Transcripts For CNBC Squawk On The Street 20170620

Tech ceos on their meeting with the president. And whole foods and amazon, how both companies see that deal making sense. Mondays tech rebound result in nasdaqs best day of the year, closing highs for the dow and s p were not far away from posting doubledigit yeartodate for all three, which we havent done since 2013. No. And a lot of people felt coming into the year the market was overvalued, having had a big run after trump got elected. Obviously, that was not the case there was more to it a lot of people would have felt if you had the Federal Reserve being as aggressive as it is, theres no way you could do it earnings worried about the strong dollar, we have a weaker dollar one thing i point out today will be oil its going to be very messy. This is my level i felt it could get to those are big cap stocks f it goes too much lower, people will say, wait a second weve been buying. Maybe demand is not as strong. Because its the summer, you would expect more demand be careful, oil. Tech sector yesterday whoever was selling either went bust or decided i dont want to be in these stocks and they just flew without any real buying. There just wasnt a lot of selling. Now were following up today with some upgrades nvidia to a buy. Where have you been, partner . Supply chain checks. Look, this is a nintendo switch. You cant get the switch its too hot its in pretty much everything crypto currency mining taking up inventory. I cant wait to speak to ibm today. They do block chain. Ginni rometty. How many currencies can you really have here its a little nutty. Individuals have been in it, obviously. You cant trace them. Speaking of mad money, Lloyd Blankfein talking about why he tweets, why bank regs need to be rolled back responsibly and on the consumer and the economy. Listen. If you looked at things statistically, you looked at the numbers and metrics, u. S. Had virtually actually full employment, low energy prices, growth a lot of the metrics are all positive. So, what did you take away from that . Ive spoken to lloyd for 35 years. And this was the most i dont want to say hes obviously a guy always worried about risk but basically saying hey, this is a pretty good environment. Not volatile but pretty good environment. I came away thinking, you know what you keep waiting for something big. The next quotes were about china, for instance. Chinas pretty good. He thinks the environment is one thats pretty positive for financial for securities and i also feel like hes saying, look, there is going to be a rollback but i love the fact that he owned all the banks were k culpable he didnt single out what goldman did. You mean by mentioning counterparty risk . Yes, he did but he did point out, look, they were fine. And everybody it was one of those things he basically said, look, it was our time on the cross. He basically just said this is the way it happened. But he felt i loved his praise of yellen and bernanke. No one ever thanks them and said they did a good job and made a recession that was going to be really horrible shallower. And i think the response about how he felt goldman did well during this period and i think that he was very cognizant that doing well suddenly meant they were doing bad. He said that and wasnt going to let anybody define goldman this time around. Hence, the tweeting. You asked him why he has been vocal. It sounds like his mission now is to communicate more broadly about the work goldman does. This is Lloyd Blankfein last night talking about why hes tweeting youre tweeting what is that all about you know, i agree, its not for an institutional firm like us its not that usual. You asked me about the financial crisis before. In the financial crisis, nobody knew anything about what Goldman Sachs did, the value we create, what we do in the communities. Also, the importance we do in raising capital for people who need capital, helping them to create business, hire people, virtue of circle by hiring people as i said if this ever happens again im not going to allow there to be a vacuum about what were like im going to have to communicate to the world more of what we do, which weve done institutionally but also theres a personal element to it, too and over the financial crisis receding a while ago, we kind of never picked up on it. When there is that vacuum others will define you. Yes. Goldman knows that. You talked about he brings up government facts and how the way that we all learned with goldman, you were told by your bosses, look, after youve done well, go do something good for society and dont come back. It wasnt like you were supposed to go, revolving door. Somehow that became bad. Somehow a guy would finish his career, retire, go do Something Else, then go into Government Service and it was regarded as wow, the goldman tentacles no, it was what we were taught to do. Try to make as much money for the firm as possible that was the goal, Financial Firm and my boss came to me and said what are you doing for the community . Have you looked at joining a Hospital Board Hospital Board no this is what we do Government Service or charity. And i was kind of like, wow, thats a different world im not sophisticated. I dont even know how to approach those things. He said well explain it to you. Lloyd is saying thats what we do not like we go into government then come back and clean up. I thought he did a great job. A lot more to listen to with that interview weve got good stuff lined up. Thank you. Meanwhile, white house meeting with tech ceos with the president , who called for a sweeping transformation of the governments technology, overhaul aimed at achieving 17 million over the next decade jeff bezos made the case for Artificial Intelligence. It would be impossible to overstate this the United States needs to, at every way, in every level be working on Machine Learning and Artificial Intelligence. That can be used in every part of government to improve the services that government provides to citizens. Meanwhile, the times reported that tim cook told the president he needed to show more heart on immigration it does sound like, though, there was listening going on on both sides. There has been listening and then forgetting is the way i look at it you get these people in a room and they have ideas. And i was shocked at how poorly the government has underspent listen to these guys they can make it work. Artificial intelligence im hoping that the Defense Department we certainly want Artificial Intelligence to be way ahead of everybody else. The idea that the government interacts with a lot of people and we should have Artificial Intelligence, why dont we, i thought was very important. Taxes, of course, also on the table there. Well hear from ryan later on today. Speech at the manufacturers association. It sounds like he will argue for increased confidence that this could happen this year not sure were going to get clearance on back or revenue neutrality but hes going to make the case that the u. S. Is an outlier and how we encourage the sourcing of jobs and capital. Every time they get close to doing something, we hear about health care or we havent heard about russia in a couple of days right . Every time that theres almost like a little momentum, somebody leaks to the papers about russia and then russia is the headline and then we have more investigations i think its one step forward, one step back. I keep hoping we are all hoping for tax reform. Think about it the whole country is hoping for tax reform and becky asked a very good question of secretary mnuchin. A lot of people are holding back spending because we dont know what tax reform is going to be secretary mnuchin kind of bob and weaved everybody wants tax reform and then it goes back to russia or health care. It seems to have gotten bogged down, referring to the white house. I was hoping that he remember, he talked about gary cohn, chief economic adviser cohn one of the things you do this stuff as a journalist ive known gary cohn for a long time and lloyd for so long they cant have that kind of relationship and he said its interesting you want to pick up the phone. You want to just call gary and say, gary, man, what are you doing . But no, thats not what happens when you go into government. Theres no hey gary. Goldman alum, secretary treasury was on with becky, wilfred and michelle talking about whether or not this could actually happen this year. Its massive tax reform that comes along with tax cuts. This is my number one focus, critical to Economic Growth, as i talked about continuously. Our economic plan say combination of tax reform, regulatory relief and trade. Last week we were pleased to deliver our report on Regulatory Reform and are moving forward quickly on tax reform and expect to get it done this year. Interestingly, their fund manager survey, top risks, chinese credits tightening number two, crash in the global bond markets number three is a delay in tax reform. I think theyre going to get the delay. I think that what happens is that theres just no way these spare parts can work i would say you have that thing ahead of us, the chinese crash, i think its interesting that lloyd immediately went there and said i feel china, i feel very good about china world bond i dont know i think that theres too much emphasis thats a story thats been haunting us for a long time. Did you get the sense that blankfein was having to hunt for things to worry about . No, no. Hes a understood. Theyre not in your face. No letter that says this is right in front of me that the euro is going to collapse or we have to worry about italy, next domino or ireland, like the old days when we were talking about greece the worry would be nothing happens in the country and that theres this great enthusiasm in the market but nothing happens because they are so bogged down. His word, not mine. Right well Pay Attention to that and hear what ryan brings us around 12 45 this afternoon. Excellent. Yep. When we come back, the message that whole foods ceo mackey gave to employees about the deal and Charles Evans. Premarket coming off those record highs, all three indexes up for the month with nine sessions left in the quarter, s p on pace for seven quarters up. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. We created the ripple the doughnut in a doughnut in a doughnut. Right away, it was a success. I mean, it really took off. What people dont know is that it all started with points from my chase ink card. I bought the ingredients, utensils, even custom donut cutters. Wow all with 80,000 points. What will you create with your points . Learn more about the ink business preferred card. But weve got the get tdigital tools to help. Now with xfinitys my account, you can figure things out easily, so you wont even have to call us. Change your wifi password to something you can actually remember, instantly. Add that premium channel, and watch the show everyones talking about, tonight. And the bill you need to pay . Do it in seconds. Because we should fit into your life, not the other way around. Go to xfinity. Com myaccount amazon announcing prime wardrobe this morning, new program to sell apparel, where you can try before you buy, something that some startups have tried to work on. Amazon moving in to make their day a little darker. This is another reason for nordstrom to be able to cash out, sell the company and cash out because the great thing that we all know about nordstrom, you can take it home, wear it even and they never even said a thing when you brought it back not that they wanted you to wear it but nordstrom was legendary willing to take back clothes guess what, amazon legendarily will take back clothes kochlt people wear them and abuse it . I guess so thats height risk, right . You order it for the prom and then you send it back after the prom. Yep nordstroms program, and we know rent the runway. Nordstrom hasnt done that well with trump club i think this is what do you do if youre niemann what are you thinking here its like you wake up in the morning and say, oh, were all right. Theyre going after food then its like, holy cow, theyre going after me do we ever want to leave our house other than to go to work i love my house. This has been your thesis for a long time. Between the video games and my daughter buys a tv, 55. I have cable dad, it is the greatest tv in the world. I said did you hook up the cable . She said why why . Downgrading the cable sector, which well get to in a little bit. It was truly love at first sight. Thats what john mackey told employees about the deal to acquire whole foods. Quote, its been a whirlwind courtship because weeks after we met on a blind date were engaged. But like an old traditional marriage where there are courul and chaperones, we cant consummate the marriage until were actually officially hooked up. Jana comes along, puts in a fabulous team. Gabby solsberg they wanted fresh blood, i guess. They had ron shake it Means Nothing to jana no matter what he did. And, you know, john mackey is a proud man. He had the high eest square foo dollars and has done a great job. Its almost as though nobody remembers anything they did other than the last 18 months. The courtship is easy. John mackey probably hated to go to work every day after all the changes he has made in there nothing . Nothing . At what point do you start to say to yourself, all right youve digested enough for now lets ive got to tell you, really hoping that walgreens and rite aid if this doesnt want to go down, you know they want to be in pharmacy so bad. Amazon. They have a huge footprint. The stocks all trade as if cvs, as if this is next anything that makes this pharmaceuticals, you do prescriptions. Maybe you do buy one, get one prescriptions. Can you imagine that buy viagara and get some lyrica. I forget who we spoke to. Whole foods was still breaking we were asking about other sectors, building supplies, pharma his words were that they could take down the Pharma Industry in one night. People feel theyll go into furniture, not appliances. The last mile ipo, logistics has it ready to be able to do it if you want to deliver the big ticket stuff if theres you know, whatever you want to buy. There will still be reasons to go out maybe you need something that minute but now, just in the last five days, theyve taken on a lot of different retail look, ill tell you, if they take on petco, game over right . Pet supplies . They already dominate in food but if they can give you a rescue dog it wouldnt be that far ofa leap thats for sure. Whats left whats left, carl . I mean, whats really left thats the theory, that bezos mission is to convince you that you dont need another retailer. You know, you have your cell phone. And, i dont know, i mean what cant you get . What cant you get right. Wow take back the clothes. I could wear them. Weve got a thing going this weekend. I could take them back. Cramers mad dash well see if we can build on yesterdays rally. Futures still pretty steady. Back in a minute this is where i trade andrs. 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. Ready or not, here i come. Ek. anyone can dream. Making it a reality is the hard part. Northrop grumman command and control systems always let you see the complete picture. And were looking for a few dreamers to join us. Our 18 year old wase army in an accident. 98. 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. Welcome to holiday inn whether for big meetings or little getaways, there are always smiles ahead at holiday inn. Looking from a fresh perspective can make all the difference. It can provide what we unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Couple of upgrades today. What can amazon not take on, really inexpensive fast food that knows how to do it. Mcdonalds goes hold to buy. This is all about Digital Initiatives saying u. S. Comps will be higher people love value. Easterbrook again like, remember, hes dead. All they have is allday breakfast. They had so much, easterbrook taking the best of whats going on anywhere in the world, putting it to work this is a remarkable story people recognize value when they see it congratulations to easterbrook for creating so much value comes in at 93 and has just done so many things right. Yep. And i wish he were more of a showman. I try to get him to be a showman. Cowans target is 180 and goldman upgraded around may 3rd, which kind of got you moving. And i felt come on, little johnny come lately, i think everyone is going to come around people are desperate to find something that is a safe place to go in the consumer Package Goods retail spend this is one of the last domains. Because you can get in there for instance, people are worried about casual dining. If you get whole foods, prepared foods coming to you very easily, that may be less expensive way a lot of it depends on liquor. If you can have liquor at home, its so much cheaper than when you go out and the consumer really understands you can get liquor and you dont need to go out and thats where the big, heavy fig is mcdonalds, congratulations. Easterbrook, please come on, i beg. Bring those mcmuffins. Well see we he e eng lln few minutes. A at fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Predictable. The comfort in knowing where things are headed. Because as we live longer. And markets continue to rise and fall. Predictable is one thing you need in retirement to help protect what youve earned and ensure it lasts. Introducing brighthouse financial. A new company established by metlife to specialize in annuities life insurance. Talk to your advisor about a brighter financial future. Live from the Financial Capital of the world, opening bell in 90 seconds we wait for the speaker to give a major speech on tax reform keaching our eye on oil, which did touch 43, jim, lowest since november. I think youre going to see a breakdown. This will flush out a lot of the speculators, exxon and chevron can really weigh on the market caterpillar has been thought to be brought down by oil but enough is happening in china, asiapacific up, world plus 8 plus one for total machines this last year that its separating itself from oil. In the dow, besides chevron, besides exxon that you really worried about. Exxon will get hit badly i think you ought to be thinking maybe this is the breakdown, the washout not the beginning of the big down move like so many say. You dont think you said earlier if it falls much lower well start to ask questions about demand but were not there yet . Not there yet that will be the 30s look, tomorrow inventories will be big again friday, i think youre going to start seeing maybe fewer rigs added. 43 is an interesting level its a mooch. Opening bell and s p at the bottom of your screen. Rich ritchie brothers, celebrating its acquisition of iron planet. Boy, did we need that natural gas, i wish people would separate natural gas from oil. Up another 10 cents. Im looking at my billboard report and ive got to tell you, nat gas, july price outlook, 3, up 10 cents thank you so much for my people, rusty brazil gave me the first call on these. These are very important natural gas is separate from oil. Its doing better. But youre not seeing it as a broadside of weakness even with the curve. The 30year, 2. 76. Tradewell energy, kyle cooper, theyre making theyre not making a standup call but saying year over year, this is not bad. Theres so much capacity coming out of nuke and coal its happening much faster than people realize natural gas, they cant open their fields fast enough natural gas is one market and oil is another people are not even looking. Thats why that price deal yesterday so significant because eqt, which stock got killed really wants out of as much natural gas as possible. In the east we need it in the northeast, weve got pipe. We need it in the south and weve got pipe and natural gas is going to be stronger than oil but nobody cares theyre trading down big. Our parent company, comcast, is the biggest s p loser. Yeah. Cuts cable sector and comcast to neutral. Big. They talk about the performance has tripled in five years. Room for a differentiated upside forecast has narrowed as the Cable Companies are a Good Business and thats no longer a secret, they say. You know, its been a great run. Ive been waiting for someone to say that comcast is overdone on the run. But what are you going to do sell it at 40 39, try to buy it back at 38 . Its a profitable growth for all situation where the cash flow is amazing. And i just think you cant trade it you have to own it. Target remains 45 well watch that cmg, this has got some people scratching their head. Last night, they appear to a firm and then some firms today say the implication is that comps would be weaker. Look, were almost at the 18 months of december 7th norovirus. Youre going to sell chipotle now when people just forget what was going on guys just want to dump on chipotle i go with piper. Piper say buy at 530, target let chipotle come in if you want to but this company is not going away theyre doing better than people realize. Yes, theyre spending a little bit more the same store sales are better and youre really going to people dont have that kind of memory in this country they dont what was that was that chipotle that had that problem . Its fine. Fine. While were on bearish notes, cowan on nike takes in some numbers. Competition from adidas and under arm oour. Theyre saying when they report next week youll see a bad number no kidding thats about as regulatory as crest upgraded nvidia. Remember what i renamed myself by the way, the dog named everest, its Everest Nvidia i gave him a last name why do dogs never have one name . Mr. Nvidia he eats at the dinner table. Why not . Mr. Nvidia, go have some roast beef. Nvidia is your fourth biggest gainer and then lenar had gains today. I love the lenar quarter. Youre looking at lenar and thinking how could they do even better 91 cents versus 74 back log increased what happens is that sellers come in with Home Builders the pattern for the longer term has been up. And lennar is distinguishing itself for being just really, really fabulous. Theres a lot of undercurrents in the semis nice note about marvel i think marvel hold to buy back crest. It wouldnt surprise me if marvel gets bought gets bought. By . By consolidation is going on in this business. Theres a positive note about micron people want these little parts companies. I shouldnt call them little theyre actually pretty big. They want good things to happen in this group because like jp morgan, who is very good, says dont sell micron. They want to keep the balls in the air. Micron needs to take out its high, though doing well off an article that they are ahead of intel. Intel mobile does well new guy, new support partner this is the group to buy if you think the economy is slowing, too, because theyll have a great secular tailwind i think that we have oracle coming up to report, adobe both will be strong. A did. B. E tends to run in advance and then get hit orion. Come from the white house meeting yesterday. Yes and, again, the cloud the government needs ginny rom romettty is on tonight security is all good on the cloud which, by the way, is mr. Cloud. Theyre actually mr. Website you have to use wix in order to have a website that work. Chris ladell from the white house with us yesterday said what percent, 3 of government i mean, i would have thought 30 to 40 the cloud is 41 14, i guess. For every 4 you have to spend, it only costs 1 for the cloud they should have done it obviously they underinvested i wish former president obama, you want to ask him, what happened why didnt you spend more on the cloud . The problem with that is that they were all trying, i think. They have Big Government contracts. Its not like the government was asleep at the wheel but the move to cloud happened so fast, you could argue that the retailers arent on the cloud, just starting to get on the cloud theyre just starting. I would love to have some of those contracts. Jim, some of the auto parts supplierstoday, oreilly, auto zone, advance. People keep thinking whats next you know that amazon is going to move into that because thats a very big market. Ordering a muffler . Auto zone is a big company. That whole group is right for consolidation. Bezos sits around and says should we dominate auto parts . Whats an amazing guy. What should we take over today what should we destroy today with our Gross Margins tv hosts who do business yeah okay. I wonder whether destroying industry on earth is getting a little pedestrian, that theres bigger fish hes going to want to fry on mars or in middle space. I wish he would do that just for the sake of every other company. Jeff bezos, put a man on the sun. Its real hot there. Did you ever see that richard pryor, first man on the sun . I have not. Amazing. Reports that tesla is nearing a deal to build a factory in china. Ive got guys coming in to me saying, listen, the death now of tesla is right now no, its not the death now theyre moving into china. Tesla continues to confound the short. It is one of the worst shorts ever. Very expensive. Bitcoin, tesla, amazon. They will be known as bad short. Ntsb, by the way, saying the victim of that autopilot accident had gotten repeated warnings to keep his hands on the wheel. Again, theres just i know one of the things that alphabet talks about is that it is so much safer and that the outliers tend to color the story. And if you didnt have the outliers you would realize we have no business driving cars. If henry ford was to start over, last thing he would ever have is a human driving the car. Humans drink, fall asleep. Make mistakes. Lets get machines to drive cars and humans can overlook them. One last car thing. Ford investing almost a billion to build a truck plant in kentucky, thousand hourly jobs ford expedition, lincoln navigator. That could have been in mexico thats the president im surprised the president hasnt flown right to kentucky that could have been easily where theyre building all the next big cars or in puebla. Something that began under fields. Yes fields well, yeah, wow, spent a lot of time with the president. Should have spent more time in the factory. I dont know that was bad look, its a challenge industry. Mark fields was trying to do his darn best. But they have no we have no time for that anymore in our country. Lennar holding up here. Yes mcdonalds supporting the dow. Chevron is dragging it down. Poor chevron. Lets get to bob pisani hey, bob. Good morning, guys. It was 31, declining to advancing stocks we improved, about to go positive energy is an issue here. Take a look at the sectors tech, a lot of the semis on the upside new highs there. Health care has been a Market Leader industrials as well. Lot of new highs in industrials. Caterpillar is a new high. Honeywell, 3m. Theres the weak link, Energy Stocks we havent had anything at all this year. The big thing right now is a lot of new lows. Weve been hitting this a lot. Well hear a lot again today transocean, hess all at 52week lows good and bad news about all of this earnings estimates will have to come down on all these big names and that was a big part of the whole oil recovery story good news is that Energy Stocks are a lot smaller or part of the Global Markets s p 500 right now. The impact will not be good lowering the numbers it will be a lot less than it would have been two or three years ago. Number two, its a big help to consumers. Finally, you noticed we stopped sayingoil is a proxy for the Global Economy we sort of delinked that because of the structural issues going on, the supply issues going on i think thats good we finally stopped saying that oil is a proxy for the Global Economy nearing the first half of the year well talk about how the performance was. Ipos, well get a bunch of them in the next two weeks. 11 ipos as people try to get out the door for the july 4th slowdown 77 if all of them go in the next two weeks. Thats a lot better than last year a miserable 42 its not so great compared to the prior years. Weve had pretty good years. Last year we fell apart. Were trying to get back here. Its been a long, slow slog. While theres been issues, the returns have been good ipo, etf is up 20 , the basket of the last 60 or so stocks, big ones, in the last couple of years. Its not how many there are but how well youre doing. Returns have been better because theres been a vaulation push. Investors dont want to pay too much for these ipos. Look at the recent ones weve covered in the last three, four months floor decor, canada goose, mulesoft, emerald sxogss and cloudera the guys issuing them want to get as much stuff out the door as possible, theyre not happy here the second half of the year youll be hearing people screaming about vaulations we had a Cloud Platform company that announced terms half the valuation two years ago. These big unicorns sitting out there will have problems you cant get an energy ipo. Oil is below 45 you want to be retail . Okay well get blue apron, an interesting one to watch its a tough environment for ipo business well watch for blue apron next week meantime, big decision today for msci, biggest indexer in the world, Mainland China stocks in their global indices only Hong Kong Listed stocks are now included no Mainland China stocks are included in these indexes. U. S. Listed Companies Like alibaba are included awfully big market thats a 6 trillion in Mainland China, same size as the hong kong market. United states is much bigger but 6 trillion is almost onetenth of the total stock market capitalize in the world and its not in the indexes why is this important . Indexes rule the world indexes kerm determine what goes into these etfs. Thats why indexes and the politics of indexing has become a huge issue overall meanwhile, eem, the big emerging market, etf. The waiting of china from 27 to ultimately over 40 if China Mainland stocks are fully included decision will come at 4 30 today. Even if they do include it, it will be a gradual inclusion. They wont put all these stocks in on one day. Thats good news different ways to play this. A shares, kba is the symbol for that that includes these 400 or so stocks that will be included a gradual process. Some of this may be a competitive thing. Theyre already competing indexes. Vanguard employs one from ftse that does include Mainland China stocks right now if youre an investor and you invest internationally, chances are youll be owning a lot more china stocks in the very near future dow hasnt quite gone down s p down two points. Back to you. What a day to watch the yield curve. Rick santelli is at the cme. Good morning, rick. We love the yield curve every day. Today is more sxoiting well get to that in a second. Two day of tens. Were a couple of basis points down, as you see on the chart. One week of tens heres whats important. Were around 222 on the fed day that we raised rates you can see we havent quite gotten, ascertained, taken back that drop in yields. November 1st start to tens, its amazing to me we continue to see this drift rates really arent bouncing much higher while all of that is being traded we see whats going on in equities quite a divergence to many higher yields. Tens minus twos. Lets get to that yield curve. Tens minus twos is virtually actually the lowest since 2016, september 2016, but that was last week. Were not much higher than that. It was below 80. Were a little above 80. Carl is referencing 30 minus fives. This is now below 100, trading around 96. As flat as the curve has been since 2007 here is the triple asterisk. While we all have gotten used to the odor of natural gas in the room and cant tell its there, we all talk about the yield curve like it means something. How can it mean something when the entire long end of the market globally in the biggest economies of the world have a big central bank thumb on the scale . How do you interpret this . We move on like robots means recession. Ill tell you what it means. Any yield curve you want get mario, janet or carney on the phone and tell them to sell a few securities euro versus the pound specifically on a day when brexit negotiations have finally gotten under way, that chart doesnt look a whole lot different so we want to continue to Pay Attention for that dynamic. Carl, jim, back to you. Rick, thank you very much when we come back, well talk to Toni Sacconaghi on the changing media business. Because technology is moving so quickly, its really a moving target you know, audiences know what they like today and the way they like to see or hear it but they may not know tomorrow and so thats why its a guessing game and kind of a nightmare for those who want to invest in these things. Latest season of binge full episodes Live Streaming on cnbc. Com binge dow is down 13 were back after a break [ indistinct chatter ] [ intense music playing ] its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the gle350 for 579 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. They are the natural borns enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. The power of a low volatility 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. Alibaba kicking off a twoday event in detroit, helping them market and ship their products to chinese consumers, part of mas pledge to help create a million new american jobs. David faber is there he will be with the vice chair today at 3 30 on closing bell and then tomorrow with us on squawk on the street the man himself, jack ma. That will be fabulous i urge people to recognize that this man is the guy who changed my mind. My friend, hesh greenburg, told me a lot of Different Things to ask. I asked them when we were delivering alpha so much, i like joe tsais answers. Some people may not. It will be a very powerful interview. People will have to watch it very powerful. The coattails for Small Business do you think can be as big as the app was over at apple . People have to get more comfortable. I found the site awkward to use but thats because im older etsy, if you can do etsy these cufflinks, carl you probably cant see it. Heisenberg these are from etsy. My daughter gav them for me for fathers day let me get that down there she knew how to do it, to go on etsy and do it she knows the people who make this stuff thats who is going to sell. Can you imagine this what a great daughter, to get me for fathers day thats where you go on etsy. Boom it will be great. Stock trading with jim after the break. Gru get your mojo back. Become a villain again. Mmm. [ minion babble ] [ minions cheering ] [ minions sighing ] [ minions cheering ] [ minions booing ] okay minions, were going back to villainy. [ minions shouting ] so bad so good that im so bad. [ honking ] so, youre villains now . [ nervous laughter ] i mean, hello sweetie. Despicable me 3. Rated pg. Time for cramer stock trading. We all listened to Lloyd Blankfein last night goldman takes paychex from buy to hold. On the tax reform if they cant get it done, i happen to think paychex is a driven company and they should be more patient. Its interesting people are starting to say, wait a second maybe there wont be tax reform. What youre buying on that tax, maybe you shouldnt do and this is the beginning of people saying, we bought these stocks maybe we should hold back. So be careful. So, ginni tonight. Yes. Thats a big one and also wix, which is very exciting. They make all the websites adobe tomorrow, trying to have a big week not unlike february 20th, 24th when the allies in 1994 had a big week. Crazy anniversaries. And Irene Rosenfeld i cannot wait to talk about food with her and amazon and whole foods. Who better to speak to than one of the great people in the industry, Irene Rosenfeld. My head is still trying to spin from amazon, what theyre going to do next. What cant you get . Thats what you said. You cant buy a sports team i know you cant no theyre not going to give you a sports team. Jim, well see you tonight mad money 6 00 pm. Clive thexuswi chicago fed president Charles Evans. Dow is down 22 [ indistinct chatter ] [ intense music playing ] its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the e300 for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. upbeat dance music dance music abruptly stopping dance music starting then stopping good Tuesday Morning welcome back to squawk on the street. Im Carl Quintanilla markets trying to build on yesterdays tech rally moderate losses of the outgoing waiting for speaker ryan this afternoon. Our road map for the hour starts with the market stocks take a breather dow hit another fresh intraday high well discuss where you should be putting your money to work. Special election in georgia, putting the president s popularity back on the ballot is the mostexpensive congressiona election in history. Live to atlanta. Plus amazon prime wardrobe, ecommerce giant testing a new Fashion Shopping service for its members. Fresh record highs as tech rebou rebounds having its strongest day of the year. Many wondering if that will have any impact on the market rally Steven Mnuchi joining squawk box earlier this morning here is what he had to say about that. What comes with that is reform, broadening the base, taking out reduction we have one of the highest tax rates. We tax on worldwide income, have a concept of deferral. We want to make sure that Companies Bring back that money on shore to reinvest in American Equipment and american jobs. For more, lets bring in david kelly, chief global strategist and chief global strategist atwells fargo good morning to both of you. Brian, what will investors be listening for . Im not sure how much investors will be listening to what paul ryan has to say. Its interesting to listen to him to find out what the road map is for the house one of the key obstacles to tax reform is not the house of representatives but the senate that is not necessarily a slam duveng that it will make it through the senate it will be interesting to see whether or not he changes his tune as far as the border tax or anything like that im not sure people will be sitting on pins and needles, waiting to hear what he has to say. David, if you look at some of the biggest beneficiaries of a Corporate Tax cut, for instance, you saw the russell 2000 gain a lot after the election the domestic players, restaurants and retailers. What do you do with those . Do you take fresh positions in those as the conversation continues to heat up around tax reform and we might get actually, as brian suggested, if House Speaker ryan abandons the border tax, some agreements between congress and the administration on which way they proceed here the overall direction of the market should be a little more toward large cap and taking advantage of International Growth and lower dollars im a little more on the large cap side than the small cap side on tax reform, there is a question mark. We desperately need lower tax rates and love the idea of a territorial system as opposed to the u. S. s worldwide system. We have to make sure were not too ambitious in this. We dont need tariffs as part of this its important to focus on something that is not protectionist. And think of the scale we really dont need huge tax cuts a narrowly focused Corporate Tax cuts is good for the stock market overall but not necessarily favoring small caps over large caps. The bigger economic story is a World Economy thats growing faster than the u. S. Right now. Brian, the progress on tax policy is really just one of the expected catalysts that hasnt really come about for this market we havent necessarily seen a rapid acceleration in u. S. Growth and oil prices giving up their earlier gains from the lows yet the market continues to march to the upside. Do you think that this in this environment, equities can keep feeding off this high liquidity, slow growth story this environment that we have with its slow, but steady growth, diversifying Economic Growth picture where its not just led by infrastructure sped spending in china but somewhat broader across the globe, that should be beneficial overall to the markets. As far as where some of the opportunities are, keep in mind, were in a very heavily rotationtype environment here out of the election, small cap and financials, year to date has been more for large cap growth were probably entering into a period of time where somebody else will be taking the baton. I really like the idea of rebalance your portfolio more frequently to get to target allocations, so in a way dont let your winners run in this type of environment. What does that mean in practice pull back on some of the big tech winners i think in practice, it does mean that you look at those parts that have under performed year to date and where where might the value opportunities be i think that actually theres some decent value in Energy Stocks here. A lot of them are paying decent dividends, profitable at lower price points with oil. Yeah, we could see some more downside but lets see if we hold the levels that prevailed. June 8th, were approaching those lows then we have to go back and look, can we hold the august 2016 lows for energy i think that we will and, you know, that might be somewhat of a pain trade in this type of environment, though. Absolutely. With oil prices getting crushedd again today, david since you like big cap stocks, ill ask you about technology. The sentiment has been swinging wildly from one day theyre the only place you can have Earnings Growth and major Disruptive Forces to the next when theyre at the highest valuation since the tech bubble and its getting out of control where are you on some of these big cap tech names im all about vaulation i worry about things that look expensive relative to their cash flow the other thing thats changed in the last week and i dont think people have realized it. We are now fed with the plan because theyve announced how theyll normalize the Balance Sheet thats lock them also in to a path for Interest Rate increases. I think the fed will move in december and twice in the first half of next year in terms of raising the federal funds rate, pushing up ongterm rates. You need stocks that will do well in a rising rate environment. Thats where were headed despite somewhat weak economic data. And treasury yield is back lower again today. Well leave it there guys, thank you. David kelly and brian jacobsen. Tech ceos meeting with the president yesterday. A live report from the white house. Last night on mad money Lloyd Blankfein, goldmans ceo, talking about yellen. No playbook for dealing with deflation, innovative policies that were regressive and took a lot of courage all the naysayers were lined up against them if it went wrong. You look at it now and everyone is worried about this, worried about this, but it hasnt gone wrong yet. We will talk deflation, road ahead for rates and a lot more with chicago fed president charles evs. An dont miss that exclusive. Stay with us investing approa. 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. To err is human. To anticipate is lexus. Experience the lexus rx with advanced safety standard. Experience amazing. [ laughing ] oh. This guy, the mansion and the cars. This is the best . I dont like it. Gru, villainy is in your blood. [ evil laughter ] [ minions shouting ] look at us, two brothers pulling a heist. [ upbeat music ] [ gasps ] im gonna be empaled [ chuckles ] im okay. [ exhales ] despicable me 3. Rated pg. President trump meeting with tech ceos at the white house eamon javers joins us. Reporter between those tech ceos, a lot of the biggest names in the business and the president of the United States, im told one Interesting Exchange between the president and apple ceo tim cook over immigration. Im told that the president was briefing the ceos on health care and told them that the Health Care Bill thats making its way through congress now needs more heart, quote, unquote. And im told that tim cook responded to that by saying, in fact, the immigration approach of this administration also needs more heart tim cook reported to have said that tech employees and their coworkers are concerned about their situation, given the Immigration Reforms contemplated by this administration and im told the president responded to that by simply saying that the United States needs a broad immigration bill, urging the tech ceos to push their local representatives and senators to push for a broader comprehensive Immigration Reform approach that was in the behindthescenes portion of the meeting yesterday here at the white house. Here is what happened on camera. The president did take a strikingly different tone on immigration with the tech ceos than he took, for example, on the campaign trail last year here is what he said. When it comes to what were here for today, american technology, were working very diligently with everybody, including congress, on immigration so that you can get the people you want in your companies and its been a tremendous problem that youve had over the past long period of time. Were expecting to hear from speaker of the house, paul ryan, who will make a big push for tax reform and will appear on cnbc to answer some questions here is what we expect paul ryan will say he will make a push for comprehensive tax reform, that we shouldnt water down the reform proposals out there and will remind republicans in particular that the gop has a onceinageneration opportunity that they cant miss because they do control both houses of congress and the presidency and say that the tax system should remove incentives for corporations to offshore jobs, whatever the approach ultimately ends up being, it should include an approach that at least disincentivize disincentivizes that from the economy. Thank you for a strong report, eamon javers were joined by ny u2 sterns eamon paired that sound from yesterday to what the president said on the campaign trail do you think these executives have had some push have they made the president pivot at all on immigration . Its hard to know whether he has pivoted. What we say, what we do are very Different Things we will see. I do think theres a continued recognition that there are more job openings than there are people to fill them right now in silicon valley, in particularly for highend engineering jobs. Chegg is working hard to get People Education in stem there arent enough people available right now. Its a real problem. I hope that the administration and congress does listen because its a big deal and will matter to the economy and the growth of these companies. Scott, how would you evaluate the impact that these executives are having on the white house . When you look at them they look like teenagers out to dinner with their parents. Theyre very self conscious and look like they would rather be anywhere else. I agree, we hope theres some progress here. The fact that they attract the brightest and hardest working people in the world is one of the secrets to our success yeah, i hope the president is listening. Dan, these meetings come at a time when theres a whole lot more attention on just the market power, the economic caps of a lot of large companies. How would you weigh the risks versus the opportunities of a ceo trying to build a relationship with the white house here well, i think look, initially, it was a very, very polarizing thing to do but in this particular world out here, i think people recognize that you have to engage with the people that are making the laws, that are making the decisions and the opportunity to educate them, to engage with them is one that you shouldnt pass up its not like in the case of these tech guys that theyre going in and arguing socia going to happen there. So the topic of the meeting, scott, was actually about ways that the Tech Community can, as the journal put it, act as a help desk to the federal government President Trump says they want a sweeping transformation of the governments technology. Who benefits the most in that room in terms of contracts and working closely with the government as far as lending some business there on modernizing the infrastructure thats a great question these guys are they are mostly guys but the men and women in that room are in an impossible position. Youre right you do need to engage and want to be seen as contributing to the dialogue but the bottom line is that anyone who enters a photo shoot with donald trump usually leaves with less credibility. And you can just tell these people dont want to be there. So, i think their attitude is do no harm, dont offend anyone and then get the hell out of dodge. Scott, with all due respect, i think these ceos, if they didnt want to go, they wouldnt go weve had examples facebook, for example, scheduling issues came up. They werent able to attend even though they were invited you dont think ceos are being brought there under duress i dont know. I think when the president invites you its very hard to turn down. Reasonably speaking somewhere between a third and half of their consumers support the president. When the president calls you, you go and i just my sense is theyre just not thrilled to be there. You have a different take . The picture on the front of the wall street journal supports your view nobody is smiling or looks enthused both the administration and tech leaders after the meeting played down some of the differences on climate, on immigration. That wasnt the focus of the meeting. The folk you was how they can help modernize government, get more coding out in schools, get more Government Systems on the cloud. And with that, not only is that a revenue driver for these companies but also it could actually bring them a lot of clout when it comes to changing the way washington works dont you agree . I think theyre spending a lot more time hoping that theres huge tax cuts. Im sorry, Corporate Tax reform as opposed to increased budget from the government i apologize. I didnt mean to interrupt your other guest. Go ahead, dan. No, look, i think i know some of the people in the room and, you know, theres never a reluctance to go do what you think is right to do its uncomfortable to be in a situation where youre being judged all the time. This particular agenda made perfect sense for the tech ceos to be there. Its about using technology to impact the way the government communicates and works with the citizens and using technology to streamline these things, i think bezos said using ai. This is trying to turn government into a Consumer Organization that focuses on the needs of their constituents. Thats a positive agenda to be there for and also Good Business in that a lot of these companies, as i said earlier, do sell to the government at the end of the day you have to work with people you agree with and dont agree with if youre going to build a Global Company that is successful so, theyre going to go. Its not like, you know, tech ceos have, much like government regardless who is president. We had that discussion yesterday, the idea that tech ceos are perhaps better than anyone at cooperating and dealing with people who they might not agree with on other fronts well see. The details are still to come. The optics are all we have to work with today. Dan, scott, thanks, guy. Thanks for having us. Thank you. When we come back, house special election putting the president s popularity on the ballot well go live to georgia. And we talk to veeps executive producer about competing for ratings with the president. If we had to compete with the actual trump clinton Election Campaign in real time, i dont know how it would have played. We were lucky we got it in just under the wire. The entire season of binge is now streaming on cnbc. Com binge squawk on the street continues in a moment. They are the natural born enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. Voters heading to the polls in georgia in what has become the most expensive congressional races in american history. Reporter this runoff has gone for nine weeks. Voters have been flood with so many ads today is timely decision day for Republican Karen Handel, democrat jon ossoff in this district, which has been consistently republican, but where democrats have mobilized largely in opposition to donald trump, to try to make this special election victory happen. 2018, when there will be a broader fight for control of the Congress Democrats need to pick up 24 seats in 2018 to get a majority. 23 districts held by republicans that Hillary Clinton won in 2016, but there are another dozen of them, including this one, georgia six, where she came within five percentage points. They need to win some of those this is a sign of how well they might do look at the polls. It is incredibly close at the end. Container ha Karen Handels pollster tells me she has had some push at the end,. 2 lead over jon ossoff. Early voting, heavy turnout so far. Support or opposition to donald trump. Donald trumps favorability rating in this district is just 35 overall. He has got 26 of republicans who are upset with him, which is a higher percentage than nationally this is such a republican district, that might not be decisive finally, guys, this will also be in a lesser way a referendum on the Health Care Reform process, the republican Health Care Bill, which has passed the house, which karen handel has supported, is significantly unpopular. 6 in 10 voters here say they dont like that bill and 3 in 10 republicans dont like it. Everybody, as the senate prepares to take up that issue, will be looking at the results we get later tonight. And, john, the president has been tweeting in support of karen handel is that support welcome, given where we are in terms of approval and disapproval in that district reporter well, given the fact that 68 of republicans in this district still do approve of donald trump, certainly there are voters that donald trump can connect with who will be sympathetic with him, who may come out so, i think its a mixed bag karen handel has not been talking very much about donald trump. The fact that donald trump may be separate from her campaign, pushing those trump voters out to the polls, yes, that could help karen handel on the other hand, democrats read those tweets as well and theres a mobilization, countermobilization process going on. We will see w. H. O. Gets a better return on their heavy duty investments in georgia. John harwood, thank you for setting that up today. Amazon unveiling prime wardrobe all the details. Steve liesman sits down with chicago fed president Charles Evans, talking timetable for rate hikes evans, by the way, is a Voting Member of the fmoc you wont want to ssmi this interview on squawk on the street. The power of 100 of the worlds top companies. 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. Im contessa brewer. Underway in georgia, Republican Karen Handel who voted this morning is trying to claim a seat thats been in her partys hands for nearly 40 years. Of course, all eyes on this race because its consider aid test of republican strength early in trumps presidency were learning more about the suspect linked to mondays attack outside a London Mosque darren osbourne, father of four from the welsh city. Attempted murder and other alleged terror offenses. Cincinnati coroner is examining the body of an American College student who died less than a week after returning unconscious from north korea. The country detained warmbier for a year and a half, accused of stealing a banner containing a political phrase. A volcano waking up after about, oh, 7,000 years scientists decided to classify a mountain these are scientists youre seeing, north of tokyo as an active volcano experts say dont expect an eruption any time soon after 7,000 years, theyre probably overdue thats the cnbc update for this hour back to you. Contessa, thank you. Amazon making another big announcement this morning, introducing amazon prime wardrobe, try before you buy service for clothing and shoes for more on amazons next move, were joined by aaron turner and amazon analyst john blackwell. We brought you on to talk to us about the groceries in this country but now we wonder what the future is for clothing retail on amazon and who should be most worried. Two years ago we said amazon would be the number one apparel retailer in the United States by 2017 it was a huge call at the time we think thats happening. Im not surprised. They are going to do everything they can to innovate, to drive further share in apparel and grocery, some of the biggest retail categories in the u. S. , to drive kind of their business over the next, you know, three to five years. Apparel and grocery are the two big categories to drive their retail biz. What about you, aaron how do you read into some of the recent moves were going to talk about whole foods in a moment and your big call on who could be next but first to this prime apparel announcement, how do you think this strategy will play out for amazon and what kind of opportunity are we look at i think its a pretty incredible time for amazon in general. Theyve got the resources to try a number of different initiatives to drive their business so, it doesnt surprise me that they would be able to roll out Something Like this so quickly. So, john, we did get this s. E. C. Filing about the employee town hall where john mackey, ceo of whole foods, who is going to stay on, took some q a, talking about it not being a tinder relationship and took that metaphor very far in terms of how happily these two company l s will be married. Any insights into where they go in their relationship . Testing the format in seattle. Thats a smaller footprint than whole foods footprint and its kind of prepared foods and quick pickup, almost like a convenient type of store. Maybe it could be Something Like that like a smaller format type of thing to drive the kind of overall platform. Aaron, Bigger Picture when it comes to amazon, is one of the takeaways from the whole foods deal coming after it has really attempted for a long time to penetrate grocery, that whats left at least on a relative basis are tougher, more complex for amazon to do its thing yeah. I think thats right if you look at their food initiatives, they really have two big food initiatives one is fresh and the other is restaurants. Growth in both of those verticals probably not as robust as they would have liked so, they need to go out and make an acquisition to support those initiatives. And you think grub hub might be one of those acquisitions. How are you making that leap from grocery delivery to Restaurant Delivery . Two main food verticals, fresh with whole foods i dont think theyre the type of company that would let the restaurant vertical wither on the vine it was launched with much fan fare and hasnt been that successful if they want to make a dent in that market the choice is really only to acquire grubhub at this point. John, do you buy had an do you think theres any possibility . I would just add, we think that their grocery strategy is multiplatform. Its not just fresh. Its in 20 markets in the u. S. But prime now, in 32 markets in the u. S. , covering 60 of gdp. 10 of prime members per our data use it every month, grocery, personal care and household goods. Pantry obviously, prime, a big part of the food, 800 billion grocery segment is up. Nonperishables so its supported by multiplatform approach as it relates to the commentary around grub, i think theyll be focused on whole foods, closing that deal, integrating it and really attacking what is the biggest Retail Market in the u. S. , which is grocery. Aaron, finally, were in this period here where were all talking about the growth but whats the likelihood that we have serious conversations about amazon operating margin in the back half of the year might make some earnings more volatile, that kind of thing possibly. I dont cover amazon specifically its hard for me to comment on that i follow grubhub. Consumer discretionary. John carl, just in terms of the margins in the back for amazon, i would say that they have pretty easy margin comps remember last year they doubled their weve been saying all year the margin comps get easier the stock has had a huge run this year but could be a driver as we get through the back half of the year. All right well leave it there, guys John Blackledge and aaron turner other food news to mention, nestle buying a stake in freshly. The food giant said it was a lead investor in a 77 million round of newfunding for the company, freshly, that is. My takeaway on this is twofold number one, its very conservative nestle is the worlds Biggest Food Company they could have just bought blew apron outright, the leader in what is becoming a huge market, 10 billion prepared food or food delivery kind of service. So conservative and small but number two, nestle is also the leader in frozen foods frozen foods and frozen meals are not very hot lately. This could be the future of frozen foods, an acknowledgement by nestle, maybe an early preliminary one. Maybe well see more from them coming but could be that instead of frozen foods its going to be these fresh Meal Delivery Services Comes at a time when that space is very, very crowded. Tough for business on the ground versus delivering frozen stuff to supermarket. Thats why they need to invest in the growers already. Oil is below 43 now lets get to Jackie Deangelis at the commodity desk. Jackie under 43, expiring at the close today. Most volumes in august 43. 04 trading on a percentage basis roughly down the same amount increased production in libya, iraq, nigeria, concerning tra r traders out there. If we keep moving up and the opec countries are not committed to this deal this market will get very concerned about it. Also another build in crude and gasoline potentially tomorrow tleerks weeks in a row that is not seasonal this time of year. Supplies going up and demand isnt moving up to meet it, there is a problem when it comes to pricing production in north america is on the rise. Crude potentially seeing 10 Million Barrels a day. As far as this rebalance goes, some people are saying all bets are off and a three handle is possible back to you. Jackie, thank you. When we come back, well watch oil. Also the road ahead for Interest Rates. Steve liesman will sit down exclusively with chicago fed Charles Evans, a Voting Member welcome to holiday inn whether for big meetings or little getaways, there are always smiles ahead at holiday inn. Is the market in a bit of a state of denial . Thats what David Rosenberg thinks youll find out why. Coming off those record closes we got for the s p and dow, though declines at least for the dow are prettyminor. S p 500 down. 3. No surprise, mike, energy is at the bottom of the barrel with Oil Prices Falling as we just heard from jackie though, technology is holding up well thats been the key leadership area in this market. Tech leadership and the ability of the market to sort of not fall apart all at once if something does give way, like energy has for a while now, Something Else is holding it together thats been the case again even with financials down a touch again today. 25 record closes for the s p 500 in 2017, 22 for the dow. Lets get to Steve Liesman with Charles Evans hey, steve. Good morning, carl. Im here with chicago fed president at the nasdaq. Thank you for joining us. Thank you for having me. The fed is in danger of sending a message that this 2 goal is a cap and yet you have voted twice now to raise Interest Rates while the fed is not meeting the inflation target why do you consistently vote there but also say on the other hand that the fed needs to set a consistent message about inflation . Fair question its very important that, you know, we said 2 is our objective and we need to follow through on that. We need to average 2 over a long enough period of time we have run under 2 for a number of years. Its very important to get inflation up youre right i have voted with the committee on the rate increases so far and thats in part because i think that the fundamentals for the economy are good i think that the Unemployment Rate falling to 4. 3 is good. I think its likely we will see more inflationary pressures but im nervous. I think our current policy, even though reraised it from 1 h00 basis points before. The recent inflation data might be nervous about that. Its much more challenging from here on out. Talk me through what youre looking to see in the next several months here, to get you on board with either additional rate hikes or saying, you know what we need to stop here. First off, if the inflation data turned around and the last three months were anomolous, that might be part of it thats too simplistic. Yes, it does seem like they were one off the data services. Right. The cost of that falling and some other things. But in a world of global competition its not just in the United States. And technology, i think competition is coming from new places, new partners are choosing to merge and changing the marketplace. And more competitive pressure, potentially on price margins, if thats the case and i think thats speculative at this point then it means we need to make more accommodation to get inflation up the changes in price margins would reduce relative prices thats good for the consumer but will find its way into a lower price level and we need more accommodation to get inflation up to 2 . When you say more accommodation do you remember reversing rate hikes continued accommodation perhaps a shallower path of increases. At the moment weve done two rate increase this year. Median s is for three maybe two or three is the right number we have time to look at the data. Bond yields, yield curve has flattened quite a bit. I have two questions with that one, what is the message you get for the economy and inflation from the bond markets . And, second, how important is it to policy that yields behave in a way that the fed is sort of hoping for well, you know, i think the economy has been doing quite well i think that after the election, there was a wave of optimism business, consumer surveys show people were more optimistic about tax reform Regulatory Reform. Whole host of things, which could lead to, you know, increase in activity, certainly an increase in stocks. So weve seen that it also gave quite a lift to tenyear treasury rates, for instance i think part of that is a judgment about future policies. Thats coming off, you mean since then, you know, theres a little more uncertainty. Timing how much well be getting. All of that is more unsure also the International Situation has also been uncertain. Although there have been elections in france that sort of changed that a little bit. Some of it is other factors, reducing rates tenyear treasury is a safe haven. This year, next year, labor market gives us a chance to get inflation up to 2 but i am nervous. When you say above trend, what numbers are you looking at for this year and next year . Its a delicate question. Its political, too. It should just be an economic issue, right if you look at potential Labor Force Growth plus productivity growth clinical way . Add those two together. I think thats important demographic factors have reduced Labor Force Participation rates a lot. Over a long period of time its a secular change. How much can we expect people from coming into the workforce and adding labor input is much different than it was in the 80s we had over 3 trend growth. Arguably we had good growth. A lot of people coming into the labor force. We cant count on that now productivity growth seems to be stepping down from the wonderful tenyear period we had so its been step iping down. You put all that together and i get 1. 75 . Im not the most pessimistic person. But now it begs the political question, do you believe the administration can ratchet growth up to 3 or higher . So, first off, if its just a temporary increase in growth, yes, that can happen you can get fiscal stimulus and get growth for one or two years or maybe well, a little bit more but Sustainable Growth is what were talking about over a long period of time its not a question of can we. The question is how do we . So somehow youve got to get more people coming into the labor force so its consistent with much stronger labor input than what weve seen and also productivity improvement and thats a tough. Net nut to crack actually it doesnt come overnight. It requires innovation and putting new technologies in place. We are seeing interesting and important technological changes right now and theyre influencing how we buy everything, how we go about handling caps but its disruptive, too. And so for every, you know, company that sees the value of their capital go up, theres another company thats been disrupted in the value that their capital gets marked down because its not going to compete the same. 4. 3 , are we at full employment is the labor market tight or do you think theres more slack out there . I think its getting tighter, for sure my own estimate of the rate of employment is 4. 5 thats actually in 2020. So, demographic factors are working there. Yeah, i think weve gone below the natural rate of unemployment our current assessment, we could move it down were still learning about this. If we saw more inflation as we saw unemployment move down, then we know that the phillips curve is still alive and well. At the moment doesnt look so alive and well. Lets talk bhashgt about market levels some of your colleagues are concerned about the Financial Stability implications of low Interest Rates are you concerned at current market levels and any concern that maintaining low rates for too long creates Financial Stability issues every quarter we look at the state of Financial Stability at the fomc meeting we do a report and run around the all the markets and different segments and all of that recently weve seen yet again it seems like it is moderate risk there are certain sectors which a little hotter. Others have more of a cushion, more capital there im not overly nervous about that it does highlight the fact we need a regulatory structure in place which sort of looks at the biggest risks and makes sure that we dont let financial instability risk grow. Monetary policy cant do everything and weve already got quite a number of mandates were supposed to support maximum employment and stability. Wheef a ha weve had a hard time get be inflation up to 2 f we worry about long periods of inflation rates because other regulatory agents cant handle on the own, the mandates wont be fulfilled. Hang on a second. One hanker back at the New York Stock Exchange has a question for you. Hi. Im back at post nine. Twin i want to ask you about the comments around the confidence bump weve seen. Are you surprised and why havent we seen a bigger translation into higher consumer spending, more Capital Investment from manufacturers and Home Builders and other companies . And do you think that confidence has peaked i think the consumers have been strong during this time period i think they were strong before that im not sure it is confidence numbers per se i think its been an expectation that washington, the president and congress would deliver on, you know, some type of tax reform right sizing regulatory burden, less regulatory burden, things like that. Its taking longer and there is more uncertainty it hasnt really been laid in and out a clear fashion, i think. And so people are probably downgrading how much they expect and then on top of that, you haveto wonder is it really are businesses all of a sudden going to finally expand because they see this new opportunity or do they see this as an opportunity to return capital to shareholders who then will reinvest and redeploy in other areas but then he would see that Capital Investment coming from other firms . Presumably they could do that now ahead of that, maybe through borrowing instead of capital raising. Those are a host of issues i think people are uncertain about houm how muw much well b what you said about Interest Rates and how thats going to work relative to inflation, is that the same thing true for the Balance Sheet or do you think the Balance Sheet you ought to begin reducing it irrespective of the Inflation Numbers and can you give me a number for the Balance Sheet . I cant give you a number for the Balance Sheet. I think she was extremely clear on that. Clever. We have two aspects we have a very large Balance Sheet which has been reducing term premium on, you know, Long Duration assets and treasuries so were getting to the point where we have begun renormalizing the funds rate weve gone up 100 basis points and close to the point where we start running down the Balance Sheet. We described a plan where were going to slowly and gradually adjust this it tail over three years to get it down to whatever number youre asking me to tell you that well finally bottom out at what the chair said and i agreed with, were going to learn a lot as we continue through with this well see how markets are functioning. And then well see when we need to start growing the Balance Sheet again. All right thank you for joining us, charl charl Charl Charlie evans, back to you. 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