always great to see you. appreciate you helping us out through these issues on the fly. right now, dow looks like it would open higher. nasdaq up about 115 points. the s&p 500 up about 20 points. what a show, folks, right? >> that was. that was a lot. >> it was a lot. it was a lot of good. we're going to do more tomorrow. >> how's your readings? >> "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street," i'm david faber. i am live from post nine at the new york stock exchange. jim cramer, he's at amazon's headquarters in seattle. there he is. he's getting ready for his exclusive interview with the ceo of amazon, andy jassy. that will be aired tonight on "mad money." and carl quintanilla, you ask? well, he's in nashville ahead of tonight's cnbc special presentation of cities of

success. that premiers in primetime. all right, so, we're all here, just all over the country. let's give you a look at futures as we get ready to start trading 30 minutes from now. you can see we are set up for what will be a significantly higher open, perhaps, and of course we're keeping an eye on that ten-year yield, which did fall briefly below 4.16%. our road map starts with a break from the bonds. the late-year rally losing steam in recent days, despite what has been that continued relief, as i said, from bond yields. and mega cap tech, it has been underperforming the broader ma market. is a renewed magnificent seven rally on tap? wall street heading to capitol hill this morning. some of the biggest u.s. bank ceos will be testifying this hour, and of course, we will be covering that. we begin, though, with jim, and what's an exclusive tonight with andy jassy. jim, what are you -- i don't even know how you made it out there.

i was here late yesterday at the exchange, watching you tape "mad money" at like 5:00. i don't understand how you made it there. >> you know i'm anti-sleep. i've not changed that strategy. i never slept on tuesday nights for years because that was a waste of time. so, i'm here. i'm at headquarters. we got to speak to andy. of course, we've got commerce to talk about. we've temu to talk about, your shein where your wife buys all those clothes. >> yeah. i mean, there are so -- we are not a shein family. we might be a temu family. i don't really know. it's funny. i saw the first research today on shein. some analysts are starting to get ready. it's still a ways away, the ipo, but obviously, they have done a great deal of marketing already in terms of getting people prepared to understand their business model, but let's get back to amazon. what's the focus for you? you know, is it broad? is it consumer? is it aws? is it all of the above? are you going to talk about prime, which i always go on

about and whether they need to be spending all that money? >> yes. well, look, prime, you spend the money, let's say, on prime video. it brings in new people. worldwide. i'm going to focus on international, which nobody focuses on, and i think it's terrific. and you know what, david? amazon web services, that's been their focus. it's really come back. back into growth. and you know why? a.i. so, yes, the focus will be a.i. because, you know what? i think they're playing catch-up, and i think they'll pass everybody. >> you think -- explain what you mean when you say that. you think they're playing catch-up, but then you think they will pass everyone. >> microsoft, we know, they have openai. google, always been involved with a.i. but amazon is the one where you try to figure out the practical uses of a.i. for commerce. and i think that the commerce cloud, so to speak, thank you, marc benioff, for using that term, makes me feel like these

guys could be the locus of actual profits from a.i. that's what i want to find out. >> okay. well, amazon is one of the magnificent seven, of course, jim. yesterday, when we were sitting next to each other, we were talking about the fact that you thought that things might have already corrected enough that they were getting interesting. it didn't take you very long. it was like one trading day or a couple of trading days. this morning, goldman is out with a note talking about, of course, the magnificent seven as well, in which it says, "as the laggards to leaders theme gain traction and a market participants started to shift focus from the best to the rest, u.s. mega cap stocks have sharply underperformed." yesterday, they came to life. apple, we were talking about very early in the session, it surged above a $3 trillion market value yet again, but many of the others also had a very good day.

>> yeah, the trajectory was down at the opening. nvidia, down a couple at the opening. finishes up ten. apple was the star of the day. looked like that things would waiver, and we got a couple pieces of good news. apple, the net -- their actual apps, the app sales were up. and you know what? i think we have to start realizing that when foxconn has good numbers, that usually means that the iphone has good numbers. the street was very wrong about the iphone, i think. the street was talking about how if there's a lot of phones for sale, it must mean that the supply is way overdone. i think that they made enough to meet demand, and that's the way i want to look at it. >> we've also got some reports out today, specifically from the "ft," saying they want batteries for the latest generation of iphones to be made in india as part of these efforts that apple has under way to diversify that global supply chain, the key to that being moving some manufacturing out of china, which still, of course, represents the bulk of their

iphones and/or other components to a certain extent, jim. what do you make of that? >> well, i know that they need to put more stores up. i know they're trying to figure out how to, let's say, be more balanced, because india's got a better demographic. it's younger. it's growing. it passed china in terms of population. and they have leverage. i mean, if they want to build something away, the chinese can't complain. the chinese unemployment remains a major story, simply because we don't know how bad it is. but david, we do know from what eunice yoon said yesterday, this is not a $700 billion problem with property. she used the term trillions. if it's trillions, anyone that wants to move out of there, the government can say do what you want as long as you keep some focus here. i think it could flop and chop after this big move but i think it's going maybe to $3.5 trillion. >> 3.5? another $500 billion to go. >> yes. i'm going there.

i'm saying that. by the way, i think amazon is -- that could have a half a trillion to go. i know it sounds so strange. >> well, yeah. gets back to something we talk about often, which is just the size of these companies is truly something. we've both been doing this a very long time. it's stunning. the numbers are still stunning, whether it's the market cap, whether it is the profits, whether it is the revenue number, the capex, go on and on, the cash flow, the free cash flow, the cash position, for example, at apple. it just -- the numbers themselves, the size, the power of these companies is stunning, even if they may not be violating antitrust law. they are awfully large. >> i'll tell you, one of the things you have to recognize is this move started during the banking crisis when we thought we were going to have a recession. there's so many people out there saying, given the numbers we're seeing this morning, adp, they have to cut. we're on the verge of recession. i'm so not in that camp.

they moved in march. they're going to move again. these are nation states, david, they're not companies. they're nation states, and they don't even have to pay taxes. it's fantastic. >> wait a second. that sounded like a reversal from you. you sound -- suddenly, you sound like, i'm not sure, like somebody who may want more regulation. >> no, no, no. these companies are all about -- look, amazon, if you go look at their mantra, it's about reducing prices for the consumers. if you look at the ftc's mantra, it's about helping all the small businesses that are on amazon, and i got to tell you, david, that's -- they can be at odds, those two views. >> yeah. i thought it was interesting. i think lina khan last week said she doesn't even have prime. she's a purist. she won't even actually use -- >> she's a luddite. she's not a purist. >> she's far younger than we are, jim. i don't think she's a luddite.

i don't think that's fair. >> did she fight the loom? >> i'm not aware. i'm not aware. only if it was, you know -- >> i think she was anti-loom. i swear. >> what else are we going to be talking about this morning? we're obviously keeping an eye on the ten-year yield after the adp number. you know, we saw a little bit of a weakening there, jim, in terms of yield. i should say, price action, strength, and although i can't haven't taken a look in the last five minutes or so. is that trade still in place where ultimately money's going to move into mega cap tech and other growth areas if, in fact, yields continue to move closer to 4%? >> well, the shocker of the adp number was the decline in travel and leisure jobs. american express, most recently, is good, but american express in the month of october, not so good. david, maybe people are starting to stay home again. i know people are going to say, that's because they have too much debt. no, i think they went

everywhere. cigna, jared, kay, we are starting to have, after a long dry spell, people getting married again. remember, it takes a couple years before you date and stuff, but there was no dating during covid. look at that chart, will you? look at that. it's a rocket ship. that's because people are getting married again. i think they're not traveling. they're getting married. >> really? i think marriage rates are still pretty low. >> no, next lie. people get married, david. >> all right. i'm happy for them. i wish them all -- >> mostly first-timers. >> long life success. >> you're not going to my anniversary party. >> your anniversary party? wait, is there another one? oh, yeah. all right. jim, stay there. >> when we come back, i'll tell you. >> don't fly from seattle anywhere any time soon. stay there. we got another 50 minutes of show to do at the very least. we also got carl, because he's in nashville, and he has a

sneak peek of tonight's cnbc special, "cities of success." carl? >> hey, david, yeah, it's poetic that jim's at amazon, and we're here, because amazon is just one example of the fierce flow of capital out of that company to various local economies around the country, changing the face of major american cities. we're going to take a crack at nashville tonight with "cities of success," our new franchise, 10:00 p.m. eastern time. we'll talk about that as we watch futures, yields and a lot more as "squawk on the street" continues. there are some things that go better... together. burger and fries... soup and salad. thank you! like your workplace benefits and retirement savings. with voya, considering all your financial choices together... can help you make smarter decisions. for a more confident financial future. hey, a tandem bicycle. you can't do that by yourself. voya. well planned. well invested. well protected.

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welcome back to "squawk on the street." we're here in nashville this morning, and we're excited tonight to be launching a new franchise on cnbc in primetime called "cities of success," in which we examine american cities that have been reinvented themselves over the past several years and in the process are drawing in huge flowsof capital and jobs and investment. nashville is going to kick off our series tonight. a good example of all of those things. a lot of these dynamics were put into place years ago by former governors, for example, who courted professional sports teams, and now nashville has major league soccer, professional hockey, the nfl. we talked to former governor phil bredson, who talked at length about creating a dynamic in a city where people want to live, which then makes it easier for employers to hire locally. take a listen. >> there's a lot of different

needs in the community, and it makes no sense to dive after one of them and ignore everything else. this issue of trying to create a community that would attract young mobile people to want to come here and live, that's the foundation for the economic success we've enjoyed. >> there's actually a recipe there that works for the business. it says, i can have what my employees like and want, a big, diverse environment with a lot of bentertainment, but also get what we want, low taxes, friendly business environment. >> with growth comes the classic growing pains that other cities like austin are well aware of. housing, education, public transit. for our talk tonight, diane olick talked to john eldridge about the housing environment in nashville and how much that's changed. >> we don't currently have any houses that are built, completed, that are for sale that haven't been sold. we had this huge boom that went through in nashville that phased in and maintained a steady momentum.

>> jim, it's a pretty fascinating look. there's going to be several other cities on our list to look at down the road, but nashville is a great pilot, and i mentioned the amazon tie-in earlier. amazon's building twin towers here downtown, and moving or creating 5,000 jobs. nashville wasn't quite a candidate for that hq2 drama that we had a while back, but it's one of their biggest retail operations hubs in the country. >> i got to tell you, carl, i can't wait for this, because i'm so riveted to the idea that there are places you can go for opportunity, particularly for young people. that's why i really love this series. i have just felt over and over again, it is not time to be in new york. it is time to go west, young man, but not all the way west, because that's not that good. because amazon, which is where i am, is so huge in nashville. that says everything. is it possible they might be building an entertainment center? i got this idea.

could taylor swift be entertaining in nashville for amazon on prime, and we all have to be members? everybody's got to be a member. >> are you talking about the new "time" person of the year, taylor swift? >> well, you know what? i think that marc benioff has made his mark. maybe she'll come to the big gala, but i like the fact that where you are, 10:00 tonight, is a place that, frankly, people didn't used to go to. but when you get with people who are, let's say -- let's say a woman's weekend in new orleans, it's shifting. they go to nashville. and it's a change. it's a changed mindset, carl. how did it happen so fast? >> yeah, i think it's exactly the right point, jim. i mean, nash vegas is the thing you used to talk about, the music industry, the honky-tonks, the party atmosphere, but the health care industry makes six times what the music industry generates in terms of revenue in this city.

it used to be that employers would say, yeah, we're trying to get people to come. they know housing is cheap, which is a plus, but i'm not sure. now, it's the flipside. now they're dying to move to nashville, and housing is the friction because of the rising costs. we're at the headquarters right now of alliance bernstein, with an amazing view not far from where amazon is putting up their towers. they moved their headquarters from new york. only about a quarter or so of the employees followed, made that relocation, so they had to hire locally. so, you almost have to do the workforce first before you can pull those big employers in. >> it's absolutely true that if you move there and we have a work-from-home movement, obviously, that your headquarters is going to cost far, far less. you know, carl, i think if you go to nashville, everybody's earnings per share goes up. everybody's. >> not just that. as seth bernstein of alliance bernstein would say, you're the top dog in your industry. you're not competing with the inflows in new york where google and facebook and so forth were

creating share shifts in terms of employer attraction. now, it's the number one financial poll ifyou're going to move here in the world of finance. it's likely going to be for a.b. that replicates itself over several industries. >> i need to know about this series. i see industries moving in other places. this series is so important. where else are we thinking, and how have things changed in cities we may not know? >> i don't want to give the store away, jim. we're definitely considering a bunch of other candidates for future episodes. i'm sure you've got ideas. i'm sure chambers of commerce all across the country are going to put their hand up. but it's going to be cities that have made this pivot successfully and are managing the growth problems that inevitably come as we mentioned earlier. that's a big part of the puzzle is trying to figure out how to carve that path exactly right. some stories are well known,

like austin and salt lake, but others are still getting into that chapter. it's going to be a fun ride in the coming quarters. >> 10:00 tonight, i can't wait. i love new cities. i love youth. i love what people are doing. i think this is a terrific way to look at real america right now. >> back here at the new york stock exchange back in good old new york city, but coming up, we are going to have a west coast edition of jim's "mad dash." of course, we'll count you down to an opening bell about ten minutes from now. let's look at futures. again, you are seeing that we're set up for what will be a higher open. we have a lot more "squawk on the street" straight ahead.

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on capitol hill, senate banking committee hearing due to begin very soon. ceos from eight of the nation's largest banks will be testifying. that will include jamie dimon, brian moynihan of bank of america, was a guest yesterday on "squawk on the street," jane fraser as well. we're going to bring you live coverage. actually, it was two days ago. no, it was yesterday. q&a session. jim, any thoughts? we've gotten some of the prepared remarks. a lot of it is going to be the focus on the capital requirements and the basel iii end game and making sure you aren't too punitive, at least for the perspective of the banking executives. >> well, look, if you look at the way the stocks have acted, it's almost as if people feel there can't be a lot of growth. jpmorgan has had a bit of a move here. wells fargo had a bit of a move. citi, we heard from a high-level

official that they missed -- they're going to miss the quarter on trading. i think that what's happened to the banks, david, is they've become like common carriers. they've become like greyhound buses. we used to say, regulated industry can't make a lot of money, and i don't think anyone is really interested in these stocks. i think it's a shame, because, you know, look, if they don't do well, then we can't have a next level growth. but you know, david, these -- bank of america's been between 25 and 30 forever. >> true. >> i don't see the upside. >> all right, well, maybe the mid part of next year, you know, if interest rates do start to decline in a meaningful way, we get this super charged idea of net interest income and/or they also, you know, you know the story that i'm laying out there in terms of portfolios and the like, and those things run off. it all starts to get a little more positive. >> exactly right. >> yeah. we'll talk more about the banks. we've got some other news to get to as well from exxon and

mcdonald's. but first, we're going to get a "mad dash" and about five minutes from an opening bell right here at the nyse. don't go anywhere.

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leader in income, alternatives, and responsible investing. it's a cross-country "mad dash" as we like to say when jim jets off in the middle of the night to parts unknown, this case being seattle. we want to talk a little bit. one seattle-based company and also p&g. >> right. now, yesterday, i said that i thought the starbucks was doing well. i want to make this very clear. there has been a down tick in china because it's not coming -- let's say, not coming back fast enough. ge, i'll go there too. and i -- and procter spoke yesterday, and they also said that china is going to be weaker before it's better. procter took a charge. this is not unlike what they did in 2015 with venezuela. if you look at 2015, after they took the charts, the stock just moved. zoom, this is about argentina and nigeria. they're not making money there, trying to get away from places where the weak currencys are crushing. but david, both of these stocks

have widely telegraphed the weakness in china. you have, look, you've got procter down. you have starbucks from $107 to $95. i don't know about ge. i think like that. sometimes, the stocks are ahead of what people are saying and when laxman narasimhan says, listen, starbucks, china, not coming back as fast as, maybe you should say to yourself, that's why it's been going down, and buy some, not sell some. there. >> we had this conversation yesterday, and you know, you were sort of saying, listen, things are okay in china as far as your checks were aware. 12 straight days down for starbucks, by the way, coming into today's session. not particularly good, jim. >> no, look, i want to be -- make it clear. when they reported the quarter, laxman narasimhan didn't give us a feeling that china could have this slower recovery. that's why this was a bit of news. somewhat disappointing, david, i

admit. somewhat disappointing. but maybe the street is enough punishment. i think the punishment's been meted out. we would like to buy some if we weren't restricted in the travel trust. >> about 7.5% loss over the last month. here's the opening bell. look at the realtime exchange back at headquarters. here, doing the honors is "time," revealing the 2023 person of the year. if you haven't heard already, you can see right behind them. taylor swift. over at the nasdaq, six, the tony-award-winning broadway musical that did the honors. we've got a music theme here today with both "six" and, of course, the giant that is taylor swift. not to mention that, yeah, carl is in nashville. music city. it's a music-themed "squawk on the street" as we get started with trading, and you can see

we're up across the board. we're also keeping an eye on that ten-year yield, which i believe had fallen to some lows we had not seen in a bit in terms of the yield. obviously, price moves in the opposite direction, so when we talk about a rally in bonds, we're talking about prices going up, yields coming down. jim, sometimes it's worth reminding some people who are just tuning in, perhaps, getting to know the financial markets for the first time, what's caught your eye so far? >> exxon. you know the company well. they announced big buyback. they announced they're going to be -- do exploring more in the permian, and david, it does nothing, why? because oil is the key to this market. if it doesn't -- it doesn't hold 70, i don't know where the thing goes. but boy, is it going the way of the fed. and by the way, so is productivity. and also, where we see job not so growth, manufacturing, travel and leisure. it's set up. i'm not saying it's set up for a

cut. that's -- there's so many people who were talking about a cut. i think that powell wants to wait a little bit longer before he cuts, but look at that. look at crude. look at exxon. what does this say? it says that year over year, prices are coming down. >> ten-year, 4.48%, and you saw again, january, crude or -- yeah. we're in $70 level, jim, and that's, as you point out, shares of exxon and chevron and, as you might expect, the sort of broader complex there. the news itself from exxon, though, i do want to get to, because they do, as you pointed out, they raised their share buybacks to as much as $20 billion next year or per year, and this is as well from the pioneer close. remember, of course, they are in the midst of trying to close that very large acquisition of pioneer. they did get a second request, not unexpected, from the antitrust authorities for more information. that will, as expected, it will take some time, but they do increase that buyback.

you see some of the other things, jim. capex is going up, and you know, something i have been following since we did our documentary back in june of 2022, low-carbon solutions are what they're now talking about in terms of lower emissions opportunities and what they're spending to pursue those opportunities. that now goes up to $20 billion. it had been at $17 billion. again, this is over time. this is not all in one year. they do expect to generate $9 billion in structural cost savings by 2027. that's an addition of $6 billion. total structural cost savings are then brought to $15 billion versus 2019. so, in other words, by 2027, versus '19, they say they, jim, will have removed $15 billion in costs overall from the company. your thoughts? >> well, i think that they are the leader in carbon capture. they have got this gigantic project that also involves

lending. somewhat secretive about it. but maybe they've gone from being aware to being, maybe, the most aware of the damage that oil companies do. i really want to hear from -- i hope you're going to be able to speak with him. >> i will. we just put it up. you can take a look. darren wood is going to be our guest tomorrow. my guest right here at the new york stock exchange. i'm happy to have darren. >> oh, wow. >> yeah. first time we'll have seen each other in a little while. i think we saw each other at milken last year. >> does he have two plants? one plant on either side of him? >> the ferns? no ferns. no ferns. i miss that show. >> david, this guy, he is -- this pioneer deal is the biggest growth deal that you could have in america. i think that -- you know, i think that mr. sheffield has done an amazing job there. i love this acquisition, because it's going to give them growth for many years, and i love what they're doing in terms of carbon

capture because they've become the company that says, look, we're good actors, and that's going to help everybody in the oil patch, that exxon has become the good actor. >> it's interesting. the biden administration recently asking for or demanding, you know, more in terms of methane, more restrictions. amazon has been ahead on that in the permian itself where they are trying to get down to zero methane if they can or almost zero because, of course, it has far -- it goes away more quickly in the atmosphere, but it is the cause of, you know -- it's a lot more significant generator of carbon than it is -- or i should say -- yeah. i'm trying to say a lot of different things here, jim. >> when you get together with oil executives, you know what they talk about in terms of methane? >> what? >> i'll give you a hint.

moo. >> cows, cows, cows. yeah, i knew you were going there. i know. it's from their burps too. all right. let's move on. you want to go to mcdonald's? let's do mcdonald's. they also had some news out this morning. >> growing a little faster than expected. this is one of those where they never go wrong. mcdonald's never goes wrong. they did all the right things, but you know what, david? i think it's a little boring. there are 50,000 stores. i like some of the other guys who are, frankly, not talked about enough. i like qsr, restaurant brands, and david, i like places that are kind of no one's talking about, which is amazing, which is yum. i think yum is cheaper. >> look at the move that stock has had. come on. that's a nice move right there. one month, 5.4%. >> it already happened. people bought it in anticipation. >> all right, let's give people the news. it was out at 9:15. they are going to increase their digital loyalty to 250 million active users, they say, and

deliver $45 billion in sales by 2027. getting a lot of 2027 estimates here from both exxon and mcdonald's. or at least goals. they're also aiming for 50,000 restaurants, as you just pointed out, by 2027. and they expect to, get this, jim, apply generative a.i. usage cross restaurants in a new google cloud partnership. what do you think of that? yeah. >> i well, i mean, i don't know. did it say that the mccrispy is going to be good? >> what do you mean? they just reworked the whole cheeseburger. looked pretty good, actually. i haven't had one in a very long time. looked pretty good. >> you haven't been there? >> i haven't. i haven't been to mcdonald's that often, no. >> i want you to name me a company that does not talk about a.i. one of the s&p 500s. give me a name. >> i can't. they have to be. >> me neither.

>> they have to be thinking about it. they have to be testing it. or they at least have to be talking about it, even if, in fact, jim, as you know, they're doing absolutely nothing. >> david, they should at least rent the cloud with snowflake so they can say they have some involvement. you know, out here, it's very interesting. people have a little chip on their shoulder, because amazon was not first. but i think when people think of a.i., not generative a.i., but you know how it comes up? if you like the -- this baby powder, you will like these shoes. i mean, that's, like, deep mind, because they're in here. but you know, david, if you go to temu, it says, like, if you like this cheap t-shirt, you will love this bargain basement hoodie. that thing is, like, wow, that stuff is at the bottom of the barrel. people love it, though. >> they do. >> amazon's down? the stock is down? do they not know i'm here?

i'm here. >> you're there. but maybe it's going to be what comes out of your interview that will actually move the stock tomorrow. who knows, jim? i don't know what you're going to get. you going to suspend a lot of the show with him? is it going to be most of the show? i hope so. he's that important >> not enough. we like to talk a lot of people, and we're out here. david, we have to talk about campbell's soup for a second. >> okay. >> this is a company -- stock is down 25% -- that has been missed quarter, missed quarter, missed quarter. they made quarter, and i think people aren't thinking about the glp-1s for a second. they got a lot of snack foods, and the numbers are good, and he's turning it around. >> what happened here? they just sold more soup? >> snacks. snacks are good. pepperidge farm. >> more goldfish? >> pretzels. >> love those goldfish. >> people like goldfish. >> they're so good. love it.

i think they're better than cheez-its, right? >> you're going to keller nova? >> how's that done? >> they won the ncaa a couple years ago, remember that? and then jay wright left. >> i know the knicks have a lot of players from kellanova on their roster. they got josh hart, brunson, divincenzo. we couldn't beat milwaukee last night at all. >> if campbell's is doing well, people do have to take a hard look at kellanova. >> i like that read-through there. as we said -- >> google a.i. -- it's google a.i. david, by the way, people are worried out here. they're worried about the thing you're worried about, which is the takeover of the world thesis. >> tell me what you're hearing. >> generative a.i. knows -- >> yeah. listen.

i'm no less worried than i have been. listening to musk last week with andrew, always trying to read and listen to podcasts, nothing is making me feel better about things, jim. i don't know what you're hearing out there, but i'm curious. article today in "the journal" about the fact that none of these governments are going to be able to keep up in terms of true regulation and/or various nation states that are going to be developing things at different rates or see an opportunity here, not to mention, obviously, the profit motive, which is going to be behind so much of this in terms of the development. the capitalists are in charge, and ultimately, when we get to general artificial intelligence, when this thing exceeds our own intelligence and becomes our digital god, as elon musk seemed to indicate could be really not that many years away, it's got me worried. what are you hearing? >> well, i think people are concerned that one of the best

uses is to summarize this report. people are worried that it may slant in a particular direction. there could be a way that, in your mind, you don't realize it, but there's something political, something it skews left. i know this is not something i'm worried about, but i do think when you look at the summaries, david, a.i. tends to be a yes man. it tells you what you want. if you have a certain political view, it's entirely possible that you get your view in an echo chamber, and enththat's no going to help our country. >> not to mention all the deep fakes. by the way, the explosion in phishing and everything else, cybersecurity you've talked about so often. it's creating so many more threats and just being able to create them in a much more robust fashion as well. >> look at sentinel 1, the letter "s," this is a second tier, some say third tier cybersecurity company. doesn't matter. everybody needs cybersecurity

because they can reprogram us. all this stuff is true. i've been spending a lot of time trying to rebut things you're talking about, and i'm having trouble. i just think that, in the end, it can be skewed, and we don't even know who's skewing it. it's a black box that may be making us feel more confident than we should be. it may be echoing what we want to hear. and i don't know whether i can trust its as much as i thought i could initially. >> yeah. not to mention, of course, we are, you know, less than a year away from a presidential election. you can only imagine what's going to heat up in terms of some of the threats you're talking about, misinformation and the like. the main thing i hear so often about the use right now of generative a.i. is coding, actually, and the advances that it continues to make, jim, the productivity it's able to create already for companies that are able to use it to help them code, fill in vast amounts of code where then the engineers only have to sort of focus on certain things. so, that comes up a lot.

and i did want to mention -- >> that's positive. that's the microsoft view. >> yes. >> and microsoft view is you don't need to go to stanford and get a com sci degree to use a computer. that's very democratizing. right now, there's only an elite that can use a computer. everybody can use it when you can say, hey, listen, tell me how mcdonald's -- give me three highlights of the mcdonald's -- give me three highlights. it's just that i don't know what those three are going to be. could it be skewed? >> right. should mention as well that elon musk's efforts ex-a.i. filed to raise as much as a billion dollars to sort of continue his development of their generative a.i. product. and then i'll take a look at shares of tesla, jim. it's kind of had a little bit of a nice move, up another 2.7% this morning. you know, you'll see some of these charts that indicate, listen, even though demand in

the u.s. may not be growing as fast for evs worldwide, there is still a belief that it is. a lot of that is being stated by cheaper evs from china, but the bulls will say, hey, it still indicates there's a great deal of growth ahead for evs worldwide. >> look, i've been saying to people, if you want to own ev stock, don't buy charge point. don't buy plug power, which is hydrogen. buy tesla. i mean, they're the ones that have made it so that it's incredibly profitable. it's the largest selling car in the country. the numbers in china are good. their european business is good. go buy a company that's making a lot of money. if you look at the ones that are up there right now, tesla is the most lucrative. >> we mentioned the banks. you mentioned something with citi, but that stock is actually up over 3% this morning. one of the bigger beneficiaries right now, it looks like. and i don't -- couldn't find --

i didn't know what you were referring to when you talked about a warning on trade. jane fraser is in the middle, as you see her, as tim scott starts some of the -- yeah, some of the statements. we're waiting for q&a, we should point out, from the bank ceos, of course, and we will take that live once we get it. jim? >> you know, look, i'm watching deere go up. that stock has been crushed, and analyst recommendation. analyst recommendations are moving things right now. the citi is a surprise to me because the trading revenue was weak according to their cfo. but you know what? look, david, when rates come down, as you said, you're supposed to buy the banks, and rates are coming down. what can i say? definitely coming down. >> yeah. and how are you feeling about that broadening out that you were talking about with me last friday? >> i think if the financials are part of the broadening out, then we're going to be in good shape. if it's going to be a broadening out that involves inflationary stocks, no, thank you.

i don't want it to be materials that takes us up here. i want it to be financials. i'm cognizant, by the way, of something that carl talked about with, he's got "city success" tonight. health care. we have seen a decline in health care. yesterday, did you see the tug of war between cvs and the drug stocks? >> yes, i did. >> i mean, cvs is laying down the law. who is cvs to lay down the law in america? >> well, they go to cost plus as they say they're going to, start rolling out next year, that's going to be significant change. they obviously -- >> it would be. >> yeah. lot of people still get their pharmaceuticals from cvs. >> i went to a dwayne reed yesterday. i needed to get flonase. i found the guy, and eophe open it, and i got flonase. it was amazing. normally, i go to amazon, i happen to need flonase that moment. i just go to amazon and i put it on a monthly and i get flonase

the rest of my life. how about that? >> how about that? you should have filmed that moment. it's quite a moment. somebody opening the cabinet for you and giving you the flonase. >> it was incredible. i rang a buzzer, and three minutes later, i got the flonase. >> only three minutes? >> by the way, andy jassy might have gotten it to my door in the same time. >> i think it would have been close. between three to five minutes most likely. jim, stand by. stand by. got a reminder that you can get in on the cnbc investing club with jim. sign up, find out more, c cnbc.com/jointheclub or point your phone at the qr code on the screen and go right there. before we head to break, it is time for the bond report. let's give you another look at treasurys. of course, we talked about them a number of times because yields have been down. in fact, to levels we haven't seen on the ten-year in a bit, although we have crept above once again the 4.15% level. we'll be right back.

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take a look at the top gainers on the s&p as we're 21 minutes into the trading day. campbells soup right near the top. we talked about that, the quarter given concerns the glp 1s pressuring some of the companies as well. i can see carnival and norwegian diut the top 5. we're back after this.

all right. that means it's time for stop trading. jim, what are you thinking? >> look, in a tightening cycle the one group you're supposed to be selling or shorting is housing, toll brothers up 80% this year, gross margins going higher. once again this is confounding people but it is a housing shortage and people want to work from home, toll brothers, huge beneficiary, just a gigantic move in the stock. no one expected it but it's happening. >> is it -- it's just going to have to be lower mortgage rates that get things moving and if,

in fact, that day comes, do you on the other side say toll is no longer worth owning? >> historically that's when you should own it. >> right. >> that makes it seem like it's a secular growth story. home building is the most cyclical in the world but it's changed. their eyes don't get too big. they say we'll build to suit, we won't get more aggressive. and they've become gross profit machines. it's surprising how brilliant these companies are incredibly smart, nothing like our parents' companies. >> and that's reflected in the percentage of overall sales that are new home sales, which is levels we've never seen given the overall lack of sales. >> jim, let's get to mad. because we know you have a big guest tonight. i don't know what else you may have on the show as well. >> we're focussing andy jassy,

this is a tnp show, take no prisoners. i feel like jassy knows more about what's happening with the country whether it's with a.i., the cloud, or retail. he's the man, and i cannot wait to sit down with him. >> so many places to go that are of importance. it really is. a great interview. a great get. >> thank you. >> i'm not sure when you flew, how you flew, middle of the night i suppose, it had to be. it had to be. >> yeah. best way to fly. >> best way to fly. >> that's how you get things done. >> tuesday nights, they're not for sleeping. >> i don't like sleeping on a tuesday. >> no. jim, good luck. see you later. >> thank you. coming up right here, by the way, speaking of the consumer, we have an exclusive with walmart's ceo, doug mcmillon. also ahead, eight ceos that

include moynihan, dsolemn -- there's brian moynihan there. they're in front of the senate we'll bring you the q&a.

shot of capitol hill right now where the nation's -- the ceo of the nation's eight biggest banks including jamie dimon, brian moynihan, they're testifying on oversight of wall street firms. we'll take you there live as soon as the q&a begins. good wednesday morning. welcome to another hour of "squawk on the street" i'm sara eisen with david faber. carl is on assignment. look at stocks rights now. we have a rally building here about a third of a percent. every sector is participating except energy and staples. what's leading, the cyclical groups, like industrials. financials that sector up about three quarters of 1%. there's the picture of treasuries and the rally continues there too. it's the everything rally these days with bonds and stocks.

see it more on the long end of the curve with the 10 year at 415. two year 46. ahead this hour an interview with the ceo of walmart, doug mcmillon he talked about everything from walmart strategy, consumer demand, inflation, deflation, and much more. >> deflation, okay. looking forward to that. let's get to leslie picker on capitol hill, ahead of the q&a portion of the senate banking hearing. what's at stake today, leslie? >> good morning, david. you know, there's significant focus on these new proposed regulations on banks calling end game, it's already very much in focus today. the rules are supported by many democrats, despised by republicans and ceos alike. they hike capital requirements for the largest firms in the country. so democratic senator sherrod brown who leads the committee

pu kicked off with a push for stronger rules. >> you'd rather fund risky trading than boring bread and butter small business lending. you can still lend to small businesses and homeowners you may not increase your frprofits quarter over quarter as much as last year. >> senator tim scott opening with a pointed critique of the rules saying they leave fewer dollars in the hands of americans who are looking to, quote, experience wealth in america. >> we think about the proposals, not of good regulation, but of a nightmare proposal caused basal three end game. we should ask ourselves how does it transfer to the average american working living paycheck

to paycheck? it makes the american dream harder to achieve and access to capital for some folks who started where i started, virtually impossible. >> senator scott said the risk higher capital rules will push outside the banking sector. echoing comments that several ceos plan to remark. you can see jamie dimon hitting on the risk that the higher rules will move outside that regulated sector. >> testimony from the eight ceos have gun. nearly all of them are expected to lambaste the rule as going too far while highlighting the potential collateral damage if passed in their firm. >> look forward to more color from you and this hearing as we get going with the q&a. leslie picker on capitol hill today. looking at the markets, david, we're stronger again on stocks and bonds and data to

chew on. we have the private sector read on jobs. the adp report which came in a little bit soft and that's what the market has been looking for lately. what the fed is looking for, signs of slow down without recession. private sector job creation did slow. companies added 103,000 jobs for the month of november. it was downward reviced. >> this is the adp numbers. >> yes. pay came in lighter, 5.6% increase in annual pay, the smallest gain since june 2021. and the breakdown, i thought it was interesting that goods subtracted so all the growth in jobs for the month came in the services sector, but not in leisure and hospitality. which has been a huge leader post covid recession in 2020. we actually saw a loss in jobs for leisure and hospitality in the month, 7,000 jobs lost.

so normalization i think is the key here does it have a correlation to the big government jobs on friday, not great. we're expecting 190,000 jobs to be added in the month. last month there was -- >> adp they diverge a lot. >> last month it was closer. but you can look at the trends. you add this to what else we've gotten in terms of evidence of a slowing labor. yesterday we got job openings which showed a much lower number in the 8 million range than we were expecting. the quit rate which i was watching stayed the same. well off the highs of 3% where we were last year. so just increasing signs that the labor market is softening, which would what you expect to see after an inflation shock and rate shock and so far there's not evidence there's anything super troubling or anything like that. i go through the commentary from the companies. we got dave and busters today, for instance -- >> how do you characterize them?

>> arcade, fun -- >> travel and entertainment. >> it's not good spending. but dave and busters is seeing growth. i think from a trends perspective, the relative to 2022 and 2019 have improved throughout the third quarter. subsequent to the quarter on the walk in side it's continued to improve relative to last year and into 2019. toll brothers i thought was also strong. >> jim and i were talking about toll brothers the stock has had an incredible move not what you expect with mortgage rates what they've been. and inventory so tight, they've been keeping a lid on things as well and building to demand. >> the supply. >> as we said many times but i'll repeat, the percentage of new homes as a percent of overall home sales has never been higher, which shows how few

homes are being built because people don't want to leave mortgages that are lower to take on a new one that would be higher. but he had positive things to say. >> and on top of the tail winds you just mentioned, they now have something to look forwards to, which is lower interest rates and lower mortgage rates which is what we're seeing and that came across in the quote here based on nonbinding deposit activity through the first five weeks of our first quarter, demand remains solid as we approach the spring selling season in january we are encouraged by the recent 75 basis points drop in mortgage rates. is it enough to get people back in buying new homes? they're still higher as diana olick points out but moving in the right direction for people. that's for sure. overall take on the economy, as we get more data points every day, that you share with us. soft landing so far.

>> soft landing intact. >> looking good. >> i pulled out one chart i thought was good because we got the pmis. the manufacturing data from around the world. it is a global story. here's citi group, shows the picture. the blue line in the middle is global manufacturing blended rate. it's below 50 so still contracting. however, it's ticking up. and citi economists suggest maybe we've seen the bottom in global manufacturing. the orange line is developed markets so worse shape than emerging markets. the green line is emergiing markets above 50 so expansion territory. so this is a signal, manufacturing is. if we do continue to see a little bit of recovery it could mean we've seen the bottom in manufacturing and trade and that could be the good news going into next year. >> right. market continues to think the fed is going to cut next year. >> the question is when, first or second quarter? markets aiming for may.

i think a lot depends on the economy and the consumer. and every day we talk about all these clues we're getting from different companies. i went straight to the source, the biggest retailer in america. to find out what is going on with the consumer. yesterday afternoon p i sat down with doug mcmillon, the ceo of walmart in a revamped walmart super center to talk about his game plan for the holiday shopping season and what is going on with the consumer. listen. we're a retailer so we have things going on, ecommerce wise, store wise, marketing wise and we had a chance to walk around and show you what's happening with the remodels here. we have quite a few stores that have been refreshed and that's excited headed into the christmas season. >> how is it going so far? how is the black friday, cyber monday, thanksgiving period? >> we've released our third quarter results early in november and we talked about the fact that we saw softness at the

end of the october but november started off well. what we said at that time is we expect that black friday will go well. and that things may be a little soft until you get closer to christmas. because customers are really price sensitive right now. they're prioritizing their orders and they know there's a chance the prices might be lower right before christmas or after christmas with clearance so that's what we expects to happen. >> what are we seeing in terms of traffic around this important holiday period. >> we're continuing to see traffic growth in store plus more transaction growth for pickup, curb side and delivery. as a company our in-store business is continuing to grow. we expect the trend for faster growth for curb side and delivery will continue and we're happy to serve people however they want to be served. customers these days shop. it's fun to come in and pick up what you need for thanksgiving and also look at what was

available for black friday. and that's the behavior we're seeing. >> what about by income level? it feels like it's been bifurcation? >> everybody is price sensitive. >> we went through the period of inflation, which has changed. we're starting to see deinflation, which we're happy to see. as the price sensitivity went up, everybody was looking for value and we did well and continue to with higher income. >> higher income trading down, is that still happening? >> we don't like to think of it as trading down to come shop at walmart. it's more like people looking for value. as we've shown you in the apparel category we have better brands even though they're higher price points than in the past so walmart has appealed to some people in categories forever. but these days we're focused on offering customers what they want in apparel and home and other categories that have more of a fashion component so we can serve everybody better and bring

al along services like walmart plus to get free delivery and hopefully retain the customers that have been with us. >> you mentioned the general merchandise categories which have been weaker compared to staples like food. is that reversing? >> not in dollars but in units we're seeing gms come back. we've done well in gm through the year, back-to-school was pretty good, things better in the second quarter than the first quarter. it's interesting to watch what happens in the general merchandise categories in the year ahead. we're down in pricing in the general merchandise categories, nonfood, by about 4% and seeing food about where they were a year ago. today if you're a customer shopping our app or walking through the store you see rollbacks. our toy department has toys under $25. >> you couldn't do that last year. >> hot wheels are still selling at $1.18.

barbie is hot but under $25 is an important price point. >> is that helping sales? >> it helps sales but you have to sell 6% more to have a dollar increase in retail. but we'd rather that lower than higher prices. >> you got attention for using deflation word. so where is the deflation happening? >> the general merchandise categories for some number of months we've seen the trend coming down, as i mentioned prices are lower than a year ago by 5 or 6%. on the food side, the fresh food categories go up and down in a more fluid fashion. beef is higher than a year ago. chicken is less. that always happens but the dry groceries and consumer categories had a bit of stubborn inflation in it for a period of time. we're seeing that change. on the gm side we're below a year ago. on the food side that's where the trend is headed.

what we said at the end of last year, there's a chance we'll find ourselves in a deflationary environment in total. >> how do you drive growth in that environment? >> sell more units, grow more market share but it's good for customers they get lower prices. >> do you expect a drop off in 2024 if the prices continue? >> we haven't changed our plan, expecting to drive a lot of growth. we're well positioned with store side and delivery and a lot of upside related to ecommerce deliveries whether it's from stores or from our ecommerce fulfillment centers. we've made a lot of investments to have a better ecommerce experience and so we expect to grow regardless of the environment. >> the numbers have been good. so is that a continuation from covid habits or something you're doing specifically to change the appeal? what's driving it? had. >> people love to save time. if they can get walmart price on a basket of food and

consumables, that's what they want. so covid definitely accelerated trends that were happening. but last quarter in walmart u.s. we were up 24% in ecommerce that's driven by pick up at store level, delivery by stores, which are either first party owned or our third party marketplace which is growing, enabling you us to develop more services, have an ad business, fulfillment service business things like that. >> are you taking share from other ecommerce retailer like amazon or is it your own customers? >> we're growing share across categories and i think now you can get a walmart price in a broad assortment anyway you want it. >> you described the consumer as softening, that's what you're seeing in terms of the trend. what do you think is causing that? is it the inflation? there's also a number of factors hitting right now. we're seeing fewer, for instance, the food stamp programs, the assistance that was happening during covid

running out. the student loan payment resumption. what are you seeing as a mover? >> if we had been talking last spring or the beginning of last year, i expected more softness by this time of the year than we're actually experiencing. and i think employment and other things have propped that up. you just listed some things that would be downward pressure but also some positive -- there are positive things happening. so all in all, i'll look at this year and it's stronger than i would have thought this year that we're getting ready to wrap up. next year is a different story. i don't know what next year is going to look like as credit balances go up, the balance sheet of the consumer is not as in good a shape as it was six or 12 months ago or a year ago. but we still may find we're back to growth rates that look like 2018, 2019 in terms of total retail. we just think our opportunity is greater than that and we can grow faster than whatever the retail market grows. >> are you bracing for a recession? >> no.

we always manage our expenses. we want to play offense. you saw the inventory in our store today. we are ready to drive sales and e we'll do that through next year. inventory levels are in good shape, instock where we need to be in stock. >> you've been growing profits faster than sales. i'm curious automation how much is that a factor in places like fulfi fulfillment? >> when we look at our multi-year plan there are two levers that grow income, one is automation the other is the way business model changes, as ecommerce grows, we have membership income, marketplace service rates, we have fulfillment services, et cetera, the things i was talking about advertising. but as it relates to the automation side, it's early days. we just started in the last year or two to put some of these automated storage and approval systems into our centers so the

upside from that automation will play out over a period of time. you can think of it as a four or five year time horizon. >> you expect it to increase profitability. >> it'll help in a number of ways, customer instock, inventory turn, accuracy generally which is a lot as we try to optimize the supply chain and help us with productivity, changing the back room of the store in a receiving process in a way that helps our associates. >> what about generative a.i.? >> we're excited about how jen generative a.i. is helping with search. it's more of a solution to say i want to prepare for a 7-year-old's birthday party. you get a better answer than what we could have done in the past. i'm excited about how search and chat will be more personal and relevant in the weeks and months to come. we can use generative a.i. to help our associates. everyone can learn about their

job and know what their next task is to do. on the supply chain, demand forecasting is the key to success. the way data and more intelligent algorithms are getting smarter with our own large language models and those of others together with physical automation. it's a different supply chain in a matter of a few years. >> where are you in that process? >> call it a year or two in on about a five-year plan. it's different, depending on whether we're talking about the automation of our perishable distribution centers, ecommerce centers. we had a conference earlier this year where we tried to lay out all the changes and they have different time lines but generally speaking this is a four or five year journey from here. >> do you think investors appreciate what it is for generative a.i.? >> probably early days. we need to know what we can do

with it and communicate it, and that's what we're going to do. >> you said it could help with associates. would it lead to fewer associates? that's something that people are wondering about. >> probably fewer in the back room and maybe if technology can help us at the front end. but the sales floor probably gets more people. what we see in the supply chain it's the same number of people with more productivity but their jobs changed. i was in lancaster, texas a couple of weeks ago, visiting with associates there who work in an automated facility and their lives are better and they make more money. they're not walking ten miles a day, not lifting as much weight but supervising the automation that's there and getting rewarded for it. that's what we like. to have people extend their career and when work is over, be able to go coach their kid's soccer team rather than being tired because they lifted so much weight. >> fewer back house employees -- >> we're doing more deliveries

with associates over time. i think what we've seen happen so far is as we applied technology for the picking process in the store, for example, is that job composition has changed but we have about the same number of people. i suspect over the long term that's probably what happens with us. there may be times when you have a bit fewer and times when we have more and there will be some changes like by location when the texas facility becomes automated and it wasn't. but in general i bet you over time because we come up with new ideas to grow sales we end up with the same number of people making more money. >> big call there from doug mcmill ron. next hour you can catch more of my sitdown with him. we talked about the job market right now, whether walmart is hiring. and we talked about the lower basket sizes. you want to hear what doug mcmill mcmillon says about what he

thinks the longer term impact from some of the weight loss drugs. >> he's been there since 2014 as the ceo. i remember having met him when he was running international many years ago at this point -- >> he's been in a lot of jobs there. >> he has. when you look at a ten year chart even as well. after a first rough year in terms of the stock market, stock performance you can see. he has really reengineered the entire company, especially the digital efforts that he talks about with you. when you think back to 2014, they were in the news so often in terms of wages and other things we do not discuss nearly as often any longer when it comes to walmart. i think they raised their wages. >> we were in a supercenter and that was one of -- he mentioned this at the top of the interview, the remodelled ones. they're seeing 15% better traffic growth in remodelled -- this was not the walmart i grew up with in cincinnati, ohio.

it was clean, beautiful, and it was fun and crowded. which i don't think was staged because the ceo is there. i think that's the vibe at the new walmarts. which is definitely a point of the strategy. the other thing i got to see upclose was how the stores have turned into fulfillment centers. and the problem they have right now is they don't have enough space and capacity to meet all the demand they're getting from online. so they are now building out sort of these warehouses in the back of the stores or the side of the stores because there's so much online ordering. and a point that mcmillon made to me is the online orders are not from different customers. they're the customers that come in had store and what they're seeing is it's not an instore customer versus online customer it's a customer that does all of it. and they're incorporating the q r codes into the store hoping to make the prices go digital at some point in the coming months so employees don't have to

change the prices on every items in the stores on the shelves. they want to digitize that. >> i see. >> that's why i spent so much time on automation there because it's boosting profits faster than sales. >> and you were asking key questions in terms of weather it will replace employees or help them? >> he said, no. not replace them. >> they have one -- not still. they have 1.6 million employees. are they still the largest private plemployer? >> i believe so, yes. >> amazon is getting close but it's still an enormous company. >> they expected some softness and acknowledged it but said we can grow faster than that, but it wasn't as bad as he thought it would be at this time, last year when he talked about where the consumer was going the the disinflation helps. it's a little bit of both. >> a little bit of both.

>> saying general merchandise prices are lower than they were last year. we're taking a break as we await commentary from the ceos of the biggest banks. there's david solomon, the ceo of goldman sachs. tonight at 10:00 p.m. eastern do not miss the launch of "cities of success" exploring cities that have changed into power centers, hosted by our own carl quintanilla. >> we're in nashville, tennessee today examining cities reinventing themselves and pulling in big flows of jobs and investments. tonight our prime time special itof success: nashville" 10:00 p.m. eastern time. with non-melanoma skin cancer. 40 years later, i've had almost 20 mohs surgeries. i had just accepted that the pain

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we continue to monitor the senate banking hearings set to start q&a in just a few minutes. you'll hear questions and answers from lawmakers, two of the top bankers. let's bring back leslie picker and emily wilkins both in capitol hill. what is the vibe right now, emily, from lawmakers? we go in waves of hostility towards big bank ceos. >> reporter: you'll see a lot of that. it's going to depend whether a democrat is asking questions or

a republican is asking questions. most of the republicans i talked to, including today in the halls said they want to focus on in had on the capital requirements and they say they want to be able to cut through the noise. they want to help banks make the case that this proposed regulation would not be helpful to consumers, small banks and small businesses. of course you heard in his opening testimony chairman sher rod brown come back and refute that. i think from democrats you'll hear a wide array of topics to touch on, including climate, diversity and inclusion, and more minute things they want to hear from the banks on. remember every senator only gets five minutes so they have to prioritize what they want to ask. because it is not that much time when all is said and done. >> leslie, they want to talk about the basal three end game rules and how they should be

remanaged. they made their opinion osthat clear. what else are you looking for? is it the economy? anything else that you think puts them in a more uncomfortable position facing the lawmakers? >> reporter: that's it. i would say any comments about the macro would be really important here. we're going into an election year so the lawmakers are looking to get any sense of things maybe under the surface that may be going on with regard to the economy and how that plays a role in 2024. so any indications will be important. jane frazier did comment on the economy saying a recession was still on the table although the base case was to expect for a soft landing -- >> leslie, i'm going to break in on you because sherrod brown is about to begin the q&a and we want to take every minute of it. listen as we listen on senate banking. >> to deliver value to your shareholders. what we did not hear was any concern your firms would not be

able to meet the anticipated increased capital levels under basal three end game. i would like you to set the record straight. do any of you have any reason to believe that your firm would not be able to achoieve the increasd requirements if basal three was adopted? raise your hands if if you think you can't. thank you. i think you've indicated your firms will be able to meet the capital requirements. it leads me to conclude that this proposed capital scan dards are not to onerous. american support for unions is at a half century high. unions ensure that workers share in a company's success through better pay and benefits, control over their schedules, greater stability in each of their personal and professional lives. workers at two wells fargo branches will be voting to

unionize this month, dozens of other drives are in the works. wells fargo recent scandal highlight the pressure that under work and overpaid workers face. one worker said the executives don't have to deal with the consequences of their decisions in a direct sense but we do. i appreciate your willing to talk one on one about this with me. i remain concerned about unfair labor practices and reports that wells fargo has geared up in response to the union campaign. will you remain neutral as these employees vote to organize. >> chairman brown i agree with your sentiment about the importance of our workers and employees. we've done a tremendous amount to support them and will continue to do that. we believe that it's best that we have a direct relationship with those employees and we do intend to exercise our right to speak with them, to make sure they make an informed decision. >> thank you.

>> it was an opportunity to show the american public wells fargo, it's unfair that it's not at your bank. >> interest rate reductions cost service members $100 million between 2007 and 2018. you can unilaterally act to ensure service members receive those benefits they're entitled to. do your banks proactively check authorized military data bases to identify accounts that may be eligible for escrow protections? mr. scharf? >> chairman, we have huge respect for those in the military. specifically to your question i'm not sure but we'll check and get back to you. >> mr. moynihan? >> we follow the provisions on an annual basis we retroactively

looking back, after we get notification about $180 million a year we send back to service members, including fees which we're not required to rebate but we rebate them. i'll check to make sure we're looking at all available means but we comply with the law. >> mr. diamond? >> i'm sure we comply with the law. we hired 18,000 veterans the last couple of years, we support the military, we hired 3,000 military spouses. so we stand 100% behind the classes that we hold in the highest regard. >> ms. frazier? >> similarly we are proud to employee many veterans and incredibly grateful for everything they do for our country. we make extensive investments in ensuring we comply with the laws and we do tap into the database. >> thank you. thank you for your candor about that. i urge you to check if they're

eligible for escrow benefits. the answers were helpful and we'll be back with all four of you how we can help do that proactively. there's plenty we don't agree on, it's clear. i want to finish where we agree, supplemental security income. ssi provides a lifeline for 300,000 ohioans. the problem is ssi's eligibility rules haven't been updated by congress, that's on us, in 40 years. they're now so outdated they lock people in poverty. ssi's asset limit is the most aggressive anti-savings provision in federal law. i have a bill with senator rounds of this committee to raise the program's asset limit and stop punishing people for working and saving. i know j.p. morgan is supportive. tell us how it affects j.p. morgan and why you're so supportive and i would like to

ask all of you if you would join mr. dimon and senator rounds and me in support. >> we have employees who don't want us to increase their salary because if it goes over a certain amount they can't get that benefit or have assets over $10,000. it should be fixed we support it and will try to be as helpful as we can. >> would you agree to support mr. dimon's position and mine? >> it sounds like something e with'd be willing to support. >> ms. frazier? >> fully and wholeheartedly. >> mr. handily. >> we do support. >> mr. solomon. >> we do support it. >> mr. gorman. >> yes. >> thank you all. senator scott? >> thank you, mr. chairman. question for the panel. the chairman asked a question can you achieve the increased capital requirements. my question is can you achieve the increased capital requirements without negative consequences to the economy and

to lending? >> senator we have concerns that some of the items in the proposal will lead us to either increase the price or to reduce the amount that we lend. >> there's a chart in the mpr that looks simple, it says here's the rwa before the proposal and after the proposal, 24% increase. that's a reduction of capacity of this industry to serve its clients. no questions asked. it should have been used to create the incremental, it has to be used to sustain the same activities with no risks from the dray before to the day after and what the enterprise does. this is about using our capital, whether we have it or not, have it to meet the new requirements, to support additional activity, not the old activity which doesn't help the american economy. >> one of the frustrations you

hear is this question should have been asked before it went out. we have to hold 30% more capital than international banks in the united states of america for every loan. a lot of loans have fallen between -- have become unprofitable. a lot of loans don't make sense for our company, small business, cdfi, solar, wind, middle market loans. certain trades you do with pension plans, et cetera. the work should have been done beforehand. by law, the qis was the qualitative impact statement should have been done beforehand. we had ten years to do this. it's shocking to me that we're sitting here ten years and talking about what it's going to do to small business and we have to analyze it today. hundreds and thousands of pages responding in a detailed way to every one of these things but it was not thoughtfully done. i'm not sure it was shared fully among all the regulators. this should be relooked at. >> before i go to ms. frazier.

my assumption is everyone is going to say with consequences it's going to be negative. so let me ask a different question. the impact and perhaps the unintended impact from basal to end game. >> we talk about the american consumer as if there's one generic consumer out there. in a state like south carolina where we have farmers, the impact on farmers and access to not only credit but liquid in the hard times can you give me a 30 second reaction to will this have a negative impact on the rural communities, need derivatives. walk me through that in a second. >> certainly. thank you for your questions, senator. this will, to your point, increase the cost of borrowing for farmers in rural communities. it could impact them in terms of their mortgages, their credit

card and it could impact their cost of any borrowing they do. for a farmer, hedging your commodity costs and prices is an absolutely fundamental piece of providing stability and ability to sleep at night. this is the cost of derivatives that would increase materially and that would have an impact on farmers to do a fundamental component of risk management. it could also impact access to c credit. it's the cost of borrowing, access to credit and fundamental tools they need to manage their stability of income. >> you said something earlier that i thought was important mr. solomon as we discuss the proposal and the impact on lending and folks like me that come from poverty or looking for the ability to achieve the american dream.

is it going to make our financial situation safer, to make sure our financial institutions are able to meet obligations and responsibilities under an even worse case scenario and your opening comments reflected that yes, we can meet a more disastrous crisis. can you walk through the regulatory that exists and how basel end game would make it harder for small business borrowers but not necessarily making our economy safer. >> i tried to highlight in my opening comments and mr. gorman highlighted it quite clearly. these stress tests are very significant tests. they look at very severe shocks to our balance sheets. i highlighted 50% decline in

equity prices over a one year period on top of a simultaneous shock that has looked at 30% instantaneous equity declines so very severe shocks we have not seen. that puts buffers in place to protect the systems but, of course, a sound and secure system is imperative for capital markets and we can have debates at the margin as to whether or not there are things to do to strengthen the system but a wholesale increase of 25% capital in the largest banks with provisions that affect different activities i think is punitive to economic growth and doesn't strike the right cost benefit analysis. we need to make the system secure, the system is in good shape, that doesn't mean there aren't things that can't be done at the margin but this is a wholesale change that leads to problems. ms. frazier highlighted one

example, talking about farmers. you can look at airlines hedging jet fuel. look at other derivatives that gets passed to consumers, gas being hedged to utilities which gets passed to consumers. and there's a provision called sft under the rule that allows institutions like ours to borrow securities from pension plans and give cash that increases the returns, allows them to use assets to increase returns. capital would increase by eight times for those transactions which would make it less attractive for pensions to access that tool for returns. >> senator scott reed is recognized. >> thank you, mr. chairman. first, let me thank you for your support of our military men and women, they are superb and their spouses are siuperb so thank yo for helping them out. with respect to the legislation that we passed several years ago, the military lending act, i

think the key aspect is the 36% interest cap. i think it's such a critical aspect it should not be just a province of military personnel but every american. i think, essentially, your banks k collectively have made $200 billion in profits and i believe your credit cards are not beyond 30%. so the 36% interest rate seems to be very appropriate. and so, i can -- would you support a national 36% interest cap? >> senator, i appreciate your thoughts on this one. i think we would be concerned about setting a flat number without really understanding what the impact could be and different inflationary environments.

>> mr. moynihan? >> senator, it's not really relevant to us. we don't engage in prime lending. i think, it's a question of balance. what would push outside the system, what would it make not available. i think it's not a relevant question for us because we don't have rates that high. >> i guess in a general sense it's relevant because most of the people who use this adversely are payday lenders and rather dubious operators who will induce borrowers into arrangements which are something you wouldn't even tolerate. so i think we've reached a point now up to several years of questioning, i'm not picking on you mr. moynihan to come to a conclusion. i think the conclusion is it should. mr. dimon? >> we don't engage in that. i agree with your intent. i think there should be a focus on payday lenders and check cashers and things like that.

we would look to help you design it so it doesn't have any bad consequences. there are people who make small loans and may stop them from doing that and push people to payday lending. >> senator, thank you for the question. we applaud the intent of what you're trying to do. i think as large banks we're mindful of our responsibilities in protecting customers from abuses. experience has shown that caps diminish access to credit, can do in the systems and the federal reserve has a study to show that. so i think similar to my colleagues, we believe there are other ways to achieve the intent. but we'd be supportive of following up with you on how. >> mr. handily? >> we don't engage in consumer lending but we do support what you're trying to achieve there. >> thank you. >> senator we're also not in the consumer business but we support

the intent. >> thank you. >> mr. sullivan. >> we have a small business in the consumer area but support the intent. >> thank you. >> i support it, senator. for normal what i consider normal economic times. i came to this country and borrowed at 24%. so not quite your 36. i found that particularly heinous. but turned out okay. but no, i think anybody who's forced to borrow 36% that's sort of unforgivable. >> i was living in the united states when i was borrowing at 24%. i recall we had to repeal rhode island legislation because it was 21%. so again, i hope to work with you on this because i think it's very important. and i don't think it'll cause disruptions that you might anticipate. i think it can be done and i think the other thing that

should be done and i know many of you are doing it, is to go out aggressively and start getting people backed. one of the reasons that they find themselves borrowing money from unscrupulous characters is because they have not been fully introduced to the banking system. understand it's relatively easy and much more appropriate than some of these other areas. but thank you all and we'll continue to work. any advise i appreciate it. >> thank you. senator rounds of south dakota is recognized. >> thank you, mr. chairman. i appreciate the plug for our bill together. we do things occasionally on a bipartisan basis, even in the banking committee but we have an opportunity once in a while to disagree and that means we get to have you folks participate in that disagreement process. today you're going to hear us talk a lot about consumers as they are the latest victim of heavy-handed washington

bureaucrats. in the last few months alone financial regulators have put forth or finalized regulations and guidance that represent the biggest rewrite of banking regulation since the passage of dodd frank. the community act, and climate risk management, just to name a few. however, we know that none of these regulations exist in a vacuum. vice chair barr said himself that the basel 3 end game proposal is, and i quote, project to raise capital for large banks. this may result in higher funding costs. but this is only half it will story. end of quote. i want you to help tell the other half of the story. now, i was originally just going to ask this of one of you, but since our chairman has kind of set the example of asking folks to raise their hands, i'm going to apologize in advance, because i think folks hate to be put in

that position, i think it's critical that you get to tell the other half of that story. none of you raised your hands when you said that it was a case of where you couldn't meet the capital requirements. the issue is what damage it does to the economy when you're expected to raise that and the folks who need that capital. so here's my questions, and i'm going to ask you to raise your hands. i apologize for that. but if you agree with these assessments, would you please raise your hands. do you believe in its current form, could these regulations negatively impact first-time home buyers? do you believe in its current form, could these regulations negatively impact those saving for retirement do you believe that these regulations could negatively impact our farmers and our ranchers. and do you believe that these regulations could negatively

impact small business owners? see, this is the rest of the story. sometimes, we think that we're just beating up on the big banks, tbut the bottom line is, it hits the american consumer where it hurts. this is at a time that when they try to go after the big guys, it's the american consumer that will suffer. you can already see the signs of consumers struggling as they are utilizing the buy now, pay later approach to products and making late payments on credit cards. this is because americans are paying more per month just to get by since president biden took office. bidenomics has led to a family of four in south dakota needing to pay over $900 more a month just to get by for normal living expenses. i'm going to say this again, regulation does not exist in a va vacuum. and the federal reserve must

take this into account as they work towards finalizing their rule making. i won't embarrass you by asking you to raise your hands anymore. i apologize for that. but i think it's important that the american people see the rest of the story and who is really going to pay the bill for this overzealous approach, and without finding out the rest of the story about these types of regulations and who really gets stuck with it. in recent years, u.s. federal debt levels have climbed further and annual interest on the debt is slated to reach over $1.4 trillion in the next decade. almost outnumbering all discretionary spending. i'm concerned about what riskin to the economy. according to your estimates, the treasury will conservativelily need to issue $20 trillion of debt in the coming decade. i'm not only concerned about who's going to buy this massive

issuance of treasuries, but with a federal funds rate of 5%, the treasury will be paying more to borrow as treasuries with near zero rates mature. mr. solomon, how could sustained high loefls of debt have adverse effects on the u.s. treasuries market, the dollar and the general economy? >> thank you for the question, senator. this is a significant issue of one i tried to highlight in my opening remarks. the growth of the u.s. treasury debt has been very, very significant over the last 15 years. it's more than tripled. that debt will continue to grow as the cost of refinancing, that debt will also grow. the office of budget and management, looking out through the decade estimates a 3.5% cost to refinance the debt, but i certainly think there are scenarios where that cost could be higher. this cost, obviously, hampers our ability to invest in other things. you know, as a nation, that we need. there certainly is a lot of attention and focus on things that are needed to strengthen our economy, to strengthen our

society and the cost of that burden of the debt to future generations based on decisions that we've made is something that we'll have to get focused on. as the cost of debt goes up, it certainly can create volatility in funding treasuries, it can create volatility in the treasury market. one of the things i also am concerned about when i look at ba basel 3 impacts is to the business of prime. the business of prime finances institution' security positions. so asset managers, investment managers, asset management platforms that regularly trade in the treasury market, provide liquidity to the treasury market and the cost of the financing that they have to finance those positions would go up with this proposal and it could potentially therefore impact liquidity. that's another risk that i think we need to look at carefully. >> thank you, mr. solman. >> i want to thank the can chamber ranked member for

holding this hearing and the panelists for your testimony and for being here. and i want to echo senator reid's comments on your support for the military, both active duty and veterans. them and their families is very, very important. i serve as the chair of the defense appropriations committee. i spent a fair amount of my time thinking about national security, how to protect against folk who is want to do this nation harm, terrorist organizations, as well as foreign adversaries. you all have responsibilities, including legal responsibilities, to make sure that you're preventing hostile governments like iran, that would like to see the u.s. not exist, from financing terrorist operations and other illegal activities with the funds that have gone through your const institutions. so this would be a question for mr. gorman and not for any particular reason, it's just that he's right in front of me. and if any of you would like to add, you can. the question is, how are you as chief executives making sure that procedures are in place and that they're followed so that your institutions do not end up

inadvertently financing illicit activity? >> senator, thank you for the question. obviously, it's critical, as a good player in this country to do our best to work with the government. there are two things that i would just point out. the first is what i call our cybersecurity efforts to understand incoming into the financial system. several years ago, when i started this job, i believe we were spending about $50 million on that activity. the number is closer to $1 billion now. we work very closely with all the intelligence agencies, ensuring that we have a proper cyber command to keep the financial system safe. and then, secondly, as it relates to specific individuals, bad actors, governments, we have an enormous compliance effort focused on anti-money laundering to ensure that they don't get in by verifying the source of where their funds come from. obviously, we deal with not as many clients as some of the institutions here, but we still

have over 18 million individual clients and many, many tens of thousands of constinstitutional clients. it's an extraordinary effort with several hundred employees constantly working, interestingly. i think the advances in ai will be a real strategic weapon in this regard. >> very good. anybody have anything different to add? okay, thank you. along those same lines on anti-money laundering protections and national security safeguards, mr. roman talked about cybersecurity. mr. solomon, would you like to add anything in regards to anti-money laundering protections that you have? >> i don't have anything to add that's materially different from what mr. gorman stated. we file thousands of sars in the course of our compliance department's financial crime team, working every day, but no difference in that focus and the intensity of that focus. >> very good. earlier this year, mr. scharf,

wells paid nearly $100 million innocentlies to the fed and ofac for violating sanctions against iran, syria, sudan. i think we can all agree that's not a good thing, but what is your bank doing to ensure that these sanctions violations never happen again. >> preventing bad actors from abusing our services is a top priority. we have extensive systems in place that we're constantly looking to make sure that they're as complete as they can possibly be. we work in industry groups, we work with the government and the regulators to make sure we're doing everything we possibly can to prevent that abuse. >> thank you. this goes to the non-banking world. some of you have talked about the fact that -- and maybe all of you talked about the fact that this will force -- basel

will force money to go out -- >> good wednesday morning. welcome to another hour of "squawk on the street." i'm sara eisen with mike santoli. we're continuing to monitor the bank ceo hearings and we'll bring you the latest headlines as they happen. in the meantime, here's what else is ahead this hour. lots more from the ceo of walmart, doug mcmillan, exclusively. his take on the jobs market, pricing, and the rise of weight loss drugs. >> plus, the ceo of campbell soup is with us. how does ceo mark klaus plan to turn around a stock that has underperformed the ceo 500. >> and omar agular breaks down why the fed has enough support now to end its tightening cycle. >> but first, the markets, large-cap indexes, modest gains. the s&p 500 a bit off its highs. nasdaq off a quarter of a percentage point, although, sarah, another one of those days where the average stocks doing a lot better.