early in the season tend to do better. they're largely i.t., the retailers come at the back end and they'll obviously have more problems. >> not only that, plus you can raise you're estimate. >> well, i don't know. did you read, one of the analysts called apple's forecast comically conservative. >> well, they do that every time, set a really, really low bar so they can blow it out of the water every time. >> gene munster. i like when illinois tool reports, because we get to talk about rod blagojevich. he's an illinois tool. i messaged and said sxb tell audio to get a rim shot ready for my broke. can we try that again? let me just try it and then get

basos ready. i like when illinois toy reports because then we had talk about rod blagojevich. nice. >> we have the best audio engineer on the planet. >> why do i even try? i've got nobody that likes it and then people -- fine. >> the only routine i hope up -- >> is it your tool? >> no. i think it means you're a jerk. >> it does mean you're a jerk. do you want to talk about besh unanimousky? >> i think talk about the fed. >> maybe we can do a rim shot after this. >> i don't think it's going to be that funny. federal reserve chairman ben bernanke heads back to capitol hill today. he's going to testify before the

allergy capitol hill today. the fomc believes a highly acome dafb stance to monetary policy will be appropriate for an extended period. however, we also believe that it is important too sure the public and the markets that the extraordinary policy measures we have taken can be withdrawn in a smooth and timely manner as feeded, therefore, affording to a future right with inflation okay. if you went in trying to bring yields down, trying to bring oil down, stabilize the markets. >> if you saw how the journal spun it on the fron he's talking about how the economy is stabilizing and the market read this out to be the acome dafb

policy will be here for a long time. >> we'll see, we are trying to balance off the bond vigilantes and the inflation hawks with people that think we need a second stimulus package. i mean, you know, we're still in that area where we really -- who knows. none of us know, right? and we've got this solar eclipse coming or did it already come? >> there was an eclipse in asia. somewhere in asia, you could see the full eclipse. >> and yesterday the "new york times" had a whole thing about the solar flare and -- >> why did you bring that up is in the. >> in the ice age, if you happen again drn i wasn't there for that, but there some seem to be correlation between the earth's temperature and sun spotting. why would the sun have anything to do with how hot it is here? it's probably the 400 parts or

00 parts of little co2 in a million. >> it's happened over the last eleven years from major solar flares to little economic activity. >> have you turned your air-conditioning on even in new york city this year? >> is that a shot on the solar aclips? at dawn local time. >> you saw that here, too? >> no. president obama, meanwhile, has talked about health care eight out of nine. that's still not enough. tonights he's hoelthd a prime time news conference about health care and this is the journal's take, upping the ante on it. there are some critics that say -- and i don't know how you say that. i hope they mean in kravrting.

>> they even got carwell saying he's ratcheting up the stakes and the stakes are build. if you win with this before august, it's a big deal. if you don't, it festers and people pick it apart. >> although the administration is saying it doesn't have to go past august and it's the political reality, the gries in arkansas, rothd hisberger hinge his name is. >> and they got politic on cap & trade where you can agrees these guys that that will go with him. >> they're trying to keep the solidarity. the president says reform is closer than other and you can go back and previous administrations never got this

far and they've tried, going back to the '60s. there's no agreement in congress on how to overhaul the industry. and appearing on nbc's "today" show, the president said hiking taxes on the wealthy remains an option. >> a bag which will probably include some additional revenue from well to do people, including me and you. >> you can watch the president's press conference live tonight at 8:00 p.m. health and human services secretary cathly sa bailus will give us a preview this morning. two togetherso sonumbers up shares of yahoo! came under pressure. the company's earnings and

revenue meeting the street's expectation pes.but the company did give a worsening ad slump. that gafr smip investors a little bit of pause. >> mike abranski covers apple. mike, we were just talking about how very few companies are posting results top and is bottom line above last year. a lot are beating expectations. but all the expectations were lowered. in this case, appearlity last year and this year handily exceeded expectation peps. >> yeah. that's correct. it was pretty amazing and a testament to apple's innovation and how even in a concession, consumers are not able to hold up with its stuff. in fact, you thought the disclosure of steve jobs was top

shelf. but do you tend to be on the side of apple in most cases, mike? have they made any mistakes? >> well, apple is not perfect, but i think the board did a very good job of managing the information that was probably coming directly from steve and his doctors as they were receiving it. you know, it's a challenging situation because you do have obviously a ceo who is so core to the company. but innovation is alive and well and i think that's the point for the long-term. >> well, even buffett said at the time, if i had someone as important to accompany me, if i had a deliver transplant, i might have told somewhere before, instead of four months afterwards where it freaks out on the instructor. >> let's go to the iphones. if they go that much cheaper, they sell seven times as many as a year ago. >> it's a bit artificial because they just launched the new

products. so the year over year is a little bit distorted there. but it is true that by lowering the price, particularly outside of north america where people are very price sensitive and prepay is popular, they are seeing acceleration. but what's really amazing was obviously the 3g southbound. hit extraordinarily live in items of our number. and that's before apple has expanded that distribution. >> do you think the outlook that a -- one analyst, one of your peers called it comically low. is it low? and number two, is it a good thing that they're not able to meet demand? too bad they can't meet demand. >> yeah. i think it's never a great thing when you can't give somebody

what they want right away when they come into a store. but at the same time, clearly, apple is getting a lot more attention for its products even in a recession, as we said earlier. and that's true of this phone, as well. i think that they probably continue to be very conservative in their guidance. but it's probably going to come somewhere in the 35% range. that's pretty astounding. it says that they're able to preserve pricing in this environment. again, joe, i think it comes back to the fact that they have the best user experiences and those experiences are something that many people aren't willing to pay up for. >> and if stock price is any indication of what the board did, that's like an a plus. >> they closed at $151, i think. >> yeah. through time period we're talking about, when this was

happening about mr. jobs, i think the stock went from $180 do $160. >> you don't think that's a toy company? >> i mean, you sell a lot of margins. and if you have a profit margin, it doesn't matter what you're saying. >> they did say seasonality will be making changes. >> we'll see whether they're just lower and now you know what you want. >> so ewe apple shareholders aren't upset. >> let's turn to citigroup's internet researcher mark mahaney. it's good to talk to you. this story was not nearly as positive. we've got the rezooin design of this home page, the revenue. i guess the thing that caught me was all the spending that

they're doing, reversal from the cost cutting that they're doing. is that the right move? >> it's probably the right move. revenues came in in line, but earnings were better than expected. then they took out some revenue, adding in some costs. both of those were discreation off mall. there's interesting value with the stock here. that's why we like it. what is your terms of wlash said about the tigz. >> you know, the positive news on the revenue side last night came in that premium display advertising segment. search was softer unanimous expected. premium display advertising was stronger than expected.

in terms of the outlook, what they stated is no realtime yesterday here. but no sign of a pick up yet. >> they was asking about being the new. some people want to read the sign that there is an ad deal to be done between yahoo! and microsoft. is there? >> i think there is always that potential. there's been this potential for the last three to four years. could a keep happen? could it involved search and business play advertising? and main row soft displaying technology to yahoo! it's hard to mamg that deal in that space.

whether it was a private deal or a public deal in the past that failed, it could come back. it seems like it makes still a lot of sense. >> the stock is just under $9. what's your take on that? >> with yahoo! carl? >> yeah. >> we think we'll have stabilization and revenue. the pick and search engine will continue well into 2010. that will be the first quarter for a new cfo and the third quarter for a new ceo. we like the setup. >> okay. we'll be watching for that and

see how the redesign of their page attract users, as well. mash vitner and chris johnson are joining us now. the dow has been up, the s&p finally hitting resistance yesterday, i believe around the 56 mark. what's happening here? when do you worry about the stocks getting too high? >> well, i think there is a case where you couldn't have everything coming together at once in a better fashion. joe mentioned a few moments ago that earnings are coming in better than expectations. they're not that great. they're coming in and beating right now. that's like your son and daughter coming in with a few, but at the same time, you know things can go better.

a lot of investors and analysts are looking and waiting for that sideline cash to start flowing into the market, becky. it's not going to happen in this particular situation. we're going to see a trickle of that cash. investors have been interested in diving just here and there into the market. what i think you'll see is a market that continues to challenge the upper levels of the technical which are around the 950 level. we've heard about the head & shoulders pattern, etcetera, etcetera. we'll slowly wither away and it will be a slow, arduous climb higher. >> mark, if earnings have been better than expectations, but a lot of cautious guidance from companies because i think they are having a hard time seeing what's coming in the next few quarters. how are you taking what we've been hearing from these big companies and fitting that into your economic models? >> well, it looks like we've gone through a cycle where companies have overdone it in the way on the cost cutting and slashing inventories.

and i think the best food is behind a lot of profits. nominal gdp probably declined in the second quarter as well as real gdp, of course. but normal gdp was likely to climb, which meant that revenues were continuing to fall. we're not seeing the economy deteriorate near the rate it did before. in the third quarter, we're looking for it to turn around. if companies are looking to get a better idea where the revenues are going, i don't think there's a lot of information out there that's going to help them. at least they stopped falling. >> both of you, what's it take to see some turn in the economy. we have to get investors back in. >> well, i think we have to see a more significant improvement in employment. when you think about how elated we got over the slowing and the rate of job losses, it was still the worst rate of job losses

that we've ever seen. you're not going to get a very strong recovery and final demand when employment conditions are deteriorating there. we may get some because of the timing of july. >> chris, what does it take to the that money off better. i think the employment rate would get investors into action right now. listening to the slowing of the downtrend is not going to do it. we're going to need to see vast improvement in those numbers. >> but isn't that a lagging indicator? >> right now at this point, that sideline money that's out there earning 1. % per year is not concerned about whether or not it's a lagging indicator. they're waiting to see when they can get into the market at a

safer point. this is a situations where investors are feeling twice bitten here. they just want to live in a market where they can make realistic returns. >> when we come back this morning proctor & gamble beating expectations yesterday. take a look at yesterday's winners & losers.  (announcer) illness doesn't care where you live...

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reportedly in talks to sell its pharmaceutical divisions. the pharmaceutical unit could be worth $3 billion. they decided to focus on its over-the-counter products like pepto-bismol. i was just looking at that for myself to figure out what they sell. because you don't think of -- you know, you get drugs from at&t, but $800 million in operating profit. actinel, this one, you know, caught my attention. a bladder control drug, enablex. >> caught your attention? >> well, each year, you see the guys on the golf course, oh, it looks like he's getting ready to

drive and he jumps in his cart and drives to the -- why do you drive somewhere? you don't need to go anywhere on a golf course. >> viewers may not know that on every commercial break, joe goes to -- >> that's a dirty, low down line. i sit here for three hours. i have a catheter. no, actually -- no, never mind. >> negative mind. >> i don't think we need to go into sexual female dysfunction, do we? that's the last drug the journal points out here. >> thank you for not mentioning that. coming up, we'll have more on the day's top stories. plus we'll get the pulse in the pits. we're talking with our friends at the cme. so, what's the problem?

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good morning. >> i'm joe kernen along with becky quick and carl quintanilla. on today's market jaent, earnings and more earnings. we're going to look like eli littlery right now. before the bell, we've got things like boeing and pfizer. morgan stanley, u.s. bancorp, wells fargo, eli lilly, illinois tool bank of new york mellon. boeing expected to post a

increase in profit year over year to $1721. revenue seen rising. as for pfizer, it's expected to earn 47 krentsd a share rove knew of $11.3 billion. how are they often performing during this earnings season? >> i'll tell but lily real fast. this company coming out westernings better than expected. it's now talking about a range of $4.14 to $4.are 25. on earnings per share, leigh at the gas -- >> well, the street is already at the high end of that range for the year at 423. so they're looking at 414 to 424. other than that, we see something coming in -- >> $1.12 is 10 cents a ahead. 4.23 is the estimate for the year and they're talking about,

as you say, 420 to 430. >> they say they raised their guidance because they received several important regulatory approvals. note:bly, iffian in the united states. they're talking about how they condition projects. >> these are earnings that they think will help their earnings per share. >> they are raising guidance to where the street is at this point. >> the cfo is coming on the program at 7:15. >> on our program? >> on our program. >> okay. we won't talk about anyone coming on after 9:00. >> really? >> if it happens away from me, it's like a free falling until the forest and i'm not in. >> you were just talking about

what you were watching yesterday. >> i'm not sure -- >> let's get a check on markets today on this wednesday, when the earnings strike continue. lily will get boeing later on today. for the time being, it seems like some of the momentum in the rally has stalled out a little bit. the nikkei is up 10% year-to-date, but some of the other asian markets are down. oil, we have switched over to the september contract and we're down 78 cents there at 64.84. yesterday, the yields have come down. the dollar is relatively stable, although the dollar and yen has been benefiting from the yen, some of this weakness, relative weakness in the global markets with the euro and the pound, losers against the dollar.

>> we have a lot of people, bernanke -- and he's in chicago. let's go to the futures pits now and see if jason roney can say it right. jason, what do you think of bernanke's testimony? i'll speak your language. what did you think of the fed chairman yesterday? >> we didn't get any real new news out of bernanke. but the key take away is that rates will stay this way for a long time. we're talking 2011 before fed funds rate were to move. there is so much slack in the economy still. just the taylor would would suggest rates are better. we would start to see the unemployment just a few minutes.

>> there are a lot moves he makes, and he can, jesus. you're not saying we need a second stimulus, re? whether you're right or wrong, i think that will come on the table next year. the reality is this recent rally is led by sgroeth out growth ou. during this is earnings season, it's pretty easy to see analysts underestimated the ability of companies to cut costs. if you look at -- i think the nasdaq is worth talking about, because not only did we do ten straight up days, but the nasdaq 100 has seven days in a row it closed in the top 50% of the ring. to do something we never did during the height of the internet bubble says we just underestimated the ability of a few companies to earn, but for

the most wart, avenue outline companies that got just that. the point is that they're cutting so much out there, it's more than neutralizing the benefits of the first stimulus project. hopefully that's not a microcosm -- not microanything. but hopefully the rest of the country, you know, the slowness of the economy and cutbacks to the states, hopefully that doesn't neutral eye the first stimulus left. >> and well, states will have to continue to cut costs, unemployment is rising and wage rates are declining. that will not allow for domestic demand sxakz other than a incremental recovery. clearly, we're in that.

expectations will have to go up over the next quarter. >> do you think that this is going to make it hard for these huge initiatives, health care, that we're considering right now, jason? if what you're saying hapg happens, will the politicians still move forward with things that cost -- >> well, i think clearly it will make it harder, but i'm a trader, not a politician. i think the ability to push forward that agenda is very sentiment driven. so what the polls say is what they'll be able to accomplish. it's amazing how that changed over the last 48 hours. >> and you wonder which way the polls go. this is a full-court press we'll see over the next several days. maybe pek thut push this around. but we're all talking about it. it's on the front page of every paper every day and it probably

does makes a difference. thanks, jason. >> see you later. >> if you have any comments or questions on anything you see here on squawk, e-mail us. squawk@cnbc.com. coming up, earnings hitting the tape nonstop. joe has his calculator out in his head. we're going to head over to the earnings command center and round up the numbers you need to know about. we compared los angelas veg wynn. i think wynn is very, very aggressive here. we ran through why apple is such a used stock. i think apple goes to $200 opinion the gross margins were extraordinary. (announcer) this is nine generations

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call 1-800-552-7724 or go to our website. i'll see you at 3:00! announcer: captioned telephone - enjoy the phone again! k today. welcome back. we have traveled to our earnings central demand center. it's a demand center, joe. >> i'm tired. >> way across. >> it's all the way over there. >> way across the studios. >> what did you watch last night? apple and yahoo! were the headliners, right? apple, revenue beat the streets. the shares were up after the bell. >> and some of the margin discussion was pretty good. they talked about over 30% margins. they wouldn't say for how long

and talked about how back to school will be pressured by a lot of promowings. >> the only thing that may have been disappointing was ipod. can't the iphone do the ipod or something like that? >> the iphone has a music -- yeah. they're different products, but -- i know what you're saying. i know what you want to say. >> the ipod wasn't as up. but the amazing thing was how they cannot meet demand. i think that's a good thing to say, for the most part. that means demand is strong. if the supply is not there, people are willing to pay. but then again, you would like to satisfy them when you can. youny no matter what sids that stock was going to down a little

bit. a worsening ad slump gave nervous investors reason that pause. >> they're all operating in this environment. not that tradition media is any better, but even web media, web-based advertising can't hurt, as approximately. and then you've got amd. the shares were clock after the close. that was a 13% block. so even the eu, it's unclear whether the eu is -- and auto ben fish of that wvb taun eers. they are berchb. >> i wish we had more.

>> well wibt costs too much. we have to pay 90% of salaries for three years if they do get laid off. >> we've extended job benefits in this country. >> but you extend them to the point where you can't hire anyone because you're worried about getting rid of them, then there's fewer jobs. >> if we're not going to see anyone in this company -- well, revenue beat analysts pointing to -- actually, a lot of cost cuts and store glowsings by the fiscal giant. they talk about full year operating improvement of $2 auto basis pents. companies in general are '01. >> it's not '01, it's -- >> that would be 2010 -- >> the year 2010. >> yeah.

i don't even know if starbucks will be around. >> we're still going to be on the show. working together. >> so do you feel like it's a testament to the power of the american corporation that they made these cuts, stayed profitable in this environment, or is it a bad thing that it's happening on the back of people that have been laid off and will be laid off in the quarters to come? >> that's the great question, isn't it? even ceos that are known to be -- i don't know, even they're prut pruth.so if you had to do 10% or 12%, whatever it is, you have to thin the herd. business is war, business is tough and a lot of times, it's survival of the bittest. not everyone, you know -- if there's -- you can't distinguish between people that are good at what they do and people that aren't, then how do you move forward? >> you know what it's like? it's like the hot air balloon.

sometimes if the balloon is losing altitude and -- >> did you see me struggling with the met for? why didn't you just take over? you know you're the man for met fors. >> i was waiting to see what you would come up with. >> you came up with that immediately. >> you know something about hot air, right, beck? >> yes, he does. that was pathetic, joe, it really was. anyway, geese, when we return, we'll be talking more about deficit well-being of your brother. coming up at the top of the hour, david walker. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney.

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time now for a check on news. monica. >> hi there. >> give us the news outside of business. it says here it's going to be a roundup of the headlines. >> round it all up. okay. start with independent investigator in alaska who found evidence sarah palin may have vimted ethics laws paying legal bills from multiple ethics complaints filed against her. investigators characterized fund-raising as using her

elected position for personal gain. april setback, senate republicans set back vote for sonia sotomayer. they forced the committee to push back the vote until tuesday. sotomayer is almost certain to win. across asia, nations were plunged into darkness by the longest solar eclipse from the 21st century. from india to china millions watch as the moon moved between the moon and the earth. in some areas the eclipse lasted more than sick minutes. on a remote japanese island there's a report a group of cows were so confused, they moved over to their trough and started having din are in the middle of the day because they couldn't figure what was going on. >> sounds like us. we were looking at the pictures. it through us for a loop, the sun spots, flairups, what it means for the market. >> you had astrologers saying terrible things were going to

happen. >> monica, i like the way you pointed out it was on a remote island where the cows were fooled, not the city cows. >> city cows -- >> at the looked up and said oh, that's an eclipse. the remote ones never heard of an eclipse. >> the city cows went to starbucks. >> exactly. they saw scarborough there buying coffee. all right. where are we going, parking ticket? >> yeah, parking ticket. >> bye, monica. >> we were talking how everybody is tight on cash. apple mentioned school budgets won't have as much revenue. states and municipalities have run into big trub, too. they are looking around for ways to raise revenue. fortunately for you, drivers, they are doing it by raising parking tickets. it happened around the country.

california put $3 on every municipal ticket handed out, marketing tickets because they are trying to raise money for funding court facilities. yonkers, new york, trying to pay for a punlg shortfall. new york increased from $20 to $45, andover, mass. >> $65 in manhattan. >> a no-brainer. >> put a quarter in. >> it's a good thing to you unless in new jersey, there's pushback. tourists will not want to come back. they will have a sour taste. if you have a rough downtown parking scene, people may not come down to the restaurants or stores downtown. >> let you go -- if it's 65, they let you go 75. all of a sudden, you know, if they want to start -- >> end of the month. >> end of the month they have to make their quota. >> look out. be careful where you park.

>> next. >> biotech. >> i am? >> yeah. >> i thought it was you doing -- i'm looking forward to see how you handle -- >> really, please. >> here is the deal. what do you do with these complex molecules that biotech companies develop from living cells, biologic, $50, $100, $200, normal growth, biotech industry wants 12 years because it costs so much to develop them. >> twelve years. >> twelve years to recoup the money they put in. in this day and age what do you think consumer groups would like? five year exclusivivity. the word is never develop an innovative drug. like we deal with. do you fire people or keep everyone?

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pfizer eli lilly filling out second quarter prescriptions. boeing on the runway with its flightplan. "squawk's" earning central ready for action. health care sticker shock. uncle sam's former top

accountant david walker sounds off on reforming this trillion dollar industry. buckle up "squawk" fans, time to take off. welcome back to "squawk box," cnbc. futures are a little bit lower this morning for the first time in several sessions, as the earnings streak continues today. we just got altria and pepsi. i think you're watching pfizer now. >> 40 cents ahead of expectations, increasing to $1.90 to $2 for '09. the street already has a number of $1.96 already. revenue fell 9% to $11 billion. obviously there's going to be four numbers there as well.

most important drug to look at is lipitor. we've also got altria. do we care about altria? we do, don't we? what are you looking at, becky? >> lipitor. >> altria '09, $1.50 to $1.56. i don't know whether that is an apples to apples comparison to $1.71 i have here. also looks like second quarter net was $1.08. that looks like it includes something as well. the number is down to .47 a share. revenue 6.72, the adjusted number was 50 cents for altria, .50. that versus expectations of .47. let's react to numbers on the phone katherine arnold, senior

pharmaceutical analyst. any surprises you see so far in pfizer's numbers? >> good morning, joe. as we're going through them, looks like revenues are a little lighter. mentioned affects, that would play an important role. expense is key here that feeds into the story. it appears some of that in mind. they have to hit or beat. if they put that together might be an upside on synergies, revisit dividend and management will run the company tightly. that's what the key focus will be. >> lipitor $2.7 billion in lipitor. how is that? >> that's the consensus number. >> when does that go away? >> lipitor actually goes away essentially the impact will be in 2012.

they will have some affects prior to that. it's pretty much a 2012 event. >> pretty much 2012. is that doing to help? >> well, absolutely. what it does, it goes from having a crater scenario to being a flat earnings story without any kind of business upside baked in the stock. the reason we like pfizer, you really don't see pipeline numbers in the models. they do have some drugs that really could become big products but they are not in the numbers. as a matter of fact, the company's guidance for $70 billion in 2012 is not what the street or myself are estimating, closer to 64, $65 billion. there is a gap there, even it's partially, you look at the upside. >> when you do $11 billion in a quarter, does it matter you're a couple of hundred billion short. there was 11266 for the

estimate. does it matter that's below? will people look at that and decide i don't want to own the stock at 16? >> everyone likes the revenue number to be as tight to the expectations or above. we have lived through some wild currency swings lately. i think there is some forgiveness that goes on in regards to currency. yeah, you want the top line hit, explainable by currency. i haven't seen the numbers on that, so i can't really comment yet. i think there's forgiveness on it. i think in this story, management really leads into next chapter of pfizer. i think that will be watched more closely. >> revenue 9%. what does that equate to? that doesn't mean since it was down 9% from a year ago, that doesn't mean it would be flat without forex, would it? >> when they gave this at the begin of the year, they said revenue would have been flat if

it wasn't for currency. >> reading that now. actually i just saw that. revenue flat on constant currency basis. >> yeah. >> which is good but doesn't take into account the challenges facing pfizer once the generic stuff starts happening with their key drug. but flat is not too bad in this environment. it's pharmaceutical, right? >> that story led them up to the merger. >> yes. >> that's obviously obvious and that's why the stock is trading at six and a half times in 2010. it's all about expectations when you go into earnings. i think the key is going to be how are these guys going to execute as they close the company merger later in third quarter or probably third quarter. that's why we have the expense management conversation. last but not least, what's the state of the ed market.

viagra, has it lost to cialis or other competitors or is it still a strong market? >> the volumes for viagra this quarter were actually down 2%. so you are seeing volume losses to viagra. looks like a pretty strong price scenario. that's somewhat surprising. there's a lot of out of pocket in that particular market. cialis on the other hand has volume increases of 12 1/2%. cialis is taking share away from viagra. that's not a new trend but what's happening. >> wonder what the prospects are with the public plan. that couldn't possibly be covered. that's in the cadillac plan? >> that's cadillac. we're living in a volkswagen world. >> you're on your own in terms of, you know - >> whatever. anyway, thank you catherine, we appreciate it for playing along

as well. very good, thank you. >> quickly, let's mention a couple of things on altria, adjusted 50 cents, 49 on straight number, streets 47. talking about raising their full year guidance, non-gaap of 172 to 177, street took 171, again 172 to 177. they are talking about how they are raising their guidance because of the strong first half business performance they have seen with many other cigarette companies. >> pepsi $1.06, estimates were a buck. revenue a little light again at 10 six billion. estimates were 10 nine eight billion. high i think el dinlg growth. currencies did take out 6%. all of that guidance is absent the impact of their proposed transactions to get a piece of -- or all of the pepsi bottle

group. we got coke yesterday. here is a look at pepsi. >> another major story, 12%. >> huge. >> hear catherine say, too, go easy on some of these companies because it's been so volatile. don't know what to expect. other stories, ben bernanke heads to the hill for the senate banking committee. he fielded questions yesterday on everything from the financial crisis to the obama administration's proposal to expand the central bank's powers. speaking of obama holding a prime time press conference tonight. the focus on that, health care. he says reform is closer than ever but no agreements in congress on how to overhaul the $2.5 trillion industry. we'll talk to kathleen sebelius later this morning. she'll join us live at 7:40. earnings front eli lilly did report they beat estimates on the top and bottom line, raised their earnings forecast for '09.

we'll talk to the cfo of lilly in about 10 minutes. our guest host has been calling for the government to address the government long before t.a.r.p. was in town, stimulus, all those words entered the national lexicon. joining us david walker, the former u.s. controller general, president and ceo of a foundation. it's a great day to have you here. >> great to be back. >> we're talking about all kinds of issues that fall into your wheelhouse. the plans and proposals we're coming up with for spending out there and what it's going to mean over the long hall. you heard about health care, you heard carl, the president on this. what's your take, what needs to be done and what the concerns are. >> there's no question we need comprehensive health care reform that addresses coverage, cost and personal responsibility. however, i think they are moving too fast and there's a risk it's going to come apart if they are

not careful. when i say "they" i mean elected officials. they need to learn lessons from the stimulus. they moved quickly, didn't structure it properly and set proper expectations with the american people. therefore that expectation gap is causing ratings to go down. the same thing can happen with health care. you cannot control costs by expanding coverage. that's an oxymoron. what we have right now is a house billion on a sinkhole of sand with a flawed foundation. the plumbing is leaking, the roof needs repair. it's mortgaged for more than it's worth. that is our health care system. we're talking about adding on a new wing. we're only going to pay for the new wing. when are we going to fix the house? when are we going to make sure we can deliver on the promises we've already made? just another example of trying to have your cake -- people would argue the reason cost is

so high is we treat people who aren't insured. the solution would be to ensure those people as well. why is that not the answer? >> there's no question we need to have some level of basic and essential health care coverage for all americans. >> you think universal health care. >> well, but we need to have a debate on what that level of health care is. what's being talked about right now is not affordable, not sustainable. we have not engaged with the american people to an adequate extent to ask them. for example, when you ask -- i've been to 43 states in the last years. they will tell you preventiveness, wellness, chronic, protection against financial ruin and catastrophic, that's what they need. do you want as much as you can get as long as somebody will pay for it, the problem is there's no free lunch here. people are being led to believe there's a free lunch. there is no free lunch of the top choices are not made. >> your argument is those people

should be insured but with minimal coverage. >> with a level of coverage that meets broad-based societal needs, that protects them against a catastrophic accident. >> keeps them from going to the emergency room with a hangnail. >> personal bankruptcy if they get some type of catastrophic -- >> the number one cause of personal bankruptcy is health care coverage. people get treated. they get treated, carl. people go to the emergency rooms, however else. we need to look how we deliver health care. we need more clinics, more innovative medicine. we need to leverage technology with regard to cost and quality. national evidence-based practice standard. we need to change how we pay. >> are you telling people in washington -- i mean people at home might not realize you're completely nonpartisan. i can vouch for that. in the past i've tried to get him to say -- i can never get him to say something.

he's purely nonpartisan. i would hope you're there -- you're willing to talk to rahm emanuel, talk to sebelius. she's going to be on the secretary later today. are you talking to them? >> i'm talking to a number of people. i talk to people on the hill. yes. but the president promised health care reform. >> do it right, though. >> we've got to do it right. i'm concerned that we're trying to do it too fast. >> what are we doing you think -- give us a couple of for instances, this is not something we can afford or pay for. >> we're talking about a level of coverage we can't afford or stain. >> what is something, viagra paid for under the coverage. >> by the way, medicare did pay for viagra, which i would question that, okay? some of the things we're going to have to look at, we're going to have to look at end of life care no matter what your age is. no matter what your age is. to what extent should the fund

heroic measures that do not immediately improve or extend life. that's based upon the physicians determining that, not based upon some government employee determining that. so we need to recognize that, because that's a big part of cost. yes, we need to be able to get a lot of administrative costs down, leverage technology. if we're going to have to spend money on technology, we've got to require people to use it as a basis of getting paid. if we spend all the money on technology and say, gee, we'd like you to use this but you don't have to use it, that doesn't make any sense. same thing like evidence-based medicine. we need to be able to tie medicare payments and federal government program payments to that or else it's nothing more than a recommendation. and that won't work. >> david is going to be with us for the next two hours. we're going to be talking about this and other issues. >> any comments or questions

about anything you see. a lot to talk about today. futures for the first time are lower as some of the momentum came out of the global markets overnight. asia was mixed, europe has been down for most of the morning. we'll talk more about that. when we come back, huey lewis and pfizer are not the only ones on the hunt for a big drug. we'll talk to derica rice, cfo in just a few moments. don't go away. >> time for today's aflac trivia question. who was the first major league baseball player to throw a the answer when cnbc's "squawk box" continues. you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh

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now the answer to today's aflac trivia question, who was the first major league baseball player to throw a curveball? the answer, bobby matthews, who did so in 1877 while pitching for the cincinnati reds. this news out this morning. ge capital, obviously a ge unit and ge parent of this network, has received approval to exit the tlgp plan. that is the fdic plan whereby temporary liquidity guarantee

program. as a result ge capital no longer issue government guaranteed short-term debt and will be able to issue long-term debt with maturities of 18 months to three years as well. it means -- it signals, basically the capital markets are returning to health. also that ge doesn't need backing to put out debt. it's issued $12 billion outside the program already. it was already operating outside that program, which was going to expire anyway. >> in october. >> i don't know whether they will let it do that. by the way, ge paid $1.3 billion in fees to the fdic to participate in the tlgp. you need to apply to leave it. ge will be the first one, ge capital, the first one to get out. in addition pfizer, glass come smith kline, lilly is out.

mike huffman is here with another person on cnbc. good morning, mike. >> i don't want to spend so much time but since you were so keenly interest viagra was down 9%, cialis was flat. i'll move on. >> market share? >> market share but also as catherine arnold was saying pricing. lilly's second quarter revenue in line, beat by a dime. narrowing the range of full year guidance and high end by a nickel. joining me live first on cnbc from lilly headquarters in indianapolis, chief financial office derica rice. mr. rice, good morning to you. thanks for being here again. >> good morning, mike. >> so your revenue, as i said, was essentially in line, up 3%. beat by a dime on the bottom line, increase of 19%. given the fact that like everybody else you're facing a huge negative impact of forex, wasn't this all done with spending control and cost cuts? >> no, mike. nfc, we had very good volume

growth. so if you were to remove the impact of foreign exchange for us with a negative headway of 6%, we actually had good performance growth of 7%, comprised of 4% of good volume growth and 3% in price. then we were able to leverage that growth into strong operating performance. we were able to improve gross margin by grog cost of sales, as well as good cost containment in skpends. that allowed us to deliver $1.12 a convert which was 19% earnings per share growth. >> soon bottom line contributor. you plan to launch your new blood thinner early next month. will the market for this month be limited by the patient population it's approved for and in addition the very stiff safety warning the fda slapped on the label for that drug? >> mike, we're still very

excited about the opportunity it presents for patients. the box warning we believe appropriately positions the product in terms of those three subclass of patients that have increased risk of bleeding. when you look at the overall risk reduction of 19%, we think this still represents an outstanding opportunity for patients. >> as you know president obama goes on tv tonight to talk about health care again. merck said on his conference yesterday he said at least this time the drug industry that a seat at the table. he remains confident that health care reform can be accomplished. does lilly see things the same way? >> mike, we are supportive of health care reform. we do believe that we need to approve access health care in the u.s. while at the same time improving quality and affordability. the thing we're also eadequately interested in sustain medical innovation that laos improved

outcome for patients with medical needs. >> before we go, the naacp has gotten behind a lawsuit for racial bias saying dozens of black employees were not paid as much as their white counter-parts and passed over for promotion. as the highest ranking african-american in the company and the man that controls the purse strings, do those allegations have any merit. >> it's unfortunate naacp has chosen to get involved in this matter. we do not believe the allegation has any merit. we fully investigated those. the allegations are not consistent with the company i've known for the 19 years i've been at eli lilly and company starting as a financial analyst. we believe the way we treat our employees is around respect, integrity and excellence. that's been the environment that i've seen in my 19 years. >> thanks again derica rice, ceo joining us on cnbc.

the lilly is at 9:00 pfizer at 11:00. i'll be on that one. >> a lot more "squawk" continues.

lmplt one dow component down, one to go. we've heard from pfizer.

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welcome back to "squawk box," everyone. let's look at the markets. we've been watching this

closely. this morning those futures have been under a little pressure. talking about dow down by 30 points. remember, this is after we've seen a week straight -- actually seven trading sessions straight of gains for the dow. s&p running onto a little resistance yesterday during the day. talking about a market approaching 956 on the s&p, previous interday high for the year. >> boeing up 31 for boeing. that looks above expectations if that's a clean number. 121. fiscal '09 seeing $4.70 to $5. that's above where the street is. the street is at $4.52. revenue 17.15. that's right in line with expectations at boeing. and it's going to issue a new 787 schedule in this quarter we're in now, due to maturities in boeing capital notes and

didn't acquire any of its shares in the second quarter. earnings guys will be re-evaluated during the new schedule for the -- for the 787. we'll talk about that. so far so good 20 cents ahead of expectations. boeing is a train wreck. that's overstating it. the stock has not been -- >> last year? >> when it got up to well over 100, it was great. unfortunately they got below 29, back to 43, two-week high of 69. at this point we'll see whether -- did they say anything? >> concerns on 787, delays on the dream line are. they say they have identified a technical solution to the previously announced requirement to reinforce that area. >> the wing. >> that was the area -- >> i would say that's critical. >> do that.

take your time. >> where the wing is attached, take your time on that. >> they are evaluating that. as you mentioned they are going to be reassessing this during the third quarter. at that point they will give us the earnings guidance will be re-evaluated because they will talk about that new 787 schedule. >> they farmed out so much, like airbus has as far as sort of modular construction. subcontractors, really. >> problems with the outsourcing. >> so is the federal government. >> but these are big heavy things that fly. you want them -- >> i'm looking forward to the 787, too. no rush. we can wait. >> the other ones seem pretty nice. >> they work fine. >> some of the carriers use these delays as an excuse -- they don't want them now because of the downturn in the economy. they have used that as an excuse to get out.

>> 12 cents on a 10 cent estimate. net chargeoffs of 17.9% and tier one capital at 19 four, includes fdic charge. >> the bid is about to close. moving higher boeing at 4410, 4444, after a 43 close. now 4426 up $1.20. there it is. it's moving around. >> so on earnings, do we have a dow component missed yet? our record -- >> not expectations. looking at expectations you can look across the board at pfizer and boeing, the 12 before that reported, add two more. halfway through the dow 30 and 14 of the dow components have -- >> revenue missed. so much currency turmoil it's

been difficult to get a good estimate. >> good management. >> lots of cost-cutting after you get lower revenue. >> or setting expectations. >> managing of the analysts. >> that's part of what you've got to do. >> that is. definitely. >> sure is. >> are we ready on -- we are good. we're going to washington. our next guest is proposing a new commission to ensure spending remains under control, government spending, on items with the most positive impact, senator head of the committee. glad to have you back. >> glad to be back with you. >> i want to get this commission to talk about how the government planned it's tax entitlement spending down the road. but i've got to start with health care. people aren't talking about anything else this morning. senator dement was on the "today" show and would not back away that health care would be obama's waterloo.

is that overstating it? >> we're not stating it that way. the fact is we have a situation today which presents a dilemma. the dilemma is this. i remember it vividly from my days when i became governor of ohio. i told the people, gone are the days when public officials will be judged by how much they spend on a problem. the new realities dictate public officials will be judged whether they can work harder and smarter and do more with less. >> that's a big change in the political framework of this country, would you agree? >> absolutely. that's why we need to look at this financial situation that's not sustainable. when you talk about deficits, deficit of $1.8 trillion, next year another $1.4 trillion. predictions are that the national debt will double in five years and triple in three years. we are on a course that's not sustainable. american people are getting it.

in their own families they are cutting back, not buying as much, trying to save money. they are asking the question, how in the world can this government of ours, with the financial difficulties we have, the spend and borrowing, take on new responsibilities at a time when we can't handle the responsibilities we have. for example, medicare by 2017 is going to run out of money. in other words, the money coming in is not going to be enough for the money to take care of the people that are there. people are just looking at us and saying, what are you people doing? >> senator, dave walker. good to see you again. senator, you obviously know we're headed for a fiscal cliff. you obviously are proposing this legislation, this -- to cure america's future economy with senator lieberman. why do you believe an extraordinary process like this is necessary? >> i think a good example of it is what we're going through right now, trying to put together a bill that will reform health care in this country. i think we've proven that we cannot take care of this problem

through the regular order of business. what joe lieberman and i are promoting, something that's supported by the heritage foundations, brookings and other responsible groups is an 18-member commission that would be for a year and would come back with recommendations on how we can deal with entitlements and also tax reform, which are both died together. right now we're fighting about entitlements. the big issue over in the energy and congress committee in the house of representatives is how do we pay for it. so you can't -- you've got to -- it's time for us take this on. the only way we're going to do it, david, you know you've been watching this for years, you can't do it through the regular order of business. we need to have this group meet together, if 13 out of 18 agree to go forward it gets skpe addicted procedure, goes to the house, senate, up vote or down vote like very much we do with

the brac commission. it's the only way to deal responsibly with this problem. the world is watching. they know the course is not sustainable. i was up in canada with the u.s.-canadian parliamentary group. they are saying, what are you guys doing? i was in europe. they know we're on a course we cannot sustain. the american people know we're on a course we cannot sustain. we refuse, the president and the congress, to face up to the fact that now is the time for us to get serious about dealing with these long-term fcial fiscal problems we are going to v if we don't do it pretty quick, david, we're going to lose credibility and credit and see interest rates skyrocket. >> senator, one question before we go on health care. how much of this disgrooemt agreement with the administration is about the policy of health care and how to fix it. how much is republicans obvious and understandable desire to declaw the president politically? how much does that fit into the

equation? >> i think it's 50-50. i will tell you this, we have enough republicans in the united states senate that want to work on a bipartisan basis with this president to try and come up with something that the americans -- that will not kill our economy and make sure we start to do a better job with the money that's being provided for health care in this country. we know we're spending more money on gdp health care than any nation if the world. we have to figure out how to do a better job with the money we're spending today. i think if the president continues to work on a bipartisan basis with chuck grassly, the finance committee, there's a possibility we could have something get done. at the same time he's going to have to worry about his democrats on the other side who realize that marginal rates are going up, we're going to tax dividends higher than we did before. and we're going to have to deal with the estate tax. a lot of these taxes are going up, up and away. now they are talking about, well, we're just going to put

more taxes on one group of people. they know if we continue to do what we're doing we're going to kill the goose that laid the golden egg. >> senator, appreciate your time. good to talk to you. senator voinovich joining us from the hill. >> coming up, health care pitch before the big game. kathleen sebelius will be our special guest, gets up and ready for prime time appearance by president obama. we are coming right back. my mother made the best toffee in the world. it's delicious.

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welcome back, everyone. the president will address the nation in an effort to drum up support for the health care plan. joining us with more is kathleen sebelius, health secretary. thanks for joining us. stakes are rising rapidly with respect to the health care debate. yesterday the president said he would not pass a bill that would increase the federal deficit. as you know the congressional budget office has a lot of issues about how you come up with this and the expense they see over a ten-year period. does the administration accept the numbers coming out? >> i think there are two issues, becky. one is not increasing the deficit and both the house and

senate bill that are out have done that so far. the other issue is lowering cost over the ten-year period of time. what the cbo says is that the draft bills that are being worked on still don't lower the overall cost over the ten years and the president is committed to doing that. if he's working hard with the house and senate to actually make sure that costs go down in the lifetime of the plan. because right now costs are rising rapidly. the cost of doing nothing will continue to bankrupt families and governments and medicare will run out of money as the senator just said. >> what are some of your biggest concerns when it comes to the cost? what do you think needs to get stripped out of the bills before the house and senate right now? >> well, it's really that a lot of the money we're spending right now in the system doesn't pay for things that work. and we know that, which is why both the house and senate versions of the bill actually use existing money in the

system. we spend about $2.5 trillion each and every year, half of the money to pay for a reform of the system is money we're spending each and every day but overpaying for equipment, paying subsidiaries to private insurers that aren't justified by the benefits they are delivering, overpaying for drugs. unfortunately people are stealing from the system. cracking down on fraud and abuse is a piece of this. we need to redirect the funds to things that work. we also need to begin to focus on health and wellness system, driving down the conditions that make up spend so much more than any nation on earth, on chronic conditions, lowering diabetes rates, lowering the rates of obesity will have a huge impact in the future on not only the health of americans but the cost of health care. >> recent polls are showing growing doubts among americans as to what should happen with

this health care plan and the belief this should get passed. many sticking points, people calling for a slowdown for more debates, even democrats in congress are balking at some of these issues. are you convinced that this legislation will pass? >> well, i'm convinced that the house and senate is determined to tackle what is a very complicated and critically important issue. that's very good news. we've got members from both side of the aisle and senate at work trying to get this right. we've got committees at work in the house to make sure that they don't rush a bill but they actually get comprehensive reform in a way that lowers cost, provides quality and choice and builds on what we have that's working well right now for american people. the president is committed to some principles offering coverage to all americans, lowering the cost for everyone. stabilizing the medicare system, which is so important to our seniors and helping to pay for

prescription drugs, which is a part of this plan. so there is components of this that are common across the house and senate. what we need to do is continue to work on the overall cost issue. the president is committed to doing that and so are leaders of congress, which is why they are back at the table to fashion a bill that lowers cost for everyone. >> madam secretary, as you know, there is concern that the cost of the bill beyond ten years is something that needs to be focused on as well and that we need to not just look at the federal cost but overall health care cost. in that regard, when are we going to start recognizing the reality that medicare itself is $38 trillion in the hole. when are we going to start doing something about that? has the administration looked at the biden bennett bill which the ceo said might be bottom line neutral? >> there are a number of components of the bill that are

incorporated into both the house and the senate bill. i think that's a very viable idea that's definitely on the table. the ceo said the house bill does not raise the deficit over ten years, the health committee doesn't raise the deficit. the cbo has scored all of those bills as not increasing the deficit, which is one of the president's principles. what now is at work, how do we in the future make sure costs actually come down. not that just the bill is paid for but the costs come down. the president has a proposal on an independent commission which would help enforce paying for what we know works. high quality, lower cost care that exists in some parts of the country but doesn't exist everywhere. too many medical errors, too many procedures that just add to the cost and don't improve the outcome are done day in and day

out. some places like mckeown, texas has health care but the president is committed. we hope house and senate adopt long-term proposals that stabilize medicare but also improves health care for all our seniors. >> madam secretary, i almost called you governor. >> it works. >> you were governor, you were able to go in and talk to some of the governors that express fear or trepidation about what it would do to their budgets. we had one of those people on saying you were able to allay their fears. did you turn people around when you went and talked to the governors about what it would do to state budgets? >> the vast majority of governors have been eager for health care reform. frankly they are in the situation right now where states

absorb the cost of millions of uninsured americans accessing health care at the most expensive least effective way, emergency room doors, come to health clinics, show up on hospital rolls where they can't pay their bills. so states right now are struggling to try and make that system work. what they are not in a position to absorb, given the current economic situation, is millions of dollars of unfunded mandates. so we talked about that. the house bill that's out actually recognizes that states don't have the resources to pay millions of extra dollars and actually pace for it. >> the mayo clinic also said about the house bill that it, quote, misses the opportunity to help create higher quality more affordable health care. the lesson of the '93 attempts at fixing health care clinton didn't let congress get its arms around the package while it's being designed. the president that designed it

to let them take the wheel and that seems to be equally troublesome. does the administration regret letting congress have such a strong roll in this? >> no. i think the lesson of the early '90s is that the house and senate have to actively engage in drafting the legislation and writing it. what's happening right now is the president is very engaged, as he has been all along, around making sure we have a comprehensive bill. has he a proposal that actually the mayo clinic has endorsed saying this independent commission to help drive quality and lower cost like existed at the mayo clinic would be a good plan. the president has supported that since early june. members of the house and senate back at the table looking at that proposal again. he's hoping it will be part of the comprehensive reform that will actually lower costs in the future. >> secretary sebelius, we'd like to thank you for your time today. >> thanks for visiting with me. >> we'd love to invite you at any point to join us for a much

longer discussion. >> okay. sounds great. >> thank you. again, president obama will be making a direct approach to the people. this is a pitch he'll make tonight health care reform. you can catch it live on cnbc at 8:00 p.m. eastern time. >> when we come back, sharpen pencils, earnings school in session. joe kernen will run us through names you need to know. first check out oil prices. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience.

boeing is leading our list of stocks to watch. reporting earnings above expectations $1.41 versus expectations of $1.21. that $1.41 unlike a lot of companies was above last year. earnings per share above last year. revenue above last year. only a 1% gain but was above. a new 787 schedule coming. the company reaffirming its full year guidance. orders down. a little bounce in that stock. pfizer reported .48 cents on revenue slightly below, 10.98 billion versus $11.26. full year was raised $1.90 to $2. that is that bracket estimate of

$1.94. all right, back to you. >> thank you very much. coming up financials back in focus. expecting quarterly results from morgan stanley and wells fargo. we'll have instant analysis. plus he had the ear of the commander in chief, talking about applied materials ceo making his pitch for energized future for this nation. harnessing the power of the son, "squawk box" in our next hour. , traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way

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welcome back to "squawk" on cnbc. our guest host david walker former u.s. controller general, ceo oferer, dow in six-month high as people question the momentum of the rally we've seen over the last week or so. dow components keeping their record perfect in the earnings season. we are just now getting wells fargo and waiting on morgan stanley in the next couple minutes. we've gotten boeing. >> looks like headline numbers second quarter 57 cents above the estimate of 34 cents. not sure if it's a clean number. waiting for the actual release to hit. the headline number for wells fargo second quarter 0.57 a share street like for 0.64. >> up from 53, revenue $22.5 billion, in keeping with what we've seen, $20.492 was the

estimate. talking about 22.5, $2 billion above on the revenue number. that's what we've seen with some of these banks. >> talk about this is a record company. record revenue of 22.5 billion, up 20%. legacy is 13.6 billion, up 19%. you've got to include in wachovia, contributed 39% with consolidated revenue. >> 11 last year 11.5 to 22.5. >> you have to remember knockdown competition, led to higher checking and savings deposits, up 20% on annualized basis from the first quarter. >> it still needs to pay back t.a.r.p. funds unlike some of the banks we've seen. the stress test said they need to raise another $5 billion in fresh capital by november. >> there's an article in the "wall street journal" pointing out we look at book value for the company, it's right now trading at 1.58 times book

value, which is a higher level than you see for bank of america and goldman sachs, jpmorgan. "wall street journal" questioning it. these numbers are better than expected. >> we'll wait for morgan stanley which we expect any time. boeing did rern $1.21, 20% ahead. then there was pfizer. there's a look at boeing, see what it's doing. pfizer beat by a penny at earli impacted by aheadlines. >> morgan stanley lost $1.10, estimate for loss of 49 cents, revenue 5.4 billion, down 6.1, down from the estimate of 5.35. the loss from continuing ops is $1.47, unrealized losses on security. did raise $6.9 billion through

common stock offerings. i don't know what all is in there but the stock is indicated lower at this point, 26.68 after 27.56 close yesterday. we're starting to see some of this stuff come in. quarterly dividend of a nickel, pretax loss and asset management -- loss of $339 million, total client assets $1..42 billion. a lot of numbers here. there does seem to be quite a bit worse than expectations with a look at metrics, credit provisions they have added, writedowns. >> includes negative adjustments of $1.32 from improvement in morgan stanley's credit spread, 40 cents from purchase of t.a.r.p. capital. a lot of different numbers. hard to say exactly what analysts knew about, what they didn't. >> reaction to these numbers, let's get to former e.f. hutton

president. george, i don't expect you to be a cfa type crunching the numbers. whar the most important things to look at with morgan here? >> i think the morgan results reflect very strong investment banking courtesy of uncle sam. the financings they did were primarily follow-on offerings for bailedout banks and placement of debt. investment banking revenues were courtesy of the federal government. most of the other elements, joe, were largely as expected. right -- cost related to the debt, it's passe, factored in. the fact trading results were good but paled by comparison to goldman is nobody's surprise.

i think investors will look beyond the results and listen very carefully to the 11:00 a.m. conference call because every company will claim to be the best in every business, biggest trader, best distribution force, strongest research, our currency traders know more than everybody else. in the narrow lane, no company, not even morgan stanley can be dominant in any sector. investors will look at where the mack attack will be. >> talks about fixed income trading and asset management. two areas they are taking steps to deliver results because they were not satisfied with the performance in those two areas. >> becky, it's interesting, they have to be quick, not becky quick but wall street quick to decide whether to focus. i think with mitsubishi, ufj is their dominant shareholder. the probability they are going to take a high degree of risk is

reduced. mitsubishi by culture is a low risk company. they are going to restrain morgan stanley on the debt side in terms of both leverage and line. the acquisition of the citigroup smith barney retail sales force is very bold move. it's the best sales force in wall street. the question isis the retail brokerage business self-apocalyptic? >> because it includes the broker -- i do see it breaking. it has been under 26. it printed at 25.95 to 26. it's trading right at 26. that's down about 506789 the company does concede that chargeoffs for 2.11%, also they expect things -- allowance for

credit losses. they have $23.5 billion at the end of june. credit losses will continue to increase of the same thing that may have spooked people about top tier guys, jpmorgan's comments about not being totally out of the woods, we're definitely seeing it in morgan stanley as well. >> morgan stanley does not have the size or panache of jpmorgan or goldman in the debt trading markets. so i think they are trying to tiptoe around the question of is that going to be their major focus. i think they are going to answer it as a no. >> chargeoffs, george, in the second quarter went to $4.4 billion. then in the first quarter 3.26. >> that's a worsening trend when most others have been reporting at least lesser losses and0 lesser write-offs. >> george, appreciate your time0 this morning.

>> all right, joe. good to talk to you. >> take another look at wells fargo, a bit out there.0 the stocks under quite a bit of0 pressure. other comments from the company. they are talking about how their credit losses were higher. they expect credit losses and non-performing assets to continue to rise. >> they wanted my reaction. i don't know if it was quite poignant enough. >> listen, i think it's kind of cool to see how i react to what becky is saying. >> we could do where the camera is only on you. >> off the camera. go ahead, becky. >> wells fargo's allowance for credit loss 23.5 billion. say that again. >> i was reacting to you, what you say, camera on me, please. >> stuff happens. >> let's talk to david walker really quick. not to have you, david, respond quickly to these bankruptcies.

they are going to be mixed. overall do you think the decision by government, knowing what you know about government spending, to support these banks in the time of crisis was a good idea? >> well, i think this. we spent $350 billion on round one of the t.a.r.p., and we didn't have clearly defined objectives, didn't have criteria for who should get the money, who shouldn't. we didn't have conditions established up front as to what you could and couldn't do with the money. as a result we really don't know what the taxpayers got for that $350 billion. now we're finding people are saying, well, it would have been worse if we hadn't done that you can't prove a negative. we're also finding some of these institutions are starting to get numbers back, credit starting to flow. guess what? there's probably a correlation between paying back the loan and granting big bonuses. maybe that's an analysis we ought to look at. that's the lesson. when government is going to intervene, you need clearly

defined objectives, criteria and conditions established up front. >> not on the fly. >> not done on the fly. >> by the way, same mistake was made for stimulus. you can have all the kind of oversight and transparency, if you don't have conditions established up front you're going to waste a lot of money and be disappointed. >> it's hard to do these things ad hoc. >> there's definitely something in here, in both of these reports. >> wells fargo and morgan 40 stanley. >> 23, from 25 to 35, morgan. there's a lot -- >> we have analysis after this. >> chargeoffs, credit preserving. >> what they are talking about with tangible common equity. bunch of moving pieces. details afterwards. we have an analyst lined up to tell us about the state and what's happening at wells fargo. then we go from earnings to

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all right. wells fargo reporting its quarterly results. as you can see the company's stock is under pressure, bid 2.70, ask 23.71. now 25.35. joining us head of research and rsi group, ed, what's happening? why so much pressure after the company beat on the bottom line? >> we're still digesting the results as quick as we can. headline number was obviously strong and beat consensus. when you dig into numbers you realize a couple of things. number one, a very significant portion of the earnings came from, number one, mortgage origination revenue at $2.2 billion, which was a very strong number that is unlikely to recur now that the mortgage refinance boom has subsided. secondarily there was a billion

dollars of revenue from a net hedging gain on mortgage services rights. so if we sort of normalize those numbers, we're guessing we lose 20 to 25 cents a share earnings right there. the other thing i can say, we saw fairly noticeable deterioration in quality, credit rising 211 basis points to 153 basis points in the first quarter. 50% increase in non-performing assets and not a very large build in the loan op reserve to cover those things in the future quarter. investors are focusing on future earnings power as opposed to big headline number reported this morning. >> he wanted to know what the chargeoffs were, reserves, gave them an a for -- >> that was on -- >> bank of america. you're saying chargeoff continues they are not reserving

enough and a half they covered the chargeoff and built the reserve by $100 million. a big bank the size of wells fargo when we compare that to b of a or jpmorgan we saw a much more significant reserve bill at other large banks. >> another question hanging out, is this bank going to be able to earn enough money to raise the other 5.1 billion that the government is expecting them to raise by november after results of the stress test? is it going to be able to do that? if not it will have to issue more stock. >> we saw a big chunk this quarter because they did report a strong headline number and those earnings were retained, $3 billion of that got covered this quarter as far as we can tell quickly. should be able to get that done next quarter. >> investors, one thing they don't have to worry about is this idea of additional dilution coming in. >> you don't have to worry about

additional dilution related to the charlotte fall and capital they were supposed to raise subsequent to the stress test. i would say, remember, $25 billion of t.a.r.p. preferred equity on the balance sheet. at some point they are going to have to take that back and probably raise some capital -- if they want to pay that back in the near term, probably raise some capital to do that. >> ed you're not related to jon najarian, are you? >> i'm not, no. >> double-checking. what's your final grade. with the stock selling off, what would you tell people to do with wells fargo. >> this acquisition with wachovia we think is going to work out fine in the long run and we think is going to create a lot of earnings leverage positively in the long run. i would say, this however. the company -- the stock has run up fairly substantially on strong first quarter earnings and prospect of strong second quarter earnings which we got. however, we think third and fourth quarter will be more

challenging and put pressure on the stock, which is i think what you're seeing reflected this morning. that's probably likely to compress the stock a little bit further. once it gets to a cheaper evaluation it's probably more attractive. we would be on the sidelines at this point. >> ed, thanks for your time, appreciate it. >> okay. you're welcome. >> energy secretary stephen chu looking for friends on the energy bill. he's set up a facebook page to do that. will this keep climate change front and center or will health care overshadow that. mike splinter, ceo of applied materials who met with the president earlier this month. >> i did. >> talk about solar in general. >> most people we have on when we talk about cap and trade want to see the senate water it down. you're worried they will. >> exactly. >> why? >> well, there's a couple of things that are important to the energy conversion that's going to happen over the upcoming decade. number one is distributed

generation. that means solar energy. having that being an important part of whatever energy bill gets done is critical and also a renewable electricity standard to motivate utilities to do that conversion and really get moving on it. >> all those things, all those benefits offset the costs some argue you might get from cap and trade system. >> we have to be thinking about where the jobs are doing to be coming from over the next decade. in the energy sector creating new kinds of energy are areas where we can expect a lot of job. in fact solar is one of those areas we can actually manufacture in the united states, can create hundreds of thousands of jobs over this period. >> why is this an interest? >> our company has been making endeavors to make manufacturing equipment for all different kinds of solar panels. our history has been in semiconductors and making equipment for flat panels and

we've really been able to move our core technology into renewable energy space. that's really a new direction for the company. >> you make the point that people always want to ask what is going to lead the economy out of this long-term, right? >> it was technology once, housing another time. you think energy overall could be the thing that propels the economy for the next 20, 30, 40 years? >> absolutely. energy and the environment. we think the application of technology in this transformation is a huge job creator. hopefully the energy bill is going to be able to make those inroads and ability to create jobs not only in installation but in manufacturing. today we're seeing many of those jobs created in europe and china. >> specifically in solar or across the board? >> across the board. across the board but specifically in solar. about 50% of solar panels are made in china, 50% in europe,

almost none in the united states. >> do you believe in it? >> i believe that we fully need to look to alternative energy sources. look at distribution means to be able to capitalize on that, get the energy from where it's generated, needed, used.ig we're going to need to conserve more. we consume way too much energy. frankly, i think cap and trade is in trouble. i don't know that they have got 60 votes in the senate. we need to be thinking about what other things might be done. it was interesting governor dean, former governor of vermont talked about the possibility of a direct carbon tax dedicating revenues of carbon tax for health care expansion to try to achieve progress on front. i think cap and trade is in trouble. >> what about people who say solar is great but in terms of price parity it's just not there yet or won't get there. >> that's a common misconception really. our company's history has been all about driving costs down and

making technology available to broad, broad markets. that's been the success in the semiconductor industry. it's what we think we can do in the solar energy industry is apply our technology to drive costs, make it comparable to electricity produced by other forms of burning coal or natural gas and make this a cost effective approach. with solar you don't need so much transmission. that's why you get an extra benefit with distributed energy. >> people talk about moore's law being applied to solar. how does that work? >> it's a little bit different but the same kind of concept, improve efficiency, productivity. >> same rate? >> ramp up scale, maybe not quite at the same rate. you don't get the multiplicative of shrinking dimensions, actually, have to expand dimensions, make it bigger, much like we've done with flat panel tvs. you make it bigger, make them cost less, they become

ubiquitous. >> what was the president's take when you met with him, you and other executives. >> i met with him with other energy executives. we talked about the energy bill, how it was going to get through the senate, what form. he's very committed to making it happen, very serious about it as well. >> as david mentioned, does he have the votes? >> i'm sure there will be compromises along the way. there has to be. we're focused on renewable electricity standard and distributed generation multiplier. >> mike, great to see you. >> good to see you. >> on a different tonic than usual. thanks. >> distributed what? >> here for the last five, six minutes. >> i'm going to think about both of those things. tonight before you leave i want to talk about that. hard sell for health care reform senator kay bailey hutchison

coming up next.

all right. earnings fast and furious. when we return head to market central for a rundown of market movers and we find out if the bull run has legs. pushing blue chips past 8900. "squawk box" will be right back.

so many names, so little time. let's look at a few in earnings

central. we'll start with financials, morgan stanley are called lower at this point. company reporting a bigger than expected second quarter loss. revenue did meet consensus but you can see the stock is stabilizing right around $26, above that, $26 and change. i've seen it below 26 but has moved back up. wells fargo interesting, also called lower. results were much better than expected. earnings and revenue. an analyst we spoke to actually back from the mid 23s. an analyst we spoke to said some of the big upside in that 57 cent number was because of mortgage arms not occurring anymore. also concerns about, the simplest way to put it, credit quality, how much the company added to reserves to cover increasing losses in parts of its business. things all the financials are dealing with. still at this point. we also heard from two dow

components. boeing shares getting a boost. aerospace giant second quarter earnings based a streak 20 cents revenue in line both above last year's numbers, not just above expectations. boeings full year guidance also was raised. i don't know whether the company raised it but above where the company is forecasting, you can see above the $4.52 estimate. pfizer a penny ahead of analysts expectations, revenue short. full year guidance the company provided non-gaap brackets where the street is. it's raising the low end of its revenue guidance, 45 to $46 billion range. it does fall a little bit short of consensus. the street looking for full year sales of 46.9 billion. look at that, full year sales, $47 billion is something which includes lipitor and other drugs, the consumer products it sells as well. back to you. >> thanks. we'll talk more about that right

now. guest host is david walker. former u.s. controller general, president and ceo of peter g. peterson foundation. david, we've been talking a lot about health care today. we've got serious thoughts about where tough decisions are going to have to be made to pay for health care to everyone. >> right. let's kind of review some of the things that happened so far today. on prescription drugs there are going to be some issues on the limited reimportation. competitive bidding for prescription drugs for federal c programs and potentially a limitation on advertising prescription drugs. most industrialized nations don't allow that. there's a constitutional issue. if you ling it to whether you're eligible under federal programs you can deal with the constitutional issue. we've got secretary sebelius whc i have a great deal of respect for but frankly i was disappointed she didn't answer questions. i didn't feel picked on because she didn't answer anybody's cc

questions. there's a serious issue of what's the cost beyond ten cc years. prescription drugs, you know, wc made a huge mistake on prescription drugs because we only looked at ten-year costs and they exploded after ten years. secondly, medicare, $38 trillion in the hole. when are we going to start dealing with that rather than trying to expand coverage which is the easy stuff, if you will. >> advertising is a process of recooping the cost you put in to develop a new drug, a new drug that ostensibly saves lives. why would you want to prohibit someone from advertising when we're in an economy where the ad market is in will doldrums. >> to what extent does it stimulate demand make may not be in, frankly, the patient's interest. >> shouldn't the doctor decide what a person -- you would rely on your doctor about prescription drugs. you wouldn't rely on madison avenue to decide what drug you

should be using. madison avenue has had the purple pill. i wanted that pullel pill, i didn't know what it did. soma, it was nexium, i don't have gird. you need this purple pill. it's great. >> purple is in. >> david, you point out some of the marketing budgets for these companies are bigger than what goes into -- >> they are a private company. what business of the government is it to say -- how much money they take from that account. >> federal government pace one-third of health care costs. so it is subsidizing this advertising. to what extent does it create demand that is not affordable and sustainable and in many cases is not in the patient's interest. >> i wanted that so bad, caved to pressure. >> your doctor should not have given it to you. >> he prescribed a blue pill for

me. i'm not sure what that one does. dave, earlier -- >> right now? is it working? >> we talked off camera, because the public plan, tip together around what real issue here is between the two sides. both sides all you get are talking points. not just the president's people but you do get talking points there. we're going to get talking points probably from senator hutchison as well. you said it's possible the public plan, it might be feasible. >> what we have to talk about, if you look at a public plan as a default option. if other mechanisms you put in place fail, it's something that could pop up. >> not something they are proposing. >> senator conrad, chairman of the budget committee is talking about trying to create regional consortiums if you will, purchasing pools.

>> co-ops. >> co-ops. which is an alternative way to try to create competition. >> that's not what the president is holding firm on. holding firm on the public plan. he says you can keep your own. but there are provisions in the house bill that within five years employers, they would be greatly motivated to move into the public plan. you won't be able to keep your plan. >> most people are told if there's a public plan from day one, without looking for alternatives, then that over time -- >> why does he insist on telling me i can keep my own plan, looking straight into the camera and do it. >> technical thing but eventually you'll houston it. >> in form you can but eventually -- >> fewer people in these plans as more employers drop them, it becomes more and more expensive to keep those cadillac plans. >> there's a huge expectation gap built now. there was an expectation gap on

the stimulus. but scale and risk associated with health care, much greater. you can't -- if we expand coverage, we're not going to control -- we're not going to save money. all right? in addition people are led to believe it's going to cost them less money by doing what the government is talking about. there's no free lunch. >> why doesn't anyone tell us the honest truth, you're going to have to give up some stuff -- >> that's why senator voinovich is correct. in in order to make tough choices on taxes, medicare, medicaid, et cetera, it's going to take an extraordinary process. it's going to have to engage the american people, tell them the truth, take the heat -- those are two key things, tell the truth and tat heat about tough choices to be made to achieve the grand bargain that president obama said he wanted to achieve. how are you going to do it? >> going on television seven out of eight days. to say he hasn't been engaged with the american people is probably a stretch, giving it

the hard sell. >> the problem is he's raising the stakes. therefore if he doesn't end up succeeding, the consequences of failure. >> waterloo. >> meanwhile i've never seen you so -- about the advertising. when brian retires you're going to be there to take over. >> you need the interest of our corporate parent. >> and nightly news. >> we have a lot of ads for drugs. >> there won't be any nightly news. >> ms nbc, oxygen. >> shows truly independent. i realize it's a controversial issue. >> flomax, all the -- >> ask your doctor. it may or may not be right for you. >> you want nightly news -- >> i want "squawk" to do well, have a lot of advertising. >> we need some advertising right now. >> when we come back -- >> got to go, got to go. >> health care, will it fly in

texas, kay baill hutchison members of budget committees about the overall plan. joe is going to the bathroom. as we take a break, check out futures. weakness after seven straight days of gain. we'll be right back.

i'm convinced the house and senate is determined to tackle a

complicated and important issue. that's very good news. we've got members from both sides of the aisle and senate at work trying to get this right. >> that was hhs secretary kathleen sebelius earlier on "squawk box." the white house making a huge push for health care reform this week. president obama trying to get the house and senate to pass legislation before their august resource -- recess. texas senator kay bailey hutchison on appropriations and budget committee. i'm thinking so far ahead to what i'm going to ask you resources not recess. first thing, thanks for joining us. do you have any hope that for the american people we can do this in a bipartisan way and really get behind something so important down the road? >> joe, i would like to think that we could. but in fact, the republicans have been shut out. there is no bipartisanship here. there were something like 45

amendments on the health care bill that came out of the senate committee. two republican amendments were put on out of 45 offers. it's just not the case that republicans are being listened to. if the democrats want to pass their own plan, of course, they k this plan is so flawed and the american people are seeing how much it is going to cost. it's going to increase debt, it's going to increase taxes. it's going to penalize small business for hiring and it's going to cut hospital reimbursements to pay for it. it's stit not going to be paid for. everything should be on the table here for trying to either drastically reform this bill or stop and start all over. >> are you counting on senator grassly, senators grassly and baucus, are you seeing any middle -- are they getting any

closer? is there middle ground. seems like it's a public plan, no way he accepts it, any way the president will have a reform without a public plan? how do you get these two sides together? >> well, the public plan and the concern about it is, of course, that it is going to drain people out of the private sector and their personal insurance. the president really steps back from the promise that you wouldn't lose your coverage because he didn't factor in that this low cost plan that will not offer the choices and the services and will ration health care is going to cause employers to stop giving health care. they are not doing it stay in the private plan when the health care option can cut costs so much. when you cut those costs and take out the competition, of course you're going to cut quality. this is really the introduction of the government health care plan that we see in canada and

great britain. >> senator, secretary sebelius was on with us earlier. i asked her a question, what about the cost beyond ten years and what about the fact that we are $38 trillion in the hole from medicare. what are your thoughts? unfortunately she didn't answer the question. >> i think they don't want to look beyond ten years because the estimates for the first ten years are so horrendous, and you know it's going to increase as more people go into the government plan. it's going to be a government-run health care system in america. and the costs are estimated at 24, $25 trillion in the out years. we're already being saddled by the biggest debt we've had since world war ii with all of this spending that isn't helping our unemployment situation. so carl, i think it is very

important that we look at, for instance, "the washington post" that says this is a plan that is going to increase taxes on small business to the greatest rates since tax law was changed in 1986 and small business will be paying even more taxes than corporate businesses and we already have the highest corporate tax rate in the world. so it's just -- it's an economic killer. it is a job killer, and it's going to knock down the quality of our health care system. >> senator, bobby jindal has an op-ed in the journal today talking about how to make this reform bipartisan. he says the administration has resorted to a fundamentally dishonest approach to reform. do you think that's true? if the plan is so dangerous to corporate america, why has it drawn the support of groups like big pharma, the ama, groups you

normally would think would be hostile to this thing? >> the ama came on board because they didn't cut the doctor reimbursement. in the house plan they have now offered a 5% increase over medicare reimbursements to doctors. that, in my opinion, caused the doctors to come on their side. >> so he sweet talked the group. is that what you mean? >> i think he did. i think he bought their support. but hospitals are going to be cut. so the hospitals say they have given enough. >> aha, american hospital association says they have already given as much as they are going to give. >> of course. hospitals are already struggling. and they are going to cut the added compensation for treating indigent patients in rural hospitals and urban hospitals. so all that will be cut back.

hospitals are going to have to cut back on services or close their doors. this is just -- there's nothing coming out that's factual that says it is good for the patient, for our health care system. >> what do we do about illegal immigrants. you're for taxes, disassociated taxes with illegal immigrants. to what extent should they be covered by some type of health care plan. >> it's a very hard question. illegal immigrants are treated in emergency rooms. so you're giving primary care at the most expensive rate in emergency rooms because they don't have coverage. that's why so many hospitals in texas are struggling. and the taxpayers are paying for it through county funded hospitals. yet you can't have a government-run health care plan that gives a benefit like this

to illegal aliens, that's not right either. it's a very hard situation whachlt we need to do is try to get a handle on illegal immigration. but having a legal way to come in, a guest worker program, secure our borders better. these are the things that would help that situation. but the health care cost of illegal immigration is huge. 80% of the babies born in some of the hospitals in north texas are for illegal aliens. so you've really just got a huge problem in that regard. let me just say there are some answers to health care reform, and we need to be looking at positive ways to address the high cost. and also to give small businesses an economical way to offer care that could be offered by a private employer at a reasonable cost is the answer here to increase the number of insured

and cut costs for everyone. >> all right, senator, you know, we get the summer doldrums, now we have this august deadline looming and we're all watching it to see what happens. i don't know if anybody should be drawing a line in the sand like that because it makes us all that much -- >> oh, it would be terrible to watch this. o'connell said the other day that margaret thatcher reformed so many things in great britain but because they had gone to this government-run health care, even she couldn't reform that because it was so big and so entrenched. i don't want to do that to our country. and rushing this thing through and possibly having a health care plan from which we cannot retreat that deteriorates our ability to do research, the care that our patients get, would just be unthinkable. >> sure. new. senator hutchison, appreciate your time this morning. when we come back we will talk more about markets.

and the president will be talking directly to the american people with a pitch for health care reform tonight. you can catch it right here live on cnbc at 8:00. we're back in a moment. soon there will be 1 trillion connected devices... in the world. can you hear them? food is talking to store shelves. cargo containers are talking to supply chains. power lines are talking to the grid. now that's smart. systems that allow carrots to tell truck drivers how fresh they are. roads alert cars about traffic patterns. cars alert mechanics before they break down. when things communicate... systems connect.

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art cashin is direct ever of

floor operations at ubs financial services. art, i guess if you could only look at one stock to explain what's happening this week, look at cater filler as you do this morning, right? up a couple of straight days by significant amounts and called lower today. is the rally running out of steam? >> well, there is a concern about that. if you recall, that's why i extended that 17th checkoff date until the end of this week. there's a feel that you run some, i would say about a 30% chance of a sudden reversal. we'll find out over the next three days whether that's true or not. but the caterpillar results, as you know in my note, i said that they weren't quite the unalloyed joy that they appeared to be. i think the company's a little stretched. they benefited from the chinese stimulus. now we'll wait and see. it's still top line/bottom line argument. >> we talked about the head and shoulders formation, the possibility of a super rally. maybe we've already seen that. >> i think you may have seen a

part of that. when they reversed and negated what was almost universally talked about as a head and shoulders an broken neckline, usually people feel that's a reliable formation. didn't happen. when it failed, i think you started to route the shorts, at least the week shorts easily. so i think we've had a good deal of that rally. >> yeah. you mentioned a couple, marty talking about the risk of a double dip and bill gross talking about the same thing, going largely more to cash. those are not nuanced opinions. they have a point of view on that. >> you're right. it's not the proverbial two-handed economists. give me one handed economist because they keep saying on the other hand. that's clear. we're doing to get a little false hope in the third or fourth quarter and then things are going to get bad again. so that's going to make for a tough trading market. >> art, we'll talk to you soon. >> okay. >> art cashin.

when we come back, final note with david walker in a moment. undefeated professional boxer floyd "money" mayweather has the fastest hands boxing has ever seen. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster, email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.

in these markets, i'm glad i turned to fidelity for an annuity with guaranteed income for life. that's right, guaranteed income for life. my annuity from fidelity means my retirement income is safe. it's guaranteed, no matter what happens. if guaranteed income for life sounds good to you, do what i did -- let fidelity be your guide. call fidelity at... for details about guaranteed income for life. david, we've been talking all morning long about health care. it's the issue of the day.

what's your final thought? >> yes, we can end up reforming health care, control costs, enhance quality and improve personal responsibility, but we can't do it fast. we have to do it right. things are being rushed too fast. we're not engaging the american people enough. the american people are much more concerned about escalating deficits and debt than expanding health care coverage. statistically valid polls show that slow down, get it right. >> david, come back soon. we love having you here. that does it for us today. join us tomorrow. "squawk on the street" is next. this is cnbc.com news now. >> morgan stanley shares were called lower after the bank reported a bigger than expected quarterly loss. wells fargo and u.s. bancorp are called lower even though both banks reported quarterly numbers above wall street consensus. and mortgage applications rose 2.8% last week despite a rise in rates. mortgage bankers association says average 30-year mortgage rates rose a quarter of a point to 5.31%.

the cnbc.com news now. i'm courtney reagan. live from the financial capital of the galaxy, this is "squawk on the street." good morning, everybody. i'm mark haines. banks break more than a week of strong starts to trading. yeah, results from morgan stanley and wells fargo kind of taking the wind out the market sails, even a soaring boeing doesn't look like it will give enough lift to the blue chips to get an eighth day of gains. but, it's early yet. >> it's still early. i'm rebecca jarvis in for erin burnett. if to underscore the caution, bernanke back on the hill today to reiterate the need for fiscal responsibility. we'll bring you his senate side q and a session live when it begins later in the next hour. >> okay. the futures, down 840, but we

get a little break here because we were two points above fair value. still, you're looking at a drop of maybe 30, 40 on the dow. >> all right. and we're going to find out how this porning's news is playing out in early market action. we've got it covered. reporters are standing by. we begin with bob pisani here at the big board. bob? >> good morning. interesting mixed picture here on the earnings front. boeing came out with good numbers. beat by 20 cents. one of the few companies that did better than last year at the same time. top line, essentially in line with effect p taations. deteriorating credit is a problem here. wells fargo beat on the bottom line but the comments here, the mortgage refinancing, unlikely to reoccur. net chargeoffs, nonperforming loans, all the metrics we use to look at credit deterioration