Transcripts For CNBC Squawk On The Street 20170601

Like well get a positive open, but things reversed yesterday. Financials in particular. Europe you ask, jim, you didnt, but ill show it to you. All five of the big markets. You can see spain is the only loser thus far this morning. Continued strength in the euro markets. Eurozone look i think that draghi im not kidding, no conspiracy theory, keeping the euro lower. Theyre not happy with our president. A lot of unhappiness in a lot of places. Our road map starts with President Trump, as he is expected to withdraw from the paris agreement. The major names opposing the decisions and what elon musk said hell do if the president does withdraw. One of the companies by the way hewlettpackard coming up. Well have ceo meg whitman. Shell join us in an exclusive interview. The earnings which were reported after the bell yesterday. Opaque somewhat given a lot of a good word for it. I said difficult. You have to understand opaque is even more by the way its auto sales day. Out this hour, ford and gm. Well get ethe numbers as both well get the numbers as both cross. It will tell us about the health of the auto industry. Phil lebeau will help out with that. President trump plans to announce a decision on the Paris Climate Accord this afternoon. It will take place in the rose garden. It is scheduled for 3 00 p. M. Eastern time. Withdrawing from the accord had been one of his Campaign Promises but a number of leaders including tim cook from apple, elon musk from tesla are urging the president to stick with the agreement. Yesterday, jim, multiple news outlets are reporting that the decision had been made. Although with this president , one never knows. But the corporate world has been somewhat united certainly larger companies. Right. Even those in the fossil fuel business such as exxon mobil, but much of hightech is represented, saying dont do it. Do not do it. I had coned on last night, theyre not a producer, that i got out in 1991. More than 15 years out of that business of production, but they said, look, this is kind of like the norm. Is to be with the paris accords. Can i just for one minute explain why you might not want to be in the paris accords . Okay. Go ahead. If you ran on the idea that the American Worker has been sacrificed on by other countries that do not that produce far more pollution than us even if they subscribe to the paris accords then you have to reject the paris accords, because you said well bring back coal because the miners lost their job and its duplicitous to be in favor of the paris accords and think that coal is a fuel that should have a renaissance. Right. You dont believe that coal should have a renaissance answer the marketplace more importan y importantly if the marketplace runs its course at this point, coal wont have a renaissance either. China scrapped the plans to build a hundred coal plants. Almost everyone has plans to phase it out. So the utilities, i interviewed almost all of the uhuh tillty guys. Theres a surfeit of natural gas, the price of which is not expected to go up any time soon and it will remain a cleaner and cheaper option conceivably than coal. We didnt even talk about three mile island. Natural gas is so cheap they want to decommission the Nuclear Plants that actually work. Larger pictuk larger picture here, facebook, gap, google gap . Gap . Im looking at the list here. Levi strauss, morgan stanley, pg e. Does this in if we do withdraw retard the progress that this countrys making and the jobs that have been created in renewables or does that move along regardless . No. Look coneds ceo mcavoy said that the way that the price of renewables is coming down it will be cheaper than coal. So the idea a lot of this is just economics. I mean, if solar is cheaper than nuclear or coal, nuclear being very inexpensive, but difficult to build as we saw from toshiba, we havent covered that lately. We have to stop subsidizing solar. We dont. I mean, theres a large the largest Solar Project in the Brooklyn Navy yard. Its inexpensive power now. You cannot fight history because the price of solar is coming down so great. Where does solar not work . Antarctica, a terrible place for solar. Yeah. Its dark a lot. We would only join syria or nicaragua as i listened to sylph this morning or swilf. Nicaragua is great. My fatherinlaw was stationed there in the snans sandinista period, and he had a brush with them. I was surprised that nicaragua made a strong stand in favor of pollution. Theyre starting to emphasize tourism as well. Starting to hear about nicaragua as a tourist destination. Maybe they say, come, welcome. Were fine on pollution. Maybe thats more of a draw than you and i realize. To me, i would rather go to the country that didnt subscribe to pollution, but nicaragua is taking a strong stand. Thats become a destination for people who dont mind perhaps getting respiratory illness. All right. Lets get i cant think of the other come to nicaragua and get respiratory illness. I dont know. What is the is there some sort of other thing that you maybe. I mean, theyre very im going to check it out. I want to go before it gets too polluted. Lets get some highlights from the code conference before we talk about those things. Join karl out in southern california. Of course a lot of highlights you have to share with us, i know, carl. Yeah, david, paris has been one of the dynamics running through the conference. You see what elon musk said about potentially leaving that white house council. You have tim cook, mark benny hoff talking about it. If the opening day was about robotics and andreessen, then this was a deep dive. And Shari Redstone who made more news, going into more detail about why cbs and viacom did not happen. There was more value to viacoms brands than she thought. Take a listen. Content is being valued more highly than it was ever before. My dad once said content is king. I think what youre seeing now is Technology Companies realizing they need that content. They need that original content in order to succeed and have the relationship they want with the consumer. She did say i have a great relationship with les and i think we would have worked really well together on a combined company. That whole dynamic, guys, about Tech Companies going after content and companies with great content trying to get data is really an interesting thing. Look, the at t deal was largely about us getting data even as the youtubes and amazon of the world are trying that get their own game of thrones. You need data, and were increasingly competing with west Coast Companies that want to be in the video business. They want to be in subscription and advertising and theyre using data and direct connections to people the viewers in order to do that. And we need to be able to compete with that. All right. So speaking of data well hear from Brian Krzanich as day two of the code kicks off. On our air well see dick costolo. Steve case of course whos made enormous efforts to bring the power of Venture Capital into areas of the economy and into areas of the country who have not benefited so far. And brad guester in will talk about the Airline Business and this whole idea, jim of ambient computing. Computers talking to each other. Its a huge investing dynamic out here and well talk about that in the year to come. Well, i do hope, carl, that someone addresses the idea if you have robots building robots the robots can program the robots that are not necessarily pro humanity. People arent talking about that enough. I hope someone addresses its. By the way, jim, Shari Redstone made some comments about football. I think were within a hundred days of the season. And we talk you and i and david have talked all season long last time about the dilution of the brand. The ways in which the consumer was confused by the way the sport was being delivered. Take a listen to shari talking nfl. I think that it got very confusing for the consumer for the nfl last year. They were on too many networks, they started to commoditize the experience and not keep it as something really special on sundays, on thursdays. You didnt know what network it was found on. I think they had a lot of social issues they were dealing with, whether it was the concussion issue or domestic violence. It occurred to me, jim, you could have written that answer for her. Yeah. That is i mean, i went too much about tired night football all last year. The thursday night, the coaches and the players hate it. And they matter. Thats what people realized last year. I hope that her words have gravitas with the networks and the nfl. The Networks Want it no matter what because when you wake up youre watching their shows. All right. We will be checking in with carl of course throughout the morning. Some big interviews coming up. I want to make it clear, nicaragua, im being facetious. Theyre about the rich countries paying more. Thats why theyre fighting it. Syria, no. But nicaragua is being viewed as an outcast, but thats because they think we are polluting too much. Theyre taking the strongest stance possible. I dont want to make fun of nicaragua that says theyre against the accords but theyre against it because of us. Well, up next, well have is a live and exclusive interview with hewlettpackard enterprises ceo, meg whitman. Think again. This is the new new york. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov steve, other than making me move stuff, im here at the Td Ameritrade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. We are told the pyramids werewhat was that . Ombs. Nick [ gun shot ] but the truth is. Theyre prisons. Do you have any idea what you have unearthed . [ suspenseful music ] who are you . Shes unlike anything weve ever faced. The mummy. Rated pg13. Experience it in imax. Shares of hewlettpackard slipping more than 2 this morning. This after the Company Reported Second Quarter numbers yesterday after the bell. Earnings per share in line with expectations. Revenue was a bit above what many analysts who follow the company had estimated. In april, hp completed the spin merge with csc. That did have a complicating impact on results this quarter along with a number of other things. Well get to all of it with meg whitman, ceo of hewlettpackard enterprise who joins us from california. Meg, always nice to see you. Even this early in the morning which we always appreciate. It was a somewhat opaque quarter is the word jim and i referenced earlier. But lets come back to margins because a lot of the analysts who follow the company and investors are focused on that. Margins were down. Youre saying perhaps they bottomed. Is that the case, are we going to start to see margins in the Key Enterprise group which is essentially the company at this point start to rebound . Well, you will start to see them rebound. But let me give you a little context. We are almost all the way through probably one of the largest transformations in American Business history. And by the time were down, we will have created four Industry Leading Companies that i think are much better equipped to win in their markets. And you know as i think about the shareholder value that we have created through this transformation, its really quite remarkable. So if you think now about the go forward hewlettpackard enterprise which is largely what we used to call eg, the margins were under pressure this quarter. But largely from some one time events whether that was the hc 3 transaction. We sold 51 of the China Business to shingwy university. We dont account for that. It comes through oie and we had stranded costs from the spin. That used to be allocated to es and now theyre allocated to eg. Those will be worked off by the end of the year and then we made six acquisitions in the last six months. There are some dilution associated with those acquisitions. On an ongoing basis we face Commodity Prices and a competitive pricing environment. But because of the first two elements we think the worst is over and by the end of this year should return to last years level which we think is great. If you think of the revenue, we saw some real bright spots in our pivot to higher margin, higher growth businesses. Lets go there then. Because like a lot of Technology Companies that are more mature, if i can use that word, you know, you have High Performance computing, all putting up decent Growth Numbers but the question is can you outrun the legacy declines . Yeah. So when will that actually take place if it takes place, meg . Well, one bright spot this quarter was our core server business excludeing the tier one server business it stabilized this quarter. It is down 1 which is a Strong Performance given the market. But youre right. Our higher margin faster growing parts of the business have to continue to perform as they did this quarter. We got a lot of confidence that that can happen and we have to continue to stabilize the server growth. One why do you have confidence why do you have meg, yeah, why do you have confidence that will continue . Why . Well, i can see it in the numbers. I see it in our ability to execute. Im out with customers now every single day. Im spending probably 60 to 70 of my time with customers. They really understand the strategy. They like our innovation agenda, they like the acquisitions that we have made. Theyre super excited about synergy which is a whole new category of servers that we call composable infrastructure. And so i can see it in the marketplace. I can see it in our execution. To your point the Commodity Prices and the competitive pricing environment is still a challenge for us. Thats the nature of this business. Theres always something this this business. But i feel great about our portfolio and our ability to execute. Yeah, youre an incredibly competitive business. I dont need to tell you that. All of your equipment businesses are challenged to a certain extent in terms of competition, not to mention as you pointed out Commodity Prices. D ram prices which dont seem to be coming down any time soon. How do you change the way this Company Operates from the way it operated previously to meet those challenges of not just higher Commodity Prices, meg, but incredibly your words, a challenging environment . Yeah. What we said in the call yesterday is because of the continued commodity price pressure well take another 2 to 300 million of cost out of the business in the second half. Thats another reason that we anticipate margins will return to levels last year. But its also a down payment on we now have to reengineer the go forward hewlettpackard enterprise. Its a Smaller Company now. 28 billion. And we now have to rethink our supply chain processes, our you know, how we organize ourselves. Spans and layers and whats really fun about it is i can see it very clearly now because were a much smaller, much more focused company. Were still carrying a lot of the overhead from a company that had six major lines of business in 170 countries selling to the 250,000 of ours. Were a much more focused company with a much more focused strategy. And i think were going to be able to take a lot of cost out of the company by reengineering how we do things. Thats the exciting next chapter of the company. Right. Some people hear that. They think, okay, more job cuts perhaps beyond what youve indicated in the past. When you took over this company, of course it was enormous. It had over 300,000 employees. I dont know what the numbers were. Yeah, 325,000 employees and 80,000 contractors. Now youre down to about 55,000 after the software spin tykes place in the takes place the fall. Are there more job cuts to come, listening to you talk about as much as 300 million in cost cutting and rationalizing, certainly sounds that may be the case. The kind of thing we have to do, david, think about our server business. We do a tremendous amount of custom server work and we have got to simplify that product line, rationalize the stock keeping in its so that we can keep manufacture the servers in a much more efficient and effective way. That doesnt involve job cuts but a policy decision about how we want to run that business. And it also creates complexity when you have that many skews, complexity drives costs. It drives node costs and all kinds of things. We have to reengineer the processes. I said there may be some incremental job cuts but what im really hoping is that as opposed to now hiring from the outside, well promote our people from within. Well give some of the next Generation Leaders a real chance to shine in a smaller, more focused company. So were excited about that. And i think, you know, people are feeling pretty good about the future of this very focused, highly strategic now company to our customers. Meg, jim cramer, good to see you, thank you for coming on. I need to understand last time we spoke, i got actually quite bullish. What you said was there was execution issues, there were different reshuffling, but when thats clear you will see a much more profitable hewlettpackard enterprises. Now, thats happened but were not seeing that much more profitable. I also im not quite sure about what happened between microsoft and you. Because they essentially put you out of the cloud server business. Maybe that was a problem. But i have thought that last quarter was the last quarter that we had to worry about the mess. Then i find its this quarter. But then next quarter will be fine and i i need faith, meg. I need some faith. Well, have some faith, jim. We are in the middle well, now close to the end of really as i said one of the largest corporate transformations and for this past quarter we owned enterprise as much as for two out of the three months. Were still lapping the hc 3 transaction. We had a number of different factor tos. By the way, while we were divesting we had a lot going on here. As we move through q3 thats the last quarter that we own the Application Software business and my view is youll see a pretty clean q4 and then a very clean fy18. But we do think margins will go back up towards the end of this year. I think youre going to see incremental growth in our high volume, high margin products d and, you know, im looking forward to q3 and q4. Because i think youll start to see less of the confusion of all this work that we have done. And it is complicated. Theres no question about it. But i think we see very clearly our way to a nice clean q4. Meg, finally, later today the president is expected to withdraw the u. S. From the paris accords. We dont know for certain. Youre one of the signatories to this letter along with a lot of other large corporations saying please dont do that. Now is your last chance to make a Public Appeal on television. What would you tell the president . Please do not withdraw from the Paris Climate Accord, this not in the best interest of americans. We need to own the next generation of jobs and whether thats clean energy or 3d printing or immunotherapy, this is an arena that america should and must lead. I think this will be a big mistake if he withdraws from the Paris Climate Accord. Meg, as always, appreciate it. Got a little politics in there, but kept it largely to business. We appreciate you joining us. Meg whitman, ceo of hewlettpackard enterprises. Thank you. Take care. You too. All right, we have jims mad dash coming up. Welcome to holiday inn thank you wait, i have something for you making every stay a special stay. Holiday inn, smiles ahead. Whether for big meetings or little getaways, member always save more at holidayinn. Com usaa gives me the and the security just like the marines did. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children. Were the williams family, and were usaa members for life. All right. Were going to start trading in about 2 1 2 minutes. Lets get to the mad dash from jim. John deere today they buy a company excuse me german, for 5. 2 billion. This is into road building and construction, mixing Global Leader and road construction. Faster growing, less cyclical. They have a great enterprise synergy. David, i have to say this transformation of deere even without the ag economy doing that much better is remarkable. My hat is off to the guys. They always made the best. I had a deere. Their stuff is a little expensive now for me versus stock is up 52 , you like it here . Its a brilliant acquisition, yes. Because suddenly they have become a lot more infrastructure related in europe. Which is turning. They have they had a construction of forestry. This makes it so youve got this company that is a great global machinery company. Not a great global ag company with a construction business. I applaud them for taking such aggressive action, wow. They are back, they are like the old deere when we were growing up. Where they were the only putting everybody out of business. Deere by the way, they last forever. Everybody loves their deere. You do have to pay more for deere. But theyre the best. Quality. All right. Lets briefly talk about the market as we were about a minute away from the opening bell. Its my time to ask you the key to this market. Yes, okay, i am glad you asked. Because im going to tell you that the key is the ongoing battle with what stock . General electric. This morning, Credit Suisse comes out and says that ge has reached the attractive entry point. Maybe not as much leverage on sales. That is directly opposite from Deutsche Banks dire dividend cut comment. This is a battleground. I want to know what the relation of shoermds are going to shareholders are going to do. Are they going to sit back and say, you know what . Im worried about the Deutsche Bank view or are they going to be take solace in what Credit Suisse has to say. Well, i love it. Well keep our eye on ge as we often do. Theres the crowd cheering here. The opening bell of course ringing. You can see the realtime exchange back with a little more green on the board. Broadridge is celebrating the tenth anniversary. And celebrating the release of captain underpants the first epic movie. I know thats on your list. This weekend, you know where ill be. Captain underpants. An easy gm Just Announced the u. S. Sales down 1. 3 versus up. David einhorn is in there. David einhorn has a big stake. Yeah. Lets get to phil now on the monthly auto Sales Numbers. David, lets pick up where jim left off. General motors reporting in may weaker than expected sales. The street was expecting 5. 7 and the sales dropping 1. 3 . Well talk a little bit more about the gm sales in a bit. We have ford numbers a few minutes up 2. 2 . Slightly better than the edmonds estimate of 2 . Two things to note on the gm sales in may and really what the company sees overall both in terms of inventory and Industry Sales. Inventory ending the 100 month day supply. They have been building the truck supply up as they transition later this year. Thats part of it. But the higher number in terms of day supply will get some attention on wall street. The other part of the gm release, its estimate for the Industry Sales 16. 6 million. Guys, if we come in under 17 million, it will be the First Time Since july of 2014 we have had three straight months under 17 million for a sales pace. Back to you. Wow. Okay. Phil, thank you. Gm also, jim, involved in a proxy fight with greenlight. One of its investors which wants it to which wants it to basically split the company in terms of two separate classes of stock. One that would be about capital return, the other that would be about growth. I would point out by the way, greenlight itself has not done a particularly good job picking stocks and its manager david einhorn, they were down 3. 7 for the month. And down 3. 4 year to date. When you look at the overall performance of the fund, the early days was very strong. But it has been years, years really since they have had particularly good numbers versus the rest of the industry and overall. A lot of times you annualize performance and it looks good because of the early great early years. You do that here, after those years its bad. Well, its a problematic situation because most of these activists that i know have been going after winwin situations where the companies are doing well. This is a situation where i dont know, gm, if we are peak auto. You want to keep every dime you have. We know its challenged technologically. So i dont know. I dont think that mr. Einhorn i think this is a little don quixot don quixotest. He did not win that one. I did not economic in on the actual check in on the actual proxy fight for itself. The Company Fought back aggressively on any number of fronts including the rating agencies which it had quoted saying this would change our potential view of it because of capital allocation. How does a board go about making decisions as well with two sets of shareholders in that sense. Yeah. Just to try to get their line. You know, this is one of those plans that just basically weakens the company dramatically. Doesnt make sense. Lets talk about pinnacle foods. I want to say first of all, this is a reuters story from yesterday. Saying that conagra approached pinnacle and the stock went up. I made the calls and then everybody calls back while were on tv. Dont they know were on tv . No. My wife will call and its something involving the dog, in the middle of the show. But pinnacle whether or not its true or not, there are many people who believe that the combination makes sense. It makes a ton of sense because you have to consolidate in the socalled center of the store. This is the freezer section. Now, i dont know if you saw only the brands of pinnacle, david, but they tend to be brands that not even our parents want mostly our grandparents, or my house, a tang house. We were a hawaiian punch house. Did you dilute did you dilute the grape juice, did your mom put water in the grape juice . No. I grew up on hawaiian punch. Those of us who had it watered down because it was too expensive, who recognize a lot of these brands. Right. I know were going over with shannon siemens, the greatest producer we have, talking about the brands. David, you look at them, here log cabin. Duncan hines. I remember my mom saying, listen, were making a stand. We are not so poor that we will use duncan hines. It was like a statement. But we ate a lot of birdseye, why . It was frozen. And frozen meant fresh in our house. Like voila, birdseye has a voila version. Vlasic pickles we never went to that level. But these guys were for sale once before with hillshire. Hillshire got obviously a takeover and took it because it was tyson. Paid a huge number although that deal has worked out. On this one, lets go through some of the numbers here. Go up since then so pinnacle is a great i dont eat hungry man anymore. And mrs. Pauls, fridays, that was it. Conagra, you can say the shares are up. Thats important. If you want to get to the market, check on this. Floating the idea that you want to see how your stock and investors will respond. Thats important to keep an eye on. They have a 4 billion tax loss carried forward that could be helpful to them. Multiples here, jim, to your point. This is not a fast grower. About 2 at thats not hormel peer group trades at 15 times. If you assume a bit more multiple than that, you can get to the mid 70s. People are modeling roughly 70, maybe more. Theres a bit of a takeover premium in the stock thats good if they can get it that cheaply. Give me a number. I mean, everyone is coming in with the numbers. Having confirmed this, would love to get some sense as to whether its really serious or whether it was just a drive by or whether it was anything at all. In the freezer section thats what you have to do you do some line extensions. Its a good deal. You know, i have to tell you that pinnacle, david, you know, they made something of this company. You know, they didnt get that bid and then they doubled the stock. My hat is off to them. If they can get even more value, i had them on mad money. They have done some things that are fresh with birdseye. But they have created value from the old brands. Not actual maple syrup in log cabin, right . Theres zero . Im not an expert on that. We use log cabin exclusively when we were growing up. Because it was the least expensive. Not that they im going to give you a hawaiian punch if you mention it again. [ laughter ] why . Because that commercial . Hawaiian punch. So violent. Yeah. Those days are over, david. We havent even talked theres so much going on today. Im embarrassed that we havent mentioned palo alto. We havent gone there. Talk to me about palo alto. Reignition of the i wont mention hawaiian punch anymore. Reignition of the growth at palo alto. Mark mclaughlin, congratulations. Ciena, smith being as bullish as possible. This is a great sales for optical. And i would stay in and argue your position. There you go. I have been trying to get that across. All right. So palo alto shares palo alto is just on fire. Vox, aaron livvy. Ciena is up almost 17 . On this Conference Call i have many people on the ciena Conference Call and they are saying that this is the this is the best that gary smith whos been at it forever. Aipac, david, this is asian pacific, up 50 . Europe up 10 . India off the charts. Gary smith whom i have known forever is the most bullish that hes ever been. This is goodyear tire, getting some real traction. When people are saying that mccow are so strong, wynn breaking out to the new high. You went from ciena to wynn . Because im trying to say that the market is not as narrow as people think. Youre fighting back . Im giving them all a hawaiian punch. I wish you hadnt mentioned that. Ppg. Yeah. What is the shifting going on there, man . The shticking its shticking we have to say shticking because it sounds so much better. Listen, that was that was a formidable defense that akzo when they had won the court case. Strong statements from the judge in terms of saying, hey, you know, you havent really engaged the way your shareholders would like to, akzo nobel. They still went their way. That was it. Ppg had today to decide whether it wanted to go hostile. It is withdrawing. That is over and done with. The way that many had anticipated it might go. Including yours truly. Because shtickings are tough. That was a lot of wasted time by ppg. I mean that was. It was a huge waste of time. I question that. I question given the fact that you knew from the beginning that this one was not going to cook. But people dont seem to mind because ppg they were trying to get hammer lock on coatings. It made a lot of sense, because Sherwin Williams got vas par. And mcdonalds hitting a high. Now these are mcdonalds you have to go to it. Dominos is takeout. I think people continue to underestimate this market because you know why . Theyre looking at jpmorgan and bank of america. Well, thats funny. As usual, you read my mind which sometimes i can read yours. It happens. We have been together a long time. Like an old couple. Kind of an odd couple because you dont shop, i shop. You do the shopping. Mary ann told you to go jump in the lake yesterday if you own jpmorgan i felt. Yeah. Mary ann lake. Well, theres concern about net interest income. The flattening of the yield curve not good for margin and a number of them talking it down in conferences. And the stocks yesterday were very poor performers. Terrible. I mean, do you want to stay clear of financials. I guess we were all waiting for some sort of renaissance, you know, deregulation. Hey, listen if we got three rate hikes the world would be forgiven. These are not trading driven companies but it doesnt seem to matter today. I come back and i say, i cannot believe this is bear market territory for these stocks. I dont want to give up on jpmorgan. Jamie dimon is a pretty good banker. There is banking there. Its not just trading. But its the time is to be in tech. Thats what people want. Then broader. Fine. Youre talking broader. Then you say its time to be tech well i saw you pushing autodesk yesterday. Its probably the greatest unknown company. You want autodesk. Adi, analog devices, its working out incredibly well because of auto. David, we didnt discuss what can elliott really do to get Nxp Semiconductor higher . Thats a done deal. You were not here yesterday and i talked about it yesterday as you know i talked about you were the one that something could happen, everyone thought it was done. Guys kept buying the 110 calls, mr. S. E. C. Are you listening . Only trading 59 cents or so below the 1. 10 cash price. Back to netherlands again. They have to tender that to get 80 . Elliott is making calls out of london to a number of large holders, i have spoken to a number of the large holders and there are a handful who look at the multiples of the peer group, jim and they say, you know, based on the last quarter, and the earnings were going of to lever up a little bit and be back to where the leverage was, put a multiple on that, thank you very much, we want the deal to break. We dont want this deal to go ahead because we believe the stock price will be higher rather than lower. Well, were telling people not to tender. My Charitable Trust has owned this i think since the 70s. Why tender . I want more. Theres more chapters to come here. We didnt get to dollar general. Plus 7 versus plus 4. They added 322 more stores. That was a terrific number and people thought that dollar tree should have been better, but they made the acquisition. Ollies Bargain Store i was going to we didnt want to go too facetious, 2. 5 billion company, remarkable quarter. Why . Because ollies busy. All of the merchandise that others arent taking. Consumer products but also pets. I dont know, this is some day. This is a day where people are talking about how coach and kors were competing left and right. Now because theyre not because theyre merging, excellent number. Im going to save my best for last. Kors was yesterday. Well, there was a good note today good note. Youre referring to coach buying kate spade. It will be great. One thing before we break, i dont want to break, david we have illinois tool works. Goldman goes from sell to buy. Mea culpa. We didnt know the company was this good. Had they watched us on mad money i rest my case. The prosecution rests. Lets get to dom chu to see what he thinks is moving on the floor. Good morning. As you talk about the idea that maybe some of the traders down here want some of that hawaiian punch or want some of the koolaid guy busting through the wall to get some activity in the markets the dow is floating around the unchanged level. Gains in the nasdaq composite a third of 1 . And the early sector movers again the day is still young. Started off with financials, showing a little bit of sign of life. Bouncing back from yesterdays losses. And you can see now were back to flat again. Health care though still showing some healthy gains up by half a percent overall and Technology Stocks to jims point showing some relative strength. Utility and reits so far lagging behind. As we look at the bullish and bearish case thats playing out for many of the traders out there, not just on the floor here, but throughout the wall street and the financial markets, the underperformance in small cap still sticks out like a sore thumb. Watching whether or not we see some kind of a catchup in the economically sensitive sectors of the market especially on the market cap side of things with the small cap stocks. Transportation stocks as well. That divergence is well known and showing some signs of that kind of gap widening out a bit. The stocks are lagging the s p 500 overall. Jim had mentioned the idea going from ciena to wynn about the breadth of the markets right now. We have some numbers on that. It turns out if youre on the more bullish side of things you feel good about market breadth right now. Of the 500 issues in the s p 500 around 330 of them are actually positive year to date. Pretty good sign that were close to twothirds, more than half of the stocks better on a positive basis. 230 stocks, nearly half the s p is actually doing better than the overall benchmark at about 7. 75 entering today. The five biggest stocks, all up between 12 and 32, 33 . So the heavy lifters showing some signs of life there as well. Jim, david, as we talk about the idea that there is broader participation here, the question becomes whether or not we do see any kind of a catalyst right now. Interest rates are part of the story for the banks. See what happens with technology, guys. Back over to you. Thank you, dom. Lets head to the bond pits and join Rick Santelli at the cme group in chicago. Good morning. Good morning, david. You know, the the month we just finished trading indeed may had an eight basis points mover in tens. We settle at 2. 28. It wasnt a huge month but whether its the fixed income markets or the Foreign Exchange markets, they all seem to be fishing for a bottom. Some place to hold. Now, if you look at the two day of tens quickly, adp did give us a pop. Where that pop goes, thats the issue. Lets hold may 1st constant for all of our charts today, shall we. Lets look at ten year. You can see its bumping along what was the low close yield of the year, right around 2. 17 averted for now. Challenging that bunds pretty much the same. Tens minus bunds is an interesting one because its a good directional trade. It looks like it wants to turn higher. Well have to monitor it especially right around that 1. 95 area. Tens minus twos, this doesnt look like its bottoming any time soon here. We hover at 91, 92. Once again, im not talking about what it means recession economy. Just from a directional standpoint because its really been a proactive trade moving that. On the ten year side. Dollar index, here is one for sure that really looks like its not ready to make a bottom. But if you start to look at one of the key pieces to the dollar yen its fascinating because if you look at the range on that chart, the high is about 114. 13. And the low is 108. 30. Midpoint is about where its trading 111. 30 or so. The traders are always longing for clues as to which market will give them the turn first. Jim and david, back to you. Thank you very much, Rick Santelli. Still to come, were going to head back to the code conference in california. Carl is there. Hell have a live interview with the former ceo of twitter, dick costolo. Also an exclusive with fed governor jay powell. I love jay, known him for years. Squawk on the street will be right back. The power of 100 of the worlds top companies. The power of a proven 15year track record. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. With e trades powerful trading tools, right at your fingertips, you have access to indepth analysis, level 2 data, and a team of experienced traders ready to help you if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade. Start trading today at etrade. Com heres a look at the nasdaq of course. It is by far the best performer for 2017. Up next, with well do stop trading with jim. Arent sellin. What are we gonna do . How about we pump more into promotions . Nah. What else . What if we hire more sales reps . Nah. What else . What if we digitize the whole supply chain . So people can customize their bike before they buy it. That worked better than expected. Ill dial it back. Yeah, dial it back. Just a little. Live business, powered by sap. When you run live, you run simple. All right. Lets get to it. Stop trading with jim. Where are we headed . Im looking forward to a conference that you and i are going to be youll be speaking at. The Corporate Governance conference on monday. Im going to have ed garden and mr. Hogan put together this pent air split up. Well, goldman says forget about it. Its a sell. The valuations are stretched. The sum of the parts suggest downside. Theyre right on pent air as they were on illinois tool works. Not very. So i look forward to speaking with you at the conference and justice and to ed garten from trian. Wow. What a promo for that conference. Yeah, theyll make a case that pent air, that this was good activism, good constructive engagement and i cant believe that goldman came out with the sell. I think thats ill advised. What do we have on mad tonight . Did you see that i said that paypal would go down. Scott wapner asked me. And we have peter gasner. And then workman, david, distribution now, this is a company that is in the oil patch and seeing good business. I cannot wait for tonights i cant wait for everything. I dont blame you. I cant wait for everything. Good, thats the way to be in life. I mean, come on. You cant wait for the phillies next game. How about a nice hawaiian punch. All right. You had to join us earlier if youre not getting that joke. It was a joke, i hope. Coming up, carl has a lot more from the code conference, including a live interview with dick costolo and then the exclusive with jay powell. Keep it here. S my headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. Welcome to holiday inn whether for big meetings or little getaways, there are always smiles ahead at holiday inn. Hes a nascar champion whos shes a worldclass swimmer whos stared down the best in her sport. But for both of them, the most challenging opponent was. Pe blood clots in my lung. It was really scary. A dvt in my leg. I had to learn all i could to help protect myself. My doctor and i choose xarelto® xarelto®. To help keep me protected. Xarelto® is a latestgeneration blood thinner. Thats proven to treat and reduce the risk of dvt and pe blood clots from happening again. In clinical studies, almost 98 of patients on xarelto® did not experience another dvt or pe. Heres how xarelto works. Xarelto® works differently. Warfarin interferes with at least six bloodclotting factors. Xarelto® is selective. Targeting just one critical factor, interacting with less of your bodys natural bloodclotting function. Dont stop taking xarelto® without talking to your doctor as this may increase risk of blood clots. While taking, you may bruise more easily, or take longer for bleeding to stop. It may increase your risk of bleeding if you take certain medicines. Xarelto® can cause serious, and in rare cases, fatal bleeding. Get help right away for unexpected bleeding, unusual bruising, or tingling. If youve had spinal anesthesia, watch for back pain or any nerve or musclerelated signs or symptoms. Do not take xarelto® if you have an artificial heart valve or abnormal bleeding. Tell your doctor before all planned medical or dental procedures and before starting xarelto® about any conditions, such as kidney, liver, or bleeding problems. Youve got to learn all you can. To help protect yourself from dvt and pe blood clots. Talk to your doctor about xarelto®. Theres more to know. Good morning, welcome back to squawk on the street. Im sara eisen here with david faber and mike santoli, live at post 9 at the new york stock exchange. Carl quintanilla is with us from the code conference in rancho palos verdes, california. He will be joining us often and shortly. Lets get a quick check on the markets this morning. After a little selloff yesterday, we start the month of june on an upbeat note. Stocks are coming back a little bit. The nasdaq is up the most, up 0. 2 . The dow is just barely positive. Crude oil losing some of the earlier gains, 3841 after a 3 slide yesterday. Yeah, well, speaking of fossil fuels, we start with President Trump getting ready to make an announcement on the paris climate agreement. Well get a live report from washington straight ahead. Stocks remaining resilience. The nasdaq hitting another record high and a big jobs report out tomorrow. Plus, media moguls are speaking out. But first, more Economic Data crossing the tape. Lets send it out to Rick Santelli for the manufacturing numbers. Yes, and Construction Spending for the month of april was down 1. 4 . Last month though did have a big revision, down 0. 2, now stands it up 1. 1. But minus 1. 4. Thats the weakest level since april of 2016 on a month over month basis. Now lets get to that may read. The headline number, 54. 9. Its not bad but it is the Second Lowest of the year. The first lowest was last month. At 54. 8. Now lets go through it. Theres some positives here. Considering we have the Employment Data tomorrow, we had solid adp today. We move from 52 to 53. 5 on the Employment Index on new orders, we move from 57. 5, to 59. 5. Prices paid, this is surprising but its volatile. We move from 68. 5 to 60. 5. So at least on this metric, the inflation heat was cooled off rather dramatically. The response in the marketplace, a little bit of buying in treasuries but really not too much. Dollar index Still Holding light gains and stocks still, still on the record run. Sara, back to you. Yeah, dow up about 19 points right now. Rick, thank you. President trump getting ready to make an announcement on the paris climate agreement this afternoon. Lets get straight to eamon javers outside the white house with what we know so far. Good morning. Good morning. That ceo all out lobbying campaign is the story of the morning as we look ahead to the 3 00 p. M. Announcement by President Trump about whether the United States will stay in or pull out of the Paris Climate Accords. Heres what the president tweeted last night, setting up the drama here. I will be announcing my decision on the Paris Climate Accord in the rose garden. That set off a tweet from elon musk who said that he he said he doesnt know which way paris is going to go, but hes advised detective direct directly to the president of the United States and the white house ceo councils that he he was asked what would happen if the president pulls out of the accord and he says well have no choice but to depart councils in that case. So elon musk there making a bit of a threat. We saw mark ben ahoff urging that the United States stay in the paris accords. Meg whitman of hp just told david that she believes the United States should stay in it and made her appeal to President Trump to stay in as well. I talked to the white house about this today and yesterday and theyre saying they know theyll make some enemies here. Which ever way they go. Theyre emphasizing very much this is not a slight to any one of the individuals depending on where the decision lands. The expectation as of right now is that theat is that the president is likely to announce that theyre pulling out of the accords but with some caveats to hedge that. Its not clear who is urging the president to leave the paris accord. We talk about ceos, we talk about his fellow leaders, even leaders from china and russia. Not just g7. The pope. All are urging him to stay in. Whos telling him to leave . Well, the National Mining association is one group thats urged the president to stay im sorry to leave. Also out on the campaign trail this was a very potent piece of rhetoric of the president saying well pull out of the paris accords. Theres a many it cal Group Political group in the country who feel this is part of the overall war on coal which they dont like. This would be a sop to the president s base politically if he makes that decision. The white house is getting calls from ceos on the side of pulling out of the accord. Im asking them for some names and hopefully well have some names here this morning to share with you. Who has been calling on that side of the argument. But the overwhelming name number of names that we have seen so far has been on the side of staying in the paris accords. Certainly from big business. I think this will be a test of his ceo advisory council. Thank you, eamon javers at the white house. Its been another big day at the code conference. Carl is there. He joins us with some of the highlights. Carl . Hey, david, yeah, the paris news of course is making news here at the code conference as well. Everything eamon said about the uniformity of the ceos being opposed to the withdrawal, its true, but especially true here at code. Youre dealing with Silicon Valley innovators and trying to come one a new way to deliver energy, whether its wind or solar or renewables. Keep that in mind. Separate from musk and tim cook and meg whitman. Last night it was steve jobs widow who urged the president to stay. I think like everyone i agree it would be a colossal mistake for the United States to pull out of the paris accords for every reason thats already been outlined. Obviously economic, everybodily thats obviously thats the wave of the future. Of course thats where the momentum is. All right. So well hear more about the paris news later on this afternoon. Of course, well see how that echoes here at code. In media, the relationship, the back and forth relationship between content and distribution. Silicon valley who have the data, meanwhile, Traditional Media Companies that want that data as well. Jeff bewkes talked about when its a subscription model like netflix, generating a hit for hits sake is not the point. Take a listen. Subscription paid tv, netflix, hbo, showtime, we dont care what the audience is. Were not trying to make a show. We did not pick game of thrones or the curb your enthusiasm reboot. Theyre each for a different audience so the whole definition when youre in nonadvertising subscription only tv is a little different about what you think a hit is. Coming up later on this hour, well talk to Dick Costello about twitter. So much news about the model there. Whether or not its being gamed to feed misinformation as the New York Times trying to argue today. Well talk to steve case about whether or not we can actually bring the power of Venture Capital to areas of the country that desperately need it, but have no way of tying into Silicon Valley. Then Brad Gerstner talking about airlines. Again, this notion of Ambient Technology. You will hear this term again and again. Computers talking to each other without your involvement and the wave of investing coming up behind that. A lot coming up here on day two at code. I was struck by jeff bewkes comments about the advantages of marrying his content business with the data driven customer touching telecom business. Or thats implicit in there. I looked at when time warner spun off time warner cable. In 08, 09. It was a full fledged Telecommunications Business and it wasnt a great fit. It shows you how things change. Hey, we got paid multiple times here. We spun it off, and its kind of interesting. When you pull them apart its a prelude to putting them back together. Yeah. That tied in tied out dynamic has been going on for a while now. Its distribution thats truly overtaking contempt, i dont know. Thats a debate that we look forward to talking to steve case at 11 15 a. M. Eastern time about whether that back and forth, that on again off again relationship can be settled and whether or not the new model thats being if they can coexist in ways that wont be separated down the road. Well, Randall Stephenson tried to explain the rationalization or the reasons behind at ts purchase of time warner including those comments we heard from buicks and bewkes and we heard from Shari Redstone, the same thing that her father has been saying for the last quarter century at this point. Thats true. We have talked about whether or not a lot of viacoms brands had not been revived, renewed over time. It had gotten long in the tooth. Obviously she feels much different. But to your point, david, were awash in content and so if youre going to navigate through that, not like there were three networks you didnt need all this data. Its the sheer amount of content raining on us that requires data for the consumer and the distributors. Just to wade through all that. See if that what steve case says about that later today. Carl, youre in binge heaven over there, enjoy yourself. See you in a few minutes. Youre not kidding. Carl, carl quintanilla. We have some more auto Sales Numbers to get to. Lets get to phil lebeau with those. And sara, a big part of what were talking about today, soft sales for the month of may, including a memorial day weekend that was soft. Take a look at the numbers from toyota, down 0. 5 . Thats below the estimate from edmonds which was for an increase of 0. 1 . Not a huge decline, but you saw weaker than expected from toyota, weaker than expected from general motors. Overall, guys, the estimate is with well see a sales pace of about 16. 7. Maybe 16. 8 million. Maybe as low as 16. 6 million. This is what people are expecting. That slowdown, not a dropoff. Huge dropoff. But a slowdown relative to where this industry was last year and the year before. Back to you. Yeah. I guess some hoping for a rebound. Not so much. Phil, thank you. Yeah, you bet. Federal reserve governor jay powell is with us for a rare interview. Why he said its an appropriate time to be raising rates. Plus, more from carl. Well hear from former ceo of twitter, dick costolo. His take on trumps twitter tactics and where hes investing in business right now. Squawk on the street will be right back. Welcome back to squawk on the street. Lets send it out now to senior economics reporter steve liesman, sitting down with a special guest. Take it away. Thanks very much. Im here live at the Nasdaq Market site with Federal Reserve governor jay powell, who was the head of the supervisory committee. Thanks for joining us. Thank you for having me here. I want to get into the regulatory things important to all. You said that you think that rates ought to raise slowly this year. But i havent heard you say how many times. Whats your number . Well, so i havent put a number out there. But i would say that if the economy continues broadly on the path its on, i can see a couple more rate increases this year which would be a total of three. You also said that the fed ought to begin reducing the Balance Sheet. Do those two things Work Together or separately . Would the fed stop raising rates and begin to reduce the Balance Sheet . Not necessarily. So when we reduce the Balance Sheet that will increase debt held by the public which could put upward pressure on long term rates. To the extent that happens we have to take it into consideration. But the effect might be fairly small. Of course if theres a bigger effect than i would expect, then that would be taken into consideration in setting rates. You talked in your speech about some estimates from staff about the effects. Maybe you can put them into a bit of english for us. How much would yields rise if the fed follows through on the Balance Sheet plan here . You look at it through the eyes of the highly complicated model and they suggest pretty modest effects. A few basis points here and there. So really i think a better way that i like to look at it, how did the market react to the news that we put out . I think based on the march and may meetings we talked about moving forward the expectations of the market to when we would start from mid 2018 to krengtd. Correct. To the end of 2017. The Market Reaction was pretty small on that. That gives me some confidence there may not be a big Market Reaction. As i said its hard to predict markets. I try not to do that. And if the markets do react more than i would support our reacting have you surprised though . I keep reporting these things. That 4. 5 trillion Balance Sheet is going down. Whats the number to think about . My own thinking it really depends on a whole bunch of factors which havent been decided yet. Its hard for me to see the Balance Sheet getting lower than 2. 5 trillion, 2. 5 to 3 trillion. That assumes that we normalize the Balance Sheet over the course of the next five years. And go back to a fairly small number of reserves. Lets talk about the economy. The Inflation Numbers have been going the other way on you. They have been you were on this approach towards your 2 goal and now they have come down for three months. It has not moved towards your 2 goal. How much concern is there that inflation is going the wrong way . I watched that carefully. The march and april readings were weak, were sideways as you say. Theres good reason to think were on the path of gradual increase in particular spending data has been pretty strong. Labor market data is pretty strong. If those things continue, i expect them to continue to put some upward pressure on inflation and we continue to move back to 2 . We have to show our commitment to getting to 2 . So we have to be guided by the incoming data. One of the things you have to be guided by is the expectations for fiscal policy. How has that changed over the last several months . My thinking hasnt changed because i felt that first of all, i feel like its the 2018 event. You know, the effects on the economy if any would be felt in 2018. And its very difficult to incorporate anything into 2017 because we dont know the timing, we dont know the scope or the character of what will happen. If you assume as i do sort of assume theres some tax cut that it would probably provide some support for the economy in 2018. But it wouldnt really affect 2017. Do you have a number that youre building in if it happens it means x to gdp . Its hard to say. Im not thinking of it that way until it gets done. We dont have to do that for this year. You think of a tax cut in the range of 1 of gdp. It would raise it a fraction of a period of two or three years. Stress tests are coming out soon. I guess at the end of this month or so. Youll release this information. Banks have complained about them. They dont have information. Youre not transparent enough. Now that youre in the new job of the Bank Supervisory for the fed, how do you want to change the stress tests . Well, we should committed to running as transparent and as effective as possible a set of stress tests. These are very successful, very important post crisis innovation. And we want to continue and strengthen that. So we do hear these complaints and, you know, we are working now as we have continually to provide more in more information, more transparency. Particularly were working on something that will do well do in the coming months which will provide much more granular information for portfolios on corporate loans and other kinds of loans. That will help. Well provide more guidance when we announce the results on june 22. We we well provide more guidance on the qualitative guidance and seek information from public on how to go about with more transparency. President trump said hed do a big number on dodd frank and called it quote a disaster. Do you believe a big number has to be done on dodd frank and is it a disaster . I would say that the post crisis Reform Program has been mostly completed and has mostly been successful. I think its our obligation now as we reach completion of it to look back over it and ask what aspects of it may be redundant or utterly essential and should be protected down to every letter. But there are some adjustments. I think thats only appropriate. Much of the new stuff was novel and it would be very surprising if we got it all exactly right the first time. You talked about scrapping the vokal rule and other things. Well, were working on a way to Congress Makes the laws, we implement them and were working on a less burdensome way to implement that. I think were working now on a reset really of how we how our supervision interacts with the board of directors. Were going to eliminate many of the really specific directors, on the boards of directors. We want directors to focus on the main job of overseeing and Holding Accountable the management not running the company. And not getting tied up in a lot of check lists but freed up to think about the strategy of the company and performance of management. Finally, jay, theres a couple jobs open on the fed right now. Its vice chair of Bank Supervision is open. Your name was mentioned as a potential fed chair in a recent wall street journal article. Are these jobs youre interested in, have you been talking to the administration about it . I have several jobs at the fed and im extremely busy doing them. So i wont have any comment for you on that today. You dont say if youre interested or not, just no comment . Correct. Last question i have for you. When we go and potentially reduce our or scale back some of the dodd frank rules, youre also going overseas and dealing with basel. Is there a i believe well be involved in basel and i believe the changes we are making will be in harmony with what we have agreed at basel and it will be about making Bank Regulation more efficient and effective and wont change what we have done. Jay powell thank you for joining us this morning. Thanks, steve. Back to sara at the nyse from the nasdaq. It is. Thank you. Back here at the nyse. Steve liesman, thank you. Feels like the working theory for the fed is three rate hikes this year. Two more to go. As we head to break, lets look at stocks this hour. Got a minirally going on. The dow is up 26 points. As for the s p, youre seeing strength in groups like materials and health care and the financials are catching a little bit. Technologys at the bottom of the s p. Much more squawk on the street. Stay with us. Investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. Welcome to holiday inn whether for big meetings or little getaways, there are always smiles ahead at holiday inn. Take a look at the auto stocks this morning. Its the day they report monthly sales. Actually some mixed results. Ford outperforming gm, annual rate of sales below 17 million it looks like, but the stocks bouncing pretty much across the board. They have been bad underperformers here to date. Ford up 3 and gm up 2 . It seems like rotating into the laggard stocks tone the consumer and industrial area, even though the Sales Numbers have not been so great. Squawk on the street back right after this. I joined the army in july of 98. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. Good morning, everybody. Im sue herera. Heres your cnbc news update at in hour. At a News Conference in st. Petersburg, russian president Vladimir Putin insisted his government never engaged in hacking and he scoffed at allegations that hackers could influence the elections in the u. S. And europe but then he added that patriotically minded russians might have meddled in the elections. As President Trump prepares to announce his decision on whether or not to pull out of the Paris Climate Accords this afternoon, Boris Johnson says that britain will continue to urge the u. S. To take a leading role in bringing down carbon emissions. Objectively, america and the american states have already made very substantial progress in reducing co 2 emissions, nor do we expect that progress to let up. But well continue to lobby the americans and the white house to show the leadership they have shown in the past in reducing co 2. A guitar that the grateful dead that jerry garcia played in concert fetched over 1. 9 million overnight and the proceeds are earmarked for the southern poverty law center. Sara, back to you. Some deadhead spending money on that. We have breaking eai inventory breaking out. You can see were down more than 1 on the eia. Thats more in line with last year and the five year historical average that what folks were expecting. The total stocks are about 2. 5 trillion cubic feet and thats 13 . So expect that to continue especially with the cooler temperatures if they continue as well. Now over to carl at the code conference. All right, jackie, thank you. Welcome back to the code conference out in california. Joining us this morning Dick Costello, the former ceo of twitter. Dick, reversed roles in a bit of a surprise. They interviewed walt moss berg who is retiring and he was asked about the time that steve jobs shipped the first iphone, if walt liked it first. People are coming into your office in d. C. This is in 2007, talked about the pilgrimages to your office in d. C. Right. And as we saw in the video, steve brought the first iphone to you. Actually that was in cupertino i saw it. Its not mince words. Pretend im asking the questions. It was a great interview, dick. Great to have you. Happy to be here. Great sit down with walt. It gives us a chance to put into perspective where tech has gone. Over the course of his career. His attitude was basically that tech has gotten it right. They got the memo to make things easier to use, right . Yeah. S his first column in the his first column in the wall street journal in 1991 was personal computer and technology was too hard to use and its your fault. He said on stage, all right, problem solved. Well, well see about that. He also said a couple of other things. One, his last column for the verge about Ambient Technology and thats something to wrestle with. Alexa and google home and things that are listening and you dont know theyre there but theyre all collecting data, how are we going to deal with that. All the privacy information. Right is the ambient commuting thing a giant investing theme . It looks like it has to be. You can see how quick these devices are becoming useful to millions of people in their homes. In their kitchens. The conversational ui or a notion of a conversational ui is faking is taking off pretty quickly. I think it will be ubiquitous more than we think. On the consumer side . On the consumer side you can see dozens of applications, without having to walk over to it and touch it or type on it. So i think that in the consumer space you will see dozens of useful applications for it pretty quickly. All right. We have been talking about the internet of things for a couple of years. For viewers what do you tell them thats new . The funny thing about technology theres a great line in hemingways the sun also rises. How do you go bankrupt . Gradually and then suddenly. Technology takeup curves are like that. They creep along. You see the same things at the Consumer Electronics shows every year and i think it will be like that. The alexa and the google home. You think were at an inflection of sorts . Yeah. Is that what does that explain the valuations. At least on the big guys, facebook is up 32. Amazon, 33. Google, 25. S p, 8. Yeah. Look, valuations are its not something i ever understand. I was talking to a friend about tesla the other day. I remember henry blojics call for amazon 400 back in 99. He was right, it was just it was a while later. I sort of feel the same way about some of these valuations. It may be a 340 stock but when, you know . I mean, it is today, but when that valuation really earns its way in is another question. So you dont think the cult status of some of these names is reflecting the promise of the technology you just talked about . I was talking about one thing specifically. In amazons case it does appear that the Business Models that they have working along multiple business lines and firing on all cylinders. Amazon web services is a juggernaut. And their expansion into other areas seems to be going quite well. Thats so that particular company is another issue all together. What about tesla . What remains to be seen. The model 3 i havent seen it yet. Theres a lot of promise built into the valuation of the company and theres no question that elon is one of the smartest in the business and in the industry. Hes extraordinarily bright. He thinks in these sort of grand terms about the world and the future of humanity, et cetera. Its remarkable to listen to him. But whether tesla is a 340 stock and its going to be were going to see it hang out around there or stay there over the next couple of years is a completely different question. Its hard valuations are so tricky when he just says the word saturn, right . Yeah. The bulls feel like they have Something Else to pin their hopes on. I feel like ceos would love to have a safe word for their underlying stock price. Lets talk about twitter for a moment. Not too much. How did you feel when ballmer here at recode said that investing in twitter basically cured him of investing period, post microsoft. The thing that people dont understand about twitter is its a remarkably resilient network. The value of the network and the value of the immediacy of news dissellmation and correcting things that are said on the news that are wrong is incredible and unrivaled. I think that resilience has proven over the years that its got enormous value and is going to continue to have enormous value. I think that the leaders of that company understand how to take advantage of it. Theyre trying to do things like all their live initiatives that will be helpful in that regard. You talk about being a selfcorrecting ecosystem. You wrote a famous memo that the company under your tenure was unable to get rid of hate and abuse as you thought it was necessary. I said in that memo that we werent doing a very good of it and needed to work more quickly and harder at it. I think the company has done a great job of that since my departure. Today in the New York Times, one takes a crack at if you can get things to trend on twitter you get covered everywhere. But if youre trying to create misinformation and propaganda it works equally well. Its an incubator for fake news. I dont agree with him. There are numerous instances that news, not just on twitter, but other platforms like facebook and on Television Programs announced that this is this rumor we have just heard about something thats happened. And were looking into it. And twitter and platforms like it tend to be the platforms where that news is where that misinformation is immediately debunked. And the value of having people around the world who can visually see whats actually happening and take photos of it and report back, this is whats actually gone on, this is what i see happening. Its tremendous. You see it all the time and in politics now with people correcting what something that has been stated as true. People who are on the ground will say im here, and thats actually not true. I think thats an enormous value in that network itself is going to be extraordinarily resilient. One last thing. Is it do you believe the president s twitter account is populated by millions of bots . I saw that report the other day. While it would normally not be any place to comment my place to comment on that, i think that was debunked pretty quickly. Finally, chorus, your fitness venture. Tell us about the progress. Whats it going to be . Its great. The thesis behind it is that social accountability and social motivation are the things that work in trying to help people get into shape and live healthier lives. There arent any digital platforms that i think correctly think about social accountability and social motivation in the health and fitness space and were building that. Its in beta. It will be launched some time this fall. The beta is going as well as could be expected and were cranking away in a small office in downtown san francisco. Im not working out with you, because ive learned the hard way i cant keep up. No, its a lot of fun. Thank you. Thanks for having me. Sara, over to you. Carl, thank you. When we come back, wells fargo officially losing its new york city business today. Eight months after the fraud scandal that rocked the company. Well discuss that and more when squawk on the street comes right back. Stay with me, mr. Parker. When a critical patient is far from the hospital, the hospital must come to the patient. Stay with me, mr. Parker. The at t network is helping First Responders connect with medical teams in near real time. Stay with me, mr. Parker. Saving time when it matters most. Stay with me, mrs. Parker. Thats the power of and. After looking weak for a while is a rally ahead for oil . Tom lee is looking at some key signals. Find out what they are at tradingnation. Cnbc. Com. Is more squawk on the street coming up. Welcome to holiday inn thank you wait, i have something for you making every stay a special stay. Holiday inn, smiles ahead. Whether for big meetings or little getaways, member always save more at holidayinn. Com lets get out to the cme group in chicago. Rick santelli. Good morning, sara, thank you. A local man, id like to welcome congressman peter roskam. Its great to have you in person. Youre in exactly the right place in government to have a great discussion on taxes. Youre the chairman of the house ways and means subcommittee on tax policy. Big job. I guess the first thing everybody has to ask is the time line. You have others like ryan, treasury secretary mnuchin putting pretty big blockers as to when they think this gets done. Tell me your thoughts. Think of this in terms of fruit ripening as opposed to pulling the fries out of the fryers in nine seconds. When this is ripe, it will be ready. Im not trying to be cagey, but im trying to describe kind of getting some of these difference concepts sort of publicly litigated and well understood. We have passed an important phase. Nobody is defending the status quo. Theres nobody that likes our current tax code. Nobody likes the irs. Theres a recognition that we have once in a Generation Opportunity and now is the time. So i think 2017 is the year for tax reform. Okay. Now, off camera you said pretty much you still pretty much believe 2017 is the year that this may get done. Now its once in a generation, you brought that up as well. Last time Ronald Reagan didnt have twitter, didnt have social media. Didnt have a microscope on every little detail. Im not saying whether its bad or its good, but doesnt it make your job much more complicated . Its challenging, but toward the end you can use the same tools to get out and talk about things to have a broad discussion. So with propose 100 expensing and it creating an incentive for companies to come out and purchase things and it creates churns in the economy. So rather than being nostalgic about the days gone by, dump it its not here. The only thing that reminisces 1986 like its a Ferris Buellers day here in chicagoland, but thats the only thing. We have to use the sort of tools and explain it. Like Margaret Thatcher said, you win the debate and then you win the vote. Were winning the debate on pro growth tax reform. We have to do the transition, the transition is harder in terms of what it is, tell me this and that. But theres no defending the status quo. All right. As i look up in the sky do i see a bat sign up there . Is b. A. T. Still alive . B. A. T. Is still alive. Its in the context of doing a couple of things. Having antibase erosion rules. So what we propose what does that mean in english . Heres what it means in english. You lower the corporate rate, move from the International System to the territorial system. You need some sort of protection against Companies Just putting their intellectual property in ireland, god bless them at the lower rate. So what jack lew tried to control those leaving the country for tax benefits thats what youre talking about . Thats right. He tried and failed. Redefining the debt and equity doctrines for 40 years it doesnt work. House republicans tried in the place. So what youre saying in engli english, the b. A. T. Its too hard for the public . Its a new concept so it takes time to get your heads around and understand it. You have seen this all the time. This will get discussed in this sort of isolated detail. And so, no, dont put it in isolation. Look at it in the context listen, if b. A. T. Had onetenth the time that the russian stories have had, i think most of the people would have a ph. D. In tax policy. Listen, congressman, been an absolute pleasure. Get something done for the americans that were out there in november, who really want this type of change. For sure. David faber, back to you. All right, thank you, mr. Santelli. Now, lets send it over to jon fortt at the code conference. We have a look at whats coming up on squawk alley. Hi, jon. Hey, david, well, we have steve case coming up. Formerly of aol. Big focus on media content and also on developing technology in the middle of the country. Also, weve got a vc who invested in uber and is investing in the andy ruben new smartphone and home venture. Thats coming up on squawk alley. Wells fargo officially losing its new york city business as the city cuts ties to the bank this week. Eight months after the companys massive fraud scandal. Vanity ferriair recently went bd the scenes. Joining us now is the author of that piece, vanity fair special correspondent and cnbc contributor bethany mcclean. Thanks for having me. You went deep into this more than 150yearold banks corporate culture. What did you find . I think its interesting because this really is a story of the slippery slope of corporate culture. It was put in place by the former ceo dating back to the early 202000s, becoming a dan dangerous thing for lowlevel employees. What did you find, beth aany about the way the bank is now. They promoted tim sloane to ceo. They have made moves to correct the culture and the behavior. Have they done enough . Theyve done a lot. John stump, the former ceo stepped down, theyve put in police steve sloan. What remains to be seen, wells has always stood out on wall street because it did have these great cross sale figures, means customers of wells fargo used a lot of products of the bank. And the bank over the years, as the scandal began to come to light internally, they were reluctant to back off the sales goals because they are afraid if you lost the bad sales, youd lose the good sales, too. What we dont know is how thats going to filter through wells far fargos staleales. What does the bank look like without that seaales culture in place. That remains to be seen. Youre no stranger to Corporate Cultures that go awry given the reporting youve done on any number of corporations that have had their share of ignominy so to speak. Is there any role to be played here, any blame to be put at the boards feet . If you read the report that the board of independent directors put out, which some would read as a selfserving report, it does absolve the directors. They argue not quite that they were lied to but they were essentially misled by executives at wells fargo about how big the scandal was. They thought it was maybe 250 employees being fired a year and a very local problem. It turned out it was more like a thousand employees a year and even that number is a crazeily misleading statistic because the number of people who were fired a year for supposed sales abuses captures one thing and one thing only, right, which is the number of people who were caught. It doesnt capture the number of pop actually engaging in sales abuse or the number of people that left the company, the people who left the retail bank because they simply couldnt tab the culture. But i think there are limits to what a producer directors can do, even a wellintentioned board and they were certainly trying to get information from wells fargos executives for years before the scandal broke. Its a great piece. We recommend reading it in vanity fair. Thank you for joining us to talk about it, bethany mclean. Coming up, were going to go back out west and join the code conference and speak to the former ceo of aol steve case. Stay with us. Heres to breaking more glass ceilings. In golf and everywhere else. The kpmg womens pga championship. I am benedict 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 welcome back to squawk on the street. Ticker xlv a close to a new 52week high. Im going to send it out west for the start of squawk alley. Thank you very much. It is 8 a. M. Here for the final day of code, 11 a. M. Back on wall street and squawk alley is live. Good thursday morning. Welcome to squawk alley. Before we get