Right now. Take a look at what happened in asia overnight, as well. A lot of these headlines hitting as japans market was opening there. That was the first sign that argentina was not going to be able to make its payments. As you can see right now, the nikkei closed down by about 25 points. The shanghai, though, was up by close to 1 . Among todays tests for the u. S. Markets, we have economic numbers, more earnings that will be hitting. At 8 30 eastern time, we will be getting the weekly jobless claims numbers. Polled economists were filed last week, up 21,000 from the week before. When it comes to earnings, Oil Giant Exxon mobil, Conco Philips are both reporting. Mastercard and kelloggs, those are among other names that well be expecting today. Right now, lets get over to michelle with a roundup of some of todays other stocks to watch. A number of companies posting results last night, becky. Revenues came in just shy of expectations and the company is cutting its full year forecast for the fourth time. Its a tough Competitive Landscape. Yelp reporting its first quarterly profits since going public beat wall street expectations. But the Consumer Review websitess business account group fell short of expectations. You can see its pretty tumultuous in after hours trading. Kraft foods posted a 40 drop in Second Quarter profits. Price increases to cover rising commodity costs hurt consumer demand. The companys ceo told investors, quote, theres no question economic and Consumer Trends are creating top line challenges for the food and beverage industry. So unable to pass on price tags, necessarily. Shares of yum getting hit in extended trading. The Company Warns china food safety scarce have had a negative impact on samestore sales there. They point to a local expose that showed improperer meat handling by one of its suppliers. China is yums brands number one consumer. Target has been looking for a new top exec after removing Greg Steinhoff following targets massive data breach. Ive emailed back and forth with him a couple of times. It was not just the data breach. It was also canadian acquisitions. Theyve had a lot of trouble with that and thats one thing the street has been focused pop. Cornell has been at pepsi for nearly a decade. This may be another important component, its not just the implications for target but also for pepsi because the journal says he was a contendtory sa keyed the current cfo of pepsi. We will see if they have a deeper bench than just him. General electrics credit card unique is now the biggest ipo so far this year. Argentina failing to reach a deal to keep it from defaulting. Here is what Fortress Investment group mike nobagraft told us earlier this month at the delivering alpha conference. Something doesnt happen and they have a default, youll certainly see a selloff. But that selloff will be met with capital coming in. That will be a buying opportunity if youre not already in the trade. The full video of novogratzs delivering alpha panel is available now at cnbc. Com. Joining us now is kate kelly. What does this mean . Becky, were still waiting for the official word. But for all intents and purposes this morning, argentina is in default after mentioning important payments to bondholders last night. At issue, 539 million owed to a variety of creditors and another 1. 33 billion who havent received payments in years. The hold ups prevailed, at least legally, but argentina has steadfastly refused to make good. At a Heated Press Conference last night after two days of settlement talks, the argentinean Prime Minister was resolute saying the country would not and that the situation was unfair. That prevented argentina from paying the half billion it owed to the nonholdouts without paying the hold outs, too. Elliott management led the hold outs charge in court, said in a Statement Issued at exactly 12 01 this morning that argentina had shunned numerous solutions to the impasse pushing it into default. This is argentinas second default in 1 must know years. Prior to that, argentina had intrd the largest default in World History on roughly 100 million in 2001, the very event really that spurred todays events, guys, because of the hold out. Exactly. I mean, the vast majority of the bondholders agreed to restructure bonds in 2005 and in 2010. But these hold outs wouldnt do it. They wanted to be fully paid and they had taken it to court, taken it as far as the Supreme Court which declined to hear a crucial aspect of the case, did hear another, but more importantly kicked the ruling back to a lower court which said absolutely, average teernlg tina, you have to pay. And specifically if you dont pay, those that took the discount webs if you dont give the hold outs money by tend of july, youre in default. So for the view erts, why is this being litigated in the United States in the first place . Because the bonds are governed under american law. If you have euro denominated bonds, those might be governed under english law. But if you are an american investor, you bought argentinean bonds, you might be, as well. And why would a kch that has argentina law be accessed in new york. They wanted access to the markets. Maybe longer. You want to be able to raise money for the government finances, they want to have their corporations have access to International Capital markets at lower rates. They do, by the way, but the borrowing costs of Companies Like ypf are likely to rise as a result of that. Were going to talk in a moment about macro implications to the degree there is going to be some. But what is paulsingers end game now . A couple of things. Negotiations are supposed to pick back up today. So this is just a big dance . Well, that depends on whether you think argentina will settle. So far, they havent. It sounds based on the reporting they reiterated later saying, hey, take a haircut, which these but have the holders said well take less than 100 . I think theyre amenable to some settlement, but so far, the sides are very far apart. Argentina didnt even show up, by the way, until two days ago and that was a surprise. Doesnt this act of default take the boot off argentinas neck a little bit. Because this problematic clause said if you pay those guys that much, you have to pay everybody else that much. Does that clause now go away . So there was an equal treatment clause argentina was worried about. And that expired at the end of this calendar year. If they can get to the first of the year, 2015, theyll have that behind them. Then they pay off the gas price . Then they relieve the pressure. If argentina doesnt follow u. S. Courts on them, why would anybody believe them in 2015 orr beyond when they start issuing new debt . That is an excellent question and thats why these are essentially distressed bonds that pay higher yields because the risk of default is great. Argentina is regarded as an especially bad actor in this arena. I believe theyve defaulted eight times in history. That is a risk that everyone takes. If we want any access to the International Capital markets, they have to play sooner or later. But so far, theyre saying well take our chances dealing with our own finances ourselves domestically. And its that important to us that we not set a precedent. Is there any chance that they get nothing from all of them . Theres always that chance. Hes gone as far as the Supreme Court and found in favor of his position. But its still effectively saying were not paying you. Right. Effect ily. So it is possible. Theres a key lesson were seeing with greece, puerto rico, and now argentina. With that bond that you buy, what law . If you bautd a uk bond, youre getting 100 on the dollar, a ton of money. So a lot of countries that are problematic turn they want lower Interest Rates so they turn to the United States or the united kingdom. Why is that . Because what greece did, they couldnt impose laws retroactively. So puerto rico when it last went to market, no longer issues under puerto rico law. Now it issues under new york law. Right. So theres a lot of judicialal arbitrage that goes on. 100 cents on the dollar, great. But in new york, apparently our lawyers arent tarnlg tina is not paying better attention to the holes, right . Thank you. Youre very welcome. A funny moment, leonel messi said this is a sad day for argentina. I was going to mention it on air, but it turns out he was coming out of a funeral, not commenting on the default. Were going to continue this conversation and see you in a little bit. Thank you. If youre just waking this up morning, futures are not looking pretty. Lets show you was going on right now. They suggested the dow would open lower by 88 points, the s p lower by 12 and the nasdaq lower by 26. In addition to argentina, the market is turning its attention to friday jobs report, the Second Quarter gdp data and the fed production is out of the way any worries about our computer . Argentina is something that weve been indicating has been in this press for quite some time. Its something that the emerging markets have been dealing with for quite some time. Systemically, you dont you can have a hiccup on the back of it today, but nothing systemic is going to come out of this, no. It wasnt july 10 it was portugal. Portugal was 1. 5 of the european economy. I think this thing will go away. Its not like the Global Financial markets crisis in 98, russia defaulted. Its not going to set off a worldwide story. Then why are we all crazy about this . But then i say to myself it is absolutely. But the sun is going to come out in argentina today, right . Its not like the world is coming to an end. We had Martin Sorrell on the program just coming back from his vacation in greece. My point is, its not like in items of investment prevalence, it could have an eye on. But on the other hand, stocks are at important levels here. Were at new lows. That follows through the next day. What about the Economic Data . When you look at the gdp number, its a glass half empty, its a glass half full, the reality is the glass is just half. Up 2 on average over the last three years. Not a particularly good performance and oh, by the way, the first number is pretty good. To me, theres no new information youre not pulling the feds Interest Rates forward . Not at all. I think a lot of the fed members, its kind of a split committee at the moment. I like the people who think about raising rates in march next year. Now, theres many indicators out there like durable goods, initial unemployment claims, exports, car sales. If that was on the feds dashboard, they would raise rates right now. I dont buy it. What about the employment report on friday . If it comes in stronger than expected, does that any employment report is expected. The problem is what level of threshold do you need in order to change the perception among members of the committee. I think the answer is you need he a fairley large number. Its a number where a lot of the jobs are full time jobs. Its a number where hourly combination is going up. Hours worked is goc up. Something we havent seen. Something we havent seen. And the same is true with the durable goods numbers. So at the end of the day, we just have a glass thats half. Cant say that its half full or half empty, its just there. So what about the fed acting sooner could put of the margins. The forecasts are very important at the moment. 13 out of 16 see 2 higher fed funds rate at the end of 2016. That means they have to start in june next year. If anything, it will be pushed forward. Are you suggesting they only do a thwarter point move . Yes. Every other meeting, they put that out there, like the 10 billion cuts. They put out there when we go, its going to be every other meeting. I wish they would normalize rates. Does the fed ever come back into play here . The markets, annoying this, continue to move towards record levels. Yes, the fed has a forecast. The problem is their feds have been potential. The forecasts are horrible and i dont buy their forecasts. I think this economy stuffed at around 2 growth and thats why were going to be. Were not pulling down excess capacity and thats what the fed is concerned about, as well. The net result is we just sit here longer than anyone participants. Coming up, talking about everything from battling. First, were going to get a little liquored up and diageos ceo will join us to talk about the results and the future of the worlds biggest disteller after the break. Squawk returns. [ male announcer ] dont just visit miami. [ jackhammer pounding, horns honking ] [ siren wailing ] visit tripadvisor miami. [ bird chirping ] with millions of reviews, tripadvisor makes any destination better. Starts at 6 30 a. M. On the vo rush hounose. Und here but for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Welcome back to squawk box. Diageo posting a drop in the profits. Meantime, americans are drinking cheaper vodka. All of these trends spelled trouble for diageo. Joining us now, the cfo ivan menedes. I joked before the break that it might be time to drink. Its 5 00 somewhere. It is. But in this particular case this quarter, you didnt look as good as i think some people had imagined. In particular, the china piece, sales down 33 . What happened . Let me put the business in context. North American Business is very strong. Its up 5 . And in our u. S. Spirits and wine business, which is a fallout for the company, so about 40 of our business. Western europe has recovered. Its stabilized, which is significantly better than where weve been in the last few years. And the emerging markets had been choppy. Weve historically grown double digits in the emerging markets. The last 12 months have been more difficult. China, to put it in context, is today about 1 of diageo. We had a Business Plan where there has been a shut in the marketplace which has dropped significantly this year. But the fundamental necessary china are still strong. Our top end business, Johnny Walker blue is up 40 in china. So i am comfortable with china gets back to a consumptionled economy, well do well then. Im just talking sales in china fell 33 . So your sense is that the market there is still strong . Yes. A big piece of it, with the change in government gifting and entertaining, its a high end product. Its about 100 a bottle. That is the segment thats been impacted. A brand like baileys is showing a 20 . High end scotch whiskey is doing very well. We built some Johnny Walker house necessary shanghai and beijing. The business did have a disruption, but the underlying trends on consumer led growth, im still optimistic and bullish about. Ivan, youre not the first highend company that ive heard that from, about the crackdown in china changing those gifting policies. Is that a disruption that is here to stay . You dont expect that part of the business to come back any time soon, do you . No, i dont. Nor do we need it to. Because our focus is to really build our brands for private consumption and were seeing the response to that, whether its the young women in their 20s drinking baileys or young entrepreneurs going into the Johnny Walker houses and spending 2,000 or 3,000 a bottle on special blends of jaukny walker. But the demographics are very good. We have 23 Million People drinking wage every year. So that nature of business i think will not recover but the consumptionled growth. And whats going on in the United States . Why are we drinking cheaper vodka . Its not true. I dont know who is writing these stories. The fact of the matter is the United States spirits market is growing the faster at the top end. So americans are spending more on priceyer spirits. Whats priceyer . Whats really expensive vodka these days . If you look at surrock, the top end is if you look at spirits above, say, 20 a bottle in the United States, thats the fastest part of the market. Johnny walker blue is up oh, yeah, every hipster in brooklyn drinks that. I want them to spread the word. Right now, the other question was going to be about india as an emerging market and a big market for you. Where does that stand . Yeah. Just this month, early july, we now have the majority stake of the United States. This is the lead spirits player in india. It has nearly half the market. India now becomes our second biggest market after the United States. I think this is a fantastic market. Indians drink western style spirits. Diageo is big in whiskey. I see Enormous Growth potential out of this market for us. And we do have the price assets in the United States now. So im very optimistic. Our own brands had Johnny Walker. Any hope for europe at this point. Its getting better. It has stabilized, which is better than i would have predicted a year ago. Our business in europe used to be down minus three, minus four, minus five. This past year, weve been flat and encouraged. Markets like the uk are in growth. The benelocks and gbr in growth, even southern europe, we were minus 1 . Thats a huge turn around. I bray there are enough issues and challenges. Hey, ivan, before we let you go, im going to let you in on the gossip and cocktail chatter out there. Theres been a lot of rumors about sab miller, the potential interest in a merger with dia dw eo. Whereas inbev just tell us the lay if you wouldnt. Our business has groan through organic gr