that came out, the data that came out on gdp and other factors. steve liesman says, look at gdp over the last couple quarters. he says average them out for around that 2%. treasury yields with the ten-year at 4.24%. that does it for us today. make sure you join us back here tomorrow. right now, it's time for "squawk on the street." ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at post nine of the new york stock exchange. stocks do look for some stability after wednesday's long absent 2% decline. q2 gdp solid, thanks to inventories, but these disappointing earnings at ford, american, whirlpool, nestle and others briefly take the ten-year below 4.2%. futures turn green, investors weigh gdp after stocks saw the biggest one-day drop since '22 with mega cap tech hit

very hard. plus we have an autos slaert, so to speak. ford shares are pointing to what could be the worst day those have seen in more than a decade after a massive miss on earnings. and this hour, we are joined by the ceos of servicenow and southwest. lot of changes there at southwest. of course, both reported quarterly results. let's get to the markets a day after the s&p and nasdaq saw their worst day since 2022. jim, sounds like you still think we might be overbought here. >> yeah, we are. and look, the small cap trade with the mega cap trade is, i think, still going to be on. they're going to try to make a stand here, and i think you have to watch nvidia, why? because that's been behind everything. every company seems to be paying too much for nvidia. that's the new narrative. if there's paying too much for nvidia, that means that you don't get the bang for the buck for a.i. we do have bill mcdermott, who was very positive on a.i., david, but i would say that there is a revulsion to the idea

that a.i. is the savior, and it really, i think, can be laid to the horrible tesla call that i actually thought was okay, but the reaction has been -- >> but why would that translate into a.i.? >> he spent the most visibly. he talked about the -- >> he did. >> he talked about nvidia chips. >> everything else except automobiles. >> look at micron, down 50 straight points. i don't mean casual. i mean, like, wow. >> a number of things happened at the same time. you had rates start down, and that sparked this huge rally in the small caps and medium caps, so the russell, the iwm, as we've discussed, and then you also had this thesis that sort of is gaining momentum that, will they ever see a return on this enormous amount that is being invested in capex by the big four, really? >> it is the big four. we should get rid of the seven. that's irrelevant. >> those enormous numbers. we talked about it yesterday with alphabet. ever really generate a return.

now, they say yes, of course. at alphabet, they say yes. >> i don't think that's true. i think they said they can't afford to not spend because it might be -- yes. but that's the answer. the street hates that. i mean, you're buying stuff because amazon's buying stuff? is that, like, the rap? i thought before there was going to be so much -- i still think there's going to be great money. i just think the narrative has changed to the point that you're guilty about spending until proven innocent and we don't have anything to prove your innocence yet. >> but they're not going to stop their spending. >> no, they won't. we know, carl, a lot of this is a defeat of jensen huang at nvidia, and what nvidia said was, you can't afford to not do this because you'll never catch up. i believe that. but that may mean that i am an s-u-c-k-e r. do we have that ratio? that's the key ratio. >> meanwhile, jim, all the results today imply price cuts

in cars, price cuts at airlines, price cuts at restaurants, price cuts at consumer products. >> yes. it's unbelievable. but remember, this is in reaction to the customer going on strike. they're not going to pay for the high-end pet food at nestle. they're really rejecting french fries at restaurants. this customer, at the supermarket -- >> isn't that what we wanted? >> it's exactly what we wanted. it's what jay wanted. jay powell. what he wanted. so, this is what happens when you finally get your cut, but -- did my thing just go off? i don't care. can you hear me? >> i hear you fine. >> this is when you get the cut. at the ugliest moment. we come in today, say, david, there's a french fry revolution, and you say, let them eat cake, i'm shorting cake. >> you're shorting cake as well. >> big time. >> yeah. the reversal that we've seen when it comes to the small caps versus the mag seven or the whatever you want to call them. >> whatever. >> mega cap tech. it's historic.

>> no, it's unlike anything. jo jpmorgan's chief puba, you have to go back like a hundred years before you see this. >> only you are in a position to actually recall exactly how long that is. >> it's just like, you know, when i call -- photo alongside my grandfather in world war i with pershing. it's historic. >> yesterday's action, nvidia down 7, tesla down 12, mag seven, forward pe down nearly two points. >> it's extraordinary. and so, the question is, do people believe in the thesis that david propounded, which is that you're just going to keep -- until there's an roi, you're an s-u-c-k-e r, and i don't want to be that. i've been riding these all the way up from my trust, and believe me, the meetings that i have had, both with jeff marks and of course with myself, very soul-searching, because in the

end, i'm kind of like a dom deluise. i'm triple schizophrenic. >> don't you think people would be like, all right, i'm not worried about roi anymore. i remember the panic around alphabet for about a three-week period. their monopoly on search is threatened by a.i. >> and then search grows by a third. >> nothing to see here. >> we made trims. i was not as stupid as i may look to you. >> well, we'll get to ford in a moment. >> i didn't go to harvard to get stupid, but i own ford, and it looks like i did. i did well at harvard. now i feel like they should take my degree back. >> there's some more chatter today, guys, about september being a 50 rather than a 25. if the fed were to cut, if they were to find a way to cut next week, what do you think the reaction would be? >> panic. >> yeah. >> they know something we don't

know. >> yeah, that would be -- that would scare people, wouldn't it? >> it would be like every airline is southwest air, every auto is ford motor. honestly. what? what are you laughing about? what's so funny? >> i find you risible on occasion. >> risible? >> like a clown? am i a clown to you? that's what you're supposed to say. >> it's, am i krusty or bozo? the clown has already been decided, because i also own honeywell. >> oh lord. pens are already flying, and it's only 9:07. >> let's get to ford, by the way. it is down premarket. warranty costs hurt the quarter. jim farley talked about those concerns on the call last night. >> as painful as it is, quarter after quarter, to have all these great launches, we do not release them until we're happy with the quality and that we've done all the testing. and it makes our quarters lumpy, and it's challenging, but it will reduce warranty over time.

>> what's weird is the ebit guide was fine and they raised the cash flow guide. >> well, they thought it was a good quarter. which, frankly, is delusional. the warranties are so bad. and it came back. the pledge not to have the warranties come back and then -- warranty issues come back and then, boom, they're back is, to me, insulting. it's insulting to people who have hung on to the stock. >> stellantis is going to open down eight. they're not alone. >> when you go over what adam jonas said, why aren't you doing a buyback, they said, we have better things to do, after gm stocks has moved up. this is the bottom five in the s&p. i thought adam jonas was a teller of truth on this call. >> he hasn't covered himself in glory in this name. >> neither have i. >> still says it's a top pick here. thanks, adam. >> i don't say that anymore. >> i've asked you many times why you own this, and you -- you

kind of have a hard time explaining it, but you haven't sold it. >> no. we downgraded. am i sitting here telling you, like what i hear about everybody else who comes on air and says ai i'm early? do you see me being fine? >> no, but you've been a believer in farley, and i think that's what's kept you positive on the stock and the company, right? >> that's true. >> yeah. >> and so, what you should say is that i have been wrong. >> you've been wrong so far. >> it's okay. i've been wrong. it's all right. >> i think you've been hopeful on returns because even jonas has said that the gm performance here today might be entirely due to the buybacks. >> i don't care how it gets there. i don't care if he didn't kill his wife. okay? this is a fugitive-like situation. i know this quarter was not good and they thought the quarter was good. if they had just said, listen, we screwed up, i would have liked -- i'm sure they can find

something. they can chat it and find something, but this was a very tough -- i went home last night, and i almost had a drink. >> on a school night. my goodness. >> i got out of that game. but i read it, and i said, okay, listen, i said something that gene hackman said to me 25 years ago. >> which was? >> sometimes you just get had. >> sometimes you just get had. yeah. all right. that's true. >> great man. >> i'll see you in hell. >> i didn't say -- that's -- that's from "unforgiven." >> what a great movie. >> i didn't say, i'll see you in hell, because you're not going to be there. >> i'm just going with the hackman quotes, literally one of the best actors. >> we won't see you in hell because you'll be up there laughing at me. >> jonas is bringing us existential questions about, are we sure the ev business is a value creator? tesla is only making money -- the underlying ev business is not profitable on their estimates. >> jonas really shined.

i know you said he's recommending it but his questions -- i was shaking when he asked that question about the buybacks. he basically said, it's the family. maybe we even have a -- what's known as a s.o.t. >> i don't know that we do. we got breaking news, though. >> what? >> you like basketball? >> do i like basketball? only if i overpay for it. >> well, obviously, people may well know that new nba contract for the right to air the games beginning next -- not this coming season but the next one has all been signed up. we've been talking about warner brother discovery's failure to land the deal. amazon has the deal. now, as we've been telling you, warner bros. discovery is suing the nba. kind of an interesting moment here, suing your one-time partner, continued partner, really, in airing games over the next year, but at least from what i am hearing, and we haven't yet seen the complaint. that's expected to be filed this morning. may not be quite readily available. certainly will be redactions,

but we'll get a look at the complaint very soon. this is over what is essentially a five-page-long matching rights provision in the contract that they signed with the nba ten-plus years ago, and it may come -- well come down to, you know, a breach of contract, so to speak, but really, what the definition of internet television is, and that will be something, it appears, that the courts are now going to be deciding after the nba chose amazon, said, in fact, that warner bros. discovery did not effectively match as, again, we've been reporting, would likely be the case, the package that amazon stepped up to the tune of about $2.19 billion. that does include wnba games. warner brothers coming back with an offer for only the nba games. they say it matched on economics and streaming. it was going to be on max, but yeah, they would have tnt airing the games as well. that's at least some concern for some out there who own the stock in terms of what becomes of tnt without the nba. of course, warner bros. discovery responds, hey, we got

plenty of other sports on there as well. there you see the packages that have been selected by the nba. it's rare that you see this kind of a thing, and you know, when i hear is, listen, they feel as though, at warner bros. discovery, they have a duties to their shareholders, a fiduciary duty to defend here, and the hope is that either they come away with some money, the games themselves, or they lose. but in their opinion, it seems as though they have very little to lose by litigating. and they feel like there were any number of things that were already said against them, including things like the requirement of three years of fees being in escrow, for example, which would have been very difficult for warner bros. discovery to do. and it's something that was agreed upon by the other participants here. they even came down the -- after matching -- after the exclusive period had expired, they came with youtube as a potential partner for some other aspects of the deal, saying, listen, we

can figure it out if we have to. apparently, the nba, not interested in doing that. we'll see. you know, discovery, jim, as you well know in lawsuits, can find a lot. are there emails? are there nexts that are going to show there was a predisposition to amazon all the way? >> what happens if there's an email that says, you know, we don't want to go linear anymore. we see where the world's going, we'd like to be with you? but there's a contract. >> yeah. so -- >> explosive. >> again, we pointed to this as being likely. it has now happened, and it will be in the courts. of course, we will be interested in reading the complaint itself when it becomes available, but the nba is being sued by warner bros. discovery. jim? >> fabulous work. i know there was a downgrade in macquarie. i read it and thought it had a lot of cogency. servicenow beat. company raised its annual subscription revenue forecast on strong demand, but they had some

issues involving a senior executive who left the company. we're going to get to that first before we talk about how great the quarter was. i want to bring in the chairman and ceo, ibill mcdermott. thank you so much for coming on "squawk on the street." >> thank you, jim. >> all right, so, bill, you bring it up. i didn't know about this, but you -- i thought that, look, great quarter, great quarter, but at the very beginning of your conference call, you talk about an internal complaint earlier this year that indicated to you, and then you followed up, that there was some, what i would regard as being, let's say, not in keeping with your company, and that meant that c.j., the president and c.o.o., offered his resignation from the company effective immediately. bill, what does this mean? does this mean there there will be a justice department investigation? does it mean that the $400 million contract that you got with the army is now in jeopardy? i think a lot of investors want to know whether there is a

possibility that your huge federal business could be in jeopardy here. >> yeah, this is a single-threaded event, jim. and internal investigation was conducted, as you said, with the help of outside counsel. we transparently reported that we felt our policy was broken, and the necessary actions were taken. subsequently, you know, the client that you mentioned and the government entity has since renewed and expanding their relationship with servicenow. we feel that it's a privilege every day -- >> bill, did they know about this before they renewed? it's great if they renewed, but not if they didn't know. >> we feel it's a privilege every day to serve the citizens of the united states of america and all the government entities and our federal business is fantastic, and i think that everybody appreciates that integrity. we don't grade on a curve when it comes to compliance, and we absolutely want to do the right

thing, did the right thing, and we're confident in our position. >> have you been contacted by the u.s. government, the justice department or the department of defense? >> no, i haven't, jim. again, we are proactive in disclosing everything, so there's no need for anyone to contact me. we've already given them everything. >> okay. like, i -- i hope that's the case. i don't think that it's necessarily over, but that's your judgment and my judgment. let's talk about the quarter. there's been a sense that the -- that a.i. has been overhyped, but when i look at your quarter, i would say a.i. is integral to a lot of the business you're winning, and you won a huge amount of business in a very uncertain time for everybody else that seemed certain for you. tell us how that happened. >> a couple things. this is the a.i. platform for business transformation, and when you think about what ceos are looking for today, they have to grow their companies, but you can't grow your company unless you simplify, digitize your company to enable better customer, better employee experiences and obviously,

innovation. you have to build applications that serve the consumer and meet them where they are. this is one platform, one clean sheet of glass that resides above 50 years of mess, and we have powered it with gen a.i., so it's now assist gen a.i. that's built into the platform, and when you think about companies, seriously, like stellantis, merck, adobe, american, honda, sd microelectronics and so many more and our great government customers, u.s. air force, national science foundation, australian department of defense, they're all jumping on board with this platform because they have an end-to-end operation, a mission to run, and this is a very exclusive enterprise software platform that's transforming businesses every day, jim. >> okay, so, bill, before these companies brought you in, and i know they brought you in because your phone is actually running off the hook because of your

product, what were they doing? how much are they saving? there's a sense that everybody has overhyped a.i. and it's not giving return on investment. it sounds like your customers are getting an roi. >> we have domain-specific llms and this is quite a different approach than most, right? they run inexpensively. they have no latency, meaning, they're lightning fast, and they're totally secure, and we're working with the customers' data. so, when you think about helping employees do their job better or serving the customer better, we have cases where we're improving productivity, including with developers, by 55%. so, the drop to the bottom line is evident, and that's why, quarter over quarter, our now assist business actually doubled, and the pipeline since our knowledge 24 event in las vegas in april is up 50% year over year with an added billion

in revenue opportunities and lots of that's driven by gen a.i. so, this is a truly sensation. i think one of the analysts that covered us, put out a nice article this morning, said, this is the exclusive platform for the enterprise, and we couldn't agree more. >> yeah. i mean, just so people know, 9 out of 14 analysts congratulated the call. one said that you were exceptional. the other one said that you were amazing. that is the highest congratulations ratio i've seen so far in 2024. congratulations on that. it does matter. you talk about jensen huang, and you talk about getting right with jensen. what is nvidia doing with you that's so exceptional? >> well, we started building large language models with jensen and nvidia, great company, great leader, more than five years ago. so, this is not wet paint. we have been at this for a while. and because we've been at this for a while, we've built our game plan on top of the amazing technology of nvidia, and i mean, the whole stack.

so, if you think about that partnership and what we did, we started with i.t., we quickly moved it into the employee experience. now, we're running the table in customer experience, and obviously, developers are improving their productivity by 55%, so the compute power coming from nvidia is powering the servicenow platform. >> all right, yeah, it is an excellent partnership. one last thing i had. carl, actually, back from workday on and marc benioff yesterday from servicenow, they want to come at you. they want to do on-boarding. they say they have the data, not clear they think that you have the data, but they've got it. is it an existential threat to your company or just something to keep an eye on? >> no, i think it's actually more of the same. first of all, everyone's entitled to their strategy, and i couldn't be happier for them, because they have databases with data in it. so, if you think about salesforce or workday, s.a.p. or

oracle or any of the other ones, they have data in their system of record. that's 20th century architecture. we know that. we appreciate that. that data can be fed into the servicenow platform where everything is automated and work flows in a seamless, rocket-fast way, so it's really more of the same, and the fact that they're cooperating is going to help us help customers, and i want to tell you something, jim. one of the sleepers, and some of the smart analysts picked it up yesterday, is we invented something called raptor db and we're ingesting massive data at scale, 12 times the amount of data that's ever been achieved before in an enterprise platform, and we're processing analytic queries 27 times faster than has ever happened in an enterprise software platform that data will come from those databases like the companies that you mentioned, so we're thrilled about it, and our customers are loving it and that's why we're the unicorn and

growing faster than all the other ones. >> that's absolutely true. let me be the tenth out of 15 people to congratulate you. the stock is up big and everything else in your segment is going lower, because you outperformed everybody else. i want to thank bill mcdermott, the chairman and ceo of servicenow. >> thank you so much, jim. >> yep. we'll get cramer's "mad dash" in a moment. we'll get to ibm and honeywell and the airlines and chipotle nu.shin er's "mad da" a mite ♪ oh in a harbor, there was a port ♪ ♪ the busiest port, that you ever did see ♪ ♪ now the boats move the goods ♪ ♪ good jobs for the people ♪ ♪ the people build the city ♪ ♪ and the city comes to life ♪ ♪ and the life has a rhythm ♪ ♪ and rhythm has a home... ♪ jpmorganchase invests in infrastructure to help create more jobs here at home. ♪ make the green grass grow all around all around ♪ ♪ make the green grass grow all around ♪ ♪♪ tony, its gone. no.

how am i going to do this? welcome to the mdy mid-cap cup, presented by state street global advisors. today's challenge is to play 9 holes without the middle of your bag. how does that sound? that sounds terrible. ♪♪ ♪♪ ♪♪ ♪♪

♪ airlines under some pressure today. mostly because of this american guidance, but we'll also talk to southwest and ceo bob jordan ending their 50-year tradition as they begin to offer assigned seating, premium seating, red-eyes. we'll talk about that when we're back in two minutes.

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. all right, let's get to a "mad dash." loud crowd here. lot of earnings. honeywell. >> in the few seconds before i can't hear you whatsoever, honeywell reported a mixed quarter. they're setting up for a very strong 2025. they did have margin pressure this quarter, some of it related to deals. we're telling people not to panic at the club because it's been -- it does have a new ceo, and i can tell you, i am very

disappointed in 2024. i expected better. and that's okay. i deserved that. we deserve that. >> year over year sales growth of 5%, 4% organic sales growth. not enough. >> you know, you can't say, hey -- [ cheers and applause ] >>l let's get the opening bell. at the big board, health services provider concentra, celebrating an ipo today. at the nasdaq, it is the largest ipo of the year, and that's lineage, a temperature-controlled warehouse reet. >> that's a good sign for the market. a lot of it like lineage, which is a very big deal, and that's where the money is. >> people are talking about that lineage ipo like it's the next

prologis. >> that is a comp. >> cold storage in terms of -- and logistics, obviously, being a key part of it. i had some statistics i'm looking for, sorry. >> that's real. >> i wrote them somewhere, but i lost them. but it was very much oversubscribed. i think top 25 holders all represent mutual funds or sovereign funds. no hedge funds in the book. we'll see how lineage performs when it opens. >> it's like it has the added advantage of not -- of having very little to do with the megacaps and a lot to do with just kind of the general way that we do business in the country. prologis had a good quarter. it could be worse. >> could be worse, right? but as we point out, one of the large -- the largest ipo of the year, so we'll see how it performs. it's going to be a while until it opens. >> yeah, look -- >> and it is a reet. >> we need to remember that this is the dead of summer, and i would not, carl, have expected something this big to be able to be priced so well. >> speaking of real estate, jim, nycb getting taken apart today on their results, trying to

lower their cre exposure to 30 to 35 billion. provisions. >> this is what they said would happen, so i'm kind of surprised that everyone's in panic mode about it. but you know, when you go over commercial real estate, there's still nothing really to write home about. and any -- anyone who has any exposure is obviously looked not aghast but they initially worry, and then they should look at sl green, vernato, and they should look at simon, which is more retail, obviously, and they come back, and that's why i am not as chagrinned as others about this. >> we did get a nice div hike over at b of a yesterday, 8% and a little buyback, $25 billion. >> you know, not everybody's being heard here. i think we're way too close to what's not going right. we're going to have the same problem when we get to southwest. it's easy to emphasize what's not going right. >> what'd you make of the

american guidance, jim? they were looking for -- >> it was horrible. >> $225. they say it could be as low as 70 cents for the year. >> phil lebeau is great because he -- i'm the color man on this, but could it really be that bad so fast? i mean, every plane is full. they have a little bit of a -- of a seesaw, of a fulcrum where they add three more planes, whatever, and pricing goes down. how could they be so wrong? where's the stock versus covid? >> load factor was a beat. 86.6, as phil will tell us, but rasm down almost 6. >> when i looked at that, i said, wow, i thought american could do something better. the stock has been acting quite horribly. but it's deserved. and i cannot believe they could do so poorly in what is a tremendous time for travel. tremendous. look, american express will tell you it's tremendous. we've got companies that -- across border. mastercard and visa.

that was part that was really strong for those guys. these guys are playing right in the sweet spot and this is all they can do? now, they're largely domestic, so they can say, jim, you're talking about overseas, but i don't know. i expected better. i just expected better. >> speaking of expecting better, i'll mention a company we don't often talk about here, but it was a $52 billion market value before trading today. edwards life sciences. >> oh my. major product is not selling well. >> let's take a look. you're talking about transcatheter aortic valve replacement, tavr. >> they invented it. >> this had the same market cap as ford, basically, a couple billion less, at the beginning of the day. my point is that it's losing a quarter of its value. if i had the old pienguins from the old "squawk box" days, i'd be rolling them out because this morning, suddenly, the analysts see something they don't like. at bank of america, baird,

jpmorgan, at truist, and it goes on from there. downgrades are everywhere. jim, the growth rate was simply not there for this key product. sales of a billion grew 5%, 6% constant currency. edwards' competitive position, they say, did not meaningfully change globally, although the company experienced regional pressures and pricing was maintained, so what is the -- what's the issue here? as they obviously, again, this transcatheter aortic valve replacement. >> they used to have to crack open the chest cavity to do an operation, and then this company comes along with a product that makes it so you don't need to crack open the chest. it's revolutionary. the fact that it slowed down is really kind of, well, what are they besides that? this is not boston scientific where they have a million products. boston scientific, by the way, up. also does cardio. and i don't know what to say about edwards. this is -- when you have a --

when you make -- when you're a bread company and you don't sell a lot of bread, people don't say, listen, it might have been the peanut butter. >> no. well, what had been $52 billion is 25% less, so that is not a good day to be a ew shareholder. >> no, it's not. those who have it, just go switch to boston scientific. they're doing so many things right in so many different fronts, so let's keep that in mind. that's the winner in the segment, and edwards is the loser in cardio. >> viking therapeutics up as their drug goes to late stage. >> let's give them their due. we own eli lilly. viking has got a catch-up thing going, but this is phase three, and let's remind people that lilly has very similar products. someone should go buy viking. if i were pfizer, i would buy viking, but i would buy it because you want to compete, and it's worth it, but this is not going to hurt lilly longer term, because it takes billions of dollars to build the plants, and they're -- lilly's got the same

product. this would be a me too kill but theirs is once a month. we're not sure the duration of -- is it once a week for lilly? we need to know from lilly, and i don't have that source -- i don't have the sourcing to be able to check to see what lilly has. nobody else does either. >> lot of movers on them. here's another positive one that we haven't hit yet is raytheon, or i should say rtx. rtx, very strong results that are being g-- getting a very positive response in the market. reported sales, up 8% versus the prior year. they say 10% on what they call an organic basis. gap eps, 8 cents, including 29 cents of acquisition. accounting adjustments and $1.04 of other net significant. adjusted eps, 141, up 9%. jim, you're getting a very positive response there. >> and they should be. >> passes the torch. >> to chris. it's fair to say, is this greg hayes' quarter?

i think both of them worked together for a very long time. what i really liked about this quarter, david, in particular, is you remember a couple years ago, greg hayes came out and said, listen, we're having a problem making the turbo fan, and they recalled all of them. turns out less than 1% had a problem. hayes bought every share while the stock was down, why? because hayes believed in hayes. a lot of other people were skeptical. greg hayes is one of the great ceos of our era and he's now retiring. what a good guy. never screwed up. never. >> well, the turbo fan thing was kind of a screw-up. >> but it was only -- less than 1% that was a problem, and they recalled everything. i'm just saying that he -- he admitted it, he owned it, and they looked at his -- it wasn't so bad. >> gave you an opportunity to buy the stock, to be fair. >> that's my point. in the end, look, they did a great job with that. they called it back. i guess i'd rather do these contracts with boeing, carl.

if you worked at rt ax, you shod be proud. >> speaking of the airlines, let's get to phil lebeau in dallas alongside southwest's bob jordan. >> lots to discuss, bob. q2 is not necessarily what people are focused on. it's the guidance. is this a case where you've got issues with revenue management as well as so much excess capacity you have to flush out over the next six months? >> i'm not happy with our results of q2 either, but there are a lot of impacts. there are, you know, at this point in time, there is excess capacity, more than demand, and we're working to flush that out. our capacity is actually going to come down to about 2% here in the third quarter. it will decline to a 4% decline in the fourth quarter. actually, seats will be down 8% year over year. but i'm really happy with the demand for southwest airlines. we have record passengers. we have record rapid rewards members. we have record revenues.

we have record credit card members. so, there's a lot of demand for southwest, but we have work to do on the revenue side. >> you've got a lot of demand, but you're changing the business model, though. after 50 years, you are now going to assigned seating, premium seating with more leg room for up to a third of the cabin, new boarding system. why change now? >> well, i'm very excited about the set of strategic initiatives that we have to transform the company, and this is a purposeful build. we've been building for two years, adding seatback power, adding larger bins, expanding our wi-fi performance. this is what our customers want. 80% of customers that fly southwest today want an assigned seat. 86% of customers that don't fly southwest want an assigned seat, and when a customer defects from southwest to another competitor, it's the number one reason, so it's the right thing at the right time >> but did it take elliott management taking a stake and saying you guys aren't doing well enough in order for you to make this change? the cynic out there will look at this and say, you've had to have

known this for years. >> the elliott thing had nothing to do with it. we've been working on this since last fall. we have very rigorously studied this. it's a big change, so you don't do this lightly. exintense focus on surveying our customers, a lot of engagement to understand the operational impacts. we've been working on this for actually, nearly a year. now, any change like this is huge. we've been open seating for basically the entire life of the company. i know there are going to be customers who say, i want to stay with open seating. it's a minority, but we had the same thing when we switched from plastic boarding passes. we had the same thing when we took peanuts out of the cabin. so, i'm convinced we can win them over, and the customer-friendly set of things that we offer our customers, the best policies in the industry are going to win them over. >> bob, jim's got a question. jim, go ahead. >> sure. okay, bob, thank you for coming on. terrific. i do want to ask you, what

happened to your booking policy or the way you did it? how did you execute it? when i look, you estimated two points of year over year headwind from revenue management challenges because you sold an excess number of seats for the peak summer travel period too early in the booking curve. isn't that the kind of execution that you have to be concerned about yourself? >> you know, jim, the move to a new revenue management system, ond system, which is far more complex, it just takes time, and there is an opportunity to really tune the system and continue to improve our processes. but no, we sold too many seats too early for the high peak demand summer travel period, especially on our best flights, so you get to the summer and there are just fewer seats to sell. we have a plan. we brought in experts to understand what is happening. we have an action plan going forward, and i expected the issues to taper off, but no, the new system is far more complex. we're also adding talent in the area. we're bringing in a new svp

chief revenue officer, and we're beefing up resources, but i think we understand what's happening. we have an action plan. but no, we cost ourselves roughly two points of revenue. >> bob, the faa has launched a safety audit of your operations after a string of scary incidents. how do you explain these incidents? >> safety is number one. absolutely nothing tops safety at any airline, especially southwest airlines. we take the issues very seriously. we have a team that's focused on understanding what happened, what we can do to improve. i actually talked to fa administrator whitaker earlier this week to make sure he understands my personal commitment to safety. we welcome the faa, and we welcome their assistance. >> how do you explain this? the person watching this at home will say, yeah, you want safety. how do you explain aircraft that are diving low and staying at a very low altitude? >> that is the purpose of the investigation. to understand, of our own personal investigation here at southwest, to understand what

happened. a lot of times, these things are human factors in the cockpit. i don't want to speculate but we're going to do the hard work to understand what happened, we're going to work with the faa and we will get better. >> jim has another question. >> kind of a good news/bad news situation. one week ago, crowdstrike released an update, and it infected a lot of pcs around the world. it did not infect yours. as i looked into that, it was because you had not updated previously to this, because you didn't have the latest computers, you weren't hurt by crowdstrike. is that the correct narrative? >> that is absolutely the incorrect narrative, jim. we have been investing in operational systems for a long time now, and our operational systems and improvements and the redundancy they provided actually is what helped us operate through this. we had core redundancy in operating systems that were affected by crowdstrike.

we were able to find a work-around. that redundancy helped us have a 99.9% completion factor on that friday. we do use end point cybersecurity, and in some cases, we use a different vendor, but we had key operational systems that were affected by crowdstrike, and we were able to mitigate that through investments that we've made, redundancy, and we will continue our investment in operational systems. >> one last question. elliott management has basically said you should be fired, chairman gary kelly should be fired. have you engaged in any meaningful discussions with them, or is this pretty much, that's their position, we're going to continue running the airline? >> you know, phil, we listen and talk to all of our shareholders. so far, elliott has shown no willingness to engage in any meaningful conversation. we'd be happy to do that. but it's hard to have a dialogue that's one-sided. right now, i'm focused 100% of my time, looking forward, the strategic transformation plan we

have for southwest airlines and making this an even better company. >> bob jordan, ceo of southwest airlines. lot of stuff going on around here. guys, we're going to send it back to you. >> fantastic stuff, phil. busy morning for you between southwest and american. jim, i want to get you on chipotle where the drawdown is now almost 25%. we had nickel on "overtime" last night. this near-term guidance on margin pressure, at least for the coming quarters. >> we had jack hartung hanansweg those questions. he said, we raised prices in california and that caused a dropoff in sales. the cadence of the sales wasn't that good, meaning the best month was the beginning, went down from there. but let's just talk about the social media issue that i thought was put to rest. there's one thing that brian niccol said, listen, we instructed everybody, there were some uneven sides. everyone's going to go back to fall. i thought that was great. never going to criticize a company that did double-digit

comp numbers. they will be back. they will be back, and i think people are jarred by the fact that there turned out to be a price that people wouldn't pay. that's what surprised people. we have heather gaines is one of our producers, it's her birthday today, and i know at chipotle, we don't look at the price, but in california, they look. >> i didn't mean to interrupt. the stock was up a lot. >> we didn't know about the california comment. >> i was watching "closing bell." >> same-store sales were terrific, but when you found out the cadence -- plus, can i just say, chipotle tells it. there's no -- there's no omission of facts. >> you see it right there. >> on a chipotle call, and i think that, yes, it was jarring to hear that there was a price, but no, they will be back. >> comps were up 11 and sales up, to jim's point. lamb weston gets a downgrade at bank of america. they were at $109. they go to $66. that's a haircut. >> yeah. look, lamb weston remains the

benchmark in 2024 of the worst prediction and the fact that french fries got too expensive and that dining out, which is really the culprit, got too expensive is something which says -- speaks to what you asked me at the beginning of the show. it's the backlash, and they were caught. the collateral damage of the reason why the consumer has had it and they're not going to take it anymore, and just so happens they're the ones that got hurt by it. that's the future if you don't lower your price. >> that was yesterday's news as well. today, i mean, some of these moves we're seeing are dramatic on earnings. ford is down over 17%. >> had to bring that up. >> i had to bring it up. >> servicenow is up $90. >> that's great, jim. ford is down 17%. >> well, ford had warranty problems after they told you that they had fixed it. ford had the gall to say they had -- now it's up $94. they had the gall to say it was a good quarter. you can't do that, david. you can't say something's a good

quarter and have your stock down 17% without having some serious soul-searching. >> yeah. >> serious soul-searching. >> by the way, lulu is down to the lowest level since covid. >> well, that downgrade by citi was just -- shook you to the core because it said, look, there's just a tremendous -- again, revulsion to paying a lot of money for athleisure. these are all the consumer saying, i'm not going to pay for this stuff. even in you look at tractor supply, one of the ones that david is so familiar with, tractor supply, they actually came out and said, look, some discretionary sales weren't that strong. but at least they have all this other stuff that makes up for it. but if you just have discretionary sales, you have been annihilated this quarter. there's no going back from the consumer just saying, we're not -- we're done. we're absolutely done. what's interesting is there are companies like whirlpool, which already took the medicine and didn't get hit again. >> that's true. >> we knew it was going to happen. we say, hey, you know what,

that's what they told us. they told us that. >> we should -- keeping an eye on mega cap tech, of course, all of which appears to be down right now, other than tesla, if you want to include that. there are others who have a larger market value. by the way, lilly is below an $800 billion market value. i want to circle back quickly to warner bros. discovery, story w brought you towards the top of the hour. there's tesla which is bucking that trend. those shares are down sharply down 7% again on news that we shared they are suing the nba. i guess never a great story when you're suing your long-time partner at some point and, you know, are there questions about whether other leagues will think twice about going into a long-term deal with warner brothers discovery. they say this is a one off. this is a contractual issue. it's a five-page thing on matching rights. they matched. they said they didn't. they want to see what a court decides. i wanted to point that out, guys. so many of these movers, dramatic moves on earnings, up or down to your point,

servicenow up ford down. life sciences getting crushed. >> you execute poorly and don't tell the community what's going to happen you get annihilated. communicate ahead of time like a tractor supply or whirlpool, own it. memo to corporate america, own it. own it! don't skate. you won't get away with it. >> did southwest own it there? >> did southwest own it? i think phil asked the question if everybody knew and didn't like the way you did seating how did you do this? i thought bob acquitted himself. i thought he acquitted himself well on that question. >> yeah. >> i don't know. not everybody -- well, he's been under a lot of fire. >> meantime, jim, we'll watch bonds. 10-year briefly got to 4.19 this morning as we're in the fed blackout window back above 4.2 at the moment. oil below 77. that's a one month low. vix holding 18. stay with us.

♪ (alarm sound) ♪ amelia, turn off alarm. amelia, weather. 70 degrees and sunny today. amelia, unlock the door. i'm afraid i can't do that, jen. ♪ (suspenseful music) ♪ why not? did you forget something? ♪ (suspenseful music) ♪ my protein shake. the future isn't scary. not investing in it is. you're so dramatic amelia. bye jen.

nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. (reporters) over here. kev! kev! (reporter 1) any response to the tradees, rumors, we keep hearing about? (kev) we talkin' about moving? not the trade, not the trade, we talking about movin'. no thank you. (reporter 2) you could use opendoor. sell your house directly to them, it's easy. (kev) ... i guess we're movin'.

♪ let's get to jim and stop trading. >> i want to apologize to the viewers. you can't do justice to all these companies and, for instance, i've got hasbro tonight and hasbro reported a terrific quarter. this is the regime doing well the stock was up dr. pepper. i can't wait to speak to them. cracker barrel. dow, the old dow chemical, okay quarter, basic company, but this is a morning where you -- where it's a jeff probst morning as i posted on twitter. memo to corporate america, you screw up, we ain't got nothing

for you. >> one we didn't get to was ibm worth a mention, up over 4% on earnings. >> they raised the fcs guide at $12 billion. >> software was good. the main frame cycle was good. give them their due. that was a strong quarter. i was looking at the red hat business, only single digit it growth that i thought might hurt them, but it didn't. they executed very well. congratulations. >> i mean, we could spend another half hour on the robert half and o'reilly autos of the world. >> absolutely. and again, there's so much of corporate america that is in flux. i don't even think we did justice to ai, but i think the rally in servicenow shows you if you use ai you got a return on investment you'll crush it. that servicenow is real and deserving. what are you -- >> i was thinking about the crazy story about succession and the murdoch empire.

>> wow. >> we didn't get to that either. the lawsuits, the three children. it literally is playing out like the hbo show >> they don't have shiv's vote. >> clearly they don't. >>. >> frank must be likable. >> what is going on here. >> >> we'll see you at 6:00. >> thank you. >> "mad money" at 6:00 p.m. eastern time. quick break as stocks try to rebound after wednesday's drubbing. back in 3. 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 thursday morning. welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla and david faber live from post nine of the new york stock exchange. stocks trying to rebound. you have sectors that are green. real estate, staples, financials are up today, industrials, health care. the reason the overall arrange

are down is technology is a big weight. again, information technology sector down 1.7%. s&p down 1.3%. better than yesterday's move since 2022. take a look at treasuries after economic data we'll talk about including gdp. bonds are getting a bid even though gdp was better. the 10-year note yield 4.22%. 2-year yield 4.4% right now. we are about 30 minutes into the trading session. some movers we're watching this hour. shares of ford tanking after its massive earnings miss on pace for its worst day now since may 2009. stellantis tumbling after reporting a 50% drop in first half profits. tesla rebounding after dropping 12% yesterday. watching the airlines, american airlines turning higher despite

cutting its outlook for the year. southwest also higher. the company beating earnings estimates but making a major overhaul to its business. more on the airline trade and o autos later. health care stocks on the move, astrazeneca shares dropping despite beating earnings estimates and raising guidance. astrazeneca's ceo will yoin us this hour to discuss the company's outlook. let's start with the culprit of some of this selling we've seen in stocks which is the dollar/yen. i mean the sharp rise including yesterday in the japanese yen, that's never a good sign for overall equities and what's the connection, you might ask. >> you might actually ask, sara. why would you go there is the reason for the underlying weakness. explain. >> i will. this is the carey trade, where you borrow in low yield

currencies or sell, a very crowded and popular trade and buy higher yield in currencies with i is the dollar. that's been the gap. that has started to unwind in a very sharp and violent way because japan is set to raise interest rates next week and the fed is to hint at cutting interest rates next week. and when that unwinds, it unwinds a lot of the popular trades that have been -- this is a funding trade that had been funding the equity market rally. so i'm not saying it's the only reason, but it's definitely something people are pointing to when that snaps back, then you see other major trades that have worked, like gold, like bitcoin, like stocks, all go the other way. so part of the reason i think that you're seeing that plunge. what are we seeing today? a little bit of a relief and potentially trying to see the stock market come back. there are other factors.

we should hit gdp. gdp was pretty solid overall at the number. i think definitely better than economists were looking for at 2.8 and they were looking for around 2.1. marked a rebound from the previous quarter of 1.4%. personal spending, which is the engine of growth in this economy, the consumer, 2.3%. not too bad and it was a pick up from 1.5% in q1. i hate the word goldilocks, but it was kind of goldilocks in that the inflation numbers were more benign. they do core pce on a quarterly basis, the placing index 2.3%, a drop from 3.1. look at core, strip out food and energy, 2.9% and that, carl, is a real step down than what we've seen. certainly from the first quarter, which was 3.7%. the fed is going to like this number because it shows them the economy is holding up, the consumer holding up, and inflation is moving back to target. we'll get sort of a fresher monthly look at pce tomorrow,

but this quarterly number, so far, so good. it's above target, but it's moving in the right direction. it gives them the breathing room to not feel like they have to urgently cut next week but they can signal the cut is coming >> inventory almost at a full point. >> take that out a lower gdp number. there were strong signals in here. did you see capex. capital expenditures, 11.dr. pepper% growth in spending on equipment and a lot was software spending as well. 5.2% in nonresidentialings investment which reflecting spending on commercial construction, equipment and software. positive signals despite the fact that inventory is definitely made it look better. >> software but data centers and chips that go in them. >> all of it. >> it's boosting our economy. that's what this is showing. >> i would expect it would be when you talk hundreds of billions. >> the question, it's doing it without an inflationary effect so far. so we're not seeing any kind of tick up in inflation numbers. so that's a positive sign too.

some people think it will be very deflationary once it starts. >> if, in fact, under a benign ai scenario as elon musk likes to say. >> a benign ai scenario. >> you don't want the other side of it, but the benign ai scenario, it's going to be great. >> this is a benign economic report i will say. initial jobless claims nice surprise there. dropping 10,000 to seasonally adjusted 235,000 for the week. again, kind of a soft landing day on better than expected economic data. if you're chipotle, things are good. no matter what income level you're catering to. listen to what the ceo said about the consumer. >> the good news is we're seeing transaction growth from every income cohort which speaks to the strength of our brand and value proposition. >> and then keurig, dr. pepper, did talk about the diskrp pansy in the consumer. >> the operating environment remaining uneven with resilient

demand from higher income consumers and value-seeking behavior among low and middle income consumers. >> so you really got to be doing a good job to get to the all-consumer income levels doing well now like chipotle. >> we were talking with cramer, with 11% comps, stock has been cut by a quarter in the last few weeks. >> it had run up a lot. it was one of the popular beneficial trades. but just in terms of looking at what they're saying, they're not talking about weakness in consumer spending or pullback at any of the income levels. you know, i've been tracking some of the luxury players as well and we did get word from some of the european luxury giants, karen, the parent company of gucci talking about the different regions in the world. japan is a star for all the luxury players because all the tourists are going and buying designer goods. north america they say remained in negative territory. polarization, brand positioning

persisted in bow ta ga ven net ta with q2 retail up 18% in the region. its brand specific there. zena talking a little bit about the environment. they call the overall environment challenging and i think that's been a difference in tone from the luxury players. we rec nognize 2024 will remain challenging. it's okay to say that if you're a luxury player, even though the high income has held up better than the low income. >> with the yep soaring perhaps the tourists will slow there. >> perhaps go the other way. >> the stock market, we are seeing mega cap tech giving up significant or having significant losses yet again. the s&p down 0.5% and the nasdaq down another 1.4%. of course this comes as what was really the worst day in two years and as we said, that magnificent seven group continues to move deeper into correction territory, down more than 10% from recent highs.

wall street's vix hits a three month high. mike santoli is here to help us understand this. sara says it's all because of the yen. >> it's a big part of it. >> it may be and the reversal is historic. no doubt about it. iwm is up again. >> for sure. one of the big dynamics over the last several weeks has been anything that was a crowded trade is suffering at the, you know, to the benefit of things that were neglected. short yen, was absolutely one of those things. and i also feel as if it's once you have this corrective rotational move, one, the least likely scenario, i think i've been hitting this, was going to be a perfectly fluid, painless move from nasdaq 100 into russell 2000 somehow. that was not going to be the way that it was going to go. you've seen the friction in the momentum unwind in the big stocks. now, i feel like what the yen moves down it's kind of like feeding the volatility gremlins after mid night.

come in the in the morning and there's stress positioning. it's all mechanical stuff. it's happening with a little bit of a growth scare in the economy. not a major one. you're kind of sensitive to slow down indications. a high hurdle for earnings to please investors. no downward revisions in s&p earnings over the course of the second quarter and you have a high kind of threshold for pleasing investors on the reactions. and then, you know, in a way, this is how a fully valued kind of well-embraced, optimistically driven rally would behave in late summer. that's altogether i think what we're seeing. now the question is what happens after the first 2% drop in the s&p without a long streak without one? not a ton of damage. incremental basis. it's not an absolute peak. on the other hand, i do think you have unsettled action for a while here. the vix towards 19 with pretty modest index moves shows you

there is a little bit of agitated positioning. >> now above 19 even as you speak. mike, stick around. our next guest does say while the unwinds in the market seem to be triggered by hopes of a rate cut a lot of this points to a positioning driven technical squeeze. joining us is barclays vanu crishna raised his forecast. great to see you. want to weigh in on the impact of the unwinds. >> i would argue while the catalyst was a soft cpi print, which includes the likelihood of rate cuts, that doesn't tell you the story because entering into this whole rotation, already the likelihood of a cut was close to 75%. all that's happened it's gone well over 90%. right. if we dig in deeper, positioning in tech was extreme real and fast money yet again. if you looked at what drove the returns in june and july, it was

a substantial move in big tech, driven not by earnings but a substantial expansion of multiples. going from around 27, 28 times, to 34 times. which we felt was unsustainable. but you flip it and see the move in russell, which is the most perplexing. the correlation between russell and absolute basis have been highly negative interest rates. it's not surprising that when the 20-year rate goes down 40, 50 basis points, that it does lead to a rally in russell. i think, again, that doesn't explain what is happening. you look at some of the moves in derivatives market you have the niche situation small caps. small caps are up, but the volume is up. at the same time -- that is not supposed to happen. then you have a significant increase in core volumes versus put volumes leading to flat and skew. pretty rare for a move of this magnitude, right. i think we are seeing a lot of

hints in terms of movement which clearly point to a significant technical. systemic site, you know, very underweight russell and overweight s&p and nasdaq in a matter of two weeks. they're dramatically changed. now they're actually pretty light on ndx and pretty significantly heavy on rty. the reverse can happen as fast, right. i think as far as the rotation is concerned the single biggest standout is not momentum or v value growth it is science. the single variable across the board is science. and if you break it down in science, break it down into lots of 50, there's a clear relationship between and the last up with i'll say is that it is not just a junk rally. what you find if you dig deeper

there's a quality byuyer. there is a matter behind the madness as well. >> a long way of saying this whole thing may be a head fake? >> yes. we think it's not sustainable on a fundamental basis. one of the arguments small caps were historically cheap versus large cap. our analysis that gap has predominantly vanished now. getting to par levels. second, if you look at earnings growth for small caps the forward revisions are still negative to modestly flat. for large caps it's up 5%. for big tech it is up 20%. that doesn't give you support. if you look at what the consensus numbers are, i think they're optimistic. they're expecting not only a ramp in margins for small caps, exceeding large caps, but that will drive significantly faster earnings growth for them over the next three or four quarters. i think that is wide

expectation. we feel this rally can last a little while but eventually it has to peter out. so the last one i would say is everybody points to the facts that rate cuts and small caps benefit the most. but if you look at the last, you know, 13 interest rate cutting cycles small caps have never done well. they've always lagged. in '95 when they did do well and you had a soft landing, was the time they were ahead for about two months and gave it back. >> i see you nodding your head. >> i think it's sort of a be careful what you wish for thing. right. small caps are going to be much more erratic. they're not as fundamentally based. they're generally lower quality. you are somewhat seeing it, just a rebalancing of the market away from semis and mega cap tech. health care perking up. financial strength is undeniable. that's related to the small caps. the market is attempting to

relieve these extremes that we've seen and we've been talking so much about for several months. but it's just happening in this sort of forced contrived way in a sense based on a lot of mechanical forces. i think at this point you look for a pitch you want for the market to get oversold, semis will look that way and the nasdaq 100 down 10%, and, you know, maybe then you refresh the rally and probably it's not going to necessarily go back to exactly how it was, but, you know, it's going to follow fundamentals. >> how many times can the market price a soft landing? it feels like sometimes we're priced for a deeper down turn recession and then get a good gdp number and price for a soft landing again. like how many times can we do that until we know what's happening? >> i mean another way of saying that is, a soft landing is a continuing expansion. and so you price it that way until it's disproven, i guess. and so when you go away from pricing the soft landing it means you have a scare long in

the tooth. that's a normal ebb and flow. not like a moment we're building toward. redeclare the soft landing is here. >> i would add, be careful what you wish for in terms of interest rate cuts, right. if cuts -- that's telling you not we're going into a soft landing but rather going towards a -- at least a shallow action which is not good for the mechanics in the market right now. i would say this has been a perplexing economy when it's been flipping and flopping and, for example, the rates market has been the most off. >> yeah. >> right. >> the smartest market in the world. >> to practically one third and down to two cuts this year. to the print, certainly on the gdp front and the inflation, the best of both worlds. we're getting inflation heading the other direction. economic growth still resilient,

bouncing back from q1. that is a very healthy drop for the equity market. u.s. exceptionalism eventually will prevail is our view. >> a good note to leave it on. always good to see you. thanks. as we head to break our road map for the rest of the hour. ibm shares moving higher. fresh color from the ceo on the results. >> airlines and autos, ford, american airlines and southwest all are moving big after releasing earnings and their outlook. what investors need to know. >> and tesla coming off the worst day in almost four years. down 12% yesterday as you know back in bear market territory. we'll talk about how to play it from here when we continue.

. take a look at shares of ford down over 17%. that's the worst day since may of 2009 if it were to hold. big earnings miss there. stellantis, as you see, also moving sharply lower. been a brutal week for the automaker stocks. tesla is up today but did not get a good response to earnings. phil lebeau tracks these names for us. i assume you want to start with ford. >> we can. let me start with stellantis because we got the numbers from stellantis. when you look at stellantis, the operating income for the first half of the year, $9.17 billion.

why is that significant? that's down 40% year over year and the issue here comes to too much capacity. too much supply i should say within the system. so they announced today look, we're going to cut. north america production, didn't give details on how much. cut pricing in north america. that's the reason you see shares of stellantis down more than 9%. now let's shift gears and talk about ford. this is all about where the company reported q2 earnings and it was a big miss. coming in at 47 cents a share. street was expecting 68 cents a share. we'll explain why in just a little bit. revenue a little bit better than expected. why the miss? warranty costs. warranty costs are killing them to the tune of a billion dollars lower in terms of the ice division. about $800 million was the change between q1 and q2. here's jim farley talking on the conference call about warranty costsnd and the impact they're facing.

>> we did see warranty costs increase in q2 tied to new technologies. fsas and inflationary pressures for the cost of repair. we expect technology related margin costs to have now normalized as technology matures and we deploy the capability to address known issues. >> several times, jim farley, talked on the call about their belief that they have got their arms wrapped around the issue with quality control and warranties and that you look at the data coming out of the new vehicles as they launch, that there should be fewer warnts issues down the road. carl, this gets back to this problem we've seen this over the last couple years that warranty costs continue to come up and they hit their earnings. by the way, they cut their forecast in terms of the ice vehicle division in terms of full-year profit by about a billion dollars. then they raised guidance in terms of the commercial vehicle business expecting another

billion dollars in profitability compared to the previous guidance. bottom line t they've got to get this issue figured out with warranties. they say they are. time will tell. carl? >> crazy curve balls of the auto business the last few days. we didn't talk about stellantis much today. thanks. phil lebeau working cars and airlines this morning. when we come back we'll drill down on ibm. the latest results and the outlook speaking of guidance. shares up 4%. we're back after this.

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check out shares of ibm. winner today after a big top and bottom line beat. the company raising its growth forecast for its software business. i was able to speak with the ceo about the quarter and what they're seeing and here's what he told me. i'll throw one number out which is important. $2 billion, what ibm says now, their book of business related to ai has grown to over the last year. here's the story with ibm. according to krishna, as enterprise ai cases begin to scale we benefit. they have been focused on enterprise and not consumer for generative ai and that's what is winning that business. the software growth, he says, is

a secular trend. on that software beat we talked about it, automation and main frame software drove the growth. enterprise ai is becoming 5 to 10 penetration rate right now going to 100 and if as a company you don't deploy ai at scale, krishna went as far as predicting it will be a 5 to 10-point tdisadvantage to you i your performance. the downside consulting which is another part of their business was below what we expected. krishna told me. consulting he said is reacting to uncertainty around interest rates and inflation when you have that he says it pushes on discretionary and short-term projects why the growth was only 1%. as far as raising the free cash flow estimates, he says how we're using ai inside the company is making us more productive. he's been talking about using it for back office functions and saving that money and repurposing it. he said we've been also a big proponent of hybrid cloud

because of the homogenous risk involved. that was a nod to the crowdstrike, microsoft i.t. outage which was an example of using only microsoft cloud and not microsoft and lynx, which is what ibm has been about. plug are for the hybrid push they have been making. too early to see whether the i.t. out annual has generated business, but it's something they're thinking about. as far as a gauge for overall enterprise spending growth it's a few points abovegdp this year. my one takeaway from ibm if you are looking for this stock to be an ai beneficiary, even though it's not spending as much as the hyper scalers and systems aren't as big or fast, it has generated this $2 billion and krishna said this is a trend continuing and is -- it is also growing faster and larger than the consulting, for instance, weakness. >> slowing. >> which is slowing because of the macro factors.

he said ultimately should turn around too because that will be influenced by generative ai. >> challenge to the business. how do you grow your growth businesses than the giant business you have that is slow growth to begin with? >> they're doing it. 7% growth in software will get you there and higher forecast on where the growth is going to end up and more profitable at it because they're using ai themselves. >> let's take a look at the broader markets here. we're well off the lows. the s&p climbing back down less than 0.1%. and the nasdaq coming off its lows. we are seeing the significant rotation out of these mega cap companies. even though eli lilly shares still down about 4%. why? it's not mega cap tech so to speak but one of the largest market cap companies out there and they continue to give up the market cap. bob pisani is here at post nine looking at a number of major issues facing the market right now following, of course, yesterday's selloff. >> lilly acts like mega cap

tech. it's getting rerated with the rest of the markets. we're facing four issues with the market, tech rerating, slower economy, seasonally weak period and maybe possible impact from the presidential election. first the tech rerating. prices for mega cap tech stonck have run up, much of it ai inspired. the problem as demonstrated by the reaction to alphabet's earnings yesterday is investors are coming to understand there is still not a big payoff for the ai infrastructure play. the return on investment on ai is not going to materialize in a big way for a long time. investors had been rerating tech stocks for many weeks now. the major tech etfs, s&p 500 tech etf already off its high topped out weeks ago. semiconductors, which were the market leaders in the fourth quarter had been weak. many of them off 20% or more from their recent highs. look at nvidia, for example. second, i want to point this out, there are concerns about a slowing economy.

former new york federal reserve bank president bill dudley's editorial yesterday was the catalog for the worry wart crowd on the economy. dudley announced the facts have changed and i've changed my mind about the economy he called for the fed to cut rates next week. the three month unemployment average was rising. as volatility continues to increase, goldman sachs noted yesterday that inflection date, the date when the s&p starts seeing more down days than up days is july 17 with the peak in september and not really flipping positive until the very end of october. finally, this is very interesting. historically most presidents don't have a big impact on the stock market however this election may be different. goldman sachs had a note out yesterday noting the s&p 500 has been super correlated to trump win odds lately noting that recent change in election probabilities with kamala harris now the democratic nominee may be causing some recalibration in portfolios. cfra's investment strategist sam

stovall seems to agree. the certainty of the trump trade appears to be fading he wrote in a note to clients last week. kamala harris, pardon me for the miss pronunciation there. the rerating on tech stocks nvidia 47 times forward earnings a month ago, now 36 times forward earnings. that's a rerating. it's not necessarily the earnings estimates are coming down. the multiples are dropping dramatically. lilly's the same situation is happening there as well. not mega cap tech, but sort of acting like mega cap tech. >> it's lumped in as one of the largest market caps i guess. meta shares have sold off dramatically as well this week again right in there. the multiple on all these coming coun. alphabet if they do $100 billion which is possible from what they just did, talking like 20 times. >> yeah. the important thing is the earnings estimates are continuing to rise fbig cap tec

stocks. the velocity is slowing down. n nvidia's numbers going up, the rate of change coming down. that's a warning sign for the fundamental people and catalyst for rerating the multiple right now. >> meantime got the russell up better than 1%. see you in a bit. >> russell outperforming the s&p and s&p 600 small cap, the higher quality small cap, also out performing the s&p this month. >> bertha coombs. >> good morning, carl. a former school district police officer in uvalde, texas pleading not guilty this morning to felony charges related to the may 2022 robb elementary school massacre. adrian gnz is accused of failing to engage the shooter who killed 19 children and two teachers. he is just one of nearly 400 law enforcement officers who responded to the shooting but waited more than 70 minutes to enter the school. president biden and vice

president harris are preparing to meet separately this afternoon with israel prime minister benjamin netanyahu, one day after his fiery address to congress. administration officials say the president will discuss a u.s. backed cease-fire deal in depth with the prime minister before the two speak with families of american hostages. and former first lady melania trump announcing she will release a book this fall. she announced the publication of her memoir titled "melania" on her website saying it will tell her powerful and inspiring story. exact release date has not been shared, but it could be timed near november's election. back over to you. >> thanks so much. when we return shares of tesla bouncing back after the double digit drop yesterday. stocks back in bear market territory down 20% from the highs, recent highs. ensqwkn e re" the road ahead wh "ua othstet continues.

. welcome back to "squawk on the street." look at ford shares today tumbling on the back of a big earnings miss. back with us today is rbc global analyst tom ryan. we lost your audio yesterday. we wanted to bring you back. the mover de jour is ford, not tesla, like yesterday. down 18%. what happened? does it deserve this kind of drubbing? >> yeah. i mean it's similar to what we saw with tesla. you had a big run with ford and gm into the print, but now since the results what you saw was something that really scared people, which is something that people have been waiting on for years to happen, which is finally the pricing to kind of capitulate. we did hear that that narrative happened potentially in h2 on their ice vehicles. it drops completely to the bottom line to their ebit and

that's the narrative. because the stock ran so far into it and the commentary that placing is finally falling, they didn't raise guidance, everybody kind of thought they might, the other thing i would note is capital return that you saw gm has been doing and done, not seeing it from ford, not seeing it from stellantis, so it's really that. like the fear that pricing is about to really come down hard, inventory levels for ford and stellantis 94 days inventory. it should be around 50 to 60. you have a bunch of dealerships with a lot of cars in stock and the fear is they have to discount them heavily to get them off. >> is that what you predict will happen? what kind of price decreases are we looking at for the industry and ford in particular? >> yeah. they said they could be -- tbit could be like 2% price coming down. that could be reasonable. the worry is not just this year, but what happens next year. right. i mean, pricing is up 35 to 40%

since 2019 going into 2023. that's a lot of inflation. you also have affordability questions, high interest rates which impacts the ability to buy a car that, you know, a jeep wagoneer is like 100 plus thousand dollars that used to be 20 grand less. it does beg the question of, are people willing to pay these high prices? >> hey, tom, one of your competitors, morgan stanley, who has been dead wrong on ford, i might point out, says about tesla, if you strip out the credits and downstream dealer services aftermarket revenue, tesla's underlying ev business not profitable on their estimates and goes on to raise this question are we sure the ev business broadly speaking is a value creator? what do you think? >> yeah. that -- it's interesting. i'm kind of glad my audio cut out yesterday. i did a lot of calls today and people are getting more constructive on tesla, so i have

some stuff to actually talk about that's interesting. regulatory credits, people are looking at this as why does this have to be something we x that out. there's an ev slowdown happening. others are needing credit unless trump undoes the credits, which i don't think happens, it looks like this is going to be a part of this business, you know, the going forward, and the other thing i note is, you know, battery prices are coming down and they're going to produce their own 4680s domestically. i think the ira is here to stay. so fine, maybe underlying maybe getting worse, because pricing is coming down similar to what we talked about with ford, but they're getting benefits from credits. they're getting credits from the ira, a lot of credits. both are making batteries and $7500 that goes to the consumer. i don't think we should just short-change them to x out all these things. maybe these are something that should be structurally considered underlying just the

car business and we haven't even talked about the other businesses, right. energy storage and fsd. those i think could be something that brings margins actually up next year. everyone thinks that margins are coming down. that may not be the case here. >> okay. that's pretty positive. tesla is a little bit higher today. mini rebound. up 4% from yesterday. thank you for coming back on. >> sure. >> with that valuable new information. >> you got it still to come this morning, exclusive with the ceo of astrazeneca. stock under pressureeste a dpi beat and raise. we're back in three. in any business, you ride the line between numbers and people. what's right for the business and what's best for everyone who depends on it. solving today's challenges while creating future opportunities. it takes balance. cla - cpas, consultants, and wealth advisors.

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few names to watch in bitcoin. sanofi driven in part by its treatment for asthma. the company raising its guidance and pointing to a strong pipeline ahead. stock up 3.5%.

edward life sciences, big mover, slumping after slashing its outlook for its heart valve replacement product down 25% right now. and then astrazeneca also under pressure despite an 18% surge in revenue in the first half and a guidance raise over there. the stock is down, though, the sector, david, is a little bit higher in the s&p. >> yeah. let's get over to angelica peebles at cnbc headquarters and she has astrazeneca's ceo. >> hey, david. that's right. joining me now is pascal soriot, the ceo of astrazeneca. i want to talk first about the quarter because like sara mentioned, you had a pretty good quarter. you're raising guidance for the rest of the year, but your stock is down today. walks through the dynamics we saw in the quarter and what we should expect to see from you for the rest of the year. >> thank you. first of all, thank you for having me today and for asking a very important question. we did have a tremendous first half. 18%. we had a rate cut second

quarter. every part of the company is growing strongly. oncology 22%, biopharma 22%. rare disease 15%. every geography is growing. u.s., europe. china is rebounding, growing 15%. emerging markets out of china are tremendously growing. really tremendous growth and we are very much on track with what we said was our ambition. we raised the guidance for the year. now, there's a variety of things that people have reacted to. first of all they see we continue to invest heavily in r&d. the second half of the year we will have a moderated investment and cost increase compared to last year because last year we had a relatively high increase of investment in q4. so that will moderate.

but the other question that people have in mind what's the news flow over the next six months. we have a strong news flow and we will demonstrate around this. finally is this ongoing question about the process. a number of questions will be resolved over the next few weeks and months. we're on track and the company is doing extremely well. >> yeah. a couple months ago you set out a goal to double your sales by 20 2030, and today we saw weakness in your newer drugs. strength in your older drugs. that's give people a little bit of concern that you can actually achieve this goal. how can you reassure people that you can actually do this? >> well, actually, if you look at what we call our core products, the new product, they are doing very well. the growth rate overall is in

line with the overall company growth. now some of our older products, are over performing tremendously. like asthma and far see ga for the kidney disease, and people have the question as to whether that's doable because the those are our other products. we think the future will, of course, stay, but those products have momentum. the new products are very much in line with what they expected. i really think over the next few weeks, months, the questions will disappear and people will see we're on track to deliver our long-term goals. >> let's talk about a it for a minute. what can you tell us about the negotiations and what that process has been like and where that final price might end up.

>> the price is ongoing and the price is as you would expect. the outcome is not extremely relevant because we lose protection in 2026. the impact for the price revision will be short-lived. we don't comment on the pricing discussions. they're very much on track with what we expected. there's nothing really dramatic to report on the front and it will remain a product for us. in the emerging margins, it's less relevant. prices are lower and they're driven by the volume, the demand that derives volume substantially. >> paschall, thank you for joining us. sara, back over to you. >> thank you for bridging us that moving interview.

coming up, peter orszag and, of course, his thoughts on kamala morris, likely to become the decratic nominee. that's at 11:00 a.m. eastern time. we'll be right back. stay with us. >> announcer: real-time exchange sector sort is sponsored by sector spider etfs.

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we have a news alert on meta. for that we're going to turn to julia boorstin. >> metawill be issues with an antitrust fine. this fine could be as much as $13.4 billion. that would be 10% of meta's 2023 revenue. though fines are usually smaller than that cap, than the eu sets. all of that comes after eu accused meta of giving marketplace an unfair advantage by bundling the two together and

imposing unfair trading conditions on services that advertise on facebook or instagram. we see shares are trading down less than 1%. back over to you. >> shares still down about 40 bucks the last few days. we talked earlier in the week, david, about the ad sales of youtube and capex. >> that's a very large number were that to actually come to fruition. ad worries seem to come. after the alphabet earnings, we saw less growth. it was estimated to be 18%. that had an impact as well to carl's point. it's also wrapped up in the overall rotation that we have spent so much time talking about, mainly out of mega cap tech into the smaller companies,

iwm. we keep an eye. as much as 1%. the s&p is up. the nasdaq has coming down from what -- >> we're rotating out of the rotation because nvidia turned higher. >> we do seem to be. >> and amazon. meta off its lows. eli lilly down as well. we'll cover that and a lot more after this. (♪♪) car, this isn't the way home. that's right james, it isn't. car, where are we going? we're here. (♪♪) surprise!!! the future isn't scary. not investing in it is. car, were you in on this? nothing gets by you james. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

welcome to "money movers." i'm sara eisen along with carl quintanilla. peter orszag with us on earnings, the fed, the latest on the election anding with the obama administration. >> we'll look at housing. >> dana white on the upcoming fight in the uk. the current political environment, longtime supporter of former president trump, introduced him at the rnc last