we'll talk more about it. >> kelly, thank you very much for joining us today. a pleasure having you. >> thank you very much. >> scott, thank you for joining us, too. >> pleasure as always. just a chance to hear the muse zmr. >> "squawk on the street" begins right now. ♪ >> good friday morning. welcome to "squawk on the street" opening with some bare naked ladies, the pride of ontario, canada, along with r.i.m., not so much the pride of ontario. it's going to be a big story today. welcome to "squawk on the street." i'm carl quintanilla, melissa lee and david faber at the nyse. cramer is off today. take a look at futures. we're looking at a massive rally on the back of this eu summit which depending on your point of view had some results, definitely above most people's expectations. we'll see how long this lasts but it's looking like the dow could close positive for june, the first time it's been up for

that month since 2004. europe also a massive rally under way as well. euro, huge gain, crude commodities, we'll talk about all that later this morning. >> no surprise starts with the rally in the premarket here, fueled by developments out of the eu summit. leaders agree to direct recapitalization of banks. but is this a rally to fade? >> signs of a slowdown. ford warning of outside international losses. nike posting a big earnings miss. talking about speed bumps in china. is this a taste of what's to come this earnings season? >> and the clock may be ticking for research in motion. how much time does the company have to do those options? >> as we mentioned, stocks set to open sharply higher after european leaders unexpectedly agreed to take action to bring down italy and spain's borrowing costs. i leaders in brussels agree funds may be used to stabilize bond markets without forcing countries to adopt extra

austerity measures or economic reforms. this idea that they may eventually directly recap banks without loading down the sovereigns, trying to break the sishlgs between sovereigns and their banks. >> we have a new acronym, the. the c.r.p. which would be a direct injection into the banks as opposed to adding to the sovereign debt load. this would be a direct injection. this is something that would help spain. it's something that conceivably would be helpful to the likes of ireland not for countries that are not in a position of having to bail out their banks but already have too much debt on their own balance sheets. >> like greece. >> like greece, exactly. and seen as a positive and unexpected in terms of the development. perhaps we started to get some sense of that late yesterday when we saw the huge turnaround in our own stock market on some

vague but positive -- i don't even know if they were headlines out of europe because it was pretty late over there. >> a lot of it was just merkel canceling a press conference late in the evening, negotiations -- >> it read as good news possibly. progress being made. we saw the huge turnaround from the depths in the selloff of yesterday's session to flat. but this is the fourth make-or-break meeting of just the past year. and it's probably if you look at the charts the fourth time the markets have rallied sharply in response to developments out of europe and then every time that has been an opportunity to fade. >> an incremental movement of merkel and germany, joint and several liability. they will think this will be very positive. but many say it's never going to happen on that front. let's bring in our chief international correspondent as well, michelle caruso-cabrera, who can bring us up to date on the other events that have taken

place in europe. >> you were talking about one of the key takeaways here which is germany flinched, right? angela merkel said last week that not in her lifetime would the rescue funds be used to buy bonds and yet what do we have? we have them agreeing in principle, at least, that that's going to happen. you talked about these headlines. germany caved. when we hear germany say, no, no, no, we don't know if really it means no at this point. that link between austerity measures and help, that has stopped or changed. the devil's going to be in the details. and we'll get more european-wide integrati integration. in turn, angela merkel gets a euro-wide banking supervising body. those are the key, systemic takeaways, broad-brush takeaways. now they have to work out the details. that's going to be incredibly difficult. she was asked repeatedly at a press conference, how much

pressure did you come under from mont monti? and she said, nothing's really changed when you look at the wording -- it's going to be tough. she's got to bring something back to germany in order to get this thing approved. but i would say we have seen a shift in the conversation which is pretty dramatic. and even german stocks are higher by nearly 4%. will it all fade as they start to fight out the details? probably. it's going to be pretty messy watching the sausage get made. but there is a fundamental change in what they're talking about here. >> michelle, just to make sure -- in other words, i thought she said she would over her dead body in terms of euro bonds being issued -- >> which she reiterated today. >> as opposed to them buying the sovereigns. >> i thought it was also sovereigns. i was pretty sure it was the sovereigns that was buying the monetization of debt was going to be something that she did not want to see.

and she's very much concerned about the spreading of liability without also the spreading of recourse. she re-emphasized that. >> michelle, so much discussion about how much firepower is in the esm, this billout fund after commitments to spain. there is this notion they could lever up if they were given a bank license. but that would writer rewriting the charter, ratification by 17 members. that's a big hurdle. >> absolutely. that's going to be potentially the next battle. if you can instead of having half a trillion dollars in firepower, if you can bring that debt to the ecb and give it to them as collateral and get a whole bunch more cash and do it over and over and over again, your firepower goes up pretty dramatically. whether or not it's going to happen, that's going to be the sausage being made. are they going to try to achieve that? are they going to ask for that? but the firepower isn't necessarily big enough. >> what a day for monti, not just beating her at this particular poker game but you

watch the soccer championship in italy -- my gosh! >> i was working but also watching. it was quite something. >> the shirt came off, incredible. >> goal at the very end. but not enough. >> michelle, thanks so much. >> see you guys later. >> the news not just in the futures market but take a look at the euro. this is a massive move in a currency market, up by about 2% right now. trading above 1.26, trading at 1.27, actually. those are keying off what happened over in europe. >> one final point on this troubled asset country relief program. it will be peripasue with other bondholders.

it's important because you don't want to lend if you're going to then be made subordinate to somebody coming in above you. you don't want to lend to the banks, be a bondholder of these banks that are also getting aid from this new acronym. >> well, even those who were mildly impressed by last night's events say after 18 summits, this sort of broad, vague notion of moving towards something isn't a lot. >> no. and i think that's an important thing to keep in mind. we are still making very, very small incremental steps while this gallops ahead while they're trying to walk behind it. global concerns weighing on two company this is morning, nike reporting profit and revenue below expectations thanks to a restructuring effort in western europe that included a number of job cuts. ford says its international losses will triple during its second quarter largely because of weaker sales in europe. the nike haircut, if we can call it even a haircut in the

premarket session, it's just amazing to consider that nike had been trading at all-time highs back in may, 114 and change was the open. and it looks to open -- it's not just about europe but it's the growth that had been baked in, the expectations for china and now the head of china at nike saying they are encountering speed bumps. we've heard these sort of little snippets as the weeks have gone into this earnings release from channel checkers out there saying that, you know what, we visit the showrooms in china, we are seeing that things are slowing down. there's not as much excitement about a lot of the merchandise that's been unveiled in china and here we have the evidence of it in the earnings report. >> futures, which is the big metric in the shoe business for nike, in china, up 2%. the estimate? 13%. talk about a speed bump. long-term topline concerns. and postolympic inventory

problem that is nike could face. >> you featured this on "fast money" last night. what about a read-through to other names that have similar -- >> you take a look. a couple of different kinds of read-throughs. you have the china read-through. you look at yum! brands, which is viewed as a u.s. company with a china story to it, the china kick. and that stock is trading lower in the premarket as well. and then there's the athletic gear, athletic footwear sort of read-through. you take a look at for instance a foot locker. yesterday those were taken down. and under armour, it was getting taken down into the after-hours session. it is a little bit lower on an up day. but those are the sorts of read-throughs when you see a move like nike's move here. baird cut its rating saying this is going to be a new fiscal year for nike and they're not going

to see premium valuations until china rebounds. >> yeah. couple it with ford, overseas losses tripling. didn't really comment on whether or not america is at risk in the quarter. but citi removes it from the top picks list this morning saying the long-term thesis is intact. if nike, ford and r.i.m. are any indication, this earnings season could be a little interesting. >> and it already has been interesting in terms of at least the preannouncements we've gotten in this season or leading up to it versus what we saw in the first quarter. there's no doubt the quality of earnings or the lack of earnings growth is a concern and has been a concern for this market for the last few weeks. as for ford, applied $570 million loss from non-north american operations. that includes asia. not just europe where we know there's a great deal of weakness. we'll see what gm does. we've also been -- there's also been concern there about their business particularly in europe. but we go to this global growth

theme or lack thereof and this certainly doesn't do anything to mitigate concern. >> yeah. >> and what they say specifically about europe is extremely troubling, they're saying that europe has deteriorated significantly since just the start of the year. and you think about the other automakers like a gm which does have a heavy european exposure in terms of their operation there s there. >> speaking of headwinds, blackberry maker research in motion posting a quarterly loss. revenue coming in light pushing back the launch of its new blackberry 10 until early next year, plans to cut 5,000 jobs. the next several quarters, they say, will be very challenging. they said they would have their first operating loss in about seven years, but nobody expected this. and the relatively new ceo said the 10 was tracking well. and a big blow to credibility for him today. >> yeah, not so much, i guess.

won't be available for the christmas selling season. >> no back to school. no holidaying. >> there is something about momentum both ways, i think, not just for a stock price but for a company. and it would seem everything at this company, the momentum is downhill, or i should say downward. you wonder in terms of just things that even -- employees and their morale and how that impacts their ability to do their work, this is just terrible news for r.i.m. it's obviously reflected in the stock price going even further here. i don't know what you do from here. >> they have a lot of cash but they have to cut costs and they are cutting 5,000 employees. but that is not without costs as well. there are severance costs which will weigh on their cash flow. you have to wonder how much in terms of the time frame -- when you thought about r.i.m. before this earnings release and how much time it had to explore its option, how that time frame might have been compressed because of the delay of this new phone which they hung their hat,

they hung practically the future of the company on. let's bring in the analyst who upgraded r.i.m. to a hold last month, maintains a hold following yesterday's earnings. alex, great to have you with us. why is this still a hold at this point? >> i think it's because of the strategic options that the company still has. there's still some intrinsic value in the company and in those 78 million subscribers out there. it's still selling a decent number of cell phones a quarter, about 7.8 on a sellover basis. there are still opportunities for the company to extract value. we've said and still believe the company can't go it alone. it does need a strategic partner or a strategic out for its i.p. >> what would be the best option from the shareholder perspective? >> well, so that the company acts in good faith on what it's already said, that it's open to all alternatives for its technology. so i think what's interesting about research in motion isn't so much about what it's failed

to do but what the competition is doing to it. so that's menning apple and android. and there are a number of other technology companies that could find themselves in the same boat as r.i.m. in very short order. we know nokia is already there. motorola's falling before it. other companies need to think about exploring alternative -- >> you're saying you want to tie two rocks together and hope they float? what is the option you think will be the best for shareholders? whether an outright sale or perhaps leasing out its network? >> so finding an out for the i.p. that still has value, an out for the user base that in many cases still is very loyal to the blackberry brand and the qwerty keyboard experience that they offer. a lenovo in china that could extract value, even google, you think about taking some of the research in motion i.p. on board. that's what i'm talking about here.

finding that critical mass and partnership to create value for its intellectual property. >> i continue to hear that they're just not really interested in trying to sell the whole thing. given all the different options, what do you think is most likely at this point? >> i don't know that i have a crystal ball that can tell you what's most likely here. i do think the company is acting with a certain amount of urgency here, 5,000 employees being cut is nothing trivial. it's almost a third of its workforce. again, they have that network infrastructure system is a potential. they have the i.p. they could license in some form. they have the new operating system -- >> how much time from a cash flow perspective does research in motion have? >> i think they've got between one and two years. remember that capital is cheap right now. so they could have some options in terms of finding additional sources of funds. >> alex, we're going to leave it there. thanks for your time this morning. >> thank you.

when we come back this morning, the first tech company since facebook is going public today. we'll talk to the ceo of service now. as soon as the stocks starts trading here at the nyse. take another look at futures. interesting stat from bespoke this morning. since the '09 low when the s&p gaps at the open 1.5% and closes higher 16 of 19 times. back from post 9 in a moment. from around the world...es ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this.

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♪ ♪ we are celebrating a birthday today. five years ago today, the iphone entered the world and effectively changed it with all its apps and the way consumers interact with their phones. that brings us to this morning's "squawk on the tweet." think back five years ago before the iphone ever existed and tell us, what do you remember was the coolest thing your phone could do? tweet us and we'll air your responses throughout the morning. it is amazing to think about what -- i don't know what you could not do on a phone back then. >> i said ring. that was my answer. there was that nokia tone that sounded like video game music. remember that, david? that's the only ring you could choose. >> that's true. i could go back to the original

wireless phones. fun stuff. i loved my star tack. i thought i was -- >> coming up next, the head of the floor of the nyse to see how to set up your portfolio on this last day of the week. take another look at the futures as we head to the open. barrelling to a rally here at the open. the dow looking to add about 192. much more "squawk on the street" straight ahead. [ groans ] [ marge ] psst.

constipated? phillips' caplets use magnesium, an ingredient that works more naturally with your colon than stimulant laxatives, for effective relief of constipation without cramps. thanks. good morning, students. today we're gonna continue... just minutes before the bell on the last trading day of the quarter. want to bring in art cashin. good morning to you, art.

would you sell at the open? >> i might get a little defensive. we had a summit-derived rally like this last october. and it lasted for a couple of weeks, though. so we'll wait and see. i want to see what they say in frankfort and berlin. there's an outside shot we might get a little bit of a vote on the esm as early as today. i would suggest the viewers keep an eye on the euro. i think the euro's going to direct it. >> do you think monti played her or by agreeing to only vague stuff, is she playing us? >> well, i think what happened was spain and italy locked arms and said, we're not doing anything unless we get some relief. as i've said here, i think monti was in real political danger. if he came home empty-handed completely, he might not have

lasted three days. and that would have thrown italy right back in the center of instability. she began to realize that at the end. i think there was going to be a different course and i think that's why we got that headline about canceling the press conference. it was going to go a difference way and they came back. >> in terms -- this is the last trading session of the quarter, the last trading session of the first half of the year. the bias, isn't it just to the upside to ride this to the close because it's the last session? >> i think the bias particularly is that way because of the huge short positions there are in. we should have all guessed because the expectation level was so low for this thing that if they all escape add alive, we probably would have had a rally. >> a read-through to yesterday's huge comeback? >> well, the -- oolate surprise when they said that she cancelled the press conference. the futures markets rocketed, which tells me tremendous short

covering. and in today's new world of twitter, information's instantaneous these days. that's why markets react as quickly as they do. >> constants you not always right the first time. >> as we saw yesterday. >> talk to you later, art. >> okay. the opening bell is just moments away. get ready for another big day of trading on what looks to be a rally to finish off the second quarter. much more "squawk on the street" straight ahead. today, a rare interview with google's eric schmidt. don't miss sleep train's 4th of july sale.

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>> funny how they chose the nyse. >> service now, by the way, provides cloud-based applications, helps technology operations. symbol n.o.w. we're going to speak with the ceo in just a moment. over at the nasdaq, kior, a next generation renewable fuels company. the ipo process getting renewed attention today, more than a month after facebook went public over at the nasdaq. we haven't mentioned -- faber, you were going to mention -- >> we talked quite some time ago about the likelihood that cody would file for a public offering. ] . interestingly, before they made their unsolicited bid for avon, they had a meeting with bankers to pave the way for an ipo. once they dropped the avon deal, we found out they selected jpmorgan. that's been filed for a $700 million ipo.

there will be another offering. as june ends here, we've seen so few initial public offerings. it looked as though we might have a june without any which would be the first time in 40 years. that was not the case. but we've only had three or four as the month comes to an end. >> people trying to take stock of where we are on ipos and on m&a, we had microsoft, billion-dollar deal. aside from that, beard today -- >> that large dollarwise deal. and we've seen deals fall apart, including one of the biggest, estrada and lind corp. it's been barren when it comes to markets activity, even in the fixed income activity which had been a key driver for so many firms in the first few months. and m&a activity remains extraordinarily low particularly in light of what many anticipated at the beginning of the year would have been a very strong year. not going to happen.

now we're moving into the dog days of summer. >> day after the health care verdict came down, we are seeing gains across the board in the health care sector. not just the hospital stocks which were the big winners in yesterday's session but also the insurers recouping some of the losses they suffered yesterday. we have the likes of a united up 1.3%, humana up 2%. r.i.m. is trading lower, no sprid, down by about 13.5%. this is a multi-year low at this point. $7.90 is where it's trading now. a look at the ripple effect of r.i.m.'s disappointing quarter and the delay of their newest phone to early 2013. nokia could possibly gain because there is no new phone coming out in the fall. so small gain for nokia. but translates into a decent gain for the stock. >> even though june looks to be pretty good for the main indices, the quarter is not going to be so great. top-performing dow stock in the

quarter, verizon, which has virtually no international exposure, up 15% followed by at&t, walmart and disney. worst performing, caterpillar, which gets most of its revenue from overseas. >> investors have been gravitating toward those domestically based companies. not solely, but disney obviously has a lot of international operations. walmart has tried but still a bulk of its revenues come from the u.s. >> caterpillar followed on the downside by cicso and jpmorgan. that's for the quarter, not the month, not the year-to-date but q2 overall. >> we should point out the banks are up sharply as you might anticipate. jpmorgan lagging a bit in terms of its percentage gain this morning. but all the banks up because of europe. good news out of europe, banks move up. bad news out of europe, the banks move down. >> one exception to the banks, barclays continues lower today, down by 1.2%. the ceo, bob diamond, said today he would not resign.

yesterday, the parliament basically was calling for his head because of barclays alleged role in this libor fixing scandal. barclays shares continue lower. >> after a huge decline yesterday because of concerns that further penalties could come for barclays, of what the future is for mr. diamond. that scandal is one that is should be front and center for many investors, particularly for these european banks. >> and from the bank of england, saying exactly what -- >> the comments led me to believe that he wanted to revamp the way libor is actually computed. >> computed. >> exactly. >> too big to rig, as jim said here yesterday. >> you'd think so with $350 trillion worth of debt linked to it. >> right. >> that it would simply be impossible to actually move it one way or the other. >> yeah. amazing. >> apparently not the kaits case. and those e-mails, they get them every time. >> yes. homebuilders are another area we're watching.

pretty good data points this week followed up by earnings this morning out of kb home. growth was small at 3%. when you compare that with lennar, their growth was 40%. in comparison, not good. but overall, the earnings were better than expected. keep in mind, too, that this is a very heavily shorted stock. this is one of the most shorted stocks, in fact, in the s&p 500. top three. half of its shares are held short. >> kb. >> kb homes. part of this pop is a short squeeze and part of it is sort of just the positive sentiment across the board in the homebuilding sector. >> let's get over to courtney reagan on the floor of the nyse watching what else is moving this morning. >> good morning, david. we're seeing u.s. equities pop at the open. the dow is up 187 points. that's just a slight hair off the highs of the morning following what we saw out of europe. somewhat surprising but perhaps a very mrez ent surprise to many

traders out of the eu summit saying the eurozone rescue fund could buy bonds to help some of these troubled countries. seeing a nice lift across the board. as we end the quarter, take a look at this. the s&p 500 down nearly 6%. germany down more than 8%. spain down more than 12%. and brazil, emerging market, down more than 16%. we're seeing crude oil and gold, the commodities themselves make some nice moves to the upside on the back of the european summit moves. as a result, you see some of the stocks move higher as well. freeport-mcmoran, bhp billiton. you mentioned kb homes, i want you to see the chart. it's moving nicely to the upside. and constellation brands beat the street with their expectations. they are also going to buy the rest of crown imports, the 50% stake they do not own, for $1.85 billion. those shares are opening at

4 1/2-year highs. this week, the one-month drought we saw after facebook with service now ringing the opening bell, a new ipo today, a cloud computing company, the range was $15 to $17. that opens at $18. we'll see what happens on its first day of trade. >> thank you very much, courtney reagan. let's shift to bonds and the dollar. rick santelli's at the cme group in chicago. good morning, rick. >> good morning. today if we look at the ten-year, we're in the 1.60s. we're up about a half a dozen basis points. and many of course are pointing towards europe. but let's be real here. it's the last day of a quarter, a big quarter. and there's definitely a bias towards upward stocks. everybody was expecting it and many believe at these yields, it's not surprising to see a bit of a kick-up on the interest rate side. if we start to look overseas, the bund is up twice as much.

it's up about a dozen basis points. and we now only hold a three basis-point advantage in terms of our higher yields on tens. spanish tens, down 44 basis points. it's still at 6.5%. remember, mostly, the first glimpse of many of those almost programs in europe or the best look, we'll have to debate that, dollar index down a penny and a quarter. big day down for the dollar index. david faber and gang, back to you. >> thank you very much, rick. latest moves in energy and metals. sharon epperson is at the nymex. >> rick set it up well what we're seeing in the action in the dollar because of course that will have an influence on the commodities market and commodities are on a tear. we are looking at oil up about 5% or so for the nymex contract. the wti contract. and big gains as well in silver and gold and in copper.

gold prices have topped $1,600 an ounce today. up nearly 50 bucks on the session. that really doesn't show what has happened for the quarter. still pretty much in the red for the second quarter. in fact, oil prices are poised for their worst quarter since 2008. copper's down about 9% in the quarter. gold prices are poised for their worst quarter in eight years, david. it's still not a great quarter for commodities but with some of the book squaring that's going on right now, looking at a little bit of a lift across the board. back to you. >> joined now by scott cutler in front of the post where service now will soon open. you're talking about about 11.6 million shares, priced at $18. what's happening here, scott? >> what happens in the opening of an ipo, particularly for a deal like this where it looks like it's going to open above the offer price, we post the indications of interest, which right now are between $22 and

$25. those indication of interest is a range that's communicated out to the market that investors have the opportunity to react to. buy, sell, cancel orders. and it's an open and transparent process to get to what we think will be the right price to open. and ultimately in this case, morgan stanley, the lead underwriter, is controlling that process in determining -- >> what does this gentleman here who keeps yelling out, what is he doing? >> he's saying at $23 on this stock, they've got right now at least 1.5 million shares -- >> 23.5 on -- >> $23.50 is where the stock is -- there's about 200,000 to buy at that price. that's communicated out to the market. and as we get closer and closer, that range will narrow and then we'll open at the right price. it's meant to be a process where there's control and transparency

around it versus just flipping the switch and having it trade electronically. >> you would, i guess, argue, then, that it is therefore necessary to have an actual human being? >> yeah, actually this is the perfect time to understand the value that the floor provides because the information that's communicated here with the floor, the designated mark maker of the post, as well as back at morgan stanley on their desk, all of that information is being communicated out in an open and transparent way. it's really the value of that human judgment and intuition that's happening right now whether otherwise we'd just be trading in machine land. >> scott, thanks for your insights. appreciate it. >> great, thanks. >> morgan stanley probably going to be happy to watch this thing open and perhaps stay above issue price. back to you. send us your tweets out there. today is the five-year anniversary of the iphone. in honor of that, we want to know, what was the coolest thing your phone could do five years ago? tweet us. we have some of your responses in just a few. take a look at this

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breaking news on chicago pmi, about to hit the wires. rick santelli, what's the number? >> well, tell you what, we're going to have the numbers shortly. but we have one of the experts from the group that calculates the number, 3, 2, 1! june chicago purchasing managers up .2 at 52.9. still hovering near 33-month low, just shy of three years. and the one -- actually two areas that jump out at me, prices paid dropped 6.4. but employment jumped 3.4 and inventories popped 3.9. alice, give me the lowdown on this number. >> the lowdown on this, rick, is that you're going to look at this report and think it's not so bad. the barometer actually up a little bit. employment up. and production up big. it was up seven points this month. the fact of the matter is that this is really a wicked report. you have to look at the details. >> wicked good, wicked bad? >> wicked bad. looking at the details, the

three-month moving average on the barometer down again. it's down for the third month in a row. the three-month moving average on all of the business activity indices except for employment, down this month. you have new orders and order backlogs just continuing to go down. >> let's keep it simple. we have inventories up. we have backlogs down. where i come from, that doesn't sound good from your interpretation. >> right. the interpretation is you have order up bt backlogs down to 34.2. you have these companies chugging along producing goods and services but they're eating into their order backlogs at a time when new orders are not coming in. the big issue is this inventory increase, was this intentional or not? and inventories are the trickiest part of this report. now, this month, i would say that with order backlogs down and orders down, that the accumulation was not intentional. however, i am hearing from lots of big companies that they are

dramatically under inventory. keep in mind that inventories were down seven of the eight last month. >> let's make it short, sweet and easy. give me a recession read on the entire package, close to 33-month lows eating into inventories, demand questionable. are these series of data points over the last several months pointing to a recession and if you had to handicap a percentage, pull one out for me. >> here's the deal. last month we talked about the percentage chances of having a recession. with this business barometer, if you have the three-month moving average down three months in a row which we do, or the overall business barometer down three months in a row which we had last month, in the last 11 national recessions, we've been able to forecast a recession down the road with a six to eight-month lead time. >> you heard it here from alice from the folks that bring you the chicago purchasing managers

survey. >> the applause here at the new york stock exchange was on the open of service now. opening higher by more than 30%, pegging valuation of this company at more than $2 million. service now open for trade, up 30%. >> relatively smooth process here this morning. >> smooth and timely. >> that's what the exchange would like people to notice, given all the controversy over ipos over the last few weeks. want to get to "squawk on the tweet" this morning. as you may know, the iphone, five years old today. introduced in the states on this day five years ago. changing the world with all of its apps, the way consumers interact with their phones. five years ago, before the iphone, what do you remember was the coolest thing your phone could do? charlie writes, survive the washing machine. never tried that actually. another says, i love the motorola startac. it was the first phone you could put in your pocket. another says, send texts with

one hand. and another says, make a phone call without dropping the call during the conversation. >> the iphone has used up so much bandwidth because of the data usage, at&t is dealing with that. it became very difficult to make a phone. rick was telling us, the three-month average down even though some of the internals for this month were up a little bit. like employment and production. when we come back, we'll take a look at some of the biggest movers of the morning. a lot more "squawk on the street" on a friday still ahead. time is running out to get the hottest deal on a new mattress.

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♪ time now for "the faber report". want a take a look at a deal we heard about earlier this week. inbev, anheuser-busch's acquisiti acquisition. at one point, it was seen as a

w way or anheuser-busch to avoid the clutches of inbev. but years later, here we are and they have. i'm told they've been negotiating this transaction for quite some time. the price was agreed to back in february, more or less. but there are a lot of details to go through. also talking about a lot of different family members. the control group of modelo. it was a very long process to get through. but at the end of the day, they did create a company that will have $46.8 billion in revenues. 17 different billion-dollar brands in terms of beer and 150,000 employees. something else that's interesting to note in terms of acquisitions because we have seen a lot of consolidation when it comes to -- let's call it the beer industry -- that multiples to ebitda have been moving up consistently. inbev paid 12 1/2 years worth of ebitda for anheuser-busch. sab miller paid 14 times ebitda

for foster's. anheuser-busch is paying 18.4 times ebitda for modelo. if you actually apply what they paid for the first 50% and etch it out, they're paying a lot less than 18.4. but the point is they're a willingness on the part of acquirers to pay up on what is a high-margin business. another part of this story has been unfolding as well. you may have noticed it in the stock of constellation brands which moved up sharply when we first heard about this potential deal earlier this week. take a look. as part of this deal now, unexpectedly, modelo is actually going to pay -- constellation brands, excuse me, is going to buy back the 50% stake that distributes the beer in the u.s. and pay $1.85 billion for that but keep the distribution rights here in the u.s. despite the fact, of course, that

anheuser-busch has a very well-worn distribution network of its own. that's being viewed as a real positive by constellation brand shareholders because that will continue to pay them significant money for distribution rights. and they're levering up the balance sheet which a lot of people like to see in this environment. we should point out, of course, the borrowing costs here, very low for anheuser-busch, for inbev/anheuser-busch. and they're talking $600,000 in annual synergies. >> incredible. breaking news with rick santelli? >> university of michigan sentiment survey for june? it's going to be kind of famous but not in a good way. it's the lowest level of the year. 73.2. less than expectations. we're basically looking for a push. unrevised last look at 74.1. we're looking for a similar number. 73.2 is still not out of the range of significant extremes. think back, last year, 69.9 is currently the comp for december.

but it wasn't that long ago. in september of '11, we were at 59.4. disappointing lows to the year. but doesn't look like we're getting a huge kickoff. this comes at a time when energy prices for the most part have been falling, which is evident by the last number, the big prices paid drop in the chicago pmi. back to you. >> thank you very much, rick santelli. time for some of this morning's stocks to watch. oracle upgraded at rbc, citing an accelerated growth outlook. goldman sachs cutting several dozen jobs from its u.s. operations as it seeks to cut costs because of slowing capital market activity. and sachs getting upgraded at jpmorgan. and facebook trading lower has initiated a neutral. take a look at shares of bed bath & beyond, getting upgraded at bb&t capital markets. for more, go to sots.cnbc.com.

also, r.i.m., this is a nine-year low for shares of research in motion. so that is amazing. we should note that overall, it is down almost 40% since the beginning of the year. is there anything that can turn around the stock? plus -- >> the iphones turns five years old today. we'll travel back in time and see what the world was like before this device came along. are we better off? we'll talk about that when we come back. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.

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♪ welcome back to "squawk on the street." let's get you caught up on where the markets stand right now. we have a rally on our hands as we wrap up the last day of the second quarter, the last day of the first half of the year. the s&p 500 adding about 22 points here at the open. the dow higher by almost 200 points. really being led here by strength in financials, in energy as well as materials. want to hit the commodities picture here as well because we are seeing green arrows across the board. gold trading higher by about 3%. wti crude, well above 80 bucks a barrel.

higher by 5.25%. and copper also making gains here, up by almost 4%. quite a session shaping up. let's get the roadmap for the next area. markets in risk-on mode on the back of this eu agreement. up for debate as to how big it is. will the rally fade? what are the best ways to play it heading into the second half? >> at homebuilder out with good news. kb home reported narrower loss. is the homebuilder optimism here to stay? >> has ford and nike upped the ante over speed bumps in china? find out why one investor says china is the very place to be putting your money to work. one hour into the trading session. let's head to chicago and check in with alan nutman who's at the cme. great to speak with you. >> good morning. >> you see it lasting today? >> we'll have to see. i think a lot of traders might be cutting out early with the

upcoming holiday. but the trab has been set for all assets on the short side. this is just a confirmation of that. we had a key reversal back at the end of june in the dollar, the euro currency and in bonds. we've never retested those over the last month. that shows a real sign of stability. this followthrough above 1,340 in the s&p is very positive, that's a halfway point of that selloff. >> what are you seeing in terms of options trading today -- i'm just wondering if people are putting on hedges since we're seeing a crush in volatility today on the gain in equities and with next week being a very quiet holiday week, premiums should be lower as well. >> right. never hurts to put on insurances. you know this, 20 in the vix have been pivot point. i look at bonds as a reflection of the way that monies flow when people get nervous and emotion gets involved. and looking at the bond market, it's turned back over. i alluded to the fact that bonds made those highs for the year and then closed lower back on june 4th. that was a very negative sign for bonds and a positive sign for the market.

looking for this to turn over as people unwind. if the dollar gets below 81, that's the point of the highs and lows in may. if it gets below 81, that's going to support all the asset classes you see in commodities and you're going to see a lot of unwinding, all the people that chase dollars and chase bonds, they're going to put their money back in the stock market. that's going to be a very positive. >> key to all the dollar levels, as you know, the euro is a big part of the basket, which the dixie is made of. we have a big ecb meeting coming up. how does it play into what happens at the ecb meeting? a lot of people were expect figure we get nothing out of the eu summit, a rate cut is ant table. >> when it comes to the eu, people have been more irrational about what's happening. if you look at the price action, the recent lows in the euro currency were nowhere close to the lows we had in 2010. we're getting a series of higher lows every time the news seems to be getting worse over the last three years. i think the markets have put it

behind us and put in perspective the euro was at 1.20 when it was launched in 1999. for those first three years, it traded below that 1.20 level and traded as low as .80. the euro value right now is much greater than it was way back then. that's not a sign from the price that catastrophe is going to ensue. i think that 1.20 level is the point that traders are leaning against. i'm seeing a trap that everybody was short the euro currency. now what happens when everybody's leaning one direction, the market usually goes the other way to take advantage of it. >> hence the 2% move in the euro today. we're going to leave it there. thanks for your time. >> thank you very much. >>. shares of research in motion down sharply after a dismal quarterly report in which the company announced a delay of the blackberry 10 and 5,000 job cuts. jon fortt is live in san jose with more on the situation there. jon? >> reporter: melissa, it's amazing to see because r.i.m. is basically managing to commit all the cardinal sins of consumer

hardware at the same time. they've mismanaged inventory, released products like the playbook that just weren't finished. they're laying off a third of the company while they're in a product transition, perhaps worst of all. they've told the whole world about their next platform and products, blackberry 10, a year before they're ready and now they've let the delivery date slip. last night's headline numbers were bad enough. revenue came in way low at 2.8 billion. the street wanted 3.1. eps loss was 37 cents, not three. and the gut-wrenching drop in blackberry handset shipments more than 40% year over year. and it's worse than it sounds. r.i.m. only managed to hit those numbers by aggressively discounting, sacrificing average selling prices and profitability. given the extremely tenuous nature of r.i.m.'s position right now, i find it baffling that just a few months ago, the new ceo insisted to me that r.i.m. was not in need of a turnaround, just a marketing makeover. and three months ago, he insisted that blackberry 10 would be delivered on time. it would be one thing if he had

fallen off the truck into the job but he was in charge of operations before he got the job. and r.i.m.'s operations are in far worse shape than its marketing was. interesting to see how they big their way out of this. >> did he use those words, r.i.m. is not in need of a turnaround plan? that's shocking. find a shareholder of r.i.m. hoping for a change at the company, that's not encouraging to me. >> reporter: he did, melissa, more than once. i said, are you sure that's what you mean to say? he said, yes, r.i.m. is not a turnaround story. we're fundamentally sound. we need to get our story out there better so people buy the phones we have out there right now. he came in to inglewood cliffs and told you guys the same story and a few weeks later changed it. >> you would think with the delay, the blackberry 10 till early next year, maybe realization would set in that the company has bigger problems on its hands than just its marketing campaign. >> reporter: yeah, he's changed the story since then. and something that r.i.m. has said that a lot of people

haven't digested, once blackberry 10 comes out, it's not going to be a majority of r.i.m.'s handset shipments for quite a while. they have to figure out a way to sell blackberry 7 for probably more than a year. right now, they're having to aggressively discount to do that. not clear what new features or what new hardware they can wrap around that in the coming quarters to make it more appealing than it is right now because right now the profitability of those handsets is slowly and maybe quickly draining away. >> jon, thanks for your reporting, jon fortt out ol of silicon valley. service now is now open for trading. the ceo ringing the bell this morning to celebrate their opening here at the nyse. the first tech ipo since facebook's ipo over a month ago. he joins us at post 9. congratulations. >> thank you. >> not a bad turn of events. does it bother you as being seen a guinea pig in light of what happened next month? >> not too much.

we'd rather be out than covering in ourfoxholes. >> as you pondered the notion of going public, did you debate nasd nasdaq/nyse? >> we were pretty much whetted to going with the nyse. they're a very large, prominent customer of ours and we like the people. we like how the place is steeped in tradition. it's been a very good experience for us. >> your company is not going to be profitable this year, i don't believe you've said n 2012. although you did have profitability last year. you're growing very quickly. what assurances can you give to shareholders that you will get back to profitability given -- you've got a accumulated deficit of about $78 million and you're spending a lot of money? >> yes, this is a company that has had extraordinary growth. it is inherently very profitable. we keep it in the position to continue to drive the stellar growth that we've had historically and we have the

opportunity -- we really managed the business on cash flow and bookings, profitability. we show profit -- >> people may hear cloud. but what differentiates you from the likes of some of your key competitors whether it's bmc, hewlett-packard or ibm, all of which are far larger companies than your own? >> those are the legacy guys. you have to think of service now, we now very similar to salesforce.com, it's generationally different. it brings much more the business to consumer-style technology to the enterprise. that's really been the big differentiation. >> what does that mean, though? >> it means interfaces like apple and google and yahoo! -- technically demanding kind of arcane 1990s style of systems. >> to do what and where? i'm curious, where does that company need to do in terms of

efficiencies and what percentage of your revenues are in the u.s. versus abroad? >> good question. 70% of our business is northern american, 30% obviously outside of that. service now is a company that addresses the enterprise i.t. department and function. think of s.a.p. and oracle, salesforce.com addressing sales, that's what service now is to i.t. we are the system of record for i.t. that's everybody in i.t. -- that's how they know what they have to do in the morning when they come in. >> you're listening to the conversation about r.i.m. earlier on. i leaned over to you and asked -- you said an iphone. >> right. >> this is a separate question from service now. but is the enterprise embracing apple in a surprisingly strong way, as far as you can see? >> i believe so. our company, we're all apple wall to wall. not just on the iphone but also on our notebooks x lapt, laptopo on. >> you're going from third-party

centers to your own. in terms of spending money, is that a great expense to do that? >> it's an important transition. the great expense is really that while we are in the migration, we are running duplicate, redundant infrastructures. that is temporary expensive and depressing growth margins. but we'll turn that off by the end of this car dar year. >> how many people are you going to hire this year? >> probably around 400. we have tripled our head count just over the last year. >> some point to the valuation at the midpoint at least going into this morning. would have been 13 times trailing revenue or so, which some say is double the average for a software company going public. >> yeah. >> does it seem rich to you or not? >> people are paying for growth. it's very hard to come by these days. growth is our middle name. that's why we're investing at the rate that we are. >> your ipo was seen as a test, not just for ipos but also for

morgan stanley which brought you here. do you think the process was colored by what they went through in facebook? >> i think the investor sentiment was definitely affected by people that are a little bit more testy and a little bit more rigorous in their approach, a little bit more price sensitive. but as far as the process goes, it's been the same. >> there are a couple of key differences. you're only selling a small part of the company, 9.7% of the company. only one insider was allowed to sell shares, your founder. and michael grimes did not beat this ipo. is that correct? >> that's correct. chamberlain was our fearless leader on the morgan stanley side. >> was that by design? >> no, i've had a longstanding relationship with paul. >> congratulations, $23, $25, not a bad number to go away with this morning. >> thank you. >> thanks for join ugs. let's get over to h.q. and join brian sullivan who's got a

market flash for us. >> smith & wesz wesson reporting sales ahead of expectations. handgun sales up 38% this year, sporting rifle sales up 72%. so far this year, wedbush securities saying they might be there might be consumer pull-forward here. people are buying guns now. stock's been on fire, up nearly 60% year to date. smith & wesson, guys. >> brian, thanks a lot. guns and booze, themes in the defensive market. coming up next, the latest in the madoff ponzi scheme saga and why the claim that bernie madoff was in it alone may not stand up anymore. let's take another check on the markets in the midst of this big rally. nasdaq at session highs a gain of almost 60 points there. is n. we built the first railway, the first trade route to the west,

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madoff is expected to plead guilty later today for securities fraud for his role in that enormous ponzi scheme. mary thompson is live at the courthouse in manhattan. she has the latest for us. mary? >> reporter: david, in just about 45 minutes, it is expected that bernie madoff's younger brother will plead guilty to two charges in connection with his older brother's $65 billion ponzi scheme. that will make peter madoff the first family member and eighth madoff employee to plead guilty in connection with that decades-long scam. the 66-year-old arrested earlier this morning at his lawyer's office in new york city. he was then brought to the courthouse at around 8:30. this coming also three years to the date his brother and former boss was sentenced to 150 years in prison. a lawyer, peter madoff served as bernie madoff's general counsel and chief compliance officer for 40 years another madoff's firm. he will plead guilty to one count of committing securities

fraud. and agreed to serve a ten-year prison sentence and a largely symbolic forfeiture of $143.1 billion in assets which includes all of his personal property. what peter madoff is not pleading guilty to is the fraud itself. since his brother, bernie -- since he was arrested back in december of 2008 that he acted alone in that regard, masterminding a scheme that caused thousands their life savings. madoff trustee irving picard charged with distributing funds, picard maintaining that they used the firm as their personal piggybank and as overseas of legal compliance at the firm, they are derelict in not detecting the fraud. one of those includes peter madoff's daughter. like him, she was a lawyer. and "the wall street journal" reporting she remains a person

of interest to prosecutors along with bernie madoff's surviving son, andrew. the hearing will begin at 11:00 this morning. we'll have all the details once the hearing has concluded. back to you. >> mary, see you a little bit later on this morning. mary thompson in new york today. when we come back, the euro rallying today following the eu summit agreement last night. how should you trade this currency? we're back with "money in motion" after a break. ♪ ♪ [ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-be financial services.

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last day of the quarter. and whether you call it short covering or window dressing or just a bald-faced response to the eu summit last night, the dow is up 227 points, awfully close to the highs of the day. let's get to brian sullivan for a quick market check. >> carl, you have navistar up. i know david's probably been talking about this. navistar a couple of days ago reports out that it had hired investment advisers about possible asset sales. stocks down 51% year to date. it's up about 7.5% now. there's talk on the wires that it maybe reached an engine deal

with cummins. and renewed chatter that it took over -- you get about a 7.5% move for navistar. 4% for cummins. maybe we'll get another deal for navistar this year. the euro taking a turn for the better in the wake of the eu summit. how long will the euro run? what's your trade here? let's get the "money in motion" trade. boris joins us from new york. i love this quote which you say was the best quote you heard about the eu summit. a decisive solution using a fund that doesn't exist to buy debt that won't be repaid via a mechanism that hasn't been agreed to. >> right. >> do you think this is -- is this substantive at all? >> it is substantive. despite that quote and despite the massive wall of skepticism, the euro is up substantially. the move last night was a game changer for the time being, for

the short time being. a tremendous amount of people are short the euro and ting squeeze is going to continue going forward, especially if the european policymakers back up their rhetoric with action and recapitalize the banks and reliquefy the system. there's potential here to buy the euro for the short term. i'll be a buyer here on a dip to 1.2625 and a target at 1.2528 some time next week. if we get a comeback on a euro, it will be a good opportunity on a pullback. >> is the expectation for a rate cut -- does that diminish given what we've gotten out of the eu summit? >> i'm not sure it diminishes it. it would be very, very helpful if the monetary authorities came on and did a rate cut in addition to this. they cannot do any half measures at this point. i think they're beginning to realize that. in many way, if the ecb comes in supportive, it's only supportive towards a long-euro position.

if they are reticent again, that can hurt the euro trade absolutely. >> given what's happening now with the euro up 2%, do you think you'll get that opportunity to be long on 1.26? >> i think so. we're going to have a little bit of profit taking. we'll have a hangover monday as we typically do after the big run-ups into the weekend, and maybe an opportunity to get in on the trade on a pullback. i don't want to chase it at such a high level right now. and i want to make sure my risk/reward ratio is proper at this point. it's not a long-term trend but there's a continuation for the next week for the short squeeze higher. we've resolved the short-term issues. the path of least resistance is up right now. >> this growth package, i wonder your view of it and i wonder if you think the money is fresh money or an amalgamation of other plans that are already existing being put together. what do we make of it? >> it's probably an amalgamation. everybody's very tight with

their pursestrings right now. frankly, the biggest amount of money that can come easily is from ecb. it's ecb that really constantly basically needs to print money in the eurozone right now to reliquefy. this money in many ways is kind of window dressing. hopefully they will come up with a solution on that front. >> boris, good to speak with you. for more currency trades, catch "money in motion" trading tonight, 5:30 p.m. eastern time. when we come back this morning, some reaction to results from both nike and kb home. nike, the single-worst loser on the s&p this morning. and there's a look at kb as well. we have the trade on both those big players. one more look at markets as we take you to break. the dow up 219. and the s&p up 25. [ male announcer ] introducing a powerful weapon

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♪ ♪ markets rallying across the board on the back of the eu summit agreement. this as the dow is on track for its best june performance in more than 13 years. similar picture for the s&p 500, actually rich peterson over at s&p just sent me an e-mail saying the s&p is on track for a gain for the month of june, up 2.6%, which would make it the

best june since 1999. you take a look at the sectors leading us higher. it is the financials. it is materials. energy stocks on the back of oils bid higher today, above 81. now at 82 and change per barrel on wti. seeing the energy stocks rally here in relief of that. >> you don't see crude up 4.69 usually in one day. and june, we should point out, usually is not a good month. september, the only other worst month for the dow at least. and we went for seven straight years with down junes. so it hasn't taken a lot to make an impressive month of june. >> there's nothing in the global economy that we've learned over the last day that would seem to indicate why crude should go up. >> no. it's just this better sentiment overall from the eu summit and that perhaps if europe does get its act together, the problems we're hearing from corporate america at least these days about slowing demand out of europe, slowing spending out of europe, maybe part of that will be addressed and things could

actually turn or at least stabilize there. >> after those earnings from nike and ford, one has to wonder again about the level of broke particularly for china and asia. >> the real standout in terms of being the exception, shares of barclays, we pointed it out right at the opening. but barclays is worsening. it's at session lows, down by more than 4%. there were some comments about how the libor investigation could impact a lot of these overseas financials, the likes of barclays, the likes of rbs and saying that investors shouldn't minimize the importance of that scandal on this. >> barclays is also very much a u.s. bank certainly having bought lehman brothers or most of what was left of lehman brothers, who were compensated in those shares. watching shares of nike, the biggest loser on the s&p today. down about 10%. fourth-quarter earnings did miss. a very rare miss for nike, the

first time in two years, as the cost of raw materials used in its shoes and t-shirts hurt margins. . there was a buy rating on it. sam, has that changed today? >> we just downgraded the stock to neutral. the margin disappointments over the last few quarters and the weakening of the futures, specifically in china, led us to our downgrade. >> we've had you on a couple of times. you talked at length about innovation and technology, new products, the pipeline looking good. but to what degree is that even a potential offset to these numbers specifically that we saw out of china today? >> well, it's sort of like it's good but not good enough scenario. and it sounds like they've got a little work to do that could take a year-plus to do it. business in emerging markets in north america are strong still. that's why you saw the good results at the finish line here

in the states this morning. the innovation pipeline is there. it just can't overwhelm the macro at this point. >> in terms of the margins, you pointed out that it's actually the sixth straight quarter of year-on-year gross margin declines for nike. what is it doing in terms of not controlling its costs? does it simply have to wait for labor as well as input costs to go down? >> well, the input cost situation seems to be fixed. this time the margins were down because some digital investments as well as some charges from one of the emerging market countries. however, the real issue here is that they said they would be down 100 basis points and they miss that had number. and they've missed the guidance over the last few quarters. and then said that margin would continue to be stressed over the next two while improving through the full year. it's more just worse than expected. and we think a lot of it's due to investments.

they seem to be able to pass through the prices, especially in the u.s. and emerging markets. probably there's some drag going forward because of china. >> sam, you had a buy on the shock. you now have a neutral. you've adopted that neutral stance after the stock has corrected 11% on what we now know was a disappointing quarter. so why from here do you believe that things are not going to get any better? >> well, it's not that i don't think they're going to get better. i just think it's sort of a "show me" situation at this time. i want to make sure that they actually deliver on what they -- deliver on what they say. it's a great company. it's just until i get a little more clarity, i'm going to stay away from. >> do you think there's more downside in the stock from here? >> you know, i think it will settle. i'm not exactly sure where it's going to settle at. i think as people use their crystal ball over the next few weeks, they'll make decisions. clearly a lot of the new product

is working, especially here in the states. but it sounds to us, just from conversations, that china, especially the tier 1 and tier 2 cities may be a little oversaturated at this time. and things have to settle down there before they can kick in again. and i think that's the big issue. we didn't expect to see the futures to fall to just 2%. >> sam, historically, going into an olympic game, not bad time to get into nike, a big platform on which to advertise. is that going to -- is that dynamic going to exist this year and what do you make about some competing analysts saying even after the olympics you might end up with a big inventory overhang? >> well, the inventory certainly is an issue. but i don't think -- this is not like what happened in china because they didn't need to go from 0 to 60 in no time at all the way they did in china. it's already an established business in europe. but i wouldn't be surprised to see the macro sort of kick in

post-olympics and that's the concern that we have there. it's certainly going to help over the next quarter. but, again, the fall-off in china still seems to be the overhang, as far as i'm concerned. >> sam, thanks so much. sam poser over at stern agee. let's turn to the kb home story. building on that homebuilder optimism that we've seen all week, the stock is trading higher by about 4.5%. could it be another sign of the recovery in the u.s. housing market? robert is a homebuilder analyst at rbc capital markets. good to have you with us. the numbers looked good on the surface. but compare this to what lennar reported, growth of 40%. that does seem disappointing. how do you assess the quarter? >> actually, it's a really good quarter, melissa. if you look back to last quarter, they had a down 8%.

expectations were for another negative print. so against very low expectations, kbh printed a healthy number. that's why this stock is up today. we think this is a transition story. the stock's going to work out by year end. they have a new mortgage lender. the big question investors want to know, can kb homes participate in the spring selling question. our answer is, yes. >> why do you see that, especially as we see cancellation rates still elevated? they're higher than a year ago. >> you brought up lennar. lennar's the best to breed, the market leader in new residential construction. that's a world class company which is really leading the pack. kb's had a very difficult year, the first quarter was definitely a misfire. we think this is a transition story, which is going to work out. if you want to make money in the stock, you have to buy stuff when it's still uncertain. what we're seeing today, we think is incrementally positive. if this trend continues you're

going to get better growth in the third and fourth quarters in tandem with continued improvement and new residential construction. that's what you want to focus on. >> are you more bullish -- sounds like your more bullish on kb homes than perhaps some of the others who have had stronger rallies this year? i ask you because kb homes is a favorite for the short sellers, half of its shares outstanding are held short on this one. it's one of the top three shorted stocks in the s&p 500. what are the short sellers missing? >> i think that the unexpectedly weak performance in the first quarter created a lot of controversy, whether kbh was going to participate in the spring selling season. i think he got a pretty definitive answer today that things are better than most investors thought. i've always been of the view it's going to take two to three quarters for these guys to get things on track. it seems to be playing out like that. why do we like kbh? because the stock hasn't moved as much as some of the other

homebuilders which have already had better numbers. we like the west coast asset base they have. it's going to take two to three quarters to play out. but there's a lot of upside in the story. >> robert, yesterday some reports circulated about big institutional bets in futures that would be a play on a truer housing bottom than we've seen so far. if we're going to get a housing bottom anytime soon, do you think this week was the best example of it so far? >> we feel really good about the housing market. it's a bright spot in an otherwise sluggish outlook. if you really want to think about it, last year we built 600,000 new houses. this year, we're definitively on track to get to 700,000. i can't find anything else which is experiencing 15%-plus growth. so this is the tailwind which is great for the builders. the question is, where do you want to buy the builders as a group? we like it long term if you can own it for two to three years. the stocks are going to work ut. you're going to grow book value.

that's what people need to be thinking about. >> at the same time, a lot of these stocks have had stellar runs so far this year, anticipating a housing recovery, which stock would you be most likely to sell at this point to lock in gains? >> we think a little bit more of like, where do you want to be if you own it? i want somebody who hasn't participated, a weaker name that hasn't had a big run, is something like kb homes. if you're just a buy-and-hold traditional investor with a long-only bias, we stilg still like the lennar trade. the stocks tend to trade together and have very high correlations. the bigger question is do you want to own the builders as all? we're saying yes. we would prefer if investors get in at lower levels, buy on dips as opposed to to chasing the rally. >> robert, good to speak with you. >> thank you. let's get to brian sullivan for a quick market flash this morning. >> a lot of stocks up. one stock is down. i'm going to dig out the one down.

mead johnson is down. data out of china that shows that market share declines continue to accelerate for that company, specifically to pfizer and wythe. goldman sachs coming out and cutting estimates and its price target by one penny. they make nutrition in the pediatric space like enfamil. that stock is down 3.7%. only going to find losers from here on out. why not? >> all right. >> tired of all you people smiling all the time. >> i know, right? he's in a bad mood. shanghai composite, down over 20% last year alone. up next, find out why one investor says china over the u.s. is the far better place to put your money. we're back in two. ♪ ♪

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ford saying late last night

its profit will be lower in the second quarter. phil lebeau joins us with the latest on that. >> shares of ford getting hammered today. trading well under $10 a share, off 40 cents on the day. here's the warning the company issued last night. most of it is centered around europe but it's also about overseas business in general. the company warning its overseas losses will triple in the second quarter versus the first quarter. now expecting to lose about $570 million. again, most of that coming from europe. the company has said it has not decided to close a european plant. not surprisingly after that warning, in come the warnings from wall street to steer clear of this stock. morgan stanley is cutting ford's estimate by 30% for this quarter, 14% for the full year. here's the ominous part. it says ford's losses in europe could exceed gm opel. the analyst says ford must reduce capacity urgently.

yesterday, bob shanks, the cfo of ford, was asked about that during an interview. he said, we are not going to provide any specifics about our plan for europe, including capacity. it is too soon to say what we are going to do. when you think about what it takes to sustain the business, our philosophy is to align capacity with demand. and when i've talked with people in europe and in detroit over the last 24 hours, everybody says the same thing -- we are seeing a rapid deterioration in auto demand in europe. that's why you see shares of ford down 27%. it's the same thing with gm. they are facing mounting losses over there, too. and at the end of the day, this comes back to the bottom line is now really being hit with that weakness in europe. >> thank you, phil lebeau. it's not just europe, ford and nike also raising big fears about a speed bump in china. our next guest says china is exactly where you should be putting your money to work. andrew swann is head of asian equities at blackrock.

given you believe that and i'm looking at a country as many investors are that seems to be having diminishing growth, why would i want to be there? >> the last six to 12 months, chinese growth has been decelerating. we're seeing the effects of that coming through not just in local corporates but in international corporates with exposure to china, like nike today and ford. the reality is we're seeing a bottoming in that rate of growth. and we think the prospects for growth in the second half will be at least partly better than what they were in the first half. right now, valuations are cheap because those fears are very, very high about rates of growth. and importantly inflation is at a much more manageable level now. so we're starting to see some stimlatory policies coming through. >> is it to buy u.s. equity that is benefit from that potential rebound in the economy or the local companies? >> the most important thing is valuation. what's in expectations? in the case of chinese pure listed equities in asia, they're very cheap right now. and that's where we really think the opportunity is.

i think the realities of a slowdown in china perhaps haven't been reflected in a lot of overseas stock at this point in time. >> when it comes to consumption in china, where do you see the growth slowing down the most mongs the chinese consumer? there's a broader array -- much more different than the united states -- the spectrum of the consumer in china is very wide in that you have the ultrarich and you have the very poor by u.s. standards. >> sure, the last year or two, it's been a boom time for luxury goods. we are seeing slower rates of growth within that area. it's also in the gaming sector in macau. we're going through slowing rates of growth in general. also political transition is going on affecting a certain -- raising uncertainty. as a result, luxury spend is slowing down. where we do see still resilience is in general consumption. the headline rates of growth are slowing. but some of that's inflation driven rather than demand.

>> how much of the problems in china are euro-driven, europe export driven and how much is internal domestic con consumer driven? >> with the slowdown, most of it's a reflection of the tight monetary policy that china's been going through the last 12 months. this was a slowdown that we're looking for. >> really? even to whatever the number is going to end up being? >> absolutely. that's what they need in china right now. it's a 7% to 8% growth economy. you have to keep in mind that the working populations aren't growing anymore. the last decade has been about growth and porg population, it's been about urbanization. >> when i speak to people on the ground in china, they describe a culture over in china of, in their words, lawlessness. and say that there are a lot of things you simply can't believe, whether it be the numbers coming in terms of economic production overall or the numbers from many companies. lawlessness is a scary word but

it seems to be borne out of communist party leaders and the like. how do you invest in that kind of a market? >> it's still an emerging market.market. a lot of the companies are first generation companies. i guess that's why we try and do our work. we go out there, meet these companies bb look at their accounts, check out their facilities, manufacturing companies, just to make sure they're real. there have been terrible incidences the last few months and there will be more. there are some good quality companies there. let's not forget that, there are some good companies there. >> and we won't. thank you. >> you're welcome. >> dow holding on to 211 points. we will talk all of the big moves. the breath in the s&p impressive today. only handful, maybe 10 or 11 stocks in the s&p are down at all. we're back in a moment. but first, rick is working on the next hour of squawk on the street. rick? >> paul, well ask a really

simple question today. is anything in life really free? you know, this is a great time to ask. an election is four months away and maybe that's where democracy works now. there is a lot of free stuff tossed around and things get done. maybe that's how it works. but remember, if you take the wo word free out of free dumb, all you're left with is dumb.

. >> markets moving sharply this morning. what does this mean? david is an investment strategist. david, always good to see you. >> good morning. >> do you feel good about europe versus 24 hours ago? >> sure. this is clearly a sign that risk of a systematic global fm crisis has been significantly reduced. new what we've done is separate bank financing from state financing. direct capital into the banks. which is what we did in the u.s. thaents what it did to get us over the hump here. so it is a great sign. for the market, it is also a sign that global central remains in an accommodative mode and that digital easing is likely

going forward. >> don't you feel like we've been through this before, david, where we get a ray of sunshine from the eu. some sort of summit or little development we rally on it and then only to get obliterated on the other side at some point? >> yeah. we have been through this before, but this is different. what we are seeing now is this ecb become much more accommodative, much more like the fed here in our country is. you can argue that the ecb is the most resistant it easing measures of any central bank around the globe. now we are seeing the direct investment, the lto was the first step. but this bypasses the state entity so you don't have that issue with which debt is senior. this is something that we think we need to see. we would like it see it go up purely on fundamentals but at the same time, we have to solve the european crisis or eliminate the risk after global financial crisis before we get the confidence levels we see here.

>> you do sound quite a bit more optimistic. sounds like you believe this have a game-changer of sorts. are you actually going in there and believing that the markets will go higher? that we have turned the corner, so to speak. >> well, turn the corner is a big phrase. again, we would prefer to see true strength in u.s. and global economic fundamentals. that is what drives stock prices. and to the extent that this improves confidence levels, both with consumers and corporations here, we will see better economic data here in the u.s. that's what we need to see. so today, this is great. good news, the next step in a long process and ultimately if it leads it truly better economic fundamentals then we will be very optimistic. >> skeptically optimistic. thanks, david. >> you got it. >> we will have final thoughts amid the big rally, after this. [ male announcer ] eligible for medicare?

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strong. s&p 500 up by 8%. if you were to point to any weakness here, it is just a handful of stocks. j.p. morgan is now flirting right now.

>> surprising, given that huge rally in banks. that number from yesterday in the new york times, not to be believed in terms of $billion from the potential lost there but the mark set paying attention, i guess. >> weird that losers are down because of big macro concerns, even though the rest of the market is up. very strange day. david, have a great vacation. >> weekend. i'll be back monday, tuesday of next week. mega gone. but i will be thinking about vacation, carl. >> if you are just joining us, here is what you might have missed earlier on. >> welcome to hour three of "squawk on the street." here is what is happening so far. >> the uncertainty is now over. it is the law of the land. so let's make sure the law of the land is in everyone's best interest. >> why hold a vote that you know has no chance of repealing healthcare reform now? >> i think frankly it would be negligent if we didn't hold one. >> spending numbers, very close

to expectations. goose egg, unchajed on spending. >> stocks said to open sharply after european leaders unexpect ily agree it take action to bring down italy and spain's borrowing cost. >> i think there is still opportunities for the company to extract value. we've said and still believe that company can't go it alone. it does need a strategic partner or strategic out for its ip. >> university of michigan sentiment survey for june, it's going to be kind of famous. but not in a good way. ity's the lowest level of the year. 73.2. >> you cannot do any half measures at this point. i think they are beginning to realize that. so yes, in many ways if bcb becomes unsupportive, that is unsupport any of that position. if that are rhett zen again, that could be the trade. >> good morning to "squawk on the street."

very interesting day. dow is up 217 points. looking at prap the best june since, june historically an good month. september is the only month that's worse. it is turning out okay this time. we have seen lately the market overcoming a very, very weak monday. meantime, gold and silver rallying avenues of eu plan last night. team health holding, down after the three companies leaders were selling 8 million shares of company stocks. well start with the markets. we are on the back of the eu summit. is there a reason to believe we are turning a corner or is this a fleeting rally in jason is from glenn meade and charlie

smith from ft. pit cap capital. welcome to both of you. >> thank you for having me. >> is this fleeting or is there something more to this here? >> i vote for a fleeting moment, carl. if you remember in october, we sought same response in the summit around greece. the ecb came in december with the rltro that the markets got going. so i think the central bank is where we want it focus our attention instead of the stop/start summit result. >> by the summit bank you mean the ecb? >> yes, definitely. >> what is to think you from thinking that day two might take on a larger role if merck el and germans can change the way things change collectively. >> i don't think they need a larger role, they just need to continue what they are doing every six months or so. politicians will kick the can and put the central bank when it comes in when things really get

tight and that's been the pattern for, you know, over two years now, i don't think that's going to change. >> jason, somebody pointed out, they said today is like turning the hour glass over again. that's a little more time for that sand to fall through. is that how you see it? >> i think that's how we see an ecb reaction. this is another one of those incremental steps in the right direction. it is not the complete solution. every time the eu gets together and puts together some sort of movement, extra stop toward fiscal union, we are closer and closer to the final solution but truthly we're not there yet. final solution, by that, what? >> we need a fiscal union in europe. one that is completely organized with euro bonds eventually being issued or able to have that capacity. taxation across or that sort of policy. fiscal transfers across the union. we're not there yet. when every step closer is better but that doesn't mean we are through it yet. >> charlie, even last night,

goldman says short term tactical trade. keep shorting down. >> i'm not sure i agree with that one. the risk is that multiple could move up a lot. in an environment of 2% inflation, normal would be 16, 17. assuming raernings come in in the hundred dollar range, we are looking a the 25% rally. so i think if we keep inflation in this 2% range, the risk is to will upside to multiples. i don't think there's a whole lot of down size here, assuming earnings don't collapse and we just don't see that. growth is in the 1% to 2% range and that should equate to $200 in earnings in the s&p. >> we will no more in the next few weeks. ford and nike aren't telling us about international growth. do you think this earning season will turn out to justify any short term rally at all? >> we're on the side of thinking

that's not the case right now. we think we're in the midst of yet a third annual growth scare. it is not that the long-term trajectory is definitive, we are just going through cycles of normal growth it a growth scare that recites the recessionary and almost fears again. through the whole cycle, we are still inching along in a ps growth rate. but we are in the midst of the growth scare of the cycle and we think that is a not so good earning season. >> jason, how do you approach equities versus alternatives? do you think there is a trade here? >> we have taken a defensive stance. less so with treasuries. we are using more corporate bonds and municipals. when you look at ten-year numbers, it is hard it make an argument involving cash and treasuries. so we have taken the approach that you really don't want to be

on either extreme of the riszing spectrum and you want to actually hide more in the middle. that means higher risk fix income. taking credit risk, but lower risk equities and using alternatives and unique solutions like selling options against your stock portfolio. anything can you do to squeeze out the e. tra bit of return. >> charlie, i will let you have the last word. sounds like you might be more comfortable simply going wrong. >> i think we are in a stop/start phase. i think 80% of the way of the stock phase. you need prepare your portfolio with cyclical exposure and that could happen, you know, after second quarter earnings are released. we would be emphasizing more cyclical names that have come back 10, 15% over the past month or so. >> all right. guys, thanks a lot. >> we have a lot to talk about today, jason and charlie, appreciate your time. >> let's get to the group in chicago today. rick santelli with friday

edition of the san santelli exchange. >> everything is free. free stuff, free lunches. let's think about this and maybe even have fun and kind of learn something from it. how many of us have kids where, you know, you walk into that restaurant or the waiting room for the orthodontist, whatever it is, and there's a big bowl of candy. atsz obviously free. i don't know about your kids, but my kids never just took one. they would take handful. it's free p. now think about what is going on with politics. this is a democratic/republican issue, not just a united states issue. it seems as though the things about the category of free, not only expand in front of elections, they get divvied up. now i don't care what your political affiliation is, when you have four-year terms or longer, why is it that the first part of the term we don't see a lot get done. second part you worry about reelection, more things get

done. you remember that zz top song, "cheap sunglasses", think of that analogy. i don't know about you, but i started buying the cheap sunglasses. i started taking better care of them. but if you lose them, it's not that big after deal. think about the modern art piece screen that sold for boat loads of money. i guarantee you after spending all of those millions, somebody put that in a place of reverence. but let's say it was the value as it appeared to some people who don't understand the intry can i california sis of modern art, you have no idea, looks like it is made in crayon. you think would you hang it in the best room of your house, not in your workshop. but maybe the significant issue is that anyone who wasn't born with lot of things, what did you do when you had something really

good? you took care of it. you know, just the notion that something has value, derives how hard you had to work to get it. so in the end, the problem with free stuff is obviously, it isn't free, and there is no take-backs once you give it. if you start putting nickel up by the candy jar at the orthodontist office, i don't think people would be happy. if you give free stuff, people want it, you're not going to be able to take it back. let's but this in one final term. i heard a lot yesterday that small business is going to be so much better off. now i'm an healthcare expert on the current healthcare plan. i try to read it when it was printed, but i couldn't. it was 2300 pages or whatever? no, that's dodd-frank. in the end, is it free insurance that small businesses now aren't going to have to pay for their employee? they will shove them out, because it's free.

do you really believe that? do you think on the back side, when the government is really the entity that's paying and it's not free? the bill is going to come. but it's not going to come saying, here is your bill for healthcare. it will come via the irs. back to you. >> that's right. tax is the word of the week probably, rick, thanks so much. rick santelli, a market flash this morning. ryan, talking this morning about sony, ryan. >> yes, i will just move it along. the federal train commission okayed a deal to buy emi music publicing. so sony will go from fourth place music to first place, like new york, new york and adell's "rolling in the deep." the ftc still has to rule on whether universal music group can buy a different catalog from

emi. that's more controversial. they will buy it from citigroup, carl. did you know that citigroup owned emi owe music group for $1.9 billion sni had no idea that citigroup was in the music publishing business at all. >> music publishing is a difficult business to follow. a lot of change over the past ten years. >> when is your track rolling out? >> i play the piano, yes -- >> why is the cd? >> well, emi doesn't own mine, i'll hang on to that baby. a lot of questiones since it is the last day of the quarter. to what degree, this is quarter end accumulating. in advance of the end of the quarter. but we are holding on to 64 points on the nasdaq and almost 25 on the s&p. nike though, getting stomped on last night's earnings after reporting its fourth quarter profit fell 8%. london olympics loom is that of positive sign.

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last night after the bell, for the first time in two years, we have more on the numberis causing problems. >> hey, carl, nike told this story. we are a premium brand, he will be able to pass on the cost to our consumers and there is a more positive story, costs are

coming down a bit, but we believe we can keep the prices where they are. ultimately the street is dispointed where the margin is done for a sixth straight quarter on year over year basis. shares plummeting 10% after hours after nike reported. there you see 10 percent s. nike execs trying to tell a positive story on the call yesterday. mentioning 2012 revenues to $24 billion. but two analysts, one at bear, one at stearns, in the last hour, downgrading nike this morning. other issues, concern over china slowing down and the big boost of the olympic games less than a m away won't in fact happen due to the softness of the economy there. you know, there is so much good here, carl. lebron, the fact that they outfit italy's valeteli, spain, on their boots, for those that watch the you're why finales this weekend. there is time that nike has been insulated from the world

problems, now is not one of those times. the drop puts nike shares in the negative versus where they were a year ago. i got to read you this. this says, the market didn't think so with nike's positive play. the stock is down 10% today as investors were spooked by aggressive sg & a spending surrounding the european soccer championship and olympics. that was not from today, carl. that was from june 2008. almost the same time the market was not impressed with what nike came across with. so nike down about 10% today. it's its worst day since october 15, 2008 when it was down 11.8%. and it must be down 9.8% around where it is right now to remain true. carl? >> interesting. i wonder, daren, is it good news for underarmor or does this boat carry all passengers the same

way? >> well you you a underarmor be down about 3 bucks yesterday after so the market at least deciding it is probably not good news for underarmor. but i will tell you, underarmor does not have the international sales that nike does. nike sells more gear outside the united states than inside. underarmor certainly does not have the same type of presence, more than 90% of sales are in the u.s. at this time. so they're not effected by world economy as much as nike is. >> after watching wimbledon yesterday, i wonder if nike is calling today. what an amazing match. >> a hundredth in the world. amazing. >> thank you. markets still trending high. dow is up 216, sprinting to gains on this last day of the second quarter. we will pick apart some of the biggest moves of the month and quarter when we come back. and the close in europe, what a week they have had there.

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's we all 's we all know who a story commodities have been. and rick has the story, rick? >> yes, acreage and stocks and we have a guest for most of the reports. usually she brings her dad, jerry, but i think she chained him in north dakota to work the fields. what do we see in today's report, simply? >> soy acres are up, so is corn acres. this is the most planted since 1937. there is a lot of everything. >> specifically colorado corn is up but not a lot and beans up 3%. they were already up elevated

levels. >> correct. >> the piles of corn and beans we have -- >> greater than expected. so slightly improving acreage. stocks up. i would have guessed blindfolded we would be on change or maybe a little lower. but that's not the case. >> no. the market really doesn't care about the report today. >> 18 cents in corn and 24 cents in beans, explain why. >> well, everyone knows, or most farmers know especially if they are in the southern corn belt, weather's bad. we are in hot, dry weather. that makes for poor pollination, poor filling of corn. we're in a bad situation for a drought situation right now. which could change with rain at any time. >> now let's take this purportedly historically large corn crop. you told me something off camera that almost gave me the kind of, oh, my god, i'm having the big one. what percentage of corn in the united states is used for

ethanol? >> 39%. >> i don't know about viewers or listeners, 39%. i find that really -- maybe i should have flown. it just seems unusually large. they have taken away the subsidies, but what they haven't taken away is that we still have to use this. the amounts we use, not so much the subsidies. what is this doing? is this still having a large lingering effect on the corn market? >> with prices higher in corn, it makes it more expensive to produce ethanol, so margins are tighter. with crude oil going down, it is back on the up, but with crude oil ear corn prices higher, it makes it not really profitable to do ethanol. have a lettero closed two plants lately. we might see more of that. if ethanol drops off the board, that could be bad for the corner market. >> so i was thinking mandates. mandates replane. >> right. >> so we rate the crops in terms of conditions.

if you see something rather historic in how the lack of moisture thus far affected the crop. why don't you tell us? >> there is a ten-year range in the middle, which is shaded in. you will notice the line that goes down. this is this year's rating. it is worse than anything in the last ten years. definitely below the five-year average. not looking good right now. last report is down three consecutive weeks in a row. corn ratings are down. we will probably expect that this week and that seems to be when it happens is over the weekend. >> real quickly. i had dirt that i back filled some new construction 12 years ago, 15 years ago. and it came from a farm. and i'm not kidding, those soy beans come up almost every year. i don't know how they keep coming up. they are like a weed, resilient. but let's go to the corn. the amount of sugar content, all of that, gets so negatively affected if over the next three weeks we don't get a lot of rain. is there any way it'll come back? >> with rain. we need rain.

>> that's it. north dakota, there are places in the country that aren't experiences this. in other words, do you think we had more rain in the next two weeks, do you think we would see a big drop off in the price in the future? >> i don't know if there would be a big drop-off. we would have to see the range in the areas where it is pollinating. so in north dakota, that is great for my crop up there. because prices are high and my crop looks good up there. i can't tell what you the earth will do but -- >> well, the favorite saying on the floor is knee high by 4th of july. >> about the only thing i know about crops is knee high by the fourth of july. thanks. >> we will bring you all the closing action after this short break. don't go away. across america. these internationally recognized benchmarks... ...are unlocking a better way to prepare our children for college and their careers.

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♪ your ticket to a better night's sleep ♪ one one of the great debates offer the next few weeks is whether or not this is game-changer in europe as the eu summit comes it a close. let's bring in michelle and talk about what this all meant, michelle? >> there's a lot of big key headlines, carl. and at the same time, a lot of things we don't know. we you a all these eu leaders come out and talk to the cameras and give their interpretation of what is going on. guess we won't see the video there. on and on and on. a lot of talking, a lot of press

conferences. still a lot we don't know. la do we know at this point? they tell us that rescue funds in europe will now be allowed to buy sovereign debt. but how and under what circumstances -- the headlines were tremendous, had a tremendous effect on the markets. look at this. sea of green. huge rallies across the board especially in troubled countries like spain and italy, where you see gains of 6 and 5%. because they were very worried about what would happen to their interest rates. would they get any kind of help when it comes to lowering their interest rates? when you look at spanish and italian yields in the last 24 hours, they dropped pretty dramatically and german yields rise. here you see the spanish ten-year is lower. italian ten-year is lower as well, 5.8%. take a look at the german ten-year as they assume responsibility for what is happening in europe, their rates are rising. why? rescue funds can now by

sovereign debt. that the one key headline we know. but under what circumstances? monty came out and said there won't be much conditionality. merckel said oh, yes there will be imposed. so something that angela merckel said they didn't agree with. so something else we think we know, the big headline, funds can be inject need banks. spain very much wanted this. what is still unclear is is you board nation. first headline was, don't worry, if you lent money to spain or spanish banks, you are going to be equal to the rescue fund. and merckel came out and said, no not so fast. we decided that is what would happen spain, but don't expect that to be carte blanche. then, euro wide authority of some sorteded up by the ecb. but how far does it go? are you going to get single deposit protection schemes? are you going to get common

resolution authority? those are all of the details, carl, that can really hamstring us as weeks move forward here. we see this frequently, right? rip your face off rally. they make this incremental step forward and then, two steps back as we see the sausage made. one thing i want to say is dave aid brought up this thing that angela merckel said. no debt liability as long as i live. i took that as the bondsman at esm. he thinks it is euro bonds. he is right when you look back at the context of it. dave sid always right, though. >> between merckel, chief justice roberts an nadal losing, tough all the way around. >> we went in with such low expectations into this summit, which is why you see such an incredible rally. nobody expected anything but monty drew a line in the sand along with rejoy and said, we're not relievering until we get

help with long-term interest rates because it is killing us. >> michelle, thanks so much for helping us on this friday. want it bring this courtney. watching a pretty interesting day here too, court. >> absolutely. i'm nodding as i listen to what michelle is saying. that incremental step forward is really lifting everything today. dow up 212 points. light now we see a nice rally across all major sectors and in fact consumer staples are hitting an all-time high. telecom touching four-year highs intraday. commodities also responding in kind lifting both future contracts as well as related stocks. barrel up more than 6% at one point interday. gold up, copper up as much as 4.6% today. remember we watch that all the time for how it reacts to any of the global macro economic trends or data points we are responding very bullishly there today. it is not all great.

we are talking about the global economy, if we bring it back to corp rates. ford saying it will lose $470 million for operation in the second quarter. gm shares, also falling in kind. and then we've got nike. nike saying its concerned about chinese growth going forward and that's impacting shares of yum. yes they don't sell the same kind of market, but we are seeing yum under pressure as well. however, domestically it seem like the athletic mark set doing okay. shares of underarmor are okay. lululemon is higher. underarmor sales are strong. 90% of revenue for lululemon and under armor is from north america. as long as that is good, investors are looking bullish at those names today. last but not least, pay attention to the fourth u.s. ipo this week officially ending the facebook drought we saw for a

month. shares of service now up 29% in the first day of trade. the price range was from 15 to 17. ending up pricing at $18. nice rally for that cloud computing company today. carl? >> court, thanks so much. as we pointed out earlier, markets have been in rally mode all day long. want it bring back director of floor operations of usb services. nice to have a repeat, double header with you today, art. >> thank you. >> i keep hearing the theme that people who were longer able to sell out of some longs today. going to a more neutral position and 245 maybe the shorts are responsible for today for a long degree. >> i think the shorts are overwhelmingly responsible. it starts with currency shorts we had a huge amount of shorting in the europe. and everybody got picked off base there. we have a kind of strange market here. almost like i'm in commodities. it looks like up the limit.

rally sharply intorie resistanc. we are holding right there. a friend of mine pointed out, if you take it from yesterday's low, to the current highs, dow jones is up nearly 400 point on this european move in two days. so it is spectacular. how much of this is the fact that it is the last day of the quarter? >> well, i think that given the shorting and short covering that caused it, you get a big boost. people want the right positions in and want it look just about right. and some people were caught off base and were a little light. and are scrambling to square up as they say in europe and see where they can get. >> you mentioned we have seen summit led rallies before. you mentioned october of last year. lasted a couple weeks. is this beginning it feel to you like this might have a life span of a day or two? >> it has that possibility. because we have holiday in the middle of the week next week. so you will find people trying to extend their holiday, leaving today and not coming back until

the 5th. and you will have other wloes start on the 4th and go through the next weekend. so things could get a little light. that makes them a little difficult to play out. but i think what is key here is the weekend. we've got to find out what is said in the streets of berlin and frankfurt. can merckel sell this? how deep is this? and we need more detail. >> some headlines today, they could lead to you believe that this might actually get through berlin. >> so far there hasn't been a great deal of hostility. but you know, it is a parliamentary system. can you see little regional differences pop up. i'll breath a little easier if we get to monday without any hostility. >> it does add a different character to june. which we know has been a treacherous month. we talked about the june swoon as we were going into the month. does it change the character of seasonality here? would you argue that going into summer, there is less seasonal risk or not? >> well, it certainly is

indifference as you point out. june is usually the second worst month, next to september, for the market. but you know, i think this was a little bit after fluke. again, less than 24 full hours ago, we were 400 point lower than this. it might have been a different story there. >> strange to see 1355 again. >> it certainly is. certainly is. >> art, good weekend. >> thank you. >> god speed, ice cubes. >> ice cubes stand absolutely no chance. it will be warm besides. >> as we go to break, take a look at the s&p heat map here. talk about breath. green across the board. a while ago we only add handful of stocks that were down at all. we will talk today in just a moment. to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz.

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♪ don't worry. we haven't forgotten, you still like things to push. [ engine revs ] the all-new cadillac xts has arrived, and it's bringing the future forward. of stocks that were down at all. coming up on halftime report in a bit, we will tell you how to play today's biggest moves and what lies ahead, europe under focus. but what about china? j.p. morgan of global markets is our special guest. and five years ago today the world got the iphone. we will see how it revolutionized the smart phone and smart phone business. >> hard to believe it's been five years. >> i flow know it.

>> see you in a while. we will bring in founder of destination management and cnbc contributor. michael, good to have you on the phone. >> thank r thanks for having me. >> there is enough to make viewers wonder whether the nature of the market changed in the past few hours. as best you can tell and with all of the uncertainty about rad r ratification, what do you think about today as opposed to yesterday. >> well, i think that merkel would blink, and she did. it would be interesting to see her go back it germany and sell this to germans. it will be hard on her part to compromise. but i think it bodes very well for the market. >> really? some still call it an agreement on vague principles. weak on details. obviously subject to a lot of revisions and improvals, you

still think it is a game changer? >> i do, carl. yeah, some will say that. but do you really buy equities based on certainty? no, you buy and sell based on probabilities. i think when you have a public statement from a summit like this, i think the probabilities have shifted in favor of europe recognizing they simply are not going to be able to pound on countries that have huge debt loads. i think you buy based on the probabilities. i think probabilities are this is definitely a move forward towards europe stabilizing. >> interesting. it is also colliding with reports out of nike and ford and comments from mcdonald's earlier in week that overseas growth is tough. not just europe, but in china. even if this is going it pli out well for europe, doesn't it mean it is a little bit too late to save this quarter? certainly this earning season? >> yeah, this earning season will be tough. companies have benefitted, u.s. companies benefitted from

layoffs, high unemployment. secondly they have had the dollar tail wind. the dollar tail wind is having problems right now. once have you booked the profit from the layoffs, or at least the cost savings from the layoff, you are required to build on the top line. with the cycle overseas as well, even in the united states with consumer spending dropping or at least lowest level in a while, i think it'll be a tough quarter. i think what it sets up is for the u.s. to be what i call a moderate recovery growth recovery which means i still think equities are higher than where they are at after today's market move by the end of the year. >> yeah. by the way, the white house now has a comment saying it well comes quote encouraging moves. by eurozone leaders. talk to me about sector here. tell con, ver rise yn. best performing stock on the quarter by 15%. a lot of people look to tell con for its lack of international exposure. we have seen down grades of at&t

as stocks had a nice move. would you stay with it? >> yes, i would. and i'll tell you why. tell con is a way for the investor to get yield. if you are a fixed investor and have you a hundred thousand dollars an and have you 1.5% on treasury and 1% down the road, you have to go somewhere else for yield pch i think tell cons give you the opportunity, carl, to get yield. but also gives you the opportunity to get a little capital growth. if it doesn't give you capital growth, in five years, you buy verizon and the stock doesn't move at all, what the yield comparison to treasury? it is gigantic difference. >> finally, talking about capital risk, there is rim today. which is speculated about in terms of take over but the operation is a mess. would you touch it with a ten-foot pole? >> i wouldn't touch it with a hundred-foot pole. i have a blog up on cnbc right now that viewers can read about what went wrong at rim and a

complete lack of innovation and believe that just because tle, meaning the ceos, like their blackberries permanently, that we with as well and we wouldn't want to innovate. and that led to a company that is, essentially in any view, a spiralling disaster and will be swallowed up by someone at some point. >> yeah, it is tough to watch. michael, appreciate your time. thanks for come together phone on a really interesting day. michael joining us from destination wealth management and cnbc contributor. rim taking a beat down on the not surprising earnings miss. some say the degree to which it was bad was surprising. is there any hope left for blackberry maker? we will talk about it in just two minutes. [ male announcer ] how do you trade?

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research in motion taking a big hit after reporting dismal quarterly earnings. the blackberry 10, company has been struggling for a whiling with with companies like apple. john has been watching what has been turning out. john, a tough corporate saga to watch. >> it is, carl. i've been thinking, what would it take at this point for rim to turn around. and so you think about some recent tech turn around. think about apple, dell, you think about motorola and they mostly involve a dramatic shift in focus, a narrowing of focus. rimm doesn't seem to have done that. they want to focus both on

consumer and enterprise. they are trying to sell blackberry 7, the old school version. even while they are talking up blackberry 10 which won't arrive for months. it is a tough situation. you could imagine that their sales could drop to basically nothing and their profit's already gone. >> a lot of discussion about how big you need to be as your market shrinks. laying off 5,000 people, that's about a third of the work force that they had back in march. and a lot of analyst, john, continue to point out to us that even restructuring costs money and that will burn into cash. >> yeah, it does, carl. i was thinking, there is chatter about take over. when you consider they have more than $2 billion on the books right now and you count cash and short and long-term investments, and their market cap is around $4 billion, sounds attractive. well hp bought palm for for 1.82 million and it was thought to

have overpaid. and palm's problems are not nearly as big as rimm's. how big does it have to be to be a great buy? don't know. >> as you pointed out last year, he is not a stranger to the company, helped run operations for a long time. in recent weeks, though he did say, look, we will have our first operating loss in a while, the 10 is tracking well. that clearly is not the case given what we know this morning. >> it's not. he is not a guy who was ever well known out here in silicon vall valley. his legacy is from the telecom equipment side, not the silicon valley side. one thing that jumped out at me about this announcement yesterday is the guy must not know software and softwarehardware integration, if it took this long to know what a realistic map for this would be. even on the technical side, leaving rimm the past few months. if they're just figuring out what it takes to deliver that

product, that doesn't bode well. >> even you and i at the apple developers conference, we talked to developers saying, look, big corporate i.t. departments are migrating to apple faster than people think. you got to imagine with each increment yl headline with how rimm's fortunes are fading, the risk of going apple or some other vendor is less and less. >> and it is not just apple. microsoft has an opportunity o with din windows 8 in the enterprise. android has an opportunity. we saw sam sung a little more than a week ago coming out with a flavor of android tunes specifically. we know motorola was working on that. i talked to motorola about that, they are working on enterprise capabilities built on top of android even before google bought them. i expect the android eco system to make a push. i expect microsoft to do it, not just with the windows phone, but with the upcoming version ever

office. rimm's enterprise will get worse as the year guess on. >> who would you say, if you had to put on a list, hierarchy, benefits the most from their demise. as tough as that is to talk about, for anyone in the stock. you and i chatted about samsung, their ability to name the galaxy, galaxy across the vendors, is it clear to you who is the key? gainer here? >> samsung, carl. i would say them first. they're benefiting from rimm's decline and know key why's decline. apple is also benefiting. but the smart phone players who are maintaining and gaining share as the smart phone world explodes. they're the ones taking share away from rimms and nokias. >> interesting story. canadian story, tech story. tough story to report on. >> like to see canada have a win. >> yeah. yeah. john ford in san jose.

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dow's been pretty stubborn up here. not moving around a whole lot but talking about gains and breath. especially, overwhelming number of s&p 500 companies to the upside, just very few actually losing money today. want to get to squawk on the tweet for this friday morning. of course, today's apple's iconic smart phone, iphone, celebrating its five-year anniversary here in the states. five years ago, what is the coolest thing your phone could do? chris writes, playing bejewled with a stilus on a uts starcom phone was the coolest to me, in color. best thing in my palm pilot

could do was e-mail. >> it is hard it remember, john, just how primitive phones were just a few years ago. >> i was playing bejewelled. i remember this amazing thing i used to do, make these phone calls and they wouldn't drop. and i could go for miles. that was pretty amazing. phones today, a lot of them can't do that. >> yeah. and apps have changed the way we just navigate our lives whenny out in the open. an incred ill story. want it get to rick santelli this morning and talk about the markets in the states, rick, and overall what your thoughts are coming out of the summit out of the past 48 hours. >> well i don't know. call me cynical. the weekend in and of itself is ripe with opt miss ex regarding plans in europe. that's worth something in the upside. the end of the quarter is worth something on the upside of the stocks. and in terms of the market supposed confirmation, i have two issuees. implementation. let's say they really are on to

something. the implen men tags time period, trust me. it is not a week or months. it is going to be a long haul. so the stabilization in the cushion better be large. the second one is austerity. okay? basically, my understanding is oversimplified. you get the dough and you don't have to worry about austerity. so let me rephrase it. you get the money without fiscal discipline. because without the austerity, all of the columnists that write about how horrible it is, wake up. we are talking about fiscal disciplines paired with growth programs. you need have both. just one or the other isn't going to work. back to you, carl. >> rick, one last point. in putting the week in perspective wab week in which we saw worries right through barclays. worries about j.p. morgan loss, which we still don't know the size. and peter madoff being arrested. not good for sentiment.