>> you nailed it. >> i was told in my ear they repeated it several times. >> and spelled it like that. >> that was like sticking when they get off -- >> like boom. >> sticking it. >> we're sticking this right now too. does it for us today. join us tomorrow. time for "squawk on the street." ♪ ♪ friends with the munster ♪ the voices inside my head >> welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. busy morning shaips shaping up. home depot. microsoft expected to update its surface tablet this morning, futures aren't far off the flat line. ten-year yield claued back to almost 2.55. the econ calendar light today. most of europe is mildly in the red. our road map begins with home depot, disappointing.

american retailers struggle as weather continues to impact sales. luckily shareholders get a buyback. >> credit suisse pleads guilty and the stock is up. paying billions in penalties for helping americans avoid paying taxes. your swiss bank account remains a secret. >> gopro, go big, go public. wearable cameras. 1 billion in revenue. one extreme ipo. first up home depot reported first quarter numbers, 96 cents a share, that was a miss. revenues shy of consensus. frank blake the ceo says the quarter was hurt by a slow start to the spring selling season but adds the retailer had solid results in nonweather impacted markets. for the full year home depot is maintaining sales guidance and raising earnings per shaforecas. comps 2.66. people looking for something with a 4. >> this was disappointing but i want to see the linearity. sometimes you get situations where you have a couple really bad months and they actually can make some of it up.

the spring selling season is some people think their christmas season. this is when you go, i know frank, this is when you go and get your flats, when you go get your planting. >> seeds. >> your seeds. did send me the tomato seeds once when i complained about the blythe i got. you can make your numbers back. i'm not going to get rid of this. the buyback is big. i don't think you should throw away home depot. the disappointments this morning, this is the one that seems the least disappointing. >> margin discipline. ebitda margins 19 basis points away from the '06 peak. >> these -- they are great operators. lot of people saying jim, extrapolate to lowe's, you can't. that's a fool's game. lowe's you want to see if they caught up to home depot, if they didn't. the focus on home depot and listen to the conference call you're going to be pleasantly surprised an those bailing here should remember this stock has come down a lot. dealing with the finest operator in that segment. i would not toss out the home

depot. >> jc penney being tossed out this morning by wells fargo. >> did you use your gift certificate yet? >> not yet. it's been 24 hours. >> it has. >> i take it out of my pocket. i got to -- >> all right. because don't forget they've got really good, very, very good -- >> these are the same guys that lowered the recommendations when the stock was down and now they sort of do it again. they've been wrong. >> they haven't done wells fargo. come on. look at tjx, disappointing, never disappoints, when tjx has plus one and does what she called slightly below expectations, my question is where are the customers going? my answer is jc penney. going back. >> the downgrade, they cut to underperform. they're talking about levels of ebitda that they called nearly impossible to achieve. they say sales productivity is weak. they say lack of free cash flow. any increase in cash is going to be used for capex. >> why did the preferred go up

so much? come on. this is just the same kind of thing we saw with rite aid. fix the balance sheet, bring in the new merchandise, redo the stores, get the customers energized, get the sales people more commission. you clear out the nonsense that costs a fortune. the joe's sport coats. i mean those were hideous. when i go to kmart to shop i expect those things. which by the way -- >> you do not do. >> the only place i do not shop. i shop everywhere. >> but kmart. >> i have my standards. but i think that in the end that jc penney looks better than people realize. maybe that guy ought to go shopping. he'll say i visited 1700 jc penneys but my jc penney looks really good and so does the houseware business and i think that's a fatuous downgrade. >> dick's no good today. cut their earnings for the year, cut comps, one to three ver us a prior -- >> dick's down eight means tomorrow two, people will have to downgrade. keep in mind this was golf and hunting.

hunting i never felt they had the best selection. you have to go to ka bela's to get your guns, period end of story. ar-10, go to ka bela's. golfing, people have made a big bet -- oh. people make a big bet on golf and golf has been a loser category for a long time. i'm waiting for ed stack to say i went too overboard on golf. jordan spieth, that line for under armour is selling. don't extrapolate underarmor. they call out apparel good. foot locker bunch of number bumps today means sneaker being good. this is -- i'm putting this on hunting and i really am, putting it on golf. >> okay. golf and hunting. >> really golf galaxy down 10. >> i mean -- >> on a day where tiger said it's hard to play with his kids his back hurts so bad. >> he should see dr. oz, very good this morning. golf is a sport you make your bed with golf, you don't have the growth. you make -- have you been to the new under armor store in tribeca. this is the most exciting new

retail store i've been to. i bought my daughter the whole line of five borrow shirts, brookl brooklyn, queens. >> i'm familiar with those. >> fashion forward. when that store blows out under armour is the place to be. i think that right now, dick's is challenged and they've got the wrong product and the wrong emphasis. >> all right. move from retail to finance. and, in fact, what seems to be a trend in finance which is large institutions paying enormous fines. this time different. credit suisse has agreed to pay $2.5 billion to u.s. authorities for helping americans evade taxes, it becomes the largest bank in 20 years to plead guilty to criminal charges. the ceo saying credit suisse regrets the past misconduct that led to this settlement. there we have it. a criminal charge and an agreement, but a bank that is not going to go under.

that perhaps the authorities have gone to great lengths to make sure they got the guilty plea the institution was protected from being put out of business if you will. >> remember ef hutton, it was about the institutions not able it do business with someone that pled guilty. remember drexel, folded like a house of cards. >> an indictment. >> arthur anderson. somehow the government has carved out a some sort -- i mean the government. look, the government can't tell an institution it's not supposed to deal with a guilty party that they should deal with a guilty party. >> went to great lengths here whether eric holder or loss ski in new york state taking in 700 plus million of fines that will go to new york state, maybe help pay for pre-k. >> easy come, easy go. after all the things we heard about if you plead guilty, it didn't matter and the stock goes higher and we live to play again, is that the deal some. >> i think that is. now listen, the authorities can

say hey, we criminally charged and convicted, if you will, not in a court of law, but a criminal plea -- >> ceo stays. >> from a bank which did not occur during the financial crisis, right? so you can put that on the wall. but at the same time ceo stays, institution remains. doubtful they will lose many customers as a result of this. >> well that's -- >> gain some customers. >> that is like -- that's a big deal. like no. i mean i know they worked hard to get this plea and i know it is a very big sum, but i think there will be people in the audience who say why does the ceo stay. from investment banking, wasn't involved, good guy, married a sweetheart after he -- who knows. all i know is that i think that we're all used to the idea that someone should have to pay but looks like no one did other than the shareholders. >> arthur anderson many look back on that and feel like there were a lot of people who paid with their jobs who didn't deserve to. >> we know that the -- at the

time said it would never happen again. i don't want people to lose their jobs because of this. i think that upper level management should be scrutinized. if they write a check and it goes -- and it's done, i think that there are people who kept thinking that when pa the reba regard said things listening we could indict someone, the prospect the indictment closes them. this is a new level of we indict you, you plead guilty, life goes on. >> a new chapter. >> new chapter. >> not a deferred prosecution however. it is an actual -- >> new chapter. >> it's a new chapter. >> but maybe a balance here. which doesn't involve putting a company out of business. >> don't want thousands to lose their job because of one division that had a tax problem. am surprised that the attorney general made a big deal of it when this is really no different from what's happened with all the others in terms of writing a check. >> right. although, right, although that -- those were not krshs

that was not criminal. >> absolutely right. i think there has to be some institution that says we can't deal -- we're going to switch our business to morgan stanley. we're going to switch our business to -- but right now it's the government saying, basically the government saying, please continue to do business with these guys. i don't know. >> when we come back, gopro offering its ipo vision and what to expect from this morning's microsoft surface event. will the company go smaller when it comes to new tablets? ahead texas governor rick perry on the lone star state economy and his message for the president regarding the keystone pipeline. >> oh. >> take a look at futures, coming off the second lightest volume day of the year. lot more "squawk on the street" live from post nine at the nyse when we return.

♪ one of my favorite tweets of the week out of the "mad money" twitter account is an up close and personal view of what jim sees when he hits the sound board on "mad money." got a lot of response from viewers. the buttons, hogs, head shop, baby, subdive. it brings to mind where this idea came from and what your favorites are. >> from my radio show because i think that what would happen is that you try to make -- radio is

about trying to make it visual. i like the house of pleasure, from my old makeup person laura and i like the rim shot. i try to tell a lot of jokes. when i asked david about where does he get his guns, that's a rim shot situation. >> buy buy buy. >> hogs get slaughtered. press the hog button and guillotine. >> the gong, the whip. which do you use the most? buy buy buy but sell sell sell. >> the bull and bear are used and a lot of the submarine dive dive dive. >> highlight of any tour that i give at cnbc. >> you would be surprised. >> allowing people to push the buttens. >> got to go in the smithsonian eventually. >> the smithsonian? >> wouldn't that be nice. >> next to julia childs' kitchen. >> and seinfeld's puffy shirt. >> it's vintage. the ceos who come by say can i

press this button and mention their stock and hit buy buy buy. >> great stuff by the way. >> thank you. >> meantime wearable camera maker gopro revealing plans to raise hundred million dollars in an ipo. in a regulatory filing the company said it generated almost $1 billion in revenue, revenue growth did slow ver sauce a year ago. intends to list on the nasdaq. have you used one of these things? >> yes. i find it exciting. i particularly like it if you see kids like surfing it's exciting. almost like a movie in itself. >> when have you used sfwl dd o? >> i got up with as a gift and returned it immediately. returned it to best buy. >> why? >> i thought you would use it on the subway. >> use it on the subway? i'm not going to use it swimming. don't want anything on me. >> all right. >> where am i going to use it? riding a bike? >> yeah. >> skydiving, base jumping? >> use it here on set.

>> look, i -- i've watched -- look, i think it's a popular gismo. lots have it. at the same time i thought the numbers, the initial numbers didn't look -- like they should have brought this deal public a year ago. >> if you go skiing now, every other skier has it on their helmet. >> right. i have sage coming on my show, the gold medalist, and i'm counting on him to have gopro footage. >> isn't there a limited audience that will be penetrated and perhaps has already having been. >> skull candy. >> and then it will growth will dissipate quickly? >> could be. >> not recommending the stock. >> everybody in new york city wearing one. >> there are a limited number of people who will use a gopro like some of the other fads, but this is a got a lot of millions of people using it. fit bit f that company were to come public, probably think that's a fad. >> but fit bit i can see there's

a data business there and there's a whole model there. >> wearables. >> with wearables that conceivably open up a lot of channels for them. i'm not sure i understand gopro. >> you don't use it. >> okay. >> we've never done that with you before. >> i think it's questionable. let's see -- see where it's priced. a lot of deals if priced correctly they will work. >> that's true. meantime in less than two hours from now, microsoft will hold court at an event in new york city expected to unveil new versions of the surface and surface pro tablets. speculation a smaller mini tablet with a 7 or 8 inch screen could be part of that launch. we will bring you coverage at 11:00 eastern time. a lot of talk about the challenges in mobile hardware in general. two-track nokia and surface stream as well. >> the surface is one of those products where i think if you watch tv, you feel like russell wilson is in your house. a huge number of ads for surface. and you keep thinking it's going to break out because of the

marketing muscle of microsoft. the xbox has broken out. this product has not yet broken out. >> one reason people say, they're coming in just as tablets are flattening out. >> peaking. everyone says tablets are peaking. i would be careful. i think the stock is inexpensive because i think that they're de-emphasizing windows. a lot of the good things going. >> and you give nadella good marks so far? >> i think they're going to try a lot of things, breaking with the past. i like the cfo, amy hood. i like the stock. i like the stock because they've got the balance sheet to take action and xbox is an amazing franchise and don't play it up enough. >> we don't talk as often now about potentially breaking up some of the units. splitting off. >> this man is capable of breaking from the past. he does have mark pen, kind of a strategist, but mark is emphasizing look it's not just windows. a lot of people feel it's just windows. they have a lot of businesses.

look there was a gaming site yesterday that is being bought. >> yes. >> well conceivably. it hasn't been announced. >> what do you watch when you're watching twitch? you're watching people play an xbox. i mean, xbox is a great product. it does a lot of things. even russell wilson tells you you can skype and pay attention to the kids you work with. the quarterback of the seattle seahawks. we had the pleasure to meet. >> very nice young man. >> i was as tall as he was. that's why i -- how i define someone i like in pro football. >> when we come back, we'll get cramer's mad dash, countdown to the opening bell. one more look at the premarket on tuesday. more "squawk on the street" from the nyse straight ahead. [ female announcer ] there's a gap out there.

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we're eight minutes before the opening bell on a tuesday. time for mad dash. we talked retail at the top, but we did not talk about this name. >> lost in terrible retail numbers is urban outfitters. urban outfitters is a tale of three cities. do a little dekeynesian thing. anthropology just doing fabulously, that's home goods. frank blake on the home depot call saying he still believes in the home thesis. let's not quit there. free people, having amazing numbers. urban outfitters which is extremely disappointing. the company is abject on the call saying they got more inventory, not going to be this quarter that's turning around. those buying it now and a bunch

of analysts reiterating be careful. too much inventory and they don't have the formula to turn around the flagship store yet. be careful urban. >> stig figuring out how i approach retail given everything i've heard and cross currents and weather weather weather and the idea there's still the change in terms of people actually using their phones and mobile devices and not going to the mall. >> i think you go back to who actually did do great numbers. my travel trust owns costco. was amazing. put up fantastic numbers in this environment. nordstroms, they know how to do canada. target doesn't know how to do canada. nordstrom's knows. dillards, i know you haven't shopped there in years but they're doing well. nordstroms the credit card wise and move off to staples. >> i thought staples because of the office depot/office max combo would do something in this quarter. wrong! another terrible quarter and they're challenged by amazon. don't forget amazon is the wrecking crew for so much retail

and people just don't go to office supply stores anymore to get office supplies. >> right. >> so office depot, office max had a good quarter. not staples. you want good retail? cvs, walgreens, which i know you're akin to because of the inversion and rite aid had great numbers. wonder, are the drug stores taking shares from companies? they offer a far further, much better array of products. i like them. kroger in the supermarkets. circle back. maybe a great "mad money" piece. who's doing well in retail. >> safeway getting taken private. let's not forget that. >> yes. >> your reference to wall green an important one, one we're watching. >> doing so well, will they being pressured, choose to do an inversion because they're going to buy the rest of lion foods. >> it's an amazing story. some shareholders starting to push back saying it's about more than just less taxes. >> a lot of chicago loyalty, like the cubs and how well

they've done. >> and the union pushing back a bit. >> that's a story not going anywhere. a lot of other stories to cover on "squawk on the street." the opening bell five minutes away. microsoft's surface launch, many products with promise. we're there live, squawk alley, 8:00 a.m. pacific, 11:00 eastern on cnbc. yeah, i'm married. does it matter?

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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in a couple minutes. the home depot conference call is happening right now. the cfo referring to may sales has used the word robust two times. >> and she's dynamite. they're hearing blake talking about pro sales good, services good, big ticket good. new england region the only bad because of the weather. the stock is turning around. those who bet against frank blake have been proven wrong time and again and you're wrong once again. >> that's a name we're going to watch. caterpillar filed an ak offering their rolling three-month global machinery sales. down 13. >> yeah. >> through april which is heading in the wrong direction. >> the stock has been the best performer in the dow. industrial oil and gas remain the bright spots. people dump on that stock but i understand that was not a good series of data. >> yeah. have we done urban yet? >> yes. >> i got to tell you, if they

were to close urban -- half the store can't close half, there is an urban outfitters you and i will go to, all three of us, to williamsburg, one that is -- >> like the three amigo os on horseback. >> yes. we will go in there and get you gift certificates not unlike my jc penney and we'll figure it out. >> that sounds like a great outing to me. >> thank you. >> maybe we can walk across the brooklyn bridge or maybe the williamsbu williamsburg. >> that is always fun. >> it is. let me mention hca here if i can. shares of hca this morning, one of the greatest leverage buyouts of all time is hca. this morning, the news is that the private equity holders which are slowly but surely getting rid of all their stock, selling about 29.5 million shares, 15 million for a secondary, the company also buying back 750 million of their shares as well. 51.51 a share. so we'll keep an eye on that.

bain and kkr, the selling stockholders there. >> this has been win for everyone. it's a great thing when everybody wins. >> all right. there's the opening bell and the s&p at the top of your screen. down here at the big board the nyse hosting pan european days, an event highlighting investment opportunities in the euro next markets. at the nasdaq proofpoint, a cloud-based computer security provider. with all of that we'll keep stock -- retail will the story of the morning. >> yeah. got to go through it. mine you can't lose sights of the fact that not every retailer is doing badly, and there's also a lot of lost in translation what month did turn around, may a little better. i don't think anyone expected robust numbers. a whisper lower. the surprise is not urban which i didn't think was going to be any good but it's tj. you set your clock with tj and carol mira. that is indeed a disappointment.

>> lot of folks wondering if lowe's can finally beat home depot on the comp. in other words, post a better comp they've been trying to do for a long time. >> that would be something. i have come to respect what lowe's is doing. there was a period i felt they lost their way. a period where obviously they were the great growth story for a long time but i wouldn't bet against lowe's either. home depot is a truly great, great story. and you know, you buy home depot in june and we get good weather, holy cow what they can do. >> meantime upgrade of dow over at wells. one of the big gainers this morning. >> my friend frank mitch lays out a good story about why they don't need to split up if they don't want to. we've got some saber rattling there amongst shareholders. but dow is a cheap company. >> yeah. although dan loeb who you're referring to, who put it in his shareholder letter, did back off a bit from the idea of splitting the company, i believe. >> right. >> we'll see. >> doesn't need to split up. we'll see if he revisits that in

a more hostile fashion down the road if he doesn't approve. sony comes before dow when it comes from mr. lobe and his large positions to see what he can accomplish. >> a good point. we go over these and try to figure out, dow harnessing the american gas and oil resolution. you should be thinking of dow. caterpillar involved with the natural gas and oil revolution -- renaissance in this country, north american construction industry sails sales rise 17%. keep track of the fact i had kareso energy talking about how great the unit is in ohio, how great the marcellas, outside of colorado, denver, the eagle ford may be the greatest prospect in the history of america. >> did want to mention shares of vodafone down rather sharply. the sponsored adr here in the states, vod. the company coming out with earnings in which, of course,

you can remember vodafone has done so many things since last year, the deal with verizon to sell 45% ownership stake, bought cobble deutschland or not closed -- the spanish company, but ceo saying our operational performance mixed. emerging markets' business has performed strongly. in europe we face competitive regulatory and macro economic pressures. we've taken steps to improve our commercial performance in germany and italy and beginning to see encouraging early signs. they're making a big invest ment next year. the numbers were not on the revenue side what people had hoped for. the stock is getting hurt. >> not covering the dividend but paying the dividend? >> they're paying the dividend? >> i know. not covering the dividend. >> positive free cash flow after all capex before m&a, spectrum and restructuring costs. there is some concern. >> because i think that that's a great stock if they can pay that dividend. looks like they can. >> and they plan to invest

around 19 billion pounds over the next two years years in terms of investment to bring their network up to higher capacity, higher speeds. >> have you seen the -- this is the -- >> this is a company in transition. say again? >> the cell tower stocks have been incredible in this period. sba, which is a really well-run company. the american tower. remember the bears were all over that. crown castle. these companies have been the way that you can be able to just put on some, remember you have a tower, you can add -- it's like a real estate investment trust. >> that's what they've become. >> exactly right. >> did want to mention yahoo! this morning. yahoo! japan, of course, yahoo! owns -- sometimes i forget 30%, yahoo! japan dropping a $3.2 billion deal to buy a company called e-access from softbank. this hit yesterday later yesterday, but is worth noting. yahoo! japan may be buying back

more stock, that perhaps seen as a bit of a positive for yahoo!. given the significant ownership state there. softbank which controls yahoo! japan opening 42.6% will now move in a different direction. that was going to take cash for softbank will help them when they try to buy t-mobile. >> no one is left alone. every company will get purchased. [ inaudible ] times weighed in with an editorial. >> a wave of consolidation occurring here. no doubt about it. we know that amongst the distributors, given comcast, time warner cable and yesterday's huge deal with at&t and directv. the question is what more will come, if anything, and then another key question is also, well, do the content providers themselves start to feel pressure. because you do have 30 million homes, 30 plus million homes both of these, does that -- certainly at&t and direct talking about synergies and savings that will come in part at least from being able to pay less for programming, that

remains a key question. by the way, don't forget, netflix with 40 million -- >> does the leverage shift to those who distribute the programming as opposed to produce it is always a key question. time warner shares, time warner -- >> stock very weak. >> see what time warner did yesterday. twx up sharply. i think people may be way ahead of themselves in starting to believe in consolidation amongst the programmers but i would note that move in time warner yesterday. >> becoming a mainstream story. "usa today" could the at&t deal raise my bill? tom wheeler in front of a house committee today on the hill from the fcc answering questions about net neutrality and some of these -- they got their plates full. >> college tuition and cable bill. name me the last time those went down? >> they do not go down. college probably has more of a chance to go down than -- thank you. sorry. what is never? >> yes. >> what is never.

college bill more outrageous. it's amazing. >> the daily double. to bob pisani on the floor and see what's moving. >> good morning. we're just talking to some of the guys here. very indeterminate trading at the open. what's weak financialses, retaters. put up the board of retailers. this was a mess today. there is not company specific story. everybody missed and almost everybody guided lower. staples missed, guided lower over the second quarter, trying to remake that business. computer sales aren't there anymore. dick's sporting goods. golf and hunting. got in lower for the second quarter. tjx misguided. cato raised full year guidance but second quarter guidance is below expectations. everybody missed at this point. take a look at home depot. look at these numbers down, double digit declines for some of those. home depot is up, missed but reiterated their full year guidance. that's why that one is trading up. nothing great in home depot. what's going on in retail? a few obvious conclusions you can make right now.

there have been an awful lot of miss, we're negative for the first quarter, many, many are guiding lower for the second quarter. it is not just the weather and it is not company specific. you can't just say dick's falling apart. they're all crummy. the issue is just less money for the consumer and apparel is not hot. obviously they're spending on electronic, games and some entertainment out there, but they're not spending money on apparel. those are obvious conclusions here. take a look at the xrt. an etf for that. everybody trades in the retail space. it's down today. it's down maybe 8%, 7% for the full year. elsewhere, weakness we're seeing here, mostly banks. regional banks had a tough time with the low yields overall. there's huntington, zion, fraction al declines will. ipos. everybody was delighted about gopro being profitable, nicely profitable. the story is a lot of chinese paper will get dumped on the market in the next month or two.

the story about jd.com versus alibaba. bitter reviles in china. jd.com is pricing tomorrow op the nasdaq. the largest on-line direct retail sales company in china. this is a big ipo. they're seeking to raise $1.6 billion this week. alibaba we don't know what they're going to raise. the talk is 15 to $20 billion. but they have very different models here and different profitability. you can see here, jd.com about $11 billion in revenue and about break even. alibaba has $8 billion and $4 billion in profits. 50% margins. this is why everybody is so excited about alibaba. it's a slightly different model. jd.com is a lot more amazon-like. they take possession of things, they ship, have a lot of costs. alibaba doesn't do any of that. they basically just stand out there as a marketing platform for different companies and they take a revenue from the fees they charge. guys, this is a real big concern. a lot of this chinese paper. did you see what happened today?

the chinese authorities came out and limited the ipo market in china this year to 100 companies. a month ago i said there were hundreds of chinese ipos waiting to go public. everybody thought there would be 300 or 400. the chinese authority today comes out, carl, and says 100 this year. that's a sign that chinese authorities are worried about a glut of chinese ipos. i'm not exaggerating when i say there's worry out there. back to you. >> bob, thank you very much. bob pisani. let's get to the bond pits. rick santelli is at the cme group in chicago. >> hi, carl. i'll tell you the treasury market is seeing a little bit of selling. we are seeing the southern southern european yields like spain really pop up. you know what that tells me, a bit of a holiday setting going on. many traders are calling it a day early. maybe thursday. and what's going on in europe? may have reached a crescendo in terms of some of the southern europeans. the two-day of 10z crept up,

open the chart up to july we're dancing along the edge there. not getting our toes wet much under 2.50 but that might be a temporary condition. look at the spreads. really enlightening. this really does auger that we're kind of in a taking a break mode. it's been all about flattening. look at this two-month chart of 5s and 30s, the wide yield curve spread traders like to look at. has done some speepenning. if you open the chart up we are still hovering basically in a zone, a threshold of some of the flattest 5s to 30s trades we've seen since the fall of '09. consider this, when we talk about the good sovereigns, these spreads are very enlightping. boons in particular. boons versus 10z getting very, very close to making a new pass, close to 10-year wides. meaning, boon yields are low and this auger it's going to be hard for our 10-year to see a yield

pop. look at the yield versus boons. a 16-year wide. now let's go back to the foreign exchange market. february 3rd is one of those days whether looking at the nasdaq, treasuries, now whether you're looking at dollar/yen. see the relationship here. the dollar now the weakest since february 3rd. the correlations are enlightening. see the nasdaq go down, see the dollar versus dollar/yen go down. yields won't be far behind. david faber, back to you. >> thank you very much. mr. santelli. well, what's become parlor talk these days in the world of media and telecommunications. a part would be what is dish going to do? that has been a key question for investors for some time, one we've discussed many times here, of course. it's poker playing founder and ceo charlie ergen giving no signs at this point of what the plan is. there are a few data points to

at least highlight for you. one, well let's start off with news from this morning because yesterday, there was some reports which briefly moved dish's stock price higher. that they were talking to verizon. i did not believe that to be the case and today, the ceo of verizon, at an investment conference comes out and says it's not the case. he came out and said i know there are reports out there that we're talking to dish. i can tell you now, that is someone's fantasy. there were not and there are not discussions going on with dish. all right. good to put that aside because i think the idea of verizon, which is still paying down debt by the way from the vodafone, the acquisition is not going to be in the market for a huge deal. that would not seem to be likely. also should mention that dish has delayed its annual meeting. i've asked the company why. they say a scheduling conflict. when you look back they've been holding that meeting more or less the last few years, 2009, may 11th, 2012, may 2nd, 2013

may 2nd. this year nowhere in sight. and, in fact, the proxy was just filed i believe they filed an amended 10k on april 29th. which includes executive comp and related party transactions. no proxy. kind of weird. >> what the heck is that? >> scheduling conflict. many believe well actually what they're going to try to do, delay the annual meeting, at the same time perhaps need some sort of a shareholder vote on some sort of a transaction. what would it be? at&t is gone. no short speculation that at&t had its eyes set upon dish. yesterday, or in a conversation i had with randall stephenson on sunday night and in a filing yesterday, at&t seems to say hey, it wasn't that. we always liked directv. why? well, dish doesn't have the premier pay tv brand, the content, or the customer base as good as dtv. by the way, we would have faced

a lot more regulatory scrutiny and complexity and also if we bought dish and that spectrum that came with it we wouldn't be able to participate in the incentive auctions that are taking place next year which we want to take part in and think that the fcc wants furious bidding from four telecommunications companies for wireless companies. a story for another day about t-mo and sprint. what will dish do with the spectr spectrum? will it sign a commercial agreement? is google a possibility? we can speculate what will happen here. one has to believe it will be very interesting if and when it does happen. i would throw out one other thing which is this nfl sunday ticket which we talked about yesterday. >> oh, boy. >> as being a potential issue to this deal, it would not cost charlie ergen that much to compete, to compete there, and throw a complete wrench in at&t and direct's deal by saying see ya. >> randall stephenson in the

"new york post" tackled. there he is the bottom of the pile. >> for its part at&t again in this filing that i was referring to earlier says we're very confident we're going to get this thing done, but by the way, yes, it is an out for our merger. it's true. if in fact there is no sudden ticket for directv. >> how quickly would you rip out directv if you didn't have that ticket? >> isn't it goings to cost money to change that for the bars in america or not? >> my friends who run sports bars, yeah, it would be a little bit. >> apple's retail chief with a three-part strategy. what the former burberry ceo has in mind. take a trip to the squawk alley joined by "shark tank's" kevin o'leary, an eye-opening take on investing and when satya nadella will be speaking at this microsoft event. we'll be right back.

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angela is making her presence felt in a big way. she's reshaping the executive team visiting stores, holding calls with managers. she has outlined a three-part vision for apple retail and emphasis on china, payments and revaming the apple store sales experience. you're a fan i went on the salesforce.com website, her presentation about what she does at berberry. an electric way to shop and the real deal. >> we had the 13th anniversary of the first opening yesterday in tysons corner back in 2001. john fortt was here talking about how at the time walt mossberg is there, fortt there is, no one thought this was going to work. we know what a force it is now, but what can she build on to it that hasn't been done? >> i think that they -- they have actually lagged the idea of what starbucks has done with howard schultz. lagged handheld, they've lagged an interactive way to be able to

go to the store and have your product ready. she has done some remarkable things that are 360 for individuals in burberry they know more about you than anybody else. take a look at salesforce.com presentation she did at dream force and you'll know what i think is going to happen with apple and exciting. >> we did get to 606 yesterday. >> right. >> still safely above 600, but you think this is going to hold? >> i think it's an inexpensive stock and people keep trying to call it top. my problem with that is that if they have one new product that they unveil you'll wish you owned the stock so you have to stay long. it's been a remarkably good run from 390. people don't talk about it because it's like ah, but i'll take it any day of the week. >> stop trading with jim in just a moment. dow down 56. we'll be right back. capital to make it happen?

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go rhythmic when you see clorox up, people starting to take salesforce.com, kimberly up, start taking fireeye. >> amazon and netflix. this is a trade and the trade is when the economy is slowing which people are reading off the retail sales you buy the consumer package goods. not going to miss the quarter. the highest growth stocks because they'll make the quarter. >> they or al gor rithles. >> it's algorithms. the machines think they're smart but they're not. stupid trade. >> you can beat the machines? >> if they don't believe their quarters they don't believe like they used to. these are not monolithic. they used to all do well. kimberly downgraded yesterday. i think they're doing okay. you can't go in and do the stuff. the machines have no nuance. >> yeah. people have to be careful with that trading. the market is headed down. wait right now. >> interesting. what's on "mad" tonight some.

>> okay. i think we're in the fulcrum of what i talked about. salesforce.com on. they report. go back to february 28th, stock jumped up to 67 in the closing hour and fell and has been bottoming in the high 40s. if marc benoff does a great job and if they deliver on both a guide of both earnings and sales, not just sales, then this will be the line in the sand for momentum. he's got to do both and do it on "mad money." >> maybe the most important interview he's done with you in a while. >> i think this is. the stock has been just a real house of pain to use our buttons. house of pain. >> house of pain. >> house of pleasure. hit that sound board. >> fun show. see you at the gun shop my friend. >> 6:00 p.m. eastern time. simon hobbs is here with a look at what's coming up at 10:00. >> good show, guys. we're delighted to say that the governor rick perry of texas will be joining us shortly on the floor of the new york stock

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welcome back to "squawk on the street." our road map with retail, home depot's results disappointing as weather continues to be an issue but shareholders get a buyback is that enough? >> texas governor rick perry will be live at post nine to talk the economy of the lone star state, jobs and bringing big business to texas. >> head of u.s. equity strategy of bank of america, merrill lynch. >> home depot, did disappoint the street. weather continues to impact sales. courtney reagan back at hq. >> spring didn't quite spring for home depot. the retailer is just the latest in a line of retailers to blame mother nature for a disappointing quarter. however, encouraging guidance and the use of the word robust

to describe may sales on the earnings conference call really has shares moving higher you can see that sharp turn at the open. that was all because of the use of that word robust. for the home depot's first quarter, it was a rough go. the retailer reporting earnings of 96 cents per share, falling 3 cents short of expectations, revenue of $9.69 billion, short of analyst consensus. u.s. same-store sales go grow 3.3%. and on-line sales 40% in the quarter. making a shift to focus on e-commerce. home depot says after the harsh winter and delayed start to spring maintenance materials did perform well, though outdoor merchandise suffered. op the call the company noted strength in geographies with more normal weather, 15 of 19 regions, the four with the negative comps those impacted most by the weather. a lot of discussion on the call about the housing recovery. home depot says its data doesn't reflect a softening trend and tps to believe home price

appreciation, affordability and aging housing stock in need of investment will drive growth. carl? >> all right. courtney reagan at hq, thank you very much. let's dig deeper into home depot earnings and bring in an analyst who covers the stock, the managing director of equity research at raymond james joins us now. you heard courtney, positive commentary on the earnings call. can we chalk this quarter up to the bad weather bug? >> i think so. i think courtney got it right. the word robust has turned the stock immediately when the cfo used that word. >> does that mean that some of the problems in the quarter were directly attributable to the weather or is there something deeper to read into what we've been seeing out of the housing data? it hasn't just been housing starts. sales are losing momentum. home builders confidence dip. clearly that has to be a little bit of a concern here for home depot? >> actually, the housing came in

pretty much where they think it's going to come in. remember, there are two factors. not only activity, it's a level of home prices. housing prices have been pretty robust with the increased mortgage rates that may be putting a dampper on activity. the value of the houses are continuing to rise. so they think about 200 basis points this year of improvement from housing and i think that's still in the cards. >> so if you're an investor right now should you buy home depot as a play on the recovering housing market? that's the view from the company. or as a retailer? >> well, i think you buy it as a retailer and buy it as a well run company. they're earning about 21% on their capital. housing is one factor of home depot. it's not the only factor. but the improving economy is probably 300 basis points of improvement there. the company's execution continues to be very crisp. >> on some of these margins are we going to blow past the pre-crisis peak levels? we're going back to 2006 in some

cases. >> yeah. i think -- i do think that's accurate. that's in the company's plan and it's in our plan as well. that they probably will. they've -- look, they don't have some of the distractions of the previous cycle where they had a number of different initiatives that are no longer in play. and so yeah, i think they're going to get past it. the company relies pretty much strictly on the orange box and that's a real positive. >> how is the company doing with the pivot on-line? as so many retailers are trying to emphasize e-commerce and spending to bulk up the business, home depot has stores in every u.s. state. how is the transition going? >> well, that's going pretty well. right now on-line is 4.2% of sales. you said that. it's about 100 basis points of comp in the quarter. grew about $232 million. so it really is -- that's improving. their buy on-line pick-up in store, has -- is [ inaudible ]. the growth rate in on-line may not be as great but grew 40%

this quarter, 50% last quarter, but still a very nice growth vehicle. >> all right. thanks for joining us. sounds like you agree with your fellow analysts and investors not worried about the disa poimts in sales and profit for home depot this quarter? >> i think we've learned the power of the word robust. >> all right. the power of the word robust. thanks very much, bud. >> thank you. >> microsoft is about to hold a tablet event here in new york city. the company expected to unveil new versions of the surface and the surface pro tablets. john fortt is live outside that event with more. john, i guess in many senses, they're trying to catch up here on the ipad mini? >> yeah. that's exactly what they're trying to do. we're not sure if we're actually going to see the smaller surface today. there's been a lot of build up in anticipation for that. a few outlets have pulled back saying maybe we'll get a bigger surface, maybe a harder push on the surface rt, which doesn't use intel chips. it comes at a time when the tablet market overall has been slowing down. some critics have said this is

the wrong time for microsoft to be launching products into the tablet market. i personally think that that's the wrong way to look at this. the tablet market and the pc market are increasingly blending together. microsoft has this device and services strategy. they have to push forward. i think the question is, how exactly they do that. do they go low with the prices, trying to push the services, as satya nadella in his early moves has since hintsed as an area he likes to explore strategically. do they try to roll out high priced devices and try to burnish the microsoft hardware brand at the same time. a lot of directions they could go in but this leads up to the dads and grads season, to back-to-school, microsoft's chance to grab some share, perhaps from apple. this what is apple was able to do as the pc market was slowing down, gain share with the mac. the software and services that microsoft builds into these tablets, those will be the things that gain them share if they're going to gain any share

at all, guys? >> all right. john, thank you very much. a lot more from you later this morning. john fortt at the microsoft event in new york city. to dominic chu and get a market flash. >> good morning. what we're looking at is dick sporting goods, the stock whacked after the company posted weaker than expected first-quarter profit and lowered its outlook, citing continued weakness in among its golf and hunting units here. the stock at a 16-month low. down about 16% in value. not a good day. also falling in sympathy, check out golf club maker callaway golf as well as outdoor sporting good maker cabela's, both of those on the weakness that dick's says is occurring at least out of its hunting and golf equipment segments. back over to you. >> got a downgrade at stern ag. under pressure. thanks. >> up next texas governor rick perry joins us live at post nine. plenty to coverage with him. his new job initiative. chipotle banning guns. the lone star state's wooing of

the california sa ranch cha factory. it's coming up on "squawk on the street." we'll be right back. i'm type e. i know what my money is doing. i rebalanced my portfolio on my phone. you know what else i can do on my phone? place trades, get free real time quotes and teleport myself to aruba. i wish.

got news in the fast food world. turns out mcdonald's has a new

mascot called happy, a dancing, singing, talking red box. there it is. animated happy meal box trying to promote healthy eating. like the yogurt side. happy seems to be inspiring more fear than anything else. take a look what twitter had to say about that. not so happy. sons of steve garvey said hey kids i'm going to eat your souls. it was described as creepy. bridget carey writes oh, god it has teeth. and steve writes it's the meal that eats you. twitter not happy. >> the problem is if we take another look at him his mouth is too big. his mouth is a third of the size -- >> is that the problem or the fact that he's a box with teeth? >> if you want a cute cartoon tv like tv anchor this is have to have big eyes. his eyes aren't big enough. >> or maybe had he's not ronald mcdonald which everyone is fond of. >> he's had a rework.

yellow cargo pants. >> trying to shift the focus toward a healthier menu. ronald's new outfits. >> really? >> pretty brutal. >> second big marketing effort that has fallen plat for mcdonald's after ronald's new clothes. >> mcdonald -- >> "today" show did the box, getting a lot of attention. >> why is the box bad? >> just looks creepy. i think is the general take. >> okay. >> just looks a little disturbing. >> not so inspiring to get a happy meal from the box. they have their shareholders meeting this week. mcdonald's. clearly the company has been under pressure on global sales, on u.s. sales, declining. trying to rework their imaging. speaking of marketing moves burger king revamping its slogan. now be your way. instead of have it your way. which has been around the last 40 years. according to the company they want to remind people they can and should live how they want any time it's okay not to be perfect. sort of a new vibe from burger king.

>> be your way. >> be your way. >> a little bit like -- do you remember when loreal changed their slogan, because i'm worth it because you're worth it. >> nice reference. >> be your way. >> like live mass, the taco bell a lot of people are drawing comparisons to that one, the spirit of individuality, and more than a parking message -- marketing message, more cultural within the organization. i don't know. under pressure. you're not a fan? >> i'm trying to think about it. >> do the faber children mcdonald's and burger king? >> they don't actually. >> the stocks have done okay. bkw and mcdonald's close to new highs. >> they both have -- >> with the healthy yield. >> bill ackman a large holder there as well at burger king. >> perhaps not the most important what the twitter universe thinks about the marketing slogans. >> probably not. >> up next on the program, texas governor rick perry will join us live on set. we're back after this quick break.

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with the dow down now 44 points, let's get over to dom chu for a quick check of oil. >> oil is holding farm fairly steady as unrest and low yuts put from libya of a weekly build in u.s. crude inventories to a record high. now brent and west texas intermediate oil are currently trading you can see down from about a half to at least -- well call it 0.5%. oil stocks marrying the oil trade in oil prices. look at the major integrate,

exxon and chevron and conoco phillips as well as hess on the refining side of things, they're showing just a little bit of movement here so again, oil prices certainly in focus especially with some geopolitical risks still, carl, on many investors' minds. back over to you. >> thank you very much. speaking of oil, pro-business economic policies appear to be paying off for texas. a number of companies including toyota have announced they will be relocating to texas this year. the state did earn the number two spot on cnbc's top state for business list last year. texas economy continues to be on the upswing. unemployment dropped down to 5.2% in april. employers adding more than 64,000 jobs. no state has done better than that. in a letter to the president yesterday, governor rick perry says the texas economic and energy model could be a model for growth for the entire country and we're honored to be joined by texas republican governor rick perry who joins us at post nine. great to see you. good morning. >> thank you. >> you've been the top state three times. never lower than number two.

how do you like your chances this year? >> my friend rick scott reminds me number two is a good spot for texas. i tell him it's gooed to have a competitor like him that continues to push us. when you're surrounded by bobby jindal and susanna martinez and mary fallon, the governors that put good pro-business policies in place it makes you work harder. we don't take any time off. i think our legislature works on a regular basis to put those tax and regulatory legal policies in place. our skill work force is one of the best in the country. i think we were a'now up to the second highest graduation rates in america out of high school. those are indicators headed in the right direction. we know every day is a new day and have to be more competitive. i wish washington had the same understanding about competitiveness and let the states free them up from this one size fits all whether health care, transportation,

infrastructure or education policies that they try to push down upon the states and allow these states to really compete against each other because i mean, the new new york campaign, i will suggest to you, is because rick scott and rick perry, have come up here to promote and get people to move their businesses here. >> you keep coming to new york, though. andrew cuomo has seen enough of you, i think. >> well, you know, the fact is we need to have a good, thoughtful, win some conversation about policies. i would love to have a debate with governor cuomo on the issue of hydraulic fracturing. look at southern new york and you see the really dire economics of that region, and i can show him clearly where that if he had the courage to put these types of policies into place, that blue collar individuals could be working and having great jobs in an extraordinary opportunity for them to take care of their families. that's, exactly what happened in south texas when the eagle ford came on-line and kids that maybe

didn't have a job five years ago, driving a truck, making $100,000, living in a new three bedroom two bath driving a brand new pick-up truck and talking about where they're going to send their kids to college. that's an awesome story that needs to be told across this country and the president's policies are keeping that from happening with not opening the pipeline. >> you're zeroing on the energy problem or pipeline. clearly your policies in texas are business friendly but are they environmentally friendly? >> let me give you an example. in the decade we finished up, the nitrous oxide levels which -- nox, real pollutants down by over 60% in texas. ozone down by 23% during that decade. at the same time the state grew by 5 million people and created almost a third of the jobs, little less than 30% of all the jobs, in america during that period of time. that is a model for this country. you can safely, environmentally

soundly produce these resources and this natural gas, i will suggest to you, is the fuel that's going to drive the world in the future. as a matter of fact, we'd love to see lng going into the european union. my bet is that would be a powerful message to mr. putin. >> on the subject of natural gas the future as you put it, why don't you call the democrats' bluff? say to them we will support greater controls on coal moving forward, greater controls on automotives moving forward in exchange for the keystone pipeline which is a rounding error in the emissions of this country? >> the fact is, innovation is what's driven this country from its inception when you think about the revolutions that have occurred in the world, generally speaking they have been associated with the united states. on the energy side in particular. i happen to think that the coal industry, they can find the ways to use coal and to use it in a

environmentally safer way than what they have historically. and if you give that type of innovation, the idea that this administration is in an absolute war against coal, killing some of those states' economies like west virginia, that's just unacceptable. when you look at kentucky, and eastern kentucky -- >> excuse me for interrupting you. they would say we don't have that technology for clean coal. >> we didn't have -- these are the -- >> the technology in first. >> but these are the same people that say we peak -- we had peaked out with energy row duck six years ago. george mitchell proved them all wrong. when you think about allow our universities in the private sector to work together and partnerships to find the innovations that can change the world. when you think about energy, you think about oil and gas. well the number one wind energy producing state in the nation, as a matter of fact produces more wind energy than all but four other countries is my home state of texas. that's the type of innovation and the flexibility and when you look at what we've done on the

environmental side to drive down those emissions, there's a model for this country. let's take a look at that instead of this steel hammer of regulation that comes out of the epa and this administration that is killing jobs, not just in southern new york. >> well, governor cuomo has not made a decision on fracking. it's still out there. there's been no decision made. >> but let's make a decision. i mean that's the point. not making a decision is making a decision. >> governor, education is proving, of course, an important issue in the election for your successor. and your critics would say, yes, incredibly low tax rates but you're underfunding education. >> not at all. >> 43rd graduation rate. >> wrong numbers. wrong numbers. >> 46 -- >> second in the nation. >> 49th in teacher pay. i'm looking at numbers here. >> whoever gave you the numbers are wrong, brother. >> it's from -- >> i'm telling you, second in

the nation in graduation rates is where texas is today. >> how are we measuring that? >> the number of kids that start the fourth grade and finish in four years. that's what i'm talking about. we're second in the nation. those are new numbers. the issue is over 100% incross in hispanic participation in higher education. over 200% increase in hispanic graduation rates. our national assessment of education progress we're seeing those on an upward track. fourth and eighth grade hispanic and african-american test scores some of the highest in america. >> you think you spend enough on education in the state of texas? >> we are getting a good result out of our expenditures. the idea that those that say, if you'll spend more money, that's how you judge it, i would suggest to you, look at californiap. look at new york. look at illinois. >> you're going to steal the sriracha family from california.

>> we're going to give the opportunity to come somewhere where they're free from over taxation, over regulation. oxy moved their headquarters about 60 days ago to the houston area. the toyota story, certainly a big one. every i-book -- >> mac production. >> mac book pro is made in austin, texas, and that's the type of competition. people need to understand there are places they can come that there are environments where they can keep more of what they work for and their families can have greater opportunity. >> we're running out of time. i want to ask you, many people would like you to make a run towards 2016 but equally worried about this grand jury investigation you have which i think resumes on friday. very, very unusual that by withholding money, $7.5 million as governor to a unit because the district attorney refused to

resign for a drunk driving charge you are in some way coercing the democratic process. some would say a storm in a tea cup. it could have serious consequences for whether you run or not say others. what can you tell us about that? >> what i tell you is that the authority that a gov governor has to veto a line item has been in place forever. if the idea is you can say you cannot veto a line item because someone would think that that's bribery, is just on its face -- >> coercion is the -- >> i happen to think that it's very clear the authority that a governor has in the state of texas to line item veto state money going to whether it's a -- any other place, the governor has the right to do that. that's exactly what we did. we used that veto authority to -- and i think in a very appropriate way and a constitutional and statutory way. >> i don't know if you heard chipotle is making -- the restaurant chain is making some news today saying that guns are not welcome in the restaurant,

something starbucks has said. you have a problem with that? >> people get to make decisions about where they shop every day and if you want to do that in new york, or texas, that's your call. and then people will decide where they're going to shop. >> think they will be punished by consumers? >> we'll see. >> have you made up your mind about 2016? >> i have no. >> no update. >> no update. >> governor, enjoy your time here on the floor. >> you're welcome. >> you'll be a hit. >> see you in november. yes, sir. >> governor rick perry of texas. straight ahead, we are nearly half way through the year and the three major indices putting in very different performances. what will the rest of the year bring? b of a's head of equity strategy joins us in a moment. dow down 63.

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now you could have done it twice. this is awkward. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business built for business. about an hour into trading. some of the stories we're togging about. staples the biggest decliner on the s&p down 10%. the retailer posting weaker than expected numbers and issuing lower guidance. wells fargo upgrading the stock to outperform from market perform raising the estimate for dow. and a market milestone for unp and norfolk southern hitting record highs. >> we'll check out more market action, dominic chu for a market

flash. >> do you like gourmet burgers? if you do check out red robin, known for their burgers is on fire after reporting better than expected first-quarter profits and sales. its restaurant comparable sales increased by more than 5%p see the stock is up for session highs up 12% in today's trade. back to you. >> thank you very much. at the start of the year our next guest predicted the s&p would rise by 8% by the end of the year to a print of 2,000. almost halfway through the year its gain is a meager 1.6. let's bring in savita subramanian, with b of a, merle ril lynch good morning. >> good morning. >> i'm concerned where we are in the markets. i love how you described the first quarter, one of the messiests. >> very messy. really no trend that consistently worked in the first quarter. except what we found was that the most crowded expensive stocks sold off the hardest and

stocks that were unloved like utility, the yield plays did the best. it was a very difficult to quantify quarter which is what i try to do, but it turned out to be all about ownership, crowded stocks sold off and neglected stocks did well. >> what can you tell about the future? >> where are we right now? my bet is that interest rates in 12 months are higher than where they are today. >> staungsally higher? >> i'm saying like maybe 50 to 100 basis points which is a big dealt on such low rates where they are today. >> this is one year from now. >> one year from now. >> let's talk about next 12 months. and then i also think that the economy is going to be on better footing. it's going to be on more solid ground in 12 months which bodes well for some of the most hated sectors in the s&p right now. so if you look at the average active manager, he or she is underweight energy by about 30%, underweight big cap technology stocks. there are big movers over the

next 12 months by cesense is th buy side is not long. we're positioned for more of the same. more easing, more liquidity, more consumption plays. >> i want to add one more thing before everybody else dives in, you believe share buybacks will be replaced by corporate spending. that's an important dynamic. >> i think buybacks could continue, but my sense is that the market gizzing to reward -- the market will reward growth than returning cash to shareholders. we've seen this happen. share buybacks, companies doing the largest have started to underperform the market. companies spending on capex, on m&a even, have actually outperformed by a pretty wide margin. i think that that's a sign that investors are kind of tired of cash returned. it makes sense to buy back your stock when trading at depressed valuations. today maybe it makes less sense. >> over what period are they starting to outperform? when did that picture change? >> yeah. great question. it changed probably third quarter of last year to now.

we've seen a big reversal where, you know, for most of the last couple of years, all you needed to do was buy companies, buying back stock. all you needed to do to make money. just like a couple quarters ago well, started to see a real shift? the alpha generation from buying buybacks. >> part of it has to be the mega m&a we've been seeing. >> big m&a. >> blockbuster deals. you predict that will continue. you invest in sectors where that is set to happen? >> i think m&a could continue as well as capex. you know, probably the best hunting grounds for either acquisition targets or acquirers are tech and health care. those are sectors where we generally seen the largest deals take place. large cap companies tend to buy growth in smaller cap companies. we think that's probably the best way to play m&a. >> david tepper made waves last week arguing the ecb behind the curve and it's nervous time. what did you make of his comments? how was it talked about on the floor where you are?

>> so i think there is a tremendous amount of bearish sentiment in the market right now. that's what we're hearing from compliants, hearing from -- clients, from everyone. a lot of negative sent ment swirling around us. i think that's bullish for equities. you look at the average allocation that wall street is recommending, 50% to equities. that's very low relative to where we normally are. >> there are reasons for that. it was highlighted yesterday on the front page of the journal, the earnings outlooks are not so strong and the jury is still out on this great big economic snapback that we were going to get in this country, let alone what's happening in europe, where some of those countries are going into recession again. >> sure. so the jury is out on the economy. but so everybody is talking about a negative on 1 q gdp. that's what everyone is focused on, the kind of scary economy. >> and no retail sales growth last month. >> nobody is focusing on the fact that year over year first quarter growth is about positive

3%. it was marked down to zero the at beginning of the quarter. we've actually surprised by about 3% to the upside. and nobody is really giving corporations any credit for actually maintaining some, you know, year over year earnings growth. that's a very under the radar data point and, you know, the sales aren't necessarily coming from consumer. that's one of our underweighted sectors. consumer discretionary stay away. last cycle leadership underweight we think it's done. what could work going forward? your more gdp sensitive mid-cycle plays like technology, energy and industrials those could start to kick in. energy second best performer this year. weird surprise to everybody. >> so interesting to hear this conversation. you haven't mentioned the federal reserve or janet yellen once. >> i haven't. i think that what we're seeing right now is a typical transition from early cycle which lasted for a really long time, a five-year early cycle, normally lasts two years, this time lasted for five years, it's weird, but right now i think what we're doing is transitioning from easy money to

mid-cycle leadership. i'm not saying the economy is great, but i think it's going to gain momentum than lose momentum. >> always great to see you. savita subramanian, head of strategy at b of a merrill. >> up next a potential move by google that could change the video game industry. the former ceo of omgpop joins us live here at the new york stock exchange with his take on that. back after a quick break. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote.

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♪ i can't comment on industry rumors but what i can say we are proud of what we've accomplished over the last three years. all credit goes to kevin lynn, emmitt sheer, everybody else at twitch that built the company and the entire community on twitch that gathered by the millions to share their love of

video games. that we're proud of. >> last night here in new york at the red carpet. it was the vp of marketing for twitch. of course talks between google and twitch are reportedly in early stages right now. no deal is imminent but since twitch allows video gamers to live stream their plays, what could such a deal mean for youtube and the entire industry? we have a perfect guest to talk about it, dan porter with us, the former ceo of omgpop head of digital at william morris endeavor. you sold omgpop to zynga. what is twitch sp. >> i love this deal, by the way. twitch is a live streaming platform for people who play video games. you sit on your computer and you watch people playing live and you chat live on the side. while youtube is all about views, twitch is about concurrens. how many people are on at that time watching. youtube has struggled in the live event space. they did coachella, red bull

jump from space, not much else. video games are probably the biggest things on youtube. cutie pie the biggest followd and biggest subscribers and witch owns that genre. the reason you and i don't know about it, people who watch -- >> i'm not a hard core gamer for one. >> people who watch video games play video games. i watch football, i don't play football. you got to watch and play. >> importantly these guys will sit there for hours. >> for hours. >> so it's 45 million unique visitors a month, 44% of all u.s. live streaming. >> yes. >> phenomenal figures. >> and chatting live on the side. they're not static comments. talking to each other. has its own subculture. >> about advertising at some point. >> the live capabilities of what youtube has ultimately. because if you look at television, what matters is sports. award shows. all things live. twitch totally nailed it. they figured it out. >> is this a billion dollar deal? >> i think this is bigger. think back to the youtube deal why did google buy a site that has dogs on skateboards for a

billion dollars. now youtube wherever everywhere. >> why isn't it at&t? for all the reasons that they're buying directv or comcast? why are they not in the space? >> i think youtube understands this and ultimately for someone like twitch it's about scale. when you start to serve 1 to 2% of all video streams you need the resources of a google or youtube who know how to build this he tcompany from a technol server perspective. >> beyond the live events, people watch other people play video games? is that a thing? >> they absolutely do watch them and i know it sounds weird, but the narration, the live casting, they're very, very engaged. if you ask kids this is bigger than sports. twice as many watch the final of "league of legends" as the nba finals. these things are selling out in stadiums in ten minutes. >> what else can you conceive of creating that people will watch as a live event? at the moment, all the media

companies chase these sporting events, hugely expensive. can you originate stuff that people will watch as a live event? >> certainly i absolutely think you can. why isn't there a qvc as a live thing streamed over your computer. >> qvc is live. >> internet first, digital first. enable all these people on youtube who have huge audiences to get into the live streaming. you didn't know it was video games. it's going to be other things that are kind of at the edge of the market whether it's gaming, whether it's shopping, and they're going to sweep up to be -- >> i just want to ask, who's the next twitch? who else is twitch? who does facebook have to go after if google makes the deal. >> really no other twitch. they figured it out dominating a niche where people are on their pcs playing these games. twitch is huge on mobile too. so they -- they are really the dominant play in the market. >> wow. bullish on twitch. certainly -- >> very much so. >> interesting to see what

google does. dan porter always good to see you. >> thank you. >> he knows his video games. doesn't he? >> he does. >> up next, in about ten minutes, the new ceo of microsoft will take to a stage in new york to announce new tablets potentially for microsoft like the ipad mini. we will take you live to that event shortly on cnbc. cars are driven by people. they're why we innovate. they're who we protect. they're why we make life less complicated. it's about people.

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comcast business built for business. >> welcome back to "squawk on the street." more bad news on the retail front. this time tjx company the owners of off price chains like t.j. maxx and marshals falling after reporti reporting weaker than first quarter earnings. low sales of discretionary items like home goods and apparel. off by about 6%. now back to simon and sara enjoying the gorgeous day outside the nyse. >> literally "squawk on the street." >> literally. over to chicago and rick santelli for the santelli exchange. >> thanks, simon. seems these days, the only way you're going to really figure out where the market is going,

is to have a little sit down and a little chow with your favorite economist. my favorite economist is jim bianco. welcome, jim. >> thanks for having me. >> is this going to cost me th $250,000. >> depends what you ask, how i say it. >> why exactly do you think interest rates are where they are? are the markets rigged? are there unintended consequences? can we learn anything, for example, by the bank of japan or the japanese securities market? >> when central banks and marks step in, they do it for one reason. they believe markets put prices at a place they don't like. what happens is everybody then looks at the market like we do with bonds or like we do with jjbs and say those prices are wrong, and we all bet one way. and then, trading stocks, because everybody bets one way. and last month, in the jjb market, a larger market than the u.s. treasurys, the 10-year went 36 hours without trading at all.

>> 36 hours. without trading at all. i mean, ponder there. and not only that, where are japanese interest rates? >> at about half a percent -- >> about half a percent. and the bund is 1.35-ish, probably on its test to a 1%. the spread between bunlds and 10, 1 1/2 wide. is there any question how high interest rates can go in the u.s.? >> that's what happens. you have the central bank here -- >> you don't want to tell everybody. this might get out. >> i don't want to. but the fed is in the market, too. the result of that has been surveys, like economist surveys with 100% of economists looking for higher rates, or the vast majority of money managers looking for higher rates. watch cnbc for ten minutes and somebody will say rates have to go up. volume is drying up. volatility is drying up. everybody's just sitting around waiting for the inevitable, and

the inevitable won't happen because the two-way market is becoming dysfunctional. >> i think there's a bit of hubris here. we were talking earlier, and you said, well, at some point, it becomes an argument that it's the economists, it's those in charge, it's the central banker putting markets where they don't necessarily want to go. how do they know where the market wuss have been? could you think the global economy is in spectacular shape? >> no. >> okay. when global economies aren't in spectacular shape, what usually happens with interest rates? >> they usually fall. >> okay. is there a possibility that if there wasn't all this tinkering, and after the crisis the central bank would have reversed crisis mode quickly, that we may be in a similar situation with all the markets without all of the unintended issues such as four-plus trillion-dollar billion sheet -- we won't go into the ecb or japanese. >> and that could be the problem. maybe you could argue markets would be here anyway, but market participants don't believe that. they believe the markets are

offsid because of central bank policy and that's creating a problem. they didn't let the markets handle the problem after the crisis. they thought the markets were the problem, but now by tinkering with markets, by forcing them to go where they don't want to go, they're now creating a whole other raft of problems we're starting to see. it hasn't merged yet, because rates haven't shot up, equity markets haven't gone down, but we're definitely not getting the rebound that they had hoped for when they put these policies in place a few years ago. >> i guess one final question. there is now talk that the traditional tools might not facilitate an easy exit, so, you know, reverse read -- we know repo rates are probably more accurate. as you pointed out in your piece, fed funds, which are becoming less of an important tool, you have a world of derivative pricing off of those. another unintended consequence of messiness? >> absolutely. trillions of dollars of derivatives priced off the fed funds market. that market almost doesn't exist. it's not needed anymore. the fed is going into a free

market of buyers and sellers and has become the largest player. i fear they'll start having a whole raft of unintended consequences from here. the story is definitely not over yet. >> jim, thank you. viewers and listeners, you don't need to send out any checks. this was au gratas. back to you. >> and we appreciate that. now, we'll turn it back over to the new york stock exchange where kayla is at post 9 with a look at what's coming up on "squawk alley." twitter style, 140 characters or less. one pro's name, as go pro goes public. the ceo on the stage. and crowd thunder raising funds next. e or au lait? cozy or cool? or "woof"?

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we just want to mention where we're with carnival stock. it jumped more in europe on an upgrade from morgan stanley to equal weight. they're still very cautious. it's interesting. you asked about some of the cruise liners and whether they were sending their ships to emerging markets. certainly carnival has announced it will send two ships to australia, a very fast-growing market, but not an emerging market. more interestingly, royal caribbean said recently that the big new ship with the mobile arm

is going to do six months here in the caribbean, and then they'll send it to china. >> interesting strategy. that's where the growth s watching the russell 2000. just got word it has erased yesterday's 1% gain. now down about 1%. one of the big movers is orbitz. i know you cover this company, as well. >> it had a secondary offering announced last night, so selling more stock. it's not one of the company's, but the original shareholders. >> home depot is a stock to watch. actually trading higher. more than 2% after initially falling after reporting disappointing sales and profit numbers for last quarter. mostly blamed on the weather, because the highlights from the conference call, according to executives, a robust outlook. that was the word used. the power of robust as an analyst told us at the beginning of the hour to describe may sales, and also talking optimistically about the housing market, not seeing the signs of pressure we've seen from the government data. in terms of housing, watch home depot. >> okay, that's it from us. we have completed our hour, our

task is over. let us send it to "squawk alley." >> well done, guys. thanks. home depot is the best performing s&p component now. good morning, 8:00 a.m., and microsoft headquarters in redmond, washington, 11:00 a.m. here in new york. microsoft is about aannounce with the surface tablet. the "squawk alley" is live. ♪ ♪ that is pretty good. welcome to "squawk alley. "counting down the days to june 6th when it hits. did you like the new open? >> i liked it. >> congratulations to our tape producer.

i think brian might have had something to do with it. we'll hear from the lead actress in "taylor schilling." but kevin o'leary joins us, investor on "shark tank" and here, as always, kayla tausche, jon fortt live outside that microsoft event in new york city. guys, good morning to all of you. jon, let's begin with you. that di that nadilla in the building. >> that's right. the new ceo is here, which lends this event that much more cache. look, there are people out there saying it's a horrible time for microsoft to launch a new surface. growth in the tablet market is tapping out. listen, it's a worse time for microsoft to leave the old surface on the market without updating it. they've got to gain share here. they've got devices and services strategy. there's a range of what they're expecting. maybe a smaller tablet. those tend to be selling a bit better with lower price points, and maybe a larger tablet, as well, on the