Transcripts For CNBC Squawk On The Street 20170615

Weakness this morning as we get set for the open tim cook wants to quote yell out and scream about ai. Well fill you in. And the king of snapchat just went platinum. Dj khaled is ringing the bell here first up, we mentioned the downgrade, how much of this is digestion of this new fed . Well, im the one to ask that thats a dj. Heres the deal. I think that the many people are ascribing way too much to the fed. I think the fed did business as usual. Theres a vicious rotation going on its a continuation of what we saw on friday. If you look at the last 20 minutes of trading yesterday you saw the repeat of what was friday which is a bang down of all the big hightech stocks and then money back in to retail and to finance i think why people were fooled it didnt go back into oil low tech health care, also higher valuation health care you watch celgene and biotech. Watch Illinois Tool Works which is a great tell for the industrial you can watch jpmorgan, you can watch the trading of wells fargo. There was a real rotation going on there was not a lot of money driving it Everyone Wants to attribute this to things that were said by yellen this is exactly what was going on on friday somebody wants out of these kind of stocks. We can be in the market right now where it could be somebody maybe a large mutual fund theres nothing going on in the companies. Now today analysts who are who had been on the fence come out and now we have a downgrade of spelunk for competition and we got a downgrade of nvidia, competition. An interesting downgrade from canaccord about alphabet theres nothing. It doesnt matter. These are the days you do that very interesting because yesterday goldman had to bump up Nvidia Nvidia is the ultimate battleground because its doing very well. But tim cook, might want to jump up and down on Artificial Intelligence and they have nothing in their quiver. But theyre throwing asset aileen on the rotation and janet yellen is trying so hard to be a nonevent and we confuse people she said that things are okay. We get the claims numbers, they tee best in ages yes, we dont have Wage Inflation but you know i have to tell you if you attribute the decline that were going to see in spelunk and alphabet and nvidia toe anything that yellen said, it will be a real stretch. Im not going there. So you dont think theres any deserved nervousness about the treasury market behaving like or preparing for a policy error by the fed i would have thought that if Interest Rates were not going higher today we have a real tell. We have dramatic increase in rates. Its only about a third to where we were yesterday, but if rates had gone through two today i might have adjusted my thinking and thought that yellen is more powerful a couple days from now, when things settle down well forget that we attributed anything to yellen because in the end, the last half hour was about stocks that should have gone down if she was being a hawk all of the housing related stocks went up well, if she is going to wreck Mortgage Rates by taking then up what group should have been the most powerful decliner the group that went up we ought to be careful in relating yell on the what happened in the stock market given the last half hours moves. The bakes start banks started to move up before she went to her rate hike. You think its too much to extrapolate yellen to market you dont put stock in the analyst downgrades mizuho on apple. No, theyre nice people what does dj say we the best. He talks about keys to success the keys to success is to downgrade google on a day when it longs weak, okay . So the only thing that would move you would be these preannoun preannouncements that would worry me jabril came out, yeah, theyre yapping, yellen yellen, yellen, theyre yelling yellen i listen to jabril because im a complete geek. I get home from a great dinner at a hotel with my wife, jabril, no, they do 24 of the business is apple first rule about apple youre not allowed to talk about apple, its like a total fight club situation. Jabil says if you look at it being on a sequential basis, on year over year basis i think its quite good but i cant add a lot of color bingo, apple is on target so theyre the heaviest right now people want to knock down apple because its like whack amole, boom in the end, carl, we may look at the stocks, nvidia cooled off, i want to get in there because gaming is good apples come down to the level we have been there before. Thank you. A couple months ago, right . We have been there before look, again, if you look at the industrials and the housing stoc stocks after yellen talk and they got knocked down, but i look at the employment number, its looking good. I think yellen is trying to take herself out of the picture we should look at the tstocks to see if they dont bottom between 10 00 and 10 30 today. Claims at 2. 37, another head shaker empire is the second biggest sequential jump in the history of the survey. I thought that was you know, thank you for mentioning that i wrote that down. I dont usually mention empire, but empire is strong maybe new york in the last in the last 18 months has become an Industrial Power but what this is, theres business picking up. I mean, this could be corning its a volatile its volatile, but volatile to the good side we have very few of the federal reports that are bad we had inventories lower yesterday. Yes, i want to see Consumer Lending be stronger. But things are better than 1 fed hike 1 rate. Things are stronger than that. When we get this employment number i keep thinking, theres one thats going back to 300 we a lot of layoffs in a lot of Different Industries we hear about, but no. The most disturbing thing today was kroger. Which well get to in a bit. Because they employ a lot of people. Kroger a big employer. Well, guides to 2 to 2. 05 they were just on squawk a few moments ago. A margin story. This is a dogfight. And yesterday we didnt talk about whole foods because john mackey, hes the ceo, he was saying that a bunch of greedy bastards thats janet trying to put whole foods in play. Im not saying thats disingenuous, but remember walmart wants to own food. Amazon wants to too, but theres only so much they could do although the packaging for cold foods isnt bad for amazon we order a lot of amazon food now. But this walmart is not to be reckoned with. I mean, they are just coming in with guns blazing. Theyre unbelievable. Yeah. Kroger is going to be the focus at the open for sure brief pivot to politics here special Counsel Robert Mueller reportedly expanding his investigation beyond russias role in the election according to the Washington Post. The probe now includes an examination of whether the president attempted to obstruct justice. He tweeted they made up a phony russian story. Now youre witnessing the single greatest witchhunt in history led by some bad and conflicted people he doesnt overtly confirm the obstruction report from the Washington Post. He doesnt say who he means when he talks about bad and conflicted people. No but my problem is they appointed a special prosecutor to look to see if he was obstructing justice. That was kind of why they appointed him. They wouldnt have appointed him to kind of twiddle his fingers and that was the deal and whether there was a talk about whether trump would fire mule theirs the game i mean, theres great gravity to appointing a special prosecutor. You appoint him because theres something wrong that you want cleared up this is no were viewing this as being still one more surprise thats why he was picked so you know the futures did take although gold is down 20 bucks. Gold is really thats the one that stumped me. All this worrying and hand wringing youre doing, be careful. Its not so bad. But like i said, we can easily craft really negative stories today. Im not going there. I refuse to do it. You mentioned layoffs, jim. This week has been sears, imax, boeing, bank of America Today and now nike has an announcement 2 i believe of the Global Workforce. Wow thats wow, nike. A sizable number of people. Holy cow, nike. That is thats very interesting. I have been waiting for nike to take some action i didnt think it would take that action. Nike does not like its stock stalled between 50 and 55 forever. Mark parker hes kind of a belichick figure in the business everyone assumes that kevin plank is the hard charger, but parker is the wolf in sheeps clothing this is a very interesting announcement he wont stand for that stock price being where it is anymore. Wow. Nike. From the release, organizational streamlining will speed up the execution. Those who remember read the best business book, shoe dog know that phil knight ran that company with seven misfits. I think parker has taken stock in saying we have too many people and thats china sells it very good. They have nike espn all the guys spent too much money on sports. Yeah. I dont know about the payoff right now. I do know that i have never made a lot of money betting against nike nike has been a phenomenal phenomenal stock has not been a phenomenal stock lately and maybe this is going to two quarters from now impact how much money theyll make. Really interesting. This new alignment they talk about specifically driving growth in 12 key cities. New york, london, beijing, shanghai, tokyo, berlin, some others do you see it as a company ahead, but trying to stay ahead . Yeah. I mean, look, i think that everybody is trying to figure out whether theyre bloated or not. When their stock hasnt done anything i find that this this is a remarkable story because nike is really unassailably the best. We have not talked enough about how nike stock hasnt done anything pvh stock has moved up skechers stock has moved up. Under armour stock has moved up. Parker not reacting to the stocks, but he says come on guys his Conference Calls are very good he doesnt like whats happening at his company, wow. Direct to consumer is where he needs to do it i like him, hes trying do more personalization. Lets watch this stock the stock gets hit first because people say wow, things arent so bad and then it comes back to life mark parker, not to be trifled with. Well take a break. When we come back, tim cook says theres something that makes hip want to yell and scream and well tell you what that is. And dj khaled has been referred to as the king of snapchat hell join us. Some pronounced weakness in the nasdaq futures see what happens when the bell rings in over 15 minutes i put everything into my business. And i had all these points from my chase ink card. So i bought ingredients, utensils, even made custom donut cutters. Wow all with points. Thats how i created the ripple the doughnut in a doughnut in a doughnut. Suddenly its everywhere. I mean, it really took off. What will you create with your points . Learn more about the ink business preferred card. What will you create with your points . Steve, other than making me move stuff, im here at the Td Ameritrade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. Become a villain again. Mmm. [ minion babble ] [ minions cheering ] [ minions sighing ] [ minions cheering ] [ minions booing ] okay minions, were going back to villainy. [ minions shouting ] so bad so good that im so bad. [ honking ] so, youre villains now . [ nervous laughter ] i mean, hello sweetie. Despicable me 3. Rated pg. Got some breaking news on Industrial Production. Rick santelli has that hey, rick. Yes, more data. May Industrial Production if we look at that number it is 70 im sorry. Industrial production is down everything is moving so fast, its unchanged what i was really paying attention to the most was Capacity Utilization up changed we were expecting up 0. 2 we did garner an extra 0. 1 last month. Utilization rates thats more my favorite and that one we expected 76. 8. Similar to the last look, but it was down at 76. 6 but keep in mind, last month 76. 7, okay is the best number going all the way back to august 5th of 2015. So utilization rates are still running on the high side and that i think is something to Pay Attention to carl, back to you. All right, rick, thank you so much well continue to watch the data by the way, dj khaled is making his way to the nyse floor. Well talk to him in a bit not just about the music business or his nike collaboration. But the 3 million facebook friends, the 6 million instagram followers. The king of snapchat probably undisputed king of snapchat. What a great guest because one of the things thats happened in the last 18 months people going from having experiential i want to take taking pictures of themselves to wanting others to see their pictures whos done it better than this man . Nobody that 2yearold is huge. Thats his son, right . Yes. Trying to keep up here. Not easy thank you, dettwiler. Im so excited about it, i want to yell out and scream. Thats tim cook describing his plans for augmented reality. Cook suggested a plan to repatriate overseas cash with a reasonable tax rate and for future i come up with the simple system. I go for zero deductions, i would be draconian and say none. Maybe it can get to 15 , that people are talking about maybe its 20. That covers why the home pod is 349, all kinds of discussion. The augmented reality is one of Service Revenue the more augmented reality you have the more the more apps the more games the more revenue. And there was remember the downgrade that came the weekend the apple massacre, the sunday night massacre is whey call that from mizuho really questioned the Service Revenue. My contacts at apple say that would be one of the things you would not question augmented reality would mean a great deal and the high pod, the Apple Ecosystem will get people to try it and the indian phone companies if they know that people want apple theyll find way to get those phones. So we can write off apple because its down for four days, carl we should write it off, right . Apple must be going bankrupt the best days of apple are behind them. Tim cook hasnt given you any performances up from 50 to 140. What is that heres a line from the interview talking ar can we do everything we want to do now, no the technology is not complete yet but threes the beauty to a certain degree this has a runway, its an incredible runway. Its time to put the seat belt on and go. But i have to tell you, this of course texting all my kids about dj so i have something to say so this is considered theyre going to have it bendable. This is so hes got to come up with anything else, hes not come up with the this does not have wings, it will not take me to Englewood Cliffs by holding it up. Until he does, hes finished there. That is the whole arc of the analysts all right . I hold this up, carl, it does not beam me any any where, scotty you know what . If he doesnt get us to live long and prosper with the next phone, im telling you im going to switch to the company the fire phone fire phone they put that did they put that out arson phone is that done i love when we can wade in your sarcasm, jim. This watch, this does not connect me directly to the president thats also a mistake. He talks about serving on White House Councils he says he and the president are dramatically different but the bottom line he feels theres more to be done by being engaged. Who has committed hundreds of millions of dollars to American Manufacturing . Not the president. Not the president. Tim cook too bad hes finish and the company is in bankruptcy. We want to take a short break. Well count down to the opening bell of course dj khaled will join us after he rings that opening bell in just about ni mutneines at fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Wee talk to dj khaled in a minute you want to watch that google down braid. Yeah, ill tell you why its a downgrade about f. A. N. G you can say what they do about google, canaccord, because its talking about going too far too fast saying the gross margin is headed marginally lower. You can always make that case, but valuations stretch see, when you have analysts say valuation stretch theres no comeback, right . Well, sure i wish i had bought it here. Up here the valuation is stretched. You could have said, listen, head and shoulders a ton of reason to downgrade these. But heres the problem a hedge fund, yes. Wants to catch down to 928 a person at home may be selling this company when theyre 70 billion of waymo embedded, autonomous driving when search is doing really well they can train themselves on any area, so yes, a great hedge fund call but not for people at home. What do you make of the point that the increase in the ad load over the last couple of years on youtube, on mobile search is going to be hard to maintain hard to sustain. You know, youre going against youtube, going against ruth porat who thought i through. I go out to california quite a bit, they have thought this through. Like going to junk up the facebook feed no, hes going to get killed by snapchat and instagram is even better by the way im the only one who hasnt collaborated with him drake did, Justin Bieber did but we have to be careful. This is a generic what they did was they downgraded f. A. N. G. , but chose do the g which is a. There it is. Like the weather board, its hot light here here its raining, this it is. Its a Weather Report downgrade. Looking like theres going to be some storms but when the storms pass, buy. Well get the opening bell in a minute dont gowa ay. The power of innovative thinking. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Predictable. 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Pound does surge a bit to 1. 28 that 2. 9 inflation number they got they think it will go 3 plus by fall. Theyre coming in hot, but thats not youre seeing here. By the way, i know the opening is going to be very bad. I am saying this is business as usual. Please dont if youre a home gamer, please dont jettison at the big board its dj khaled, spokesperson for get schooled, that motivates students to graduate from high school and succeed in college. What a great cause. There you go. Well talk to him in a few moments. At the nasdaq, tcgbcd, an Investment Company celebrating its ipo. We have covered a few movers but kroger is one of them. Yeah. But kroger is its amazing. You know, i read through the release. I know they absolutely cut their forecast i know that industry is tough but i know that kroger is tough. You want to throw away kroger over a couple of days thats fine the supermarket industry is very challenged but its a very good company i just dont think it merits this kind of landslide selling it had been creeping up, maybe theyd talk about food deflation not being that bad theres a huge seller out there. If you put away kroger at 25, i think youll come back okay. The supermarket industry is challenged but theyre a challenger. Far and away the worst loser on the s p, followed by a bunch of chips apple is one of your worst chips. Microsoft is one of my favorites. The analysts will come out pretty soon, they have a refreshed cycle. Doing so many things that are right. But you know what it moved from 53 to 69, then to 70 were taking off a lot of remember we had a friday selloff then we had a weird bounce on monday we should have been going down more were replaying that lets watch the bank stocks to see if they dont catch bids because thats where the money is going very low valuations. Some health care im watching United Health can they stabilize what a stock that has been so im its funny, because United Health is up. The two stocks that went up on friday that people should be watching were ibm and United Health a lot of money going into them today. This is the seller whos back. Who ever was selling this is their game plan. Buying ge and ross stores ross stores, kind of a good move on friday this guy is back who ever was selling is back today. I know people at home are saying what is cramer talking about this is a very ill liquid market if you have a guy trying to sell 5 billion of f. A. N. G. , f. A. N. G. Going down you wont have guys saying i cant wait to buy that lam research because the buyers have been convinced that its got the absolute best Animal Health care no its semiconductor equipment. Its lam, but not lamb. No. Fellow travelers who arent that very familiar that micron simple mu, its not a cow company. You talk about the financials catching a bit and will they. Yep yep. Odds of another rate hike this year below 50 right . Somewhere in the 40s. I look at that job numbers. People are going to say what are they smoking that theyre not tightening my whole view they should be selling their bonds furiously, not buying bonds that would be a better way get the rates up get an inflection in the curve theyll listen to me, not. No i mean, theyd rather go to hamilton and listen to what he was saying and not me. Came out okay in the play. In the play you werent we have three misses now in the core cpi you know, this thing again. This thing is making everything cost less you know, i do believe that the theres a lot people arent buying like they used to. Because they kind of have everything they want to take trips. Trips they want to go on carnival cruise. I cannot wait for dj s an instagram economy. Its what people want. People are spending money on prestige, prestige makeup. So when they go out theyre fine spending money on apple. And theyre not spending a lot of money away from that. Look, im not saying im heartened. I am saying this is a continuation of that rotation. Except for oil is not making i think Oil Stabilizes between 40 and 43. I am literally putting my head in a guillotine. You know, im hoping theres khaled making his way we think to post 9 in a few moments where well talk about a lot of the names were discussing now all the gains we got from the opec cut are gone. A lot of panic. The algorithms really hit. I thought what the oil number was bearish. It wasnt like that were swimming in oil. There is a lot of oil out there. But i did not regard the number nearly as badly as everybody else did i think the algorithm has accentuated it well get a rig count that will show more. Because theres a lot of companies that are making money at 34, 35 a barrel. Theyre selling the futures constantly trying to bring in some cash. But so you think theres a long way to go before rig count goes negative. Cant go negative theres hanesville is doing well bakken is doing well theres a lot of areas doing well theyre going to add more rigs so on friday, you know, between 12 00 and 1 00 another down in oil and i think thats the one that will stabilize. You mentioned some retail we got signets up there theyre nibbling at bed bath coach got a price target. I love this coach deal. I think the coach kate spade deal is fantastic. Coach is doing so many right moves. A lot of people in the industry i talk to cannot believe how shrewd that acquisition was. I think coach is an up stock accessories, you know, remember, were seeing pretty good numbers from a lot of the companies that sell in to Department Stores even though i dont want to own the Department Stores. But im remaining convinced im going out on a limb here a nordstrom deal gets done and gets done in the 50s there was a note this morning, very interesting, inevitably going to be wrong. But still interesting about dicks that dicks should go private. Look, they have lat of capital, they have a really good Balance Sheet. I can say that about kroger, i remember when that company well, that company has done a lot of good stuff for their Balance Sheet. I do not think that dicks going private. But i do think this was a stifel note very aggressive but i think nordstrom will do the job. If im a kroger people, were not that bad. Do you know how hard a business this is yeah. I mean, the board meeting. You know, were not terrible but walmart this guy Doug Mcmillen who has been so low key he wants to own the supermarket. By the way, remember Brian Cornell at target hes trying to find relevance in the super market at the same time, kroger is a supermarket. They have to do the buyonline, bogus none of the guys love that, but walmart is going to do it walmart they have guys who will drop it off on the way home. I have to invite that guy in for a scotch he cant, hes driving. Youre right about nike selling off. Now the dows worst stock. 2 plus. No pain without gain. Just like the shoes. I like the company nike but its been a a real dog remember they use flex technology meaning meaning that they have Incredible Technology to individualized shoes flex is a really good on demand Technology Company been a real winner this company is not again, i think that nike is doing a reset. Very, very smart very smart what happened with here we go ago, boeing. Another one that acted great on friday this guy has tried to disguise his moves but im on the him whoever is making the rotation, hes saying, darn it, cramer sees our footsteps but i think its one of those im one of the who are those guys, like at sundance i know i see your footsteps. Well find you. Yes and we will. Not. Great movie. Dow is down 61. Lets get to bob pisani to see whats move tong floor. Downside, today, carl, particularly in tech lets look at the sectors. Technology down led by semiconductors thats the highest beta group thats out there so thats down bank stocks a bit weak telecom is down fractionally a slightly more defensive tone to the market. Lets put up the dow for the last month i think the reports that mueller is investigating trump for possible obstruction of justice, remember that may 17th, there big drop, 373 points that was when reports came out that the former fbi director mr. Comey had written a memo implying that trump asked him to stop the investigation of Michael Flynn the markets are concerned about anything that would interrupt the trump agenda i think thats a factor today. And the fed tightened aggressively yesterday i think it caught some people by surprise the hawkish tone after people listened to the press conference i think there may be some residual effect on that as well. Lets move on and talk about things that are moving jim had a very good point this morning. He mentioned the Home Builders holding up the hxb hit a ten year high, yesterday hit a ten year high. This is the major etf for the Home Builders here and theyre having a great month pulte is up. Toll is up theyre generally outperforming the market up 5 or 6 nice moves there i think the knee jerk reaction here is to sell the builders when rates rise, but remember whats been happening with the ten year its whats important is the ten year because its tied to the mortgages. The shore short end of the curve is up but the long end has not moved at all you see the ten year rates thats an issue. On top of that, demand has been phenomenal i spoke with bob toll. He came down on the floor and rang the bell the other day. He said bruce toll said that business is phenomenal right now. So they have Pricing Power theyve got strong demand, low supply rates are continuing to stay low. Boy, this is about a perfect environment for the builders here i emphasize the supply and demand equation here in moving that forward. A little more tenuous to me in my opinion is the position of the banks. The banks have been holding up well the kbe, this is major bank etf, its up 6 this month. Regionals like comerica is strong citigroup at a new high. This is harder to justify. I know what the idea is. Keeping the banks up theres hopes for a steeper yield curve. Thats obvious theres hopes for a dismantling of dodd frank. Theres hopes for Corporate Tax cut. And theres a lot of hopes for more dividends and more buy backs. Remember well get the ccar at the end of the month here. Not a lot of priced into the disappointment here, i guess what im saying here theyre hoping to be raising the dividends after the ccar results come out i dont know, well see. But the point is none of this has happened yet you can see the banks are moving on it. Finally, i want to mention all of the semiconductors down notably mere carl, do remember something, these are high beta names. So if the market is down 1 these stocks are going to move 2 carl, back to you. Thank you very much, bob. Fresh from ringing the opening bell his latest single went platinum. Dj khaled is a social media phenomenal music mogul, producer, the so socalled king of snapchat hes helping to ring the opening bell for get schooled to help students graduate. Dj khaled. Get school. We were applaud whg a great cause it is. I love it i have been with them for almost like two years now a year and a half. I think its closer to two years. And its such great energy inspiring the young world, motivating the young word and giving the young world keys. We have khaled, keys program for get schooled it actually won awards its really big its exciting, man i used to go city to city, but it all started in miami when guy to the schools and i have been a principal for the day. Giving back to the Community Also buying instruments for the kids you know, just uplifting them. Lets take this national, you know what im saying a major key to your success, i think, is that youre upbeat we listen to you as a family. Thank you. And i want to know i mean, you seem to be you want to help more you want to help the schools but this 12yearold that you helped with selling shoes. I mean, you seem to be a person who wants to create happiness. I mean, i dont mean that in a simple way. You know, you know, i believe in having joy and happiness and love its special because sometimes we take it for granted and weve got to realize we have life when we have life we can accomplish anything we wanted to now im a father so i have experienced another joy and love on another level and also im a young mogul, young executive, young ceo i just want to inspire the world to let them know we can do anything they want to. Im about to drop my tenth album coming out june 23rd my son hes executive producing it and hes only 7 months old. Like its his first album. You know what im saying this what we do. We the best. You know what im saying yes. Lets talk about your reign of social media. How you did it and whether or not you now have favorites. Because youre everywhere. But you must have a stack of what comes first, second, third. Well, me, you know, i put out love and my social media, i use my platform to put out love and good energy. When you put love and good energy out, you receive it back. The more blessings you give, the more you get back. If you put Something Else out there, thats not good energy youre going to get that back. I try to use everybody use the social media for uplifting an motivating people and for getting your message across for love. Which platform is best for that im real good at snapchat you understand i like instagram as well twitter, i think all of them if you know how to use them all right, you should have them all link up and go at the same time. Now, do you think that speaking just granularly that facebook is an facebooks imitation of snapchat is a winner or are you always on snapchat because you have great loyalty . I have love with snapchat, we made history together. But at the same time, you know, its about staying when its time and staying ahead of the game so all of the outlets and devices everybody got to be on their game everybody got to be stay and theres competitors throughout, everybody has to step it up. Thats part of doing business. Part of being in the game. Me what i do is its a blessing. You could actually link all those things from facebook to twitter to snapchat to instagram, all at one time i could take my snap and post it on instagram i could take my instagram and post it on snap. I can take all that and post it on twitter you know what im saying the good thing is if you know how to do it, use it all. Interesting im listening and im thinking if i were one of the execs i would be calling all of them, lets do a collaboration we dont always have to be enemies. It would be great for someone who has a good message like they could influence the good messagers were going to cop rate with. It would be a nice change of pace versus the partisan and anger. I think it would be genius if the ceos got together. I know everybody is competitive and doing what they have do. But if they got together and made maybe a switch where we didnt have to actually put it and post it. But find a way to way to break it off that one switch, the fans and the consumers use that one switch find a way to break it down for all of them. But it would maybe i can pull it off. Honestly, you could. Maybe i can call all the ceos and have one roundtable. The younger people tell me if anyone can pull it off, it would be you it would be the major key to cooperation. Thats right. What would you say is the secret to being good at snap well, my secret and its its not a secret. But being yourself thats the key be yourself. You know, with my snapchat, all im doing is being myself and real being authentic always wins when people see somebody thats just real, they love it. It aint no act. Aint no faith you know what im saying just real. Real you know, i mean, the 12yearolds name you were able to make the shoe mogul is something that youll do you you inspired a lot of entrepreneurs. Who are the next entrepreneurs youll work with obviously my son. Im just raising him to be the bringing in the Family Business the way my family brought me into the Family Business just kept me around family, but also kept me around the business because i have to show our children how we have to pay the bills an feed ourselves and our kids i want my son to be around my Family Business. Wow i like this. You have advised young up and coming moguls to invest in real estate why . Well, i have been blessed to be successful and im making some good money right now. Im using my money instead of buying more watches and more cars im buying more property. More houses. So what i believe in, i want to buy a lot of mansions. And i want to enjoy my money i want to live in them i want to buy them in different states but at the same time, it like a bank. The money is sitting in the house. If you need to take money out of it, take money out of it if its a rainy day you can sell it if its not rainy day you might make a profit. Youre not buying facebook or buying snap . Im not saying that im definitely going to get into investing in the techs. Okay. But the reason why im saying buy homes, me i have a different perspective. As money its money but i can enjoy it i can you cant live in a stock. I can enjoy it, you know what im saying thats my personal opinion, of course im investing i have a lot im in the restauranted by now. Oh, yeah . Finger lickin which is in miami, very big. I have some top secret investments i have done in tech. I cant oh, come on just give us one. Im a silent partner. Im a wait until its the biggest thing on the stock market and im going wave my hands like hey, im part of that you know what im saying but listen its Justin Bieber and drake, you have not collaborated with carl yet. Were doing it right now. Were doing it right now making history right now. Music business, all right, we have every day its a war spotify, pandora, apple music. Do you have a sense of who are the winners in five years . You know, me as an artist, you know what im saying, all this excitement this shows that the music business is doing good theres a new life to the music business im going to speak as an artist and as a ceo, you know, i have been blessed to do a lot of great things with apple music. You know what im saying with apple. With apple. I was going to ask you if youre samsung versus apple, youre definitely apple. I have my apple. Samsung, forget that. Im i have my mac book got my apple iphone. I love their technology. And then the story is inspiring for apple. Always look at the story, how he started apple. You know, you look at the stories and i look at my story i look big successful mogul story. Im inspired by the story as well you like the obviously the resolution you see whats happening, people are look better. My new theory is for a long time instagram, initially it was about you looking good now its about you getting more followers so they see how good you look thats a little vanity but i think it works thats kind of the second iteration of the instagram. The instagram thing its special because, you know, you get to post a picture up then you can put an image up you can put a video up theres no more middle man. Right. The game has changed. No more middle man back in the days you had to get in touch with somebody to get in touch with somebody to try to get to the main person theres no more of that. Its called you can put a picture on a message, hey, and the message is out but my key is, make sure major key. Make sure its a good message because thats what we have to show the young world, good messages out there some people use the social media for negativity and its disgusting thank god for the block button. Yes. You block people . If its so negative i have to because i refuse to let that in my blessing and my surrounding you know what im saying as kids were on this lets not get it confused. We live on our phones. We watch tv on our phones. Theyre watching this on their phones like its just so we have to be we have to have some type of censor when it comes down to protect our kidding. Another thing you can do. Negativity. How about the charity, how many kids have you gotten in a year or a year and a half. Give us some statistics. Me, every day im giving. You know im giving back every day. If its from, you know, support charities or giving money. But also giving knowledge. Also hugging and also just touching, you know what i mean its so much ways of giving. You know what im saying thats a major key thats why im so blessed too. I believe in the more blessings you give, the more you get back. Yeah. Your message is i mean, its much needed in this environment. And we talk here about politics and not just here in this country. All around the world do you sometimes feel like youre pushing a rock up a hill . You know, climbing the mountaintop they never said it was easy to win, you know what im saying but theres the beauty, the victory when you get up top. Thats the beauty. When you see khaled, you know khaled work hard if you see a success, people that know me say that man worked hard. But the millions of followers tell me that there is an undercurrent in this country that really wants to go away from the anger you would not have these this massive followers growing every day if there werent people that wanted a real positive message, that didnt think it was uncool or think it was like thats my parents talking. You have young people who want that positive message and theyre not being reflected in a lot of the stuff i see. Right well, you know, at the end of the day is we cant fall for the trap either. Meaning as in, we have to continue doing what we do on the positive level just because maybe over here they are not accepting it they keep putting this negative energy we have to learn not to fall for the trap dont fall for the trap. You know what im saying the key is to stay focused im focused. No way you will met fall from the trap and no black clouds are around me. No bad Energy Around me. I just wont i leave the building and not you have to leave the building i hope you think we have good energy because were fans and my kids think that dad is not just a complete goofus moron. You lit up this room. Thank you. Thank you i appreciate it. Lets get over to Rick Santelli in the bond pits in chicago. Hi, carl. You know, i have had a fascination in the last ten months obviously somebodys doing something. Are they buying or selling vol theyre buying it for a change listen, i have been fascinated with the dollar index. Look at the june 1st dollar index. One of the better turn arounds maybe its going to firm a lot of good signals there. Hard to make the definitive call but lets do something fascinating. Pair it up with tens for one year what do you think of that chart . Lets just look at it since may and look at how the relationship looks. Im telling you traders always like to find the horse thats winning and they always figure its pretty easy because all the other horses are following it. Now, if we look at the november start to the shot two year in europe guess what . The yields were getting less negative rather quickly. If you look at the june 1st start to the bund, that end of the curve isnt as responsive. They kind of have flattening issues as well but really its one of the few times where it looks as though those holding the paper that is being supported by the ecb are starting to scratch their heads a little bit carl, jim, back to you all right, rick, thank you very much. Just from the positive just the positive message. How different from yesterday its great. Whats coming up on mad money i have a drilling company, patterson, well put this in perspective. Everybody thinks that the world is coming to tend in the oil patch, i dont know, mark segals numbers, he has a good view theyre not giving up on us, but were giving up on them. Dj khaled. Did he impress you . Major key, man. A full throated endorsement of apple. Oh, geez, tim cook, thats what he should be jumping up and down about if this man says that apple is the one the other guys, the other guy i mean, no. Sam sam i am. I am sam what is that . Jim, well see you tonight. Nice hour. Mad money, 6 00 p. M. Eastern time when we come back, alphabet getting slapped down with the downgrade at canaccord the dow is down about 70 heres to breaking more glass ceilings. In golf and everywhere else. The kpmg womens pga championship. I am benedict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound good thursday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen, mike santoli at post 9. David faber is off the market having troubles get it of the gate the dow is 26. Nike one of the dows laggards with layoffs of about 2 of the Global Workforce. Our road map for the hour starts with President Trump reportedly under investigation over possible obstruction of justice. Well get a live report from the white house straight ahead. And well take a deeper dive into the rising of the Interest Rates decision and alpha get got slapped with a downgrade well speak to the analyst behind the call next. Some Economic Data diana olick has the numbers for us. Home buyers sentiment dropped to 67 and mays reading was revised down by 1 point. Anything above 50 is considered positive, but confidence has been falling steadily after a big surge following the president ial election and the First Executive order lifting some environmental restrictions. Given the shortage of Housing Builders should be happier but they continue to struggle with shortages of labor and buildable lots costs for materials, especially lumber are also going up of the indexes three components, current Sales Conditions fell to 73 and sales expectations over if next six months fell two points to 76 the traffic dropped two points to 49. That one the only one in negative territory i asked the ceo of the Home Builders association this morning if the drop in sentiment has to do with the lack of more deregulation from the Trump Administration he said no he said builders are looking forward to financial reform in banking if the trump agenda stalls though, that may bring confidence down even further all the numbers are online, realty check. Cnbc. Com. I was wondering if it was a trump confidence bump starting to fade. Speaking of trump, the Washington Post is reporting that the special counsel is starting to investigate President Trump for possible obstruction of justice our eamon javers joins us outside the white house. Good morning. I have been talking to folks inside the west wing about this story. Let me bring you the highlights. They are saying that the obstruction of justice investigation into President Trump began days after his firing of the former fbi director james comey theyre reporting that the director of National Intelligence dan coats and the nsa director mike rogers and director Richard Leggett have agreed to be interviewed by muellers investigators into this theyre looking into evidence of possible financial crimes among trumps associates aspokesman for the president s private attorney issued a Statement Last night about all of this. Saying the fbi leak of information regarding the president is outrageous, inexcusable and illegal. That despite not being entirely clear that the fbi did leak this or that if anyone discussed that with the Washington Post, that it would in any way be illegal. All of thats got the president s attention this morning. He put out a couple of tweets. They make up a phony collusion with the russian story so now they go for obstruction of justice on the phony story nice then the president following it up, youre witnessing the single greatest witchhunt in american political history led by some very bad and conflicted people make America Great again. I was just inside the west wing talking to some of the president s staffers here about those tweets this morning trying to get a sense of who the president is referring to when he says that the investigation is being led by bad and conflicted people, is Robert Mueller one of the people hes referring to as bad . They wont discuss it. In fact, they traditionally have said that the tweets stand for themselves, they speak for themselves now what theyre saying they cant talk about any tweet that the president makes related to russia at all. They refer all of that to the private attorney several weeks ago, when the white house was asked whether or not the president was under investigation they would refer to former director comeys statements that he was not now they have stopped doing that theyre simply referring all of the questions to the president s private attorney the White House Press shop here is entirely buttoned up, guys, on this topic. Wow we will await for any information separate from the president s own tweets this morning. Thank you very much. Eamon javers at the white house. Markets meantime are cautious after the fed raises Interest Rates for the second time this year yesterday central bank signaling the next hike could come in december. Joining us is phil campanelli, and ethan harris, b of a, head of the Global Economics research guys, good to have you both with us. Good morning. Ethan, a lot has been written about yellen and relative to her initial reputation of like this dove from San Francisco sort of flying in the face of that is that how you see it yeah, i mean, that story was always overdone. I mean, yellen is a situational dove shes dovish when the economy really needs it and she will hike rates when necessary. I was a bit surprised however at how hawkish she sounded yesterday. The economy has slowed down. She gave a Glass Half Full version of the world i think its out of sync with what were seeing in the data. Was she boxed in by expectations this meeting and do you expect that to reverse later in the year . Yeah, i think Going Forward is the fed will have a big challenge here the big market is saying that the fed will do almost no rate hikes Going Forward. They have given her a free pass, then the Balance Sheet shrinkage announcements. But Going Forward the market is pricing in no hike the fed is going to deliver on the hikes it will create pressure in the bond market. So the environment is much more challenging going ahead. What do we need to know about that shrinkage of the Balance Sheet . When, how it will work, whether it will impact the bond market and hur the economy. Well, i think that they have laid out a pretty clear plan here and unless something quite bad happens, they probably move forward, by cutting by 10 billion a month and then slowly escalating that every quarter. They probably end up shrinking the Balance Sheet down to about 3 trillion from 4. 5 trillion so the shrinkage is much less than in the first place. I think its Wishful Thinking to think thats no impact on the bond market or the economy here. You know, so far the fed has been able to announce these changes. With very little reaction in the markets. You know this is a significant policy change. It did help the economy. And stimulate the bond market when the fedex banded its fed expanded the Balance Sheet its one reason to be very cautious around the bond market Going Forward. I think its amazing too. I mean, they compared their cw so you kind of stage this, and does the equity market in particular look at the past three rate increases if nothing else you had a couple of weeks where there was a downward bias. The markete flattened out had to absorb the prospect here. What message are wenrgetting and theyre telling youjfxddd theres with global growth, maybe bailing out. W the last couple of times they went throughe decemberco thats something to Pay Attention to. n europe is outperforming the s p. A lot of consideration to. And i think what gave them as ethan said a free pass to n yesterday. Do you think thefa markets reacting atqall toc what eamon just myreported that mueller is looking into obstruction of justice i remember the last time we saw more than 300 pointt dow selloff, that came aftercothe revelation that the firing of director james comey had to do with russia. t hap hc of justice or is it just a correction from what where are we . O a few whispers awayo[2 uzthe record high . I think that the new news back when the market dropped over 300 points was appropriate. Today its a little bit of rehashing of that news i think the market down today is misplaced if its based on the fed. It really isnt much new news out of washington today. You think about its more about the equity downgrades. Yeah. We continue to look at the First Quarter of earnings. First quarter of earnings was arguably the best earnings we have had globally in the First Quarter. Especially in places like were talking about 10 sales growth after negative sales growth last year our Global Portfolio has the em. So q1 earnings peak earnings in terms of growth . W35n test test. Test test dynamic performance, so you can own the road. Tracktuned handling, so you can conquer corners. Aggressivestyling, so you can break away from everyone else. Experience the exhilaration of the bold lexus is. Experience amazing. Canaccord downgrading alphabet, citing recent growth on mobile search and youtube, which they argue is hard to repeat Michael Graham an analyst with canaccord. He made that call today. Good morning. Thank you, good morning. Been talking about peak ad load for years really. Why is this time different well, its been a really intense time over the last two years for google in terms of the ad load. They effectively doubled the ad load on a lot of mobile searches going from two ad units to four. And thats probably the biggest thing thats going to be hard to repeat Going Forward and they also really increase the ad load on Youtube Youtube ad load can probably go up a little bit, but i think overall the really easy growth for this, you know, ad business has sort of, you know, passed us by over the last two years i still think that the core Google Properties Revenue Growth can stay at 20 or more for this year and next year and thats a key psychological hurdle for a lot of investors but i think, you know, much beyond that and looking out past 2018 thank growth might get a lot tougher. One other key point to our call here today, the gross margin profile for google is changing a bit. Some of the Revenue Streams that are growing the fastest like youtube and mobile search come in at a lower growth margin. Were not calling for any kind of, you know, big negative event for google, just more it will be a little bit harder to raise the estimates Going Forward. You make the caveat that if we do see a broad selloff, google might have some protection in the defensive stance which will make your call look too early is that why youre maintaining the price target well, in some sense, yes. Our price target is 1,000 you know, this is more of a call that the stock has worked well up over 30 , its gotten close to our price target. Do we have a really good justification for raising our price target further and we felt like with maybe a lack of earnings upside and then with the multiple which is at 24 times, you know, gap earnings its at sort of an alltime high for google so we felt like we couldnt really raise our price target. That said, among the f. A. N. G. Stocks google is one of the more reasonably valued. You could argue its the cheapest stock in the same group. If we do get a pull back in tech in the short term, google may outperform were looking out a year and say and saying that the growth in google is going to be lacking relative to the other f. A. N. G. Stocks you point out in the note that all the f. A. N. G. Stocks are up roughly a percentage year to date is it your sense that investors have been essentially hiding in this group and in alphabet, maybe more than the other ones and in the absence of other things in terms of seeking growth you know, one of the things thats really interesting is we did a screen for all of the large cap tech stocks that are growing revenue by greater than 15 . And if you look at that in 2017, these four f. A. N. G. Stocks represent about 25 , there are 16 total stocks. But if you look out to 2018, four of those stocks drop off and a there are only and there are only 12 left and the f. A. N. G. Stocks are in there they represent the best options for large cap growth managers. You know, we look at the group as a whole and just think facebook, amazon, netflix have more dynamic upside in our view. You know, one thing i was wondering michael was about the timing because in your note, you attribute the rise in f. A. N. G. Stocks to two key markets. The rise of the pass give investing massive investing im wondering what has changed on that front along with the fact that this has a group that has earning power, its going through big disruptions like ai and digital video. A lot of other rising trends. Well, its a great point on google that, you know, google has its own bet segment which has some interesting and probably prophetic long term bets you mentioned, you know, ai is one that really weaves itself throughout googles business then you have things like selfdriving cars and fiber. You know, our view on those is that google and facebook and amazon are some of the best companies in terms of positioning to allocate capital to some of the big future bets and google has done an admirable job in that respect. When we look at the actual impact on earnings and cash flow for the next say three years, we just dont really see much impact from those other bets with google which is why we dont give them a lot of value in our thinking currently. So when people talk 70 on waymo, do you have a number in mind or do you just think that number whatever it is is too high well, we again, you know, we feel like all of the contributions from waymo and the other, you know, other bets and google theyre too small to move the needle on a business thats generating tens and tens of billions of dollars every quarter in revenue it takes a lot to impact that from some of these, you know, early stage bets finally some today said your call was really a veiled attempt to downgrade f. A. N. G. At large by using google as a poster child. Would you push back on that . I would just say that we still like the f. A. N. G. Group in aggregate. We looked at all four stocks to make sure that we could justify stock price appreciation to a price target that we felt we could defend we think we still have that with the other three stocks and we felt like with google were sort of closer to the end of that run than at the beginning. So i think its fair to say t t that, you know, i dont think were downgrading the f. A. N. G. Group. I think we like the f. A. N. G. Group in general you know, just that we tend to like the other three stocks now more than google. Michael, thanks for coming on and talking about the call got a lot of attention today, thanks so much Michael Graham over at canaccord. Lets talk about shares of nike they are on the move moving lower biggest loser in the dow right now. The Company Announcing it will cut 2 of its Global Workforce its reaching the target consumers more efficiently it will cut the number of Business Segments from four to six. Reduce the number of the shoe styles by 25 . Guys, its making some moves to go more at direct to consumer, which is where the growth is nike gets hurt by the retail weakness and the wholesale business, the declines and discounts. So its focusing on nike. Com and some of its stores and its adjusting the business to right size the number of staff, styles and cities that it targets to just focus on core growth. Why dont investor like this move why are they reacting negatively to this . Its two weeks before earnings and growth is declining. The stock is down about 2 over the last 12 months the toughest competitor clearly adidas that stock is up 50 . Im told though that the company made the announcement now because it wants to right size the business when it comes to the 70,000 employees that it wants to start getting the layoffs done over the next few months so the stock is down, but some of the moves are in an emphasis, it seems like what investors are focused on that the growth at nike has slowed in the past year. Yeah, its been almost a two year process when nike i mean, the stock has flattened out and had a downward bias. Its not just that the competitors are rallying on this adidas, under armour, even footlocker, people are worried about what it means for the category or a symptom of whats going on, that them being in a phase to sort things out. Check out stocks like dicks and footlocker that are big suppliers of nike, and this is clearly an effort to focus on the own business to the consumer less so in the stores. Keep an eye on that and coming up, financials after the fed. A look at the big banks. Thats coming up next. You see those stocks are to the down side. They rallied yesterday but theyre giving some back the stocks in general, you have the dow down half a percent and the tech is dragging the nasdaq is leading to the downside squawk on the street will be back after this break. Predictable. The comfort in knowing where things are headed. Because as we live longer. And markets continue to rise and fall. Predictable is one thing you need in retirement to help protect what youve earned and ensure it lasts. Introducing Brighthouse Financial. A new company established by metlife to specialize in annuities life insurance. Talk to your advisor about a brighter financial future. Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. Markets overall and financials specifically reacting to the Federal Reserves rate hike opening on a weaker note for more on the banks lets bring in the morning star Equity Analyst and from oppenheimer chris, whats the take away for the financials after the fed rate hike decision and the tone that janet yellen struck in her News Conference yesterday . I think the basic fact is that the super low rates hurt banks and anything you do to get us way from super low rates helps banks. You know, so i wouldnt read too much into the near term day to day trading pattern here what happened we saw last year between the brexit vote and the year end, the bank stocks outperformed by 2500 basis points so far year to date you have given some back. Thats natural and normal. Now the stocks they have lagged a rising market so far this year. They have underperformed by six Percentage Points and now theyre cheap again. Banks trade between 60 and 80 relative p e thing is the point that we bounce off it. So do you agree, james that the Federal Reserve, raising Interest Rates and signaling theyll continue to do is net positive and who thrives in the environment . I wouldnt rush to say its a net positive i think the tone for me is what is the rush. When we look at the data, yes, rising rates are good for banks. But were not seeing anyone hiring your last two segments are about nike cutting jobs and about google investing in Artificial Intelligence theres very little in the way of inflation coming through in the data you know, i think Bank Investors would like to see raising rates that the sign that the economy is getting back to normal. I dont think its back to normal yet we have seen the long term rating falling since the beginning of the year. I think thats a bigger cause for concern than the enthusiasm youre getting from 25 basis points out of the fed. So chris, are you taking the other side of that james sounds like hes speaking on behalf of the bond market which doesnt believe that the Federal Reserve can raise rates more times. Yeah, you know, these things never happen in a linear, problematic way. Im sure it will be based on facts and circumstances but from where i look, unemployment is 4. 3 Something Like that you know in addition to covering banks i cover all the private Equity Companies and these are people that have, you know, Realtime Data to literal i literally thousands of companies where they see, you know, daily and weekly and monthly p ls. In general, the read i get from the private Equity Companies is that the economy is doing okay so, you know, i think the likelihood that we go back down and have really super low rates. Also i want to stress, its the short rates that will matter more for the banks the short rates help the basic spread between, you know, deposits and loans thats where the short rates operate. The long rates, they have an impact that is much delayed, and may be impact trading results. But the short rates are the ones that really matter james, another catalyst, you have the Bank Stress Test coming out next week. Is there anything that investors might benefit from there with particular names in terms of the returning capital . Yeah, our two favorite names are the least rate sensitive, citigroup and wells fargo. One of the problems thats fairly easy to fix for citi theyre holding too much capital. Now that theyre back to earning money at a reasonable rate, now that the Regulatory Environment is easing marginally, we should see much Better Capital returns out of city. I think thats good for the stocks post stress test. You want to give us your picks ahead of the stress test, ahead of the financial dereg, anything else . Citi is one of our top picks and bank of america. Last year bank of america was only allowed to return 50 of the earnings when everybody else was between 80 and 100 if they return 70, 80 i think it just will say, okay, you know, theyre no longer in t the in the sick ward that theyre that their regular bank and, you know, then they can have a valuation kind of like a regular bank. All right, gentlemen, well leave it there thanks very much lets send it over to sue herera now for a cnbc news update at this hour. Hi, mike, good morning, everyone heres whats happening at this hour we start out with bill cosby arriving for the fourth day of jury deliberations in his Sexual Harassment trial the jurors have been debating the charges against cosby for more than 27 hours they have paused about half a dozen times to revisit key evidence north korea says it released Otto Warmbier on humanitarian grounds after it held him prisoner for 17 months he was medically evacuated to the u. S. In a coma the u. S. Official said moments ago that warmbier has a severe neurological injury. Former nba player Dennis Rodman meeting in pyongyang and he presented the minister with gifts including a copy of President Trumps book the art of the deal. Both countries said that rodman played no role in warmbiers release. Theresa may visiting the site of a devastating fire in london at least 17 people were killed, 74 injured in that blaze which broke out early wednesday. Entire families are still missing. She ordered a Public Inquiry into that blaze. Thats the news update this hour carl, back downtown to you. All right, sue, thank you very much. Sue herera eia inventory report is out. Lets get to jackie deangelis. The Natural Gas Prices are around the 3 market after we got a build in natural gas here for the week ended june 9th. Let than expectations, less than the five year average. Little bit higher than what we saw last year at this time but its really about total stocks right now were standing at about 2. 7 trillion thats the total thats a little bit less than we saw last year at this time it was about 2. 9. Thats what people are watching. Expect the builds to keep contracting as we head into the hotter weather and people are using more air conditioning to cool their homes you will start to see the prices go up. But about the 3 range right now where were trading traders tell me they feel comfortable with as this a fair value for this time of the year. Back over to you. All right, jackie, thank you very much. When we come back, well hear from the ceo of medtronics. The shares run 23 for the year. And well hear some sound from dj khaled this morning here he is on another tech company this morning ive got my mac book, apple, i love their technology. And not only that, the story is inspiring. I always look at the story how he started apple lot look at the stories. I ok amy story big, successful mogul story. Im inspired by the story as well think again. This is the new new york. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov our 18 year old wase army in an accident. 98. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. E trades powerful trading tools, give you access to indepth analysis, and a team of experienced traders ready to help if you need it. Its like having the power of a trading floor, wherever you are. Its your trade. E trade after another day of record highs yesterday, stocks are moving decidedly lower this morning day after the fed raised rates for the second time this year for now were joined by ubs floor director of operations, art cashen good morning. Is it the digestion of the fed rate hike and Everything Else that kind of comes with that or the reports about the obstruction of justice investigation from Robert Mueller . Well, i think the obstruction of justice is a factor here. Its i dont think the overall wheming overall factor, but another turn away from the trump agenda that washington going to be occupied with the investigation we wont get to see tax reform and we wont get to see any of the things that they were hoping for. And that have buoyed the market. The other thing that is equally important is were seeing renewed weakness in the f. A. N. G. Stocks and people are hoping that that was over and we were moving on. The fact that it is renewed and not quite as bad as it was that friday but a little harsher than people had expected i think oil cant seem to get its act together i think if oil sells off again and breaks 44 it will have a negative influence on the market. Putting some of that together, art, it seems like the market has to get its head around the idea and maybe this is true or not, that we have a fed now thats overlooking reasons to sound more dovish whereas for years it seemed like they were grabbing at any excuse to see more to seem more dovish its in the markets head. I think youre right. I think the market was to some degree surprised that yellen sounded quite as hawkish as she did yesterday. And they were a little disturbed. You can see the down tick when she said it would be years in adjusting the Balance Sheet. I think that was of some disappointment i think you have those factors and the fed is not to be dismissed for sure. Is the treasury market to be dismissed . Whos going to win that standoff im on the side of the treasury market. I think you may not see another hike this year. Again, were back to this. Yes and i think the fed is going to have to wake up. I dont think the economy is as good as it looked. I mean, the Inflation Numbers are not good the retail sales were not good so this its not that the any is on life support, but its not robust its not ready to do a marathon yet. Are you a believer in these theyre no longer theories now theyre huge white papers, books about suppression of inflation because of automation. Obviously, aging demographics. Are we coming to terms with some of the trends that may be with us for the next 10 or 15 years it may be we noticed it first in japan and now it seems to be spreading to all the mature economies and demographics is clearly a factor in that. You mentioned at the beginning questions about the trump agenda given the new revelations about the investigation. How much of the trump agenda is priced in at this point into stocks well, i think probably about 60 or so. I really think that they felt that coming down the line you would get some form of deregulation and youre beginning to see some of that. Theyre making adjustments in dodd frank and a variety of other things so i think the market was hopeful. It was putting up with the idea that the agenda looked like it was being postponed. But if the new investigation becomes an outright obsession of not only the white house but all of washington, then i think the market will have a hard time do you think more than 50 odds in this market that the tax reform is happening . That some form of tax adjustment if its not full reform, at least a generalized tax cut, some adjustment in business taxes. I think that belief is still out there. Lets see what we get art, thank you as always, art cashin, ubs director of floor operations at the nyse. When we return, shares of medtronic on a tear as you can see. Over the past few months well hear in the ceo straight ahead. The dow is down 88 and biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Does Robert Shiller still see the possibility of a 50 gain for stockorilrains wl isg rates squelch that find out at tradingnation. Cnbc. Com is more squawk on the street coming up. Rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Heavy day for Economic Data. Lets get to the cme group and Rick Santelli. Good morning. Thank you. Id like to welcome my guest, beaderman, beaderman, charles, thank you for taking the time. Yo, ricky all right listen its all about flows. Follow the money and charles, theres an interesting story to tell about flows. Why dont you start in my favorite sector of the fixed income area. Well, were seeing huge inflows like it could be a record inflow in june and to bond funds for some reason mainly because prices are up and yields are down. So its 2. 5 billion a day going into bond funds and at the same time, also a very large inflow into u. S. Equity etfs. Which is of concern because its a contrary indicator lots of big inflows into stock etfs, which is typically a contrary indicator and also with flows we have seen huge inflows into financial etfs as the price of banks had been going up and we since since friday we have seen significant outflows from tech etfs as prices have come down. So flow follows performance. So huge inflows in the bonds, huge inflows into the etfs, it sounds like the Japanese Bank of japan strategy for 14, 16, 17. I see 2261. 89 for the dow, but it seems like equity traders are depressed. I dont think they have anything to be depressed about. Reading your work the inflows into the fixed income bond arena are potentially you said the largest historically probably since october of 09 the stock market bottomed in june of 09. So coexistence of these funds especially as we make a transition from active to passive management shouldnt be shocking, should it, charles no. You know, flows are bonds are very attractive to the rest of the world. Youve got to remember as long as the ecb and the bank of japan keeps printing 2. 5 billion a day of new money thats going into equities and bonds, its hard to see a major down turn in either stocks or bond prices any time soon. Got it. Doesnt mean we have 20 seconds. I want your opinion on something i have been hitting all my good trading buddies with the following. If the markets are managed and rates arent really where they appear to be globally, then why is it that the backbone of most models including the feds uses the fundamentals as if theyre the same in terms of accuracy is before the crisis . Your final thought. Well, just because theyre a fed official doesnt mean they know what theyre doing. Why is an economist considered smarter than the traders who make a lot of money and the and then the economists havent been right in several in six years. You know, i got it. Charles, thats about the most perfect spot to leave it thank you, buddy i hope you can exist outside the oahu state mike santelli, back to you. Going back soon thank you. Cant wait. All right Rick Santelli and charles, thanks lets send it over to jon fortt with a look whats coming up on squawk alley. I continue to watch the markets. The nasdaq, the worst off of all the indices. Also, a peek in at apple they want to turn your iphone into the repository for health records. Finally, number two at softbank has some harsh words for regulation to get Net Neutrality all that coming up on squawk alley. Welcome back to squawk on the street. Lets send it over to our meg tirrell at the piper jaffry Heartland Health care summit in minneapolis. Shes sitting down with a special guest. Hi, meg. Hey, mike im joined by the medtronics ceo omar ishrak. Thank you for joining us. Pleasure. How are you looking at the gop health plan, at least of what you know of it so far and how that will affect your business i think by and large our business is a matter of creating value in health care by improving outcomes and by using technology to create those outcomes. By and large improvement in outcomes at a lower cost will actually provide a cost benefit to the health care system, which should if you think about it wholistically at the end of the day help with the coverage issues that everyones kind of dealing with. So in terms of the reforms that are being discussed now, does that address that problem do you see things in the bills that have been proposed that would affect you i think its not being directly addressed i think theres some interest in payment models they reform so that the value is acknowledged i think theyre still fairly fragmented and i do think that a stronger focus in that area and a direct linkage and expectation for cost benefit in that area might well help with the coverage issues. Because that is a cost problem in the end. Well, speaking of coverage, weve got some show and tell here this is one of your newer products. Thats great. The worlds smallest pacemaker, i understand. And you just got reimbursement for this, right . Thats right. Tell us about that development. Let me tell you about that product. This is the pacemaker. The traditional pacemaker is much bigger than that. Its about half the size of this thing. So the traditional pacemaker is a much bigger device medtronic was founded 60 years ago with the invention of the pacemaker, which was an even larger device at that time and the fact that this company organically can reinvent that market and can disrupt that market potentially with this device is a matter of pride for us so, i mean, thats a big symbol of what this company can do. And where health care can go where from a large device you can get to something as miniaturized as this an area which we all thought was getting commoditize in many ways is being disrupted and reinvented. So how much does this cost compared with an older pacemaker . It actually costs more, but it has tremendous benefits in the sense that in a normal pacemaker theres Recovery Time for every patient, there are leads which come out thats potential for infection. What this product has delivered through a catheter the recover is instant the patient has this lodged in the heart, has a tenyear battery life and it essentially embeds itself in the tissue and the patient after its implanted doesnt even know its there and they feel better. Was it a challenge getting reimbursement for a more expensive product even though its smaller no, thats great. But to prove theres a real quality of life benefit, theres potentially a cost benefit in terms of reduction of infections in certain patients. Its critical to people who otherwise couldnt get a pacemaker because of other conditions they may be in. So we have to prove at least in principle what the benefits were and provide data, Clinical Trial data that supported that and were going to be continuing to track that, monitor that and show that actually comes true. So what are you expecting in terms of pickup in uptick of sales of this product now that youve received reimbursement . Were getting very good sales. Theres a lot of excitement. The patients love it the physicians like it its a new product with new features but thats only a Single Chamber device right now the Single Chamber is only about 20 of the total Pacemaker Market and we think it will pick up share in that market very quickly. Well, i also want to ask you of course about diabetes because youve just actually brought to market something thats kind of the first of its kind. We have here part of this, what this is kind of known as is an artificial pancreas. This is the insulin pump connects to that a patient doesnt have to be doing those things separately. It kind of thinks on its own, it responds to what the bodys doing. Tell us about this and what kind of sales youre expecting here. Yeah. I think that is really another product that were also very proud of i mean, this is a journey that the diabetes industry has been on for the last 20 years that weve been on for 20 years in trying to develop this closed loop automatic pancreas sort of system for diabetes. The way it works is that theres a sensor thats associated with that device thats also implanted in the body. And then that sensor measures the instantaneous glucose level at any point in time and if the glucose level in an individual is high, then that sensor instructs the pump to deliver insulin. If the level is low, then the instructs to do the other way. Right. So in that way this is an Automated System and it allows the patient to be in range of the right level. Right omar, im so sorry im being told were out of time thank you very much. We look forward to hearing more. Sarah, back to you. Meg, thank you. When we come back, apples working on a new project to help users monitor their health as well cnbc h t dai owh tasheetlsn athe companys up to next at crowne plaza we know Business Travel isnt just business. Theres this. a bit of this. Why not . Your hotel should make it easy to do all the things you do. Which is what we do. Crowne plaza. Were all business, mostly. Its not just a car, work sfx its your daily retreat. The es and es hybrid. Lease the 2017 es 350 for 329 a month for 36 months. Experience amazing at your lexus dealer. Welcome back to squawk on the street. Im dominic chu. Investors are turning more defensive and cautious you can see telecom, utilities and real estate driving the trading today so far with the markets down in early trading any way. And that does it for this hour of squawk on the street. Lets send it back downtown for the start of squawk alley. Back over to you guys. All right, thank you very much, dom. Good morning it is 8 00 a. M. At apple headquarters in cupertino, its 11 00 a. M. On wall street and squawk alley is live