Transcripts For CNBC Squawk On The Street 20160811

Going to be up at the open. It would appear at least judging from the futures. European markets have had more or less reasonably decent day. Good, love to see it again. Thanks everybody. Thats going to be a constant now. You see the one outlier is the ftse 100 in the uk. 10year note yield and crude oil, crude was a story yesterday going down, 10year note yield around 1. 5 and now crude up a bit but did seem to take the market down a bit yesterday. As it weakened in the session. Alibaba reporting its earnings this morning and they did top estimates. Overall revenues were up 59 year over year. Gross merchandise volume jumped 24 . Joe tsai is the executive vice chairman of alibaba and he joins us now from hong kong. Its always nice to have you, joe. Theres a long delay, i should let our viewers know. I will talk and then you talk. Not sure were going to be able to talk back and forth as much as we might want to. Let me start with this, joe. Of course a very strong quarter. You did report gmv, but thats going away as something youre going to tell us about. You will be focusing people on that top line growth. Which reaccelerated. To what do you attribute the reacceleration in Revenue Growth . Well, thanks, david for having me on the show. The acceleration of Revenue Growth is attributed to the fact that we are generating a lot of Value Proposition for our customers. The brands and merchants that are trading on our platform. And with the quarter that we just had, we generated 4. 8 billion of revenue thats 59 growth. Its the highest growth rate weve ever had since our time of the ipo. And were very, very pleased with that. And, obviously, a lot of work has gone into that. We specifically a couple places, number one is the platform is now transforming from simply a Distribution Platform where we help sellers sell to a place where brand and merchants are coming to the platform to engage directly with our consumers. We have 434 Million Consumers that are buying things on our platform. And that Value Proposition is very, very attractive to the Large Companies and as well as Small Businesses doing business on the platform. And the second reason is were just killing it on mobile. 75 of our gnv as well as 75 of the china retail marketplace revenues come from mobile. And this is weve come a long way since two years ago when people were concerned about that issue, but today, we have just reported that our monetization of mobile users has exceeded the monetization of the users on pc. Overall we had a really great quarter. We also have broken out the core Commerce Business where we are generating 2. 5 billion in operating income and that itself is growing at 38 . Yep. This is not counting the exciting stuff like Cloud Computing and Digital Media. So were very pleased with this quarter. As you said. You hit all the highlights. I dont need to come back to them again. Mobile monetization if i might as you pointed out there was some question, its a more robust experience people say when doing it on a pc conceivably. To what do you attribute the ability to get mobile monetization rates higher on mobile or monetization rates higher on mobile than on the pc . Sure. Just think about a user on a pc, they will have to get on the computer either at work or at home. But on a mobile device, theyre engaged with the internet 24 7. They could be riding a bus talking to friends, sitting at a restaurant, any time they can whip out a mobile phone and engage with the app and you know, you know, im talking about our tabo app which has weve reported in the last quarter 427 million monthly active users and the average user is opening up the app, seven times a day. So that kind of High Frequency engagement is helping us to monetize this user base. Yeah. You know you say seven times a day which gets me to another subject that i want to get on now, even though well come back to the broader numbers, which is, youre developing yourself as well as a Media Company in part because of that kind of engagemee engageme engagement. You guys are reporting segments so we can see how much youre investing and losing, why is that an area that you believe will become one that can be profitable for alibaba. Well, we see Digital Media and entertainment as a natural continuum to our core eCommerce Business. In the past, we have being able to satisfy consumer demand for material goods that are transacted on our platform. But today, when you look at the Chinese Consumer, beyond material goods they need to have spiritual nourishment if you will. And this is where entertainment comes in. And we feel that its very, very important for us to continue to satisfy our customers, our users, and provide good Entertainment Offerings and good media offerings to them and thats why we have invested in uc web, which is a mobile browser thats the number one mobile browser in china, and also has leadership in some parts of the emerging markets. We also acquired yoko to form the core part of the Digital Media and entertainment asset. We do media pretty well in this country to. A never ending stream of rumors that alibaba is interested, perhaps, in more of our media assets as well, as you grow that platform. Is that something that is true . Are you looking at or will you at some point look at u. S. Media assets to make that a more robust offering . Well, today, media is a global marketplace. What were focused on right now is the Chinese Consumer and what they want to watch. So in terms of the shows, the movies they want to watch, not only domestically produced shows, but also shows that are produced in the United States, so, of course, were interested always in acquiring good content and licensing good content from people that make great movies, great tv shows. But thats not the only part of the strategy. Really the focus that we want to put on is to invest in original ip, invest in professionally and User Generated Content on the you could platform. As i said media is a global marketplace. Joe, cramer, you got 434 million active users, 17,000, you are about the best were going to get on china. I have to come to you. We believe many of us here who are not bearish on china and believe in the government and what its trying to do to make the individual more empowered to spend, this to me, this number looks like not only are you executing well but the Chinese Government is successful or succeeding in trying to get the consumer to spend more. Can i read through that this may be the beginning of a turn where the consumer really is accelerating in china . Hey, jim. Great question. I think you really need to take a step back and not think about the chinese economy in a cyclical quarter to quarter way. In any given quarter there could be ups and downs. What were looking at is the long term trend, what is the long term trend. The chinese economy is shifting from a manufacturing economy to a consumption driven economy. And that is very, very good for alibaba as it plays to our strengths. So in that context, the Chinese Consumer the average household in china in aggregate there is 4. 6 trillion u. S. Dollars of net cash savings on the Balance Sheet. That means when you go to an average household they dont have a lot of mortgage debt. They have a lot of savings saved up because of real wage increases if the past few years and theyre ready to spend. Thats what weve seen on our platform. Joe, as you well know, we have a president ial election entering its last lets call it 90 days or so here in the United States. Im sure its a focus in china. Youre one of the leaders in the Business Community there. I would like you to listen to a sound bite from donald trump, the republican nominee, who joined us earlier on cnbc this morning, talking specifically about china and then get your take if youre willing to offer it in terms of your thoughts about his comments, and what the overall tone is that youre hearing from the other Business Leaders in china . P. You know, if china goes down to 7 its like a national catastrophe. Were going down now were 1. 2 , were going to be lower than that its looking like in the coming quarters. Think of it, china goes down to 7 and then what they do is they devalue their currency and take more of our business and they start going up again. Sure. But were like the whipping post the United States. People that dont understand the system, we have people that dont get it, and we are being ripped by many countries. China being the number one abuser. They do it better than anybody else. Joe . Okay. Sure. Number one abuser. Please respond. Give us sure. Ive tons of respect for mr. Trump but, you know, sitting here, i feel like china is the whipping post for the United States, and whats important to see is the overall context of u. S. China relations. What alibaba is doing is were the gateway to china so right now if youre an american manufacturer, american brand, and you want to access the china market you should come and talk to alibaba. Because we have a platform that can bring over 400 million Chinese Consumers to american businesses and thats very, very impressive. Thats very, very meaningful platform. And i just wanted to say that right now, we are working with many, Many American brands, procter gamble, apple, starbucks, theyre all want to come to our platform to engage with Chinese Consumers because china is a very, very big market. So i think the overall sentiment here is we want to reach out to american businesses, we want to make sure that theres no animosity and theres a lot of synergies and the two countries are symbiotic and we really need to look to the positive aspects of the future. And joe, finally, of course, shares of yahoo are going to be up today. People actually asking on twitter why is yahoo up. Clearly because they own 15 of alibaba, as you and we well know. Eventually, that 15 will be all of yahoo or whatever they choose to call the company. It will be a 40 ad company comprised solely of potentially ta stake. Many who believe that alibaba will eventually buy that stake back, those 384 million shares. Is that something that alibaba will be focused on . Sure. I think they call it remainco. So lets get this right. If yahoo sells the stake in alibaba, they would have to attract a very large tax liability. Its a taxable sale. But heres the problem. If we go and try to acquire the shares of remainco we will not be able to cancel our shares. They still remain outstanding shares. We would inherit that big tax liability. So, i have to ask myself, why would anybody in the world want to do that. Okay. That means i guess you dont want to do that, although i thought there was a way to do it in a taxfree manner, perhaps im incorrect in terms of buying the entire actual Investment Company itself. I think thats up to the yahoo board to figure out, tax efficient manner for us to engage. And so you know, we cant we have a business to run and we cant sit here try to think about all the strange tax contraptions. Joe. You are running the business well. Look forward as well to speaking at our delivering alpha conference not long from now. Joe tsai, executive vice chairman of alibaba joining us and there he is, keynote speaker on september 13th which will be very interesting. Joining us from hong kong after jim, of course, those very strong numbers from the company. Lot of times i have to do this, when you get the tremendous bookings a lot of news broken just now. I want you to just the bullets, yahoo given from what i thought, could happen here. If they can figure out a tax efficient structure they could engage but he said thats for them to figure out. Right. But its not i regard it as a situation i think the question for yahoo which is going to be what will be the discount be that those shares trade to, to the overall value. Im saying people are looking at yahoo makes sense. A correct read through. Could be more there. Also i felt that i know that he didnt necessarily want to point blank say, that china is doing better. You dont want to read through. But Chinese Consumer ready to spend and the shift is happening. 400 million people. He has a better read than walmart. A lot of people. Lot of people. Speaking of retail, jim and i will get to macys. You saw the stock is up rather sharply on better than expected even though the numbers themselves are not that great. But first we will get to carl from the olympics and, of course, another big night for team usa. And lets give you another look at futures which we typically like to do right now. See theres macys and alibaba. More squawk on the street right after this. Mapping the oceans. Where we explore. Protecting biodiversity. Everywhere we work. Defeating malaria. Improving energy efficiency. Developing more clean burning natural gas. My job . My job at exxonmobil . Turning algae into biofuels. Reducing Energy Poverty in the developing world. Making cars go further with less. Fueling the Global Economy. And you thought we just made the gas. Energy lives here. Guyhey nicole, happening here . This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at Td Ameritrade. Usa swimming continues to dominate in rio. Carl joins us live with the latest results. Carl . David, we try to answer your craving for swimming news. Katie ledecky, last night, anchors the 4 by 200 freestyle relay. U. S. Wins gold for the fifth time in the past six Olympic Games and ledecky now has more total medals than anyone else here competing in rio. She goes into preliminaries for the 800 meter freestyle later today. The showdown, Lochte Phelps against each other for the final time. This is kind of like when agassi and sampras faced each other for the final time. Phelps, of course, holds the world record in this event, gotten it eight times. Lochte two times. And lochte talked about what tonight means given all their history. You know, going up there and just racing him, its amazing. So definitely got to be a lot faster for tomorrow. I dont know about the bromance part, but you know, me and him, weve been racing since 2004, so we definitely created a good friendship and everything from that. So tomorrow its going to be fun. Finally, guys, tonight judo Kayla Harrison won gold in london, the first u. S. Olympian ever to win gold in judo. She looks to defend that today. But she could face her main rival mira agular of brazil. Later this hour we will talk about the business of Michael Phelps as we said yesterday, so dominant here in rio, and yet so close to retirement essentially. What does that mean for endorsers like under armor, like omega, when theyre thinking about how much to pay phelps. Thats coming up in 20 minutes. All right. Thank you, carl. Lochte has a new turn, on his back from the push off from the wall. Really cool. No Conference Calls to speak of. Im going to watch. You watch that. Up next, ready for your mad dash because thats whats coming up. Whats the value of capital . But whats it cost to modernize a School District . Whats Critical Thinking worth . A basketball costs about fourteen dollars. What does it cost to build a new sports arena . Whats team spirit worth . A Telecommunications System isnt cheap. Whats it worth to talk to your mom . Whats the value of one more tree . A forest . A walk in the woods . Whats the value of art . Art open to the public. The value of capital is to create, not just wealth, but things that matter. Morgan stanley. Capital creates change. Across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, Creative Business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. Let us help grow your companys tomorrow today at business. Ny. Gov agar. We are ready here on thursday, of course, to get the opening bell under way in about seven minutes. First the mad dash. Talk macys. Okay. This is really important, david. There have been a series of what i regard as guide down, guide down, guide down, until you get the guide down too far. Thats what happened to macys. They guided down and guided down. Finally beat. In other words, im not saying things have gotten dramatically better but doing selfhelp. Closing 100 stores. 15 . 100 stores. 728 stores out. Whats interesting, these stores are making money. So what theyre saying is were going for profitability. And were going for profitability in a world where we know that amazon is gunning for us, walmart is gunning, doesnt matter. Theyre getting their act together a little better with 2. 0 of omni channel which is good. Terry lundgren trying to leave on the highest note possible, taking out a lot of costs. I have to tell you the progression, we always want to hear how the progression of sales are within the quarter, theyre like this, okay. Right. And the magic duck came down. Apparel is better. It so looks like even though ralph lauren said that america wasnt that good in apparel, even though we know that kors said america not that good in apparel, coach said not that good, the fact is the apparel stocks will fly. Should they fly . All we know is that the inventory is cleaner than i expected. You will see a read. Acceleration. Even though it is were talking 2 samestore sales declines but that was better than anticipated. Guide down, guide down. Youre not getting this. But what youre hearing is cleaner inventories and good backtoschool season. Back to school season, you should read pbh, vf corp not doing as well as pbh but those are the ones that people will go to. All i can tell you, david, this stock was twice of what its valued at coming in this morning last year. These stocks great piece, jpmorgan, calling this a great trade long into the holidays this week when the stock was right here. Nice call. I would like to point out good analysts. But this is the group is going to travel because it looks like the consumer is a little stronger than we thought. The weather went better. More porous or not as bad. Dollar year over year not a strong dollar story. You cant use that. Im think doing i us a pen to paper and look at tiffany again. Almost like that. You can almost look and say that whole strong dollar story is evaporating because look at the dollar in year over year. Its not that important. And by the way, latin american tourists not as bad as we thought. Read the read through from disney when bob iger talked about that. Oversold bounce day one. Got it. More to look at including macys, of course, and alibaba. We got a lot more squawk on the street right after this. Youre here to buy a car. Why dont you let me. And me. Help you out . Youre gonna hear what i say. I love taking stuff apart and building new things out of it. Anne pals my most advanced annedroid. [gasps] this is awesome. Oh anne you havent seen anything yet. Announcer give your Cardboard Box another life. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Opening bell going to ring a minute from now on this thursday. Got some news today, jim. This is a typically quiet time of the year. Of course the alibaba earnings, macys earnings, at the tail end here. But what in your mind is a key that we should be watching as well . Im still going to focus on oil because i feel that whats happened we had the same kind of fakeout again earlier in this week, we heard that venezuela and some of the other opec countries wanted to call. It doesnt matter. Its nonsense. All that matters is that the saudis will pump as much as they can because if they cut back someone else will take their share, thank you rusty brazzon going over this from rbn. If oil turns down again, other than a couple retailers that had genuine good news today will give back. Yesterday turned, it will turn again. If oil goes down. So were back to oil totally trapped. Look, these retailers were oversold and theyre going to catch a bid, particularly because theres a big rta. Its an etf. They all go. But be aware if oil if the saudis are in charge theyre not done. Theyre not going to stop. They can pump maybe even 11 Million Barrels a day. Here at the big board, veritiv, corporation, a business to business distributor. At the nasdaq, the challenge athletes foundation, nonprofit supporting people with physical challenges. You see it, the realtime exchange back at hq. A lot more green than red on the board right now. Of course be as we are looking for a higher open this morning. Jim, you mentioned oil, of course, perhaps being a key. A couple apple notes that are positive but its really all luke warm positive, ubs saying, rbc saying theres going to be more units sold. That stock stalled and led to the beginning of the decline in the nasdaq which was kind of happening at the same time as you got oil rollover. So you are going to see that. David i have to tell you apple had a rally since the earnings. When on mad money in 93 saying its not the end of the world. Everyone was telling him it was. He kept his head up. The alibaba interview is the most important thing thats happened. So many people david, so negative on china, and i totally get that. Its a communist country. We dont have a good read at all on it. Jd reported good numbers, bob reported good numbers. Starbucks, Howard Schultz has said china is strong. Ed young, said china is really strong. We know by the way, that hong kong has been very good of late. Take a look at what disney said about hong kong disney. And yet everyone is so cynical. I look at the people who are genuinely like to slam me, kind of amp up their slamming when i Say Something good about china, not talking politics but maybe its better. Listen, of course he joe tsai executive vice chairman discussed the transition to a consumer led economy which will take some time to accomplish but its a focus of policy makers there. It is amazing to me, people using a mobile device, check tabo seven times a day. Seven times a day. But remember what he said they have overall in terms of annual active buyers, 434 million up 18 year over year and mobile, of course, is but david this is like, for instance, say we were with my wife, okay, while im talking to you, i would have gone to one kings lane and gone to ru whatever and restoration, hardware, all of that i would have ordered while talking to you and outfitted my whole bedroom. She can do that. Does she make eye contact while doing it . Capable of doing it without even looking. Thats what they do. Seven times a day all done within the context of the talking to the boxes, listening to their wives an having a conversation with you. I just just now i just ordered a bedroom i just ordered night tables. Thats what they do. Who explained this to me is strauss zelnick. I said how can there be so many hours of grand theft auto. Theyre like working at dinner, watching a game. And david, it has to do with multitasking and you and i are singularly focused and still have these things. These are nonexistent. These are like thats a dinosaur and a stegasaurus like when dinosaurs ruled the world. No more. Jurassic cramer. Cramer faber right here. Our own jurassic park. Joe how many do you during this that ive given you, there have been like 100 millen orders placed for i dont know of course. Pokemon go. Not just alibaba. We talked about the Successful Transition facebook managed to do in its business over the last couple years making mobile the key. Amazon, of course, has managed to do that. Yelp yesterday with a good number. Point of intent. Youre looking and you i mean yeah. Its obvious, though, isnt it. By the way, i use this occasionally. Sometimes i pull it out of my pocket. See you can make a phone call with it, by the way. I dont know how to do that anymore. Whats interesting, intel made an app artificial intelligence. What thats about, them knowing what youre about to order before you order it. Thats another thing thats happening. So youre orderering quickly because they know what youre ordering. Im glad you brought up a. I. Its so important and facebook and google and amazon. They are so focused on a. I. So focused on it on facebook. What its going to mean and it depends when the machines will get smarter than us or not. They still say its like 2029. Its catching up to us. What they do know is like they have its called intent. Point of intent is google. Alphabet. The notion of intent zishg burg is focused on the idea he can figure out while youre formulating the idea where you want to go and, of course, we all see it in alphabet. I was looking at the number of units of a shake shack versus panera. It finishes your sentence for you. Artificial intelligence is something Brian Cra Zan itch is focused on and the acquisition shows me hes thinking of the future, not the past. Back to macys because its up 15 . Did it in the mad dash. I love this quote. Sometimes i like these press releases where they come up with quotes. Weve been saying a setback is a setback for a comeback. And we now believe we are set up well to proceed to a comeback. Well look, i see you and raise you with a Deutsche Bank buy recommendation of perrigo. Ideal setup from here. Why . Because its so bad. I mean, who are you kidding. Cant make up this stuff. Ideal setup. Being down by four touchdowns going into the half and say weve got them where we want them. They are thats right. Overly confident, now going to be able to comeback. Youre making a phone call or receiving one. Thats my doctor. Ill call her back. Call back. Perrigo after a bad day yesterday is up slightly. Shake shack talking about earlier. I dont like to spend too much on it, it is a 900 Million Company but we like their food, down 4 . It needed to be a 900 million because david, you had the comparison here, doing 100,000 a week. So we try to find out comparison of a Public Company like that. Panera does 48,000. Thats the most i could find. Use a panera comparison the average shake shack should be worth 5 million but going into yesterday, into the number it was worth 14 million. Right. David, on the conference call, there was actual questioning about the way that the company is kind of calculating how labor will not cost them as much as people think. They also use a very small comp group. Using very few stores in their comp, 23. I guess what im saying the skepticism here is increasing. Just when i think that the company as it goes down, rationale to buy it. Right. Because it is getting cheaper and very popular, but i have to tell you, the skepticism here is very, very big because in the end, theres just no way you can value a unit at 14 million. You cant get there. Air ritholtz matically you cant get there in terms of labor saves. That was mentioned in the call sdmm i think a very in i think a moment where you had the question do the analysts not like this. Dont cut back too much because they have to keep those clean. They have to do remodeling, more expensive than we thought. The story did not the story had a lot of [ inaudible ] on it. Move to kohls because the etf that tracks retail is up about 3 . Or one of them that tracks retail. Kohls youve followed for some time and positive on. I think youve been positive on. I felt that both macys and kohls had gotten oversold. Look they cut the forecast but here, they give you this line, encouraged by the performance of juniors and young men. Now juniors and young mens i am going to tell you again, a pvh read through. But the pbh read through. Nordstroms trading up in advance of what they will say tonight and jc penney in advance of tomorrow. It got so bad it was hard to do right. What is it, down so low that look up to me. Down so low it looked up to me. These are not stooge companies. They are companies i mean nordstrom happens to be one of the Great Service Oriented Companies but they were hurt by amazon. Everyone has been hurt by amazon. The consumer got better, the weather got a little better. And youre going to see a read through thats a little more positive. But, you know, ill tell you one that im looking at. Please. Kind of bizarre. Yes. Im looking at furniture. Furniture. Restoration and hardware. Okay. Lot of insider buying. Stock is down from 100. 25 seemed to have held. Furniture seems to be doing better. The acquisition by of mattress firm. Earlier by stein hoff. How wayfair has come down. People are cooling, cooling on online buying of furniture. Next thing you know you have a squeeze. Finally, speaking of insider buying, this guy hogue at netflix, really wants to own a lot more of this thing. He bought another 300,000 shares between august 8th and 9th. Bought 600 shares towards the end of july. This man wants to own this stock. Tell you something about jay hogue. Thats a lot. 900,000 squares. Tough businessman. I have worked with jay. Hes brilliant. Hes tough. Dont take the other side of his trade. Thats well said. To mr. Pisani who knows a thing or two about trades. The important thing about today slightly mixed opening but tech is the leadership group, has been for the last three weeks. And what a surprise, retailers are doing well today. Now the important thing and i hope you watched terry lundgren, so wonderful to watch him every day address the retail position and how overstored we are. My favorite metric of the day, terry brought this up, how overstored are we, this will tell you everything. 7. 3 square feet of retail per person in the United States. What does that mean . In france its 1. 7 square feet and in the uk 1. 3 and japan 1. 7. Terry said this is ridiculous. Five times the retail space in the United States compared to the rest of the world. And that has to change. Hes taking leadership. Thats why the stock is up. Theyre starting to address the overstored nature of the u. S. Economy. Macys announcing at some point going to close 100 of the 728 stores that they have. Gap already had earlier announced that they were going to be closing under performing stores as well. 3200. Weve seen smaller closings from pier 1, kohls, office depot. Macys is taking a leadership role here. You will see more announcements from other companies about accelerated store closinings an the reason because of the samestore sales. Look at the numbers for the Second Quarter and whats been going on here. Macys down 2 , kohls down 1. 8 . Kors down 7. 6 . Fossil down 3 . These are continuing down numbers from quarter over quarter. Year over year. And the First Quarter was even worse over all here. So heres your retail earnings numbers. Macys beat, reaffirmed their guidance. Kohls beat. Cut their fullyear forecast their numbers are above street consensus and thats why kohls is to the upside. A little glow here from everybody else. The apparel makers on the upside. Theyll be reporting later. Finally want to mention, shares of peak energy, talking about getting all the cash flow under control, theyre exiting a big position in the barnett shale. Those wells, theyre going to transfer the ownership elsewhere. They had significant negative cash flow. Theyre going to be paying williams essentially to get out of a contract for that, so paying to get better cash flow. Thats what its all about right now. Chesapeake fragds trading up about 3 . Back to you. Yeah. 52week low on that stock, 1. 50. I remember when they told me about the barnett, he found the barnett, and how rich the barnett was. But the decline rate was rather extraordinary. So its not a bad move. The decline rate in eagle ford is stronger than i thought too. Another area. Stronger being more more of a decline faster. I think look, aubrie mcclen nonnever speak ill, but i had managed my show is not about friends but money. I had a long relationship with aubrie and he built that company being early on every shale, marcellus, utica, barnett but the shales run out and people have to remember that. Thats one of the reasons why people believe ult hayley oil has ultimately oil has to bottom. Shals run out and a fast level of demotion versus offshore. See so much money offshore because they last forever. All right. Over to the bond pits, Rick Santelli is at the cme group in chicago. Rick . Well, david, if you look just at where yields are, versus where they closed yesterday, not a lot of difference. But when you look at a oneweek chart of 30year bonds and i dont normally put a lot of technical credence in intraday. I like closes. The most efficient price of the day. But you do garner the 234 on the intraday definitely is the top and weve shaved 10 basis points and very moderate type trade. Its noteworthy, longest maturity, the final auction this week, 15 billion, well be talking about it at 1 00 eastern. One month charts all the way through here, we will look at the main character at least this week in my opinion, lets look at the 10year guild. It has adrift. Lost so many basis points for what many consider obvious reasons. If you look at the rest of the curve, its come back from single digit yields like the twoyear and the threeyear. We know yesterdays failed reverse auction is something fresh in investors minds. Look at our 10s not as aggressive, more ranges, but with the volatility postbrexit were going nowhere fast to the upside even though volatility has moderated a bit in tight ranges as of late. Bunds, bunds are more similar to what were seeing in guiiltss a the tops of 30year zero jumps out of you. Thats the dividing line. Final chart the dollar index. Can go nowhere quickly with rates moving the way they have. David, back to you. Thank you very much, Rick Santelli. Coming up after the break, were going to have a lot more from Carl Quintanilla in rio. Carl . David, one of the final showdowns tonight for Michael Phelps. When we come back a look at the legacy of the most decorated olympian of all time and what it means for his business as an endorsee when squawk on the street continues live from rio. What is freedom . Yes, its riding a horse across fields and stuff. But its mostly getting to watch your directv with unlimited data from at t. Were setting families free. So they can stream away and not squabble over whos using how much. So go, family. Watch. Freedom. Ha seize the data get our best unlimited plan ever so you can stream and surf all you want. With unlimited data from at t welcome back from rio. He is the most decorated olympian of all time, 25 medals and counting, multimilliondollar brand. How big can Michael Phelps brand get with his olympic career is over. As Michael Phelps continues his quest for more gold in rio, his teammates look on in awe. I kind of look at him like you have 20 gold medals and i have one and, you know, its just hes awesome. Reporter a career nothing short of legendary. With more gold medals than some countries like india and mexico, have ever collected. Hes so knowledgeable about swimming and hes not afraid to share that knowledge with anyone that asks. And so its always good to talk to him about stuff. In and out of the pool. Reporter cashing in on his success may have limits. Not only because hes in his final games but due to personal setbacks. Dont you have anything to say, like the dui which resulted in a six month suspension of swimming in 2014. You had the 2001 bong photo incident which lost a few clients including kelloggs famously but i think the 2014 drunk driving is so fresh, you know, at the time he was 29 years old, hes not a young boy anymore, so these are real serious mistakes to make, no matter how many gold medals he wins in rio. Reporter phelps primary endorsement deals with under armor and omegaomega. Dr. Rice of st. Louis university, say his marketability may be limited if not because of his past ironically because he is an olympici openen. The reason Michael Phelps is not getting rory mcelroy Jordan Spieth money, theyre in the lime light every year. If we believe this is Michael Phelps last olympics, if he has swum his last olympics he will not be in the limelight going forward. We will see if that ends up being true. Phelps back in the pool for one of his final olympic races, facing off against ryan lochte in the 200 meter individual medley. A lot said about his maturation as a man, 2 month old son boomer at the games. We will see if he can leverage this amazing success from the past dozen or more years into Financial Success down the road. It will be heck of a race tonight and, of course, thats the interesting story on phelps overall an hit potential maturation as you say, carl, thank you. We will be seeing you again in the next hour. Up next, though, we have stop trading with jim. [announcer] is it a force of nature . Or a sales event . The summer of audi sales event is here. Get up to a 5,000 bonus on select audi models. Another day, another valeant story. The wall street journal reporting the u. S. Attorney is looking into the possibility of Insurance Fraud involving fila dor which was not technically a unit of valeant but gets ply cated. It could be an issue. The last big fraud we had in u. S. Attorney investigation was in july of 2002, a situation for bristolmyers. Stock had fallen from 50, when they realize told you there was channel stuff not unlike valeant saying in the hundreds to 21 bristolmyers. Thats where you found out about the federal investigation. The stock went to 30. In other words, when you find out about the federal investigation, it tends to be at the end, not at the beginning. If you want to sell val nts, sell valeant off the Balance Sheet and the possibility that the expectations are too high set by jo papa. I would not sell it off of this investigation which im surprised hasnt happened already. It was somewhat unbelievable that you could have all that, all the stuff that citron pointed out and to have no investigation before, the man who ultimately what happened to bristolmyers they went after the cfo and indicted him, no conviction and the company itself never ended up shareholders never got hurt because Chris Christie decided that bristolmyers should be spared. He was the he happened to be the u. S. Attorney. Criminal investigations or indictments if they come for Financial Institutions spell doom but that seemed to change that was before Arthur Anderson certainly. In this case it wouldnt seem to be sell it because the expectations too high the Balance Sheet is not good. But dont sell it because you think its going to be put out of business. All right. What else show. Just looking, im studying for tomorrow already. We didnt get to half of the things i wanted to cover. Brinker a better than expected quarter. You know, hamburger churn, right. Hamburger churn. Brinker was chilis did better than i thought, shack a little worse. Shack is to be continued. Theres a lot more there. Many more secondary offerings, cliffs natural, giant secondary offering. We know they want to clean up that Balance Sheet. Everybody is using this equity market to clean up the Balance Sheet and sell. Agreed. Buffalo, buffalo, my pet company. Yeah. Blue buff, better than expected quarter. Should be up more. See you back here tomorrow morning. No friday off for you. No. Im just getting started. Speak of fast food because he does love it, Donald Trumps bold comments on cnbc this morning. We will break it down with our expert panel and macys on the move after earnings. We will hear what Ceo Terry Lundgren has planned. More squawk on the street straight ahead. You can call me good morning. Welcome back to squawk on the street. Im sara eisen with david faber and Kayla Tausche live at post nine from the new york stock exchange. Carl quintanilla with us from rio this morning. He will be joining us in a moment. Show you whats happening with the markets. Weve got a rally going on, on wall street. It is building throughout this morning. The dow is currently up 74 points. S p 500 up 0. 3 . The nasdaq up 0. 4 . Strength in retailers like macys and kohls, those earnings well received. Wti crude is jumping a bit here up above 42 a barrel. Our road map starts with donald trump speaking this morning on squawk box as expected he made some bold statements. Well break them down. That blowout quarter for macys, kohls reporting a beat, both stocks are surging. Team usa continues its winning streak. We will go live to rio for the highlights. Start with politics as we mentioned, republican president ial nominee donald trump speaking out this morning on squawk box with our own becky quick and becky joins us from headquarters with the highlights. Good morning, sara, good morning everybody. As sara was talking about this has been a big week for both campaigns when it comes to focusing on the economy. Trump started out the week on monday in detroit, michigan, unveiling additional plans of things he wants to be talking about, issues he would like to focus on and Hillary Clinton is going to be speaking later today in warren michigan, coming up at 1 15 eastern time. We will be taking that live here on cnbc. Trump this morning laid out some additional plans for us. We talked about trade, we talked about taxes, we talked about china, we also got to Interest Rates and trump points out that Interest Rates are low right now which makes it the right time to borrow. Normally you would say you want to reduce your debt and i like to reduce debt too as much as anybody. The problem is you a military problem, you have an infrastructure problem, tremendous infrastructure problem and other problems. And also, the asset is your rates are so low. Whats going to happen when the rate eventually will go up, and you cant borrow, you absolutely cant borrow because its too expensive. It will destroy our Balance Sheet, totally destroy the Balance Sheet. This is the time to borrow. So much coverage not the but everything but. At times donald trump went off message from the economic issues, times he made missteps, these have been missteps critics have pounced over and what youre seeing in the headlines every day. This morning donald trump didnt back down from any of those controversial statements. You could say he doubled down. On the Second Amendment, everybody came to my defense because there was nothing said wrong. Im talking about the power of the voter. And nothing was said wrong. Only the haters tried to grab on to that one and it was very unsuccessful. Were talking about it has tremendous support and trems does power at the voting booth and that was all. As far as mr. Khan, its been said by everybody, i think thats been very well talked about. And thats been put to bed a long time ago. Of course its not just the haters and the critics, its many of the people who support donald trump the most strongly, who have also begged him practically to stay on message with the economy, to not get dragged into other issues. In the last week weve heard from carl icahn, steve forbes and larry kudlow all who not only plan to vote for donald trump and advise him, but icahn told wapner he would like to raise millions for him. They said the other issues, these controversial statements have been missteps for him and his campaign. But trump says he is not changing his ways. All i do is tell the truth. Im a truth teller. All i do is tell the truth. And if at the end of 90 days, i fall in short because im somewhat politically correct, even though im supposed to be the smart one and even though im supposed to have a lot of good ideas, its okay. I go back to a very good way of life. Its not what im looking to do. I think were going to have a victory, but well see. Of course big question comes in the polls, there have been a lot of polls recently that have shown donald trump losing ground. There was one in particular from the New York Times that showed republican women at this point key demographic only about 7 plan to vote 72 plan to vote for him. Mitt romney won 92 p donald trump says the pollsters are missing people who are showing up at his rally. A lot of things have happened. We saw that happen with brexit too but thats a key takeaway from what we were talking about this morning. What did he say, he will take a long vacation if it doesnt work out . Ill take a long vacation. I want this to work out. I think its going to work out. I think we will see a victory. But he said i can do a vacation, i have a nice life and i can go back to that too. Great interview. We enjoyed watching it this morning. Becky quick thank you for summarizing it. We will be monitoring Donald Trumps speech this morning. Hes talking before the National Association of Home Builders at 10 30 a. M. We will bring you news as it develops and taking live Hillary Clinton speech in detroit this afternoon on the economy. Lets talk about all of this. Right now from washington, veteran democratic strategist and former Clinton White house aides David Goodfriend who is also a surrogate we should say for the Clinton Campaign and with us at post nine, politico chief economics correspondent and cnbc contributor ben white. On the big theme this morning, about trumps spending on infrastructure, hes got grand ambitions an when he says that our airports are in need of an upgrade, i think a lot of americans can agree with him but hasnt president obama spent the last six years trying to persuade republicans of just that point . Well, he has. And republicans like to criticize obamas systtimulus a waste and boondoggle and something that didnt help the economy. Trump sound likes a democrat who wants to take advantage of low Interest Rates to spend money on infrastructure. Perfectly good idea. Republicans typically dont like it and dont want more debt. 19 trillion. Dont want more spending. Thats something that trump can say would be appealing to voters but as becky pointed out it gets lost for trump in some of the nonsense he says and the fact that he wants us to believe he wasnt talking about Second Amendment people taking into their own hands the situation of Hillary Clinton wins, ridiculous. Nobody really buys it. He gets losts in that stuff and so many things that his economic message gets blown away and were not talking about it that much. We should be. This is cnbc so we can really dive in deep. Sure. On the economy on these issues. The borrow and invest, thats like paul krugman. This is populism, Donald Trumps populism which worries some democrats. This is why they think that, you know, maybe he has some appeal to blue collar swing voters in rust belt states and democrats who really do believe that we havent spent enough and invested enough in this country. He does risk losing some republicans but that part of Donald Trumps message is probably going to resonate. What you will hear Hillary Clinton talk about today in michigan, hes for that, but also for giant tax cuts for the wealthy. Thats not such a great idea. So david, i mean the question here to you is, she supports massive Infrastructure Spending as well. She also, though, wants to raise taxes on the wealthy to help pay for it. So is she the more fiscally conservative candidate . Well certainly from a budget standpoint, moodys analytics said the clinton plan would not add to the deficit or debt and that is significant. So yes, in that sense, if youre both projobs, proworking class, proInfrastructure Spending but care about deficits, Hillary Clinton measures up better than donald trump who has said in other context, i love debt. I love debt. Says donald trump. So that would be a wedge issue for some independents and some republicans who do care about the deficit and want it see more Infrastructure Spending. To my colleagues point from politico, the congress has shown, the republicans in the congress, have shown a reluctance to do that kind of tax and spend so i think what we might see happening under a Clinton Presidency and a first 100 days, is a deal. Lets say paul ryan wants to do tax reform. Hillary clinton as president might say i will meet you at tax reform, lets do that, but i want to include some Infrastructure Spending on my first 100 days. I think. This is me a talking. Not the campaign. I believe thats a possibility under a Clinton Presidency and i think republicans in the house want under paul ryans leadership would want to do deals with a president clinton. By contrast, you see an awful lot of fracturing between republicans and donald trump on these very issues. There are republicans who are refusing to endorse donald trump bartley because of his outlandish statements but because he is not sticking to Republican Party orthodoxy on a lot of these economic messages. David, how hard is it to predict the feasibility of either of these plans without knowing what the makeup of congress will be come november . Theres a twofold answer to your question. One is, somebody running for president is appealing to the electorate at large. Heres what i want to do. With a big enough margin, that person will have a mandate that congress, they just want to get reelected after all, they have to listen to. I think youre seeing previews of that right now in the number of republicans in the house starting to endorse Hillary Clinton which is very unusual. So i do think that theres a possibility that Hillary Clinton comes in with a mandate. After all, donald trump is saying we need to improve infrastructure too. Theres very little distance between the candidates there. I believe that theres progress to be made in congress in a Clinton Presidency on that front. Now, you also have republicans in congress who will never ever, ever agree to pay for Infrastructure Spending with taxes. Thats those votes are always going to be out of reach to Hillary Clinton. The real question is whether or not moderate republicans and frankly i believe the democratic majority in the senate would be enough to get these plans through and i believe they would be. Because i believe shes going to come in with a mandate. Turn to ben for the final word. I mean, to that question is there given what trump is talking about and the fact that it has not been anything focus of republicans over time, in terms of deficit spending, can he change the debate at all or get them to conceivably consider something that has been theyve been quiet and he can to a degree. If Hillary Clinton does win and particularly if democrats take the senate and republicans sustain losses in the house, i think they would be more inclined to listen to the voters, support for Infrastructure Spending and back off some of this stuff saying we cant spend any more money on our country. I think theres a lot of that message thats gotten through. I think the other guest is right, that theres an opportunity and a Clinton White house for a deal on a big Infrastructure Spending plan, plus a Corporate Tax reform plan. The problem is, the left doesnt like Corporate Tax reform if it means less revenue so they would have to figure out a way to spin it to the left this is not an overall lowering taxes on corporations. If they can do that theres actually unbelievably a possibility that washington could produce some economically significant legislation in the beginning of 2017 wouldnt that be a thrilling situation. Yeah. Amen. Thats what we like. A good old debate on economic issues. Thank you very much. David goodfriend and ben white. Make sure to keep it here on cnbc because we will have live coverage of Hillary Clintons speech that is today at 1 15 p. M. Eastern time. Well, we had another very exciting night in rio. Lets get out to carl for a countdown on all those medals team usa is racking up. He joins us from rio. Carl . Hey, david. Not every morning get to start with fencing but thats what well do as daryl homer, 26 years old, takes silver in the individual saber. Its the first silver in 112 years and the first time that u. S. Has medaled in this event since 1984 when we got bronze. He fell in love with fencing when he saw a picture of fencers in a childrens book. Womens gymnastics, the allaround, simone biles, is it hers to lose. Aly raisman appears to be the only real threat here. She hasnt lost this event since 2013. Finally guys, right now playing is golf. The u. S. , the only delegation to send more than two golf eers wi four, bubba watson, Rickie Fowler and a couple others. 72 hole individual stroke play. There is no cut. And a tie is settled with a threehole playoff. Being played on a nature preser preserve. Thats going to be happening later on today. Tonight rowing, judo and the marquee event will be swimming. A very busy day six here in rio. Carl, how about kristin armstrong, what a story, are people talking about her . Amazing. I mean cycling doesnt get enough attention. But to win gold in three in the same individual event, three straight times, is basically hardly ever been done. Only eight times in the history of the olympics. So shes getting a lot of attention and deservedly so. Before her 43rd birthday. Amen, baby. Amen to your 40s. Well, i mean im past those but still, its good for old people. Thanks, carl. See you soon. All right. When we return macys and kohls surging on big earnings beats. Well dig through the numbers straight ahead and an inside look at the health of banking and the u. S. Consumer chase Consumer Banking ceo barry somers will join us. More ahead on squawk on the street. At ally bank, no branches equals great rates. Its a fact. Kind of like bill splitting equals nitpicking. But i only had a salad. It was a buffalo chicken salad. Salad. Alibaba reporting earnings ahead of wall street expectations. The giant Ecommerce Company reporting 434 million annual active users, up 18 from a year ago. Overall revenue 59 higher than one year ago. And that is an acceleration, a significant one quarter over quarter. We did speak to alibabas executive vice chairman joe tsai on the program and asked him as well about that key issue on the campaign trail between china and the u. S. What are his thoughts on candidate donald trump. I have tons of respect for mr. Trump but, you know, sitting here, i feel like china is the whipping post for the United States. And whats important to see is the overall context of u. S. china relations. Of course mr. Trump earlier on cnbc making comments about china and its use of currency devaluations to continue to prop up its economy. You may have noticed this morning that shares of yahoo are higher. In fact higher than the day they announced the plans for the sale of the core business because really the most important asset at yahoo is its 15 ownership of alibaba, 384 million shares. Which under the current plan will be placed in what will be an Investment Company once core business is sold to verizon, potentially the yahoo japan stake is disposed of in some manner. What will happen then . Some speculate that alibaba would want to buy that Investment Company in order to take control of its own shares. Heres what mr. Tsai said when i asked him about that possibility. If yahoo sells the stake in alibaba they would have to attract a very large tax liability. Its a taxable sale. But heres the problem. If we go and try to acquire the shares of remainco, we will not be able to cancel our shares. They still remain outstanding shares. And we would inherit that big tax liability. So i have to ask myself, why would anybody in the world want to do that. I think thats up to the yahoo board to figure out a tax efficient manner for us to engage. And so, you know, we have a business to run and we cant sit here trying to think about all the strange tax contraptions. I should point out that a couple of large yahoo shareholders tell me they believe that if, in fact, alibaba were to do that very transaction, the shares would still be treated as retired, if you will. Because they would own the shares themselves. So they would not perhaps be counted by many of their shareholders. Well see. Speaking of joe tsai, he will join us live later this year. Actually about a month from now, delivering alpha along with big names such as treasury secretary jack lew, ray dalio, carl icahn, steven schwartzman, look at that lineup, ladies. Isnt that something. They will be here, tsai in town . Yes. He will be with me on stage. A little later this year. Usually in the summer. It is. Ike we changed it so we i think we changed it to get bigger names if it was even possible to do so. All right. It is also a big day for retail earnings, kohls and macys reporting earnings that beat the street. Courtney reagan joins us with reports lifting the whole sector. Definitely. The Second Quarter is looking a lot better for Department Stores than what we saw in the First Quarter of the year. Macys reports the sixth straight comparable sales drop but it wasnt as bad as feared and the retailer says sales improved each month of the quarter successively. The Department Store beat earnings expectations by 9 cents, revenue above consensus and reiterating its full year guidance for both earnings and sales. Macys is also making some moves to close more stores. It will close 100 of its 728 stores. Most of which are currently cash flow positive. But macys Ceo Terry Lundgren says his company isnt one to sit still. Aggressive stances the right ones to make when the industry is going through major changes and right now theres too many stores. In the United States, theres 7. 3 square feet per human being of retail space. Okay. Thats ridiculous when you consider that in the uk its 1. 3 and in france its 1. 7 and japan 1. 7. We have 5. 5 times the number of retail physical locations in america per capita than any other country in the world. There has to be a rationalization and were not waiting longer. Were taking the stance, were going to have still have as courtney said, we will have over 530 stores in all the key markets. Macys is considering alternative for four large Flagship Stores and San Francisco mens store for possibility redevelopment. Macys will increase its vendor shops within the stores it keeps and continue to infuse technology both in store and online. Now investors like it. Shares are on pace for macys for the biggest daily percentage gain since 2009. Up almost 12. 5 right now. Pulling down even a little bit from what we had seen this morning. A long trading day to go. Kohls are better than feared. They beat by a wide margin, 1. 22 versus 1. 03. Comp sales but matched estimates, kohls cut its full year forecast but the street anticipated that move. Kohls shares are up 12 . Inventory hitting better levels than the retailer planned and that is improving fwros margins for the first time in five quarters. Kohls seeing strength in juniors and young mens, good news for back to school, first couple minutes of the call for macys, the cfo said the same thing, strength in apparel nearly across the board. Maybe those warm temperatures for the summer seasonably warm, finally started to help retail. Sara . Yeah. Certainly double digit moves for both of those stocks higher. They have a long way to go to make up some of the losses. Courtney reagan, thank you. Thank you. When we return a look at the health of the Banking Sector with the ceo of chase Consumer Banking, Barry Sommers joining us next, more ahead on squawk on the street with the dow up 55 points. Stay with us. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. You may have a mobile bankping app and use it all the time and saying, gee, why are there still so many branches. We have our next guest joining us, Barry Sommers, ceo of Consumer Banking at chase. Nice to have you here with us. Thanks for having me. When you walk around this city you see a lot of Bank Branches and people ask the basic question, im doing my banking mobilely why is there so many physical locations. Great question. While a tremendous amount of innovation around banking and the mobile phone that allows customers to bank where they want, when they want, and how they want, the reality is, the branch really remains the center of that relationship we have with our customer. Now what happens in that branch has dramatically changed over the last few years but it remains incrediblebly important part of our Value Proposition. Why is that . Why are there still tellers or not as many. What is going on in a branch which makes ate Value Proposition for chase and something that is worth the return on equity that goes into it. Sure. Like you said, a lot of transactions are moving to the mobile phones and machines and thats a good thing because thats what customers want. At the same time our branches have evolved into advice centers. Over 3,000 Financial Advisors helping customers with the most important things in their life, whether its the funding of their childrens college education, whether its their retirement. We have relationship managers, twothirds of all jobs created in the United States are with Small Businesses. We have Business Banking relationship managers who loaned over 17 billion to Small Businesses fueling this economy. That doesnt happen online. That only happens inside a branch. Some people walk into a branch to get a mortgage, i guess, also. Were really from our perspective the most important purchase for most people is the purchase of their home. Last year in the branches we did over 27 billion of origination. You know, inside those four walls theres a customer sitting down with a banker who cares and really helping them do important things that happen in their lives. When we talk about mortgages, of course, the wall street journal today writing about rental being as a percentage higher than its been and housing ownership lower in part people are having a tough time getting mortgages. Are you seeing that, are your standards more stringent than theyve been and there is any chance things will loosen up a little bit . In general were just very are focused. To us nothing more important than helping customers purchase a form. We have the right platform in place and our Mortgage Bankers working with a banker, sitting with our customers and offering a product. Is that a product more will avail themselves of . If its the right thing do we hope so. You know, you guys are still taking costs out of the business. Gordon smith was on, your boss, when you were doing the bus trip. Yeah. Joined us on cnbc talking about billion overall coming out of the business. Does that include closing branches . How are those going to be realized . Gordon has talked about our business will become more efficient, but i remind people its not about closing branches. Most people focus on the four walls. Its actually really important you manage the business what happens inside those four walls. So the reality is, david, there are less people in branches because some transactions have moved out. Less tellers. But you will see more client facing bankers in those branches. One other thing im pleased about is these tellers, as their jobs change, we owe it to them to make sure we have the right Training Programs in place they can reinvent themselves and do other jobs inside the branch. Mobile banking still growing but its not growing quite the rate it had been. Its the growth is slowing. Yeah. Said another way. Do you expect that to continue and what do you attribute that to . I think that the mobile phone is becoming like the center part of peoples lives and including in banking. One of the things were excited about launched, we have quick pay, our p to p payment announced an arrangement with other banks to get realtime safe payments to customers, not only just chase but other banks and Something Like the phone is going to become more important. We will be one of the first banks to roll out a phone to be able to authenticate yourself at an atm machine. Forget your card, you have your phone authenticate yourself and get cash. The phone will become more important as the years go on. And, of course, security is very important. You guys spend billions on it. Can you tell people confidently they should feel they are secure when they do not just Online Banking but mobile banking. Nothing more important to us than our customers since the security of our customers information. We take that incredibly seriously. Jamie talked about the investment inside of that and we feel comfortable. Finally back to the idea of the branch. A number of your competitors are significantly reducing their footprint when it comes to branches. You guys, i mean youve gone down a bit in 2014 you had 5600 branches, now youre somewhere around 5300 or so. But why are they moving more aggressively than you are . Yeah. I will tell you this, over the last five years, our branch count is flat but inside those numbers, weve built over 400 branches over the last couple years. Well continue to build branches and we build branches for one reason and one reason only because our customers like them. And who are these people who still need to go to a bank. Were excited about the growth of our business. If you look at the Significant Growth that weve had almost two times the national average, its because of that investment over the last few years building over 300 branches in important markets like california, florida, the tristate. These branches were a significant investment we made and are working. Well were going to be watching, of course, and analyzing the performance there. Thanks for the update. Thanks for having me. Barry sommers. All right. David were keeping an eye on the markets. Stocks drifting higher here. The dow up nearly 70 points. Energy is the sector that is in the lead. Too late to get into stocks . As theyre near record high. We will be joined by fidelitys yuri timer straight ahead. [announcer] is it a force of nature . Or a sales event . The summer of audi sales event is here. Get up to a 5,000 bonus on select audi models. Across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, Creative Business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. Let us help grow your companys tomorrow today at business. Ny. Gov good morning. Im sue herera, your cnbc news update at this hour. A canadian man previously banned from associating with isis was killed as canadas National Police force thwarted what they believe was a suicide bomb plot. The suspect allegedly planned to carry out the attack in a public area. Russian president Vladimir Putin holding a National Security meeting following reports of foiled attacks in crimea. The bleegts meeting to discuss recent security in the region. Russia annexed that territory in march of 2014. 30 residents and 3 firefighters injured in a threealarm fire at an apartment complex in Silver Spring maryland overnight. At least seven people are missing. The fire was caused by an apparent natural gas explosion. 160 firefighters battled that blaze. Disney pulling the plug on its main street electrical parade. The company will end its run at Walt Disney World in october. It made the debut at the park in 1977. The parade will be shipped to disney land for a limited run. Thats the cnbc news update this hour. Over to Jackie Deangelis for the eia inventory report. Good morning, sue. Thank you. Look at the natural gas numbers. We got a build for last week of 29 billion cubic feet higher than expectations, being interpreted as bearish by the market, a penny higher in terms of natural gas before the report came out, now in negative territory. Think back to last week we when we got an injection of 6 billion cubic feet small and sent us higher. About 10 off in terms of pricing since that number has come out. Now total stock still over 3 tritsen cubic feet. In good shape as far as the supply goes across the country. What analysts are looking at is demand. On the east coast its been very hot but the demand is measured across the country and demand has been weaker than expected. If we continue to see that trend throughout the rest of august, going into the fall, of course, you can see these prices stay well under 3. Of course sara eisen, that is good news when it comes to consumers. Back to you. Absolutely. Jackie, thank you. Meantime stocks are ticking higher. The dow up 75 points. Oil prices up about 2, 2. 5 , and reports from u. S. Retailers beating expectations helping to fuel the rally. For more on the markets joining us is yuri, director of global macro at fidelity investments. Good to see you again. Good morning. The retail reports in macys and kohls at the top of the s p 500. How far do they go towards easing some of the concerns about a beaten down sector of the economy and of industry and Consumer Spending in general . I think the u. S. Economy continues to be in good shape. Growth has slowed. But it has been a domestic consumption led economy and its been going on for five, six, seven years now. And its really remains pretty stable. Its really been the Global Economy thats been the extra factor over the last couple of years, softening while the u. S. Economy has remained pretty robust. So i dont really see that this really changes anything. Were continuing what weve seen. In general, though, now that were sort of coming to the near end of earnings season, feels like better but not stellar. Is it enough to provide a backdrop of rising stocks into the second half of the year in terms of the quarterly number . I think so. I mean this was a pivotal season. Because its the First Quarter in i think in five quarters where we are seeing actually a smaller decline in earnings, earnings are still declining, but the rate of change or the Second Derivative is starting to improve. So q1 was 7 below the previous year. Q2 looks like its going to be about 3 below. So as we all know, when you look at inflection points you have to look for the Second Derivative and that has improved from the First Quarter. Build thats the beginning of a whether thats the beginning of a sustained trend remains to be seen, of course. Theres a green chute here on the earnings front and thats important because over the past couple years, the moves in the stock market have been all based on liquidity but in the absence of earnings. If we now have a friendly liquidity environment through central bank easing plus we have a few green chutes on the earnings front i think that will stabilize the markets and maybe give it some upside here. Central bank easing aside the two shocks to the market in the last year of course came from china. Bank of america reminds us that it is the oneyear what theyre calling the yuan anniversary of the initial devaluation of the yuan last year, down 1. 9 in a day, down 6. 5 against the dollar in the last year. But do you think that the fact that Central Banks have made themselves so present in the global macro economy, means that we wont be subjected to those jolts shocking as they were, again . I think so. As you said, a year ago was the very surprised devaluation in the yuan and then about six months ago, we had another one not an outright devaluation but more of a stealth evaluation and both declines in the stock market of about 14 or so over the past year were, you know, involved with that chinese devaluation. And a piece of good news is that during brexit, when everyone was sort of looking towards the uk for what was happening next, the chinese were actually able to devalue to actually bring the yuan to a new low without causing any kind of disruptions in financial conditions. So the chinese have i think i are closer to where they need to be and were able to do it while nobody was paying attention. So thats a good sign. Yeah. But it also could suggest that investors are too complacent about the economic and financial risk out of china . I think right now china has stabilized. They did a trillion dollars of fiscal stimulus in the First Quarter through bank lending and, you know, yes, its going into sort of the same obsolete sectors of the economy that really need to be reformed, so it doesnt really fix anything over the long term and theres still potentially a banking problem out there. But china is a command economy and they control a lot of the levers, not all of the levers but a lot of the levers and right now theyve managed to calm things down and in the absence of another shock, i think the market is going to be okay from that perspective. There could be other things elsewhere but from china doesnt seem to be likely in the near term. Were looking at energy on top of the s p with consumer discretionary, financials are coming back. I mean these have been the groups that are tied to the economy, that have lagged behind the utilities and staples and telecoms this year. Is it time for a rotation in . Are you roger mcnamecommending clients. Its interesting that postbrexit breakout in the s p to new highs, new alltime highs, was led by the sort of the low val, high dividend players which are sort of the most boring part of the market and they tend to protect on the downside not lead on the upside. The leadership to the upside was really quite surprising and i think it was on the back of a plunge of the 10year yield down to 1. 3 and now yields have stabilized around 1. 5 or so, it doesnt surprise me to see some rotation out of those defensive sectors into cyclical sectors. Tech has been on the forefront of that as well. So going forward, it really just depends on what happens to Interest Rates because if they continue to fall, we may see that the sort of low val space still do better than most people have expected. As we have seen so many times before in this last few years. Exactly. Thank you. Good to see you as always. From fidelly. With the do you up triple digits 100 points. To Carl Quintanilla in rio for a look at whats coming up from the olympics. Carl . Hey, kayla, were going to talk about the beauty of rio. Not the beaches, but the business of making people beautiful. When squawk on the street continues. Many emerging markets stocks have surnlds over the last couple months. Is this about the commodity bounce or something deeper going on here. We discuss at trading nation at cnbc. Com. Lets get back to Carl Quintanilla from the olympics in rio. Carl . Hey, kayla. Good morning. Aside from the olympic crowds in rio, another Huge Population of rio tourists and theyre here to do a lot more than see the sights. Brazil is known for its beautiful beaches and Beautiful People with good reason. Brazil is second only to the United States in the number of cosmetic surgeries. And despite the countrys recession, the brazilians society for Plastic Surgery says the number of surgeries has increased 10 each year since 2010. The industry gets a boost from medical tourists who go to brazil specifically to get cosmetic procedures at discount rates. In brazil you will find prices around 30 , 50 less than in the u. S. With the same quality of services. Reporter cosmetic vacations caters to medical tourists in rio, work with 100 patients a year mostly from the u. S. Company reps make doctor appointments, arrange travel and recommend restaurants. Its part medical consultant, part concierge service. Before the surgery they come and stay some days to do tourism, of course. They want to see brazil. Reporter dr. Geraldo a surgeon with 40 Years Experience gets 10 of his referrals from cosmetic vacations. His specialty, performing multiple surgeries at once. Together its liposuction onestop shop. Reporter thats part of the appeal for patients who travel across the globe. One thing that the doctors in the United States, theyre kind of skeptical about doing all of those surgeries at one time. Reporter medical tourism to brazil is expected to grow 45 over the next five years. An attractive figure to the industry and its patrons. I plan on going back to have some other things done. One other reason people come to brazil to have those procedures done, privacy. Cosmetic vacations tells us clients come under the guys of a real vacation and go home again with a new look. Guys, with a currency here up 20 on the year, that bargain is getting smaller and smaller over time. Best performing currency of 2016, so glad you mentioned it. David is getting some ideas. Well im keeping an eye on quintanilla. He looked good going down, but lets see what hes looking like when he sits back down. Carl, your eyes look a little different. Yeah. I wonder how many people bring in a picture of gisele and say i want to look like that. You go to your hair stylist and bring a picture of Jennifer Aniston and that happens in the states but brazil has a lot of exports that are gorgeous. Im going to come back, you guys will say quintanilla has got back. Very good. They can do that too. You said it, not us. Thats right. Carl, good story. Thank you. Well see you in a bit. Send it over to Rick Santelli in chicago at the cme group. Good morning. Good morning. Boy thats a hard act to follow. I would like to welcome my guest today, peter. Thanks for taking the time. Thanks, rick. All right. Three topics. First topic, last time you were on we talked about bond proxies. That was about a month ago. Markets havent changed much but the risks are still present, maybe even larger. Explain . Yeah. I think what were hitting now you still see the utilities, dividend stocks and low volatility stocks theyve lagged the market for the last little while and i think theyre set to underperform in upside scenario and a downside. The upside if we really are having growth we should see rates rise, we should see the Growth Stocks gain momentum. That will take money out of those bond proxies. So i think they underperform to the upside. If we hit a downside, valuations are very stretched. P es are very stretched. I dont think they can continue catching the inflows. I would be continuing to reduce risk out of all those low val and dividend stocks right now. All right. Everybody knows that whether you look at any shortterm rate its nothing like it was in 07 in 07in 07 8 but as we get closer to 100 basis points not the 500 or 5 during the crisis, this is about the lead into mid octobers money market reforms. However, im sure you have comments as to how the process is going. Your thoughts . Yeah. I think theres two things going on. One, libor is recalculating how they do their calculations, right. Theyre trying to revamp that so they dont get into the trouble they had in the past. Its going to a market based mentality. Thats already pushing libor higher. On the back of it these money market reforms which further push libor above other rates. Two things that are important takeaways. One from the investment side i think people should be looking at more floating rate asset also leverage loans, etfs out there that people can participate or closed end funds and then i think on the personal side when youre borrowing money against your home, i think you want to be locking in fixed. If this libor differential is going to be permanent floating rates will be less attractive than in the past. Youre supposed to try to take advantage before it becomes mainstream and look at buying on the investment side floating rate and locking in fixed rate on the home side. Couldnt agree more on the rate locking. And finally, qe, corporate style. I havent talked to one person, source, analyst, economist, who finds any logic in the notion of quantitative easing, buying corporates. There is already no shortage of investors in corporate securities. Your final comments on that condition . Will it continue and is this another quasi proxy we should worry about as a bubble . Yeah. This is a really tough one because for my job we have to recommend people take advantage of the situation. It is putting pressure on corporates to go tighter, making it easier. Long term i dont like the fact that now longterm i dont like the fact that the governments and Central Banks are picking and choosing losers and funding rates. They should have stayed out of the corporate side but now that they have gone down the path they dont seem to be able to extra kate themselves. Its going to be continuing until we see problems. Going way back when they were trying to defend them they went to 60 cents on the dollar. It slowed down the whole fixing of grease. I could see that happen down the road through this particularly in europe. Peter, always a pleasure to hear your thoughts. Thank you again. Back to you. Rick santelli, thank you very much. 114 getting higher by nike and chevron. Were gearing up for the 6th annual delivering alpha conference on cnbc. Huge blockbuster lineup as you can see. Treasury secretary jack lou, paul singer, carl icahn. Delivering alpha kicks off september 13th here in new york city. For more details go to delivering alpha. Com. Squawk on the street will be right back. Lex challenge. People want power. And power plants account for more than a third of energyrelated carbon emissions. The challenge is to capture the emissions before theyre released into the atmosphere. Exxonmobil is a leader in carbon capture. Our team is working to make this technology better, more affordable so it can reduce emissions around the world. Thats what were working on right now. Energy lives here. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade this morning, a different story and the story is in the wall street journal and the Southern District of manhattan or new york is investigating valiant for criminal charges related to what they would say is defrauding insurers. This having come about as a result of its undisclosed, the argument is, relationship with that mail order pharmacy which has since gone out of business but the fact that the two were so closely linked and insurers didnt realize they were acting on behalf of valeant. All of this enough to send the stock down over 9 again with that criminal investigation at least apparently according to the wall street journal and still well above the lows here and down about 90 in the last 12 months. They were up 20 on earnings when youre down that far. And even a 20 move off a low base is not that much. Theres still a lot of questions about the overall Business Model given it used to be low tax rate acquire companies, file drugs, raise their prices significantly but the new ceo was talking about the fact that every prescription sent out is a profitable one for the company in the current environment. I wanted to take the opportunity to look at the Broader Market here because were seeing gains and energy is leading the charge but consumer d discretionary is up there. You have macys and kohls both out with earnings and both seeing declining sales. Its not like everything has been solved but expectations were low and this were glimmers of hope, especially in macys and also in kohls that things might be turning around and the companies were making necessary moves like the announcement that theyll be closing 100 stores. They made the expectations low last quarter in mid may when they warned on this quarter slowing. Nordstrom shares fell 16 when they reported earnings and they report today after the bell. Lets send it to swrjohn wit look at whats coming up. Alibab did well. Signal positive things about ecommerce in china. Thats certainly something to Pay Attention to. Also donald trump here to dig into his comments. What they might mean for the future and then a key executive at google. Especially when it comes to googles investing activities is leaving but does it really matter . All that and more coming up on squawk alley. Can an established bank move like a startup . Its a question we get from some of our largest banking clients. The face of their business was tellers. Then atms. Today its their mobile app running on the ibm cloud. Across every transaction, the hybrid cloud helps their data move quickly and securely. Our clients are building out features and pushing updates faster, on five continents. With the ibm cloud, they can move at the speed of any startup. Good morning. It is noon in rio. Its 11 00 a. M. On wall street and squawk alley is live. Joining me back for the hour in new york and Business Insider ceo. A lot of headlines today for the olympics and their guys with green arrows in the