>> welcome back, everybody. we want to thank guest host larry fink. we didn't get through half of what we wanted to talk about. would you come back? >> it would be a pleasure. >> good luck with the shareholder meeting tomorrow. >> it will be a fun one. >> that does it for us, right now it's time for "squawk on the street." good morning and welcome to "squawk on the street." i'm david faber with jim cramer live from the new york stock exchange. carl quintanilla is on assignment. after another record-setting day for the dow we are seeing a decline as you see it there and a significant one in futures across the board. let's take a look at europe. you'll see the same picture there. that's a painful day in europe, which as you know if you've been listening to jim kraemer has bottomed and is, in fact,

turning. you're talking about the economy and there is a look at the markets which is bottoming. >> let's get our road map started, in fact, and it starts with what else? the markets. after a record-setting tuesday things are shaping up for a volatile down wednesday and that could push it down to square one for the week. in the largest-ever chinese acquisition of a chinese acquisition shumway international can take it private for $5 million. the company has several more game changers in the works hinting that wearables are ripe for exploration. kors higher in the pre-market after quarterly results beat estimates and same-store sales soared 37%. >> it was just down because of the big slug of insider stock. >> let's get off to the start with the markets, of course. futures, we saw them, they're lower and they threatened to wipe out gains from yesterday's

rally which saw the dow up 106 points closing above 15,400 for the first time ever. worries are resurfacing about, what else? the fed slowing its stimulus efforts sooner rather than later. here's the real story. the yield on the ten-year treasury is off its highs of the morning. we saw 2.2% yesterday and what a rapid rise that has been in terms of yield. >> i was off and all i can tell you is this was all i was fixated on. i was sending you charts of junk funds being destroyed and this was a spike that took my breath away and that was the reason why the market reversed intraday and not the bankses because they may like a bigger yield, but david f you don't talk about fixed income you don't understand why some stocks, particularly utilities have turned into death trap, and i'm not just talking about service corp and enterprises. we'll get to that and another deal to speak of, but on this

note, we talk about the duration risk in bond funds, and it's many times for people to be aware of and even though we've seen some move into equities, we haven't seen a wash of money. there's a lot of money still in fixed income and it hurts when you get a move up in yield like that. >> when i saw the apple long-term bonds trade at 92. think of it as a stock, people at home, it drop s s to 92 like that. billions are wrong. they're wrong and that's just going to get hurt. >> although we've seen this once before. this year we had a move up above 2 and before you knew it we were back to 1-6 and if you continue to see housing rise and you see retail sales do better, then this is a new plateau. >> then it's for real. >> then the move up is justified? >> let's talk about that. what is it saying? is it simply saying we'll have inflation and no growth? >> i think consumer confidence and housing and a stock market have produced a wealth effect

that have made it so many people are no longer underwater on their homes and this is what i call a better situation than it it used to be that can translate into a good second half. a 2% to 2.5% growth that can make it so they can't be that aggressive and i don't want to see mortgage rates spike too much, david. >> they take the foot off the accelerator, and it doesn't mean they're hitting the brake. that's a goldilocks scenario. >> that is what i think bernanke who is chronically underrated may have going for him. that means you have to be careful if you're buying duke and if you're buying dominion and if you're going to hide in southern, there's no more hiding. they have sought you. >> let's go with this. by the way, we could have made this argument three years running every single time. >> i am out there, but this time europe is not bad. this time japan is going crazy. >> china's not good. >> no. china's not good and that has

been something that has made it so that the fed has got to be worried. i guess what i'm presenting is a consumer confidence 401(k) boost. people feel better, home depot analysis who a person who is no longer under water on its home will spend $3,000 on the home instead of 1,000 which creates a better environment and not an environment that should worry the fed. don't forget, we also have health care reform that is going to put a big break on the economy, but you know what david, tax receipts are up and i am not worried about it anymore. california, holy cow. >> i know, budget surplus, amazing. should i be concerned when i see a headline like that, you know? or is that a sign of more things to come? >> it means classic, of course, the futures are down and they can make fun of usa today today. >> right. i do think that what had to happen is we had to see the economy get better so banks could do better so they can loan

and their margins can expand. we had to have industrials do better. you know what, david? this is a market that needs to get off of fed life support and so many people think off of life support it means dnr, do not resuscitate. >> let's go with the scenario that says it is different this time and for the first time in four years this move up we're seeing will be justified in terms of yield and we're not going to come back down and prices on the bond market, we're talking about and let's call it 3% yield by the end of the year. >> when the long bond was at 17. i would call people at goldman sachs and say we have 17% rates and they say be careful, it's going go to 19. you know what? 3%? >> i remember when clinton got them down to seven and been rubin was a genius. >> the leaders -- do i want to own all of these dividend payers? you mentioned utilities? how about at&t? they're going down.

>> so do i want to move into what? cyclicals? where do i want to go? >> i think we'll go into companies that will finally start growing their top-line revenue. 3m is the classic case of a huge disappointment that occurred three weeks ago. the stock looked incredibly hideous and the stock dropped from 109 to 106. it's at 111. why? it has the potential to take part in a worldwide resumption of growth, ex-china. maybe china can come back. i listened to some guy, a great banking rf who was saying, you know, people are investing in greece again. >> when we get to greece, i'm sorry. >> at some point, you blow up china, but you're talking about greece. >> look, if europe does better then china can export. 25% of chinese export goes to europe. yes, they do. so if europe turns something big can happen. the ecb has got pedal to the metal.

japan -- i've got to go by -- >> it will prove the floorboard. it's hanging down and it's hitting the road. >> they're not using helicopters. they're using c-47s and they're using b-29s. no offense. we see those jgb yields and we'll keep a close eye on the ten-year and we'll move on to the big deal of the morning and shares of smithfield foods soaring in the pre-market and it agrees to be acquired by china's shuanghui international. the value is $34 a share and that's a nice premium for the pork producers, the closing stock price on tuesday and by the way, an affected stock price because they were in an activist share holder in continental and it might even be a higher premium to what it was prior to continental starting to agitate a bit. china is the world's largest consumer of pork.

there's a lot of elements to this deal. >> kelly evanson has a fabulous memo reminding us, i don't want to be too graphic here, but pigs floating in rivers. the chinese are anxious to have a source of food that is not contaminated hence why kentucky fried chicken is doing so well there. >> hog prices in this country have suffered a great deal and you are squeezed on both sides because corn is expensive and you're not getting the numbers for hogs. so they're going to argue that this is going to be good for the american farmer to combat what are going to be a lot of arguments saying, whoa! the chinese and our food supply, i don't like the combination. >> do people really want the chinese -- remember, you said the largest deals and unocal was a valuable resource in oil and you may be able to argue that pigs somehow are -- are they a protected class? do we really want to go to the mat and say that the chinese can't own these? >> i don't know is the key -- i

don't know. >> how did it happen so fast, david? tell me what's going on with bankers? >> let me lay out a scenario as best i can tell at this point. i don't know if the deal was rushed and what i am hearing from people involved is they've been talking for months and there's always been a relationship between -- there's always been a relationship between smithfield and shuanghui that has existed, again, this is the biggest pork producer in the world in china. you have to remember they were getting pressure from continental. they conceivably were going to mount a proxy fight although it was a staggered board from smithfield. it's never really been for sale, but i wonder if they rushed this along a bit because the deadline for nominees is just a few day away. this will pursue jobs for management and they'll get 34 a share in cash. >> my old friend michael price once described to me that this company is worth far more than

people realize and i can't believe there won't be a higher bid. >> maybe you're right. maybe there's more synergies that can be gained from the u.s. producer and i have no idea if there are names throughout and i don't know what the brake fee is here, but it's fully financed and morgan stanley, i think is stepping up, but i'll be very interested to see to your point whether there's any other interest here. it may not be over. >> the swine flu period, hormel which is a company that didn't report a great quarter, but they had a fabulous dividend record came on and smithfield foods came on and all just saying listen, you don't have to worry about our food chain. it is a remind tore me that the u.s. department of agriculture sealed the good housekeeping seal of approval is something that the chinese want so badly. >> right. >> they're going to keep all of the u.s. operations of smithfield in place. management is going to stay in place and their commitments to the community and those kinds of things and they're spelling out all of the things that they'll

need to do as a foreign acquirer, but there are so many sensitivities when it comes to china and our relationship with china. >> you did an unbelievable special about hacking. there's daily hacking. the chinese are regarded to no longer be -- >> i'm just saying that if some congressman decided, wait a second, the food chain is too vital for the chinese to be involved. >> there say very powerful congressman named are eric cantor whose district smithfield is in. we haven't spoken to mr. cantor's office and we have no idea of what his viewpoint is, and they're preserving the jobs there and it's fair to say this is an interesting deal and it's a nice premium for shareholders, no idea whether there are are any other bidders there. they've been talking for a couple of months and you do have at least some questions. they will say no, come on. this is want national security, but there have got to be some questions. >> china is such a hot button, any other country can make the bid and you wouldn't think twice

about it and i also want to tell you, by the way, that the stewart services. >> yes. funeral homes. tell me. >> i don't want to minimize this, and this is a group that many people always said had so much mom and pop operators that you can argue that the justice department will look the other way, but i do want to point out that these are the two big guys getting together and it will cost more to die. >> right. so service corp and -- yeah. >> it will cost more to die. >> well, i don't know how else to put it. >> well, yeah. your point, antitrust forces have lettest mo of the deal goes through. the big ones, t-mobile, at&t and american airlines which is key. >> the justice department here has been incredibly benigned for the consolidation. >> the funeral homes merger. >> and stewart, i think is -- okay. >> anyway, i don't want to miss the fact that there were two mergers today, not just one. >> there were almost a merger

wednesday you can call it. this close. >> in another special, rare interview it's not just special, it's rare. netflix ceo reed hastings joins us exclusively at 10:30 a.m. eastern. >> how did you get that? >> i had nothing to do with it. we're going invite your questions for the man who runs netflix, from the man who has created netflix, tweet us squawkstreet #asknetflix. >> the guy put me in "arrested development." did you view it yet or you haven't done that yet? >> i didn't binge as much as i should have. one thing i didn't do was a gin binge. it was more of a tv binge. >> so you haven't yet watched. >> all right. that's good. that's good. i haven't either, but i look forward to doing that. >> also coming up, hear what ceo them cook had to say about his company being a game changer. michael kors, by the way, beat the street one day after tiffany's upbeat earnings, so is now the time to bet on high-end

retailers. let's give you another look at futures before we head to break. >> they're all looking good, but the market looks like they were giving back a lot of yesterday's gains at least at the open. we have more squawk on the street from post 9 when we come back. ♪ ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold styling, unsurpassed luxury and nearly 1,000 improvements. the redesigned 2013 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. how old is the oldest person you've known? we gave people a sticker and had them show us.

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apple ceo tim cook isn't tipping his hand about the future product releases for the company, but he did hint wearable products could be among apple renovations. cook said apple would release several more game changers among its upcoming offerings. take a listen. >> we have incredible ideas, the same culture and largely the same people that brought you the iphone, that brought you the ipad mini that brought the ipod and some that even brought the mac are still there. the culture is all still there and many of the people are there and i think we have several more

game changers in us. >> you hear something like that, jim. $440 stock price, you've been talk for example a long time, what is the next big thing? does that encourage you? >> i think that what i am encouraged about is that nobody cares. that stock's headed down as usual. the stock has become one of the poster child for the wrong technology to be in. wrong technology, and the fact that he can say, listen, you've heard it all. i like that. this is the first time i remember someone from apple saying we've got something big and people are yawning. you know what? that's okay. we need to keep to get the people expecting the omg product to give up. when apple introduces something we all want to buy, the stock flies. >> can they do something. >> can they introduce something we all want to buy with steve jobs now having been passed for a while? >> maybe we take them cook at face value when he says a lot of the people are still there, and

i keep thinking back, and the fund-raiser and there was nothing in the pike to speak of. i like the skepticism, corrosion and newism that seems to be around the stock of apple right now. where samsung can do no wrong even though samsung seems to be less aggressive now and these things come in cycles and i say to myself, boy, you have the expectation. >> neilism? >> neilism. >> that's there, too. >> he believes in nothing and wishes to destroy them. people have given up on apple. >> i remember the big lebowski. remember that? >> every single weekend. >> my kids 10 and 7, i've got them doing it right now. this is our core audience and the people cutting school today. >> more big words to come and up

next, something else you've been anticipating for almost a week. cramer's mad dash ahead of the opening bell and we'll talk about michael kors among other things. take a look at kors, more "squawk on the street." right after this. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal.

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we have's little more than six minutes before the opening

bell and time now for cramer's "mad dash," we promised michael kors and michael kors delivered on their promises. >> i think the luxury component worldwide is doing better. we know that tiffany yesterday, great numbers. some of that was japan and kors had excellent european numbers and when you start seeing same-store sales increase 36.7, was there a very big secondary that was done and michael kors sold stock and the stock plummeted after that, people figured, look, if he's selling why shouldn't i sell, it turned out that he was diversifying and for many different reasons it was a great gay bbuy. even nordstrom's did not report this kind of number. i love what they're doing in europe. this is a very expensive product company and burberry wasn't so bad. charmed group raised taxes this the high end and they never stopped spending. >> all right. >> larger -- a larger context

is, yes, charmed group and the rich keep getting richer and spending more, but you -- it was part of the bats bee index and this did seem to be something that you want to own. >> anti-stink pants shouldn't cost the way they do. ubs raised from 77 to 90. remember that recall? >> i remember howard schultz saying, would you stop giving up on this, it turned out to be an amazing call because the recall was in its verification that we'll not sell product that is not up to snuff. >> lulu lemon, expensive, doing well. kors, expensive, doing well. >> meanwhile, walmart, target and people didn't mind, and the stock is doing fine. >> every time i look up in the corner there i see these three-month moves and 16%, 15%, 18%. >> and i'll give you -- i'll give you stocks that aren't up. >> all right.

we'll do those next. when we get to the market open? and you find stocks that like a kimberly and a clorox is where you're worried about a precipice there on rates and it makes for a huge procter & gamble. >> i was starting to be a believer in mcdonald's and the stock goes up again. we have a lot more stocks to watch, of course. it's 20 straight tuesdays, but are we going to get it done on wednesday? right now it says probably not. stay tuned. we have the opening bell next. hey, so uh... what's going on here?

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and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science. it's just common sense. from td ameritrade. >> you're watching cnbc's "squawk on the street" live from the financial capital of the world where the opening bell is set to ring in 50 seconds. give or take a second or two. which will you be watching? the yield on the ten-year is freaking me out. >> it should and one of the reason yes it should is because so much is based on that. this is the bernanke abd's no longer going go and keep these rates down. this is the mortgages that are creeping up, maybe housing affordability will be affected and we have that tremendous case schiller gain. people say how long can these low rates last?

there's such demand out there. at the same time, david, where are the jobs? where are the jobs? so well said, jim. housing has been such a bright spot, but employment, we're not there yet, retail does better and at the same time, commercial real estate not happening. small business formation not happening and when will washington rear its head again and dysfunctionality and that's what more business people are worried about. >> you hear the opening bell and you take a look at the s&p and given what we're seeing there for the potential open and largely in the end and almost a direct reversal of what we saw with the huge open in the s&p and i should mention at the big board and flex shares and etfs with the suite of quality etfs and at the nasdaq, meals on wheels association of america. >> i heard a lot of people chattering with the mark-ups. that's for people at home and people want to make their portfolios looking better and

they're always fearful that if they come in the authorities will look at the last two days of trading and they've been coming in with t-minus 3 and t-minus 4. they try to bid underneath with europe falling down, they can't maintain the prices and they tried to markup yesterday. >> yesterday was, in part, a mark-up day and there was obviously positive news and housing, consumer confidence and we talked a lot about that and we had a huge open and we gave it back as the day went on. >> they've been a tremendous tale of things not that great. i saw the housing stocks reverse. you correctly point out that the teledoughs and the bond market equivalents are not equivalent in a trajectory where rates are going higher. it is really important that the backup in rates stop and stop right here if we're going to see more upward movement in stuff. >> right here. they've got to stop. they've got to stop because if the economy isn't better, just

housing better, then we're not going to get -- then stocks pause. you need to stop being shocked by the bond market. >> right. >> that was a violent move yesterday and you have to wonder who was hurt and how they were hurt and you mentioned the bond funds and that's a key concern for people who have invested in fixed income for years although they've been doing okay. >> quite well, in fact. >> the junk fund declines were the type that you see where people have basically said, panic. i have to panic and panic, of course, never made anybody any money, but there was panic in the bond funds. you have introduced it to go to the power of credit which is much bigger than the power of stocks. we tend to believe in the shows that stocks are bigger than bonds and that's not true. >> take a look at the crisis and it was credit that led us down, down, down. equities followed and by the way, let's take a look at stocks. tesla shares, jim, are up again.

not only a 2% move and yesterday's move was breathtaking. tesla introduces each one. a lot of talk that elan is on the road talking about tesla. this is one of those remarkable moves that on the backs of people who shorted this stock. don't forget solar city, and talking about how the utilities have to get into solar city's business. elon musk is what people want to invest in. he's a remarkable man. he's been underestimated all wrong who bet against this young fellow who had a version. >> much to the chagrin of everybody. >> do you agree here? not buy it. do you actually short it here? let's call it 110 and not 109. i would be advising people to do the opposite of -- i remember,

david, noczem arks going up every single day. david, the reason why i had windows that could not be open, is it was a lesson learned and just because the stock goes up a lot doesn't mean, you know what? that's short on valuation. you are short because you believe there is something fundamentally wrong. tesla made a profit. i'm sure people would dispute that and until the sec disputes it, it's a profit. a couple of other stocks i want to watch here in the green as opposed to otherwise. can we put up hewlett-packard, by the way? because we had an incredible move after earnings last week. we spoke to meg whitman and that's been sustained the last two days. >> how could it not be? it was extraordinary, and i found myself being converted because i looked at the balance sheet of that company and this is a company that is generating cash and it may have a competitor with dell.

i see a dialing for dollar story. i didn't understand it. will you explain it today? >> i can't explain everything to you about tell. >> dell, listen, it will be a story we'll revisit again. the shareholder vote is still away. dell, we're not worried about the pc business and that quarter they did a lot of different things to make it look as bad as possible. that's their argument along with icahn that also has proposed recapitalizati recapitalization. we do care about namely the acquisitions are doing much better. >> if you are meg whitman you want it to go through. that is the tailwind for hewlett-packard. it is a major, monumental victory if there is a deal done at dell. >> it was interesting, of course, when she did say, we did want chase them down. they took the price down and maybe that's what you do when you're going private. she doesn't impress me as a

slacker, there she was putting dell down, and it was a smackdown. >> let's take a look at smithfield foods and big deal of the morning. shumway international agreeing to buy the company and the deal has yet to go through and that is the key consideration here and they're talking about the second half of this year hoping to close the deal. we're almost in the second half, but there is a look at the move up and it's a $34 deal and they are spreading it. would there be a third party? i don't know the consider to that. this is a pretty significant price. >> there was an immediate national security issue. >> that's the question? >> could the chinese bring down the standard of things given the fact that they have much lower standards of the food chain over there? >> that's a very good question, as well. i don't know the answer to either one. >> right. but i think they're valid questions and the architects behind the deal says it has

nothing to do with the national security of the united states, but people might argue otherwise. >> could there be another bidder? >> i think that's possible, as well, although this is a pretty aggressive price. >> not to be trifled with, one of the wealthiest people in the world. >> they have reduced their position and they were threatening a proxy fight and got some of the letters on smithfield and it was back on march 7th coming after smithfield, so this was done with the shadow of that is a possibility with this deal done, and maybe they're happy with 34. you never know. >> a win is a win. this fresh market, tsm was a disappointer and the secular talking about the food chain. whole foods with that blowout number, fresh market follows and fresh market was a disappointer and these are companies that have a good seal of approval and

they could sell something that could possibly be tainted. gmo, this is the way of the future. the fresh market putting up a fabulous number, bucking the trend. >> let me know before we did. 4.13% on verizon. we talked about a lot of gainers today, and we have the s&p with half a percent and with that we will talk with josh about what is moving this morning. >> what was green is now red it is down 70 points and some of the headlines they are talking about this morning, one, the news out of europe which was not good. you saw news out of germany specifically, a much higher jump in german unemployment and may number increasing more than expected and you have the imf and the oecd getting involved and here's what the oecd had to say about that weakness in twrurp, and they say it could, quote, involve stagnation for

the negative implications for the recovery. they're also saying a bit of profit taking and we haven't seen a lot of that thisser yooshgs but as the gauges some people decided it's time to bring some profits and talking about the q-4 same-store sales up 37% and just about unchanged right now. tiffany gave us the decent report and also down .9% right now. another one to check out is chico. this is q-1 earnings and sales expectations report flat and same-store sales and that company talking about cool weather affecting traffic and certainly a theme that we heard here. and finally let's end on monsanto below what the street was looking for and raises its 2013 eps outlook and the company citing the corn seed and herbicide. back to you. >> thanks so much, josh lipton. let's talk about fannie mae and

freddie mac and we'll talk about this as we move into the second half of 2013. first off, just take a look at the move of the stocks and i'm talking about fannie and freddie and by the way, thought to be worthless and may still be, keep that in mind, not to mention the preferred ps it is substantial and it is yet again today and now let's back up and explain a little bit of what is going with fannie mae and freddie mac. the two gses, as you will, are making enormous amounts of money and in fact, are in a position to repay the government by the end of this year everything that is owned, but last year, i think it was late last year, they changed the approximately see and now they sweep the profits to the u.s. government and that is where we sit right now and they'll get past what they're owed and it was 180, but we're saying 117. forget the numbers and focus on the big picture which is what

are they going to do with these things and are common and preferred shareholders ever going to see money ever get back to even? >> there is something wrong with these two. let's do the algebra here. fannie may forevpreferreds are cents. the common is worth 30-plus billion. that's impossible. something's wrong. they're saying there say huge value on this company after the government gets that, if they do, this requires action from washington, d.c. which -- >> how could jack lew, the treasurer want to miss the opportunity to recoup all of the dividends? how could the congress which has been so bent, particularly republicans on getting rid of the government-sponsored enterprises and bail out the hedge funds that own the preferred? >> how can you not allow the common and the preferred and the preferred owned by many community banks and they did a huge issue, by the way,

preferred. was it months? it wasn't even a year before the conservatorship took place in 2008. those are community banks and it was 34 billion at that point with that dividend. >> if you remember, that was perhaps the great appropriations and you remember that period? a lot of wealthy people own those. this was the stalinization of america. there is something to be said that the government has said, listen, that money is not going to these people. you need a committee, you need someone to say, you know what? we've been paid, time to let the money flow to the preferreds. i still believe that it does not have a call. you know what, david? madness can continue indefinitely. >> it can, especially when you have 30 billion. let's call it 30 billion and maybe more. that goes to deficit reduction. >> that's jack lew. he's sweeping the projects into the budget.

we have $30 million. how will they stop that? >> it's not worth anything without the government guarantee, why should it be paid? >> shouldn't you get out of the way. do we want them to get out of the way? >> we have to figure something out. >> after all of that, david, should fannie and freddie exist after what they put us through? >> i know -- there's a lot. so interesting. before we end, the stock has been up a lot and what we're hearing is bruce burk wets, the fund manager, if you recall, huge owner of aig. i've called bruce, but everything i hear indicates they're big buyers of the common and the preferred. >> i can't sanction it, because the comment goes to five and suddenly they look like -- >> talk about their 34 million. >> the preferred can't be worth

less than the common. let's shift to the bonds in the dollar and the cme group in chicago and i'm sure rick isn't that happy that freddie and fannie are back to normal. >> what are you, from mars, james? come on! they're not even with the government until they get the public's co-signed signature off the paperwork from august of '08. end of story, privatize them and that's what na need to do, but now that they're making money they'll be snoozing on this one, too, everybody has to deal with higher interest rates, right now if you're look are long you have to deal with it. all of the discussions about tapers and convexity and unhedged mortgage positions, it's all fodder for academic talk on the train, but the deal is on the trading floor when the market's selling off you have a decision to make. the rest of it is all fluffer nutter. look at this chart of five-year note yields going back to april

1st of last year and we've seen the above 1% yieldses, but what's most interesting is how far they've come since the second of may when they were trading 64 basis points. now let's look at a ten-year intraday and it reached up very close to 2 1/4 and if you looked at a chart in last april and where was it in early may of this month? 163. wow! if we think about the dollar and the exchange is on the carry trade. watch this yen, this carry trade is important. granted on this one-week chart, the dollar has only given up a little yen and this is key, and if you look at the jgb chart going back a bit, you can see the jgbs on a closing basis at the beginning of this move worth 44 and now they're hovering close to 1% this interest rate move is real, why it's going on, we can debate that at some future date.

back to you, david. >> thank you very much, mr. sand ellie. let's get over to kelly evans and she joins us from post 9. >> hello, good morning, by the way. talk about connect the two things we were just discussing. on the one hand, what's going on in the ten-year and on the other hand what's going on in the housing market. you would expect given the backup in rates that we've seen this which has pushed mortgage rates to their highest level in a year. mortgage rates in their highest level a year and what's happening is there is no refi boom. the refi demand is down and it was at its lowest levels since december. the overall index for mortgage application fell for the third consecutive week and by the way, the share purchase application is picking up and it's not as if this is saying the housing market will fall out of bed or something like that, but what is interesting is it tells us about psychology, right? especially with the jumbo rate

jumping 4%, people aren't scrambling to lock this in yet. >> they're craze. >> do they still not believe this is the end of the move? >> i've refinanced three times. if you have not locked in you're brain dead. you've got to lock in. this is a very clear call that you can't risk it. >> i mean, look, maybe they settle, but you can't risk it, kelly why have we seen the level decline? >> it's a shocking figure unless everybody -- everybody who has refinanced a mortgage has already done so. the cost becomes lower and lower of a hurdle. people have locked in a rate over the next couple of years and probably saying it's not worth it. my question is is it worth it. if we are to believe the guys who are saying, you know, the pimcos and the bill grosses of the world that this is it, the end of the 30-year bull run in bonds and even if you were to use the jumbo guys' proxy.

they don't believe it yet. we're not seeing that level of activity. >> whether they believe it or not, why not lock it in and david and i were talking about mortgages in before. >> these are all personal issues, but -- >> remember, it's not that easy to get a mortgage. you have to have a fico score of 750. they've got the best call on it, and the fact is that that number should be going up as people recognize -- holy cow. instead, they're very complacent. it's a complacent number. >> they know as a side point here that the arms adjustable rate mortgages increased and just 5% of the total applications, but if you've gotten into an arm in 2008, best move ever, right? you would have continued to benefit from that demand, but do you want people getting into arms? only 5%, not a huge move. >> do you think after yesterday, housing affordability is still reasonable or am i speaking like a real estate agent? >> u.s. housing is more

affordable if you compare it to long-term rents or income as to to some of these places, australia or canada where it's overvalued, that's where we'll be in trouble. >> we'll see you in a bit. it's a live and exclusive with reed hastings. that's right. his companies has one of the hottest stocks in the s&p this year. keep it here. [ engine revving ] ♪ ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken.

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be sure to stay tuned for a special interview. netflix ceo reed hastings will join us exclusively at 10:30 a.m. eastern. >> i cannot wait for this. typically i have a lot to do on the street. this man is brilliant. >> yeah, by the way, it's not just us that will do the questioning. we are inviting your questions for the man who runs netflix. tweet us, squawkstree squawkstreet #@netflix. six in 06 with mr. cramer coming up. woman: everyone in the nicu --

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it's time for "six in 60," we might have seven in 60 seconds. let's start with analog. >> this is where people are going which are the inexpensive technology companies. >> western ditch. people are always dumping on it.

they maintained pricing. >> 25% move in two months. >> what can i do? they maintained pricing. >> athena. this is one of those medical record plays that are probably one of the most expensive stocks in the books. it is rather amazing if this thing can keep flying. there you go. there's athena. you don't see that too often. >> seaworld comes out today and it's neutral. merrill likes it. it has 2% yield. >> 37% free -- >> that's not my fault! i prefer cedar fair and i also like six flags. >> you do? yields going up on the ten-year or at least yesterday these mortgage reits. >> people are shocked about agny, american capital and they look like they're in the wrong place on the yield curve. >> and then a y are one keys and let's end with ford. >> baron's loved it.

it is the great place to be if you think europe has bottomed. >> gm was up sharply. some of that happening in detroit. >> that stock was at 18. 23% in three months. >> it seems en kree een incred . >> i didn't need to because it was hair. >> it was nice and curly. >> didn't you love it? >> it was like sly, but i didn't know the family stone behind me. >> you have the ceo, and also a man that talks a lot about fair trade and free trade and the use of natural gas as america's treasurer. i like dan. he is the senior statesman in the group, a brilliant man, honest man and an intellectual. >> at 6:00 and 11:00. >> we have simon hobbs with a look at what's coming up in the next hour. >> we have the interview of the day, reed hastings exclusively from netflix on cnbc. we'll talk about this move and

today we're led lower by the defenses, horizon, johnson & johnson, at&t. how safe are defenses in your portfolio if the bond market is beginning to turn. also we'll take a deep dive into hour two. that's hour two of "squawk on the street." [ male announcer ] we gave the new e-class some of the most advanced driver systems ever made. stereoscopic vision... distronic plus braking... lane keeping and steering assist... eleven enhanced systems in all. ♪ twelve, counting your adrenaline system. the 2014 e-class. the most intelligent, exhilarating mercedes-benz ever made. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer,

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>> and here we go. hour two of "squawk on the street" this morning after a record-setting tuesday. the stocks are pulling back this wednesday morning as worries mount whether the fed will put an end to the stimulus program. we'll tell you how to play all of the market volatility. >> also ahead, yesterday it was a beat from tiffany, today from michael kors. so is the high-end consumer back in business? shares of netflix booking gains of 130% sense the start of the year. what's the secret behind the company's success and can it continue, importantly with its subscriber growth? we have a live and exclusive interview with reid hastings in 30 minutes. >> first, we have braking news here. the fdic out with the earnings release. hampton pearson has the details for us. hampton?

>> hi. how are you doing? the quarterly profile for the fdi-insured institutions look like this. net income topping $43 billion in the first quarter, that's an all-time high. revenues up 5.5 billion or 15.8% from the first quarter of 2012, loan loss provisions falling to 11.3 bell on. a 23.3% decline from a year ago, the lowest since the first quarter of 2011 pre-dating the financial crisis and only four bank failures in the fourth quarter and that's the lowest since the second quarter of 2008 and down from 651 in the fourth quarter and it's the eighth consecutive quarter of the decline in the total number of problem banks and a far cry from back in 2011 when there were over 888 banks on that problem list. net operating revenue up just $171 billion, essentially flat,

1.6% year over year. the statement from the fdic chairman talks about this is aing future earnings of the industry increasingly will be determined by revenues. he also goes on to say tighter net interest margins create an innocecentive for institutions reach for yield which would be a matter of supervisory attention. how do banks operate in this low interest rate environment going forward? a couple of other positives and asset quality continues to improve and more banks, in fact, are profitable and the fdic insurance balance is up to 35.7 billion in the fund from 33 billion at the end of last year. back to you guys. >> thank you, hampton pearson. >> back to netflix, as well. julia boorstin is in california and she has a preview of the upcoming ceo with reed hastings. julia. >> good morning to you, david. with threat nics shares the best

performing in the s&p 500, investors want to hear from ceo reed hastings if he can keep the stock growing. shares are up 130% year to date even after dropping over 6% yesterday. investors have been doing some profit taking after the stock's massive run and an analyst at albert fried and company called the stock overvalued yesterday. the stock is suffering from mixed reviewses from arrested development. a far cry from the positive reaction from the first original production of house of cards. a employ ssample of earnings st including three times the subscriber viewing of house of cards and an 8% increase in subscribers logging in and internet traffic over the prior sunday and this despite the fact that it launched on the holiday weekend. it is whether the big investment in original content is paying off and how will the latest results influence his strategy down the line. coming up at half past the hour,

we'll ask hastings all of the present questions and plus the questions tweeted in by viewers and as it faces growing competition from amazon, as well as the cable providers. david, back to you. >> we look forward to the half hour from now. >> we are down 67 at the open and given the surge that we have so far. what's interesting is to look at the bottom of the dow and to see what is leading us lower today. verizon, procter & gamble, johnson & johnson, at&t, coca-cola and pfizer. the question is whether the defensive sectors and the safe place to be with everything that is going on, not least the move in the bond markets and many of those defenses, of course, behave like, and they have bondlike qualities. cnbc contributor ceo of richard bernstein advisers and head of institutional portfolio strategy

with oppenheimer and company. good morning. thank you for joining us. >> let me keck off with you. are the defensive areas of the market now safe? >> no. i don't think so, simon. i think that the defensive side of the market is, as you pointed out, somewhat of a bond proxy. it looks like rates are beginning to go up and they've been going up for a year now or almost a year as the economy continues to heal and continues to strengthen. i think it makes a lot more sense to have a more cyclical bend. on top of that, keep in mind the dollar is getting stronger and as the dollar strengthens, the multinational companies that everybody's wanted to look at. >> so -- >> i'm sorry. for give me. i didn't mean to interrupt you. are people who seek dividend and tonight they have to sit in these defensive areas. i know people -- theree always a happy medium between dividends and capital appreciation and ten years everyone wanted capital a

preesh yeahing, and i think they twisted the dial too much with dividends and forgotten the total return is what you should always invest in and it's a question of what the optimal is. >> let me ask you about the bond market from an equity point of view. the bond market has sold off this major drive higher over the month and 50 basis points on the yield of the ten-year treasury. if that area is beginning to look soft and we can talk about whether it will move fast, what does that mean for equity investors? is iter relevant or is it really front and center? >> it's been unusual if you look at market cycles historically. typically, you wouldn't get a yield curve steepening led by the long end rallying because you have the short end fixed right now. historically what that means is agreeing with reach's point, you want to be in more cyclical areas when the yield curve has started to steepen more and the

bond market is sniffing out better growth essentially. so i think it was just very crowded in terms of the defensive play to your earlier question. i think it's all about what you pay for dividends and yield. the valuation got rich in those wears and now the rate that you're disdowning the meager earnings growth is going up and it actually looks more expensive. >> the market is probably range bound in here and it is still overbought and you look to get more cyclical as the market corrects. >> you said yields have been on the rise for aier now and if anything they've been trading back and forth at a choppy range and not consistently on the rise for the past year. >> you're right. if you look at the trough in the last year, i remember june or july, roughly 1.4% at a ten-year note and we are at about 210, 215 and 75 basis points and the stock market is up 30% during

that time period. so this notion that rising rates will kill the equity market is a cur if you havel. it's been happening already and it doesn't stop the market. i'm not quite sure why people are so scared that the potential for long-term rates to go up. >> we heard chairman bernanke himself say in the hearing the other day that they would welcome higher rates as a sign of a healthier recovery. is this different now than when yields first started rising a year ago, every time there was talk of a fedex, we've seen people, the sense that it wasn't strong enough to handle that, and they're trying to assess out whether, in fact, it is. >> we've gone from one extreme to the other where people were worried that maybe the fed was easing too much. we were doomed to have inflation or they weren't easing enough and they had the risk on, risk off and now people are worried about the other extreme that maybe the fed will retrace a little bit here and you can't be bullish there either.

historically, it's not when the fed starts to tighten policy that bear markets start. it's when they tighten policy too much and your indicator for that is not what the other guests say was the steepening yield curve. >> we're no place near an inverted yield curve. >> andrew, let me ask you about the front page of usa today which says that the bull run as far as it's concern side on sound footing and after the gain that we've had this year, we are safe at these levels and we are art feshlly boosted by the liquidity from the fed is not front and center now. would you agree with that? are we safe at these levels? >> certainly in the near-term we've rallied too much and you had the defensive-led rally in the first quarter and as you pointed out they're kind of correcting on the way down which is traditionally an opposite pattern, but earnings are up a lot and the market is up a lot. so the time to get super bullish

was probably a couple of weeks ago. >> hang on, andrew. you have house prices rising at 10% and consumer confidence at a five-year high. the situation continues to improve, surely. >> it does emprouf, but you do have to remember that earnings have doubled in the s&p over the past four or five years and we're $100 and the margins are at elevated level. a last of the move is behind this, given this cheapness still sells me not to expect any major correction, but given the gains we've had so far you can expect choppy sideways trading. >> richard, would you agree with that? >> no, simon. i'm obviously more bullish. i think people should maintain a bullish view toward the markets and we'll continue to see

above-average returns. i think the story for the next 12 to 24 months will be that we will slowly remove the veil of uncertainty and we'll see the multiples expand. >> thank you very much. rich bernstein there and andrew berkeley there. welcome. >> shares of smithfield foods soaring after the virginia-based pork producer agreed to be -- acquired by shuanghui. this makes it the biggest purchase of a chinese company. 31% premium to the pork producer's closing stock price on tuesday, even more of a premium one might argue to the unaffected stock price. you've had an agitated shareholder in the form of continental grain which has been a holder of smithfield for seven years although it did take the steak down just a bit. there was potential of a

proshgsy fight looming. it has never really been for sale. it's had a long-standing relationship with shuanghui. they've been talking for a few months. that being said, there is a question whether there might be another bidder out there. we don't know at this point and then, of course, comes the question here about whether there is's national security concern about a chinese company owning -- by the way, the largest time producer in the world owning a u.s. producer of hogs. there's been a surplus of pigs in this country. farmers have been hard hit as a result of that. all of this will be under review. the architects say this is good for america's farmers and should be approved without a problem. this does seem to be a way for them to get more access to the pork supply. they called it pork big meat in china. pork is to china what pork is

to, and you have the cost of product for a lot of these small farmers falling below what they were getting for pork on the u.s. oversupply and that's when we sarted to see the slaughter happen and some of the problems with with the diseased pigs and they're looking to say how can we secure that? >> were you in china when they had 16,000 hogs floating down the river. >> that was shortly after. february march and in april tp it was a story that continued to dominate the news. shuanghue has been involved in the past for some of these food contamination scandals. >> some questions or a bit more than that. listen, there will be a lot of questions here again. the two sides of the deal will argue this is good for america's farmers and we're keeping everything as it is. it's smith feel, but it is interesting so see the national security review that will take place and whether it raises red flags. erik cantor, by the way,

majority leader in the house. they'll be taking pork out of the mouths and giving it to chinese people. >> they will not being taking out of their mouths and selling the pork. that happens already. we have more hogs than we know what to do here. >> pork because our tastes have changed while there's more demand from overseas and not quite as being opportunistic. >> coming up, the ceo behind the best-performing stock in the s&p 500 this year. netflix's reed hastings. he will speak live on everything from the content, pricing and competition. you'll want to stay tuned for that. here's aye another look at markets and the dow heading back toward the lows of the day. we're up about 92 points. we'll be right back. ♪

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>> a difficult market today, but one stock outperforming is apple. shares are near their session highs and the question is can apple get its cool back after ceo tim cook saying the company has game changers up its sleeve. here is what he had to say about the future of wearable

technology last night at the d-11 conference. >> i think for something to work here you first have to convince people it's so incredible that they want to wear it because the u2 guys are wearing watches. if we had a room full of 10 to 20-year-olds and we said everybody stand up that has a watch on. i don't think anybody would stand up. i don't see it. >> well, on that point, let's bring in lance ulanoff. editor and chief. >> good morning. >> good morning. was this the pub -- >> i don't think he said i-watch. he said wearable tech, sensor technology and as usual, tim cook doesn't offer a lot of real information unless he's at a product launch event.

i thought it was very interesting what he said about the potential i watch because he almost seemed to dismiss the idea that would defy the face of what every analyst out there is saying that it's coming some time late this year or early next year and he says that the people they might want to sell it to are interested. the fact of the matter is that watches are having a resurgence as a fashion item and then the company brought this with me. this is called a martian watch and what was interesting to me about this is that it combines technology and fashion and that is sort of the direction we're going. people want to wear elegant-looking things and they're really happy if it does something special to connect with their phone. >> it's interesting, and i love that you brought that, by the way, and i saw this in barcelona, there were companies that said what they were trying to call an i watch. despite these efforts, perhaps their effort to get ahead of what apple might be bringing to market because they don't

necessarily think that that's where people want to wear this device. is this actually the shift that we've kind of seen with google glass, going after the i-glasses instead. >> clearly, apple is interested in wearable technology and they think it's a powerful, transform tiff area, and they don't -- the signals that we got last night from tim cook was all over the place and he's, like, i wear glasses. i can't imagine wearing something all of the time like google glass. it has to be incredible to wear a watch. so we don't have any clear indication of what they're doing. i think he thought when with we talked about apple tv that is when we got a clear indication and one way or another, but with wearable tech he kind of left it all open. he doesn't think what google is doing is right, clearly, but i'm not sure what he's going to do now. that's the point on apple tv,

you cut to the heart of the problem for shareholders owning the stock at the beginning of the interview where he doesn't offer product information in advance of needing to release it. so he says, yes, there are several more game changers ahead, but we believe very much in the element of sur poise. we think customers love surprises. in other words, hold my stock, if you will, but it's a total act of defiance. >> when consumers like surprises, yeah, we like surprises, but we don't like waiting for them. this is just a waiting game, but obviously now there's pent-up demand for whatever apple is going to do and people are running out of patience. there are a lot of competitors out there. as tim cook said, he doesn't stick his head in the sand and he sees the rise of android, and we want something fresh and new and is it some sort of wearable tech like we have here.

i didn't walk away from that talk last night knowing what i did really before? >> i think the fact that you're holding those watches and not wearing them. >> thank you, sir. >> my pleasure. >> though in fairness they may have changed for conferences. red leather chairs. >> yes, i thought that was interesting, as well. >> very west coast. ? shares of netflix more than doubling serbs the start of the year up 130%. how does the ceo feel about the content acquisition? how have the new series over the weekend added sufficiently to subscribers? netflix ceo reid hastings next exclusively on cnbc. and as we head into the break here is a look at the s&p heat map. we are down just over a half of 1%.

shares of michael kors are on the rise and this up 3% after it earned 50 cents a share for the fiscal first quarter. same-store sales up 37% from the year-ago period.

let's bring in corina friedman. europe in particular very strong. what's going on there? up 63% in the comp. the brand continues to grow in awareness there. they've opened significant stores and are advertising there. so we see the trajectory in europe similar to what's going on in the u.s. so comps are up 63% leak you indicated and they doubled the amount of stores that are possible in that region from 100 to 200. >> they've had a lot of momentum ever since they went public. what gives you the confidence that they can continue it? the segment that they're targeting is very appealing and accessible luxury. a lot of people call this stock a luxury stock which means the price points are a little bit lower in traditional luxury and we think that opens up a larger customer base relative to a competitor, say, louis vuitton or higher-end brands. >> what with about asia?

>> when you hear about luxury even accessible luxury. who what is the growth potential there. >> those stores are operated by partnerships, not currently owned by michael kors. so they get a license fee from that. they think the store can go from 150 to 200 as a maximum potential there. >> we keep hearing about how the luxury goods manufacturers are anxious to buy growth in some form. are you suggest tag michael kors is kind of below that threshold? it's not luxury enough and when you see so many hedge fund managers owning the stock, does that make you glad that the smart money is in or nervous that they can pull out for a better trade? >> two questions there. yes, we do think that the lower price points are increasing the customer base second, yes, this is a stock that's widely own asked that does limit the amount

of upside, i think. >> given today with the strong results, not a lot of people are left to buy this stock so we did think that there could be profit taking before it starts to trade purely on fundamentals. >> corina, we'll leave it there. thank you for joining us. >> corina friedman. >> i do think the broader index now at the lows of the session, but coming up after the break. the moment you've all been waiting for, it's true, the live and exclusive interview with reed hastings. we'll get more on the original programming, has it arrested their development? we'll be right back. ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold styling, unsurpassed luxury and nearly 1,000 improvements. the redesigned 2013 glk.

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welcome back. we are watching the dow down 132 points near the session lows and we've dropped in the last several minutes here. in terp of a catalyst not necessarily coming across on the ten-year breaking the important psychological barrier of $120 for the first time since q-4 in the last year. on the news where china is front and center, iron ore is the latest example of this and feeding through to the broader market we're seeing this morning. >> take a look at this stock, no stranger to many people who are regular viewers of cnbc. >> it is netflix, a phenomenal performance so far this year as people reevaluate what exactly netflix will be as a business

moving forward and now to julia boorstin with the interview of the day. sgrul julia? >> thank so much, simon. we are joined in an exclusive interview, reed hastings. >> thanks for having me. >> how did "arrested development" do this weekend? the ratings were not great. >> the fans were great and the director and the talent came together and just did an extraordinary thing. it is not easy to bring something back after seven years. you don't want to see just the continuation. you want to see a whole new take on it and that's what they produced. >> bottom line, how many people streamed it this weekend and how did that compare with expectations and some of the past shows like house of cards? >> we had very high expectations from the beginning for arrested development because it had a well-known brand and we were thrilled with the response and it's been huge, just as we hoped. >> can you give us any data

about how many people watched and an increase with people logging in or anything like that. >> the reason we weren't doing ratings is because we wanted to focus over the first year and we wanted to get people to watch it the first day something comes out. "netflix is being able to watch when you want and not having to watch one time like linear tv. it's over the first year. >> you've had three original shows so far. based on what you've seen with these three shows is your investment an original content which is a significant investment? is it paying off? it's a really big investment on original content, no question. it's changing the nature of our relationship both with the talent community base now we can help them produce shows that couldn't be produced and with consumers and it's been a huge win for us and we'll just continue to grow it, and when you think about it this is how hbo started, too. 20 years ago, hbo were just other people's movies and they expanded into originals and we

look at them for inspiration and say what can we do on the internet that's each more than hbo? >> so what kind of return of investment are you getting on this new strategy? well, what we've seen is steadily growing subscriber growth, growing margins in the united states and we're using those margins to expand more aggressively internationally. we are now in 40 countries around the world. when you think about it, the internet is really a global phenomena. youtube is completely global, facebook is completely global and that's what we should be, and today we're only 40 countries. how will it be based on global strategy and based on what you learned so far including the originals, are you going to change strategy? we are continuing to invest more and more in originals. we'll take that up bit, by bit. we are looking for shows that are unique in some way and that's helping us with the enter national expansion and tommestec

growth. will. >> will you have a tiny amount over debt. our debt to equaty ratio is quite low. >> do you have any changes planned as you move forward with the originals? >> no, we are really just doing more. the new black coming out july 11th and it's unbelievable. it's a middle-class woman and then, boom, she's convicted for a crime that she did ten years before she made something normal of her life and now she's in prison and she really comes to like the people in prison. that's very interesting. done by ginger who did "weeds." and i know you will do another season of "arrested development". >> arrest side unique because it's up to the talent. if they're more interested in that i'm sure they will be willi willing. we pioneered season one and moved with them and really developed it and house of cards is in filming now for season two

and we're excited with that one. >> with hulu up for sale how do you see the competitive landscape changing? >> we compete so broadly against hbo and tnt and fx and cable networks and internet networks and amazon, hulu. it's great that consumers have so manyis choes about what to do when they want to relax. we're not participating in that and it's fascinating and we have no idea who will win the bidding and that's what makes it interesting. >> which buyer would be more concern for example netflix if it went to a paid tv provider like time warner or yahoo. we should pose a bigger problem for you. then they have the most hunger. i'm not sure which company matters too much, but if they got to be an independent company like a start-up in hungary, that might be the most concerning. >> speak of competition, amazon is stepping up its competition to announce five new shows that

it's picking up today. how are you going to compete with amazon when it has limitless cash. >> they do have a lot of money and so good of what they do and the retail operations are incredible and the cloud operations are incredible and we focus on doing one thing and that's what's unique about us and in that area of internet-streaming video, we are far and ahead of them and everybody else. so we have so much competition. it's not just amazon. it's hulu and it's you tube for relaxed video and it's all of the cable networks and what's great about amazon is now they're doing original shows like beta and alpha house, and they're with the create of community. >> amazon getting into the game is pushing up your content costs. >> it is. amazon has been on internet video for fever years. they're in for the long

material. are you going to have to raise prices. >> what we arably to do is if we grow the subscriber buys, weir over before million sub pliers. >> so that means no plans to raise prices. we introduced streaming in 1999. >> dortha the explorer expired and weir hearing angry parents on the twitter and the question is losing the valuable kids' content going to be a problem for netflix? >> you know, we have shows that come in on the network and come out on netflix and if you're a parent and your child is look for example "blues clues" that is definitely a problem, but we have a ton of great shows from disney. we have a ton of great shows from cartoon network and there are other shows that will be on

netflix or are on netflix today and are great for kids. >> so you've talked in the past about how you're cure eighting for content and you're going to pay for less content, but is it going to be a problem for consumers used to having this choice and are frustrated. now they're not each alerted when they can anymore. >> it's a real problem with some of the shows when they come off like blues clues. >> if the child is used to that show, and there's nothing we can do about it because some shows come out of a window and it's the whole windowing system that hollywood has, and we're doing our best because we know what the consumer wants which is to do everything and to be able to rely on it and we'll definitely work toward that. >> how is your relationship with carl icahn these days? >> carl got in and netflix got in $60 and it's 200 so it's a great relationship. >> looking quickly at the world beyond netflix, and i've seen some people walking around with google glasses.

what is the most interesting technology that you're watching right now? >> you know, for video and what we focus on, 4k is the emerging new trend and it's an ultra high-def incredible picture quality and now there are cameras that you will get in 4k ander in the streaming will be in 4k. >> we asked some of the viewers to send questions via twitter. i want to ask about your use of social media. you tweet and you're on facebook and how is that going in terms of being able a way to communicate with investors. >> as a way to communicate with investors we would tend to use cnbc or nak or a release, but with consumers, social is very powerful, and it creates a great relationship with those very active on social. >> now we'll get to the twitter questions and we've gotten a ton of responses and here are a ton of questions that viewers want to know. >> first of all, is netflix in

talks with microsoft for purchase? don't you feel netflix and microsoft would be great for both consumers and shareholders? >> netflix is best independent because we're on so many plat forms and we are on the google platforms and on all of the tvs and sony and samsung and the value of net flicks when it's on every screen that you want to use. >> will netflix be available on netflix devices? >> we are not currently on blackberry screen. >> not quite every screen. blackberry has always been a tremendous work device with the keyboard, but for an entertainment platform is what we're focussed on. >> so that's a no. >> was it difficult to acquire kevin spaes and robert for "house of cards." i would like to add any sports. >> we do content about sports.

we're not going to be in the sports business, but there are great stories around sports and we have espn's 30 in 30 and shows like that. >> will you be having any live events such as news or sports any time soon? >> no, we're really focused on getting more and more tv shows, more and more movies and also the originals. >> is it possible to add netflix kiosks like redbox that could have member-only access? >> redbox is doing a fine job on the kiosk business. that's what they know best. they used to do the coin changing machines and coinstar and their real focus is -- and ours is around internet and doing the internet streaming better than anyone's ever done. >> mr. hastings, what's your favorite show on netflix and what's the show you would like netflix to add. >> i'm savoring on arrested development. some people are bingers and that's great, too, but i'm one episode every couple of days so i've done episodes of the new

season 4 and a little bit of joy every week. >> we talked a lot about all of these entertainment screens. what are the other apps that you're using other than netflix? >> youtube definitely uses friends to pass around links and that's the primary internet one and hbo go. i watch a lot of content in. >> you talked a lot about hbo both today and in the past. are they still your biggest competitor? >> they're our biggest competitor and i'm their biggest fan so it's both. they produce incredible content that's so impressive. >> we are starting to see new signs of a cord cutting. do you believe you're resposhsible for that? >> no. we still have 100 million u.s. households that are on cable and satellite and they been little cord cutting and tremendous growth on the internet as the channel and the real focus is how do you bring them together. >> we look forward to seeing some numbers from house of cards. thanks so much for joining us,

reed hastings, we really appreciate it. >> guys, back over to you. >> a fan of arrested development. >> thanks very much for bringing that interview to us this morning. >> we are now watching markets which are taking an internet down and 150 and 145 points on the dow and it might have something to do with reports out of china and the oecd and iron/or getting whacked and almost 5 % in the index. >> it's fallen more than 10% since april 30th for the conversation we were having earlier about how safe now defensive areas of the market are if they behave. >> still ahead, tibco software chairman vivek ranadive. a fascinating story, we're back in two. ♪

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>> take a look at shares of net flishgs as we complete our exclusive interview with ceo reed hastings. what the market really wanted to learn was whether "arrested development" had boosted subscriber growth. instead what they got was a comment that perhaps netflix was better as an independent. that may be one reason why, guys issue the stock is down. though it has to be said that the market has also been under pressure during the last 20 minutes or so. let's point out where we are on the markets at the moment. dow, s&p, nasdaq all in negative territory. it is very much the defensive areas of the market and the utilities and the telecoms that are leading what may very well turn out to be a markdown. >> all right. one name bucking that trend, of course, smithfield foods which agreed to be acquired by china's shuanghui. i took it on faith that the person i spoke to knew what they were talking about. it is not in eric cantor's

smithfield. randy forbes is actually the congressman there. so i did want to correct that, my apologies. i should have checked, but assumed the person who told me knew what they were saying. >> it is a risky run when you report the volume of volume of that you do. >> thank you. nonetheless, we are still very much focused, and will be on whether this becomes a washington issue. >> it is still controversial, that's for sure. speaking of, ahead on the program, rick santelli on the two ways to taper the fed and which one might be best. it's wednesday morning on cnbc. but-you-better-hurry- because-we-don't-want-to-see- a-grown-man-cry-spectacular! what's the short answer? nice. [ male announcer ] the chevy memorial day sale. during the chevy memorial day sale, current chevy owners trade up to this 2013 chevy silverado all-star edition with a total value of $9,250. plus get america's best pickup coverage including 2 years of scheduled maintenance.

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welcome back to the santelli exchange. our "squawk on the street." interest rates. they continued to be more than well observed these days and even though they're at levels significantly lower than they were not that many hours ago. but let's go over some reasons why. in the first case we have to start as the fed. all the certainty and unintended consequences of a market that isn't really like a bottle of wine with the cork out breathing

normally. it's very difficult to get a gps on the market. but there's one area that is getting a lot of play, a enit's the mortgage arena. a couple of weeks ago we had dallas fed president richard on. what a straight common sense guy, by the way. and here's what he had to say. my own personal preference, and i can only speak for myself being the mortgage backed securities. we had a rebound in housing. it's done its job. that's his quote. i'll take it a step further. we seem to purchase all the iss issuance. it's almost not a voluntary taper. it's just a taper. so let's look at some reasons in no particular order for the rise in interest rates. and we can include all central

banks. i've said it a thousand times. all stimulus is tangible. whether from japan, the uk, the u.s. it all ends up in the same stream and you can't pull out a molecule of liquidity. better economy. listen. there's no doubt. how many years after the crisis the economy is getting kbrt. forgetting the reasons why. but anybody who has gone to the funs. you know, i'm not the world's tallest person. i can find fun houses with mire rors that make me look 7'0". lemplg is key. it goes to convexity and unhedge possible. nonagency mortgages that carry trade as a form of leverage. the carry trade includes much of what is going on now. and this reason, i ask many traders about why they think interest rates go up. i have to tell you.

i was shocked at how many smart traders are around the floor for decades. people with fixed income no more than we do about the vetch wall size and scope of interest purchase programs. back to you, simon. >> there's an awful lot of money at stake. thank you. chairman and ceo billionaire vivk ranadive on everything from his tech to wiping out the competition in the battle to own the sacramento kings. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t

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. facebook is down. there are reports that they are losing advertisers alongside ads with offensive images. nationwide has suspended the marketing campaigns on facebook. while dove says it's working with taste book to fix the situation. facebook said we have been working to improve the systems to respond to the allegations. they have failed to capture all

the concepts. we need to do better and we will. that's always going to be a problem for social media. >> and farewell to you, david faber. we'll see you tomorrow. here's what you may have missed the if you're tuning in. welcome to "squawk on the street." here's what's happened so far. >> we had this awful worldwide system that basically tells companies if you make money overseas you better keep it overseas. you'll get hit with another tax when you bring it back. that doesn't work. >> we have to think about ways to create a different type of mandatory savings policy, which i believe we need to do in the united states. >> this is a market that needs to get off of fed life support. so many people feel like it

means like dnr, do not resuscitate. i say it means some stocks are good. we need to get the people who expect the product to give up. when we do and apple introduces something we all want to buy, the stock flies. >> now about wants dividends. the total return is what you should always invest in. >> with wearable tech, you kind of left it all open. you know, i'm not sure what he's going to do now. >> it's a really big investment. unoriginal content. and it's changing the nature of our relationship with the talent company and with consumers. and so it's been a huge win for us.

>> good morning. we're live here at post 9 at the new york stock exchange. if you mised it the markets are down substantially this morning. 173 points off the dow jones industrial average. about 1.1%. the same for the s&p 500. the nasdaq is doing a little bit better. shares f of michael kors surged. take at this luxury retailer reporting luxury retailers are positive across all markets. as for the biggest decliners, after mortgage applications fell 9%, interest rates are jumping to the highest level in a year. kb homes, toll, d.r. horton all in the red. toll brothers down more than 4% today. simon? >> okay. 8:00 a.m. on the west coast.

good morning. the markets are in the red after yesterday's big rally. are we safe at these levels or should you prepare for the possibility of a bigger pull back? plus, apple ceo tim cook is speaking out about the future of his company. find out what he had to say about apple's product strategy. what's coming down the pipeline and what he thinks about wearable technology. and the largest ever chinese acquisition of a u.s. company. we'll tell you what the implications could be for that industry. and we'll start with markets pulling back and now down more than 1%. paul hickey is cofounder of the group. good morning to you good morning. >> paul, let's start with you here. do you know why we have now taken a leg down, putting us about 175 points lower this morning? >> yeah, it's a pullback of 1%

here. the market was at overbought levels. and you can see these short-term pullbacks. as far as an extended correction, we're not recommending that going forward. >> are you recommending people buy in here? >> yeah. we recommend people scale in here and buy stocks with some cyclical names. financials are holding in here. we look at from a broader term perspective is there are two years with very close similarity to what we have seen so far in 2013. those are 1995 and 1954. in both of those years you saw strong gains in the market in excess of 10%, and in terms of waiting for a pullback, in 1995 the deepest pullback you got from an intraday high was 3%. you had to wait to december for

that so back in those years people were waiting for corrections as well. they never did come. >> given that, why are nay not acting opportunistically? >> well, i think we are going to get somewhat of a correction here. we were very, very overbought. sentiment was way too high of levels. you look at investment adviser polls and it's pretty clear that everyone was very complaisant. we had days and days and days of rallies without any kind of correction, and people got too complaisant. it's only natural to think if you put a little panic in the market -- and i think what marketed this was the ten-year trading on 2% yield. that got people concerned about what the fed may do. is the fed going to pull back? it didn't take much given how extended the markets were. now you're getting a significant pullback. and we are starting to see opportunities. the biggest opportunity i see is

mortgage. stocks were trading at a premium. now trading at huge discounts. so things can change quickly in trade opportunities. i would agree with the interv w interviewee that it's a good time to take advantage of that. about how the defensive rally has taken us to where we are now. we spoke about the fed forcing people to buy dividend stocks. if those defenses are going to turn, are we sure the stock market is going to hang on in there? >> that's a good question. it's clear the central banks worldwide, not just if fed, you can throw them in there as well, having created this. the question is how sustainable is it if they walk away? there's only one way to find out, and that is if they do walk away. i agree with you.

i think politically they won't. i think that's the problem. if they walk away, does the market collapse? let me go back to you. you said buy cyclicals. what would that mean for the overall level of the market? >> people are thinking the economy is doing better and the worry is the fed will step out. if the economy is going to do better on its own feet, then the cyclicals are going to do better here. last week's fed minute today and bernanke's testimony, we've seen that happen three other times this year. the market got short term concerned that the fed was going to pull back. but in our view the fed isn't going to pull back until everybody and their grandmother knows that the economy is on its own feet and doesn't need fed support. at that point the question isn't if the fed should step out. what is the implication in staying too long. but that's down the road, we

think. >> paul, thank you both. on if east coast on capitol hill, tim cook is answering questions at the d11 conference in california last night saying apple has several more game changers in the pipeline. what is the main take away that the dust has settled a bit? >> well, a couple of hints. tim cook is not going to make product announcements here. the first i want to bring up is the iphone. he was asked about the product range of the iphone. >> you'll never come out with two different iphones for different price points or demographics or regions or anything. why not? it worked on ipod. why doesn't it work on iphone?

>> well, we haven't so far. why haven't we so far? >> it takes a lot of work. it takes a lot of detailed work to do a phone right when you manage the hardware, software and services around it. >> now presumably if they get that work done, maybe they can expand the line. he also drealsed a larger screen iphone which apple ruled hout in the past. they kept apple from doing that up to this point. he also talked about wearable technology. di dissed google glass a little bit. saying they're not stylish enoug enough. >> i think for something to work here you first have to convince people it's so incredible that they want to wear it.

because where you two guys are wearing watches, if we had a room full of 10 to 20-year-olds and said everybody stand up that has a watch on, i'm not sure anybody would stand up. i don't see it. >> now so reading between the lines, possible wider range of iphones. maybe a larger screen. maybe cheaper ones. he didn't come out and say that. not interested in glasses. more interested in the device that does multiple things. he says nobody has done that well yet, simon? >> it must be so disappointing for apple investors to watch that. you have a stock down 16% so far this queer in a market that's up 17%. you may hope he would give investors something to push the stock up in an upward direction

if he has so many goodies up his sleeve. >> you know, simon, the stock is, last i looked, a little bit up today on a down day. you know, i'll mention this. steve jobs when he came to the conference in the past, he didn't really release product news either. what he was happy about. what ticked him off. tim cook, a lot more guarded m people said, hey, he didn't say much new. we'll have to see in a few days. we know we'll get product news there. cook made the promise. >> thank you. fascinating. fascinating to see him speak, nonetheless. up next, find out what netflix ceo reid hastings has been telling us about the future of original programming, tech innovation and a lot more. but first, rick santelli? what are you working on, rick, for the next time that we come to you? >> well with interest rates

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it's a triple-digit loss in the wrong direction.

the dow down 150 points. take a look at the consumer staples sector. it is sharply lower today. we've been speaking all morning about whether defensives in our safe, whether the types of moves that we have, and of course, many of the stocks you could consider to be bond like in their quality. let's throw it back to seema mody for more on today's big move. seema? >> that's right, sam. as traders rotate, we're seeing consumer staples stocks get hit. tobacco stocks moving lower. phillip moore ris which offers a dividend yield well above, the shares currently pay over 5%. a dividend yield of 4.8%. and dow today has been on fire this year as investors bid up stocks that offer a yield but today we're seeing red across the screen. kelly, back to you. >> perfect. thank you very much for that.

now reid hastings sitting down for an interview earlier this morning with julia boorstin who joins us now with highlights. the stock reaction has to be one of them certainly. >> absolutely, kelly. now reid hastings wouldn't reveal how much people watched arrested development this weekends, but he said the company had very high expectations for the new show that debuted on sunday. he said he's been thrilled with the response, saying it's been huge as they hoped. i asked if the big bet on original content is paying off. it's a really big investment on original content, no question. and it's changing the nature of our relationship with the talent community and with consumers. and so it's been a huge win for us. and we're going to continue to grow it. when you think about it, this is how hbo started, too. 20 years ago hbo was just other people's movie. then they expanded to amazing

originals. we really look at them for inspiration. >> hastings is also watching amazon, which is increasingly competing directly with netflix and driving up the content cost. >> they do have a lot of money. they're so good at what they do. the retail operations are incredible. the cloud operation is incredible. we focus on just doing one thing. that is what is unique about us. in that era we're far and away ahead of them and everybody else. so we have so much competition. it's amazon, hulu. it's all the cable networks. >> now as for hulu, i asked hastings which buyer would make the streaming video site the biggest threat to netflix. >> i think if they were independent. if they were in another big company, i'm not sure which matters too much.

but if they got to be an independent company, that may be the most concerning. and hastings says they're the biggest competitor and he is hbo's biggest fan. now he's looking to create the next generation hbo with his big investments in original content. back to you. >> let's brick in a pair of netflix analysts to get to that exclusive interview. and we're also joined by ed williams, managing director of. and now ed, you have a $205 price target, so you basically think the stock should be where it is now. you think it should rise more than 50% from here. why is that? did you get kind of additional -- to support that

notion? >> yeah, i think netflix is in the early days of becoming a tv network company. a tv network company is a high margin business. very valuable businesses. 30% margin of business if you look across the space. news corp., disney. multiples. there's a lot of value from having exclusive video content that people want to watch. we're going to see them grow by $1 to $2 to $3 per share for years to come. really driven by market expansion in the u.s. they're spending $1.6 billion a year on content. they don't get hbo's margins. they will drive subscriber growth. i think it's going to be a great stock from here. the big question is whether arrest development killed that. maybe that is harsh, but we still need to know that they're driving -- that it's driven

subscriptions towards the $880,000 that we're targeting. >> they're focusing here. it's maybe a million or two per episode. that's a very smart pall part of what they're spending. there were 3 to 6 million who watched the show every night while it was on the tv. if they have one million subscribers to sign up for arrested development, that would be $96 million of annualized cash flow for the company, which is only generating a couple million dollars. that salespeoples to the leverage in the model. the reaction has been great. they have a core fan base. it's been a home run. >> would it have been a better strategy for netflix to force people to tune in every week, thereby saying, i may as well pay instead of saying i got it

or i missed it all together? >> no, what is key is everyone can catch the shows however they want to. they're all right there waiting to watch. they are doing a great job going out and getting more exclusive content. that's the key to their success. that they are the only ones that have the rights to. and over time, i would expect them to start producing more shows. is this ultimately an acquisition play? we saw the shares send off when he said no, we're not in play. so despite the fundamentals, does that keep shares in play here? >> you know, it might. i think the beauty of netflix for me, at least, is that it's available on every device. so you don't want it to sell -- one of the questions was about

microsoft. you want it to be available on every platform out there. whether on samsung or whatever it may be. that's what actually creates the value of netflix. >> good to see you both. it's an important debate. it will continue. >> and markets are off their lows. we are down 175 points. now about 150. and straight ahead, we're taking a look at continued fallout from the move in interest rates. we'll talk to the ceo of one of the fastest growing internet companies to get his view and we want to ask him about basketball as well t. yes, the compare man will join us live. we'll be back in two. [ kitt ] you know what's impressive?

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following is smithfield. for $34 a share, it is the largest purchase of a u.s. company by a chi need company just edging out the theater purchase, the amc purchase, of course, which michelle ka rue sa cabrera has been following for us. she has all the details on this one. >> hey, there. the chinese will spend $4.7 billion on this deal. it's going to be worth $7.1 billion. previous to this. smithfield is the largest hog farming and pork producing company in the world. as well as the existing benefit package for the employees. all locations in the u.s. will remain in place. shares of smithfield soaring today. not hitting the $30 per share

price tag, even though it's an all cash deal. the companies have voluntarily submitted the transaction to the committee on foreign investment in the u.s. everyone calls it sypius. we called the treasury department. they koent comment on any specific deal. however, people familiar with the way washington works or with the way the deal works, the process works, have told our washington product, they don't think there are going to be any issues. however, there could be political pushback because of concerns about a chinese company being in control. they had problems in china when it was found they sold chemically tainted meat products. don't think of them as buying hogs in the field. they are sbebt intent on improving food safety and supply chain.

the most recent five-year plan made it clear they want to modernize thing ary cull clur sector in the country the same way as the manufacturing sector. simon and kelly, so a lot of people are thinking they are going to move the chinese style business to the u.s. when the chinese is saying they want to do more u.s. style processing in china. back to you. >> i guess they would say that. >> of course, telling it the other way wouldn't sell. >> the bells are about to sound across europe. we'll have the close and the details on how it will impact the u.s. next. [ female announcer ] there's one thing

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the markets are closing across the uk. simon, what can you tell us? >> well, europe was down before the u.s. market opened. it was one reason why they were lower in the united states. you'll notice they're at a 2.2% loss in switzerland. the german employment market is softening. still the defensive areas that stick out unusually today having suffered loss. i don't know if there's news in the uk power sector. i do know some of the big

utilities sold off heavily today. as you may expect with the move in all the discussion about. you can see the losses that they have suffered. meanwhile you had the leadership saying they're going to give the likes of france and spain an extra two years to meet the deficit requirements. i mean, it's no great shapes overall. they can't hit the deficit. is this a break on the austerity. a lot of the commentary is more about allowing them to kick in. as the economy continues to lag. what is happening here. i want to show you one last set of data.

this is on lending to the private sector within individual countries. and the figures are very bad for april. it's the 12th month in a row that lending to businesses in certain economies. but that's a problem for the ecb. it considers that a failure of monetary policy that there's not more lending to the businesses at lower rates in the country. so you may find specific proposals. to try to stimulate that. we'll get more detail on that probably at next week's meeting. i don't think we're going to see negative interest rates on the deposits.

thr more inclined. >> or single argument against the currency. and that goes back to the point about a drop in bank lending. and the fact there's no transmission of what they're trying to do to the harder hit markets. thanks very much for that. let's get a look at the bigboard. a pretty broadly negative day, josh. >> you see a lot of red on your screen. the dow is still a triple-digit loss. about 1645. important to note how broad the selloff is as well. that's a level traders are keying in on. we had a much higher jump on german unemployment in may.

they also downgrade china's growth forecast. rick santelli has been watching that. where a lot of the pain has been today, one sector is home builders. you look at the itb, that is the u.s. home construction etf. also utilities, less attractive as yields rise. the dow enter down about 10% from their intraday high. down five straight days now. telecom also in the red. >> thank you very much. for rick santelli. >> thanks, simon. you know, there's been a lot of talk, as well there should be, about how much pluses are being kicked into the gdp in economy

by housing. we have rob here with us. we're going to dig in on the pluses, maybe minuses of single family and multifamily housing with regard to the economy. rob, there's some positives going on, is there not? >> absolutely. the housing market is up 10% from a year ago. some of the most hard hit areas have seen 20% increases. housing prices are appreciating. the pressure on foreclosures is diminishing. i spoke with one -- a large principal in a large illinois -- large illinois foreclosure firm who said that the backlog that had been built up over the last year or two because of all the litigation on originators, that they had been able to get through a lot of that in the last six months. >> now let's look at single family. everybody the enam orred with

it. i say that we're not building as many new houses. but we're diminishing the inventory. that's a good thing. and this is really a good thing. at some point as the existing supply is absorbed we will see new construction. that will be positive thing. >> let's put up a chart. the number is down 30%. i mean, it's really huge. and there's a lot of work being done to point out the high correlation between lumber prices, s&p housing. any thoughts about that? >> well, i think it's reflecting there's not a lot of new construction. >> so that's new construction versus existing. what about multifamily? the yield curve is as steep as it's been since the rates were up there. we're going to correlate with

that. is that going to impact multifamily as much as single family. >> multifamily construction on major corridors and business districts is very strong. and the availability of money to them is very good. i spoke with the head of a s.w.a.t. team. and they said that class "b" properties need to be envated, brought up to code, improved to support them. and generally a little more leverage could withstand a 75 basis point increase in commercial lending rates. class "a" properties are ready to go. they can withstand an increase of 150 to 175 basis points and less leverage. >> well, listen, we're out of time. we need to stay in tune.

for nous housing remain one on the growing list of positives. >> that's praise from rick. we'll take it. the dow is coming off the lows as well. we're down 130 points this morning. some of the harder hit mining names also off their lows. but we're seeing a sharp drop in crude oil prices right now. sharon epperson is joininging us for. >> kelly, the weakness has spilled over to the oil market as well. over the last five sessions you may have noticed that oil has been trading in tandem with the s&p 500, with the broader equities market. that's part of why we are looking at the decline in oil right now. we have seen oil prices down a dollar. that is also forcing selling in that market and it spilled over to other energy commodities as

well. what is leading the decline in the energy market is gasoline. gasoline futures are down the most sharply. of course, leading up to the memorial day holiday, that is usually the peak in terms of prices in the summer driving season for gasoline. we have not seen that demand, that momentum around gasoline prices at the start of this. in fact, the good news, down four cents in the week. $3.62 a gallon. okay. thank you. up next, the ceo of tibco. we'll get his view on where we are on the economy, business spending and where these markets should trade with the dow down 139. but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next.

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chalky... not chalky. temporary... 24 hour. lots of tablets... one pill. you decide. prevent acid with prevacid 24hr. are we on the verge of a turning point for the rally? and a top analyst predicting an uprising in one of the market's big e tech names. our traders debate the red hot stock's next move. >> looking forward to it. now chinese pork producer agreeing to buy virginia-based smithfield food for $7.1 billion. the company's involuntarily submitted the transaction to the committee on foreign investment

in the u.s. but that's likely just the first hurdle in getting washington's approval. we have more. should we expect some interference here? >> you know, i think we can expect politics surrounding this. but not a lot of significant interference. you talk a lot about the committee on foreign investment. and that's focused specifically on national security. so it's not expected to be a problem here. i've been talking to a lot of experts saying the best scenario where they get involve sd a stretch. maybe there's property that smithfield owns adjacent to sensitive u.s. site. maybe that would be a problem. maybe there's some cyber issues here. but there's are a long reach here. now the potential area is in the dome behind me. we haven't heard any reaction from congress yet. we are expected to hear from

some of the members. also the agriculture committee has not react yet. and then there's the executive branch at the fda. a lot of folks talking about food safety. clearly questions will be raised about whether or not this has an impact on food safety in the u.s. i'm told by experts they don't have the ability to step in and necessarily block this deal. but they will be in charge of monitoring and may sublt any company here to a higher scrutiny once the deal goes through, if it does. >> unlikely. i would have thought that the fact he is about to meet the chinese premier and whether or not they have access to u.s. weapons systems. >> yeah absolutely. there's geopolitical problems with the chinese. they're a much higher priority

than this one. this could be seen as the kind of sweetener that you offer the chi nose and say we're not going to raise any questions but we'll give you one. so this could be high stakes bargaining between the u.s., but we may hear political static, but we have not heard it yet. this deal may go through entirely unimpeded by washington at the end of the day. >> by the way, it's structured with the reverse breakup fee. thanks very much, sir. >> you bet. >> up next on the program, we'll give you a billionaire's perspective on the economy. the ceo will join us. ♪

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tibco is one of the fastest growing digital software companies. and holding some of the keys to that cloud. it's ceo vivek joins us now on a cnbc exclusive. good morning, vivek. >> good morning. >> i want to start by asking you, we're up more than 200 points on the dow one day. we're down the next. what is your read on how businesses are in the u.s.? >> well, i think it's a tale of two cities. the the best of times for some people. it's the worst of times for other people. if you're on the right side of the 21st century, i think it's good times ahead. if you're a company of the past, perhaps not.

>> i'm guessing you put yourselves on the right side of the 21st century. so helping develop the information buses, which is how the company got its name, what is next? >> >> well, i think that every industry is going to change through becoming real time and through big data. so health care, the government, the travel industry, manufacturing. there isn't a single industry that doesn't need what i call the two-second advantage. which is having a little bit of the right information at the right time. now a days, massive amounts of data available. there's more data that's been created in the past year than has been created in the entire history of mankind. in that data lie answers to just about everything. so every single industry is going to be impacted by big data. >> vivek, we'll talk about the kings. i can see you're itching to talk about. i just want to mention for

people who are not aware, you are a poster child in many senses for the american dream. you watched a documentary in india when you were a child on m.i.t. you came at the age of 16 to this country with 50 in your pocket and you built a billion-dollar enterprise as a result. what do you feel most passionately about on assuring america stays great at the moment? >> well, we have to be able to hire the best people in the world. we have to keep regulation to a minimum. we have to keep taxes low. and we have to keep this the land of opportunity, which is what it was when i came here. so i am -- >> if you were that child now, with $50 in your pocket, arriving in the united states, age 16, would it be possible to do now what you've done? >> i believe so. i'm still very bullish on the united states. i still believe there's no country like the united states. and every day i see people

coming from other parts of the world. so yeah, we have issues, but we're way ahead of the other countries. we just have to be careful not to become like them. >> now, vivek, on tuesday, the nba board of governor also made it official, approving the sale of the sacramento kings to an group you're leading. ending months of drama. giving you the edge over a certain person with the regard to the future of this team. how good does that feel, to be keeping sacramento in sacramento? >> well, i did say earlier if you have 21st century technology, maybe it's not the best of times for you. no, steve is a friend -- >> wow. >> it wasn't really seattle versus sacramento. it was about keeping the kings in sacramento. i was a vice chairman of the golden state warriors so i'm very passionate about sports. when the mayor asked me to help keep the team in sacramento, i thought i had to do something. i came to california with

nothing and i had to do everything to help keep the team and i'm very happy we succeeded. >> you certainly got some help from sacramento in that regard. a lot of people want to know what kind of changes they can expect in the front office. who are you going to bring in? is it going to be all full-court press all the time? >> i'm a big believer in defense. i like to surround myself with people that are always smarter than me. so you can expect a world class team across the board. and the deal closes in the next couple of days and we're very, very excited to move this franchise forward. >> all right, vivek ranadive, joining us from tibco, the new owner of the sacramento king, thank you for your time. >> thank you. >> a little jab to his friend steve volmer who wanted to move that team to seattle. a volatile day in markets this morning. dow down about 22 points.

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the dow down 121. we got red across the board after the dow hit a record high let's not forget yesterday. so that's the broader context.

art cashin with ubs financial services is with us. good morning. what is going on here? >> well, it's -- today's kind a complicated story. japan closed in regular hours pretty well, solidly, you know, none of that volatility again, and everybody thought that would give us an extension of the rally. immediately after they closed in the aft ur hours trading, the markets began to soften over there. that spread into europe again. as you reported earlier. and it also came in to here. so new concerns about maybe things in japan aren't as solidly wrapped up as they thought. then for the first 40 minutes here, we traded in lock step against the yield on the 10-year it and then after 40 minutes, they got a divorce and we started to look at other things. we've had rumors about syria and that conflict expanding. we've had rumors about cyprus. we've had -- none of them really have taken hold.

so i would vouch to you that what i think is we have a kind of collective cloud of all those concerns and rumors float down on us. >> this cannot be, because "usa today" told us this morning the bull run is on a solid footing. there's no need for the market to full from here. >> that's yesterday's paper. >> seriously, are we vulnerable at these levels do you think? >> you can be. we've spoken before about being overextended. being 20% above 200-moving day averages and things like that so you're a little strung out, the markets had an odd shape, it was led by the defensives to begin with, and now they're coming under pressure. all this talk of a great rotation is not really come up. so yeah, we're vulnerable to currency changes and mostly things off shore. >> last week when we saw that weakness spurred by the nikkei's sell-off, a lot of people moved right back into the market. do you think that happens this week? any reason why people might be more hesitant this time around?

>> no, listen, the buy the dippers are still out there. as you and i discussed yesterday, many of these people are way behind the market. they're looking for leverage. they're even buying options to try and get back in. to get their rate of return up. so is there a need out there, is this a desire to buy stocks? yes, there still is at this time. they haven't been this weighted. but this is a kind of perverse market where they don't buy as the market's going down. they wait for the thing to .andl rush in. and believe it or not, there are some academic theories that say that's correct. as absurd as it looks to all us. they say if you buy as it's going down, you never know when the low will be so you might run out of money. so if you wait for the low and rush in, that's the best of all. >> well, we'll see if that happens this time around. art, thank you very much for your time. great to see you. that's it for us. as we hit noon time on the east

coast, let's get straight out to the "fast money halftime" crew back at hq. all right, guys, thanks very much. four hours to go till the close. right there on the wall is where we stand on wall street. the dow's down off the worst levels. that's the picture right now. s&p and the nasdaq are in the red. here's what we're following. revolt of the shareholders. why one top analyst says there's about to be one and he'll name the company in the cross hairs. getting to the core. michael kors beat the streets but not all traders have designs on owning the stock. our top story is whether we're about to see a major turning point for the rally because of rising interest rates and if so what is the best way to play the current environment. we're trading all of today's market action with pete and john, mike