have to pay at a higher tax rate than a boston public school teacher. it's not right. >> i'm sorry to cut you off but we're out of time in the program. we have to hand it over to the next show. >> you bet. >> thank you for joining us. >> i'm still thinking about the deep fakes. make sure you join us tomorrow. "squawk on the street" is next. ♪ >> good tuesday morning, welcome to "squawk on the street." i'm carl quintailla. faber and cramer have the day off. ten-year drops to 4.24. markets, of course, are closed tomorrow for the juneteenth holiday. the s&p and nasdaq aiming to set some fresh all-time highs. >> on that note, apple and

microsoft helping to fuel the technically as they continue to battle for the title of most valuable company in the u.s. the consumer the also in focus. retail sales for may coming in below forecast including a surprise drop when you strip out autos. >> let's begin with the markets and this morning's retail sales data. interesting, x auto down to 10th. ap frames it as consumers barely spent during the month. >> we knew the consumer was under pressure and we got confirmation in today's retail sales report. there was more optimism going into today because of the dip in april. it turns out april revised lower to a negative .02. the headline number today, .1% retail sales. the key control series which goes into gdp, takes out autos and gas and building materials and food services. it was .4% month over month which also came in a bit light. so, mike, i'm not sure it

necessarily changes the narrative, but it fuels the idea that it's been a mixed picture for consumer spending. if you go beneath the headline, there was strength in places like online sales which have been performing really well. restaurant sales as well. food service has been doing okay. still growth in grocery year-over-year, but month over month it was declining and weak spots like furniture, for instance, which we have confirmation from lay-z-boy which we'll talk about. apparel not doing a whole lot in terms of growth. it shows you where the consumer is spending. >> we knew that goods spending was not really where the strength of the economy was. i don't know that it really comes as a surprise to the broader markets because there's been so much of enhanced attention on the idea that the economy is wobbling a little bit, not that it's falling apart, but the deceleration is more important and probably feeds into further disinflation

which in theory should mean that the fed should come around and make cuts more likely. probably, as we discussed yesterday, because of the cosmetically hawkish tones of last week's meeting didn't take hold in market pricing. here we are with the broader market still making new highs but pleasing nobody in the way it's doing it. mostly remains the high momentum handful of names that are getting stretched and looking overheated. the nasdaq 100 had acceleration higher yesterday on zero news. i think it's not really trading off the macro numbers, but the macro numbers have to come in and provide support for the rest of the market and we can get interest rates to a level where it seems like more appropriate for the state of spending and hiring. >> the breadth is really stark. we've been talking about this. there's so many ways you can talk about this. everybody talking about the

number of s&p 500 companies trading above their 200-day moving average, it's the lowest of the year. if you look at some of the divergences, look at small caps versus the s&p 500 which is large cap. the small caps are getting hurt. the bigger caps -- and i know it's a lot to do with big tech doing much better. if you look at value versus growth, value stocks are getting hurt. this really is a tale of two markets. >> it absolutely is. once you have hyper concentration which we've had building up this year, it makes it much easier for the index to act much differently than the majority of stocks. the nasdaq 100 is a completely extreme but representative example of this where you have the top three, the big three of the s&p, too. apple, microsoft and nvidia are 25-plus percent of the nasdaq 100. it says over bought on a technical basis as it's been

over seven times in the last 15 years. what happened after it got this overheated in the past? usually takes a break, not before too long, but then resumes an up trend. it's rarely this crescendo of an ultimate bull market peak. whether that's encouraging or not, things have to go well for a macro basis and flow basis to hang in there for a little while. it's been a tough index to outperform or keep up with. you have a third of your investment in ai essentially right now. >> that's the question, carl. why isn't the rest of the s&p responding as well as nvidia and apple and microsoft to lower bond yields which the market has been craving nor a while, to weaker, but not recessionary data, which i think is important. that's the soft landing, and to the fed getting closer to

cutting rates, possibly two times this year? all of that has been what the market has been basically demanding and excited about, and interestingly it's not acting that way. it's only acting that way in a handful of stocks. >> we kept referencing the bofa note a couple weeks ago where we've touched a hot stove a couple times in the last, say, 15 years. it's resulted in concentration in secular growth names. interesting to see jpmorgan yesterday saying a relating is not going to do it and earnings are not going to do it. you would have to believe that tech is going to become a much larger part of the economy really soon in order for you to expect the markets to go higher from here. or in their words to avoid a 20% correction. >> i guess it all depends on what you think the market has to normalize back to in the way of a valuation based on current levels. individual, the current fiscal year we're in for nvidia, the estimate has tripled in the last year for what they're going to

earn. basically it's in the bag. we know the orders are going to flow through. that's not complicated. the numbers are so big that it is driving the aggregate s&p 500 earnings estimates. it's what you pay for. as i mentioned yesterday, nvidia is more expensive today on published earnings than it was a year ago on the earnings that came through in the past year. yeah, it's aggressively values. i think it's interesting you see the other strategists raising their targets because you have to make a decision as you get to midyear, am i go into tell the market it's wrong to be capitalizing these companies at these levels. when we got more conviction that earnings growth should resume and actually broaden out, i think that's interesting. so i think it weakens the point that everyone is fighting the bull market because strategists are saying, no, we go higher. it tells you that the boat -- that side of the boat is getting a little more crowded. it's more just. >> scott kroner at citigroup is the latest to raise the target.

goes to 5,600 at the end of the year, 5,800 into 2025. it's because of the big stocks. he lays out the concentration. we know this, but it's stunning to read this. almost 15% move higher in the s&p 500 this year can be broken into three components according to citigroup. nvidia is 4% of that. the remainder of the mag seven is 5% of that, and then the other 493 s&p 500 stocks are 5.4% of that. you just can't fight this trend and this move in the big stocks. >> or you can. you have to deal with either the fear of missing out, the opportunity cost of being in there. now, that being said, we keep talking about this in terms of how much of the overall gains is represented by these large stocks. the equal weighted s&p is up 4% year-to-date, up 23% off the low in october. if the entire market, the s&p were up 4% year-to-date and up 23% from last october, would we

say, oh, no, things are terrible? we'd say, e hfrment, it's kind of a blah year. >> this is the essence of what pisani said yesterday. it's not a terrible year. >> it's not terrible. still a gentle grinding up trend and potentially vulnerable if things don't break the right way, if the economy does falter a bit. it's sort of funny how the big numbers kind of obscure everything else that is going on. it's where good reason we remark on the extremes right now. the average stock is getting almost a little washed out while the overall index looks like it needs a break. >> it also leads to a debate which i'm not sure everybody is clear on as to whether that's a warning sign or a bullish sign that there's potential to broaden out and could draw the market out.

you're not seeing extreme m&a, people throwing in the towel sentiment wise. others say it's a terrible sign. >> i made the point yesterday, it's interesting. if you're telling invest, hey, you shouldn't be channeling your money this way, you're saying what's wrong with you. you're only buying the companies with the fastest earnings rates and best balance sheets and the ones in the best position to not be susceptible to macro shocks. obviously anything can be taken to extreme. i think that's what everyone is dealing with in terms of this weird dynamic of a lopsided market. >> meantime, speaking of sentiment, a fund manager sentiment is the most bullish since november of 20212, cash levels at a three-year low at 4%. mike. >> importantly, most bullish since november of '21.

where does today's bullish reading compare to november of 2021? it's a six versus a ten. we were above these levels of bullishness by this survey for most of, like, 2013-'14. times we don't go back and think of as being really giddy and overaggressive in terms of bullishness. even michael hartnett of bofa says it's not flashing a signal that people are way too over their skis. everyone thinks soft landing or no landing, 80% or 75% think those things. we're not set up to absorb a macro shock here. it also doesn't seem as though they're completely ignorant of risk. >> to that point, so very overweight stocks but most underweight bonds in a year and a half which surprised me given

that only 8% of fund managers say the fed will not be cutting rates in 2024. >> there's a little back and forth of what bonds can do in a rate cutting format. rick receiptor was on yesterday, and he said they're closed in the five-year area. he thinks if the ned cuts, the yield curve steepens out. >> and should help the economy. he thinks they should cut now? >> he thinks they have what they need to do a couple cuts, yeah. >> we'll get a 20-year bond b auction today at 1:00. meantime we're watching ev startup fisker filing for chapter 11. we'll get to some news on boeing. nvidia is going to be at hpe's keynote. a new street high on nvidia. we'll do lennar, ma'amson, oxy in a minute. and retirement savings. voya helps you choose the right amounts

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welcome back to "squawk on the street." rick santelli with you. may industrial productions expected to be up .3%. triple that, almost up 1%. that's the strongest months over month gain in industrial production since january of '23 when it was up slightly over 1%. if you look at capacity utilization, expecting a number around 78.5%, very close. 78.7. that's still the best since november of last year. last month gets downgraded on utilization rates by a smidge from 78.4 to 78.2. we see yields are down rather dramatically, down 7 in the

front on twos, down about half that on tens, as we continue to see evidence, both anecdotal and retail sales join a slowing economy. business inventories top of the hour, 20-year bonds at 1:00 eastern. "squawk on the street" will return after a short break.

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another ev startup filing for bankruptcy. let's bring in phil lebeau with more details on fisker, phil. >> it wasn't around long, but they made about 5,000 vehicles last year. they made a few hundred more this year. if you have a fisker ocean, hang on to it. it's a keeper in terms of value. somewhere down the line somebody will say, wow, whatever happened to fisker. company officially filed for chapter 11 bankruptcy. as a result, this is the latest of the ev startups that came up among the whole wave of spacs. never could get things going. if you look at shares office sker going all the way back -- now they're worthless. at one point i think the stock was up around $27, $28 a share. shortly after the spac came out when everybody believed in evs. no more. the question now becomes what's happening with ev and hybrid

demand. let me show you the current market. hybrids are outselling evs right now, about 10% of the market when you include plug-in electric vehicles against pure evs. bank of america's car wars report, highly regarded on wall street. people look at it and say, okay, what do we expect for the future? that's the current outlook. if you look at what bank of america is expected, hybrids will be surpassed probably by '27, '28. why? lower priced models. you will start to see them in the next year or so. over the next several years they mick up, that will drive demand. the number of models are increasing. here is john murphy talking about the outlook for evs. >> i think as we get to the end of the decade, you'll see something close to about 30% of the market being evs, and hybrids will probably be transitioned or flatlining in

that mid teens range. i have think as we get beyond the next three or four years in this transition period, much more potential for evs. >> tesla has not been the way to play the ev market in the last year. we talked about how the stock has struggled relative to toyota and general motors. most people believe that at some point you start to see the ev demand kick in. it doesn't mean that gm and toyota can't play in that market. they both have plans to play extensively within the ev market. the question becomes for toyota especially how long can it ride the hot wave of demand for hybrids? they're going to do it for a while, guys. they have more than 50% market share. they should do it for a while. they have more hybrids for sale than any other automaker. as a result, it has been a very good nine, 12 months for toyota investors. >> phil, fisker, lordstown also, right? >> yeah, electric last mile. we're starting to play a game where we can list them all out.

remember how this all went. those spacs came out. people said yeah, this is great. >> it was exciting. >> when it happened, how many people said do you know how capital intensive the auto business is? do you know how hard it is to crack this and make it happen? makes you appreciate what tesla has done, that tesla did not fold after a couple years. came close. but elon musk likes to point out the fact that they survived when a lot of other people, not just over the last several years -- go back decades, have tried to make it in the auto business. it's very difficult. >> as for hybrids, phil, it has been humbling for some of the street who didn't expect hybrids to make the showing they already had. morgan stanley essentially apologized to names like toyota the last few quarters. >> correct. they were widely estimated and were poo-pooed by most people. oh, hybrids, they've been around for a while. most people think of hybrids and think of the prius. they're far more extensive than

that. the general public didn't appreciate the demand that would be there because they're lower priced than evs. >> phil, busy morning for you. we'll check in the next hour and talk about boeing as dave calhoun is set to testify on capitol hill. meantime, opening bell in just a few moments. don't forget. you can catch us any time, anywhere. listen to and llfoow the "squawk on the street" opening bell podcast.

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we have a number of apple issues. i find them very serious. i was very surprised that we would have such suspicions of apple being non-compliant. but, of course, it remains to be seen, but they are very important because a lot of good business happens through the app store, through payment mechanisms. of course, even though i can say this is not what was expected from such a company, of course,

we'll enforce exactly with the same dedication and the same top priority as with any other business. >> that was madison square garden et vestager, the antitrust regulator talking to cnbc europe about apple after the report from the "financial times" that apple is set to be charged, the first big tech company under the digital markets act that europe implemented this year. of course, that is the app where they have to have all these big tech firms known as gatekeepers submit all their rules for staying in compliance with europe's very complicated competition rules. there's clearly -- she's hinted at this before in numerous interviews with us, that they're looking into especially the app store and the fees that apple charges there and the fees it potentially collects on different apps using -- going around the app store. that's something they're looking into. what's at stake? well, if it's found in breach of

these digital market rules, apple could face fines up to 10% of total worldwide annual turnover. so potentially big numbers we're talking about. definitely not the first fight if apple has to fight it, it's had with the eu and with this antitrust commission. >> it's always interesting, this dynamic, because the reason the apples of the world and alphabet and all the rest have the position they have in terms of multi trillion dollar market caps, premium valuations is actually because you basically can't escape their platforms or they're so sticky, or that they also live in a world where they don't have to make hard tradeoffs between serving the customer, investing for the future and all the rest of it. that's exactly the kind of thing that gets them in trouble with weg laters. you're everything to everybody. you have massive resources. nobody can compete with your platform and, therefore, that's a problem. u.s. investors say exactly, that's why it's $3 trillion.

>> chatgpt says we're not taking a check, we just want to be on the platform. >> jpmorgan ul to 235 today, they were at 225. that's going to be one to watch as apple has had a stellar run going into the developers contract. at the big board spire celebrating its 135th listing anniversary at the nasdaq. exl digital operations company. we even keel a close eye today. last 20 days, seven sessions have had the headline indices positive and the number of stocks down, outweighing the number up. >> exactly. i think you can go back. you basically never see it exactly this binary. it sort of starts with the fundamental preferences of investors in wanting to buy the reliable growth and basically kind of chasing the momentum in those names.

it also is a strategy. there are strategies to implement. i will trade the index against the average members. i'm going to bet that the index stays very calm with low volatility. so there are all these ways of trying to capture the fact that there's massive divergence below the surface. if that trade gets big and big and big and implicitly we're betting too hard that the index stays caught in that dynamic, maybe you have some kind of mechanical slippage. >> as everybody bemoans the lack of breath, one other divergence that's been interesting to highlight is what's happened with oil prices. it broke above $80 a barrel. energy stocks have really lagged here. if you look at some of the etfs, xop, for instance, energy stocks have not risen with the price of oil. that's different today. those stocks are at the top of the market. part of it is occidental

petroleum. that's a buffett play. >> berkshire i think owns something like 29% of the company right now, bought these shares at or just below $60. and i think it's really just the discipline of berkshire. berkshire owns a bunch of warrants on ox debital to buy the stock at 5962. they had preferred investment, quasi biling occidental out of a jam. i think when the stock price is near or below that stock price of the warrants, it makes sense to buy the common and lower your ultimate event cost basis. i don't have this on any authority except observing this is what seems to happen when the stock trades in this zone. buffett has said he has no interest in buying the entire company, but he's very happy to own it. in terms of the overall

portfolio, berkshire hathaway, almost as big a stake as he has in chevron. he's happy to own real energy assets in the form of these stocks, even as most of the portfolio, of course, apple's $170 billion position. >> energy is interesting right now. you've got wholesale gasoline prices kind of implying a further drop in retail. gasoline prices going into the july 4th holiday. you don't see that too often in the summertime. we continue to watch this aea forecast, equivalent to what we essentially saw during covid which is sort of nuts. >> that gets to what i was saying about how the stocks are trading. there's at least a perception that commodity prices are somewhat capped here. it seems like a well-supplied market. every peak in demand is lower than the prior peak in demand. that's going to be something hard for a long-term investor in

the stocks to make. the peak in demand for cigarettes was a wlong time ago. stocks have continued to work because they can skim cash over time. >> there's also pricing power and that sort of thing. >> that's true, which exxon doesn't have. >> not exactly on the energy front. today micron is leading the nasdaq. yesterday it was broadcom. micron adding another 4%. these one-day moves. is there any news on that today? >> bofa added to the u.s. ones list. i think 170 is the target. by the way, we have a new street high in nvidia as rosenblatt goes to 200. earlier in the week it was susquehanna at 150. talk about one-upping each other. we stalk about the strategist on the sell side in the indices. nvidia a whole other race. >> higher and higher. marvell technology is up nicely,

qua qualcomm, intel, cadence design. the semi caps leading the market. apple is higher again today as well. there's been a bit of a theme there in terms of market leadership. >> at the open, you have the whole wave of call option buyers. this is the self--fulfilling dynamic in the short term. yesterday was a broader rally by the end of the day. not overwhelmingly. 60% of stocks to the upside. so stuff was catching up to -- in a lesser degree. there was chatter yesterday about corporate issuance in light of the fact that thursday, friday will be -- you're not going to be here. you're going out, taking the rest of the week off. and do issuers want to get stuff done before today. >> i think $21 billion up for sale on the corporate front. that mopped up a lot of energy in the market. maybe that's why we saw higher treasury yields on the day. >> you often see that. also, corporates are pretty

smart at -- you had this 40 basis point drop in tens, and pretty much across the curve. they'll take advantage of that, getting to the end of a quarter. refinance or top up what you need in terms of cash and go buy back a bunch of stock. >> are you a buyer. i remember the goldman note a couple days ago looking at new money in july. we talk about sideline cash as the yields have dropped. is that going to be a second half -- >> i wouldn't deny that that's in the mix. i just never have that much faith or historical success in handicapping the movement of discreet piles of money from one place or another. money keeps flowing into -- retail money, into bond funds and cash. until you have the fact of the fed cutting rates and those yields going down, i don't know what changes that. but there are other institutional dynamics. july has been a super strong month. for stocks, for growth stocks for the nasdaq. multiple years in a row. late june is supposed to be

week, soond far not. so depending on which stocks you look at. >> there are other ai winners out there, super micro doing well. dell technologies up 3%, now up almost 200% in the last 12 months. spoke to michael dell yesterday on money movers and extended conversation on our leader special. here is what he says about this moment we're in right now when it comes to generative ai. >> it's certainly as big as any of the other big waves. >> is it bigger? >> it certainly could be. when into think about the internet, which go back to the mid 1990s, it kind of feels like that except it's happening maybe ten times faster because now 5 billion people instantly have access to ai, and there's so much data and so much computing power that's becoming available that it's getting used rapidly around the world and the benefits are significant.

that's why you see companies investing heavily to create this opportunity. >> the amount of data, the amount of complexity on bringing different technologies together, the hardware aspect of all of this, it's why he says del was basically built for this. it's a company he founded in 1984. he's seen a lot of these different technology cycles. look, he was super bullish. i asked him about the two sort of issues that people talk about with dell right now are the margins, the server margins, where they disappointed in the last quarter. he says those will go higher as we add more services to those ai servers. they offer a suite of services for the enterprise customer. i asked who that is. he said it's just about everybody, every company right now. that should go higher. i asked about some of the stock sales lately. they had a few billion dollars of stock sales. he said, look, i own so much and

there's such a small float of dell. so the more it goes up, the more he owns. he also has this family office he's been funding as well. he dismissed that as anything to be concerned about and didn't offer anything except a bullish forecast including the pc cycle which is up for a massive refresh as a result of ai pcs. >> which is why hpe is so interesting today on the enterprise side. antonio nearry is giving a news conference and we ears expecting jensen huang to be in on it. if jim were here, he would talk about how it is to get jensen's blessing. that's going to be one to watch. >> i asked dell about that. he said, it was not in a jab, but in the most michael dell well possibly, we've had a relationship with nvidia for 31 years. they're going to be testing out a lot of new technology and new

deals. the jensen blessing. hpe, we saw the impact of server sales on the last quarter there, too. they soared. >> they obviously don't want to be left out of that food chain. i guess the question is how the economics in the long-term are going to be shared. that's been a little bit of the overhang on the dell story in terms of how much they can capture in the way of margins. it's a precision manufacturing logistics company. also, as he sells stock, if the float does increase, i'd argue this is one of those companies where the market would prefer there be a bigger float. in other words, it has been kind of more closely held than some of the big names. you get a better spot in the index. >> also going into the s&p now because there's different rules about voting shares. previously wasn't allowed because he had so much voting shares. that obviously could be a tale wind here. >> usually a temporary bump. >> the other element about the ai part. we talked about mcdonald's

ending their partnership with ibm testing bot chats in drive-throughs. kate rogers had sources saying the technology had trouble interpreting different accents and dialects which did after next order accuracy. obviously pay attention to to every slight growing pain when it comes to technologies like this. >> not ready for primetime. you have to get that right if you're going to put it into use for customer service. i agree with that. another mover we haven't hit yet is lennar, the home builder, reporting earnings yesterday. the numbers were good. they came out better than expected. home deliveries up 15%. one thing that maybe sur plied folks is that prices fell. the average sale price, $426,000, that was down about 5% from the year before. the idea there is that people are buying homes for the right price because affordability is so difficult now with higher mortgage rates that they have to

air incentives to get people to buy prices. gross margins on home sales 22.6%. that was kind of in line but maybe left a little to be desired. stocks down 2%. >> the bull case on home builders has been that they are equipped to buy down the mortgage rates and provide incentives and somehow work to get people into that more affordable spot. there's a limit to it. there's a cross to it. you're still pushing it in terms of these prices and for the lennar buyer which is a little bit more entry to mid level, the sensitivity to rates is pretty extreme. >> really maybe one of the more discouraging reads of the morning is the journal looking at rent and what they're arguing will be a resumption of rent hikes, particularly in the northeastern united states. i did take note of retail sales today. building materials down .8. >> building materials were weak, home furnishings were weak, those kind of categories.

this comes up in the polling and the sentiment numbers. we warrant the pricing back from 2019. when we report every day on the inflation numbers being more benign and better than expected and coming back down to the 2% level. it's not taking into account the fact that grocery prices are 20% to 30% higher than they were in 2019. the rent prices, i don't even know the calculation on that, but significantly higher. that's what's behind some of this stuff. >> housing affordn't, if you wanted to buy, is not an option. i think the key question is how the fed treats the potential for rent being a stubborn part of the inflation basket. arguably keeping rates here is not affecting it one way or the other. what you really need is encourage supply, further supply, rates lower probably helps more than keeping rates here i think that's one of the

arguments where people are saying the fed should be looking through the sticky shelter inflation numbers as they go in the next few months and focus on the stuff that actually is coming back into line toward target or below. >> onto that front, goldman with a note on the labor market today essentially arguing we have achieved balance once again for the first time since february of 2020 where job openings are roughly equal to the number of unemployed. they're sticking with two cuts in september and deese. >> a lot of fed speakers today can weigh in. >> they're going to say we're patient, we need to see a little more evidence. one cut might be reasonable by the end of the year. they're all kind of saying the same thing, even if you expect two cuts or one cut. what they're sighing, the data is almost -- i keep saying is more important right now because the cpi look last week seemed more fresh than the fed dot plot which seemed stale. >> i agree with that. the data are going to drive

this. however, all they really need to do is reiterate parts of their framework which is, we always knew we were going to be cutting before we got to the 2% target. stop talking about we're not yet at target and we can't cut. that's not really an option. they've said that for over a year. >> of course they're going to cut before. >> and they also believe they get increasingly restrictive as inflation goes down. >> so collin is going to be speak, kugler is going to speak, gools bee is going to speak. >> also 3% is not the new normal. we'll get to 2. >> they have to say that, of course. they're not going to say 2%. i mean that hurts credibility to say we're going to raise our inflation target in the middle of an inflation fight. >> oh, yeah. no one is arguing that. dow is up 100 as we put together string of all-time highs. s&p up about 10. watch bonds. retail sales came in a little

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comboeing ask the biggest drag on the dow. down about 1.5%. calhoun testifies in front of the senate this morning. the journal with multiple stories about the doj calculus, how people have turned down the chance to run the company. bloomberg with another piece about whistle-blowers and alleged allegations that the company has mishandled fallity parts. we'll watch that as anortrspts are down almost 20% from their record high. dow is up 90. stay with us. this is our future, ma. godaddy airo. creates a logo, website, even social posts... in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?!

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one of citigroup's most profitable businesses turns out is also one of its most cryptic. today the bank is host an investor day to demystify the group. our lpz has more. good morning, leslie. >> reporter: good morning, sara. this is citi's first investor day in two years. at that time citi laid out its transformation plan for the bank and at today's event it's focused on the services business, something ceo jane fraser called the firm's crown jewel. citi's services group allows corporate clients to move money

around the world through liquidity management, payments or trade, just to name a few. despite being one of citi's five businesses the service comprised half of the net income in 2023. in today's remarks frazier said she thinks there's still an opportunity to grow mark share here. >> last year was a record year for services. while the business has undoubted benefitted from higher rates, we also experienced growth across all key drivers including cross-border transactions, u.s. dollar clearing volumes, commercial card volumes, trade loans. the list goes on. i am confident that we will continue to see more growth in these areas, even in a lower rate environment. there is just considerable opportunity to win new clients and to deepen relationships with existing ones, and we are continuing to invest in our

capabilities to make sure we capture that. >> citi published a deck with target. the firm expects services revenue growth through 2026 to be low to mid single digits and return on tangible common equity to be in the mid 20s. evercore isi said those were both slightly above street expectations. the ceo concluded his remarks where he called services a key part of citi's strategy and driver of overall performance going forward. so one can assume that these remarks, as well as those targets that are responsible for the uptick in citi shares today, guys. >> leslie, i could certainly understand why management would loougs like to surface the strength of the services business. i guess it has relations to bank of new york, processing bank type back office functions where they tend to get a higher valuation. i guess the question is, whether investors are willing to kind of look through some of the other more challenged or sub-scale parts of the market to say yes, we will revalue the overall

company because of this jewel at the middle? >> yeah. i believe it was mike mayo who put a valuation on this business itself saying it could be anywhere from 90 to $120 billion, just the services business where citi's market cap is consumer at $115 billion. so the sum of the parts would suggest that some of the volatility in say markets or even wealth which has, you know, the firmer has said has white space to grow there, you know, could be dragging down the overall valuation at this noipts time relative to its services business, which is why i think the firm wanted to pull it out today v a special separate services investor day, and it's also, they said in their opening remarks, something that an analyst and investors have been asking for, something that's perhaps misunderstood by them, misunderstood by the market. there will be a q&a later in the session, so it will be interesting to see kind of what's on their minds. i know one of the top concerns

is citi's ability to maintain market share and grow market share in the face of other competitors. you mentioned bank of new york melon, jpmorgan as well as another contender here. >> i was just looking back at the mayo note that you mentioned from a few weeks ago, leslie, where he did take the target to 85 and said that he did expect investors to have more appreciation after today. we'll see. our leslie picker, thank. mike, we'll talk to you in a little bit. more economic data after the break. n'gonyere. ♪♪ ♪♪ chewy, a citi client, uses citi's financial expertise to help drive its growth and keep its supply chain moving, so more pet parents can get everything they need... right when they need it. keeping more pets, and families, happy. ♪♪ for the love of moving our clients forward. for the love of progress.

is. good tuesday morning. welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla, live as always from post nine of the new york stock exchange. david has the morning off. take a look at stocks we're adding to yesterday's gains. the s&p 500 up a little more than 0.1%. it's energy in the lead today as far as energy stocks, that is.

1.6% gain there. occidental petroleum leads the way as buffet adds more to his stake. thanks to the semiconductors again leading this market. today micron up 5.6%. qualcomm, hewlett-packard enterprise, super micron, nvidia higher, yes, again, so is apple. a number of other sectors doing well too. financials, real estate and health care. if you look at the nasdaq it's floating in between gaps and losses. apple and micron helping, amazon, meta and tesla are weaker. treasures. we have an auction later this afternoon. yields lower, 4.25%. weaker retail sales has been a story this morning. 2-year yield 4.7%. here are big movers we're watching. shares of lennar in the red despite top and bottom line beats. deliveries up 15%. new orders up 20. why shares of the home builder are falling later this hour. broadcom on the move again.

research firm increasing their price target by nearly $700 on the name to $2,000 a share. this week's gains officially pushing the company past eli lilly as the eighth largest u.s. company by market cap. and then watching kroger. the grosser top gainer as vemo calls the stock a buy raising the price target to $60 a share, calling the stock attractive no matter what happens to the deal with albertson's. they're challenging the ftc lawsuit on that and kroger earnings on thursday. a quick note, apple and microsoft jockeying for the title as the most valuable u.s. company. more on the tech trade later this hour. >> let's get business inventories with rick santelli. had a busy morning. >> good morning, carl. indeed, business inventories this is ap april number which means it's the beginning of the second quarter and if it's a build that will contribute to gdp. it is a build. up 0.3%, which equals the same rate as february's change, but

you have to go all the way to december, not that long ago, december of last year to find a higher number. so more inventories will show more gdp. the real issue is, is it being purchased aggressively? is it going to add to actual gdp ultimately? we won't know that for a while, but look for some changes potentially in the atlanta gdp. we had weaker retail sales. we had bigger inventories, so we should be paying attention to the updates coming up shortly and as sara pointed out, yields are indeed lower and really it was the retail sales numbers that kicked off some of the buying pushing those yields down. once again, we have a 20-year auction today instead of tomorrow due to the holiday closure. that will be at 1:00 eastern for $13 billion. sara, back to you. >> okay. rick santelli, thank you very much. let's start with retail. the strength of the consumer, the health of the consumer, is in focus.

and the health of the consumer is slowing which is not a big surprise given we've had inflation, given we've had higher interest rates, pressuring the consumer and prices. what we saw was 0.1% growth on the month of may and that was less than expected. the control group, which feeds into gdp, is closely tied to the spending portion of gdp, up 0.4%. that was also a slight miss. people are paying attention to the revisions for april which we new was a weak month and they wept even lower. negative 0.2% for the month of april, a disappointment. some of the weakness in categories like furniture, building materials, carl you mentioned earlier, people are still spending online more than they are spending in store and these are not inflation adjusted numbers. i think it -- is it enough to keep the economic recovery intact? nobody is questioning that at this point as far as the economists are going, but we're talking about a slowing, slower

growing consumer and slower growing economy at this point. >> i think on a real basis we're down about 1 year on year, core down a few tenths. vemo out with a note saying put this together with what we're getting in the labor market and september is looking more likely. you were talking about odds for september a moment ago. >> 70% now the odds for september on top of a cut in december. so i think the weaker inflation numbers -- and there were three of them last week -- set the tone, cpi, ppi, and import prices. dismissal of the strong jobs number the week we got before in terms of headline nonpharmaceutical payroll growth, more focus on the unemployment rate, the job openings come down a sign of tightness in the labor market, but again, it's the way people feel also. it's not just all about the fed and, you know, there's a new survey out about grocery costs and the consumer and the surveyors asked about 2,000 people what they said and cnbc

wrote it up. 80% say costs have notably risen since covid-19. 29% sacrificed other needs to pay for groceries. this is over the last few months of the survey. 27% occasionally skipped meals. none of this is surprising but a reminder of the pain that's out there, especially at the low income. just some other tidbits 18% have applied for or considered applying for food stamps, 15% have relied on or considered turning to food banks. no question this is a problem for the incumbent administration running for re-election. lael brainard, the chief economic adviser for president biden was on our sister network msnbc yesterday and was asked about these high prices and how people are feeling about inflation even though the inflation rates are coming down. here's what she said. >> the pandemic was tough on american households. there's no question those price

surges and then russia's invasion led to price surmgs on food and gas prices at the pump and americans are just feeling squeezed by the cost of living, so the president has taken a number of actions and he's going to keep fighting on behalf of working americans to get those prices down. on the other side we hear a lot from congressional republicans, they like to shine a light on inflation, but they haven't offered a single proposal. >> that jab at the end about how republicans are going to deal with inflation and how they're going to fight it, i thought was notable, as this emerges as one of the top issues going into the election. >> yeah. i mean we continue to talk about wage growth being the same as these prices, and certainly as a percentage of, say, average hourly earnings, average gasoline, got to go back to 2019 or before. just hasn't become a bigger piece of people's paycheck. >> no.

groceries are bigger than gas, which is why i've been focusing on them. since we're talking all about the health of the consumer and rooelgtsz and what's going to happen, great chart out of metlife, drew maddist and the team, looking at delinquencies on credit cards which people have been worried about because they've been higher than the prepandemic levels and mortgages, though, which is where a lot more of our debt actually lies, hasn't seen as big of a delinquency jump, for instance, relative to precovid. just interesting to note that we're watching these levels. mortgages 70% of outstanding debt. that's the key. still at historic lows in terms of the delinquency rate. auto and student loans make up 9% of outstanding debt and pretty benign. auto loan delinquencies stable. it's really the credit card up with, but that makes up a smaller portion of debt, just as we're watching these trends as we look at the stress that the consumer is feeling. >> meantime goldman raising

their year-end target to 5600, a third hike, one of the highest on the street. chief u.s. equity strategist david kostin here's with more on that call and to talk about what's next for stocks. >> nice to see you. >> why the move? >> the move relates to five companies that is really driving the market and it's really a story for this year. the market up 15, 16%. 60% of that more on return comes from five companies, largely affected and influenced by ai. so two reasons, carl. the first is, the normal earnings pattern is that earnings get cut by around 8% over a two-year horizon and a 4% one year and 4% the next year. that is your normal pattern. 495 stocks, that has been the case in the last 12 months. earnings are down and have been cut, estimates cut, by 5%. but four or five companies, earnings estimates have been increased by 38%. so in aggregate, you've had really no degradation in the

expectations and the market prices expectation. that's sort of the earnings side of it. less for weakness than anticipated as are a consequence of the five companies. the second would be valuation and the way we approach valuation to think about the equal weighted stock, the typical company in the market, which is a way of value individual companies, each company weighted the same, multiple day around 16 times and our forecast is that will be model would suggest around 15 times the end of the year. a little bit lower. the premium that the aggregate trades relative to the typical stock likely to rise and that leads us to a valuation of around 20 1/2 times and the combination of earnings and valuation leads us to 5600. >> your bull case is 6300? >> if you look at different scenarios you could have the mega cap exceptionalism if that was to continue, you would have maybe 45% premium that the aggregate index trades relative to the equal weighted index.

think about that, the equal weighted index, spw the ticker and spx think about those two, one versus the other. >> did you hate having to write this note? i feel like you did -- raising for an equity strategist having to raise their target because five stocks keep outperforming, you didn't change your forecast on real yields or the earnings picture. >> excellent question. only 27% of mutual fund managers are beating their indexes here. 27% of core managers, 37% of growth managers. it's been a very difficult time to be an investor and a strategist in terms of the tailwinds. it's been five companies that have really explained the story of the market. one of the things that's interesting in terms of developments that are taking place is the ipo market. we've been talking about this for a while and expectations, given the ipo barometer, above 100, indicating kind of the normal conducive a market is for ipos. we've had $18 billion of ipos.

that compares full year last year around $22 billion and $8 billion in 2022. you've had a big increase and i was recently in northern california. we had 55 companies in napa valley to discuss. these are private companies. with the expectation of going public in the next 18 months. that's sort of one interesting aspect of where -- >> you're excited about things other than the big five? i guess some people are questioning whether the concentration risk and out performance is healthy for the overall market? >> well healthy is a pejorative term. it would be better if it was wider breadth in terms of the performance in the market. there's lots of opportunities in the market in terms of performance and talk about that every day. some of the glp-1 drugs. the real story that everyone is discussing, all the questions that come to us, relate to ai and we think about ai in a couple days as nvidia, big winner, obviously,with the infrastructure build-out companies, yes, some of the hyper scalar companies,

semiconductors benefitting. arm, tsmc, other aspects of the infrastructure build-out and much more skepticism around the sort of enabler, the revenue companies that have the benefits of widespread adoption of ai and the question, carl, about what is the return on investment of all those ai dollars. that i think is the big question and remains to be answered but you'll start to see that in the next couple quarters if there's not some evidence that there's been -- there's a return on this money, i think a lot of investors will start to ask is it a real story there? >> you think patience is a couple quarters? that's when the market gets to -- >> you would like to see some evidence of that. if you think about it, it's a political season so you think about gary hart and the comment about where is -- and walter, "where's the beef?" people want to see some evidence. there's a huge amount of capital that's been directed towards this investment.

if there's a return, great. >> is that the biggest risk to the market, that ai return on investment disappoints? >> fundamentally i would say that's a significant risk that we think about. tactically, that's the election coming up. typically volatility increases, prices go lower heading into the election. the ball is low right now. that would be a risk to point to tactically and if you want to think about the economic story, my colleagues in the u.s. economics, pretty optimist nick terms of the slowdown, but the idea of the fed cutting in september and december is a baseline forecast and that's actually -- would be supportive fundamentally. >> you mentioned politics. "ft" has a call, the title "the sell side, obviously, isn't talking about a second u.s. civil war. should it?" they cite your report and some others that are base basically side-stepping this tail risk of extreme political violence in some cases. is that something -- not a good

use of your time? is it -- you don't want to look alarmist? >> that's not baseline expectation. that's not kind of what we're -- that's not going to take place in the country. i would say the fundamentals would suggest generally speaking the economy continues to grow fundamentally and rates likely to get cut at some point, whether two times or one time, likely this year and the uncertainty around the election is certainly likely to increase that would suggest the ball goes up and prices go down generally 4% or so the weakness coming into the election. >> right. >> later this summer. >> the bottom line the range of possible incomes is wide. >> 5600 a baseline forecast. if you had a real exceptionalism and mega cap stocks continuing to it rise may 4700 on the lower end if the aggregate index

multiple compresses towards the typical stock, trading around 16 times now, overall index around 21 times, still in our view some risk to that going a little bit lower. >> well, you certainly made waves earlier in the week. thanks for coming to talk about it. >> thank you. >> david kostin. >> as we head to break our road map for the rest of the hour. microsoft's ai driven pc's go on sale today. what's at stake for the companies, rivals and the ai arms race. boeing's chief getting ready to get grilled on capitol hill. set to face new whistleblower claims about quality issues. we'll get you set for that hearing. the health of housing. what the latest batch of earnings from the group is signaling. big show still ahead. dow up 8 points. "squawk on the street" will be right back. is work not working? at least, not the way it could work. your people are buried in busy work. and you might be thinking... can ai make it all work? it can. on the servicenow platform, ai transforms your entire business. your people work better, your customers are happier,

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. ♪ we think it will be a massive refresh of pcs and think there will be ai pcs. we've introduced, you know, a wide variety of those. we have many, many more coming. and the big killer app here is saving time, right. your ai pc is going to tell you -- >> i'm wondering why do i need an ai pc? why does it trigger a huge refresh? >> it's going to tell you what you missed while you were here interviewing me, what meals you

pay attention to, what's on your calendar that requires your attention and it's going to be that smart assistance that will help you do everything you're wanting to do and do it more effectively. >> that was from our interview with michael dell yesterday, dell technology ceo, talking about a big refresh cycle coming for pcs based on ai pcs and why consumers want to buy them. it comes as the first batch of microsoft's ai copilot pcs go on sale today. all the pc brands are behind microsoft's ai push with new models launching from samsung, dell, hp and others and months before we expect apple's new ai features to hit mac's ipads and iphones. hit a record market cap for any company, $3.33 trillion at the end of yesterday's session. joining us now is brent, jefferies tech analyst, buy rating on microsoft, $550 price target. how much optimism does the street have, brent, around the hardware side of these -- this

ai pc boom and the potential for upgrades? . >> i think there's excitement that it comes in software. it's not really the hardware. hardware will make it easier as michael dell said, to hit a copilot button and tell you your next meeting and things you need to know about traffic or weather and/or whatever you need to do throughout the day. i think magic still coming in the software. microsoft and amazon are leading that push in the enterprise. google and meta are leading that charge in the consumer market. so we are very excited microsoft's our top pick. we think the stock is going to 550 on $16 earnings power. and this is just at the beginning of the ai push. we think microsoft has a huge runway. they've infused ai from security to infrastructure to applications up and down the stack. now you have a hardware layer to help reinforce this and make it easier for consumers and enterprises to adopt. i'm not as excited about the

h hardware side. >> i think most investors would agree with you, but as far as portions of revenues for these companies like a dell or microsoft or hp, there's still a lot of exposure to pcs and the market has been tough post covid with the givebacks. i wonder if dell is right that this could trigger a big upgrade cycle, what that would mean just in additional revenues and how models could change. >> yeah. for microsoft, it really has been about the recurring revenue that's created software subscriptions. so it doesn't really matter in the hardware side. it helps them, but this goes back to they run any device, run a cross platform on apple devices as well. as long as the entire hardware industry is seeing a little bit of the tailwind things will be great even if you didn't have the hardware upgrade in my opinion, i still think there's enough hardware to run these services today, so no doubt, a

great tailwind, but again, i'd say the more excitement, the biggest excitement for us is really when you look at all the different layers where they can go after from the data center to the consumer, effectively now have mobile workers that are able to use this technology on their devices, so this is going to, again, be a big boost and be helpful. i don't expect and i don't think anyone should expect this massive hardware upgrade on the consumer side because ai is here. ai is really we're in the first generation and it's going to take time. as you saw with the mcdonald's announcement this morning and ibm, like all ai is not created equal, and i think we're in the hype cycle of ai. we have to get closer to bringing that hype cycle down and getting the revenue back up and again, i think microsoft's in the best position in our coverage to capitalize on this. >> that's an interesting way to frame it, because it's hard not to notice they're marketing

already touting copilot, showing people at their computer plugging in requests to do presentations and so forth. do we have any survey work yet on how helpful consumers are finding that product? >> we don't. at this point i think it's still really early on the consumer side. when you look at the consumer side today there's so many choices whether it's chatgpt, i'm using perplexity every day. i love the application. i'm not really using a lot of the microsoft technology yet. we don't actually have the technology deployed yet. when you go back today it's easier for today, but where is my next family trip or what's the weather like where i'm going, but in the enterprise the data is not ready yet. the security standards aren't ready, so we're still really, really early. again, the channels are very different. the consumer side has so many choices today, again, multiple applications. it's not only microsoft or

others, it's perplexity, you go through the list, there's a lot of them. so i think consumers have a choice. that's going to probably shake out. we're going to have a couple leaders emerge on both sides and again, i believe microsoft with their partnership with openai on the consumer side with chatgpt is doing very well with perplexity and on the enterprise side we see amazon and microsoft being the two big forces today. >> brent thank you for joining us. reiterating the buy on microsoft up to $550 price target. >> thank you. still to come this morning lennar shares down as guidance comes in light. we'll break down the numbers and talk about what it might mean for the home builders after a short break.

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lennar is in the red after results there chairman stuart miller calling out a challenged consumer. let's get to diana olick with numbers. good morning, diana. >> good morning. lennar had a nice beat but a big emphasis on incentives and

that's why you're seeing the stock lower. ceo stuart miller said in the release although affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment purchasers remained responsive to increased sales inkrefbtives resulting in a 19% increase in our new orders and 15% increase in our deliveries year over year. this is not surprising given that average rate on the 30-year fixed shot up significantly in april to the highest level since last fall and only settled back a little bit in may. average sales price of a lennar home was down 5% to 426,000, net of incentives, but that is down less than the 8% annual drop that we saw in q1. analysts zelman on "closing bell" said her survey shows prices flattening and orders declining from a year ago. >> so i think the public will have very little upside and it's going to get harder given the valuations are at lofty levels

relative to history. >> kb holmes reports later today, and they will likely see the same headwinds like lennar they skewed towards the entry level. they may be in line better than expectations, but it's the second half of this year that could be the problem. >> thank you. still to come boeing in the hot seat today. ceo dave calhoun set to testify w a is company strougs find neceo. we're live in d.c. with a quick preview after a break.

welcome back. i'm silvana henao with your cnbc news update. the white house officially announced a new election year policy today that would shield half a million immigrants from deportation. the executive action, which is expected to be quickly challenged in court, would protect undocumented spouses of american citizens.

russian president vladimir putin is now on his way to north korea following a brief visit to a city in russia's far east. putin has promised to deepen security and trade ties with a communist country ahead of the summit. north korea is the only country to have conducted nuclear weapons tests in the 21st century. today will mark putin's first visit to the reclusive country in 24 years. and pop star justin timberlake expected in court this morning after his arrest last night for driving while intoxicated in the hamptons. that's according to the suffolk county district attorney's office. police say timberlake was still in custody this morning, but they aren't releasing many other details yet about the arrest. sara? >> reading all about it. thank you. >> you got it. >> outgoing boeing ceo dave calhoun set to testify in a few hours on a hearing on boeing's, quote, broken safety culture. phil lebeau joins us with the

latest from washington. this is going to be rough for him, sounds like, phil. >> very rough. and look, people would sit there and say deservedly so because dave calhoun has not answered questionsp on capitol hill publicly. he has met with senators in meetings over the last several months. but this will be the first hearing, and at this hearing we're going to hear him get blasted by senators who will also say look, we've heard from another whistleblower who has come forward who has said the practices at boeing are not what they should be and that because of that, the company has to make real changes. so the question now becomes, what are the changes at boeing? because that's really the news here. not that he's going to get blasted by senators. so when you look at the hearing today, a couple things to keep in mind. first of all, dave calhoun is going to come out and already said we've seen his testimony, he's going to admit, look, our safety culture, our culture just needs to be overhauled. we've heard these concerns loud and clear. our culture is far from perfect.

but we are taking action and making progress. we understand the gravity and we are committed to move forward with transparency and accountability while elevating employee engagements. what are they doing? we've talked about the quality control the focus this was hearing today, we know that they are already working with the faa in terms of new processes to put in place. the faa has said look we're encouraged by what we see, but we're going to continue monitoring. they're not off the hook in terms of oversight. you've got an increase in the number of faa inspectors at the 737 max plant. still, when you take a look at shares of boeing to a serp extent this is dead money. nothing is going to change with shares of boeing dramatically over the next several weeks because you're waiting for certain catalysts. what are those? one would be who's going to replace dave calhoun. we may not know that for several weeks if not months. it could be late this year before they finally make a decision on the next ceo.

at the same time you're waiting to see when they finish this deal in terms of acquiring spirit aerosystems and want to see what happens with the doj which is looking at the deferred prosecution agreement and deciding do we file further criminal charges, extend the dpa, do we increase the oversight on boeing. a lot of unnoeps that are there and that's why people look at shares of boeing right now and say, regardless of what happens today, guys, you will likely see little movement with shares of boeing until we see one of these unknowns get resolved, with whenever that may be, over the next several months. >> phil, you mentioned the doj and the succession element, the journal tries to tackle both. the latter part about how difficult it's been to get someone to sign on for the job outside and inside. >> right. look if you read that article you would sit there and say, what's new here. not a whole lot is new. we new larry culp , i've talked to larry culpp, he's not considered in the job.

he's content with what he's doing at ge. dave gitlin on the boeing board said i'm not interested in running the company. he announced that during the last earnings call. there's a couple of internal possibilities. one is stephanie pope, that she, who is in charge of commercial airplanes, could ultimately move up to that job. and there's also the talk of pat shanahan who used to be at boeing, highly regarded from his years at boeing, who is currently the ceo at spirit aerosystems. there's a whole bunch there in terms of what's happening with the possible acquisition of spirit, so that's where we stand on the ceo search. >> phil thanks. we'll check in with you a lot later on today. checking in on the markets as we continue to hug the flat line after a solid open. dow up 3, s&p up about 8. 6 points shy of a fresh intraday record. our next guest does think there's a possibility the s&p will see a second interyear decline of 5% or more. cfr research chief investment

strategist sam stoval has a target of 5440. good to have you. >> [ inaudible ] carl. >> 5% down wouldn't be that uncommon. do you have any ideas what might be a catalyst? >> well, good questions about what specifically would be the catalyst. a lot of people say that it's the unknowns that typically trip up the market, and i like to say that unanticipated events are hard to anticipate. but i think it has to do with the 10-year yield, would have to do with inflation readings, as well as the fed, whether they're likely to cut in september, et cetera. also at the same time, looking at valuations. i mean the s&p is trading at a 32% premium to its average p/e over the last 20 years. tech is trading at a 68% premium. growth is at a 55% premium. so i think we're really stretched and we've got to see some upward revisions to earnings estimates i think in order to justify that.

>> right. do you think sideline cash gets put to work if, in fact, we start getting cuts? >> well, it is interesting because a lot of academic studies have said that sideline cash tends to stay on the sidelines. certainly more for retail investors than for institutionals. but the institutionals probably would and i would actually think that they already have that money working because, you know, they don't want to have another year in which they under perform the markets. they might not have gotten their bonus last year but this year they might not keep their jobs. >> sam we've been talking about the lopsided nature of the market, how it's big tech and everybody else. in your 5% draw down scenario, what happens to big tech? is that where the pullback comes? or does it stay solid? >> good morning, sara. i would tend to think the crack on the ice, if you will, would come from technology, just being so weighty, that the concept about ai doesn't at least hold

it up sufficiently in the near term. when you look at the year to date performances, it's been communication services and tech outperforming the s&p, but since a recent top in the percentage of industries in the 1500 that were above both their 10 and 40-week moving averages, since that mid-may reading, we've now been in a sharp decline on that percentage reading, and at the same time, it's only been tech that's been outperforming the market. i sort of feel as if this is a jumbo jet that's flying on one engine, and you wonder how long it can stay aloft. >> sam, good to check in with you. we'll see what the second half brings. sam stoval, cfr. >> thanks. >> after the break retail sales come in weaker than expected one retail ceo's top stocks amid the volatility. that's next.

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welcome back to "squawk on the street." let's turn to the health of the consumer. very much in focus today with retail sales coming weaker than expected for the month of may and downward revision for april as a new report from bain and company forecasts a slowdown in the luxury goods market in the second half of this year due to weaker consumer confidence. jay rodgers kniffen, ww ceo, joins us now. jan, welcome. how do you characterize the slowdown that we're seeing right now in some of this consumer data? you've been relatively optimistic for a while. >> well, i've been relatively optimistic on the consumer's ability to keep spending as long as they had a job. last time i was on with you, i think i said the consumer is weakening. we see it with every report. we saw it with this report. sales were still up 2.6% versus last year taking out gas and auto, kind of the way we look at

them. is that good? no. is it bad? it's a deflationary environment. when good aren't inflating you will see the numbers being softer. the consumers could buy something else and build it back up. when they can buy things cheaper than they had been expecting to buy them, you do see the numbers soften a little bit and i don't think this is too surprising, i don't think much is happening to the consumer yet. they do still have a job. they still think they will keep their job and getting raises. numbers weren't quite as good on jobs this last report we saw and they weren't quite as good on continuing claims this last report. it is softening. i think we'll continue to see it soften, and i think last time i talked to you, i said, we need six cuts by the fed and they need to start and if they don't start they can't get six in and we will see the consumer crack and fall apart and not borrow

enough money and keep us going in this game. this is the game, if the consumer stops, we go into a recession. if the consumer doesn't stop, we don't go into a recession. that's about as simple as it is in america today. >> that's where we are right now, we're like in the inneckship point kind of on the precipes where they need to make the cut to protect the consumer? >> i've been saying since the beginning of the year it's time to start the cuts. they don't have to go rapidly, but they need to start the cuts so we know it's happening. we know they understand that inflation is falling to 2%, and that world throughout understand it, and when they do that, there will be more confidence among the consumers and more confidence among the retailers and that gets reflected in the business staying stronger. you know, i'm not an economist, but i've been watching this consumer for 60 years. i know what they do, and they've tried their best to crack this consumer and they're about to get there.

so it's time to ease up. so far, the consumer has said i'm not stopping. i've got a job. i can use my credit card. i don't want to cowtail to someone telling me what i should or shouldn't do because we just went through a lockdown. they're in the roaring 20s mindset. you can stop them if you keep the rates too high too long. >> you think there's a way to do these cuts and reassure the consumer rather than do the cuts and have financial conditions get so loose that inflation is a threat? >> like do i run the fed, no. does it look like a huge part of the inflation was caused by the supply chain, albeit pent up for two years, and does it look like a huge bit of from it is now flowing through to raise the drop in inflation? yes. does it look like goods are down to zero. yes. so it's time. it's time to say this thing is

going to land itself if we don't screw it up, and i don't want to see the fed stay too tight too long have a pancake landing on the landing. they've done a good job of getting there. looks like a soft landing. not a big difference between a soft landing and a hard thumb. now like they stayed too low too long, now they'll stay too high and we'll get a recession. if they start moving some time in the near future the consumer has a job. if we don't see jobs get a lot worse than they are now the consumer is going to stay with us and we'll just gradually float by. that's a pretty small window that fed has. >> whether you can bank on the fed cutting or not, let's talk about winners and losers because it has depended on what category you're in of where the consumer spending and a lot on execution and who is doing a good job speaking to their core consumer. that's been the story. where is the consumer going?

what types of categories and names do you want to be in next? >> well, right now it's pretty simple, right. you need big, strong, well-capitalized i can get the money if i need it consumer that can reinvest in technology and basically control what's going to be cost increases coming against what's not going to be top line growth because we're going to see the inflationary part of it come out. so it's easy if you're walmart or you're home depot or costco or dick sporting goods, those big, strong, i can get the money i need retailer and executing really, really well and all four are. it's also pretty good if you're a guy that owns your small niche like i love boot barp because they own that niche where the consumer is going. we know they're going to buy western and denim. i like levi's for the same reason. casey general store, they're executing about as well as it could be executed. i like those kinds of things.

i also like strong aspirational brands because the consumer is going to start buying goods again if we don't crack them and so we could have a pretty good back end of the year in aspirational goods. you know, i like levi's and nike and absolutely and tapestry. i like ralph lauren a lot. i think that's a good place to be. i even like the high end. i like louis vuitton because that's one place amazon and walmart isn't killing everybody, at the high end. at the low end they're killing everyone. it's not easy to be a dollar store a small retailer because interest rates are high, costs are inflating, prices are stopped inflating if you're selling goods. that's a tough place to be when you're up against amazon and walmart. >> we're out of time today, jim, but i want to get your next time on whether or not you think the consumer will upgrade their pc as we continue to talk about the impact of a.i. on electronics. we'll save it for our next chat. great to see you. >> you, too.

a whole lot more when it comes to the retail trade when the ceo of sam's club will join us with his pulse on the consumer on "money movers" at 11:00 a.m. eastern time. after the break, investing in social change. a look at where funds are getting deployed when we're back in a moment. tamra, izzy and emma... they respond to emails with phone-calls... and they don't "circle back" they're already there. they wear business sneakers and pad their keyboards with something that makes their clickety- clacking... clickety-clackier. but no one loves logistics as much as they do. you need tamra, izzy and emma. they need a retirement plan. work with principal so we can help you with a retirement and benefits plan that's right for your team. let our expertise round out yours. weathertech products are designed and manufactured in america using only american raw materials. most competitors make things seven thousand miles away... and then wonder why they don't fit. with weathertech in your vehicle you may hear angels singing as you marvel, how do they do it?

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welcome back to "squawk on the street." there have been more than $340 billion in corporate commitments to battle racial injustice since the murder of george floyd in 2020. according to mckenzie, it's not clear how those funds are being deployed or even when. for this juneteenth, our frank holland is taking a look at investing in social chaung. frank? >> we all know the juneteenth holiday started as a remembrance as the end of slavery and it's taken new meaning since the murder of george floyd in 2020. it's a day to focus on civil rights and economic justice. here are just a few ways you and the companies you spend with can invest in social change. >> reporter: billions in buys and sells happen on wall street every day. but some investment vehicles

also drive social change. that includes the naacp, minority empowerment etf. the ticker is nacp. it's focused on big companies with strong diversity policies. year-to-date it's up more than 16%, outperforming the s&p, with top holdings like microsoft and nvidia. cadence design works with nvidia on its highly coveted a.i. chips. it started a $50 million fund to help black and latino families start businesses and buy homes, investing $1 million for every $1 billion of its market cap. >> not only is there a wealth gap there's also an information gap. where can we go to get loans if we need help financially? if we get other companies contributing to a similar fund, you know, they can use our footprint or they could use something of their own design, we think this can have a huge impact globally. >> we got to find a reason to have hope. >> reporter: operation hope is the nation's largest nonprofit,

dedicated to financial literacy. >> i push for literacy as civil rights initiative. >> reporter: 1mbb is working to scale 1 million black businesses by 2030. today it's more than halfway to that goal. >> when you do this, it's not about the business. it's not about how many survive, per se. it's about the mindset. it's about shifting the brain to a can do mindset, to a self-actualized mindset, to a glass is half full mindset. >> and as we see companies make their contributions towards social and economic justice, there has been some pushback. for example, the fearless fund, a venture capital fund focused on black women's startup is being sued by edward bloom to stop it issuing grants to those businesses. an appeals court says those grants must be suspended while the case is being litigated.

>> appreciate that, frank. important report. meantime, dow has gone red. 5475 s&p. still about ten points shy of an interday high. s&p riding a six of seven day win streak. "money movers" begins in just a couple of minutes. okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them? that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it! i downloaded eight hours of true crime stories just during our last video call i'm learning a lot

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good tuesday morning. welcome to "money movers." i'm sara eisen with carl quintanilla live at post 9 of the new york stock exchange. today can the market momentum continue? young yu ma says yes and he joins us at post 9 to explain why. a gut check on the consumer and their spending habits. the ceos of wingstop and sam's club are with us this hour. news out of amazon, tackling medicare spending. dr. van gupta joins us with details. meantime, keep your eye on the markets. we have swung into the red. dow down 0.10 of a point. retail sales was a number today. we'll start with the momentum trade, though. bmo bullish on its ability to continue.