>> welcome to the "wall street journal" report. i'm marta bartiromo. apple earnings help juice the markets, but are there worries ahead? should the federal reserve start raising rates? you'll talk to one of the smartest guys in the room? chemco's. the now skooe of johnson & johnson. >> weights your plan to turn around that reputation? >> the challenges and the road ahead for alex. >> then awe-inspiring and educating new innovators. the "wall street journal" report begins right now.

>> heefrdz what's making news. an important measure of size and strength in america's economy is out released on friday. the first read of the gross domestic product is a disappointing one, though. it showed an annualized growth rate from the first quarter. it was slightly below economists' expectations. this is down from the fourth quarter at 3% growth. business inventories were down, but consumer spending was up. america's most valuable company blew past earnings extendingses on tuesday, meanwhile. apple posted a profit of $11.6 billion in the first quarter. it sold 35 million iphones and nearly 12 million ipads. that sent the stock soaring once again back about $600 a share on wednesday. adding some $40 billion in market value in one day. pretty sweet. the nasdaq as a result climbed on the news having the bers day of the year, and its biggest gain in four months. with more than 2% increase in in a case. the dow spiked during the week as well. another 100 points on thursday.

apple wasn't the only earnings news. among industrial companies 3x beat estimates as did united technologies, boeing, and caterpillar. again, another indication that the internet is hot. amazon.com smabed through estimates. the company is doing very well, while exxonmobil missed as did ups. does is there a did its des kiktd between the strength of corporate america and the strength of the u.s. economy? one doing well. the other not so much. mohammed, ceo and co-chief investment officer pimco. thanks so much for being here. >> thank you, xwlar. >> we just got the gdp on friday. up 2.2% on an annualized basis. slightly disappointing. dispinkt. were you surprised by it? what does it tell us about the economy right here? >> i think it tells us a couple of things. first, it tells us we are nowhere near escape velocity. we were hoping consensus was 4 parking lot 5%. it came below that. it's simply not fast enough for

a robust roer, but it's also told us that the composition is worried. you see what the engine was, it was personal consumption, and personal consumption went up not on the basis of income, but on the basis of savings less. the savings rate went down from 4.5% to 3. pefrz. bottom line, it's not fast enough, and the engine that's driving us is not as sustainable engine. we need more business investment. that's absolutely. >> of course, we need that business investment, and, yet, we're looking at a pretty strong earnings season so far. right? what are your expectations for the rest of the earnings season and what do you make of the strength of corporate america right now? >> so corporate america is as strong as we've err seen it. i'm referring to the big companies. they have massive cash reserves on the balance sheets. they've turned down their debt. they've retained costs, and they're selling to the most dynamic parts of world. what corporate america needs to do is to with stand these

headwinds that are coming from the economy here and, of course, from europe, so it's a hug of war, and that sflanz why the market is somehow a risk and another day we have a risk off mode. >> i want to ask you about europe. this is once again a problem for investors. i feel like the last time we spoke we were happy about the european central bank's lending facility that the ecb's action took the negative urgency of liquidity off the table. the new york -- now we see rates moving higher in spain. we see an election in france which may go towards socialism and perhaps impact the whole euro zone economy. has europe become a problem for the -- >> the most they can do is build a bridge, but it has to be a bridge to somewhere, so the ecb came in very aggressively under

what's called the long-term refinancing operations, and they imposed tranquility that is temporary tranquility. what europe needs to do is deal with the fundamental issues of too late growth and too much debt. these are complicated and until they do, we're going to have these reoccurring concerns about europe and let's not forget last week we also saw a two notch downgrade to spain which indicates that the rating agencies are remaining very wary about this. >> it's interesting because when you look at what canada did last year, they baskly moved the retirement age up from 65 to 67, and they said nobody who is about to receive social security is impacted. this is not going to impact people for 20 years. but in doing that, even though they're not taking action right away, they got the buy-in from the people. and they inspired confidence by making the people believe that they're actually doing something about their debt.

this country has yet to do that. >> that's correct. you are absolutely right in the sense that we have strategic choiz to make. they're not that hard to make, guys. just get moving. the problem is that we are stuck in a tactical mode. our political system has become very short-term. they're not even willing to look beyond and do the strategically important things. canada was able to do it. germany was able to do it a few years ago, and hopefully after november we will be able to do it too. >> yeah. this is the -- okay. let me ask you about the federal reserve. the fed, of course, last weak leading interest rates unchanged at near zero during the meeting. some are saying that it's time to normalize rates, start raising rates even given that we are seeing better economic data. are you in that camp? how do you feel about the fed action? >> so if we live in a perfect world and we're not, but if we lived in a perfect world, we would be getting very nervous about the fed artificially keeping interest rates low. there's a rot of collateral

damage and unintended consequences associated with this. the fed would be allowed to normalize interest rates because -- and this is critical -- because other government entities are doing what they were supposed to be doing, and that's in the reform of education, labor retraining, public finances. lots of things. housing. lots of things that we do. in a short world, the fed should start mobilizing rates because other agencies are stepping in. when you go from the should to what's likely for happen, of course, what's likely to hand is that the other entities will stay on the sideline, and they're not going to do what they're supposed to do, and as a result the fed has no choice but to remain in this very activist mode that has, unfortunately, both costs and -- as well as benefits. >> all right. how do you want to invest in this environment here, mohammed, given all of this? what should investors be thinking about right now? even the retail investor who has not embraced equities.

what should they be doing? >> don't get fooled by headlines. this is not all in, all out. this is a world where you want to be very differentiated because we have strong companies, because we have strong sovereigns, this is a time to be very selective. so look for companies. look for managers that stress the following. first and foremost, cash buffers. cash is very important in this market. especially for companies and for sovereigns. second remembering high uprating margins. third, low financial, and fourth, explosions to most parts of the world. there are many companies that offer that. there are many sovereigns that offer that, and the important thing is to be very selective at this stage. >> we will leave it there. always wonderful to have you on the program. >> thank you, maria. >> see you soon. >> mohammed joining us from pimco. >> up next how johnson & johnson with k get rid of its public

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welcome back. the new ceo of johnson & johnson says he will improve the health care giant's public image. j & y has been on a rough ride the last few years with huge recalls of tylenol and other consumer medicines, which, of course, have impacted the company's reputation and its share price. i spoke to the new chief executive about his plan for the first day and year on the job. >> look, over the last couple of years we had our challenges, and all of us are disappointed, and at the same time we're all absolutely committed, and i take

personal responsibility. he feel like all the employees at johnson & johnson are getting things right. first and foremost, weave got to address the operation issues. we got to get them back. and we have taken a number of steps over the last 18 months around how are we designed as an organization? what kind of plants and processes do we use for quality? for example, we have turned -- tylenol sinus, style nol children to the marketplace. we're working closely with the fda and our outside partner, and what we've seen is when we get products, customers are really demanding. i think there's a lot of opportunities for us to be brilliant, so, for example, in the pharmaceutical area, over the last five years weave probably had more new ino vative brands larchlg laureninged than any other, and products like

prostate cancer. another product that has recently been launched is getting a number of new improvements is zeralto. we're working on information. expanding. >> tell me about the medical device business. i guess the medical device business more than any other business is very closely tied to economic -- economics. so when things went down in 2008 you really saw a sharp impact on that business, right? how is it going? >> it is unique that over the last few years, particularly the significant macroeconomic issues and economic down turn, i think we have some pretty good insights into what's happening with the utilization, and for the first time since we've been tracking data, we actually saw elasticity in demand relative to what was going on with the economy. whether you looked at hips, knees, sports medicine, all the'sthetics, particularly, anywhere there wr there was an

electric electrictive nature where people could delay procedures, as to being unirsured or being unemployed or frankly being out of the chair in the office because they were concerned about the environment. we saw a drop. >> isn't that interesting? even though they're in incredible pain and they know they have to get a hip replacement they don't do it because they don't have the money, they're not insured, they do not want to be out of work, et cetera. >> the operative word is they're probably delaying it from happening because eventually this year going to have to have that procedure. and what we're seeing is that that is a dynamic that clearly the medical device and technology has been dealing with over the last couple of years, and we see a difference. that tends to be more in the developed markets. the developing markets of brazil, russia, i understanda, china, you're seeing growth rates of about three or four times the rate that you're seeing in the developed markets. we think over the long-term, though, maria, just because of demographics and the surge that we're going to see in the united states, japan, western europe, in the aging population and we

all know that we consume about five to seven times more health care once we turn 65, than we do before we're the age of 65, there will be increased demand, and it may have been delayed, but it will, you know, represent a significant opportunity for us going forward. >> let me ask you from an investment standpoint. you've got investors watching, and they want to know whether or not they should be supportive. the stock buying stock. what do you do for shareholders in the next two years? what should they expect? zi think the most important thing i can do is not necessarily focus on the stock price. it's about really focussing on what can i could to drive innovation. >> that leads to growth? >> absolutely. the other areas, globalization. we're really focused on. about 55% of our sales come from outside the united states, and about 60 different countries. what can we do to drive that to an even greater degree? particularly when you think about the people who have been brought out of poverty in china and now around 300 million.

doubling the next 15 years. that's a brand new market. almost the size of the united states. >> my thanks to alex. up next on the "wall street journal" report, gram where i winning musician john legend wants kids to love math. now ino vators can get lifted with technology. and can you find us on facebook. look for wsjr with maria.

>> music and math go hand in hand in a lot of ways. ♪

♪ say, say >> i was quite a math geek. i also lovered chemistry. even now running my own organization and looking at the business side of things, i think those skills i learned from math and science classes are still helpful for me now. we have to make sure that we're connecting the dots so that kids can see where their education now will pay off in the future. >> soul for tomorrow is a nationwide contest for schools in which samsung and oregon other partners give away $is million of technology, laptops, tvs, printers, smartboards, whatever best suits that school's needs, and we set this program up as a way to encourage kids to get excited about science, technology, engineering, and math. zi think we can develop the neck bill gates and the next steve johns, but we have to make an effort to do that. it takes inputs from society and from the community to do that. >> our are innovatives born or made? our next guest says innovation is the next best job skill.

from a high school teacher and the entrepreneurship center at harvard. the author of "creating ino vators, the making of young people who will change the world." tony, good to have ow the program. >> my pleasure. >> thank you so much for joining us. our economy is so dependent on the consumer. >> that's right. >> why is innovation so critical reason? sfli think we to be become a country that produces more better ideas to solve more different kinds of problems. we've always had great innovationors, but we've never produced it on a kind of scale that's required to transiing the economy bah from a consumer-driven? >> how do you do that? what's missing? supporting those students who may create the next big thing and change the world? >> well, the first point is that today information, knowledge, is at commodity. it's tree. it's like air, water. it's on every internet connection device changing constantly, so that the aim of education should no longer be nearly to translate transmit content through the teacher. it must be, instead, to develop the skill and the will that is

required for using that. the world doesn't care what our kild kids know. it cares about what they can do with what they know, which is a completely disht education. >> such an important point to make. how do you do that? how do you make innovation a skill, and how do you teach it? >> the first point is we need to teach what i call the seven sur swraifl skills. i wrote about it in "zoebl global achievement." we need to teach rich content, and we need to use to tha to teach skills. agility, adaptability, clab rag, and so on. the best schools are already doing that. we need an accountable system that assists those skills and not just content abbing quiz eggs. sadly, what gets tested is what gets taught. >> you talk a lot about the importance of play, the importance of passion. >> yes. >> purpose. why are those things important? >> this gets to me the will side, the moeshation side. where imcame to understand is i intufrd these young ino vators, and the culture is radically at odds with the culture of

learning that produces innovators. the most important things are we rely on extrinsic awards and incentives for learning. carrots and sticks, money for grades. these ino vators are far more moefshated, and when i look at what their parents and teachers did to encourage that intrinzic motivation, it was much more about this ark of play to passion to purpose. >> in the book you profile a number of young innovateors. this is really one of my favorite parts. particularly one 20-something that was involved on the development of the iphone. >> that's right. >> tell us about him. >>le with, here's a kid who is passionate about science. his parents totally support his passion. believe that's more pant than mere academic achievement. he gdz to exiter for their science program, but he gets bored. he doesn't find there's enough science. he drops out at the ends of 11th grade. his parents say okay. he gets into stanford. he got into a combined chemist program. two courses shy of graduating, he takes this amazing class,

interdisciplinary electrical engineering, mechanical engineering, and finally xaurt science. he learns to collaborate for the first time. he learns to integrate these different academic disciplines to solve problems. it's drafted by apple to be the project manager for the first iphone two courses shy of graduating. here's a two-time dropout. >> unwlooechbl. >> he is now working for sun run installing solar panels on homes. >> he was part of the company that is changing the world. >> that's right. >> really, apple has with all of its innovative products. what are your observations in terms of how the education of a young person should change, shift, in temz of leading toward that very path, that ino vaifsh path? >> you know, the sad thing is that when i intufrd all of the teachers and meant ors who made the greatest difference in the lives of these ino vators, i discovered they were outliars.

looking be at collaboration, and focussing on interdisciplinary studies and problem-based learning more than specialization, focussing on students creating not just consuming in the classroom, and most importantly, focussing on those intrinzic motivations and learning how to take risks and learn from mistakes. all things that their colleagues don't do. i really think we need to rethink the culture of learning in our classrooms k-12. >> great to have you with the program. >> my pleasure. >> great innovateors is the book. tony wagner joining us. up next on the "wall street journal" report, a look at the news this week, and then reaching for the stars and beyond. how a 21st century galactic gold rush could impact your energy policy. back in a moechl.

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>> check out the website wsjr.cnbc.com. high pressure will you follow me on twiter and google. look for@maria bartiromo. look at the stories coming up in the week ahead that may move the markets and impact your money this week. earnings reports will be out from dow compoen ebt pfizer and kraft foods. also coming up with earnings visa, master card, and whole foods among others. monday we get the latest figures on personal income and spending. on tuesday the latest monthly auto sales figures will be out, and on friday the labor department will issue the market moving employment reports. we will find out how many jobs the economy lost or gained in the last month. and finally today, space. the final frontier for investors. a west coast start-up called planetary resources announced

this week it is developing spacecraft to mine asteroids between mars and jupiter for natural resources ebbing like water and minerals, as well as commodities look gold and plat plumb. backed by an investor group that includes larry paige and larry schmidt and james cameron, the company plans to launch the first telescopes looking for high value targets by 2014. boldly going where no man has gone before. that will do it are for us for today. thank you so much for joining me. men and women and their money. advice for wealth and wisdom between the genders. each week keep it right here where wall street meets main street. i'll see you next week.