Transcripts For CNBC Squawk On The Street 20170725

Tenyear works its way back to 2. 3. And schiller up. Caterpillar, mcdonalds among the big dow boosters premarket. Alphabet shares sliding premarket, googles Parent Company reporting an earnings week but profits hit by a fine from the eu. Jeff bezos, trump takes to twitter, blasting amazon yet again. 3m, dupont also reporting. Also out, lily and gm. Metals are getting a bid today copper trying to break out. Thats exactly what i thought would play out caterpillar, this international would pay out. Im surprised that the United States is so strong here construction equipment, thats exactly what you want to see for energy, for transport. North america, incredibly strong latin america better than i thought. Construction is just on fire youve got a tremendous, tremendous story here where the numbers are much higher than anybody was thinking this stock will not stop at 113. There will be some bears who will try to say china is not that strong. But in the end this raise is the most serious of the earnings season. Of the earnings season . Of the earnings season. Its all points bulletin good to read tlut commehrough te comments here. Talk about favorable price realization for Energy Without oil above 50, how many people did these guys get rid of . This is an incredible streamlined cat. I am shocked they have this level of earnings power. Leverage on sales here is extraordinary. Caterpillar is back much harder than i thought this is q1 of the good. Second best stock of q2. Yeah. Raising sales expectations to 42 to 44 billion is not just ahead of estimates it will be the first annual increase in five years. Remember the old days when we thought cat would get 10 in earnings power i do not think it has 10 in earnings power how quiet it was they give you the monthly numbers. Theyve got lean inventories, too. When i look at this, i say to myself, this company can make much more money than they could two years ago, before they started take iing the costs out. Remarkable remarkable i just think theyre on q1, great numbers. Much higher forecast than even in april. We talked yesterday but only to market perform. Took a look at that upgrade that was incredible. I thought there was a chance that it would cost a 50 cents earnings month that was too low even the street high guy got caterpillar wrong. When you see the guy with the highest estimates be beaten that sadly, nobody has a clue of how to get theyll be upgrade, upgrade, upgrade, price bump, price bump, price bump and its going to come as a big surprise. The call will just lend itself to this amazing story. Cat, 3m this quarters report were a little soft. Technology is interesting that stock will not be up. I look at the quarter and go over with the company. There is some margin weakness there that people didnt count on i am seeing very strong numbers in china. Terrific margins on the service side hvac no one expected the heating ventilation to be double digit the margins are fine in that business otis wasnt up come on. The stock will be meander right here and two days later, why did we sell it continues to deliver a very streamlined company. They would have had more of a beat and raise otis would have had to have been up more i just think that aerospace is very good. Honeywell has had a bigger move i hate to say this this is why ge is at 25. They did not have organic growth i think its going to end up being do i wish i had never heard of it . No and the Free Cash Flow for ge is still its anemic. Thank you very much i have to get the roge out remember before google well get to google. Ge should be at 23. If honeywell will be at simple multiples or in the end, whats so unnerving about ge, im sorry to do that. The ge is interesting then you see how little they make and then you see this turbine. David you and i could go into turbines in terms of sales unnerving. Power. The combination of power, locomotives and health care, what the hell . I know. Turbine sales are important, too. They also generate a service fee over a long period of time unless you choose to pull in that service fee as a onetime payment. Who would do that i dont know. Thats something for investors to look at. That would be ill advised way to be able to break a quarter. Honeywell, so far, its caterpillar, then honeywell. And then United Technologies and then sadly 3m. Just not great for 3m. They continue to have a review of that business. Both engaged in that to decide or help the Company Figure out whether to separate out its Aerospace Business under some pressure from dan logue theyve decided to do that. The ceo has got cart blanche from the previous ceo. I do suggest that here is what i say about it. About honeywell if that stocks go to 180 on that, he will do t its literally how the chips may fall he is not wedded to that model a bit. I liked the Conference Call very much for honeywell i liked it caterpillar is just a gem. Hes so damn good im sick of it. Lets talk some food. Mcdonalds is going to surge to open in record territory this morning, thanks to a better than expected Second Quarter beat on the top of the bottom line, calling out a boost from upscale burgers, chicken sandwiches, discounts in beverages global comps, 6. 6. What is he, a small cap do you know how big mcdonalds is people must be going there over michelin three star. 3. 9, 3. 2. We havent seen numbers like this out of mcdonalds for a while. What are they giving away over there must be euros in the burgers. A lot of people doubt aid year, year and a half ago, that we would ever see that kind of growth, right . The best you could hope for would be. Quiet, quiet man. I wish he could come on the sho show. Chinese numbers japan. This is a hamburger. Wow filet mignon i dont know. I saw lobster in maine, honestly some sort of one of the mcdonalds was advertising lobster. I dont know what they do with it but theyre getting creative. Franchisees will tell you that the big initiatives are still to come, mcdelivery, global ordering, free range beef are not reflected in this quarter anyway. No. This is a monster quarter. He told me it would be big the guy is like there you go, david. Signature crafted. Theyre starting to theyre going to pull shake shack out of the stadium and put in mcdonalds. I hope they dont. Just kidding. We have to be concern ed 5,000 franchise. Remember thats a Technology Company that delivers pizza but. Reved up. Exactly sbl whatever that means. What is it, a loner . What are you thats what were talking abou about. I thought visa was great. Visa dont leave home without a mcdonalds burger, man its priceless. Drop in Second Quarter profits due to antitrust find due to antiregulators here is the report out last night on the Conference Call. Revenues were up 20 year on year and up 23 . Advertising revenues benefited from strong performance, led in particular by tremendous results in mobile search with a strong contribution from youtube. First to drop in operating margin in eight quarters monetizing mobile is tough, jim. Drilling, drilling, drilling, relentless this guy, these sellers, all their thinking is this i remember when it went from are you kidding me after the big fine, after paying 2. 7 billion, which for most companies would be a lot of money. For these guys is pocket change. 94. 7 billion in cash. That is actually up can i say tax reform an hour of youtube a day, proves to me that, without a doubt, people dont have anything to do with their lives yes, the sellers are going to bang it down yes, everybody reiterated buy. Yes, theyre using it as a source to fund other stocks. They are . Yes. All right for a company this size. That said, subscriber opposition costs are higher dealing with a margin structure that is not the same that youve been accustomed to. They want you to focus on gross profit dollars thats great compressed to a certain extent as a result of that. And so, jim, would you rather own facebok or amazon or even ten cent than google have to see facebook. Theyre not having margin pressure. No. Alphabet did not handle what i would have thought the call was sparse in information. It was not a great call. It was not i think they have the facts to make a great call. This is a transition quarter they have to get web services up. They talked about the notion that cloud may one day be the biggest business. By 2020, she keeps saying major acquisition, its hard to imagine how they can do that organically. With 92 billion why not buy a company that gets you there quickly . Are you nodding . Is that no have you capped datendidates theres one name. Listen, sales force used to be my very good friend. He may have to join us so we get more mojo there. Theyre going to sell it what can i say 950, 940 dont buy it here. Buy it at the end of the day, maybe tomorrow morning same thing with 3m. When we come back, deja vu . The president takes aim at amazon and jeff bezos once again. The s p will open at a record. Dow is getting closer but not quite there. Back in a minute she cant become a guitar legend just by playing air guitar. The babys room wont build itself. And her paw wont heal on its own. Were all working forward to something. Synchrony financial can help your customers make it happen sooner. So she can plug into her dreams. And theyll have a new addition for their new addition. Whatever youre working forward to, even if its chasing squirrels, Synchrony Financial can help you get there. Series of tweets he writes so many stories about me, they are as bad as ratings challenged cnn, lobbyist for taxes. Fake News Washington post being used as a lobbyist weapon against congress to keep politicians from looking into amazon notax monopoly has had the knives out for a few different target this is mornin morning. This is a publicly traded company that in the end owns a newspaper. Bezos owns a newspaper. No, absolutely. Went through the change in his couch one day, about 250 million and said okay, ill buy it. What does matter, though, is that if there is some sort of tax issue. However, Third Party Sellers on amazon may not be charging the sales tax and so that is seen as a competitive advantage over your local retailer. Absolutely. If theyre using amazon platform but its not amazon itself thats selling you the goods. With trumps continued tweeting and then this plan that the democrats unveiled yesterday where schumer was talking about monopoly power whether this starts to build into something even though there very well may not be a case to be made. What you would do, okay, is you would be a trust buster. You simply would say its not right. Got broken up because it was too powerful. And market shares. The Justice Department doesnt have to be right to bring a case. From past experience. Yes. Cramers mad dash veok at the free market once agn. Ry strong opening in store r us were back in a moment upbeat dance music bell ringing to keep our community safe. Before you do any project big or small, pg e will come out and mark your gas and electric lines so you dont hit them when you dig. Call 811 before you dig, and make sure that you and your neighbors are safe. 811 is available to any business our or homeownerfe. To make sure that you identify where your utilities are if you are gonna do any kind of excavation no matter how small or large before you dig, call 811. Keep yourself safe. Mot much m a but one deal caught your eye. I think its an overpay you know what . Lets see if the market responds jimmy choo it is rather amazing to pay out for something that people think is mall based. What coach did, which i thought was brilliant, kate spade. I dont know if this will save coarse one, they paid more than they should have. Nine west was trying to buythe for much less. Second, david, this is the kind of thing where youre just buying anything, i think, to try to become more relevant. Fourinch heels for 1200, what do you think they tell you i dont know. Shell love it because of the toe cleavage. Got it. You said Something Interesting now. Save coors does it need saving . I think its fighting for relevance in a modern day era where people are just not shopping for this stuff. I dont know how much they can do it with jimmy choo. It has to be up in price i dont know too expensive, david. Ter atgeold toe cleava afth opening bell, a few minutes from now im here at the Td Ameritrade trader offices. Steve, other than making me move stuff, 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. Youre watching cnbcs squawk on the street. Busy tuesday as we watch earnings john mccain returns to the senate today for a vote, motion to proceed on health care. Got awfully close to an eight handle this morning, jim, were basically flirting with alltime closing lows. Yeah. Look, i am so torn i keep thinking about that Goldman Sachs quarter, how little volatility there is you have to strain yourself to find something thats really wild here, that would be seagate, down terribly because of a class in prices. How can that be true when so much of the narrative today is ag, deputy ag, special prosecutor you know what what do they have to do with the mcdonalds burgers nothing. Its a Big International company with a business in United States and you know what . Its worth so many burgers. Mid stream. Recent ipo English Premiere League soccer team tottenham hotspur, competed in the International Champions cup. You should not miss the euro. I tell you, i have been a champion of the euro everyone keeps saying you have to short it. You have to short it go to europe do some business prices are it is too low. It is too low. Rates are too low. Germany is coming back, italys coming back. Only thing i didnt see strong in germany was hasbro. Playdough does not determine a country. And the banks are not as strong as our banks in terms of the price action weve got another rally off the bonds, maybe Interest Rate rally her here. Strong day yesterday. Market cap slightly above goldmans. Took note of that. Gorman will talk about his model. Thats interesting the model. Pretty amazing. We talked about, of course, Morgan Stanley thats a moment to pause because these Companies Take these things seriously do you remember when charl schwab exceeded the cap . Maybe before 2000 but during the dot com . Sure. Merrill lynch took that that was a moment for them even when tesla exceeded these Companies Notice these things certainly Goldman Sachs and Morgan Stanley, despite the fact that their strategies have diverged, no doubt, given the focus on Morgan Stanley thats a moment. That is important what kind of business is this . Assets go out the door every morning. Gorman is doing a fabulous job in leadership. I have to tell you, i dont think that you need volatility going back to the vicks question fixed income. At the beginning of this year, one stock was down Morgan Stanley is up 12 . Changing as the guard. Investors do tend to have longer memories sometimes. One of the big s p earners right now. That stock sells at tangible book value he has put now its up 50 cents higher okay he is putting points on the board. That deluge of numbers. Banks leading today, suntrust, citi, fifth third, are we once again tenyear just hit 2. 3. Jp morgan coming back to my price target. That makes me feel a lot better whats so weird is when you go over United Technologies, they need copper data copper is up you have commodities you have financials going up and you have google going down. That is listen, im happy when you succeed and get somebody. You are yes i dont feel its good for everybody. When you take the people ive had as a frequent guest and somehow its appropriate them for your own show. Cooperate darwinism. I find that a bit upsetting. My wife was doing laundry yesterday. I asked what she was doing she says laundry i talked about euro vacation she sides with him. Have no shot with corbett at all. How are you doing with benihoff my wife is interested and my two dogs. Jim, this is the kind of market you love. I do. Financials, nvidia. A focused debt. You see those financials roaring, you can pin a whole new narrative. Pncs quarter. I know its painful. You have to go over it line by lievenlt its like a really bad book that when you get to the middle you say i have to finish it i have no choice. Under armour to a sell. Under armour sell is about how people are no longer buying performance clothes. Theyre buying leisure wear. Lulu gets downgraded, king of leisure wear i dont know where to go i know to avoid both and buy vf corp vf is back new leadership, by the way but they had a strong europe im surprised nike hasnt broken out yet. The hibbett collapse yesterday has created a pause in that group. David, the collapse was terrible. It was . Pretty consistent growth, worst ive seen. People have pointed out why is it taking the actual commodity, why is it tougher sledding than some expected . Were up a buck today. In the anadarko conference, they said were not going to drill as much. Cash flow is not that great from it this is what slumber j has said. The west the whole phenomena will slow down if you think 8 that is the United States controls the price of oil, then youre going to want to buy oil. If you psychologically think that a lot of people feel that the u. S. Can now schlumberger has playing right into the fury that was announced in the call friday that the u. S. Is going to cut back and thats going to drive oil prices higher. You think we can reclaim, say, 52 . Cant go through 50 at that point, everybody sells and sells and sells. Thats a lower high. It can happen yeah oil can go higher just on what annadarko is saying, honestly. Remember, they have flash and d ran. People are taking a look at seagate saying the whole group is over. Held this 30 level for a long time even though theyve drawn out the quarters i dont want a rally led by micron i want good taste in tuna. I want jp morgan to lead the rally. A reference to a commercial youre probably too young. No, i do remember that well. And youre going to get a hawaiian punch. I remember that one, too. Starkist tuna, manfred man. Were all showing our age. We are. Nobody more than you. Hey, maybe im the marlboro man. What does that even mean . I dont know. He was my hero for a while until i realized they kill you. Thankfully you didnt remember they i didnt know until john hann came out, said it was bad for you. Jim, people are pointing out the dollar if you take mcdonalds as an example, it has not been the we didnt expect it to have a huge impact. Its been muted by historic standards. Theyre making back a weaker dollar gu to vienna you get a pretty cheap burger or italy, a cheap burger go to italy and get mcdonalds youre completely out of your mind burgers there are very cheap. Are they . Yeah. I just priced it im a super tuscan guy. In italy i wouldnt think thats the chosen cuisine. Solely focused on the performance of companies in terms of their underlying china preparing for crisis along the north korean border. Trump going to youngstown the old capital of steel, other than pittsburgh. Will he invoke 232 talking about a National Treasure theres a huge number in that gerald ford Aircraft Carrier that was launched this weekend you could make a case without u. S. Dominated steel that thing could you want to make an Aircraft Carrier with chinese steel . First six months of this year more automobiles made in mexico than last year, 16 , i think it was. Making 500,000 automobiles in the town that i got a place in they werent making any when i got to the place none pacific trade, you hear it blowing in the middle of the night. Yes. You can hear it 500 mile. I dont think its coincidence that you move in and they start making automobiles. Reference to dillon passed right over your head. Yes, it did springsteen does. Manfred mann. We cant play either one. Springsteen owns the song. David, do you think cable is heating up what does that even mean . Which part of it the distributors or programmers . The company we work for has become a genuine battleground and i have people who say youve got to go long comcast and youve got to short comcast. By the way, john ledger tweets me, jim, which is dumber, verizon or att am i the arbiter of whos dumb dumber . He thinks im petey. A customer said im about to go crazy on twitter, regarding Customer Service he gave them his personal email said email me john. Ledger. Saw that, too we were all included on that. Maybe the only ceo who does that. Facebook going down in sync with alphabet entirely i question that. Concerns about margins, i guess. Not necessarily right but money flows out of tech betting that they would talk about other bets have been cut down betting they would have substance to their Cloud Business betting that theyve been monetized, youtube at a higher margin. You sound disappointed now a little bit listen, stock is 23plus percent including todays minor downgrade. If it were a broadway play it would be open for about eight weeks. No Way Investors make their money back. Weve got a couple of hamiltons. Weve got some hamiltons caterpillar is hamilton. Dow up 114. 3m and utx keeping it check. Lets get to bob pisani. Hey, bob. Record highs. Happy tuesday, everyone. Because of the earnings situation, despite a few misses out there. Right across the board strong open, 31, advancing to declining stocks great open take a look at the sectors all the ones you like having lead the market when the Global Economy is expanding, financials, materials. Stocks moving a little because google is down 3 here and the banks are also leading europe, by the way, also doing well 2017 as the year of europe money flowing into european equities, up today german Business Confidence numbers came out in july fresh record highs this is the Third Straight month. Talk about euphoric, head of the german business Clements Fuest said sentiment among german business is euphoric with prices this high youve got to have a good beat and very positive commentary to really move the needle significantly. Caterpillar, of course very positive company. Theres a Company Moving stocks forward. Utx was okay very, very small beat overall for them they did talk bay better overall outlook. Stocks up better than 15 . Thats not enough. Just basic marginal, small little beat of a few pennies doesnt move the stock anymore you can see that 3m was about 12 lower than analyst expectations for their numbers. Look at that thats not a typo there. Down 4. 5 . Seagate, another good example. They were a very large miss. Its very unusual to have a big company miss by about 30 on the expectations you see whats happening there that stock is down by about 20 . So here is the trend so far. We got about 25 of the s p 500 thats been reporting. Were getting more Companies Beating on the top and bottom lines than usual almost north of 70 and theyre beating by larger amounts than typical. Theres the good news. Here is the bad news prices are so high, you have to have a very strong beat or very, very strong guidance, really, to move the stock forward and small misses penalize you much more heavier than big beats will help than small beats will help you out and significant misses like seagate you get dropped significantly, down about 20 as to where were at right now, 20 of companies, earnings up 8. 8 they were stronger yesterday on friday because the analysts had not accounted for googles big fine and that dropped the numbers a little bit revenue is up 4. 6 we may get to 10 . Well see what happens with that elsewhere, if you take a look at the oil, halliburton is more cautious even though production numbers are still high anadarko had similar comments. Saying current Market Conditions require lower capital intensity that means were going to spend less, folks as a result were reducing to 300 for the year. Anadarko is up the discipline theyre showing is helping them a little bit 35 down for the year on anadarko among the Home Builders its important to note generally theyve been saying the same thing. Pulte came out saying demand continues to benefit from positive Market Dynamics and generally limited supply of homes across the country pulte, take a look you can see is trading down slightl slightly. A lot of these companies in the past have been doing 20 growth little bit of a slide there. Highest of the day, dow up 122 points guys, back to you. Ill take it, bob bob pisani do want to way in now on battle for scripps networks, joined by viacom and discovery i havent really weighed in with a report yet and wanted to do that this deal could get done in the not so distant future both sides are fully engaged trying to put together a structure and price that isamenable to, of course, the Scripps Family while divergent does control the vote at that company and is intent on a potential deal following, of course, their ceo, decision to do that. Where do you end up and what does it look like . Sources indicate that scripps is looking for 50 cash in any deal not something that is beyond the wherewithal for discovery. Take a look at ken lowe, of course, or viacom. You look at viacom and its current leverage of 3. 75 you do start to wonder to what extent it would be willing to go in order to fund a large cash portion of any deal for scripps. They could do it but they would have to level the Balance Sheet quite a bit. You put them both together still youre talking leverages as high as 5. 2 if you wanted to go 100 cash at 90 bucks you get the 5. 5 times controlling shareholders at national amusements, upstream from viacom would be willing to do not clear at this point. Viacom making a decision here to pursue scripps and discovery fully engage as well in that pursuit. Its leverage is lower. It may represent an ability to use more stock if it wants to, given what appears to be the desire or at least more attractive currency than viacom. Stock prices actually moved up that helps it. So, well see. But this could be getting close. We like to do that. What are you guys willing to do . It is discovery in viacom, jim aggressively at least, engaged, in trying to figure out a way to get something done here. If youre discovery, probably not far behind. Thats the jimmy choo deal with michael kors. They have to do something. N entertainment in retail. They do not have the wind at their back. Some people wonder why the Scripps Family wouldnt want all stock. Tax consideration. But somebody pointed out to me when youre looking to sell a wellrun company to a company just like yours see you later. Take the cash and go home. Well have more, hopefully, as this week moves along Rick Santelli is at the cme group in chicago rick good morning, david fun in the fixed income area, especially sovereigns. You know, outside of cnbc, you know, there arent many who are rushing or russian, i should say, to report record prices in equity. Twos are up one fives are up three tens are up three. 30s are up four basis points, bunds up four basis points in that 227 area, 230, 260 frequented in the early part of the year real issue is that we held to 213. Didnt even get that close i cant stress how significant the upper 50s are in the oneweek chart if you move the chart to the very end, thats basically the zone bund deals are trading at euro versus dollar, one week keep an eye on the euro. It is the year of the euro carl, jim, back to you. Rick santelli well get stock trading with jim in a moment. Dow up 100 between utx and 3m, shaving about 80 points off the index. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In Clinical Trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. No one expected this its not in the playbook that stock has room to run its not going down. That was a really good quarter wow just the whole change. Nvidia is in the doghouse. Good name for a dog answers to nvidia, going to confuse the heck out of them genius, believe me you talk about gm, i want to see whats going on there. Wow, david, right in your wheelhouse, mccormick and the fren frenchs deal. You know my basic question. What are you paying . That did come up in i think one of the reason hes anxious to come on the call the show is what is he paying . I went in my pantry, took a picture. Sure enough we had some frenchs in there. Well, theres got to be a plan theyll talk all about it, multiple being a lot lower and syner synergy. I love how people love to wrap their synergy into their base number. I use it on the laundry no, i dont. But your wife does. The other day i claimed i did the laundry. My wife said i heard you said you did the laundry. I said i did it once. Mad money 6 00 pm eastern time another busy day when we come back, more on the earnings bonanza, mcdonalds big beat dow is up 96 dont go anywhere. Good Tuesday Morning im Carl Quintanilla with david faber. Sara eisen has the morning off strength in mcdonalds and caterpillar. Weakness in 3m and utx well watch that, along with oil, up 2 . Our road map begins with that earning blitz, caterpillar, gm and dupont, among the earnings this morning well dive deep into their quarters and show you what to expect in the second half of the year. Well talk to former mcdonalds ceo ramsay about whats happening in fast food. And musk versus zuckerberg on artificial intelligence. Well tell you about that. First lets get to Rick Santelli rick exuding with Consumer Confidence here. 121 handle 121. 1. Why is this so exciting to me . The read in march was the best since christmas 2000 i cant find anything in between. So this is the second best number basically since 2000. We did see a bit of a downgrade. Last look, the june number of 118. 9, now 117. 3 but thats some pretty big horsepower richmond fed doubled expectations, looking for seven, ended up with 14 unlike Consumer Confidence, richmond fed has had higher numbers this year at 20 in april, 22 in march no matter how you slice it, its a pretty decent number carl, back to you. Mcdonalds, though, is another story. Recording beat, huge jump in comps, almost double the consensus estimate as the fed is set to kick off day one in a twoday meeting in washington. Interesting bar bell here, strength in caterpillar, weakness in 3m. 3m and utx. Caterpillar and mcdonalds benefiting from their beats shows you the magnitude of how emphatic you have to be, just because of how well things have done its a net bias to the upside, i think. The market still wants to lean that way beyond the earnings, banks up 1. 5 thats been the seesaw for a while now. 3m below 200. You have to go back to may to see a number like that. Big weight on the dow in terms of price at the peak of activist energy, you would have made a run at 3m. These businesses on paper, why are they together . To me it shows you that you were expected to get this global lift, weak dollar helping almost anybody with a global footprint and even if it didnt help enough. You know, google, of course, i guess the largest loser, so to speak, in Technology Still down a little less than 3 to some extent, going into the financials, i guess. Concerns there about margins. And i think it takes you back its not as if this is really kind of an abandonment of the story. Its been unusual. Meaning bond prices are down, tech stocks are down thats the way theyve portrayed it for a while right now. Meanwhile, you and i have been swroeki injoking about thes almost got to an eight handle at 9 04, which flies in the face to everything you hear out of washington. The market doesnt, as a swren course of business, price in craziness going on in d. C you have so much offsetting action within the market the index is kind of trapped thats what the vicks is playing off of. Move on to caterpillar, machinery analyst at jp morgan and at jeffries. Good morning, guys good to see you both. Morning. Anne, weve seen the sequential improvement in retail numbers out of cat what accounts for this guidance that is Even Stronger than we had in april thats a good question. Revenues today, we did see retail sales improving the last couple of months however, as is classic caterpillar you get one quarter like this every cycle where revenues come in in line but they delivered 65 incremental profits on the gross margin. So on the outside we never want to put those big numbers into our models but the buy side was pretty close on. And the whisper number was about 5 for this year the question going forwardis, is this sustainable . Whats the answer to that well, history would say that caterpillar delivers great incrementals for a couple of quarters when they get volume back we shouldnt forget that they spent 3. 5 billion on restructuring and 16 fewer workforce today versus at the peak of the cycle. They could probably deliver another couple of quarters like they normally do the key question is, is this a different caterpillar or is this the same old caterpillar that eventually delivers lower incrementals and expectations get too high stephen, obviously, if youve been in this name youve had to have been very patient to get the leverage to work the stock could double in a couple of years. What did you make of the quarter and that longer term outlook sure, yeah. Obviously, i agree with ann. Were in the sweet spot right now, getting all the revenue bouncing off the bottom and none of the costs coming back thats always nice to see. The flip side of that at the peak, obviously. This is the good news part of the cycle. Thats nice to see i agree with ann, though, that at some point costs start to come back in in terms of the stock kind of doubling from here, i guess its worth remembering were at an alltime high right now. At least within very close distance of that and theres a fair amount built in. Whats going to determine whether, in fact, there is more life to this cycle, what parts of the world, what division . Is it still a bit of a china proxy in terms of what can get you longer term demand over the next couple of years china is what it is and Infrastructure Spending continues to expand there. I think the one incremental up side is probably europe, coming in much stronger than we had expected waiting for it to happen, waiting for it to happen it might actually be a key catalyst for caterpillar and demand for their products. Jump in if you think that is the next level. Sure. That means oil needs to blake out of the range its been in. Things like iron ore and cole. If you look historically, cat is very highly coordinated. I dont think the scotts go a lot higher. Did try to hammer away at a fivemonth high, i should say. What are critical levels for commodities if stephen is right . They consume a lot more copper than diesel or gasoline vehicles. A bold case on the copper side we would say demand should accelerate here not just on the back of higher global gdp but trends on electric vehicles pick up i think there is a bold case to be made on commodities like copper, coal and coal is very important to caterpillar. Thank you very much lets move on to alphabet, Second Quarter earnings beat let bring in Rob Sanderson and Victor Anthony post nine analyst with egis capital. Thanks to you both victor, the big picture seems to be pretty favorable. Mobile search is working what are investors kribling with, margins or noisiness nothing has changed last night materially tax spike in the Second Quarter dropping acquisition cost so thats risen that was an issue two years ago and percolated again today the long term secular story for google hasnt changed at all. Are those cost items something thats going to carry through in the current and future quarters . I think it will i think longer term youll see tha that. Margins, victor seems to be saying that it will be with us for a while. Do you agree i think its likely theyre investing in a lot of areas. Huge opportunity there behind the market leaders who want to push aggressively. Investing heavily in devices content spending in youtube and subscriber acquisition lot of areas of spending as victor pointed out, traffic acquisition cost spike that, is structural its a consequences of the move to mobile and probably sticks with them for a while. So, do you pay a lower multiple then even though you have incredible thats my words top line growth at this Massive Company . The stock has been sensitive in the past. Theyre a little better in transparency now than they were in previous cycles there is a little bit more evidence of spending conservatism in certain areas and willingness to say no when things arent working. Perhaps thats mitigated really its more of a function of what technology does and whether the market keeps going if tech is getting a little heavy, then the multiple may come back a bit. If it keeps going, google will participate in that. Wild card question, victor, whats youtube worth in the 670 billion monster that is alpha t alphabet, 1. 5 billion, its not that far behind the metrics in something you see like facebook. Is there any way to characterize what that is worth in the company . At least 75 billion. I remember estimates years ago that it would be 20. One day it might be worth 20 billion. Right monthly active users have grown from the data ive been tracking in similar ways that facebook has been part of our vernacular, daily usage. Last quarter they pointed to several different options in terms of the modernization path they could pursue. Its somewhat early. Public transportation, ride sharing are options they could pursue in the future thats one unit investors should really focus on longer term. That could be material to alphabets valuation in the next couple of years. Another area people seem to think will be material is cloud. They seem to talk about 2020 being the largest. Is that a possibility in your mind what will they need to get there . To be the largest by 2020, theyll have to make up a lot of ground in a pretty short amount of time. Theyll think its a question of scale. Goog sl massive on an infrastructure level scale base and sophistication of the advanced services level. They do a good job in basic storage and compute, media applications, youve seen migration of apple business, snap chat business, of course, and spotify. Things in the media sector theyre competitive. The more sophisticated workloads that theyre quite far behind the market leaders. Victor, obviously, this company is right at the center of whatever push there is now, globally, toward artificial intelligence, way of solutions and computing down the road. Is all of that going to be kind of incremental for alphabet or on some level is it kind of defensive . What i mean by that is tech base search is probably not the future something mover an ai type solution s is google positioned fo r that transition definitely. Voice search will dominate longer term. Youre talking 10, 20 years from now. Its not eminent theyre investing aggressively, hiring i think theyll be at the forefront of the ship at ai. Machine learning will dominate the discourse on the tech side over the next probably two generations. Lot of fun and charge showing nontech ceos, ai and Conference Calls. Musk zuckerberg feud. We may have to define what were talking about. I have an answer to that. We are all going to die. Let move on to gm thank you, guys. Gm reporting earnings this morning. Phil leb aechlt au has that in chicago with more on the q2 results. Phil strong numbers that General Motors reported. The Conference Call just begun well hop on that and see what kind of commentary they have in terms of Second Quarter, they beat the street by a wide margin revenue coming in a little lighter than expected. Numbers within the numbers in the Second Quarter, we knew they would have slower north american sales. No surprise that the revenue took a bit of a hit there. Profit margin up 10 was better than some expected return on invested capital greater than 30 , much better than what they have already said they would deliver every quarter of at least 25 . This morning on squawk box we had a chance to talk with cfo Chuck Stevens because of slowing car sales is considering ending production of certain sedans here in the u. S. We are always going to be very, very focused on aligning supply and demand. As weve seen the shift from passenger cars to crossovers, you know, weve taken very proactive action to reduce our production of passenger cars. Read between the lines, guys. Its all about where you allocate that capital. Right now with car sales down more than 18 in the first half of this year for General Motors, dont be surprised if we see them move very quickly to curtail that production. Again well hop on the call and see what comments they have which no doubt will be coming to analysts in a couple of minutes. Back to you. There were questions about the revenue number, whether or not europe was apples to apples with the street. Do we have a clear answer . We dont have a clear answer yet. As close as we can figure out, most of the estimates, when you strip out europe so that you have an actual comparison, was 37 billion, which is what the revenue was for the Second Quarter. Most were estimating around 38 billion. A little light on the estimates but certainly not what had been previously put out there as the estimate of like 40 billion. Phil, thank you very much well come back to you for more headlines. Phil lebeau watching gm. Former mcdonalds chief ed rensi will join us first, well bring you the results of cnbcs fed survey after the break where wall street sees stocks headed later w is year and next donow up 78. Were back in a moment when this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. If you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go . Expedia gives you the world in your hand, so you can see more of it. Expedia. A used car, the fed is kicking off its twoday meeting today. Steve leisman, fed survey and expectations for the stock market back at hq hey, steve. Good morning, michael 7 of our 44 respondents say the third rate hike is coming in december nobody expects a rate hike tomorrow most expect the Balance Sheet reduction in september expecting less, less fiscal policy, less Monetary Policy and not expecting a lot from stocks. Forecast after yesterdays close. Just a percentage for the rest of the year and 5. 4 by the end of 2018. Not a lot of optimism for stocks in fact, theres some concern that the market is over valued and you can see that we are expecting a little bit more growth from 2016 where growth was 1. 6 there it is. 2017 2. 5 , 2018 year over year look at how its come down after post election. You can see in the next screen here in november 2017 it was 2. 2. Then you get the election and all this optimism and thats kind of come down as fiscal policy has been kind of priced out of this market and what you see is that most of our respondents think the market is too optimistic about fiscal policy when it comes to the outlook, 50 say the market is too optimistic about fiscal policy from the trump agenda 36 say theyre realistic. And some people are really concerned, including mark zandy of moodys nanalytics saying asset markets are very highly priced not everybody feels that way thom melcher says despite the list of potential worries and the elevated valuation we believe it will continue to g w grind higher as Interest Rates drift higher. Steve, you know, that idea that markets are a little bit way ahead of themselves potentially, financial conditions being so easy thats one of the reasons the fed is going to get aggressive if they see one more hike in december. I think thats all they see right now. Some are saying after december they may stop for a while. In addition to doing the Balance Sheet. By the way, were not expecting the Balance Sheet tomorrow to be announced. But that is, i would say, a potential risk 39 see that Balance Sheet reduction coming in september and a bunch see it afterwards. I think the fed will be concerned about that fiscal policy and Monetary Policy Work Together if youre looking for less fiscal policy youre going to get less fed policy. The concern was that you would have all this stimulus coming from the trump agenda and more and more you can see, mike and i think you see it in the trade. Thats being dialed out. Yeah. That story has changed the last six months steve, thank you very much for more on the markets and the fed, lets bring in jack abbott. Jack, good morning. Good morning, mike. How are you thinking about the fed right now in terms of both Balance Sheet and potential future rate hikes with regard to, you know, how the economy is now tracking also just the way the markets are situated what are you expecting to hear tomorrow yeah. I think well hear some tough talk maybe little action. Like most observers, i dont expect any rate action tomorrow. I think they are going to talk tough. They are optimistic that inflation will pick up in the latter half of the year, that growth will growth trajectory higher toward the back half of the year and that justifies their strategy to raise rates and reduce their Balance Sheet over time. You think theyre striking the right balance here feds should go a lot faster. It seems as if theres a way to decide to frame this lots of different ways to have inflation tracking but you have full employment and markets being extremely happy right now. Yeah. I think youve got, really, the three constituencies of course, the fed is focused on jobs and the economy youve got that third constituency and thats stock market the fed, if they just purely focus on jobs and the economy, they can move forward with their rate plans and the Balance Sheet reduction. My concern is and i think i heard jamie dimon flapping his arms about this last week. If you start to pull back that Balance Sheet too quickly, especially if its a coordinated effort with the ecb and boj, which theyre certainly not on board yet, that could pull the rug out from this equity rally weve enjoyed over the last few years. Do you think theres a legitimate risk that the fed is going to go fast enough and really push the Balance Sheet to a point where the markets will be caught by surprise . No. I think because of the temper tantrumbull, turned 180 degrees on their heels in 2013 when emerging markets and other markets got upset. So i think that, you know, the good news here is of all the crisis we would have to encounter this is a contrived potential crisis and one that could be reversed pretty quickly. Im not worried that you know, i worry that they could upset the apple cart here. But i also understand that theyre very sensitive to it, too, and will likely reverse course if they go too quickly. Jack, we talked for months about the spread between the soft and the hard data this Consumer Confidence number is another reminder of that. Its just a barn burner of a confidence number. Yet, as some are pointing out, why isnt real Consumer Spending tracking it more closely yeah, carl, great point call at the paradox of thrift. The fact is that the financial crisis really focused households on preparing their Balance Sheet. Theyre doing exactly what theyre expected to be doing but the problem is that were not seeing growth as a result. Student loans and other auto loans are up but most consumer borrowing is now actually pretty prudent and so are lenders lenders arent necessarily extending home equity lines for people to take vacations anymore. I think while its more responsible borrowing and more responsible lending, were seeing it in what ill call the slow and steady recovery its certainly a lot slower than weve been accustomed to, but also on a much more Solid Foundation long term i think thats great short term, its a little frustrating. Just to quickly bottom line it from an investment perspective, does that mean you play more defense right now . Im finding better value overseas look at the the caterpillar number was fueled, in my view, by emerging markets, particularly emerging asia i think theyre cheaper. Theres more room to run and even developed markets, too. Were under in the u. S. And emerging in a big way. Jack abbott, good to see you. You, too. Take a look at shares of mcdonalds that Company Beat Expectations on earnings and revenue. It seen its sales zooming. Former ceo edward rensi will join us with what is working in fast food. Excuse me, are you aware of whats happening right now . Were facing 20 billion security events every day. Ddos campaigns, ransomware, malware attacks. Actually, we just handled all the priority threats. You did that . We did that. Really. We analyzed millions of articles and reports. We can identify threats 50 faster. You can do that . We can do that. Then do that. Can we do that . We can do that. Good morning, everybody. Im sue herrera. Jerusalem metal detectors will be replaced by cameras that can detect hidden objects. Senior palestinian officials and local residents criticize the use of cameras saying they also should be gone. Speed boat capsized off ind nearbya killing at least ten people several others are considbeliev be missing about 2,800 irover hoverboards have been recalled for overheated batteries and as profiled on closing bell three Market Square in wisconsin has announced it will begin to offer its employees a work issued microchip that can be implanted, all access to their office building, implanted between the thumb and forefinger underneath the skin. Thats the news update this hour david, back to you they say it doesnt have gps tracking ability but i dont know if i would have a microchip implanted. Who knows . Im not sure. We stuck one on our dog but i guess he had no say in the matter. That is very true. Yeah. Thanks, sue. You got it, david. The president sending off a flurry of tweet this is morning, including his displeasure with attorney general Jeff Sessions kayla tau Kayla Tausche is in washington with the latest. Very levels of intensity from the innocuous, touting a rally in ohio this evening to time sensitive, calling for republicans to repeal or repeal and replace during Todays Health Care vote to the tongue in cheek, where he suggested his 11yearold son, barron, is going to get questioned over rusha. But its his tweets using the mega phone to some 32 million followers to tabling repeated swipes at his attorney general that are raising eyebrows. To chastise him for not investigating hillary clinton. Incoming White House Communications director Anthony Scaramucci on satellite radio this morning said its probably right that the president wants to replace sessions. When you think about the relationship john fnc. Kennedy a with his brother as attorney general or that the president had with eric holder, president obama, they probably dont have that sort of relationship. And i think the president , when he thinks about the architecture of his cabinet, i think he needs that sort of a relationship there. Firing sessions would raise more questions than it answers who would replace him thats more loyal to the president . If that person were a former campaign official, would they, too, have to recuse themselves and how would this focus on loyalty affect the longterm reputation of the doj . Washington strategist greg valier says the number one question hes getting from clients, why wont trump stop tweeting at least a third of the president s tweets are self inflicted wounds that distract from the agenda and for congress part, lawmakers are standing by their former colleague, senator Jeff Sessions and say they believe the president is inappropriate in these tweets Speaker Paul Ryan says its up to the president to decide how he wants to proceed. Guys yeah, kayla, i saw Lindsey Graham coming back, defending Jeff Sessions. That clearly is the most important part of this mornings tweets from the president , as you rightly focus on them. If he were, as it does appear you dont want to jump to conclusions. We simply can read whats being said and we heard scaramucci he seems to want him out what would happen, to your point, if theres a new person appointed . Will congress, you know what about the nominating process or the confirmation process in the senate you know, what chance would they have to actually get through a couple of different options, david if they go the traditional route and choose to nominate someone that would go through the full confirmation process, there are questions over who a candidate would be that would sale through that easily. Theres not one that comes to the top of mind or that rises to the top of the chart in that way. The second option is potentially to do a recess appointment that person would serve through the end of this senate into january 2019 but that, of course, would attract new criticism at the white house over this issue, which is going to inspire criticism no matter how President Trump does it if, in fact, he does choose to do this he is seeking advice on this that is what all of the reporting at this minute tells us but its unclear exactly how he will choose to move forward if, in fact, he does continue to be frustrated and lets this frustration over general sessions continue to boil up. Kayla, thank you for that well be watching d. C. Closely, obviously, today and all week long Kayla Tausche. Meanwhile, mcdonalds forecast, Second Quarter profit up 1. 70 revenue beat expectations on global comps, up 6. 6, nearly double the consensus estimate. Its been a while since weve seen a number like that. U. S. Comps 3. 9. Hard to poke a lot of holes in it. Whats been amazing to me is how mcdonalds as a stock has just separated itself from the Consumer Staples group and actually on a yeartodate basis with todays gain its now up more than dominos which, of course, has been the poster child that has kind of cracked the code for traffic and volume through technology so i dont know how much more you can expect out of mcdonalds but its really got sort of the trend. Year to date almost 30 as far as the dow stocks go, beat only by apple and boeing. Not much farther to go to take the number one spot. Nothing defensive about the way its acting at all. For more on mcdonalds, lets bring in former ceo ed rensi good to talk to you again. Gk good morning, everybody. Glad to be here. Some of the right throughs this morning on the quarter credit the performance to, in their words, cheap soda and upscale burgers. Is it that simple . No, absolutely not. In fact, leadership, leaders and strategy counts and Steve Easterbrook is a quiet, strong, studious, intelligent man who laid out a strategy. He has been working his plan ever since he came back to the u. S. He has got the total unabridged support of the mcdonalds franchisees and they are the rock on which mcdonalds is built. Its a much more complex matter than free sodas. All right how did he get that confidence of the franchisees famously corporate tells franchisees we want to do this it may mean you have to buy additional equipment and theres always been friction around that how did that go away, if it has . Theres always that dynamic tension. The thing you have to remember, franchisees invested a lot of money and work hard at that business and its the only Restaurant Business theyre allowed to be involved in so they dont have divided loyalties. Theres a constant give and take, a push pull. That helps grow the system as fred turner and ray crock used to say, if you cant get the franchisees convinced to do something, you probably shouldnt do it. If its not just about in the latest few months, cheap soda and a new burger introduction, it does seem as if theres some ext Strategic Focus on rolling out these promotions and getting those franchisees on board do you actually think that they have sort of a clear runway to continue to introduce these things have they just been on a hot streak with them how dependent is future growth on getting lucky with some of these . Yes, no, and maybe to all of that the reality of it is that mcdonalds is belly to belly with 45 Million Consumers around the world. Franchisees are at the front of that mcdonalds does an enormous amount of research with existing customers and emerging customers and theyre going to give the customers what they want we did the mcrib, lobster rolls in boston, johnson brats in wisconsin. You have to give consumers what they want, in the way they want it, do it in an economical way theyve been incredible at gradual incremental evolution, evolving since 1955 and will continue to evolve in the future theyve got great strategies with new techniques, new strategies that will carry the day. Do you see a lot of risk, execution or otherwise, in mobile ordering or delivery via uber, anything like that i think this whole uber eats idea is one that needs a lot of exploration. I think it has a lot of potential. But food is fragile. I dont care where you get it or how you produce it and if the uber drivers arent prompt in getting that food to the customer in a good fashion with heat and freshness, then it could be a problem and some people are going to do it really well some wont do it so well convenience is very, very important to the American Consumer today you have to find new ways for convenience. If you dont think thats true, take a look at what amazon is doing to all the big box stores. Convenience is everything today. Can you achieve that convenience if youre mcdonalds without sacrificing a little bit of margin . Whats the average ticket for mcdonalds that you actually will introduce a delivery piece to that somehow . Well, you know, who would have thought that taxi cabs would be replaced by uber or limousines would be . I take uber to the airport, costs me 17 used to cost me 70. Mcdonalds im confident mcdonalds will figure it out if it can be figured out. Take a look what their g a trends have been like. That ervery good at controlling cost theyre in the penny business, scrape the last ounce of ketchup out of a can to make a profit. On that point, ed, they are doing all of this with not more storers restaurants but fewer. We know theyve had some strategic pivots internationally regarding ownership in the franchisee model does all that make sense to you . Absolutely. Ive said this for years and years and years. Mcdonalds should never have more companyowned restaurants than what they absolutely need to staff the organization and do experimentation. Company stores ought to try this stuff first so if it fails it doesnt hurt the franchisees minimum number of Company Stores is essential the efficiency is better g a is better. And you get better travel knowledge. Company and store employees are great people they work really hard. When they go home at night they dont worry about that restaurant the way an owner does. Finally, you know this company well youve been in it and watching it for decades its been through a few golden ages, i would argue. How would you characterize this one . Is this, in fact, a new golden age for the company . If ray crock were alive today he would say keep shoving that hose down your competitors throat as theyre drowning Steve Easterbrook is intelligent, surrounded himself with intelligent people. The board knows what hes capable of, has international perspective, shrinking the globe for mcdonalds, very attune to up and coming customers. If there were such a thing as the golden age, this has got to be the platinum age. Ed rensi on mcdonalds. Always good to get your take appreciate the time. Thanks for having me. Good to see you. As we head to a break, take a look at shares of eli lily, the company beating estimates while upping its outlook, the stock down 3 . Drug rollout delay and former economic adviser to President Trump, judy shelton, will join Rick Santelli for a special santelli exchange. More squawk on the street. To keep our community safe. Before you do any project big or small, pg e will come out and mark your gas and electric lines so you dont hit them when you dig. Call 811 before you dig, and make sure that you and your neighbors are safe. 811 is available to any business our or homeownerfe. To make sure that you identify where your utilities are if you are gonna do any kind of excavation no matter how small or large before you dig, call 811. Keep yourself safe. Lets get over to the cme and the Rick Santelli exchange good morning, rick. Good morning, carl. A little delay, folks. The fed is going to, of course, potentially begin its twoday meeting without any major changes, so say many but theres one topic besides Balance Sheet reduction im interested in and i want to know more information on. Thats interest on reserves. Is this something we want to continue to pay . Should they be talked about . I think its a very bad idea. The fed is really giving banks every incentive not to make loans to the private sector. Just collect interest on excess reserves that is being kept to no purpose. Its just sterile. That should be the money used as Financial Capital for the private skter. That should be made valuable to Small Business and to people who want to borrow, to create something, to do something productive and, instead, it just sit there is at the fed, collecting interest i think it gives banks the incentive to not hire the next loan analyst and, instead, be more concerned about protectin themselves from regulatory overkill from the fed. Dr. Shelton, its interesting to say that. Recently talked in d. C. And wrote a paper our unhinged fed and believes that not only are reserves a bad thing, he thinks its one of the main reasons for no productivity in this recovery he said, you know, the fed policies are supposed to minimize their effect on private sector credit creation and this, obviously, isnt finish up, if you were janet, how would you deal with interest on reserves in the here and now . Well, you know, the thing thats really sad about all of this is from the feds point of view, from chair yellens point of view. They dont really care i mean, they pay the banks not to make the loans. But they make so much money that what they pay on reserves is a small portion of that. The rest of their earnings, they turn around and remit back to treasury thats whats crazy about the whole arrangement. The fed ends up buying so much treasury debt, takes the earnings, interest from that debt, pays a little on reserves and turns around and gives it back to treasury the problem is that its just an unholy alliance between the treasury and Federal Reserve i think we need to take a deep breath and ask whether our central bank is doing more harm than good. Dr. Shelton, thank you so much for your insight into this issue. I hope to read more on ior interest on reserves in upcoming statements im not sure im going to hold my breath. Thanks again, david faber, back to you. Thank you, mr. Santelli lets send it over to john fort. John earning seasons roll on alphabet sales up 23 you might notice the stock is down 3 this morning on an issue with traffic acquisition costs how much of an issueill at wth be moving forward . Well dig in, coming up on squawk alley. The mercedesbenz summer event is back, with incredible offers on the mercedesbenz youve always longed for. But hurry, these shooting stars fly by fast. Lease the c300 for 399 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Are valuations so extreme that you should shy away from u. S. Stocks . Thats what one top strategist says ti. Akes his case on trading more squawk on the street coming up. Experience advanced Safety Technology at the lexus golden opportunity sales event before it ends. Choose from the is turbo, es 350 or nx turbo for 299 a month for 36 months if you lease now. Experience amazing at your lexus dealer. Eli lilly reporting earnings before the bell this morning meg sat down with the ceo early and joins us now with more meg, take it away. They posted a beat and raise the Second Quarter that wasnt enough to bouie the shares the stock is under pressures after the company set the experimental Rheumatoid Arthritis drug will be delayed this year. Shares down 3. 7 now some Analysts Expect lily and the partner under pressure today will need to run an additional Clinical Trial to get further clarity on the drugs risk of blood clots. That means a delay of 18 months. Despite the revenue beating the quarter, an analyst called the report an net negative pointing out much of the beat is driven by price increases for older drugs. Lilys ceo talked with squawk box this morning i wasnt there he was asked about the democrats plan on Prescription Drug prices. They pay an average rebate of 50 back to Government Programs and insurers in the United States suggesting the problem in the system is elsewhere. If you look at patient out of pocket cost that, is by fate biggest driver is insurance design they also highlight the bad actors, the tourings and valiants of the world which you report on. And thats a problem too but we think Scott Gottlieb has the right and that is to increase competition in the arbitrage opportunities in the generic market that have gotten a lot of headlines finally, another biopharma earnings news, check out biogen. That stock had been now fwz flat it had better than expected results for the new drug for spinal muscular atrophy. There was a lot of talk on that Conference Call about potential m a, david let the biotech target speculation begin. Carl, back over you to meg, thank you very much. Meg watching the drug companies. Leading the s p 500, we talked about freeport with jim this morning what a day for freeport and for copper as the metals hit a bid 3m continues to weigh on the dow. And its pretty big percentage move for a name that big it is i still think that theres a little bit of a when it comes to the actual earnings reporters, the sell on the news is bias. Just because of where were at i think 3m is one of the stories that, you know, its not something that people have a firm grasp of exactly what the drivers are in a quarterly basis. I think thats a little bit of a head wind. And utx, the reaction there has not necessarily been great at all. Look at those leaders right now. All related to mining. Taking things out of the ground. Freeport not that long ago, people were looking at the liability side of the Balance Sheet than what it had in equity given concerns about its ability to repay debt no longer. And weak dollar and you have this instinct in the markets to dredge up what hasnt worked yet and bring it back. So the rotation sometimes does kind of shine on these areas that, you know, havent necessarily been leaders yeah, well see if that dynamic lasts. Meantime, tech continues to weigh, whether its google or seagate, micron, a lot of the names leading the s p 500 lower. Going right into the banks up 1. 8 really on no news, bank earnings, its just about yields going up a little bit and money coming out of tech. Well get more Texas Instruments among some others. The former ceo of Twitter Dick Costolo is back. Well digest the results out of alphabet forget man versus robot. Its tech ceo versus tech ceo on the subject of ai. Well get one last check of the markets. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Costolo. Strong earnings are propelling the subpoena stop a new record high with energy, materials, and some of the other cyclical sectors leading the way Higher Energy is being helped by a 2 jump in the price of crude oil extending yesterdays gains after saudi arabia said they would limit oil exports in august thats putting some at least energy on pace for the best days since july 3rd here. Todays leaders include philip exploration, transocean, Chesapeake Energy all up in the 4 to 5 range a sector to keep an eye on as well and certainly the oil prices will put bigger rig counts in focus come that friday move that does it for this hour of squawk on the street. Lets send it back down to the New York Stock Exchange for the start of squawk alley. Back over to you guys. Dom, thank you very much. Good morning, it is 8 00 a. M. At alphabet headquarters in mountain view, california. Squawk alley is live good Tuesday Morning welcome to squawk alley. Jon fortt at the New York Stock Exchange dow is up 103. S p 500 hits another record high the dow was up more than 150