dividends will start to matter because you see interest rates coming down, that's where you want to be. >> thank you, sarat. nice to see you. >> nice to see you. i want to thank you both for hanging out. >> a pleasure. >> as we discussed elon musk and donald trump and the big news out of starbucks. that stock up making big moves on the back of brian niccol joining. join us tomorrow. we'll talk more about it. "squawk on the street" starts right now. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer. whether that starbucks, home depot, geo politics, pfpi. breaking news at starbucks. the company replaces the ceo laxman narasimham with chipotle's chief, brian niccol. all the details. >> ppi comes in cooler than

expected that gives stocks a bit of a bump ahead of the open, and we continue to see signs of a cautious consumer. home depot saying comp store sales to decline as customers, quote, sense a greater uncertainty in the economy. let's begin with this news out of starbucks. laxman narasimham is out as ceo, effective immediately, and amid the company's struggles as well as activist investors pushing for change, it is chipotle's chief, brian niccol, beginning in september. cfo rachel rajeri will serve until he gets there. mellody hobson will be lead independent director. this is a story you know well and have some involvement in to some degree. >> this doesn't happen in corporate america. i just had brian on, who is outstanding and did an amazing job. look, i mean, the numbers speak for themselves 773% since he got to chipotle. you rarely see this, the cfo

jack hartung is staying on. people at starbucks, he's the best, starbucks is lucky to have him. what i would point out howard schultz really wanted this. david faber, i think that is participate of the narrative. more than elliott. >> yeah. listen, mr. schultz, of course, continues to be a force within starbucks, really only as what is a technically a large shareholder. of course he's not on the board. he has no management role and was an important figure here. in part it seems, if i could say turning on laxman or at least not giving him continued support some time back, which obviously put his job, it would seem, and clearly was, in some jeopardy. moving forward and perhaps helping, the board -- my

understanding with the brian niccol thing they reached out some time back. they really didn't think they had a shot at getting him. as mellody hobson indicated, things happened pretty quickly. there had been some conversation about it, but my understanding is they thought, well, what shot do we have? >> brian is the best. howard said this is a great day for starbucks. no one better to rejuvenate the company and the starbucks' brand than him. the market's reaction is consistent with the concerns that i had, and this is the solution i had hoped for. i've known brian and the transformation with chipotle. he has my full support. one of one, that's my opinion, respect for brian and what he will mean for starbucks and shareholder value. this guy is a dream come true. he came in to chipotle when chipotle was in disarray.

he fixed the organization, and hire within, promote within, which howard schultz favored and has done a great job with. i come back and say this stock this morning was tuup $11 billi. starbucks lost $6.1 billion. it's correct. it's correct. when you get someone this monumental running the company, it is -- there's hope for change. >> do you think your may 1 conversation with narasimham was pivotal? >> narasimham, it's not like the roger mfudd interview. >> you asked hard questions after a difficult quarter for the company and, jim, you were uncarrickriescally, i could say, quite critical and direct as

opposed to more typically being a positive force. >> it was the worst quarter relative to a large cap company that i have seen. so bad, i talked about how we should have known ahead of time. >> you can see it right there in the chart. >> yeah. was it a disgrace? no, just big disappointment. and i thought there was a three-part plan, to me only had two legs. and there was very little recognition or humility from someone that i would have expected but i was rooting for the guy the last time he was on, for heaven's sake. >> want to take a listen to that conversation on may 1st. take a listen. >> speed of service improvements we've seen are real. the opportunities that we have with the new processes that we're rolling out suggest to us that we can make that even better and the entire leadership team is focused on ensuring we

make improvements as we go in order to increase that speed of service even more. >> well, laxman, the speed of service is real. that's a fanciful statement. it's the exact opposite of what is happening. and i don't know how you can say it on our air. >> we have improved speed of service quarter over quarter. if you look at how the processes that we're rolling out at our peak, what we are finding we have options to improve that even further with changes and processes and tools that we provide to our partners at peak. >> but you said that people are using the mobile app and they are not able to get what they want because they can't. it's too slow. i think your through put is

awful, sir, and i don't understand how you can say service is good and also say at the same time that through put is awful. >> all right. as i said, he was a little more critical than typical. >> the situation was suboptimal. >> and, you know, the question becomes, at what point did the board sort of already start to think about moving on? we talked a good deal about elliott being a significant owner here. yesterday i was talking about was there the possibility of a settlement. jessie cohn, who runs activism at elliott has been leading the charge, certainly conversations and if, in kt fact, they had no made the change they have, this significant change in ceo, one might have imagined that they would have walked in, so to speak, the front door, if you want to call it that, in terms of elliott. they can certainly claim credit whether it's due or not at elliott, jim. >> mellody was terrific this

morning. >> starboard, which came in, i mean, maybe they're going to sell -- i don't know how much stock they own. you'll take it. they're in the business of making money for their shareholders. it's gone the way they'd like it to. >> it's difficult to try to figure out. i can't point to mike siebert and say, mike, what did you do? these people are diplomats. they're not going to say, obviously, itches the guy who did it. rich ellison who left domino's -- >> talking about directors now. >> directors, i'm sorry. one bailed from nike, i don't know why. he used to be the chief operating officer. beth ford, land of lakes. mellody hobson, we heard how great she got him. the youtube ceo, people didn't think he did too good a job. >> you put an x through laxman's name. that's sad. it actually is.

you know, jim -- >> why? >> -- the problems at the company, whether it be pricing, this massive mobile business they have that you were asking about -- >> but it's so poorly run, like at an oairport. >> beverages now, cold beverages -- >> that they can't make. >> mr. niccol is not taking on a shortage of issues here. >> someone said -- jeff marks said to me, my colleague for the charitable trust, we have a meeting tomorrow, he said, what do you think he'll do in china? i said, brian niccol? whatever is right, and that's who he is. you don't second-guess this guy. he came in, everybody thought chipotle completely lost their way, the airborne illness. i joked with him, there but for the grace of god, everyone who runs a restaurant is fearful of that. he came from taco bell. he did such a great job at yum. he was so great and he totally got it. what he first did was figure out

how to get you a darned burrito and get out. when he was on last time talking about saving eight seconds because he had linebackers in boston. now we played boston -- we were up there, the eagles -- but there is, without a doubt, this man was this -- down to the seconds. >> got it. >> don't got it. >> inj just lost you on linebackers. >> laxman was doing with the ttwo for one with the pairings. i'm saying when you sit down with brian niccol, he talks about the desire to get people in and out quickly. he was, when i was on -- when he was on my show last defending him seven for the small sizes people were saying, and it was, look, we want to give you as much as possible. that's crazy. because we want you talking positively. and when you talk with him, he's a foodie. he talks about chipotle and has people going through. but what does he really care

about? when you try to bug him about bringing back certain things, he says, you'll in due time. he's funny. he's playful. >> you think the deep-seated problems with the company will be solved by the new management team? >> no, i know they are. i don't think. >> therefore, you are positive on the stock -- >> hey, hey, charitable trust owns it. we bought a lot in the 70s. bought a lot higher. i wish brian niccol, that i had gotten on the chipotle train when he got to chipotle. instead i was stuck with something, i don't know. and this is like a pass -- one of those jump ball passes. there's no time on the clock, and, boom. it falls into, i don't know, kelcye kelce's hands, the usual this is corporate america where you're never allowed to say someone is doing a bad job. that's ridiculous. you pay them a lot of money until they spend more time with the family. >> we have an upgrade out of

baird. even if earnings are lackluster for the next few quarters, you're willing to give them some time here? >> look, brian niccol is a serial under promiser. jack hartung, by the way, was the only person on this whole quarter who said we raised prices so much, it didn't work. how refreshing is that? no one will admit to raising prices. brian is so special. he wanted to respond. he was just appalled there was this social media thing saying that portions are smaller. i don't know. i know we have to go to producer price index, but this is shocking. >> a few quarters and you think the market is fine with it? howard schultz is fine with it? >> brian niccol has credibility. a chipotle was in shambles. jack hartung is staying on, which is a big deal for

shareholders who are frantically selling stock. you don't see this. you don't see someone don't do a good job for two quarters and then -- other than in football -- other than in football, they will fire someone mid season. i've not seen this level of rigor in a major corporation. >> it's been a while since we have had a hop like this at companies of this scale. >> and sometimes the activists can add that pressure. >> that's true. but we don't really know the activists. we know there were people on the board who just were upset. >> clearly. >> and mr. schultz. which i would not pass easily over. >> there were many people who reached out to me who said would you get on the laxman train not on the schultz train. i said, do you know what train i'm on? the train that's late because of my darned starbucks and i don't make the train. airport, airport, 18 minutes last week. no! jim, that's a licensed store. then take your name off of it.

>> when we come back, we'll talk more starbucks. we'll get to depot and the quarter there. we'll look at ppi. goose egg on core. we'll have a wide-ranging discussion with jonathan gray of blackstone when we continue from post 9 in a minute. [♪♪] your skin is ever-changing, take care of it with gold bond's healing formulations of 7 moisturizers and 3 vitamins. for all your skins, gold bond.

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and, david, look, these are numbers that up get right before you get a cut. someone traded home depot down, what an idiot. the fed is about to cut. do you know what stock you buy in the first cut? home depot. >> i know the call has been ongoing in terms of home depot whether they are forecasting the slowdown because the consumer is stretched or whether the fact that rates are going to come down is actually why the consumer is waiting to embark on some of those home improvement kind of tasks and are larger projects that would require them to finance and, therefore, waiting for rates to come down. which is it? >> so they do accept the fact there is consumer uncertainty. home depot has done straight line forecast like, wow, okay. it's going like this, going down. woo he have to say it will continue to go down and they're conservative, very good, and it really doesn't matter -- like

when they reported, suddenly builders source was up even though the numbers were -- the forecast was terrible, and the reason why it was up people say, if the fed is going to cut, i need to get in one. there are so many hamster out there. i'm not going to say they're robinhood but there is an element of stupidity that is shocking. people knew nothing, they didn't have any knowledge of what home depot was going to say. i have to call them idiots. i would buy them a koch fee and throw it in their face. >> comp is down seven straight quarters, jim. you're calling a bottom on depot then? >> not on depot. i'm calling a bottom in the psychology of the owner if we can just get the home equity loans down, get that interest rate down, if people want to do something with their place, even

if they want to stay in it. decker is a seasoned pro who knows you can't defeat the cycle, but the cycle does take a little bit to kick in. i do think that we're building inventory in the country for homes. and if rates come down, then the fed is going to be in a little bit of a jam, but we need to see some traffic. things are doing badly except paint. >> they have focused on services and supply chain. >> we have to find out whether that acquisition was helpful. the idea you want to sell this company down big on the eve of a rate cut, yes. before the rate cut was near, you have to sell the stock and people should have been in it. it is a huge -- it's more cyclical than it used to be. they don't put up any stores but it's good as gold, a well-run company. this is a company that

contractors and individuals who come in will bring back do it yourself, which has really been on standby, and it's a great situation to own. so those are down 15. have never studied the history of home depot. history means nothing among a particular cohort, and i'm not going to say which letter, x, z -- >> you don't mean the social media platform? >> no. i can't get it, so i come in and i need someone attacked me or something. i couldn't get into social media. >> probably a good thing. >> look, this is a great company. and anybody, when frank blake ran it, it was such a great company. >> mardelli. >> why do you hurt me?

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gainers this morning. we mentioned nasdaq at the top open up close to 17%. the rest indicate the chips are resurgent. we'll talk about some of the upgrades in tech today including dell, ubs on the nvidia chip delays. opening bell coming up in five minutes. don't forget, you can catch us anytime, anywhere, listen to and foll t "uaowhesqwk on the street" opening bell podcast.

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all right. let's get to a mad dash, opening bell two minutes from now. i want to talk a little dell. >> yeah, a lot of people have been watching the stock of dell just plummet. some numbers on twitter, x, shows you how well it has done. but this morning barclays comes out with a piece i've been waiting for and the piece says the a.i. hype is now flushed out, equal weight to upgrade. very smart he had it as an equal weight, as a hold. look, this is a stock that sells 10 times earnings. 11 times this year. i think that historically you want to buy this company after it's been hammered regardless.

it's been right to do that. so i agree with barclays, this stock should be bought right here. >> you like it here? >> yeah. >> anything else? do you buy hp, super micro, or this is the name? >> super micro was pressured by someone, we don't know who, to ship some materials that were, frankly, hurt the gross margins badly. hp i've been way too negative on. it's doing well. the stock should be higher. dell has just been crushed here and dell is a good company. michael delves l was at the big conference and singled out by jensen as the person up should use to do business with. i think dell is a good idea. >> barclays has not changed numbers on dell, by the way. they think this is all about sentiment. >> i know. i do think the sentiment -- this is different from micron where we keep hearing the pricing pressure. it's different from amd where we

see intel seems to be dumping chips. here these are service companies doing a fantastic job with great contacts in the enterprise. i think dell is a buy even though they did not raise -- >> the opening bell and it's real time exchange, it's home security company adt and the leading stock exchange in argentina, as we get some 1% jumps here on the nasdaq, jim. >> the updated numbers, starbucks adds on brian niccol getting in as ceo and lost 6.8 for chipotle. trying to keep track of the ratios. >> a far tcry from last monday, jim. nikkei recovered last week's drop. stocks here have done the same. >> it does feel a combination of good data and the fact we

recognized there were some errant funds. one of the things i want people at home to understand, we're not allowed to find out. when you are -- i was a manager, and if something is happening to you, it's not like people are supposed to share it. we don't really know the giant institutions that were doing this trade and had gotten this, i'm told, very complacent about the trade. >> the end carrier. >> very complacent. >> i think it is interesting how little transparency there is. >> isn't it incredible? >> everybody is guessing at how much is done and how much has been covered. given its influence on the market for what may have been a brief period but nonetheless was certainly a volatile one, you would think we would have more transparency in terms of how much was actually in this so-called yen trade. >> i think we're owed that. the industry protects everybody. carl, if people had known that it was just a couple it have giant funds that were flailing

trying to get out of very good stocks, they would have been able to buy the very good stocks. it's a shame they weren't able to. everyone is scared. they presume it was something really horrible and it wasn't. >> that said, the fund manager survey today out of bofa, the number one tail risk, u.s. recession, has jumped to number one. "the journal" with this piece about the boom in travel spending beginning to slow. >> well, remember you can't have rate cuts without things going wrong. i mean, if everything is so great, why would we need rate cuts? we could say, hey, we have great growth. we don't have any inflation. no! >> it's a fair point. it's a fair point. >> he doesn't want to straight line. he doesn't want to say, look, i recognize the data is weak and i'm going to take action. if the data were strong, the conversation would be, why are you bothering me? why are you bothering me? you know that hour and a half torture we have? mr. chairman, when did you stop

beating the fed funds rate. >> all right, all right. >> the fed chair answers questions to the american press. >> he gives people some idea of how he's thinking about things. the question now is do we get 50 basis points or 25 in september? it seems to be a 50/50 wager at this point in terms of the way the futures are going. >> do you find the press conference illuminating and make decisions on it? >> i don't necessarily. i know you're quite critical of it. it's better than the days when we used to look at greenspan's briefcase, oh, it's this big. we're going to get a cut. >> do what netflix does, pick ten good questions. that way he says, here is what i got from "the new york times." rather than, mr. chairman -- my name is so and so -- by that time, i'm done! >> my name is so and so. >> or i'm here. come on. >> shares of chipotle are down

10%. brian niccol, of course, leaving the company to become the see see of starbucks effective the 9th of september in a really stunning -- >> stunning -- >> -- move with the ceo laxman narasimham leaving immediately. chipotle will have to pay out. he has stock there, stock coming to him. a quick look indicated around $63 million to $70 million. they'll do it. i'm sure he's getting incredibly well paid for the job ahead. chipotle shareholders rekt aing reacting as you might expect, a superstar ceo. >> cease so he's so great. they have a great bench like costco, people who are very good. i know there are a lot of people disgruntled and were rebellious. they were rebellious at the company. sedition, i would call them. others unhappy people. >> we were making noelte of the

number of s&p names that have done better, chipotle has, since niccol arrived. nine. >> he rebuilt a franchise. i don't know if you remember. i was in the restaurant business, david. >> i'm aware. >> they were in a spiral that was so painful to watch. and if you take a look at a long term, just zoom in on during the 2015-2016 period where at the beginning of the airborne -- oh, my! and, well, that's an interesting -- >> we should take a look at starbucks as well because it is a stunning ascent there added to the market value. this on the expectations and hopes that will come with the ascension of mr. niccol to the ceo job there. again, a few weeks out for him, an interim ceo.

starbucks is up 20%. despite what will be continued challenges. >> i think this may be the best day in history. for starbucks. >> it should be. >> look, this is a transformation a lot of people felt that laxman was not doing a good job. everyone knows that nichol has done a good job in a similar situation. you can't get the stock. david, when i think about it -- >> all right. >> what we need is a private equity guy -- >> private equity? we need the world's largest asset manager. i think about the fact that wouldn't it be great if he was with us every day, participate of the group? >> let me try to get him. he wants to be my "mad money" co-host. >> let's not break format and bring in our next guest. he does join us here. blackstone, the largest alternative asset manager, $1.1 trillion, they own or control as much as 250 companies, 12,000 separate assets in the real

estate business, the largest private owner of warehouses globally, for example. no shortage of things to discuss with john gray. thanks for coming down. >> it is great to be here. great to be here live at the stock exchange. >> it's great to have you. you were on not that long ago talking earnings. i would rather bring it to what we talk about so often, the macro economy, particularly given some of the stats i've given people. rereading your comments and the ceo steve schwartzman's comments, i did get a more positive tone from your conference call. i would assume perhaps some others did. are you starting to see a turn and getting prepared for that when it comes to inflation coming down and the potential obviously for rates declining sharply in the near future? >> well, that positivity was about the deal business tied to rates coming down. but i think it's helpful to talk about the economic peckicture overraul. what i see from our companies is that there's been real resilience in the economy.

revenue growth still mid single digit at our companies, defaults with our corporate borrowers, still extremely low. we're seeing that sequential growth decline a bit. we're seeing weakness. and when we look out there, we're seeing weakness in water parks, theme parks, our consumer goods companies. rental housing is down and lags in the government data. we see input flat, the labor market not nearly as tight and that will give the fed room to cut rates. and when they cut rates, that's super helpful for the deal business as costs of capital comes down. so that optimism you heard from us was we were starting to invest in scale before the all

clear sign. we deployed more than $50 billion in the second quarter, deployed or committed, and we want to do that before everybody says things are safe. and that's what you've got to do as an investor. >> that was a two-year high in terms of what you were deploying during that quarter. and so you anticipate that level will continue given, what, you have more confidence now because your expectations are that rates are coming down? >> i think what you're seeing as the cost of capital comes down, it will enable companies to borrow more at lower costs that is supportive for the transaction environment. it's supportive for asset prices, right? you pv the cash flows out there, helpful for real estate. helpful for industfrastructure. in the private markets, let's try to take advantage of that. we bought businesses around the

world. we bought some fast food businesses, some technology companies and much more reasonable prices than 2021. and certainly in specific areas there's opportunity. the data center space. >> i want to talk about that. frankly, between private credit and data centers and infrastructure and so many other things at blackstone, we don't talk about it very often. what about the exit side? we haven't seen many ipos. it's been a difficult time to monetize some of these investments in the funds. do you expect that things will open up there? and until they do, can you put more capital to work? >> well, it's a natural cycle. if you think about what happened, the fed raises rates by 550 basis points and it really stops the deal business. m&a activity falls off a cliff. there is no ipo activity and you have a lot less realization. now we've seen the ten year start to move down, the fed here fairly soon will probably cut

rates. spreads are also coming in. you've seen investment grade. now non-investment grade tighten, real estate borrowing costs come down that starts to get that fly wheel starting. we're a big investor in other people's funds and our secondary business, the largest investor in that space. in the second quarter we saw 30% increase in realizations over last year. so we're rebuilding. but it takes some time. and as investors, what we're not going to do is wait for that all-clear moment. we're going to deploy some capital first and that's what you see. as we move into '25, we expect to see a meaningful pickup in realizations. >> i want to go, and i know david wants to, too, and carl, it your data is a $25 billion power hungry data center. i met the ceo of qts, thank you for introducing me, he said this is the company that has a vision. not trying to put him off and think someone is interested.

there's a real demand right now. you seem to be a believer in what a.i. can do. you're involved technically with a.i. and data centers. tell us what the big guys are saying to you. what's your relationship with jensen huang? >> i would say this, we have very good relations with the big tech companies and spend a lot of time talking with them. i know there's a lot of debate about the amount of investment they're making today. they see a huge opportunity from a.i. but it's cloud migration, data storage, and what the data centers are. >> but we have a bad highway. >> this is what we hear not on the earnings calls and private conversations, they're saying, look, we've got to spend more.

there's a greater risk we will fall behind. they are doing it in the form of long-term contractual leases and qts has done an amazing job. it's been hugely beneficial to our real estate and infrastructure investors. we partnered with other companies -- >> financed $4.5 billion, a $7 billi billion raise. >> what they do is assemble nvidia chips. they put those together. they started as a kcrypto minor pivoted, and they're using capital. the other element of this that i think is really interesting is the power that ties to it, which we're playing in private equity in real estate and infrastructure. and it's battery storage, utilities. >> is it a gating issue, john, on the ability to put up these data centers? we hear you measure them on how

much energy they consume, right? >> it is the issue. but because power is becoming in short supply, interestingly in the u.s. over 20 years power demand was basically flat. we weren't manufacturing in this company. we were getting more efficient. we start to reshore. there's more demand from electric vehicles, but it's really these data centers that are using a lot of power. they're now forecasting a 40% increase over the next ten years in power that will mean enormous investment in utilities. yesterday we acquired a company that consults on renewables, building a ton of renewables, there's all sorts of software. there's a whole grid -- >> natural gas. >> natural gas is going to benefit. lng. if you think of being an

investor, we think of finding great neighborhoods, leaning in. logistics, something we've been doing almost 15 years. the power that goes with it is a great neighborhood. there are other neighborhood around the world. india is one we've been leaning in for a long time. not many investors watching probably have exposure there. it's been a terrific market. we think it has a long run. what we try to do is find these big neighborhoods and then express it in my private equity, real estate, infrastructure and that's how we did generate outsized returns. >> you mentioned spreads, and i wonder, viewers may wonder, last week's price action prodded you to give your models a second look or your checks a second look just given the magnitude of the change. >> i think anytime there's a market shock, you look and say, had something fundamentally changed? and i think the key is to say, take a longer-term perspective. markets are like a speedboat zigging and zagging. you know this better than anybody. the economy itself is more like

a super tanker moving more slowly. and when we looked back to my earlier comment, there's been pretty good resilience but it's slowing, and there was nothing that we see that's fundamentally out of balance. i do think as the slowdown continues, it gives the fed room to cut, to hopefully soften this blow. no, we didn't come back and say we're more nervous, but it creates more opportunity to invest. when you invest away from consensus is when you generate the best returns. we said in our january call we thought real estate was bottoming. that turned out to be a pretty good call. >> what about office space? i know as a percent of your overall portfolio, it's minimal. but is it time then to consider getting back in? has office space bottomed? >> i would say the challenge on office is more fundamental than in the rest of real estate. if you think about logistics and

rental housing, so pretty healthy. the values have fallen pretty sharply, so there may be opportunity in the best buildings and best locations, but it's tough, and if you look, for instance, at delinquencies in the mortgaged backed shgmark so what we had in apartments and wear houses was a cost of capital shock that is starting to go away as rates come down. we're also seeing a lot less new building, which will be helpful. that's why after the financial crisis we want to lean in here earlier than other people. there will still be plenty of bad deals that come through the system but the opportunities that we believe is now. office, there may be some opportunities. >> maybe. it doesn't sound like you have that much interest.

very selective. >> one of the things -- we have you and you'll tell the truth, did someone say, wait a second, if president trump is elected, let's say you're trying to figure out whether you want to do lng or windows. if someone says windmills won't do as well as lng, does anyone say that's right, or do people say, hey, it doesn't matter who is elected president? >> i would say a couple things. first off, we've had blue government, red, purple government and the constant for us is delivering great returns for our investor. the second thing i would say is the shifts in developed markets are not as dramatic, for instance, than developing markets. so you often think things will move very dramatically, but you need the house, the senate, and the presidency to change things. and so it tends not to move as dramatically as you might

expect. yes, you do take into account that there could be policy changes. so energy is clearly an area. so, yes, will lng do better in a republican administration? will renewables do better in a democratic administration? yes. and so when you're looking at a real-time deal, what do you say -- what happens if the i.r.a. is changing in some way, does this business still work? what's our risk? both as a creditor or an equity investor, yeah, you have to factor this into account. what i worry about as investors they focus on the noise of the election, and it's those big mega trends we've been talking about, what's happening in digital, what's happening in l life sciences, what's happening geographically in certain markets? thatis the long term thing to focus on. >> your name occasionally has been bandied about in terms of treasury secretary kind of things. i mean, you laugh. could you imagine, by the way,

if vice president harris were to win the presidency, would a democrat ever put somebody in that position, not you necessarily, from the financial services industry, or is that just not something that's possible? >> i think it's possible. i think there's been a long history in the democratic party, not as recently of successful people from -- not recently. >> of successful people. >> yeah. >> there have been a lot of people as we know going back to the clinton administration, bob rubin did a terrific job. i think there is -- i think there's openness. these things tend to ying and yang. >> yeah. >> and so i think it's possible. i have no idea what would happen. >> would you have any interest if you were offered that position if. >> no. as you get a sense from my enthusiasm, i have the greatest job in the world. i work at this great firm. we have incredibly talented people. we get this intellectual challenge every day to think about where should you be deploying capital, how can you grow businesses, what's happening with technology, what's the next thing going to

be? i love what i do. it's a little crazy 24/7, a lot of fun, but no changes. >> i don't want to end on a down note but your stock --. >> don't -- >> you know it's coming. your stock has had a not great year. year to date, sort of flat. stop it. you know, tell investors at this point and are you frustrated at all? a number of other alternative asset managers have had better performance in the stock market? >> we tend to look over a longer period of time. last year we were the best performing manager up 80 plus percent. over the last five years we delivered a triple of investor capital between the appreciation and dividends. we love our business model. we're an asset manager whose capital light, brand heavy, we're global. we think we can continue to grow with institutional clients, insurance clients, individual investors. we think there's a ton to do. cyclically our business has been hurt a bit by less transaction

activity and incentive fees and realization. that's going to turn. the mega trend in alternatives is going to continue. >> we haven't talked private credit, of course, which we have to get to on another day. >> isn't he coming on every day for an hour from now on? >> he's our co-host. >> i'm actually leaving. >> you're going to enjoy semi retirement. >> i have nothing. he has everything, i have nothing. >> you guys are the best. >> love being here. >> we appreciate you taking your time. thank you for coming down. jon gray, president of blackstone. >> as we go to break, let's check bonds and the markets at large. pretty nice start here. in stocks at least, all sectors green except for energy. vix back below 20 and as we abate bostic at 1 -- await bostic at 1:15 today, about a one-week low, stay with us.

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we have a company that is very misunderstood. this is on on. it's been all over, it's on holding. it happens to be something a lot of us really like and i think it was a good quarter. they did a beat but didn't raise. kristin peck keeps hitting it out of the park with zoetis. i find it incredibly important to know pets and very few people know pets the way kristen does. i'm worried about my pets all the time. the cost of the vet is a fortune and we're going to address that. >> i worry about scoop a lot. >> you do. >> tells me he's doing fine. >> what did you think about gray. >> i was happen to have jon gray join us. >> did i throw too many softballs? >> no comment. >> it was a good conversation. >> a conversation. >> review everything we do in real-time. >> a conversation like, david, you ridiculous -- >> you did one tough interview and now you're passing -- >> when you start calling him

sir -- >> the sir was bad. >> i think there were two. >> immelt was the other one. >> the guy that used to run wells fargo. >> which one? >> kavosvich deserved the tough interview. >> we'll see you tonight. when we come back a lot re omon the shakeup at starbucks in just a moment.

good tuesday morning. welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla back, david faber, we are all live from post nine of the new york stock exchange. stocks are rallying. we're up almost a percent on the s&p. nasdaq doing better up 1.3%. two sectors lagging that's consumer staples and energy and starbucks the stock of the day, on the leadership change. the stock is up 21.5% on news

that former chipotle ceo brian niccol is going to take the helm. a lot of optimism being built in. nvidia up another 4.5% does not hurt. the nasdaq is doing so well. starbucks is also on the nasdaq. apple rallying again today. broadcom, microsoft, tesla, meta all joining the party and that's why we're seeing such a big move. we're going to dive deeper into this morning's inflation report which we got as well. first we need to get to that big news, big shakeup in the c-suite at starbucks, got shares surging. our kate rodgers here with the latest covers both companies. kate, boy, this came as a surprise, didn't it? >> big news, sara. yeah, chipotle ceo brian niccol as you mentioned heading to starbucks next month on september 9th after six years with chipotle. laxman narasimhan out from the board and ceo role at starbucks effective immediately. brian niccol as we know extremely well respected in the restaurant industry is a visionary leader. at chipotle he joined in 2018

the company struggling with food safety issues and quality perception challenges with consumers. under its tenure it was a blip with few subsequent issues as he introduced new successful menu items. under his tenure the stock soared 770%. prior to chipotle he was taco bell's ceo helping to create viral moments with the introduction of breakfast and catering to a younger audience and that's a legacy that remains today. chipotle has been able to capture that gen-z audience with things like clothing and makeup releases, roblox, discord partnerships and more. the challenges at starbucks will be different. footprint much larger and global with 39,000 locations around the world, company owned and licensed. chipotle on track to hit about 6,000 in the next few years. the china and u.s. businesses at starbucks are under pressure from consumers who are fed up with higher prices, speed of service challenges and quality issues. a lot to fix there. one more notable thing, the unionization movement at

chipotle really never took hold in the same way it did at starbucks. a much better, more amenable relationship between those two parties as they've been negotiating trying to reach a contact. that's another key issue to face the starbucks. back to you guys. >> kate, no shortage of challenges at starbucks, and i'm just curious given this incredible move in the stock price already, investors have an expectation that mr. niccol will be able to challenge them, whether it is the mobile issues, whether it's the fact that so much is now, obviously, a cold beverage, whether it's china. what are your -- how do you sort of see the challenges from your perch perch covering the companies on a daily basis. >> the china business is its second home market and they've been -- by coffee growing and undercutting them at price. wants to remain a premium offering but it needs to offer discounts to consumers. china is going to be key. fixing the u.s. business as howard schultz has publicly said in linkedin posts leading up to

the change that needs to be a focus and mobile order and pay something that starbucks had right out of the gate, and has had some stumbles with along the way and doing things like training baristas on ways to make drinks quicker, behind the counter to make things better for them but also for the consumer to get speed of service fixed and need to recapture the viral moments, right. the younger consumer, that's a key demo that, you know, may be facing price challenges right now and the occasional customer in the u.s. has been lost. they need to find a way to bring them back. >> what about chipotle? it's down 13.5%. what do we know about mr. boatright, the interim ceo, whether he's going to be a permanent ceo and who they've got there? >> well, also, sara, notably jack staying on. he announced his retirement after 25 years and he will be on for a bit longer there. i think they're trying to keep people who have been with the c company around for leerng time as they search for the new ceo. the playbook is solidly in place

that brian niccol has built over the years, and that's a steady ship and if you remember this quarter did quite well. consumers are not pulling away from that brand and seem happy with its speed of service, with things like its digital ordering system. we will see who they find to take the helm in the future. >> okay. chipotle down 13% as starbucks soars 21%. kate rodgers, thank you as for the big economic report of the day, that's the wholesale inflation report, ppi, coming in benign, friendly for the fed and markets. again that's good. prices rose in july less than expected. and also, i just want to mention, this was really good news, first decline in services prices we've seen all year and that's been one of the hotter parts of the economy. here's the overall ppi price index, the monthly change, there 0.1. the expectation was like 0.2. that's fwds. year over year now ppi about 2.2%. if you take outed into food and energy it was pretty much unchanged, which was tame,

another good report. core rose a little bit, but still, 2.4%, all in all, guys, a pretty decent number if you're the federal reserve looking to cut rates and the market looking to price in rate cuts. if we get a cpi report, consumer price inflation, sometimes correlated with ppi that's benign, it would add further fuel to the argument that the fed can go and maybe go more than initially expected because of the softening we're seeing in the economy and the more benign inflationary. it's the only thing i wanted to mention, carl, we look at some of the categories that go into pce which comes out later in the month in this report, physician care costs, airfares, cost of hospital outpatient care, all of those were flat or unchanged -- flat or lower and bodes well for their preferred measure. >> goldman trimming their core pce estimate down to 14 basis points. insurance is the wrinkle in that print. by the way, jpmorgan just now

saying that today's number does allow the fed to remain -- keep the focus on the labor market at their meeting. >> right. which is softening, but we don't know exactly how much. we have other indications today, small business optimism, ticked up. >> two-year high. >> good number. >> still lower than we were in 2019, prepandemic, but nice to see that sentiment gauge strengthening, highest level since 2022. 104 is the prepandemic february 2020 levels, so we're not quite there, but we're in the 90s. that's good. the other piece of good news out of the small business report is, you know, they asked the businesses about plans to raise prices or how much they've seen on average selling prices. here's average selling prices. there was a 5-point drop-off in that number. it was down. and down significantly. also the camp in planning to raise compensation and prices came down. all bodes well for the inflation story, and so we wonder now,

guys, what's happening with the broader economy, if inflation is looking more benign, do they have to cut rates more, to carl's point, on the labor market. i don't know. resilient is the word that jon gray just used with you guys. >> he did. he talked about softening a bit, obviously, in the portfolio of businesses they have as well. i think we may have -- do we have that? yeah. let's take a listen to jon gray, president of blackstone, who joined us last hour talking sort of broadly about the macro economy from their perspective, particularly given how many businesses they own and how much real estate blackstone owns as well. >> what i worry about is investors as they focus so much on the noise of the election, and it's those big mega trends we've been talking about, what's happening in digital, what's happening in life science, what's happening in the recovery and real estate or what's happening geographically in certain markets, that i think is the long-term thing to focus on. >> that was mr. gray talking more about risks of the

election, as opposed to the broader economy, which we also had some sound from him on as well. >> i think he talked about softening but did say he's seen resilience in the portfolio with the companies, not a lot of restructuring. katie huberty of morgan stanley, puts out some of the charts that stands out to her on research mornings and two i picked out had to do with serving all of their equity analysts over there about mentions much layoffs and of hirings on conference calls this season. here's the mentions of hiring. it is going down. right. we're still not like all the way down to before the pandemic levels, but that's coming down. that's worth monitoring on the softening front. we have a chart of the layoff mentions and that, you know, is a little elevated but hasn't moved too much, which speaks to i think her overall point and morgan stanley's point that we're talking about a softening, not a slum.

not something deeper like a recession. that's what the market is on high alert for and that's why we monitor all of these sort of incoming color and charts and commentary fri ceos and companies and so far it's softening. it's not recession. >> yeah. finally i know you had home depot stuff built where they talked about this they called it a deferral mindset among consumers who have the matoney t they're waiting. >> this is a company that needs lower interest rates. the home projects are put off. they thought it was going to get better towards the end of the year. they lowered their comp store guidance. higher interest rates and greater macro uncertainty, pressured consumer demand more broadly resulting in weaker spend across home improvement projects. additionally we saw continued softness in spring projects. >> let's turn to the broader markets this morning. our next guest says this recent volatility is, quote, not a blip and cautions it might be too soon to jump back in. joining us stifel equity

strategist barry bannister. great to see you again. good morning. >> good to see you, carl. >> your caution lately, especially when we were hovering near all-time highs has been well-founded although what makes you convinced there is more to go on the downside? >> well, yeah, we said there would be a correction of about 10% down to the 200-day moving average. the nasdaq 100 with its higher beta would fall by a larger percentage. it's funny, the -- there's the goldilocks and the three bears, and i think the market not only believes in goldilocks, but it thinks the three bears are exstingts species. we've seen second half gdp substantially weaker, not j scaling back on the consumption side but net exports are going to be a disappointment. we think the inflation is a little stickier than people expect. on a year to year basis the fed is cog in i zants of that. their mean target for core pce

for the full year is 2.8, but we think it's actually closer to 3 by the fourth, by the fourth quarter on a year over year basis, particularly super core and sticky housing. we will see. but it's mostly the economy slowing that concerns us. >> right. now you've argued for s&p 5k by october, i believe, yes? >> yes. >> does that -- if we get there, do you nibble? do you gorge? do you wait? >> we would still be expensive at that point. brokers love bull market and sells stock. the markets naturally manic depressive. just it swings from one extreme to the other. but the market is still very expensive and if you look at things like the futures rate cuts that are embedded on expectations, that would guarantee by 2025 into 26 a huge

rebound in housing. mortgage backed spreads, treasuries, to treasuries would collapse, down to a normal level, and the 10-year yield would be much lower. if that happens you're going to have more inflationary pressure, not just with the structural shortage of labor, the push back on immigration, and the reliance, i guess you would say of china on an export model sure to run too massive political opposition no matter who wins the election, so when i look at everything, you know, i think 2% for the fed on an inflation goal is just a pipe dream. the market on the break evens will eventually adjust to that and we'll have to add some turn premium as well to the 10-year. all these things really don't argue for the over exuberance we see today. i would say that 5,000 would be a temporary floor, but upside would be limited after that. >> finally, your inflationary concerns, you're not going so

far to call for double top on cpi or something that echos the 70s. >> it's not the 70s. however, the fed is talking about 2%, but the floor now looks like what was the ceiling in the 20 years precovid for inflation and that's a launching point for a higher move later with a stronger economy in the mid 20s. so if the fed ever gives up [ inaudible ] they should give up on this 2% goal. it's a pipe dream. the market would adjust and they might have to add term premium into the market in addition to expecting long-term yields to be higher. remember, long-term yields really should aproxate the nominal gdp of the economy. if the economy can grow 2% and inflation is 2.5%, short-term rates should certainly be 4%. futures is closer to 3% in '25.

these are not settings that are maintainable, and, therefore, p/e ratios should come down over time. >> we'll keep an eye on your stuff. you've been pretty resolute throughout the summer. good to see you. thanks. barry bannister. as we head to break here's our road map for the rest of the hour. home depot trying to bounce back as the company warns of growing cautious consumers. elon musk hosting former president trump on x last evening not without some hiccups. we're going to take a closer look at some of the troubles they had technology wise. speaking of musk, how tesla stacks up against its chinese competition. we're going to go live to the roads of beijing this hour as "squawk on the street" continues.

home depot is a big story today. they beat on estimates on the top and bottom line but warned it expects sales to weaken in the back half of the year as the consumer grows cautious and interest rates remain high. d.a. davidson analyst joins us and has a buy rating on the stock price target of 395. was this a surprise that they -- they had expected recovery in the back half of the year, but because of the high interest rates, we haven't necessarily seen that come to fruition. >> yeah. i don't think this is a surprise at all. we wrote a report about a week and a half ago, call it a

mid-year scene reset and we said for the second quarter look for a slew of misses and guide downs. 80% of the companies that we cover guided to a back half recovery and our call was that's not going to happen. it's a surprise relative to six months ago but relative to expectations not a surprise and the consensus estimates prior to today were below home depot's guidance. the street fully anticipated a guide down as we wrote about a week and a half ago. >> is this all macro, michael? is it still the high-quality home depot you want to buy when rates come down or is there anything that they're missing when it comes to driving traffic and ticket prices in this environment? >> yeah. this is a back road rate call. we upgraded home depot in june after being on the sidelines for a while, and the call there was that bad news is good news. consumer is slowing. the fed is going to cut rates. when that happens historically home depot's stock outperforms in that easing environment and

we still think that will happen. on the call today home depot talked about the weakness that they saw in the quarter. a lot of it was in the interest rate sensitive categories and as rates come down those categories should improve. it might take a quarter or two, but we think the stock will anticipate that the fundamental recovery by a couple quarters. we see it as a good sign today, this was a miss on the top line and guide down and the stock is essential i flat. we think that's bullish. >> how much pent up demand is there? >> we think there's plenty of pent up demand. they've been comping negative for two and a half years, so it will take some time, but when rates start to come down we think we'll see that return to low single digit it costs probably by early if not mid 2025. and again, we think the stock will anticipate that recovery. >> michael, is there a difference in the response mechanism to low rates between retail consumers and professional services, which has, obviously, been a focus for

the company? >> yeah. ultimately it's all driven by the same thing, and that's the consumer demand. it's whether the consumer does it themselves or uses a pro to do it. ultimately we think the demand drivers are pretty similar in that sense and lower rates should help. i suppose lower rates drive the bigger project sales that's a pro business than a diy business. that should have a little bit more leverage to the declining rate environment. it comes down to the consumer investing back in their home as rates come down. >> so whols is on watch for decelerating trends into the end of the year that was feeling optimistic like this? >> the two companies i cover from a big box standpoint that didn't guide to back half acceleration and the estimates were safer walmart and dick's sporting goods. almost everybody else guided to a back half recovery. we took our numbers down. we don't expect that. i think the good news, i don't think anyone expects it anymore

and the street has caught up to that. expect guide downs, but we don't think that's going to have a huge negative reaction to a lot of names. it's anticipated. >> all right. michael, helpful to have your commentary today. michael baker from d.a. davidson. >> thanks. >> if you want more on the health of the consumer we'll check in with the ceo of the global beverage company suntor, why. some of the key takeaways from elon musk's two-hour plus coverage with donald trump. we have breaking news on that from the uaw in just a minute. okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here.

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i've got another one. former president donald trump returning to x yesterday for a headline filled discussion with elon musk that spanned more than two hours. steve here with the takeaways. i was up late listening to it, and i'm curious what you made of it. there weren't any like major moments, i didn't think. >> yeah. that's exactly right, sara. that's because really the real story here is that the space

product on x basically collapsed last night. let me recap what happened here. minutes before the 8:00 p.m. start time donald trump posted a link to the spaces and just people trying to get in experienced error messages for several minutes. eventually musk had to kind of tweet out saying it was a d.d.o.s. attack, a claim basically saying attackers flooded the site with fake traffic to shut it down. he also claimed that the product was tested with 8 million concurrent listeners before the event last night, but i would just note the rest of x was working fine, so a little skepticism around those claims. it all finally started around 8:40, about 40 minutes late. here's how musk explained the delay. >> hello, everyone. so my apologies for the late start. we unfortunately had a massive distributed service attack against our servers, and saturated all of our data lines, like basically hundreds of

gigabits of data was saturated. we've -- we think we've overcome most of that and so it's now time to proceed. as this massive attack illustrates, there's a lot of opposition to people just hearing what president trump has to say, and so -- but i'm honored to have this conversation. i want to emphasize it's a conversation. >> look, maybe that is kind of what happened, just as likely, though, spaces kind of crashed like it did when ron desantis tried to launch his campaign on x last year. now, the first question that got things started from elon musk was about the assassination attempt on donald trump and trump spent about 20 or 25 minutes answering that one. at one point musk floated on a position working on a commission to evaluate government spending and trump kind of seemed to agree with him on that.

overall not basically different than a normal trump hour but just on your iphone. at the end of the day the question is, what do trump and musk actually get out of this? on the musk side and the x side, some political ads. we saw the trump campaign appearing to have paid to promote the conversation on x and for trump it's a little less clear. voters that probably tuned in last night not necessarily the ones that trump needs to focus on, kind of talking to his own crowd, but, of course, we know musk is spending millions much his own money in order to get trump re-elected. guys. >> i think there's something else, steve. to me, it did feel like a conversation that those two men would be having even not in front of millions or with millions of people listening, and it did illustrate that something that we've reported and known, that former president trump listens so his business backers and there were many moments that musk, i think, tried to soften positions for

donald trump around immigration, get him to really focus on the deficit and government spending, and government waste, which is high he proposed himself for this efficiency commission. you heard the former president was very agreeable to a lot of these ideas. he didn't fight back. it showed, i think, that, you know, he listens to advisors that he respects and people that he respects, that back him, like musk. i think that was an important takeaway, at least for me, and for others, as we're wondering what another trump administration might look like in terms of policy. >> he listens until he doesn't. they talked about climate and climate change and energy and when we're going to run out of oil. musk, it behooves him to believe in climate change and talk about those things because that's what helps him sell more electric vehicles. there's a little bit more pushback on that front from donald trump, kind of saying global warming is a good thing. i think he said something about

rising ocean levels will give you better beachfront property or something like that. there's a little bit of that too. also a little bit of disagreement, sara. >> you know, i wonder, steve, about the x platform versus truth social. i'm looking at djt down about 5.5%. there may be an expectation the former president will take to x once again as a frequent poster. i don't know if that's necessarily the case, but it's interesting, obviously, x a private company, a good deal of debt associated with it, given the buyout by elon musk. it could be helpful for that platform if the former president does become a more robust participant again. >> right. we know that the djt ticker largely trades on the prospects of another trump administration, the idea of being that he would use that as his main platform to kind of dictate messages out, but we saw trump yesterday posting on x, tweeting again for the first time since he posted his famous mugshot several months ago, so -- and also, like

i said earlier, what appeared to be some paid political advertisements we also saw ceo linda yaccarino bragging about what she said were all the millions of registered republicans and democrats that she claims are on the platform kind of hinting at, you know, hey, political advertisers, come spend with us. there's that angle as well. there's also some agreements between trump and truth social. he's supposed to post on truth before he can post on another platform. unclear if that was really happening yesterday, but maybe the rules don't necessarily apply there, david. >> finally, steeve they had a discussion about cutting jobs, trump called musk the greatest cutter and bled into workers going on strike and firing them and that has prodded action from the uaw just now. >> we got this in. the uaw suing musk and donald trump over those comments, carl, saying basically, it's anti-union. you can't threaten to fire or fire people for going on strike

or organizing and things like that, so really hanging on to those comments, you can see that right here, this press release, hanging on to those comments and threatening legal action for saying that we know that, you know, musk has been largely resistant to unionization within tesla. even though that's still trying to happen. >> between that and the eu, the commissioner, pushback. >> yesterday, yeah. >> so political. >> right. >> yeah. trying to go after him for digital services act. thank you very much. steve kovach still to come, starbucks shares surging after replacing the ceo. is the stock a buy at these levels? we're going to discuss that when we come right back. medicaid, i have some really encouraging news that you'll definitely want to hear. depending on the plans available in your area, you may be eligible to get extra benefits with a humana medicare advantage dual-eligible special needs plan. all these plans include a healthy

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dave's company just scored the comcast business 5-year price lock guarantee. high five! high five! -i'm in a call... it's 5 years of reliable, gig speed internet... five years of advanced security... five years of a great rate that won't change. yep, dave's feeling it. but it's only for a limited time. five years? -five years? introducing the comcast business 5-year price lock guarantee. powering 5 years of savings. powering possibilities. welcome back to "squawk on the street." i'm pippa stevens with your coupons news update. vice presidential candidate tim walz hosting his first solo event on the campaign trail since joining the ticket last week. the minnesota governor is

scheduled to deliver remarks to one of the nation's largest public sector unions in los angeles. walz, a former public high school teacher and union member, is an outspoken supporter of unions. iran has rejected calls to refrain from retaliatory attacks fence israel over the as assassination of a leader. a spokesman says iran is determined to defend its national security and dismissed calls to lower the temperature in the region. his comments came after the u.s. and a number of european countries issued a joint statement urging iran, and its allies to stand down. and the olympic flag has arrived in los angeles. the host of the 2028 summer games. officials in paris handed the flag off during the closing ceremony and it was flown to l.a. after the end of the paris games. los angeles was awarded the 2028 games back in 2017. it will be the third time the city has hosted the olympics in the modern era and, david, i'm

already excited for the next round. >> me too. it was a great olympics. i miss it already. thank you. let's get the latest readon inflation, ppi, did come in better than expected, better than many market participants expected and to steve liesman to dig into the report. >> david, good morning. a softer gain in july wholesale prices making markets optimistic that fed's preferred inflation indicator the pce is under control and clear the rate for september rate cuts. there is a warning sign in the numbers for investors. here are the numbers. 0.1 on the headline versus 0.2, 0.2 expected, bringing the headline way down, the 2.2%. ex food and energy on tap and a little bit more on the ex food and energy trade numbers. 0.3. i will talk about that in a second. a big part of the weaker number 0.3% number in services. goods to the upside. the biggest decline in services since november 2020 fueled by a

1.3% decline in trade services. that's a measure of margins in the wholesale and retail industries. it does raise questions whether profit margins will fall together with prices and where there will be some profit margin compression they call it. the ppi used with the cpi, we'll get that tomorrow, that forges the fed's preferred indicator, and there was mixed progress in the components used in the ppi. forecasters with a tentative 0.15 estimate for core pce, ability a 2.7 year over year rate, 0.1 prior than the higher one. markets saw the ppi as dovish. i look for 100 basis points of cuts this year. here's how we dets get there. odds on 50 in september followed by a 25 in november followed by another 25 in december. that's 100 basis points of rate cuts built in. the question emerges form jackson hole conference, do you make monetary policy based on

the idea that deflation has declined and the fed more restrictive than it was? you cut no matter what next two inflation forecasts are. or do you focus on the slower inflation progress of the last few months, stay tight to wring the last few tenths of inflation numbers to get to the 2% target. >> busy week continues. steve liesman. let's turn back to starbucks this morning. shares are surging on news the company is replacing the ceo, plexo laxman narasimhan with brian niccol. still has a hold and $80 target. good to see you again. >> thank, carl. big news. >> looking at your note this morning, you argue it'sgreat, but reclaiming what you call the premium brand is going to be trickier than turning around chipotle? >> well, it's going to be interesting to watch the first steps. clearly starbucks is -- has a

brand problem in the u.s. recent trends have been down. same-store sales wise, people have talked about doing things like spinning off china, but this is really a u.s. brand turnaround challenge. the good news is that brian is the guy. he seems like the one person that has this omnichannel background operations marketing, you know, crm or customer relationship management, and he brings all of those tools to starbucks. clearly this is a premium brand, and it's not one where you have this food value advantage like chipotle did, but he seems like the fi for the job. one big thing is, you have howard, the founder, that's still out there. you needed somebody with the gravitas to essentially make this his own company and attract t talent to join him on the brand turnaround. >> you're calling niccol the one

restaurant executive who has the gravitas to do that. why not rerate? >> well, we'll -- right now we're going through calls with the companies, in both cases, so everything right now is under rou review in terms of how we view this company, the earnings opportunity. i think everyone right now is grappling with that, and so we have a lot of questions and we'll be talking to both companies. >> i mean the move today is pretty big. i have a question about investor expectations and where they are relative to what we can actually expect as far as a turnaround. it reminds me of when mary dillon the former ulta ceo was appointed ceo of foot locker and that stock went up more than 20%. she was a great ceo. it was nothing against mary. but it was not a quick road to recovery on the earnings front in terms of a turnaround for foot locker. what's realistic to expect after a move like this? >> you know, the old starbucks used to talk about ebit margin

much [ inaudible ] being realistic. right now the street numbers are more like 16.5% margins expectations in fiscal '25. the higher number if that's in place, that would be high teens earnings upside from where the street is over time. the valuations in the low 20s. i think some people are going to be thinking that this can be -- go back to its old rating in the high 20s at least type valuation. that's where the dreams are going to rest. you bring up a great point, this is not going to be necessarily easy. the -- what makes starbucks special is that human connection, that premium brand positioning. the baristas have to be energized. they've had some union problems. clearly they've had a lot of new products that haven't worked. they need to rediscover what the core is, solve these operational

problems in a way that re-engages their baristas and the consumer so they've got a lot of heavy lifting ahead. this seems to be the one executive that has experience in a lot of these areas. >> david, we'll look to see if you do change your rating. at this point i think it's the best day for the shares since '09. david palmer. >> thank you. still ahead on the show, "squawk on the street" is heading to the roads of beijing for an inside look at tesla's chinese competitors. do not miss it and don't go ay.

markets are making another move higher after the first of two key inflation reports due out this week comes in cooler than expected. so are the bulls in the clear and off to the races at this point? some traders are watching a key pattern in the charts. tune in to our market navigator 20 m.asrnnc on "power luh" at:0p. ete time.

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tesla is the only mag seven name in the red for the year growing concerns around ev demand, rising competition in china. eunice has been test driving cars from a multitude of ev makers in beijing and joins us now with how tesla stacks up. eunice? >> thank, david. there are worries in the global auto industry that chinese ev makers have got an head start due to heavy subsidies and cost advantages but as i found out driving around several of the competitors to the model y, it isn't guaranteed who is going to dominate the world market. on a long road trip with your family, maybe you would like to consider a v auto l 6. families in the front seats can watch tv or get massaged by their chairs. if you want a cold drink there's a fridge in the back.

chinese ev makers are packing features into their cars to win over drivers at home and around the world. voice activated ai assistance and the neo 6. i feel so cold. nio tries to keep you on the road by exchanging your depleted battery with a charged one at stations like this. >> we're at 92% charged and that took less than ten minutes. and if you miss the roar of a combustion engine tweak a setting and the g-6. the chinese ev makers cram in these features at lower prices. the g-6 has almost the same dimensions as a model y but at 27k it's $9,000 cheaper. yet in other ways they're trying to get up to speed. please park the car. i can tell the ai assistant to park the car without me, or

maybe not. and you often get what you pay for. this is a seven seater, $11,000 less than the model y, but the back seat is a squeeze and interior trim basic. >> the shot is frozen. >> i had so many questions for eunice. we will get her back, of course. sometimes it's a long way in beijing. fascinating, though, to see some of those cars in particular, so many of the other options that go along with them, in terms of the interaction, what you can ask for, parking didn't look that good, though. >> it looked about as good as my parking, struggled to park. >> i heard some things recently, sara. basically along the lines you shouldn't be allowed to drive. >> i hit a fence last week. the charge under 10 minutes was

impressive. >> swapping out the batteries. this is an important thing given how closely we cover tesla and that market which is an important one. >> it appears the chinese are bringing the competition. stocks holding some gains. close to session highs. resqwkn e re" mo "ua othstet after this. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah.

vice president harris agreeing with president trump when it comes to one tax proposal. >> this may be the one thing they agree on. vice president harris and former president trump announced to not taxing tips. harris announced she would continue to fight for working families by raising the minimum wage and eliminating taxes on tips for service and hospitality workers. trump first proposed the plan back in june. neither candidate, however, has said how they'll pay for it. the tax foundation estimates it will cost at least $100 billion in lost revenue over ten years. oerdz puothers put it closer to $200 billion. companies would have a benefit

to create a two-tier labor market where you have some service workers who rely on tips making more in after-tax income than those with straight wages. it could also weaken social security since income taxes on tips contributes to social security and medicare. the irs has always had a tough time collecting tip income and getting it reported, yet reported tipping income has increased by 50% between 2012 to 2018 to $38 billion. any change here, of course, would have to be approved by congress. but, guys, given that nevada is a swing state with a lot of service workers, clearly, this is very popular, at least in vegas. >> sounds like a lot of unintended consequences potentially, robert. >> yeah. there was a specific line in there from the harris campaign saying, if hedge funds and private equity folks try to convert their pay, let's say,

carried interest and call it tips, we're going to make sure that doesn't happen. i think that's an exaggeration. but clearly, there would be an incentive for some companies to shift or call some of their income tips so they get that tax break. >> carried interest is already treated differently. it's actually treated that way, in a sense, as -- it's ridi ridiculous. >> maybe we could transfer our compensation to tips. >> we should start soliciting tips from the audience. >> it's capital gains -- >> put a jar on the desk. >> a tip jar. there could be -- the economics of this policy are worth discussing. we'll put a qr code up, thanks. >> scan the qr code to leave david a tip. >> what did you think of the show? venmo me. >> you are always looking for ways to be more tax efficient. >> i am. i know one key way, yeah, which would be getting rid of the salt

cap. >> we've heard it before. >> you're going to hear it again, too. >> we should hit starbucks before because this is the stock of the day. the surprise announcement of c chipotle ceo becoming the ceo of starbucks. there are questions about whether there was any activist investor involvement in this. elliott has a stake, they've been active trying to make a deal. the journal reported starboard, jeff smith, has a stake. is there any indication that that is what led to this change? >> no. there was no involvement whatsoever, is my understanding of elliott in any way choosing or being involved in the decision to both terminate or hire mr. nichol. that pressure that is there as a result of their presence and the shares may accelerate those kind of changes. i did report earlier, if it had not taken place, it seems people close to the situation tell me much more likely they would have had a settlement in which jesse

cohen went on the board. that's probably unlikely unnecessary. they're a large shareholder. they put a statement out they'll be paying close attention at elliott and they are clearly very, very happy today, as are any number of starbucks shareholders. in contrast to chipotle, wow, one guy responsible for an enormous amount of market cap on both sides of this really historic sort of ceo move. we'll have a lot more coverage of that and, of course, our markets as well, when we continue rhteronnbig he cc.

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welcome to "money movers." i'm carl quintanilla with sara eisen on the floor of the new york stock exchange. a major management shakeup in the c-suite. starbucks ceo is out and chipotle ceo is in. inside the stunning shakeup. the ceo of suntory holdings. piper sandler's chief global economist who was named one of