Transcripts For CNBC Squawk On The Street 20160513 : compare

shares of nordstrom down about 15% in the premarket, penne yerks's taking a hit. we'll break down what's really happening in the sector. donald trump launching another attack on amazon and jeff bezos. trump saying when it comes to taxes, amazon is, quote, getting away with murder. apple ceo tim cook told cnbc he's very optimistic about china and putting his money where his mouth is in a big way. we'll look at the chinese company apple just invested $1 billion in. but first up, government data shows retail sales up 1.3, surge led by autos, gasoline and online retail. but there's more department store pain on the earnings front. both penney and nordstrom tumbling. at least eight firms cutting their price targets on nordstrom, which misses by a large margin 26 versus 45. revenue was light. comps down 1.7, but the lesson here is that even retailers of that income demographic are not immune. >> everybody at the mall was out of position, no way to put it otherwise. if you think of the three drivers of what matters to retail at any time it's the kind of secular move toward online and everything else. different ways of buying. cyclical are consumer spending and then the weather. i think all three of those things went against you to some degree in april. but i think the government retail sales here it's not a macro issue most directly, in fact within that report it's non-store sales that were the strongest. >> non-store retail up 10.2 year on year. >> there it is. and it's something we've been talking about now for years, actually, this movement for your phone to get your business done, willingness of stay home or do something else, take a walk in the park instead of in the mall while you're buying things. this is a trend we're going to continue to see, i'm sure. and we've all talked about how the mall is suffering, or at least those retailers. this week we may look back on it as sort of a week where everybody started to wonder about the real future of mall base retail particularly as apparel, but at the same time these companies are still making money. macy's still has a dividend, a 5% yield at this point. you do have to wonder at what point the stocks will start to find some support, maybe even jc penney today around the dollar level despite what was not a great number. >> jcp comps up 0.4, looks good given the environment, but citi points out a model doesn't do well with negative comps and this is a little too close to that. >> exactly right. they're not growing the store base. yes, they have some cash flow. they have real estate. i mean, if that's going to be a fallback or not, maybe it's a liability. but i do think what's interesting the xrts, the etf and srp index down 15% this week. >> wow. >> so on a friday if you don't get some kind of short or reversal, the main thing to me nordstrom yesterday after the close and jc penney this morning, both stocks weak going into the reports and adding to the losses. so maybe there's some kind of a final crescendo of selling that's going to happen. >> they reiterated their $1 billion ebitda this year at jc penney. they stuck with their comp store sales target as well despite what was a number below what they're hoping for 3% to 4% for the full year. >> even margins 36.2 versus 36.4. a lot of people if you'd asked them last week they said we'll take it. >> this is where i think the street is saying, well, what do we have to actually look forward as a catalyst before holiday time, right? so you have this long summer stretch where it's give me a fundamental reason why these things are going to move. ultimately maybe the stocks have to get cheap enough so they can lift. >> i tweeted this morning remember when everybody laughed at urban for buying a pizza chain? now it doesn't look so crazy. they're going to have to start thinking outside the sbarro box. is that obvious by now? >> or outside the pizza box. whatever you have to do. >> and the world is telling these guys experiences matter, people want to spend time somewhere but not necessarily want to buy a pair of jeans. >> these companies and businesses can still generate a decent amount of cash, but they'll have to continue to take costs out. in the case of jc penney for example it appears they are taking significant cost cutting to try and maintain even those fairly skimpy margins they're talking about. one would have to imagine that's going to be sort of a role for many of these retailers. >> and dillard's no exception. 2.17 misses by 35 cents. comps down 5 double the loss expected. tiffany, the cfo resigning may 20th. going to a different company. so there really haven't been too many exceptions this time around. >> not many bright spots. i think to david's point the one place where the newspaper analogy breaks down, people say, wow, this is what happened to newspapers, people giving up newspapers to get something for free. they weren't going elsewhere to pay for something. that's the way i look at it. they're buying differently. nobody's offering free clothing out there that's going to compete with the people trying to charge for clothing. >> that's true. >> maybe that's a very small comfort, but it's a difference. >> they offer the ability to get it to your door now in less than 24 hours. >> that's true. >> and send it back if it doesn't even fit. amazon, although a different type of story today. >> everything about amazon. donald trump once again taking aim at amazon and jeff bezos in a big new way. here's what he said last night on fnc's hannity program. >> this is owned as a toy by jeff bezos who controls amazon. amazon is getting away with murder tax wise. he's using "the washington post" for power so that the politicians in washington don't tax amazon like they should be taxed. he's getting absolutely away. he's worried about me. and i think he said that to somebody, was in some article where he thinks i would go after him for antitrust because he's got a huge antitrust problem. because he's controlling so much. amazon is controlling so much of what they're doing. and what they've done is he bought this paper for practically nothing, and he's using that as a tool for political power against me and against other people. and i'll tell you what, we can't let him get away with it. >> wow. >> now, bezos has gone after -- trump's gone after bezos before on the tax front. and certainly on "the washington post" cover front. the antitrust wrinkle is an evolution in his thinking. >> it is. it's new. i guess given the week we've had and the news we've been talking about in terms of amazon eating everybody's lunch you might expect it to enter the conversation. but curious to see the antitrust case against amazon what exactly they'd focus on. what do you define as the market? and how do you go about defining their dominance of the market? it's extraordinary to hear a presumptive nominee, the republican party tap one man and one company in particular in that way. and, guys, maybe you know better than i, but the state tax story seemed to have passed on amazon, right? that's sort of an old story where they're not paying sales tax. they are now. >> on a state basis. >> yes. >> where they tend to have infrastructure in place. >> which is a lot of states now. >> yes. >> it's just amazing to me that a billionaire who won't show you his tax returns still manages to find even richer people and more powerful institutions to put himself in opposition against on taxes, on somebody who's, you know, wielding their power in a way that he thinks is unfair. it's amazing. >> and of course his reference to "the washington post" i think bezos for $250 million or $350 million a number of years ago. i'm not sure he ever thought it would bring him heat on the real part of his business, which of course is amazon. fascinating to listen to mr. trump make that attack. very much unclear to me though exactly what it would actually mean in terms of the real world taxes wise, whether it's sales tax or corporate tax. it's unclear to me. >> wow. let's bring in our chief washington correspondent john harwo harwood. john, i'm making a list of companies in his crosshairs, utx, starbucks, macy's, is there something different about this attack on bezos and amazon? >> one thing different is the story "the washington post" has this morning about donald trump and his past penchant for posing as a publicist to generate stories about himself. now, he came on the "today" show this morning, denied that he had done that. but this is something that "the post" had contemporaneous witnesses on and sounds an awful lot like donald trump. and donald trump is somebody who has shown a willingness to go very hard after his critics. and he knew that story was coming. he talked to hannity about, you know, the inquiries he was getting from "post" reporters and "post" assigning a team of people to go after him. he's trying to protect himself against the effect of those stories. >> bezos of course back in december responded via twitter saying that maybe they could send trump to space in his words through his blue origin company. where does the rhetoric lead, john? we got 180 more days of this. >> look, we've seen in this primary campaign donald trump is a politician of the kind that we have not seen before. he says things that other people won't say. he is inflammatory and direct in a way that past presidential nominees have not been willing to be. i would expect that donald trump -- there aren't any guardrails on him as a politician. you see the things that he has been saying about hillary clinton and bill clinton. we're going to hear more of that. and i think as he gets targeted or criticized by institutions, by individuals, you can expect him to go hard after them. remember the rickett's family with a stop trump political action committee, said better watch out he's got business interests and vulnerabilities stuff they're hiding. in the end governor of nebraska is a member of the family, he came out the other day and endorsed donald trump as the republican nominee. so some of these things are going to shift. but donald trump's going to go after anybody who goes after him. >> john, we're going to come back to you later on, i'm sure after a busy day yesterday in washington. john harwood in washington, d.c. meanwhile, apple investing $1 billion in the chinese ride sharing service didi chuxing. let's bring in analyst from piper jaffry. gene, good morning to you. >> good morning. >> is this a precursor to a car? is it a way to build good will with the chinese? what do you make of it? >> well, i mean, you jumped to probably the real story here is that there's probably something bigger going on. you take a step back and look at this, it purely face value, $1 billion investment on $160 billion in cash, it's just a sign that they're starting to edge outside of their core market, which is great. but then there's the bigger story which you're talking about and that is apple starting to inch into the autonomous car. and china's done a lot around that. i think most investors don't know that baido, which is the google in china, has their own initiative. they have cars driving around the bay area and they want to have a global sales driving car business. so the idea of china being a front-runner in that, i think, is very apparent. and i think apple is starting to plant some of the seeds for that potential, which is kind of consistent with a lot of people and our belief that apple is going to eventually have some form of a car. >> gene, you know, you put this investment in context of $160 billion in net cash apple has so therefore no big deal might as well experiment in a fast growing area perhaps. but what about the response even such a small investment like this reminds me of the beats deal, $3 billion, really not a big strategic move and yet everybody criticizes or thinks apple is moving away or going away from its core. does that constrain or steer apple, the fact that everything is so scrutinized? >> i think it probably doesn't because they've been pretty slow. i mean, they talk about all the acquisitions, most of them are very small. to your point this investment is a pretty big deal from apple's perspective. they spent about $3 billion for beats. this is $1 billion. this would be their second largest in some ways form of an acquisition. and so i think that that part is important and will get scrutinized because it's just a little bit bigger. one of the critical issues that apple has in terms of their stock is this idea that it's not a growth company. and the idea that they're not getting into fast growing markets. so i think a small investment in their context $1 billion can help persuade investors that they are thinking of other things. >> gene, you know, the journal just states as fact they have 1,000 people working on autonomous people. they don't even source it anymore. i guess it's widely known. is that your understanding? do you have any census in terms of how much the resources the company is devoting to the effort? >> well, one of the reporters for "the wall street journal" has probably done the best work on titan, so i'm going to defer to him on that kind of 1,000 people. there's been talk about some people leaving titan, and that's true. there have been some people coming and going, but the net number of people has gone up. a year ago that number was about 600. so they've almost doubled the number of people working on that. i've been -- learned some hard lessons over the past few years to understand because apple is working on something may not see the light of day, but this is a pretty big internal initiative for apple. >> yeah. we love to needle you sometimes, gene, about tv. but, i mean, if you're going to go here on a car, how long of a wait, how vertical will it be? do you have any guesses on that? >> well, i can say what the industry has said, we also talk to consultants that work with these companies about this. most of them say that a working pro prototype is probably around 2020, which probably means 2021 or '22 is when you could actually purchase one. >> that's a long wait for some. we're going to talk about it until then though. gene, good to see you. happy friday. gene munster joining us at piper jaffry. >> thank you. when we come back, more on today's movers plus a board battle david will talk about. the premarket does imply a fourth week down for the nasdaq. thank you, apple. and three weeks down for the dow and s&p. don't go away. & in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t. welcome back. an update now on french drug giant pursuit of the oncology company medivation. sources close to the situation tell me that sanofi is going to nominate eight directors, the entire slate actually, to replace the current board at medivation. this because of the ability to act by written consent to replace the entire board of directors at medivation. sources say as soon as next week the names will be filed, slate will be out for sanofi to move forward when the company made its offer public after not really getting a sufficient audience, medivation has since rejected that proposal as substantially inadequate. on a conference call last week in terms of earnings the company also saying we're all about value and we and our board believe we can deliver significantly more value by executing on our strategic plan versus the sanofi proposal. but sanofi now moving ahead with what we expected would be the case namely naming eight new directors that it wants to place on medivation's board by written consent of its shareholders which then would have the effect of saying we're going to actually accept your bid, or if they were to win the company would simply -- it would be a sign the company needs to negotiate. perhaps more importantly some speculation earlier this week and late last week about goldman sachs. goldman sachs became restricted in the name. that led to some speculation that perhaps it was being hired as an advisor by a particular company interested in participating in an auction to buy medivation. i can tell you sanofi has been the company that hired goldman sachs. goldman an advisor joining morgan stanley as it continues to try to acquire that company. and so goldman, which has typically advised the likes of a pfizer or an amgen, they participated a couple years ago when they were facing potential activism, goldman is now on the sanofi team. sometimes companies will go out and try to lock up other bankers they think might take part in a potential rival and simply by virtue of doing that sanofi can perhaps send a sign to anybody considering a bid that we're very serious here. doesn't necessarily won't mean there won't be potential other bids for the company. and at this point we've heard nothing from medivation indicating willingness to put itself up by sale. but acting by written consent as sanofi is going to do it limits the choices for the company, which right now is simply arguing its fundamental value, michael and carl, is above or will be above what sanofi is offering. >> it traded -- >> they keep talking about 52-week high at the very least when they talk about value. something oftentimes company say and many people speculating believe sanofi would have to pay a 52-week high because psychologically that stays in there. >> just when the drama at yahoo goes down we get drama some place else. >> we do. >> when we come back, cashin's take on the market this friday 13th. and the fed as we count down the opening bell. more "squawk on the street" from the nyse in a minute. every year, the amount of data your enterprise uses goes up. smart devices are up. cloud is up. analytics is up. seems like everything is up except 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markets make it hard to keep up. but together we can stay one step ahead. we make a great team, watson. take a look at shares of shake shack, they beat by about three cents. revenue ahead, comps up, and raising their guide on both sales and eps. good for a gain of almost 7%. we'll get the opening bell in just a couple of minutes. that's charmin ultra strong, dude. cleans so well, it keeps your underwear cleaner. so clean...you could wear them a second day. charmin ultra strong. it's 4 times stronger, and you can use up to 4 times less. enjoy the go with charmin. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just about two and a half minutes. a lot to get to. we're going to count down to the bell with art cashin, director of floor operations with ubs who joins us here at post nine. art, good morning to you. happy friday. >> happy friday the 13th. >> we're looking at our third week down, transports back below their 200-day. you say these day after day reversals are starting to do some damage. what do you mean? >> well, it's beginning to look like we're at the start of what possibly could be a broadening top here. the reversals give you on a slightly longer range the look of a flat line. and that is making some technical people uncomfortable. now, it's not fully a broadening top yet, but if it continues to operate like this it will cause some trouble. >> art, the kind of relationships between stocks and these other markets, it seems like it kind of shifts back and forth. we haven't made much progress in the s&p since the dollar stopped going down consistently. is that the one that would matter the most right now? obviously oil's kind of been hanging in there not too far from the highs and maybe has been support. >> yeah, i think if worried somewhat more dramatic move in currency, particularly the dollar, that would be reflected. i'm going to watch if wti dips below 46 today, see if that brings additional pressure in on stocks. that relationship is returned with some elasticity to it. >> yeah. yellen meanwhile making comments to congress that she will not rule out negative interest rates. >> even though she says the economy's coming along just fine. >> yes. because of the potential one day for a very adverse scenario, she says. >> well, i think we have a real problem here not just with chair yellen, but the entire fed is beginning to strain its own credibility. i mean, these guys trying to push for another june hike, when the market can't believe it and with the exception of retail sales data, the economic data coming in has been dreadful. the employment situation a lot of stuff to look at. >> so your call for no hikes this year is in tact? >> still is. >> one stubborn man. art cashin, thank you very much. let's get to the opening bell here get a look at the s&p at the bottom of your screen. again, the nasdaq going for four weeks down. by the way, today marks about the halfway mark of q2. and nasdaq has lost as much quarter-to-date as it lost in all of q1. at the big board city harvest highlighting its annual campaign, skip hung -- we'll be talking to the ceo later this morning on "squawk alley." retail will be the story. >> yeah. retail will remain the story in the morning. obviously, you know, reassurance on that government retail sales beat, on the other hand treasury yields don't respond to it. it's not like anybody looked at this and said we're really going to radically revise our growth expectations for the moment. i do think, again, when you look at that retail index down 50% this week and i would imagine should be some kind of rally attempt in there somewhere. >> getting research out this morning we talked yesterday about this resumption of coverage on ge with an underperform at j.p. morgan. today it's btig cutting jnj to a neutral. no price target but their argument is that we had counted on some m&a in medical devices and price appreciation makes it less likely that's going to happen. >> i think you have a lot of that. when you look at these kind of marquee blue chip stocks that really have been up. and jnj in a really great group if you consider it a consumer staple little more than -- it's obviously a health care company, but trades as if one of these kind of steady dividend paying stocks. it's hard to necessarily find the fundamental drivers for that. another one lockheed martin got a downgrade today. again, a very strong group within the industrials, aerospace has been great. i think people have been putting on this trade for this sort of fiscal spending no matter who wins in november kind of idea, if you look at the stocks that make rock and gravel for infrastructure, they've been flying. lockheed's in that group too. it's not an edgy you got to sell this stock now call. it's more take it off the table. >> shares of allergan are up today on an upgrade from goldman sachs. prime for growth with catalysts on the horizon says goldman. they add it to their lists of some kind or other, but they talk about the fact that of course it will be delevering once the deal to sell generics -- closes, let's call it a month from now or something along those lines. you can see the stock though has had a rough go of it for quite some time. didn't respond particularly well after the deal to be acquired by pfizer was gutted by the treasury department's new rules on inversions. for its part goldman saying after a series of management meetings they came away with several key points that reinforced their confidence that the underlying business as expressed by the first quarter earnings is strong and will continue to expand. they also of course point to that reloaded balance sheet and the delevering that will take place in the big share repurchase announced earlier this week by allergan. when i think of allergan i think of valeant. down over 10% but came back a bit in the session. but hit new lows. at least worth taking a look. >> yeah, looking at that goldman note today you almost could have said we're putting it on the condition buy list on the basis it's not valeant. there are all these specialty pharma companies that basically got dragged down along with it. whether it's the smaller ones like endo and perrigo and all those guys, look extremely cheap. but they've gone down because people are concerned about various elements of it, you know, whether it's reliance on m&a and nongap accounting. >> or increasing drug prices. to be fair endo reported a terrible guidance as well. and that helped put pressure on valeant yet again. and even on allergan, all the idea of these companies rolling up with a very low tax rate too, which also allergan shares of course given its a dublin base. i always forget where they're based these days. their all over the place. >> across the ocean somewhere. >> they're not in the u.s. >> nvidia beat by a penny. gaming was not the source, they're calling deep learning adoption by cloud providers, amazon, microsoft, ibm not a surprise. but talking more and more about it as a tailwind and whether it's halo or not, intel is the best performing dow component at the moment. >> yeah. the semis have been a tough place to be. if people looked at the apple suppliers and that was a tell to have this last leg down in apple shares, it seems like people were looking for any kind of glimmer right there because once again it looked like there was not a very challenging valuation story to be told in semis. being cheap hasn't worked. >> what would you advise people to think about, mike, ahead of next week when we do get a walmart, a target. h.d. and lowe's off a bit, building retail sales on building supplies was not that hot. it was not that hot. and those stocks have been the ones that people have been hiding in, i think, to a large degree. the broad picture to consider, i think, when it comes to this whole retail mess is that if you took amazon, home depot, lowe's price line out of the retail index of the s&p 500, the rest of retail was like 3% to 4% of the overall index. it's a very intense amount of pain on a relatively small area. now, walmart and target and costco and cvs, they're categorized by s&p as consumer staples. so basically they've kind of gone down in sympathy a little bit, but you would think they don't necessarily -- you know, discounting is not toxic to them in clothing. that's been the problem for the other guys. >> shares of apple, guys, are up for the first time in a bit. of course yesterday hitting a 52-week low and for a brief moment its value eclipsed by alphabet. they're very tight, about $6 billion market cap difference between the two companies at this point. but shares are up. of course we talked earlier about that $1 billion investment. perhaps it has the effect of putting the spotlight on just how much cash they do have, which i think is an even bigger number when you subtract about $160, man, that's a lot of money. >> which is why alphabet's enterprise value has been higher than apple's for a while because apple does have so much cash it kind of works against the enterprise value. >> it does. but particularly poor week for shares of apple, which really has suffered more or less consistently since the company reported earnings. but today it's up 5 cents. so it's got that going for it. >> people want to make $90 a little bit of a stand. >> jc penney shares not getting hit particularly badly after it looked like it would be down sort of sharply. stock holding ground about $7.50. down a little more than 3% after of course what we talked about has been a devastating week for much of retail, certainly those in the apparel business whether it be macy's or gap or so many other names including nordstrom, which is down more than jcp. >> yeah, apparently the call has included some comments about moving away from apparel. and courtney reagan will have more on that. facebook's not a big mover, in fact, it's less than a buck away from the all-time high. anniversary of the ipo coming up next wednesday. four years it's been as a public company. and speaking of amazon, companies in the general news environment they continue to be fighting this battle on the news of their timelines, their trends. they absolutely fight the battle. what's interesting is it reminds me of the kind of first years after google came public when ech the bad press about google was really underscoring its dominance. they're kind of steering search results a certain way and maybe it's not a perfectly clean view of what's going on on the internet. and yet the rieal takeaway from that was they dominate so tremendously as a business it's hard to assail it. >> zuckerberg breaking his silence with this long post about -- you could argue an attack from congress to some degree making public these 28 pages of their guidelines. in fact, they do allow for some human intervention. if you see a trend that is not automatically working its way into the algorithm, they can import it by hand. >> which maybe nobody would necessarily object to unless there's secondary arules. >> shares reported on earlier up about 1.4%, again to reprize that sanofi which is seeking to acquire the company is going to nominate eight directors, that's an entire slate, to replace the board through means of written consent. also importantly goldman sachs added to the advisory seam for sano sanofi. we'll be hearing from or some people will at least the ceo of medivation, he's scheduled to join barclays on a conference call with some of their clients at 11:00 a.m. so we'll see if there's any headlines that come from mr. hung is his name. >> finally, these shack comps are getting a lot of attention. management raising their guidance on that update. a lot of talk about good execution, strong traffic, chicken once again driving some traffic. of course we know what the shares have done relative to some others in the past year. >> absolutely. they've struggled, but the comp number was very dramatic, guidance and what they managed to put up was like double the expected comp. which says to me are they moving the lines faster? maybe the lines are not as much of a core issue outside of the ones i've seen. and they are also consistently talking about 20% increase in the store base for this year, 13 new locations or something like that. so it became -- it becomes, you know, i guess a little less of a leap of faith stock if you see the execution rolling out and the comps don't suffer. >> not a lot of buyers on this one. goldman maintains their sell even though they rab e raised their price target. let's get to bob pisani on the floor. >> mixed open today. really a mixed week. the s&p is up just fractionally overall for the week. sectors modest gains in tech, banks up a little bit. energy positive early on, now negative. materials also fractionally totd upside. of course the big story the retailers again today with nordstrom down about 14%, jc penney also weak, rather surprising on jc penney because even though revenues were light, they left the guidance in tact largely. but you still see a decline of 5% here. it's important to look at this in little longer term. just look what's happened in the retail space this week with mid -- with double-digit declines here in all the major names. this is from the open. i'm including the opening here. so nordstrom, macy's, kohl's, sears, jc penney the only one of the big department stores escaping a double-digit decline. it's important to look at this in a broader context. people may not be buying apparel in department stores, but they're definitely going out. we saw in the april retail sales numbers much stronger than expected. i look at year over year numbers for these and that's where you see the big trends. internet sales up 10% year over year. restaurants and bars we joke people are drinking more, but they are up 5%. sports, sports stores, sporting good stores, books and music stores still doing well, auto parts stores are doing well. there's the department stores down 1.7%. that number will certainly accelerate in light of what we've seen in the first quarter here. but everybody is aware of these trends in the other areas. people going out. so look at some of the other retailers out there that are not in the department store space. dick's sporting goods doing well this year. cabela's outdoor clothing, that's up 4%. auto zone in the auto parts space. and barnes & noble, that stock's been all over the place but books are starting to stabilize. more positive comments on the book sale industry overall that's up 22%. so you can see people are going out. people are buying things. just not in the department stores as much. i want to note something that's very strange yesterday. i noticed at the close apple is at a 52-week low, a number of other traders including my friend michael o rourk pointed out to me apple was at 52-week low while exxon at a 52-week high. very strange world we're sitting in right now because the market seems to be implying that exxon's earnings are troughing and apple's earnings are peaking. i don't know if that's true or not, all i know is i sit and look at the markets and that seems to be the implication. there's apple on the bottom and exxon on the top. you can see most of this move has happened since this year in the last four or five months. very strange situation now the world upsidedown. i want to note the ipo market, second strong ipo in as many days acacia communications, high speed optical networks priced at $23. they priced at the high end. we'll have the ceo on in just a couple hours right here on cnbc. so stay tuned for that. but this is the second positive ipo we've had in two days. remember yesterday here at the nyse site one landscape supply came out priced at $21. that was the mid range. and closed yesterday at $26 and change. remember, we're waiting for that to open -- we were waiting for acacia to open but that was a strong opening on that one. guys, there's still just a trickle of ipos coming. there's more than 100 that are waiting. it's been slow process, but this is definitely going to give encouragement to the market two ipos priced well. again, we'll have to wait. acacia will probably open within the next hour. right now dow up five points. back to you. thank you very much, bob. take it from the equity market to the debt capital markets. before we get to rick santelli and him talking about it, i'm going to talk about it a bit. next week dell's underwriters are going to begin marketing a massive deal or series of deals to fund that emc purchase. more than $40 billion of debt will be brought to market over time by the underwriters for dell. and it's interesting because it does shine a spotlight on the robustness right now of debt capital markets in part because of negative yields. we'll get to that in a moment, but to the specifics of dell's debt deal, which at one point had thought to be as much as $50 billion but it will be closer to $40 billion, the investment grade offering and this goes to that insatiable desire of investors out there to find something with the yield, investment grade part of this is now going to go, sources tell me, from as much as $16 billion -- i'm sorry, from $16 billion to as much as $20 billion. the bank term loan a thrks is the term loan syndicated to other banks originally targeted for 10.75 billion also going to likely be upsized. the effect of all that is going to be to significantly reduce the size of dell's needs in the high yield debt market. originally their underwriters have been targeting as much as a $9 billion high yield bond offering. that now dropping closer to $3 billion. again, all these numbers can change a bit, but it does give you a sense as to what dell's going to be able to accomplish. by the way, triple b credits borrowing call it little more than 4%, dell will borrow above that, but blended interest rate from various bank loans, investment grade deal and high yield debt deal all going to bring a blended rate below what dell had certainly anticipated when it signed up to purchase emc many, many months ago. why is all this happening now? well, in part because of negative rates. right now you have as many as 25% of all debt out there, all bonds trading at negative rates. that obviously including sovereigns. much of those bonds -- many of those bonds in fact the vast majority were bought not at negative rates but they've traded into it. meaning price has gone up, when they do, you're going to have people reinvest proceeds and managers having to do that. what do they look for? any sort of yield. where do they come? right here to the u.s. corporate bond market. that is having an effect of depressing rates. back in january and february it was a rough time for the high yield market. we were on tv talking about it. it's gone. it's like a distant memory. >> exactly. >> things are back to being as strong as they have been, in part many would argue because of this idea negative rates are forcing people to go anywhere they can find. dell is going to be the beneficiary of that. >> without a doubt. the yields are not at the lows of let's say, you know, before last may when the stock market topped, but even in this latest period when stocks have backed off highs, the high yield credit market has been very firm and one of those things people can point to and say the markets aren't necessarily raising any strong alarms about, you know, s systemic issues or macro scare. >> most of dell's borrowing will be done in investment grade markets in banks and also in the investment grade bond market in part because they have been so successful in repaying the debt from their lbo and finding all sorts of savings in terms of working capital. we're talking debt, let's keep doing that and head to rick santelli at the cme group in chicago. >> hey, david, that was a great piece. i give you a fist bump because the topic we're going to have all day today, santelli exchange guest negative interest rates and all the activity it sparks. michael dell ought to be very happy that this condition exists, as you pointed out. but there's some big minuses too. we'll get to that throughout the day. what happened today? retail sales. consider this the headline number at up 1.3 was the best headline number since march of 2015. the control number, 0.9 that you insert into the more macro formulas for other data points, that 0.9 was the best since march of 2014. so look for atlanta fed gdp to get really bumped up. and of course that's always good news. you see the intraday ten it popped in yields, makes sense. intraday two-year it popped in yield. i find that one fascinating because that pop was more dramatic. let's look at tens minus twos, it flattened. as a matter of fact outside of one basis point low made it the end of february this year, open the chart up we're about to challenge the flattest yield curve since christmas 2007. why are they selling the short end more? maybe they think june's on the table. i personally don't, but somebody does and that's important to watch the market interpretation. now, if we want to look at the dollar index it should love all this. and it did. now, if the fed raises rates of course, that has huge foreign exchange implications. we're still not at lofty levels for the dollar index, but a one-week chart shows we've been up pretty much every session in the last nine except for one. so you really want to watch the dollar index. moves have been small. mike, it's all yours. >> rick, thanks so much. appreciate it. let's get a closer look at oil prices. bertha coombs is at the nymex. >> we are seeing oil here off a six-month high, nonetheless we are on pace for some fairly healthy gains this week in oil. and a lot of it has to do with the feeling that production and demand are balanced at the moment. the surge in production that we have seen from iran coming back in the market has been offset by the fires in canada. and then as well by the unrest that continues in opec producers like nigeria also in venezuela as well where there's been so much disruption there because of political and economic turmoil. so a lot of analysts are saying for now that appears to be balanced. and we are seeing oil here up for the fifth week in six, notwithstanding the fact today we have that strong dollar putting some pressure. it's also putting pressure over on the metals space with gold set for a near 2% decline this week. we're seeing a little bit of a bid for copper with some hopes for economic news and some hopes that things will continue to produce maybe some more easing in china. nonetheless sort of a mixed day in the metals. metals overall not as robust this week, carl. >> all right. bertha, thank you very much. bertha coombs. when we come back, what penney's ceo is telling cnbc in light of the quarterly results that are weighing on the stock. dow's up 11 points. s&p up to 2066. back after a break. ♪ approaching medicare eligibility? you may think you can put off checking out your medicare options until you're sixty-five, but now is a good time to get the ball rolling. keep in mind, medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans insured by unitedhealthcare insurance company come in. like all standardized medicare supplement insurance plans, they could help pay some of what medicare doesn't, saving you in out-of-pocket medical costs. you've learned that taking informed steps along the way really makes a difference later. that's what it means to go long™. call now and request this free decision guide. it's full of information on medicare and the range of aarp medicare supplement plans to choose from based on your needs and budget. all plans like these let you choose any doctor or hospital that accepts medicare patients, and 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[light instrumental music] facebook is detailing just how its trending topic feature works. this after a report this week claims the social network down plays conservative news. in a blog post series of checks and balances involving both algos and humans ensures stories and trending topics are not bias. the post links to a 28-page internal document that facebook uses to determine topics. mark zuckerberg planning he posts to talk to leading conservatives in coming weeks. i think it's john thune from south dakota become the poibt man calling for a congressional inquiry. >> the concept of equal time and balance between the two sides of the political spectrum was abandoned. other thing that it gets to though, i think, is what bucket facebook puts certain sources. so in other words if certain websites are not categorized as news sites, maybe their opinion or political advocacadvocacy, l how the sausage is made. >> exactly. when we come back we'll get breaking news on consumer sentiment plus more on this retail rout and apple's latest best on china. don't go away. whoa. what's going on here? oh hey allison. i'm val, the orange money retirement squirrel from voya. val from voya? yeah, val from voya. quick question, what are voya retirement squirrels doing in my house? we're putting away acorns. you know, to show the importance of saving for the future. so you're sort of like a spokes person? no, i'm more like a metaphor. okay, a spokes-metaphor. no, i'm... you're a spokes-metaphor. yeah. ok. see how voya can help you get organized at voya.com. anything worth pursuing hard work and a plan. at baird, we approach your wealth management strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird. e*trade is all about seizing opportunity. and i'd like to... cut. thank you, we'll call you. evening, film noir, smoke, atmosphere... bob... you're a young farmhand and e*trade is your cow. milk it. e*trade is all about seizing opportunity. sign up at etrade.com and get up to six hundred dollars. good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sa sara eisen, simon hobbs and david faber at the new york stock exchange. the pain in retail remains acute, especially on some of the specialized guys. oil also with some losses down to 46. >> but first we have consumer sentiment and business inventories. let's send it over to rick santelli. >> well, let's go in reverse chronological order, thank you, thank you. we have a march number for inventories and that's up 0.4, double what we expected. interesting thing about when you increase inventories, more widgets end up with better growth numbers on revisions, keep that in mind. the more realtimes are preliminary read for may on the university of michigan sentiment. and in this regard we're looking for number just a little bit south of 90, we're way north of 90, 95.8. remember, this is preliminary. now, comparing that to all the final numbers, this would be the best number since june of last year at 96.1. so a nice surprise on most of the data points this morning. to the upside. back to you. >> thank you very much, rick. retail stocks continue to get hammered. jc penney of course this morning is the latest link in the department store chain to report disappointing earnings. as retail continues to struggle. so how should investors be weighing the sector? joining us is ceo of jay rogers enterprises and cnbc contributor along with sbuinstitutional investor joins us from jr.p. morgan. matt, this looks horrible. what is the broader view here? >> it was probably the worst week for department stores that we've seen since the financial crisis. the bottom line is i think the department store sector is losing a degree of relevance. i do think the consumer is also finding more convenient ways to shop. and they're looking for value. and right now the department stores are not delivering that. >> although, john, you do see a silver lining in today's jcp figures. >> they didn't miss earnings. they did miss sales. and everybody missed sales. and i think the weather cost people a couple of points. and 2% on sales is a really big deal. i agree with everything mat just said, but i think what we saw right here was every retailer giving up a couple hundred basis points of sales to the cool weather in the spring. >> and yet retail sales on the aggregate level on the data today look very strong. i have a figure from one says if you strip out autos, gas and food you're gaining at an annualized rate of 5.5%. that's a very, very buoyant backdrop. >> i agree. there's nothing wrong with the consumer. the consumer's working, the consumer's got higher wages, the consumer has a really good attitude as we just saw, the consumer is spending on experiences, the consumer is spending on cars, buying at home depot and lowe's. they are not buying in the department stores. >> i think we've been through this so many times now about what exactly is going on in the bricks and mortar problems. within that general overlaid problem there has to be opportunity. even in sectors that are in structural decline you'll see ceos who pull it out of the bag and return a lot of value to shareholders. where do we look next here to make money? >> i think you can look as soon as next week. i think the off pricers are going to report next week. you're going to see an entirely different picture. i think tjx will be almost a complete reversal of what you've seen from the department stores this week. i think burlington, i think the dollar stores, again, going back to if you offer either convenience or value, or innovation, i think some of these sporting good companies the true innovators, that's where we'd look to concentrate. i think the department stores, again, you know, a tough rout and on jan's comments on weather, weather was definite excuse in the fourth quarter. i take the under on weather this quarter. i think the beginning of the quarter was actually great, back half of the quarter suffered. jc penney talked about an improvement in trend at the end of april, bear in mind the trend fell off extremely hard in the end of april last year. i think that was a really, really concerning way to back your guidance for the year based on the back half of april improvement. >> i agree with matt on that from the point of view of the way the quarter worked, but when the weather counted, which was at easter and in april when it matters, it was really unseasonable. and i do think that a piece of this business. that doesn't mean i don't think -- i still believe that the off price guys are winning. i still believe that the fast fashion guys are winning. i still believe that the internet is winning. all of that's happening, that doesn't change the fact these guys gave up a couple hundred basis points on weather. >> i want to pick up, matt, on something you just said about the innovators and the sporting apparel makers. we often talk about nike and under armour with you, are those companies a sell? if you think about where they get a large majority of their sales it's in the department stores, which are suffering so badly. >> i think as nordstrom said last night, the real concern here is the overdistributed brands and the brands that are heavily promoted. that's exactly what nordstrom's ceo said last night. and that's what we're hearing from the department store sector is they're actually looking to move away from some of these brands. now, that does not include such as a nike or an under armour. these guys are actually creating innovative product that changes year in and year out. the consumer sees the technical aspect and interested in that. what it really points to is what macy's and nordstrom are doing with things like the beyonce brand in athletic, with things like top shop, some of the things macy's is doing i think that's what you're going to see going forward is more of these shop in shops, more licenses and almost a collaboration between the online-onlies today and the brick and mortar retailers. >> i'm curious to know, jan, how do you -- how do these department stores close doors, remodel the ones they're going to keep, save money for the buyback, spend more on online? this is a big tug of war on their cash flow, isn't it? >> yeah, it's very tough. department stores have been in secular decline since walmart opened their doors in '62. this is not new. there were 100 department stores, now there are a handful. this whole problem is just now exacerbated by off price, online and all that. and, yes, every time a department store takes a sale out of the store and puts it online, the roi goes down. every time ralph lauren takes a sale away from macy's and puts it online, it goes up. right now i like suppliers better than stores. i like ralph, hanes, columbia, vf, i think in the shorter term those guys are going to be winners. >> would you expect them to start limiting inventory to department stores? thinking it's just going to go to waste and be discounted in the end? >> right now the biggest seller of ralph lauren product is t.j. maxx, not macy's. they're bringing it in and we're going to see a disintermediation from stores to the vendors. i think it's positive for vendors, negative for stores. i also like tate and coach, you can like some of the products, it's just harder to like the stores. however, the back half of the year for department stores is going to be a darn sight better than the front half because all of the negatives we saw last year in the back half, we're going to get the mirror image of this year. right now people are going to be buying the darn things again in august. >> we're running out of time, just one more important question to you, matt. last night donald trump did an interview and a lot of the disintermediation we talk about is clearly because amazon is now selling a lot of apparel online. that comes up time and time again. yesterday donald trump in an interview appeared to say -- and this was in reference really to the attacks at "the washington post" had made on him as an individual. but he said amazon, quote, has a huge antitrust problem and is getting away with murder tax wise. now, if trump wins and trump were to look at some sort of antitrust claim against amazon, how significant might that be for the industry and for all the names that we've just spoken about through this interview? >> i mean, it's absolutely would be significant to the industry. i think amazon is a major player, becoming a much larger player. that said, i mean, as jan said fast fashion is still a big constrnt. the off price sector. but we've done the work, and amazon in the national brand arena, i mean, makes up an almost 80% overlap with all of the brands most of these department stores sell. so there's really no way out other than creating innovation and partnering up with brands and private label that's just not sold on amazon. the issue with that is it takes time, it's not going to happen overnight. most of these department stores are probably facing a three to five-year turnaround if that's the case. >> okay. have a good weekend both of you. thank you, matt and jan. >> thanks for having us. imf chief christine lagarde commenting on the possibility of a brexit today, saying it could have a, quote, negative and substantial effect. we've got an all-star panel on the other side with their analysis on brexit and some of the other risks. images, videos, social updates. we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud, we can help an energy company predict pipeline corrosion. and help a start-up to use social data to predict market trends. now businesses can get more out of their data. that's what the ibm cloud is built for. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. man 1:man 2: i am. woman: ex-military? man 2: four tours. woman: you worked with computers? man 2: that's classified, ma'am. man 1: but you're job was network security? man 2: that's classified, sir. woman: let's cut to the chase, here... man 1: what's you're assessment of our security? man 2: [ gasps ] porous. woman: porous? man 2: the old solutions aren't working. man 2: the world has changed. man 1: meaning? man 2: it's not just security. it's defense. it's not just security. it's defense. bae systems. our courtney reagan just got off the call with the jc penney ceo. >> i just spoke to marvin ellison on the phone after he finished with the analyst and he was pretty positive particularly in the face of the rest of the department store results this week. ellison says, look, it was a difficult sales environment, but we feel great about our operational performance relative to our peer group. we performed very well. we're taking share and continuing to win. that's a quote directly from ellison. we also said we have confidence that our current trends are allowing us to hold our sales guidance. ellison says his team is working towards migrating the assortment to skew towards products and services that consumers are spending on. and after an overreliance on apparel that really hurts when weather isn't seasonable, remember jc penney is expanding its appliance pilot. ellison's prior experience at home depot tells him even if it's snowing and the fridge breaks, you're going to go out and buy another one. he says appliances are bringing new customers to our store. sales productivity in the pilots are ten times greater than they were before in that area of the store. that's especially helpful because the home department is the lowest productivity area of jc penney stores. and that hasn't always been the case. so he's working very hard to turn that around. some interesting comments and, again, a pretty positive tone after many of the other retailers earnings were just crum crummy, simon. >> well, that's one adjective, courtney, thank you very much for that. meantime economy level retail sales coming in better than many were expecting. we just got consumer sentiment data as well. steve liesman is back at hq looking at the figures. what's the takeaway? >> you know, simon, he's not dead yet. that was the famous line. it applies now to the american consumer who amid plague-like retail earnings this week that courtney's been reporting about, they thought the consumer was down for the count. come this morning's april retail sales numbers with a 1.3% monthly gain, upward revisions to prior month suggesting consumers haven't down shifted their spending, what they've done is shifted their spending. here are the retail details. overall up 1.3. autos coming back up 3.2. gasoline coming back, but other areas, furniture up 0.7%. and the control group, this is the number that economists follow very carefully, it flows directly into the consumer spending numbers for gdp, that was up 0.9%. a very healthy clip for a month on month gain. the result is many economists now think consumer spending could be rising at a very healthy 3.5% to 4.5% annual rate in the second quarter. this of course helps confirm the worries about the prospects for a rebound from that very weak first quarter numbers we had. the shift to online spending continued in april with department store sales up 0.3, and the category that includes both fuel and online retail sales surging 2.1%. you can see just looking at the electronics shopping part it's been growing at double-digit rates. along with changing attitudes about the consumer and rebounding economy, do come changing attitudes of course about the fed. rdq says we think there will be a number of people on the fomc who, as recent speeches from moderates have suggested, would like to have a serious discussion about raising rates. i would say, guys, if other data confirm this strength, the fed might have to rethink waiting until september for that next hike, carl. >> all right. steve liesman, thank you very much for that back at headquarters. take a check on the markets here. dow close to session lows down 48. stocks are mixed as the dollar continues to rise. and a surprisingly strong reading on retail sales. and as you just saw on michigan as well, that growth did calm some worries about slowing economic growth while perhaps as steve said bolstering the case for rising rates. joining us this morning the chief u.s. market strategist at rbc capital markets, and the global economic advisor at pimco. guys, happy friday to both of you. jonathan, are you getting more defensive as we're getting into some of these tent pole events in the summer? >> i don't think so. i think when you're looking towards the latter part of the year you're going to see earnings pick up as the headw d headwinds from energy roll away. the economy is the data showing is, you know, tepid, but absolutely not recessionary. so, no, these news headlines don't change my overall outlook. >> you worried at all that the dollar has bottomed here? >> no, i mean, i think the real big issue with the dollar falling the way that it did was it bailed out oil, which was very helpful for, you know, big chunks of the economy that are dependent on that. it was creating a tremendous amount of stress. that stress is gone. the vix right now is well below 15. i'd love to see interest rates a little higher as a sign of health, but i think that the dollar is nowhere near as much of a concern today as it was, you know, only ten weeks ago when it was much stronger. >> it does feel like we are facing a higher degree than normal of uncertainty going forward. and one of those big risks is the brexit referendum in about six weeks in the uk. here's christine lagarde, the chief of the imf, talking about some of the risks facing the global economy as a result of this vote. >> negotiations on new arrangements with the european union and other trading partners could in our view take years. leading to a protracted period of uncertainty, and the longer this uncertainty goes on, the more heavily it will weigh on investment and growth. the majority of economic analysis that has been conducted agree that a vote to depart the eu would be costly in the long run. >> so a number of warnings there from the head of the imf. are investors underestimating the risk of a brexit? >> i think they are. i've lived in london for 20 years, i'm glad i'm in california now. if you look at the polls in the uk, it's very close. we think there's at least a 40% chance that they vote for leave. and if they do, it's not going to be pretty, not for the uk, not for europe as a whole, and certainly not for global financial markets. i think there is a very serious risk that a brexit vote could lead to a global risk off move. so that's why i think there's quite some volatility ahead. >> so how are you guys at pimco preparing for that risk scenario? >> well, we've had, as you know, a period of relative calm in financial markets since the february lows. so we've been using this rally to get up in quality. we like credit, but we've been moving in the rally. we've been moving out of the more risky and less liquid stuff, which has rallied a lot, into the higher quality parts of the credit spectrum. so that's one way. the other way is that we think the dollar has probably overshot on the downside, so we think there's going to be some moderate strengthening of the dollar. so that's the other way to play this. >> hey, jonathan, let's say that the uk votes to stay in the european union. >> right. >> let's use that as an example, then you have a fed meeting july 26th, 27, do you think the market is underestimating the degree to which the fed could raise rates? a lot of people are talking about retail, employment data is pretty good. do you think they could surprise the market and those type of noises support going in might actually bring the equity market down? or how are we positioned? >> simon, it's been quite amazing that with unemployment at 5%, with inflation right now of course epi running over 2 that the fed keep interest rates at 37 basis points. i think it's time for them to move. but if they do intend to move in june, they're going to have to start signaling that right now where the market is not going to be happy. i'm not seeing any signal like that at all. >> hang on, jonathan, the argument goes time and time again they won't move in june because the meeting dates the 14th and the 15th and the uk referendum is on the 23rd. or is that wrong? they could move then. >> i would be surprised if they do. >> right. >> but the more important thing is the fed can surely give us guidance on where they're taking us. if the fed were to tell us that the economy is in good enough shape that we should have higher interest rates and they focus on the success and the economy and they move up the expectations for the latter part of the year, i think that the market looks at that, you know, quite positively as a sign of success as opposed to the fed pulling away the punch bowl. and that's probably the more likely scenario than a june move. >> yeah. it has struck some as curious that even the doves have been onboard with this two hike year. we'll see what happens as we get into june. thank you so much, jonathan golub at rbc. ahead on the program, donald trump taking aim at amazon saying jeff bezos has some serious antitrust issues to answer to. and apple betting on an uber competitor investing in a billion-dollar chinese operator. what you need to know about its biggest investment this year. ♪ in new york state, we believe tomorrow starts today. all across the state, the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. like in buffalo, where the largest solar gigafactory in the western hemisphere will soon energize the world. and in syracuse, where imagination is in production. let us help grow your company's tomorrow - today - at business.ny.gov e.t. phone home. [ soft music ] when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. donald trump is going after jeff bezos yet again. this isn't the first time that he's taken aim. some harsh words coming from the gop's now presumptive nominee. john harwood is in d.c. with the latest. john, i think this took kind of a lot of people aback. >> it did, simon. but donald trump throughout his campaign made clear he's not reluctant to go after any corporate leader when the opportunity presents itself. he did it last night on fox's hannity show. >> this is owned as a toy by jeff bezos who controls amazon. amazon is getting away with murder tax wise. he's using "the washington post" for power so that the politicians in washington don't tax amazon like they should be taxed. he's getting absolutely away. he's worried about me. and i think he said that to somebody, it was in some article where he thinks i would go after him for antitrust because he's got a huge antitrust problem. because he's controlling so much. amazon is controlling so much of what they're doing. >> now, the comments he made on hannity last night may have had something to do with this "the washington post" story that was out this morning quoting witnesses at the time saying donald trump used to call reporters in the name of a pr person, but it was actually donald trump, to praise trump and plant stories about trump. here's the exchange that he had this morning with savannah guthrie on the "today" show about that "the washington post" story. >> the person on it talks about his dating exploits, goes on about his divorce, things like that. i guess the simple question this morning, are you aware of the tape? is it you? >> no, i don't think -- i don't know anything about it. you're telling me about it for the first time. and it doesn't sound like my voice at all. i have many, many people that are trying to imitate my voice. and you can imagine that. and this sounds like one of the scams, one of the many scams, doesn't sound like me. >> the post says that you acknowledged a couple decades ago that in fact that was you but it was a joke? >> i don't think it was me. it doesn't sound like me. i don't even know what they're talking about. i have no idea. >> so donald trump says that there are scams and people trying to imitate his voice, a lot of people will be listening to that tape today and they can all make up their minds as to who it was on that tape, guys. >> you know, john, it's david, but the key here is "the washington post," isn't it? mr. trump does seem to focus on wherever the criticism's coming from and it may be he's going after amazon but it's really about bezos' ownership of the post. >> no question about it. he talked about how the post has a team of reporters doing stories about his background. the truth is that every news organization has got teams with reporters exploring donald trump as well as hillary clinton. that's simply what happens when you become the presumptive nominee of a major political party. what we haven't seen in the past is a presumptive nominee with such lack of inhibition about going after individual executives as well as institutions. >> well, you also see when you have a presumptive nominee, john, is them releasing their own personal tax returns, which continues to be a big story. he says it's none of your business. how can he criticize a company like amazon for tax dodging when he won't even release his own? i realize there's a public company and a private individual, but he's the presumptive nominee and that's what you do. >> yes, and past nominees have all released their tax returns. we will see whether voters care about this issue. you know, george stephanopoulos on "good morning america" today pressed him on that. he said it's none of your business what his tax rate was. when he was asked directly do voters have a right to see these returns before they vote, he said, no, i don't think they do. it is an open question whether that is something that would simply alienate people already against trump to begin with or whether it would affect people who might be on the fence on trump. we're going to have to see how that plays out. but you can bet that the clinton campaign is going to press that issue. of course donald trump's response to hillary clinton who says i've released 30 years of tax returns is what about those goldman sachs speeches, what about those e-mails, and he's going to try to hit her on transparency just like she's going to hit him. >> yeah. >> you know, one of the open questions here, john, is the degree to which the press and the investigative press, the papers that still have the resources to do this are going to take any candidate through the mill of investigation as we go through this process. and the suggestion that maybe they wouldn't be as aggressive on trump as they ought to be. do you feel that the sand is beginning to shift here as to how deep people will dig on either side? >> i think the serious elements of the press, major news organizations, major news networks, are going to seriously press both of these candidates. i think that in fact has been happening for quite some time. hillary clinton has been explored at length over the e-mail controversy for example stories about the clinton foundation. there's a new one out about potential favors being done for friends of the clinton by the foundation. all of those things are in the news because news organizations are willing to do that strutny. and they're going to do that on trump as well. >> that lack of inbigs, john, his supporters would argue is part of his appeal. we will see if it matters. john harwood in washington. thanks. apple hovering just above 90 today. remaining far in the bear market, but is the widely held simply overbought? company has a billion dollar bet in uber's competitor in china now whachlt that all means for the tech giant after a break. ♪ amazing sleep stays with you all day and all night. sleep number beds with sleepiq technology give you the knowledge to adjust for the best sleep ever. it's the semi-annual sale! save $500 on the memorial day special edition mattress with sleepiq technology. know better sleep. only at a sleep number store. welcome back. i'm eamon javers in washington where we've got a bit of new news here on the bank of bangladesh heist story. when this story first broke, congresswoman caroline maloney of new york sent a letter to the new york fed demanding answers to a series of questions. the fed responded to her. and we've now obtained at cnbc the new york fed's response to her questions. we can put this out, this comes now a day after swift itself, the international bank messaging system, said it had discovered additional incidence of malware in the banking system that may have led to a heist at another unnamed commercial bank. caroline maloney asked the new york fed if it's appropriate to rely entirely on swift authentication for outgoing payments from the accounts of foreign central banks. what the new york fed responds in this letter to her is given swift's predominance around the world, swift is used routinely by banks in the united states to communicate payments for cross border payments. they're saying the swift system is so ubiquitous we have to use it. also a bit of a blame game going on here. the new york fed saying it does try to authenticate some of these messages. it does manually review some of them when a withdraw request comes in, but they also say however if a manual review occurs either before or after execution, it is not a review for authenticity of the swift sender and does not supplant the swift authentication procedures on which the new york fed and its foreign official account holders rely. that seems to be the new york fed pointing at swift and saying it's their fault, it's their responsibility rather to check and make sure these accounts are actually being sent legitimately, guys. a very complicated situation here. fascinating developments in the swift case. and, sue, i'll turn it over to you. >> we will continue to follow that story. thank you, eamon. cnbc news update at this hour, the obama administration telling u.s. public school districts across the country to allow transgender students to use the bathrooms that match their gender identity rather than their gender at birth. schools that don't comply risk the loss of federal aid. hezbollah is saying today that one of its top commanders was killed this week in an real estate air strike at the lebanese/syrian border. he was being tried for the murder of the former lebanese prime minister. four suspected bomb makers were killed and 17 others hurt in an explosion in a mainly kurdish area of turkey. the interior ministry said the blast occurred as militants from the kurdistan worker's party loaded explosives onto a small truck. eight people are going to share last weekend's $429.6 million powerball jackpot bought at a 7-eleven in trenton, new jersey. they'll claim their prize later this afternoon. they spent $6 for two tickets and they chose the lump sum payment of $284 million before taxes. we'll see who they are. that's our cnbc news update this hour. carl, back to you. someone's having a good week, sue. thank you very much. >> yes, indeed. apple meantime is betting big on the ride sharing market. what does this billion dollar bet on didi mean for the company? our josh lipton's in san francisco with that. hey, josh. >> carl, when i last spoke to ceo tim cook, he said that china is more stable than many believe. and now he is putting his money where his mouth is by investing $1 billion in didi, china's home grown rival to uber. we know $1 billion is a drop in the bucket for apple which boasts a cash mountain of $233 billion. so why is cook committing this capital? well, for one, it could be a smart investment. didi is a $20 billion company. that means it's one of the top five most valuable start-ups in the world, according to cb insights. controls nearly 90% of the private car hailing market in china, completing 11 million rides a day. creative strategies says the investment could also please the chinese government at a time when we know that government has taken a tougher line with apple. regulators there have now suspended apple's online books and movies services. this news does come as apple is under real pressure. that stock down some 13% this year. down more than 30% from its all-time high of 135 hit last spring. just yesterday company briefly lost its spot as the world's most valuable company to google parent alphabet. among the worries q2 sales in greater china dropped 26%. but highlighting another reason this investment could make sense, if apple is serious about creating its own car, this could give the company a way to learn a lot more very quickly about the tastes and preferences of the chinese consumers. guys, back to you. >> josh, thank you very much. so apple is betting big on cars in china. the company as josh just mentioned investing $1 billion in that ride sharing service, didi. this as apple shares fell below $90 yesterday for the first time since 2014, rebounding a bit this morning. let's bring in channing smith, co-portfolio mounder and founder and editor and chief at the information jessica lesson to discuss. jessica, you wrote that this move was surprising and would send shockwaves through silicon valley in technology. how are you interpreting it? >> well, our sources are confirming, i think, what josh said, too, about hearing there is a political motivation here. apple has been in hot water in china. and a move like this, investing in its home grown tech darling, goes a long way towards showing respect towards making the government happy. our sources really do believe this is driving a component of this, but for what it does in the valley it messes a lot of alliances up. you've got uber google on one side, google big uber investor, you've got apple and didi on the other. we also reported that this week the ceo of uber was planning to go to apple to talk about partnerships. hopefully those will continue. i suspect they will. so there's just a lot of moving pieces here. >> that is an interesting angle. just quickly, channing, on the political side of things that jessica and josh both alluded to, as a shareholder, do you approve of the fact that apple spent $1 billion, which is a drop in the bucket compared to its massive more than $200 billion cash pile on something like this? or does it worry you that it's becoming increasingly expensive to do business in china? >> look, china's a huge growth market for apple. last quarter we had a little bit of a blip, but apple knows this is going to provide tremendous growth in the coming years. so it's important to have good will with the government. so we think this is really first and foremost what they want to do. i think secondly there is a genuine interest in the car. we don't know what that's going to look like, but apple wants to have their products and services in the car. we like the move. like jess said it's a drop in the bucket but it is positive moving forward. >> on this notion of apple investing in the self-driving car business, gene munster was on last hour suggesting this as well, jessica, where is apple in this process? what is your latest reporting indicated on what it's doing with the car? >> i think there isn't a clear sense of timing yet, but there's a lot of activity. there's also a lot of turmoil and turnover inside the group that's working on this. which i think is to be expected. so don't have a timeline yet, but a ton of activity. and there are going to be big stakes to grab partnerships in that as well. we've seen what google's announced with some of the leading car companies recently. so apple's got to be working on those types of deals too. it's worth noting that didi doesn't have a self-driving car play or technology, uber does. uber has been growing its team, working with cmu. and in china working with baidu that has been developing technology. so this investment does plug a key hole for didi as well. >> jessica, if i owned apple stock, we're not allowed to own stock, but if i did own apple stock, i would actually be quite worried by this conversation because if i look at what we're getting from josh lipton or from you or from everybody they're saying there's a political problem here. icahn said -- and he's a guy who does call up tim cook to say i've sold my stake in your company. when he spoke up recently why he sold he said because the chinese government can make it very difficult for apple to sell there. and then you come along with a $1 billion investment and you say this is because it could be difficult for them to sell there. what we don't know is whether it resolves the political problem. you're raising it as an issue. tim cook's putting his money on the table, but we have no context or judgment as to whether it moves the company forward or not. that's what i find quite distressing here. >> you know, you're always on thin ice if you are doing business in china. i mean, this is -- in some ways it's the same old same old. this is just the latest move apple's making. you know, apple's gone on university boards in china to really show respect, to get to know the culture. so i don't think this is anything new. although we do know that the chinese government has become more hostile to foreign companies doing business in china. so there are some big changes there. but i think apple's always been pragmatic at identifying things it can do to play nice. and i think this is the next one. and as josh said it's probably not going to be a bad investment. didi is a huge potential business. it's not yet at a point where it's great from a financial perspective because it has uber helping eat the profits in the market by going head-to-head. but i think you can say it's going to be a big company. apple isn't going to lose a lot of money. >> so, channing, that brings us to the final stock question here as apple and google are sort of neck and neck as most valuable company, you prefer alphabet, or google. why is that? and does this whole self-driving future have anything to do with the thesis? >> not really. i mean, if you look at google alphabet, big drivers are mobile search, youtube. those are basically areas where we're seeing secular growth. we're in the early innings of that. if you look at apple, we're kind of at the end of the cycle for smartphone growth. and so the growth profile for alphabet is much better here. we expect to see 20% earnings growth, 20% revenue growth for the next couple of years driven by growth in mobile search and youtube. if you look at apple, we're transitioning to a slower growth company. that doesn't mean that apple's not going to be a good investment. we see a 120 price target which gets you to about the same price as apple -- or google going to 1,000. so apple's still a good investment here. there's just not a lot of catalyst in the coming months. but you still want to be involved in apple before this 7 launch. and we would suggest investors start to pick up the stock in the $85 to $90 range which is where we expect it to go in the near-term. >> a lot riding on that launch in the fall. guys, great discussion. thank you for joining us. ahead on the show, it's been one hell of a week for the art market in new york. this is from tuesday night which sold for a near record price. not all the works did as well notably impressionist during the course of the week. we're going to talk to the lead auction near for christy's next on cnbc. olay luminous illuminates skin with pearl optics science. your concert style might show your age, your skin never will. with olay you age less, so you're ageless. olay. ageless. with the presidential election fast approaching, are the polls your best way to determine where stocks are going? that's what one trader tells us. he makes his case on tradingnation.cnbc.com. more "squawk on the street" coming right up. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. let's get to the cme group, check in with rick santelli. hey, rick. >> good morning. and thank you, carl. i like to welcome peter bookvar for the last guest of the week. thanks for taking the time, peter. >> thank you, rick, for having me. >> so, you know, all the viewers out there that have been waiting for their day of fundamental info, today was your day. retail sales pretty strong, ppi lighter, a little cooler than expected. and for people worried about inflation i guess it's a good thing. if you're worried about less inflation maybe not a good thing. university of michigan, pretty darn strong. inventories kicking up in march. it's an older number, first quarter. how do you read all that data, peter? >> well, certainly q2 we're going to get a nice bounceback. but last three quarters looking potentially below 2% gdp growth rate for the year. so growth is still okay, but okay is still mediocre and certainly no acceleration. and if anything there's a slight deceleration. >> okay. now when i look up at the markets, at least the knee-jerk reaction in holding because long end rates have come back down a bit, short end rates are higher. we're at 78 basis points on the 2, the threes are under water from where they came out on wednesday, and yield curve tens to twos about to cross the threshold of being the flattest curve since december of 2007. does that mean the market's getting ready for a tightening? >> sounds like some fed presidents continue to want to raise interest rates, but seems like the rhetoric now is somewhat different from the economic data we're seeing. but, yeah, they want to raise interest rates, but yellen, dudley and fisher do not. and the odds of them raising interest rates before the uk vote i think is slim to none. if they're not going to raise until september because july there's no press conference, well, there's so much data between now and then that i take the move with a grain of salt. >> see, i would as well, peter. and it wouldn't surprise me to see the yield curve remain in this capacity. but some of the things we handicap, some of the contracts, euro/dollar future, fed fund futures doesn't look like it's anywhere near a tightening. with regard to the rhetoric, with regard to certain voting numbers, you know, holding out or voting against the crowd, is this just theater, peter? i mean, at the end of the day i don't talk to any traders that i've seen historically do pretty well trading the short end, trading the fed, so they have a proven track record, they just don't think it's in the cards. >> well, first of all, it's what yellen wants is what yellen will get. irrespective of the opinions and thoughts and comments from all these fed presidents. the fed is in a major problem that the economic data on the growth side doesn't necessarily support more rate hikes. but the inflation data is becoming more sticky. so i think they should be raising interest rates, but there's pain to that. there's pain in terms of the market response. there's pain in terms of the economic response. but on the other hand sitting there doing nothing at near zero has created its own problem. so either way the fed is stuck. >> yeah, they're stuck all right. if we go into recession before they raise rates and we get negative rates, wow, we're going to know what it's like to be a frog when they touch the wires to what's left of you. thank you, peter boockvar, sarah, back to you. >> that's one way to put it. thank you, rick santelli. when we and sarah, back to you. >> wow, one way to put it. and thank you, rick santelli. squawk on the will be back with the dow down 70 points. the first stock index was created over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation? it's time to bench the benchmarks. apple's deep dive. today, what can be done the turn the stoc another sense of whiplash to this week's art auctions in london. only one bidder for the water lilly painting. they are trying to clear 1 third of the inventory. sothebys managed to follow through on the sale. and so to work through this is christie's lead action near and president bill canon. is there a problem with the impressionist works selling at the moment? >> well, a lack of material coming through. last night, 80% of our art sold at christie's, and 87% is healthy and looking at the price of the monet for over $27 million is a significant number, but nonetheless, not that much competition at the top end, but the pricing is, you are to bear in mind set in january and february as we were moving into the markets insecure, and the old price dropping and the finance markets in a little bit of trouble. >> and why is the price of oil which is in the middle of february down around $30, and below $30, and why would that affect you? >> well, people have to choose the right moment to sell a major work of art, and they can choose, and it is the key moment of say if you were the owner of the post-war objects, many of which made world records, you have a view of the marketplace, and they made good guesses, and the market proved to be on their side, and we have had fantastic results in the post war era. >> and the whole endeavor is a new york artist who died at age 87, and what is driving this part of the market do you think? $57 million which is a record. >> it is an incredible price. the last great price was for a world record, and now, baskier. and the 40-year-old man who has grown up with the art from the 1980s and the 1990s and this is a prime example of a picture which resonated with him. and he has been open oabout it. the reason he bought it is meant to be something personal. and that is when you get the record prices when they are not only engage ed d in the artworkt it is a reflection of their own, and it is going to be in a museum, and it deserves to be, because it is fantastic. >> and so you and sothebys are not coming forward saying that if this does not sell, we will arrange to buy it off of you or off of the floor, and that not happening on the same scale year-round, and i wonder to the extent of what is happening in sothebys, and daniel lobe on the board, and activist investor, and wanting to return some cash to people, and hemorrhaging almost on a daily basis, and that destabilizing the market overall, because both of you have to come through to persuade the people to sell and sit in the room and buy. >> and obviously, people make the choices of who to sell with. we have 90% sold rates which is close to the record for any period in the art market. so whilst the sales may be down in volume, christy's is up on the volume, and so they are a different result. what is happening at sothebys is a different matter, and they will comment. >> yes, they are coming in the next hour of the show it must be sa said. >> and with the sale, not a lot of enthusiasm and excitement, and is this a turn in the cycle of the art market that we can glean about the broader picture of the economy where we are spending? >> well, the pashgt has found its feet, and the market was very hard last year, and slightly inflationary in some areas, and having seen that, we have seen the world records this week, and world records for b baskou and record for freida. >> were you expecting more? >> well, a artist from latin america, and they are happy out there, and twitter has gone crazy i gather with the fact that a woman artist is holding the record for latin america, and that is very good for her. >> yes. >> and enjoy london as well with the british art. and it is nice to see you, ju sshs jussi. >> the lead acti auctionneer at christie's. the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t. because you can't beat zero heartburn! i take prilosec otc each morning for my frequent heartburn ahhh the sweet taste of victory! prilosec otc. one pill each morning. 24 hours. zero heartburn. technology moves faster than ever. the all-new audi a4, with apple carplay integration. welcome back. bob pisani on the floor of the new york stock exchange. u.s. foods are announcing the long awaited ipo. the shares are $22 to $24 and the largest food distributor out of cisco, and the distribution to begin may 26th here at the new york stock exchange and why is this important? 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