A lot more coming up. music pl throughout uh oh. Whats up . Does nobody use a turn signal anymore . Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in 30 seconds. A big week of earnings is headed our way. Its the busiest of the season. In fact, thursday will be the single busiest day of the season with names like bristol myers, amazon,linkedin, you name it. Yeah. Remember linkedin caused the big february selloff. I saw workday downgrade today pacific crest, a lot of the high multiple stocks have been under pressure, a lot of the value stocks doing well, but thats off of oil. If oil keeps going higher well stick with that theme. I think that the high multiples, its a bear market rotation and the money is flowing out of there and going to other areas, david. Yeah. Jim. This morning the big board Global Payments provider of electronic processing celebrating its 15th listing anniversary at the nasdaq United Fire Group doing the honors. Were going to have to juggle some central bank speak. The fed statement out wednesday. A lot of people wonder if theyre going to talk more about a rebalancing of risks as opposed to downside risks. Theres been some positive data certainly on job, but at the same time a lot of whats good in the economy that ive seen in the month of april, april better than march, has to do with a weaker dollar. So, i mean, they can certainly upset that balance. I know japans trying to get the yen down. Doing everything they can. Boy, they bought a lot of stock there japanese government. Whoa. Chatter that they would buy even more. Yeah. Buy anything thats not nailed down. Are they index or theyll buy real estate. Whatever you got. Theyll buy your apple watch if you want to put it on the secondary market sdpl theyll pay more than its worth. Probably. I mean, they pay more than its worth for a lot of these companies. Why dont we talk about what a joke this is . What . Negative rates . Lets just talk about our economy and our stock market for all of its flaws, at least the government isnt in there buying back stock and doing negative Interest Rates and theres a real honest market that has real price discovery. I mean, whats the real price of the japanese stocks . Mitsubishi, i saw that down 40 . What are the buy orders like . Hey, david, could you go in and take, i dont know, tokyo electric . I want you to take that up 10 today. Would you argue with that order . I suppose. Do you think theres much difference in buying treasuries . Some would argue not that far afield, right . I think in the end thats a big liquid market and should be selling treasuries. What does the fed have on its Balance Sheet . 4 trillion . Selling now, ive been urging the fed to do that. They say they cant do it, but they can do whatever they want. Theyre the fed for heaven sake. But i think the japanese buy orders, i mean, what are those stocks without the japanese government in there . What are their stocks worth . Y idea . No. None. Right . I dont know. Does the government try to get better prices . No. They take up everything. I think its insane, right . I know. Speaking of things being taken down, vf corp downgraded today over bbnt. Theyre reporting soon. Theres been a split. You know, underarmour had a great quarter. The shorts are fighting underarmour again. But lululemon had a great quarter, underarmour had a great quarter, i think a lot of people think face people. A lot of people feel that. I dont know. But thats been the chatter. And also theyre in macys a lot. And people feel macys is under pressure. Lululemons up nicely from the call from the quarter. Did you see currys injury . I know. Hurts. I saw mris today on a strained knee. A lot of people very focused on that mri. Yeah, there are. You could go a lot of places with that north face thing. Theyve peaked. Theyve reached the summit. Geez. Keep going. Well, k2. Yeah. Taking it from base camp four down to base camp three oh, no theyre running out of oxygen. Yes. I like that. Man, into thin air. Hits very thin air. Its going to be a very hard climb from here. Its going to need a bunch of sherpas. Need their pick axes. Hes got a motif. Yes. But i do think there are other plays, i was thinking about steph curry and thinking will plank go out there and give him a striker knee . You know who else needs it . Kimberly clark a lot of things have to go right. Also the resignation or lack of a nomination for a gentleman who sold them a Company Called omega who is no longer going to be on the board. The Company Issued guidance below previous guidance for 2016 citing pressure overall. In prescriptions i guess, jim. How can they not say that the jnj comeback is part of that . And just to point it out, 2. 3 plus 75 gets you right around call it 186 a share based on where mylan was prior to the opening. So you can put that in some perspective. Thats what it would be worth right now. 186 based on their stock price if they had taken the deal that mr. Papa succeeded against heavy odds, really, to say no to. One of the more stunning things ive seen in m a fights. A multiyear plan out meanwhile didnt know jnj was coming back taking that share, obviously didnt know about omega. What a great time to have sold. Some may have been surprised. Valeant up another 5 this morning as mr. Papa takes over as the ceo in early may. Michael pearson will step down as the longtime ceo of that company. A man who helped build it and then watched it lose a great deal of market value. Its interesting that joe maintains obviously his cred, street cred that moved valeant up. Yet when i look at the tatters he left perrigo. Really . Thats what you call it . It raises eyebrows. My eyebrows are raised. They are . Yeah. The decision for him to depart under what is probably a terrible moment for perrigo given the fact that much seems to have been reversed of late. Thats tough. Im sure a number of large shareholders are calling up mylan and saying any chance can we get another shot at that . How about bringing back that tender . Please . I think theyd probably take a look at that omega deal with the impairment charges. Yeah, if youre rob cory youre like, sure, how does 110 look . I dont know. But how does xerox look. I was just going to mention xerox. Up by a penny although revenue was ahead. Cutting guidance they say based on breakup expenses. Okay. I do like the breakup. And i do think theyre creating value. Theyre trying to do whats right. Thats obviously carl icahn in there. Yes, it is. Treasury secretary icahn, right . They reached a settlement some time would be a queens government if trump wins . Yeah, i think i know you got to go all queens. Icahn, queens. Icahn, i dont know who else we could get in there. Jack lew is already the treasury secretary and hes from queens. I do not believe i would be associated with the trump campaign. Degram. Degram is not from queens, but he plays there. Yeah, well thats enough to make it so hes in the cabinet. Why not . Yeah. Secretary of fastballs. Exactly. Though we have another guy who has a faster fastball, sind gar, aka thor. Hes supreme court. I like that. Theres an open seat. Yes, there is. By the way, the guy who well, Justice Scalia was also from queens. Was he . Yes. Thats right. All right. Now that weve gone through queens history a bit for you out there, i know so many of you are interested, lets move onto newspaper history. Perhaps some being made this morning. The two companies in question are one in particular is very small, but it does not mean that it is not a significant company. Tribune owns the likes of the los angeles times, the chicago tribune, the orlando sentinel, the hartford current. Its current market value not very large, in fact when you throw in debt its still below 1 billion. But this morning it is in receipt from the bid of gannett. It is in receipt of a bid of 12. 25 a share in cash from that company to acquire it. This made public this morning by gannett in what we typically call a bear hug after a series of letters, most of them coming from gannett, the first on the 12th of april and followup on the 18th and finally one on the 22nd saying, come on, guys, dont you want to talk to us . Actually the tribune response was also on the 22nd saying give us a little more time. Our Shareholder Meeting is june 2nd. By the way were in the midst of a transformation right now. A gentleman by the name of mablg is the new chairman of the company, he bought lets call it little over 40 million worth of stock in february he paid 8. 50 a share for that. He took over as chairman. He is i believe the single largest shareholder at tribune at roughly 17 . He is now above that of oak tree, the firm that took their Equity Ownership as a result of owning the bonds in what was once the bankrupt tribune, remember. And then it split into the broadcasting assets. They also by the way that part of tribune, Tribune Media also owns all the real estate. What you get with tribune is those aforementioned publications. Much banded about with higher price tags than the market value of this company or total value of the Company Including its debt back when the likes of an eli brode talked about for New York Times or whatever. This may end up being a fight. Theres no clear path at the moment because the annual meeting is on the 2nd. They cant go after directors at this point, but they are certainly going out there because they did not seem they would get a fair hearing from tribune and perhaps were concerned that tribune given mr. Far rows ownership, previous willingness to step up that perhaps something would be worked out between him and some other very wealthy people to try to take the thing private. Thats speculation. What we do have though is a significant premium bid at 5. 6 times estimated 2016 ebitda, jim. And thats not a bad multiple, at least given where things are right now. In an industry of course that we know has been in seminal decline for so long. Im looking for a chart here, total revenues in this industry were 46 billion including digital and newspaper ad revenues. And now theyre down to 19. You have to have scale to make it at all. This would create some powerhouse. This is big media. It would own the print business. Yeah. Of which, you know, theres still money to be made. But this sounds very hostile. I mean, like really bare knuckle hostile, doesnt it . Well, i dont know. I mean, they came public with an offer because they were worried they wouldnt get an audience and perhaps something would be done away from them. It doesnt appear there are a lot of other potential buyers out there. This is an industry that is in some state of distress depending on how you want to define it. Is the New York Times in distress . Not really but its not in a great position to be able to go acquire given the state of its Balance Sheet. Reports in New York Post layoffs are coming to the times. Memo to staff say iing the ad market is soft, in an Election Year . Its interesting in the release talk about gannett strategy to grow the usa today network. The network of the paper that is you mentioned earlier one of their columnists they put a lot of money behind these people. Michael wolf had a fantastic column about the way tv has never really been supplanted and Digital Advertising is more direct oriented. I think this is really interesting because usa today has made a big comeback. In fairness, larry cramer, my friend hes on the board. Interim ceo of the street and chairman but like i watch this usa today come back. I read it every day. For their part gannett saying theres no finance contingency or any significant overlapse. Well see where it goes. But, again, small but not insignificant in terms of influence. These are still important newspapers. How do you say no to a 12. 50 bid. They have transformation. New chairman, ceo, board, give us a chance. The mylan bid yes, it was transforming. I think they take the money and run. Its a tough business, this newspaper business, as i know from the philly. Com days. Geez, i remember when i was rejected by 52 newspapers. This is just ritter got smart and took the 60, thats the greatest deal they ever took. The ritter family, wow, smart guy. Only three dow names in the green. Microsoft among them. Lets get to bob on the floor. Good morning, bob. Good morning, carl. Were not getting much help from anybody this morning even though oil is up, energys not moving. Asia didnt help and europe is down as well. Take a look at some of the european names. Doesnt matter what you look at, the banks, the conglomerates, siemens and autos all a little weak today. German sentiment numbers were a little disappointing. Here in the u. S. Oils up but were not getting any push from energy stocks. You can see theyre weak there. Techs also weak again after notably weak close last week. Materials, health care and financials, interesting financials dont have a little more of an oomph with the 10year yield now at 1. 90 . They usually get a little bit of a lift as the yield moves, but thats not really happening today. Whats important is the rotation going on in the market. We talk about this at the end of last week. Theres a lot of talk about big tech being weak, and thats certainly true. But its not spreading to the rest of the market. In fact, what were seeing is a broadening in the rotation out of technology into energy, healthcare, materials, and to a lesser extent even financial stocks. This is major sectors for the month. So you can certainly talk about the weakness in technology, and thats a source of concern. But when you get rotation like this, its generally considered a healthy sign if you look at the s p 500 yeartodate essentially since that mid february bottom lets not quibble about a few down days, weve essentially been straight up with only a week or so of sideways motion in between all that. So you can argue where its technically a little bit on the stretch side, but the rotation makes the technicians very happen. Particularly strong has been some of the sectors like materials. We never cared about any of those names like joy global. I mean, i know goldman up caterpillar and joy global today, but these names have had huge runs already. So material names are up enormous. U. S. Steel, ak steel, look at these numbers for the year. This is mostly since yan when they bottomed. They bottomed before the rest of the market. Bhp up. Joy global may have been up by goldman, but theyre a little late to the party. A lot of talk about iron ore prices going up and perceptions of greater demand in china and this is the china play very clearly making a move for u. S. Stocks. Finally, a third of the s p 500 are going to be reporting this week. The good news is the declines in the estimates for the second quarter, which is what we care about are not as great as in prior quarters. Expected to be down 3 but thats not that far from where it was a few weeks ago. We have a shot id say at 50 being positive ending the earnings recession, but that needs to stabilize very, very quick quickly. Right now the dow down 76 points. Back to you. Bob, thank you. Bob pisani. Lets get to the bond pits this morning. Rick santelli is at the cme in chicago. Good morning, carl. No doubt about it treasury rates are breaking out. Various commodities and crb index are breaking out. The stock market was, it seems like its slowed down a bit, probably central banks. Remember march madness . March madness is showing up in all these charts. Look at the mid march high yields on all these charts. Look at a march 1st of twoyear, of fiveyear, of tenyear, now as you look at an intraday of bund notice were getting ever closer to 30 basis points. Look at its mid march madness. That high yield you see in the middle of march, that was 32 basis points. Thats what you want to pay closest attention to. In terms of foreign exchange, we all know that has been the epicenter even though it keeps bumping against the edge of the pool no matter what currency youre looking at. Intraday dollar index there is a bit of weakness. Open that up to march 1st you can see that we have been definitely treading water, just walking along the bottom. You want to pay very close attention on the closing basis to that 94 level. Carl, back to you. All right. Rick, thank you very much. When we come back, the buzz continues surrounding beyonces surprise online release of her new album. Well have the lowdown on what she calls lemonade. Meantime, as bob said, very quick action to the downside. Dow is down 84. Were back after a break. 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 2016 eclass. Now receive up to a 3,000 spring bonus on the e350 sport sedan. Stephen king, the master of suspense and the macabre. I enjoy keeping people up at night. My Analysis Shows your stories are actually about human connection, even love. Great storytelling needs drama and empathy. My cognitive apis can help any business Better Connect with its audience. You should try writing a book. Find a remote hotel. Bring the family. I do not think that is a good idea. Omg. You are so funny. In the time it took me to type that, if i were driving 55 miles an hour, id have driven the length of a football field blindly. Not funny at all. Dont text and drive. The more you know. Beyonce releasing her highly anticipated album lemonade this weekend with a onehour companion film premiering on hbo. Fans could initially only access her new music on streaming service tidal. But as of this morning lemonade is on sale itunes, amazon confirming it would sell both digital and physical versions of the album coming on the heels of prince and all the discussion there of property ownership, were getting a better clue as to how this moves a title, an apple and even hbo. Downloading prince last night and downloading beyonce, i mean, these are seminal. Its kind of like jungle book for disney. These things add up. Im talking Service Revenue for apple here at the moment. I think Service Revenue is going to be very good. Have you backed up your icloud . You know, you get charged for that. Youll have to. You lose your pictures. Apple is getting a nice monthly fee from me without a doubt in all ways whether its ordering photos or my kids. Its passive. Its on my credit card. I know. I dont look at it. Its like netflix actually more than netflix. Up there with amazon prime for me. Artists like beyonce can get paid. Thats unfortunate, cd sales obviously gone. Thats right. I dont know, i continue to think they own apple and yet to go through this trough, okay, its a trough, and not a pig trough. Thats a philadelphia access. How do you say trough . Trough. Trough. Same way i say drawer. Drawer. We will get stop trading with jim in just a moment. Dont go away. Neighbor boy. neighbor yeah, so were just bringing your son home. He really loves our wireless directv receiver. dad he should know better. Were settlers. We settle for cable. But let us repay you for your troubles. Fresh milk for the journey home . neighbor we live right there. dad salted meats . neighbor no thank you. dad hats then vo dont be a settler, get a 100 reward card when you switch to directv. Youto get the help yourefar looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Time for cramer and stop trading. Tough for deutsche bank. It really was disappointing. There are a lot of different price pressures in a lot of different countries. Obviously latin america very tough. Normally i would say go buy the stock, but it only yields about 2. 9. Let it go to 3. They have a great dividend policy. Let it go to three and change. Dont buy it here yet. Its too early. It was a disappointing quarter. What it says about proctor because proctor competes directly with kimberly. If theres price pressure in diapers, that is not going to be good for proctor. You know, versus unilever, theres a diaper price war. Sounds like theres a diaper price war. And that could be meaningful. Youre just nodding your head. When is the last time you bought a diaper . Thankfully its been a while. Then youre not close to the market. Him too now. Worldwide diaper price war does not help margins. No. Well get proctor in the morning. Whats on mad tonight . Richard gelfond. Im going to ask him, disney, i think this is the new paradigm. They have five years worth of movies that will be good. We will see tonight, jim. I know. I know. 6 00 p. M. Mad money. When we come back, new home sales. Dont go away. Real is touching a ray. Amazing is moving like one. Real is making new friends. Amazing is getting this close. Real is an animal rescue. Amazing is over twentyseven thousand of them. There is only one place where real and amazing live. Seaworld. Real. Amazing good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with sarah, david faber. We had some weakness in asia overnight. Some macro misses in europe. Little wariness ahead of the central Bank Earnings coming up late they are week. Breaking news on new home sales. Lets get to Rick Santelli in chicago. Down 1. 5 , now, that is a little misleading. The actual number was 511,000, thats seasonally adjusted and annualized on new homes but last month moved up from 512 to 519 which makes that the high read of the year. That was february. You can see where 511 fits in thats down 1. 5 . Just to give you context last years final read was 540,000. Now, for more granular context digging down on this number, lets head east. Diana olick will give us more color on march new home sales. Diana. Well, rick, as you said we did see that revision higher in february. So you look at this, yes, its a miss down 1. 5 . We were looking up 1. 6 . We were looking for 520,000, we got 519. Not so far off. What im most interested in is the pricing here. The median sale price of a home sold in march was 288,000. That is down from 293, 400 a year ago and thats good news because we have seen really overheating prices in both the existing and the new home market. So its good to see prices coming off a little bit. Builders have been very, very stubborn about this saying that they dont have the margins to decrease prices. Theyre not building on the entry level, which is where we really need the supply. We have a 5. 8 month supply at this current sales pace of new homes for sale. But we really do need to see more construction. We saw a drop in housing starts. But again, right along expectations. Not a terrible number, not a great number, right in the middle. Back to you guys. Thank you very much, diana. Meantime a huge week for the market, fed obviously and earnings from no less than onethird of the s p 500. The broad market index itself dipping at the open after two consecutive weeks of gains up now almost 2 for the year and sitting just over 2 below its alltime high despite of course all that unnerving use that we got from big tech at the end of last week. Quincy crosby market financial, and jeff from raymond james. Thank you for joining us, guys. Jeff, lets talk about amazon, exxon during the course of this week. Where do you think thats likely to take us . Well, theres been some High Profile Company misses, but on balance the word for this earnings season has been beat because as of last thursday 78. 3 of the s p 500 companies that have reported beat their lowered earnings expectations. Does that not just mean that the earnings expectations were too pessimistic coming through . Where does that in a practical sense lead us as investors . Well, you know, becky asked me on february 5th what my proprietary model was suggesting, and i told her the market was according to the model was going to bottom next week. And it did it february 1 19. And weve played it pretty hard since then. But as we get towards the month of may, the markets internal energy is pretty much used up. So im more cautious right here than i have been for the past 50 sessions. I think earnings are going to come in better than the lowered expectations. So far this is the best beat rate since weve seen in the Third Quarter of 09. Quincy, what about tech . How worried should we be that big tech is falling out of favor . Given of course that it led so well last year and the fact that youre now reversing some of the fund flows there. Well, absolutely. And one of the things we saw last week is that the market is not afraid of bringing down those companies that have not met on the top line. The market just went in and said, no, no, no. Were seeing industrials move in nicely. Looks as if it wants to take the place of tech and leadership. But one thing that matters very much is the backdrop for the markets. Has china stabilized even in the very, very shortterm . Is the dollar weaker . Were going to find out this week if the fed wants to keep that dollar weaker and can keep the dollar weaker in order to help that transition over to industrials. This looks like the transition were seeing. Jeff, before we talk inevitably about what the fed will do, you mentioned you were cautious. Im sure the barrons survey over the weekend didnt escape you or senior Money Managers what they describe as least bullish results in 20 years. Only 38 of bullish or very bullish down from 55. And whats interesting its not that people are more pessimistic, jeff, is that the neutral opinion is exploding at the moment. Yeah. I think thats a very good observation. And it actually we thought that the s p and still do, is going to trade out to a new alltime high following the s p total return index which traded to a new alltime high last week. So i still think theres some up time excuse me, jeff. What is the logical connection between neutral positions or neutral views to the market going higher . Explain that connection if you would. I think sentiment has remained very bleak despite this really sharp rally that weve seen. And i think that suggests that people are still going to commit to the upside before we get a shortterm peak in the market. Normally when you get a rally like this, sentiment, bullish sentiment, goes up. That hasnt happened in this current rally from february 11th lows. So sentiment is a factor, quincy. You also mentioned earlier that the fed would help set the stage for the nearterm move in the market. Is there really a lot of mystery going into this weeks fed meeting . No press conference, yes statement. Yes, absolutely. Because the worries the fed itself engineered the backdrop that it wanted, right . Now, as we always say when rates rise something always breaks. And you see the fed not seeing a rate hike until september perha perhaps, you look at what the economists are saying and theres a disconnect between the economists and market, theyre thinking the fed may move a bit closer, a little bit more hawkish to set the stage for the possibility of a rate hike to give them two or maybe even three this year. So if you buy that, are you buying financials into the fed meeting . Well, thats exactly right. This is why the market is going to be watching what they say and well see what the algorithms come in with. And financials have been moving higher on the back of yields rising. Yields are rising despite the fact Philadelphia Fed was terrible, despite the fact that the first read of gdp for last quarter is going to be very, very weak. And yet we saw yields rise. Thats telling you that the market thinks that the fed may open the door for a rate hike some time this summer or early, early fall. And therefore youve got to be prepared for it because the dollar also is going to set the stage for what we see going on. Again, the fed is caught between a rock and a hard place. I think they want to raise rates, but the Economic Data here in america is not doing well. Right. Jeff, i think for many people given that fixed income is such a large market, the bigger question for many people for Market Sentiment given how committed they are and how overcommitted they are to low Interest Rates, its whether or not if the fed does start raising rates more rapidly than people think youre going to get massive losses through fixed income. And that in itself will reverberate around for everybody else. Where are you on that . Ive said it on cnbc for weeks. I think if the fed does not raise Interest Rates this week, i dont think they will raise rates until after the president ial election. Okay. Its a strong prediction. Well leave it there. Jeff saut joining us there, Quincy Krosby from prudential. Coming up, president obama is in germany defending International Trade deals and making a case for the transatlantic agreement with europe. Tom donohue also in germany. We ask him which candidate would be best for trade and best for business . Squawk on the street will be right back. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound i wont. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of the at t network, a network that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. I am a First Responder tor and iemergencies 24 hours a day, everyday of the year. My children and my family are on my mind when im working all the time. My neighbors are here, my friends and family live here, so its important for me to respond as quickly as possible and get the power back on. Its an amazing feeling turning those lights back on. Be informed about outages in your area. Sign up for outage alerts at pge. Com outagealerts. Together, were building a better california. The big news this morning, ted cruz and john kasich teaming up in the latest effort to stop donald trump from becoming the republican president ial nominee. Our john harwood joins us with more now in washington. Will it work, john . I doubt it, sarah. Look, john kasich and ted cruz have been going around the country trying to slow down donald trump for weeks now. They havent had a lot of succe success. Now theyve decided its time to shatter the glass on that fire extinguisher and try to team up to deny donald trump the 1237 he needs in terms of delegates for a first ballot nomination. Heres a statement that ted cruz and john kasich both put out last night. They say cruz is going to concentrate on indiana, the upcoming primary, john kasichs going to concentrate on oregon and new mexico, try to have a pinser movement on donald trump. They hope their outside allies, the super pacs, will do the same thing. Heres why that is necessary. Take a look at this poll of pennsylvania republicans, nbc news marist just came out over the weekend, donald trump has a very large lead over both ted cruz and john kasich. The danger for cruz and kasich is that this sends a signal to Republican Voters that donald trump doesnt even have a single viable candidate left. So this is a desperate move as donald trump has said, whether its going to work its quite doubtful, carl. All right. John, thank you very much for that. Our john harwood in washington. The president is in hanover, germany. Hes pushing for a trade deal by the end of the year as well as reforms in the banking system. Take a listen. We need to keep implementing reforms to our banking and Financial Systems so that the excesses and abuses that triggered the financial crisis never happen again, but we cant do that individually nation by nation because finance now is transnational. It moves around too fast. If were not coordinating between europe and the United States and asia, then it wont work. As we look toward tomorrows primaries which candidates are best for trade in the financial system, joining us from hanover, germany, is thomas donohue, u. S. President chamber of commerce. President got blowback on his brexit comment in the uk. I wonder if this message is carrying more water. Well, i think the president s message here in hanover on the trade issues here between the u. S. And the eu and some collateral discussion about the pacific agreement, which has already been negotiated, has been very well received. It is being matched by very strong comments by chancellor merkel. And i believe the Business People that are visiting here from all over the world have seen this as particularly important for the u. S. And the eu who are both trying to strengthen their economies, put people to work and drive up Economic Growth. Tom, you wrote last week its no secret that trade is taking a beating at the hands of several major president ial candidates. Which ones do you mean . Well, first of all, lets look at why it happens. Countries that economies are in trouble and that are involved in Political Races whether its for president or for lower offices all watch the sentiment of folks in the community in terms of why dont they have jobs, why is the economy down. And its very easy to blame trade. So i think its equal opportunity blamers. Youre hearing it from Hillary Clinton, youre hearing it from trump with a lot of excitement. Youre hearing it from others you are hearing it from many of the 17 republican candidates. The bottom line though is after all of the elections are in place, the reality is that 95 of the people we want to sell something to dont live in the United States. And for us to walk away from the tpp or the t tip here with europe would be just about the dumbest economic decision that any president could take. And my view is after all the politics were going to get down to a simple deal. And that is you need two votes plurality in the house and two votes plurality in the senate to do this. One vote to win and one vote in case somebody gets sick on the way to the vote. And everybody else can be excused. So youve got to cobble together enough votes just to win. Weve done that many times on previous agreements that people were opposed to during a political process. So, tom, are you saying and lets just stick with the frontrunners you have confidence that Hillary Clinton or donald trump if either were to be elected would support the free trade deal, the tpp with asia and with europe as well . My belief is that whoever runs moves into the white house goes through one of the most traumatic experiences that any leader can go through. Whoen you learn whats going on around the world, when you learn what the challenges are facing our nation, when you learn what our risks are, when you can fully learn what our challenges are economically, when we look at all of the issues in front of us particularly the entitlement payments were going to have to make in the years Going Forward, everybody who becomes president is going to look for ways to counteract those challenges and trade is one of them. Mr. Donohue, can i double back to what you believe is the longterm damage if any that is being done to the Business Community through trump and sanders at the moment. Is there any stage in your conversation perhaps an evaluation as to whether theres a greater need to get out there and talk to people in the country that feel that they are unjust they feel they are unjust losers in what some call secular stagnation. Is there a need to get out there and tell the story better . Well, there is no question that we have an immediate problem. And the immediate problem is the elections in the house and the senate and the governors and so on. We dont want the difficult exchange between the representatives of both parties to negatively effect whos going to be elected to the members of the congress and the senate. Going forward youre very much on target that we have to find more and more ways to explain to the American People what is why they dont have as many jobs as they want, why Economic Growth is slowing, whos responsible for that and what they have to do to fix it. And its not all a matter of assuaging people and patting them on the shoulder and telling them everythings going to be fine. Its a matter of telling them why we have these problems, what we have to do to deal with them and what role they have to play. Its not what can the government do for me . Its what do we have to do together to fix the environment so that their children can have good jobs and so that their economy is going to go up in a way that will support their retirement. But, tom, in order to crystallize that message, do you guys have to convince manufacturers to raise wages here, to bring jobs back . Or to make a bigger point of the bmw plants that are in south carolina, or is it a combination of all of those things . Well, many people believe that any job thats not there anymore has gone to china or mexico. Youre right that many jobs have gone to south carolinas and to texas and california. But the very, very important thing that we have to do is explain whats happened to the American Manufacturing system. 40 of the jobs in the manufacturing have gone away because of information technology, robotics, process engineering and supply chain management. Which leads us with people who dont have jobs and jobs for which we dont have people to run those now highTech Companies. Were going through a serious transition. If we decided not to go, wed be very lonely because everybody else around the world is moving in that direction. And we have to do this to stay competitive. We will create lots and lots of new jobs. Its a part of the process. And weve got to get the people themselves in the process. Our single biggest challenge right now is k through 12 education. Were leaving lots and lots of our students on the side for failure to be able to read and comprehend, to write, to count, to work in a social environment. Weve got a real problem there. If we dont solve it, were going to have more unemployment. Obviously a theme thats going to run through the election all summer long. Tom, thank you so much for joining us. Safe travels home. Thomas donohue, president and ceo of the u. S. Chamber of commerce. Thanks. Ahead on the show, a shift in the ceo ranks sending valeant higher and perrigo tumbling. David will have all the latest. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Perrigos joe papas longtime ceo who successfully fought off a hostile takeover from mylan has resigned from that company and will become the new chairman and ceo of valeant, we learned this morning at least in a series of press releases. One from perrigo and one from valeant. Mr. Papa will take over in early may for michael pearson, of course, the current ceo and longtime ceo of valeant who has, well, presided over a very difficult period for that company. And also a difficult period for himself in terms of his health. It is helping valeant this morning, which is up lets call it three or well, you see it there little over 2 . Was up on friday when we first heard the potential for this change. But the bigger story this morning appears to be that of perrigo where the departure of mr. Papa has been joined with an announcement by the company that it will not meet its previous guidance for 2016. It now issues new guidance of between 8. 20 and 8. 60 a share in adjusted earnings for 2016. That is below what it had told us back in february that it would deliver for the year. It says it is due in part to reductions in pricing expectations for prescriptions and also weaker than expected performance within a couple of other sectors. Theres also an interesting side story here involving the purchase of omega pharma back in march of last year. And that companys ceo at the time, mr. Mark couecke i believe, although im not sure how to pronounce it, his name has been withdrawn from the board of directors by the nominating and Governance Committee of perrigo. And it does appear there are some issues with omega in terms of perrigo assessing whether and to what extent an impairment exists. And it says it will complete its assessment and determine any impairment by may 12th. Thats when the Company Expects to file its earnings report. But overall perrigo shares down sharply on that reduced guidance on the departure of mr. Papa, which many believe is curious to say the least. Of course valeant certainly under severe pressure, but many believe or some believe certainly the assets there are beneficial and will be run to a far better extent than they have been previously by mr. Papa who has long experience. At 60 years old though and given what appears to be significant wealth, one has to wonder what hes getting there. It will be interesting to see his compensation at valeant. And there were those on friday when this news first started to surface who wondered whether perrigo in part its future in part was going to be in some question. We seem to have gotten some answer to that, the growth having slowed dramatically. And just to refresh, mylan at the time had a tender offer for the company, which shareholders did not tend to the requisite amount of shares into and therefore mylan failed in its attempts, that was worth 2. 3 mylan shares plus 75 in cash. Current value lets call it 186 a share. Those perrigo shareholders who decided to leave the Company Independent in part because they thought under the leadership of mr. Papa he would be able to deliver greater shareholder value are wondering what in the world they were thinking. Sarah, back to you. All right, david. Coming up, whats the best bet in technology right now . Potentially some opportunities, tech getting hit again on the back of a pretty sharp selloff on friday. Well explore that question when squawk on the street comes right back. Everhas a number. Olicy but not every Insurance Company understands the life behind it. For those whove served and the families that have supported them, we offer our best service in return. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. No, youre not yogonna watch it tch it we cant let you download on the goooooo youll just have to miss it yeah, youll just have to miss it we cant let you download. Uh, no thanks. I have x1 from xfinity so. Dont fall for directv. Xfinity lets you download your shows from anywhere. I used to like that song. Good morning everyone. Im sue herera. And here is your cnbc news update this hour. President obama in germany announcing the deployment of up to 250 military personnel in syria, mostly special operations forces. It will bring the number of personnel there roughly 300. Theyre not going to be leading the fight on the ground. But they will be essential in providing the training and assisting local forces they continue to drive isil back. A car bomb exploding in a suburb of damascus at one of the holiest shiite shrines in syria. Six people died in that blast. Shiite fighters from lebanon, iraq and iran who have come to fight alongside the Syrian Government often say they are there to defend the shrine. The brussels train station closed after the terror attacks last month has reopened. Officials say the bombings didnt cause any structural damage but destroyed the ticketing area between the street and the subway levels. And japanese Online Retail giant creating some buzz with a Drone Service theyre launching next month. The Delivery Service will be the nations first commercial use of drones. The company will roll out that service at a golf course. Delivery initially will be free. Thats the news update this hour. Back to you, sarah. Glad theyre rolling it out at a golf course. Fine if you want deliveries on a golf course. Well why wouldnt you . Not a good place to test out drones. Thank you, sue. Sue herera. Sure. Tech stocks getting slammed as earnings have kicked off. A lot more to come. Ibm, microsoft, google all dipped sharply after results. Our josh lipton is in San Francisco with more on the move. Morning, josh. Morning, sarah. So far we know tech hasnt won over many fans during this reporting period. 21 Tech Companies in the s p 500 that have reported saw earnings decline 12 year over year according to s p capital iq. Most have beaten estimates though we know estimates did decline during the quarter. In other words, theyre clearing here a low hurdle. Revenue basically flat down 0. 9 . For some Companies Like ibm this is a story of transition, big blue did report and beat, but revenues slipped as new businesses like cloud and analytics arent big enough yet to offset more mature business lines Like Services and hardware. Another tech giant undergoing big changes intel, which is transitioning away from its core pc business. Company lowered full year guidance and announced plans to layoff 12,000 people. New Business Opportunities also mean new competition. Microsofts Cloud Services are growing fast, but google is gunning for that same market with ceo saying business is strong. We had much deeper conversations than weve ever been before. We do think we are competitive across a range and areas where we view well be uniquely capable over time is because of a Machine Learning capabilities helping enterprises really understand their data. Now, this week tech investors will have a lot more data to consider with a number of Companies Reporting results including facebook, twitter, apple and amazon. Sarah, back to you. All right. Thank you very much. Josh lipton, youve given us a lot to discuss. Lets dig deeper. Our next guest says the best bet in tech for them is Cloud Computing. We welcome ken allen reporting manager with t row price. On that backdrop that josh laid out, do you lighten up after what we saw last week . Or do you buy on the weakness ahead of big names like amazon, facebook and apple reporting this week . Well, its obviously been an up and down year so far in the market overall, but also especially within tech. And theres no time like earnings season to amplify whats already been a lot of volatility in the space. The way we look at it is very much stock specific. We saw interesting earnings reports and reactions last week from Companies Like ibm and microsoft and google. And i think there is some opportunity when some of the stocks sell off on investor reaction to earnings. As you mentioned there are some notable ones coming up this week including apple, amazon and linkedin. Relative to the cloud comment you made, i think that while its not a new trend, the magnitude of how significant Cloud Computing will be for the Tech Industry is very large. And i think that continues to provide opportunities looking forward. Some of the themes you picked up on there and you mentioned specifically intel and microsoft, ibm also goes in that category. And that is these big cap tech stocks are transitioning themselves. And the new faster, sexier growing businesses like cloud and serve just arent getting there fast enough to offset the weakness in pc. So what as an investor do you do . Do you have to have a longer time horizon with these stocks . We do tend to take a longer time horizon. Drilling in on specifically microsoft as one you mentioned has this transition ongoing. So its not as obvious and easy to get ones arms around as is amazon web services, which basically entered the Technology Business as a cloud company. So microsoft has this massive Premise Software business that will over time transition to cloud. For me and to us what the most important question is is whether that transition will be successful. There are a lot of tactical things that go around it, but i think microsoft is giving a lot of reasons to believe it will succeed in that transition and will make microsoft a more valuable business and good stock from these levels. I think theres opportunity in the recent weakness. Ken, just before we go on, can i ask you about the valuation of the private companies that you hold . We learned within the last couple of weeks that at the end of the First Quarter you actually cut as an organization the valuation on 12 of the Big Companies waiting to come to market worth over 1 billion. Uber down 6 , air bnb down 6 and you cut as an organization drop box by 16 . What happens moving forward . When you see microsoft or google behaving this way on the open market, is the temptation to cut those private valuations further . Because presumably thats one of the things that youre looking at. Youre right. One of the important inputs to that and its a more complex equation than the Public Markets because in the Public Markets theyre market to market every day. But we look at whats happening in the overall stock market, look at whats happening in Companies Similar to those companies. And we have a very rigorous approach to get to what we think is the right answer for what something is being or should be valued at at present. So the turbulence in the overall market with some of the higher growth tech stocks was impactful to that assessment earlier this year. A lot of stocks are ve bounded quite successfully. We focus on being more so than the public side and focus on being selective to what we think will be Large Companies over time. You will also be observing those Companies Like uber who is incentivizing people with paper stock. Is it your belief people within those companies are reflecting valuations that youre putting on what youre holding . Or is there in general a disconnect there . So on the private side as with tech broadly inclusive of the Public Markets, options and restricted stock are important ways to allow the employees incentives with what the overall companys missions are and their execution. So thats something that we look at. I think its something that hopefully does make the alignment work well over time. And i think that companies are getting increasingly smart as investors tend to recently have started looking more at stock comp and that being a bigger factor to how people do valuation analysis. Ken, back to your picks on earnings season. I find it interesting you like linkedin given last time it reported the stock tanked by 44 . Were you not spooked by that . So the tanking of 45 can often lead to opportunities in companies that one believes in. And i think at least from these levels i do believe in linkedin. It is a company that has a lot of or stock that has a lot of controversy around it right now. And i think, again, theres opportunity in that. I think its a unique combination of dominant internet platform, obviously on the Business Network side of things where its just entirely unparalleled. And sass business which is a dominant business on that side with the Talent Solutions business. There are also good Growth Opportunities around that. So i think its a really good growth story that has been kind of thrown out and that is causing opportunity right now. The other name i wanted to ask you about is facebook reporting on thursday. Makes sense it was hit hard on the back of those google or alphabet results. Obviously they also rely on advertisements and they compete with google. How as an investor do you separate the two . And are you a buyer of facebook into the quarter . I think there is a lot of overlap in similarity to google and facebooks end markets. But if you drill down just one level deeper, obviously facebook is on the social side which google doesnt participate much in. Googles on very much the search side still as the dominant business for it. What will be interesting Going Forward is the overlap theyll have on video advertising. And thats really a focus we have in terms of who will likely have the upper hand there, but i think theres a lot of room for both to continue growing strongly as they take share from others online and especially from offline including television and newspapers. So i think both have good growth ahead. At these levels i would favor google on its recent pullback for its more attractive valuation. See what happens this week. Ken, thank you. Ken allen is a Portfolio Manager at t. Roe price. Coming up, quote, outdated and losing momentum in china. One billionaire entrepreneur is calling out apple. And coming up tomorrow here on squawk on the street, we have a big interview for you, phil knight, the founder of nike, is speaking out for the very first time. Hes releasing a memoir this week. And he speaks to us here. Well be right back. Dont go to paris. Dont go to la. Dont go to tokyo. Live there. Hey, welcome come in, come in. When you airbnb, you have your own home. Make your bed. Cook. You know, the stuff you normally do. Wherever you go. Dont go there. Live there. Even if its just for a night. Fortunately weve got some bad news, used car prices in america appear to be sliding. Whats behind the drop . How far will it go . Does it Say Something about the economy . Find out at tradingnation. Cnbc. Com. A billionaire chinese internet entrepreneur and competitor to apple calling his big rival outdated among some of the fairly colorful descriptions at a conference in china. Were in beijing with that story. Take it away. Thanks so much, simon. Well, yet another Chinese Tech Company is setting its sights on apple. Formerly known as l. E. T. Tv is known here netflix of china for video streaming services. The founder is also branching out into other areas such as electric cars, drones and also smartphones. Last week he unveiled a whole host of new phones including the lamax 2 which is flagship phone comes in at 390 and showcases the companys video streaming services. He said that apples phones are outdated for the china market. This is what he had to say. Translator in china you can see that apple has already begun to lose the rapid sales growth momentum. One of the most porpt reasons is apples innovation has become extremely slow. For example, a month ago the apple launched iphone se, this is a product with very low level technology. They launched it in order to grow their customer base, in order to increase their profit margin. And if thats not enough, jai said that the company is also going to challenge tesla. At the beijing auto show he unveiled an electric car that has some driverless features. And he said that this car is going to be just as technologically advanced as the tesla x. But its going to eventually cost just about the sum of its parts. This is what he had to say. Translator in the next generation of mobile internet, a car is like a smartphone with four wheels. Its only a smart terminal compared with a smart tv or smartphone. The only difference is the situation its used for. And jai talking up his products, but at the same time the car still isnt in the market. And of course the phone still lags behind some of its chinese rivals as well as apple, which is the leader still in china. Back to you. Ms. Yoon, thank you very much. A lot of interest in that story. Now lets get to chicago to the cme group. Rick santelli has the Santelli Exchange as always. Good morning, sarah. Today we had the october october, the march read for new home sales, 511,000. That was four in a row over 500,000. But remember, in the summer of 05 we reached 1. 39 million. Id like to welcome my housing guest mark hanson. Mark, what did you think of todays number . And what do you think about housing in general . Well, other than being, you know, 11,000 light of consensus 522,000, weve been at or below 500,000 new home sales for eight straight years, rick. Its like watching rocks grow. In the resale market on the other hand where you have all that unorthodox demand that comes through, you have sales that arent off 60 from their prior peak. You have them to regain. But in the fundamental structure end user Housing Market which is the new home sales market they cant get going after trillions of fed capital and liquidity pumped into the system and trillions in debt loaded on to the system aimed largely at housing we cant get it going. And now, rick, prices are falling. If you take a look new home builder prices are down seven of the last ten months. This isnt nirvana. No, let me interrupt you there, mark. Uhhuh. Let me interrupt you a second. High end has been the rage for quite some time whether it was in Silicon Valley or new york. Now, we all know thats slowing a bit. But the real key is will that set the stage for all the other areas of housing . Your thoughts. Well, slowing a bit is the understatement of the year. In areas like south florida, miami, weve seen supply absolutely surge and demand plummet. Now prices are taking haircuts. Beautiful condos are going for 30 off what they were a year ago. In San Francisco, the heart of San Francisco where the 30 to 40 somethingyearold carpet baggers came in to make their fortune, who did make their fortune on paper, were seeing condo supply surge and demand plunge. Were talking 70 increases in condo supply and 50 reductions in demand leading to 25 or 30 reduction in list prices of condos. And its starting to infect the outlying areas like dade county and south florida. Now the bay area. Were seeing the high end luxury in new york city doing the same. We have a tops down problem here that started not coincidentally when fed funds futures started pricing in four rate hikes in 2016, middle of last year. In the last 20 seconds that we have, mark, quickly, what id like to know is in general is this now going to bring down the renters market, which has been on fire in terms of year over year percentage gains . Your final comment. It all depends where you go, but yeah, were real negative apartment rates. Largely because many of them followed the technology the Startup Technology and Bow Technology sectors around the country and put up buildings and apartments there. And i think were going to see vacancies start to rise. And condos planned for sale that cant sale come sell come on for rents further increasing supply against a backdrop of weakening demand. Apartment rents come up once a year for renewed leases which is great on the way up but bad on the way down. Mark, thank you. Always a pleasure to see what youre thinking on housing. Thanks, rick. Down 124 points on the dow now. Up next, life in the beijing auto show where the suv is making a big impact. Man, im glad aflac pays cash. Aflac isnt Major Medical enough . No whos gonna help cover the holes in their plans . Aflac like rising copays and deductibles. Aflac or help pay the mortgage . Or child care . Aflaaac and everyday expenses . Aflac learn about one day pay at aflac. Com boat blurlbrlblrlbr choose, choose, choose. But at bedtime . Why settle for this . Enter the sleep number bed, designed to let couples sleep together in individualized comfort. Sleepiq technology tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store. Save 1200 on the i10 mattress with purchase of Sleepiq Technology and flexfit3 adjustable base. Hurry ends saturday. Know better sleep, with sleep number. Youto get the help yourefar looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. As you can see, we are down about threequarters of 1 on the dow, down 134 points at this hour. The selloff is picking up speed here. Industrials are at the bottom of the heap along with energy companies, all major s p groups in the red except for consumer staples. Simon . Meantime, the beijing auto show kicks off, big focus on suvs there as a source of growth in the Worlds Largest car market. Phil lebeau is live from beijing with the very latest. In many senses, phil, similarities with whats happening in china with this country. Reporter very much so. I said for years that when you come over to china, what you notice right away is that the chinese auto buyer is a lot like the American Auto buyer and now thats really being seen in the way suvs are selling in this country. Look at the sales between the u. S. And china overall this year. In the First Quarter, china still outpacing the u. S. , down from where it was last year but still over 6 sales growth for the year. Suvs, thats whats driving sales in this country right now, up 42 overall, up 52 for the chinese brand suvs and they are making hay by pushing models that are lower priced than the gms, fords, mercedes models that are in this market. Thats putting some pressure on those International Competitors but when we caught up with the head of Product Development for gm, he said that the company is ready to adjust as it sees more competition on the lower end. Theres big demand for suvs of lower price models but theres also high quality demand in real value in the features and connectivity we offer on our suvs. We are going to differentiate ourselves on quality and connectivity and reliability and durability and we will be competitive in the price part of it, too. Reporter this is a big deal for general motors, for ford, really for almost every automaker. Think about this. In the First Quarter, gm earned more than 500 million in china, on pace to earn more than 2 billion here this year. Suvs are a big part of that. They are among the most profitable vehicles any automaker can sell. Phil lebeau from beijing, thank you very much. Lets send it over to jon fortt with a look at whats up next on squawk alley. Lot of pain in tech land after last year saw rough earnings for alphabet and microsoft take a look at go pro, not doing so well. Hp enterprise as well. Also looking ahead to apple earnings. Will that difficult trend continue or perhaps will there be a Silver Lining . Finally, lemonade out of lemons. Beyonce has lemonade over the weekend. Where the lessons for content and scarcity in all of that. Thats coming up on squawk alley. From bank of america to buy a new gym bag. Before earning 1 cash back everywhere, every time and 2 back at the grocery store. Even before he got 3 back on gas. Kenny used his bankamericard cash rewards credit card to join the wednesday night league. Because he loves to play hoops. Not jump through them. Thats the excitement of rewarding connections. Apply online or at a bank of america near you. Good morning. It is 8 00 a. M. In apple headquarters, 11 00 a. M. On wall street. Squawk alley is live. I see it i want it i dream it i work hard i own it i go hard i go hard get whats mine im a star good monday morning. Welcome to squawk alley. This morning we welcome back roger mcnamee, cofounder of elevation partners. Good morning. Dow down about 1 th32. First up, it is a big week for tech earnings. Apple and twitter report tomorrow. Facebook on wednesday. Amazon, linkedin on thursday. Thats just to name a few. After disappointing numbers from microsoft and alphabet last week drove techs lower. Is there cause for concern in tech . Roger, im not asking that everything be amd but there arent very many surprising to the upside. Again, i think the surprise is the people werent expecting this. Technology is all about product cycles. At the scale of the industry today, in order to really move the needle you have to have something huge like smartphones but now that smartphones are mature, we are between major product cycles and you know, its m v