run health care and run it great and now we sort of know -- >> i like your task force idea. >> i'm saying -- by the way, doctors will appeal -- respond to it. we need doctors, okay. last thing, this is coming -- >> can't you see where it says 9:00? we got to go. >> bye. >> come back soon. does it for us. time for "squawk on the street." ♪ >> good morning and welcome to "squawk on the street." i'm david faber with jim cramer. we are live from the new york stock exchange. carl quintanilla is in california at the code conference in rancho pales verdes, california. the apple/beats deal causing buzz at that event. more a few moments from now. futures this morning as we head into the open. a half hour from now. you can see we are looking at a positive open it would appear, as for the ten year note yield, setting new lows yesterday,

almost for the year, july of 2013 that we hadn't seen this and then took that up. 244, takes your breath away if you're a bond nerd at least. our road map this morning starts with that long awaited acquisition apple buying beats music about expensive hardware, streaming music and mr. i owe veen and dr. dre getting desks. sound from the code conference coming up. a fourway food fight. an all-out bidding war for hillshire. tyson makes an over-the-top bid after pilgrim's pride offer earlier in the week the catch, hillshire's own bid for pinnacle, come on. that's over and done with. the u.s. economy shrinking by 1% in the first quarter. a bad gdp number but a four-day win streak. that was also snapped. let's begin with carl, he is at the code conference and let's get more on this apple/beats

deal, a deal we heard about a couple weeks ago that came together i guess late yesterday, carl. >> that's right, david, called the most scrutinized it tech deal in recent memory and even though it is apple's biggest deal in terms of acquisitions it was the single biggest headline out of the code conference this week. eddie cue who runs apple's media business and jimmy i owe veen sat down and talked about the rationale for the deal, namely i owe veen's ear for talent and sound, but also that human cur rags which is really what sets beats apart from other radio services. the conversation, though, quickly turned to a couple things. whether apple will produce its own music content which they were cagey on and, of course, the product pipeline. listen to what eddie cue told walt about the pipeline for later this year. >> we want to do a few really incredible things and we're focused on that. that hasn't changed.

and it's been keep going down the path we're going of building great products and, you know, later this year, we've got, you know, the best product pipeline that i've seen at apple in my 25 years at apple. >> and in 25 years, moss burg followed up saying eddie come on that covers a lot of ground, the ipad, the iphone and eddie cue did not flinch at that statement. as for i owe veen, a fascinating guy, asked about the business model for a bunch of different industries including free internet radio which he believes, if it continues to rely mostly on al gor rhythmic cur rags, he thinks it's unsustainable. take a listen. >> the model isn't right yet. it's not hot enough yet, it's not satisfying enough, people. we're in america. spotify should have 10 million people in america. not worldwide. >> later on today, guys, the final speaker of the conference,

reed hastings of netflix, will be on this program at 10:00 a.m. eastern time. we'll talk about his opposition to that comcast/time warner cable deal expanding internationally, raising prices here in the united states. later on bill gurley of benchmark, john mcfarlane of sonos. the apple story will dominate the morning. couple notes, the piper note that argues not only does this open the door for apple to create content, maybe in television, but larger acquisitions maybe in internet services outside of things like radio and tv. we'll see. >> i think one of the reasons why people have been critical about this deal no one envisions any other company coming in and paying for beats. basically saying you know what, maybe this is just so particular, meaning they need these people to reinvent themselves, you know what, not that long ago in january, google bought nest for $3.2 billion. almost immediately, 440,000 nests were recalled.

remember this is just a thermostat company. you go back and read why did they do it? they wanted tony fidel. it's interesting to me google got no criticism on a deal i thought was wildly outrageous. dave cody from honeywell said the same thing. apple everything they do is under such scrutiny it is unfair and tim, you're right, seems unfair. >> all right. well carl, standby. we'll obviously be watching very closely later in the show. i'm looking forward to reed haze gs also. >> i love reed. >> is it a needle mover for apple? >> no. one of the things that's happened quarter after quarter lately in the last four quarters you don't want to hear about the itunes portion of the quarter. it's like well, you know what, that's become a second-rate product. apple has always been either first rate or gone, so maybe this will give that part of the conference call a little bit more lift. why do i focus on the conference

call? if you go back, this is a conference call oriented stock. you had the china go on-line is one of the reasons why this stock has been incredible. now we started to get the price target bumps today, we've got, you know, we've got goldman raising the price target, piper, saying open other deals. i want to point out a week from now you'll be talking about the june 6th split. now these are all cosmetic. what we really need are new devices which were mentioned we might have them. >> this may start to help that. >> right. but i want to emphasize that this is the weakest link of apple, is music. it used to be the finest. >> right. because digital downloads have slowed and everybody is now talking about streaming, streaming would seem to be a part of this. it is a nay sant service from beats but nonetheless a service. he mentioned you heard jimmy iovine mention spodsfy. i would refer to an interview with greg mcfay when talking

about sirius, you and your viewers follow closer, what he said what sirius needs. >> a lot of the xm customers are streaming already, of a sirius or pandora or spotify. over time we will need to strengthen our offering through a partnership or acquisition or building our own we'll see. >> maybe should be buying the streamers. only pandora is public so -- >> you mention this, i have been a believer they ought to look at harman. i think apple has to own the car. that is the great 200 million market, right, in cars. look, if they did sirius, if they bought the sirius xm that would be a needle mover. you would say all right, they're in cars. remember beats is only in right now chrysler. harman is in every car. you need to own every aspect of a person's ecosystem.

a purchase of sirius would be excellent for apple. >> move on to what got us excited this morning when we -- when you came in to make up -- whoa. by the way, perhaps, you know, we all should have seen it coming. tyson foods jumping into the battle for hillshire brands offering to acquire the maker of jimmy dean sausages and ballpark franks for $50 a share in cash. this comes just two days after pilgrim's pride offered to buy hillshire for $45 a share in cash. all of that coming about two weeks after hillshire agreed to buy pinnacle foods in a deal worth a little over $4 billion bucks, at least the cash or the equity portion of that. if you recall at the time, hillshire's stock price, this was different than the reaction we've seen from many of the acquirer stock price in the m&a resurgence went down. >> right. 36 to 32, almost instantly when they owned the conference call sounded like we're doing this so we don't get taken over. >> don't think pilgrim's pride and its owner jbs which owns

that and/or tyson did not notice. speaking to people close to tyson i can tell you, this was in the works since that day. >> is that true? >> yes. >> this is what jpmorgan when they were saying this was a disappointment, because something was waiting in the wings. there was something. tyson up nicely today. tyson by the way, many reasons to own tyson. lately the grain prices have come down dramatically. but this is an example of david, supermarket yardage. you are dealing with companies that people do not feel have any growth at all. chicken, beef, so the only thing you can do is merge. >> a quick couple things to the pinnacle deal is done. forget about that. no offense. they can try. i suppose let's not forget that hillshire, maryland company, they can try but 45, now 50, two bidders, one of whom is fully financed, never heard

anything about financing from pilgrim's pride. they say we'll stay investment grade, offering 13.4, 13.4 times the last 12 months trailing adjusted ebitda. >> and that is a -- >> it's a [ inaudible ]. they're saying to eps in the first full year of ownership, significant synergy opportunities is what they're talking about. >> huge. >> more or less forget about that pinnacle deal at this point. >> that's mr. gamgorts they have a bidding war. been a while since we saw one of this type. i would argue tyson has the upper hand here not just because it's $5 above pilgrim's pride but a deeper balance sheet, we'll see. >> look, pinnacle food, stock since it became public m gamgourd sat over here. i thought it was amazing that company sold out because they were going to build this household of brands. i wonder whether that isn't a place to be. >> pinnacle is going -- >> good yield. >> surprised it's not down more

than that. >> down 28. >> got a good yield. that's the only reason. >> good yield. >> bonds going. >> it's going to be awfully hard for them, 50 bucks. 35% premium over where hillshire was trading on the day they announced the pinnacle deal. it went down but still. >> where is sanderson? will sanderson come in? another thing to think about. why do you have the deals, natural and organic. do you regard jimmy dean sausage as natural and organic? >> not typically. >> how about perhaps ballpark sfloonks no. >> is this the part of the show we say quinoa. >> quinoa is on fire. how did you know? >> i like to say. >> it sinnopta has the franchise. >> i had bruise sell sprouts last night. >> i had them too. shaved. i'm just saying that when you look at the part of the supermarket that's growing, it is not this. >> not this. hence, consolidation, perhaps necessary in your point, and the acreeion and synergy can result

from that to boost your bottom line and potential top line. >> exactly. >> wow. this is going to be interesting one to follow. the economy showing contraction for the first time in three years and a mixed bag for retailers on the earnings front. we're going to have those details straight ahead. plus an interview you're not going to want to miss. exclusive with reed hastings. i'm not going to want to miss that one. that's live from the code conference. it's going to be another look at futures. we were looking up about ten minutes ago. still are. as we head to the opening bell. about 18 minutes from now. more from post nine right after this. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase like 60,000 bonus points when i spent $5,000 in the first 3 months after i opened my account.

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new data shows the u.s. economy shrank for the first time since 2011. first quarter gdp weaker than the government originally reported revised to show contraction of 1%, that down from i guess you could call it growth which was 0.1% originally. the government gave no details on the impact of things such as the weather. which we spend a great deal of time talking about and specific to retail and reaction expected here? >> the country in a deep freeze when you listen to one retailer after another. they say look, we had worst shutdowns. this wasn't by the way weak business. these were stores that closed. steve liesman made great points.

some parts of the business never recover again. certain services, hair cuts, not come back. when you go over the home depot conference call which i thought was the part and parcel of this whole economy right there, said listen, it was delayed, not denied. so i think you'll see a very strong number. >> let's talk costco here as well on the subject of retail because it did report its third quarter earnings. $1.07 a share from costco, below an analyst estimates. other expenses impacting retailer's bottom line. revenue missed consensus. meantime abercrombie & fitch reported better than expected results despite a quarterly loss. and another decline in sales. that teen apparel retailer says it was pleased with its performance in what it terms a difficult environment. >> look. abercrombie is one where expectations have been ratcheted down. ratchet them down enough you are going to beat them. i don't like abercrombie. still negative same-store sales. costco my travel trust is buying

it because the gross margins turned out to be good. you have this problem where each month, got better. when you average the month they don't look that good. i have no problem buying costco. >> and where are we when we talk about as we have so often retail in general with the bad weather behind us. with may essentially behind us entering the summer, yet still dealing with this overarching theme that people are using their mobile devices to shop more and more often and not going to the malls? >> you have the howard schultz theme, the first one to propound that, starbucks over in china where is the big growth? still the united states. he would tell you the mall growth is not that great and people don't like to go to malls like they used to. by the way, when amazon had to start paying taxes there was a kind of pick-up. i think that best buy, [ inaudible ] not doing as bad as we think. look, there's still a passion for shopping in the country, but when you look at the two companies that i've always regarded as the american consumer companies, walmart and

target, you just say listen, the economy is not that good. when you look at dollar tree upgrade, you say that's where people are spending. the highest end, you have nordstrom doing a fantastic job. kors, a little controversial but kors is selling very well. >> but walmart and dollar tree, why? what's the customer base there difference? >> dollar tree, i mean look i know we make fun that i shop at a lot of places but i would never walked into a dollar tree a few years ago. didn't have good name brands and were unattractive. now they have smaller sizes. smaller sizes cost less. wow, isn't that just the classic example of how the person not that wealthy is ripped off, right. smaller size, pay less. that said, dollar tree has certain price advantages over walmart and very convenient. particularly dollar tree and dollar general downgraded today. look there's tremendous pressure on the consumer, undeniably, what's the strongest part?

the richest people. the president is like wow, what did we accomplish here? it's okay. it's not great, it's not bad and the secular trend against the mall is very real. >> something we're dealing with for years to come. >> parcel and fedex, united parcel announced -- it's been the last few quarters terrible does anyone really care? that's how we get our product. people want to be at home, they want to be on their handheld. look at the strength of this grub hub. even there. what is grub hub's chief part of a claim? here, i just ordered us dinner. >> domino's, half the people order through facebook. >> order pizza. >> actual interaction. >> no cheese. >> no cheese on your pizza. what's wrong with you? >> it is that man's mad dash as we count down to the opening bell. another look at futures. more "squawk on the street" right here from the nyse straight ahead.

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we have 7:30 until we start trading on this thursday. time for a mad dash. i want to talk a little -- a faber request on the mad dash about the investment banks. some conferences recently where the likes of gary cohen, president of goldman sachs and others, saying the trading front things are not that great, fixed income whether mortgages or whether it's any number of different areas, jim, where they

have seen great profits in the past, they're just not seeing it as much. >> when i worked at goldman in the 1980s, one business got hot, municipals and then another business didn't, you fired people in the area that wasn't hot. the government changes the triple tax rules. put all your emphasis on ipos. goldman has to reinvent itself here. i think gary cohen told only the negative side of things. they dwelds on the things that flatlining produces no bets. can't make no bets. goldman i think right now, firing people in that division, hiring in m&a. you don't have to hire that many in m&a to make money. >> a lot of people are all out in m&a. goldman always good figuring out where the puck is going as opposed to -- >> right. that's the gretzky would tell you that's the gretzky way. >> you like it -- >> buy back stock -- >> i don't know -- >> that's never been roy

blankfein. where is the stock going to be. maybe he should call us come on saying we are buying back stock. if any place will reinvent itself it will be goldman. >> a number of managements in the city group on tuesday saying listen, it's thin margins, low rates, mortgages soft, sluggish trading overall. let's move on. >> this is a company that i have had on many times on "mad money." this is the best security company, fireeye no offense, very good technology. but i felt palo alto is the gem, but they had a problem and every time they came on i had to talk about the juniper lawsuit. how much were they going to -- one of the classic -- this is, you know, juniper says it's theirs, palo alto -- they settled last night $175 million. i thought it would be $500 million. this stock is up eight and people will say that is crazy. no the stock should be up more. >> why do you like this more

than fireeye? look, unfortunately there's enough hacking, you've done so much work on cyber hacking, there's business for everybody. fireeye was a stock that got overvalued no one will quibble with their technology. palo alto has superb technology and do it by the vertical management superb there, glad they settled this, stock can go to a hundred. >> security. >> the biggest growth market in the world. >> they're all offering this product. >> yeah. >> security is important for the enterprise. more so than ever. the chinese are not going away. >> no. >> the opening well not going away either. only 4:30 from now. stay with us. i know what you're thinking...

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five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. you are watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell set to ring in a minute and a half. what's the key to this market these days? >> the key to this market what is you talk about all the time, takeovers. it those do with the fact that we don't have a lot of growth, and the only way to get growth is to buy another company.

we've been saying that should happen eventually. >> we've been saying it for years but it hasn't caught fire but over the last three months it does seem confidence, whether a confidence game or watching your peer group or somebody in your peer group do something needing to react. finally it's happened. >> every industry, toll brothers didn't buy a publicly traded company, bought a company in california. and immediately what they do is raise prices. and they make fortunes. the gross margin goss up. you look at these deals we're seeing in the supermarket, this is about kroger. you to go into kroger and say listen, we have the critical -- stop trying to jam us down. we are now important. more -- don't play us off against each other. don't you do the chicken thing against us. don't you do the beef thing against us. these are defensive against the powers that be. the supermarkets. which you know are very concentrated and very powerful. >> they are. willingness on the part of tyson to pay 13 years worth of last 12 months of ebitda generated from

hillshire brands. that's a high multiple there and it's probably going to go higher. >> i think so. now watch white wave. white wave is a company i think could be -- can't buy it yet. the stock is on fire because they do have growth. they have double digit growth. white wave my favorite natural and organic. >> the opening bell for this thursday. at the big board, bank of california celebrates transfer from the nasdaq to the nyse. as you can see, of course, largely green back there in the real-time exchange at hq in new jersey. over at the nasdaq, the peace jam foundation celebrating the launch of the 1 billion acts of peace campaign to create 1 billion projects that address important issues facing humanity. i can get by on that. >> totally on board. we've got when i look at the takeover, look at that value yesterday. my friend herb saying pearson the ceo of valeant said maybe he made a mistake saying he was going to do -- he wanted to be

$150 billion market cap company. the merger is there. did you notice the smith & nephew won't go away? >> on valeant, yeah, that was weird. valeant, listen, it's hard to do a hostile, stock based, they increased the cash portion to $58.30. but they're still 0.83. indicated that's not going to change. these guys sit down, maybe consider raising. there's a lot of time go still and as i pointed out many times allergan does have time, yes, they can move to even more hostile footing in valent, by written consent, but still going to take months. >> right. >> and we'll see what pans out here. as fwoallergan fights them off, allow valeant to report one quarter, perhaps two quarters of earnings without having gotten that deal done, will they start to show any degradation. >> without the asset they sold

to nestle you have great point. there really wasn't anything more met sa sis to me, built a good company but based on skin. two years we haven't had deals where you can keep your ear to the ground. oil. fbr said pioneer's assets, they own the best part of the permian, the assets are worth $275 there, well below pxd prices. no oils and takeovers in technology than the applied materials deal looking quite good. i am looking for tech deals and oil deals. >> yeah. i think you're right to expect that. listen, you've talked more than anybody as software as a service and disservice about the cloud ipos expecting we would see some consolidation in that arena is not a stretch. >> okay. oracle should buy, listen up, oracle. >> oracle and your buddies at sales force. >> oracle market cap in excess of ibm, oracle should buy

concur, a way it is the biggest gap in oracle's product line, travel and expense, and this is the way you do your handheld being able to keep track of that. concur such a great company, i can't believe it can stay independent unless it goes back to where it was. concur is the best of the software as a service companies i follow that can be acquired. work-day being too expensive. >> i wish they would change their t and e platform. have you ever done your own expenses? somebody does those for you. >> i -- >> 20 years been doing my own expenses. >> it's worst. i haven't put in for expenses. >> it's true. you don't bother. well i do. >> terpble. i didn't mean it like that. >> with ringing one of the other bells over there, bank of california, which as we said was just a transfer, but it is trading this morning over at the nyse. you heard that behind us.

also up apparently. up a bit this morning. oil and gas you mentioned or energy. >> where are the deals there. >> we've seen some. we've seen some energy deals. you're talking about the larger scale energy deals. >> i'm talking about anadarko i've mentioned many times, i don't think it's going to happen -- saw a huge call buyer last week, when you see insider selling nothing going on and there have been filings for insider selling. anadarko one of the untold oil stocks kept back by litigation. if you take a look at some of the companies like sanchez they've gone up so much, sand ridge which lee cooperman likes so much, a lot there. sanchez up 14 straight points because they bought eagle ford assets, eagle ford being the richest field in the country right now. >> right. i got to go back to hillshire because you could -- you know, this thing went up, gapds up, on

the offer from pilgrim's pride and now it's up another 15, almost 16% this morning. take a look at that move. >> this is -- i've been a believer in shrink to grow, we make joke about. this is sara lee. sara lee has always said to me, over and over again, we're worth a lot more if we just got a little more streamlined. so they do hillshire, their coffee business. the coffee business got a big bid. this is totally true. sara lee, congratulations, your valuation kept down by the difty of understanding what sara lee is, break out hillshire and recognize hidden value. >> great on your part. the value through the splitoff, something always in the quiver of activists, for example, and another example they can point to shrink to grow has been a mantra working in this case. doesn't always, but in this case. >> it comes back to jeffrey and denny who understood altria,

philip morris was worth more if they split it up. value for altria in excess at various times to apple. >> yeah. absolutely. by the way, in technology, twitter has had a good week, up another 3 plus percent this morning. >> you talked about an interesting merger idea. >> off camera you and i when talking about streaming i mentioned to you, a couple of people again, technology media saying to me, why wouldn't twitter buy pandora. bring people to the platform. >> by the way, always google could buy anything and everything. i can't tell you how many conversations whether media or technology, google should buy it. google should buy it. google buy time warner, buy this, dish. >> look, these companies are so loaded with cash, but david i'll tell you one of the reasons why, the cash is overseas in a lot of cases. they have to do the inversion. cash is overseas. >> right. >> now on twitter, there's a bunch of analyst reports. a lot of what's going on at twitter people realize the lockup has expired and the sales

have been made. stock is now seasoned. doesn't have that crazy feeling anymore. start beginning to think this is a news service. what carl has been doing out there, our team has been doing out there is amazing. if you can make twitter into something you don't have to tweet, but use as your news service, mark benoff, has said over and over again, ceo of sales force, don't sell this company short, it can be the service for everyone in the world. >> and you know what, they pull it off, you get a great return on investment, next thing you know you a bigger stock. i said it was going to go to 29 when negative, when it got to 29, time to go positive. i am positive twitter. >> mary thompson has more on what's moving this morning. >> markets opening higher thanks to the deal, the first time the

economy has contracted since 2011. focusing on deals and better than expected weekly jobless claims. the s&p 500 at the open set a record high, 1950 and change, come off its best levels a bit, at a new all-time high. the dow jones industrial average about 70 points from a record high. the transports also continuing their record run although off their best levels of the session. still holding on to gain of eight points today. couple groups we've been focusing on, talking about them throughout the morning, the teen retailers, abercrombie & fitch, better than expected results, nevertheless continued weakness in same-store sales. tilly's taking a hit off 21% as the company reported disappoi disappointing results and guidance for the quarter, both hurt by competitors such as h and m which bring fast fashion to this area. so both of them continue to struggle.

abercrombie & fitch getting a bit after reporting better than expected results. cost costco's results worse than expected. dollar tree upgraded over at stern. dollar general cut to neutral on concerns about competitors like target and walmart, also being very promotional and cutting prices and how that is likely to affect dollar general. the dow holding on to a 25-point gain and the s&p at new report levels. back to you. >> thanks very much, mary thompson. did want to mention up with other mover, interpublic has been getting some chatter. i pg, companies. >> left behind. >> mccann is one of their biggest assets. take a look. see what it's done. marks cap of $8 billion. a lot of chatter out there, again when publicist and omnicon went down, consolidation occur, this is a name that keeps coming up. i will add a number of trading sources indicate there's been a buyer of late.

i think it may be elliott. elliott management, the large fund run by paul singer which occasionally dabbles in activism. it could be an investment. elliott not responding in terms of confirming or not. worth a mention. because again, a number of different sources in those circles say they've been seeing significant buying, believe it is elliott. >> explain how it work, omnicom had a banker, wanted to do a deal. >> yeah. >> does the banker go home and say no more deals or look around. >> they always say look around, although i'm not sure that's the name. >> i'm just saying that industry is ripe for some consolidation. >> that's what bankers do. >> i feel that it's very funny, i mean, i do watch the show "mad men" and mccann is involved in an acquisition there. we forget that there used to be a tremendous number of acquisitions in the advertising group and they kind of really stopped. >> it's true. >> and then the deal didn't work, but ipg, that would be

worth a great deal than worth selling for now. >> we'll see. whether elliott may be amassing for an investment completely but one can never rule out what they may or may not do. from what i'm hearing still be not a large dollar amount for 8 billion company. >> jpmorgan said this morning that t mobile, s deal, sprint deal could come sooner rather than later. why are we paying them? that's the phrase you used to me but people are buying sprint and t-mobile right now. >> one thing on t-mo and sprint, which is massason did his charm offensive in washington, d.c., continues to use the same arguments at the code conference, for example, that he did with me in an interview in early march. i don't know how well, it's gone in washington, but he continues to talk to the germans who control t-mobile. no doubt about that. they continue to go back over and over again about regulatory, what would the impediments be, the ability to get it by, what will the break fee be.

yes, i think given his persistence you can expect at some point, you will see something. but always difficult to judge how the time frame in which that will come about. >> both flying. >> we'll see. >> to rick santelli over at the bond pits in chicago. cme group. rick? >> hi, david. well, if you look at intraday chart of 10s only down a basis points and we traded down as low in yield high in price to 2.42 on the data. the data you can say was a split decision. q1 gdp second look, second time around the block, down a whole percent. but we did see a drop in jobless claims. but many would say, of course, that the first quarter gdp is probably a more powerful number and many are looking for a various reasons for reversals in second quarter and beyond. we'll have to wait and see. not like we haven't had bigger gdps and smaller gdps. it's the sustainability, it's the glide path i think upsets the treasury complex. look at a two-day chart and open

it up to june, whether you look at 10s or 30s, everything is comping back to june. the yield curve has been a great indicator along with spread relationships to overseas product. so 10s minus 2s today actually is now the flattest, the flat u.s. since mid june. comping with the same metrics back in time. want to pay attention to this. but something has changed. boons to 10s my opinion, started giving you clues that something wasn't quite right in the global economy. or at least the manipulation of rates in europe as the boom made its adjustment. look what's happened. that distance right around tax day, was 121 basis points between our 10s and their 10s. it's now into 108. this is something you want to pay attention to. maybe it will mean rate wills stop going down. we want to watch this. in terms of the euro, well, with the meeting one week from today, the ecb, two-day of euro says it all. dipped below 136. back above 136.

many think this is the line to pay attention to pre-ecb meeting. david, back to you. >> thank you very much, rick santelli. all right. up next, carl, he's going to have a lot more from the code conference in california. he's here to tell us what's on tap? >> hey, david. when we come back we'll talk to kara swisher, her thoughts on the apple/beats acquisition and all the take aways from the code conference when we continue live from rancho pal los ver des.

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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ apple's eddie cue and jimmy iovine when kara swisher asked eddie about the acquisition for beats here's what he had to say. >> we looked at this is a great opportunity for us to partner and do some great things with beats and we're going to make some incredible products together. we're always looking and seeing

what opportunities as i've said we've bought 27 companies and we'll always keep looking and if we see an opportunity we'll certainly tryi lly strike. >> at the code conference is kara swisher, great to see you again. >> great to see you. >> people asking why would you pay $3 billion for a company with a quarter million subs. we know the music industry is troubled. do the economics make sense to you some. >> no. of course not. they're buying something else. they're buying -- obviously the headphones business they like it. we asked if they could get into headphones business without beats but they like the brand and a good brand and very popular among young people especially. they felt they needed a music service and this one was attached to a head phones company. it fit for them. i think the people is what's most important. the talent and ability to cur rate and trying to approach music services from a different way more human, more emotional, and we'll see. it's a lot of money. a lot of money. i think jimmy iovine was thrilled. >> does he fit in this discreet

culture? >> he's not famously discreet at all. you saw him go on and on and said a lot. he said he's extremely lucky. he's funny and very glib. he'll be interesting. he'll inject something into that culture. they've known each other a long time. something that was interesting that i didn't know. >> you asked eddie cue does this change or signal a change in apple's world view when it comes to m&a. he said we've never had a law that says thal shall not buy. are things different? >> this is a big acquisition. he was talking about small acquisitions. for them this is a small acquisition given how much cash they have. he said he felt the number, it was a big number. i think it does. it's a big bringing of talent in for a lot of money which is what a lot of other silicon valleys do. >> do you think they get into content. >> i asked and they said no. it seems logical they have closer ties with artists. they specifically said nop.

>> let's talk about some of the other prenedations and there were so many from uber to nest to walmart. ryan seacrest and dick costolo of twitter, you asked about twitter in general drives tune in on tv. that symbiotic relationship. are you convinced it does? >> no. people talk about television on twitter. that's absolutely after a game of the roens or scandal or something popular people do tweet about it and say can you believe this or olivia pope's mom do this time. they say they couldn't quantify it but nielsen smoking quantification monetary i don't know. >> asked if he was a dos company living in a windows world. i don't agree. does the interface need human touch? >> it deoes. need morse cur rags, needs to

bring more people in, a point of access and that was a fair point. haven't innovated that product. >> mary with her slide presentation making its way across the web. big takeaways from what she said and the conference overall. >> china china china. i think that was a big deal and how quickly the smaller, discreet apps grow, like whatsapp, snapchat, we chat, a lot of them are global. any globalization absolutely. everybody talked about being global. ryan seacrest talked about taking content global. not a lot of talk about nsa and things like that. seems not to be on the minds of people here. nobody talked about the tech bubble which i think was interesting. >> yeah. this beats deal by the way we should mention puts tech m&a year to date at the highest since 2000. >> more to come i think. >> yeah. >> absolutely. >> kara, been an amazing conference. >> having a great time? >> the best. >> stay out all night? >> no. thanks, kara. >> thanks. kara swisher. we'll get stop trading with jim? a moment and as kara mentioned

we will talk to reed hastings of netflix, a live and exclusive, of course, here on "squawk on the street." that's coming up.

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time for stop trading with cramer. talking food group, i mentioned it, the latest bid from tyson, 50 bucks a share, over 13 years worth of the last 12 months ebitda from hillshire. that's a big multiple. heinz went at it about 14.9 times, that's a premium brand having an effect, isn't it? >> you want a premium brand, how about campbell's which reported a miserable number and up from where it reported. kellogg, a horrible number and the stock up from where it reported. hain, a good number but now down, the answer to general mills prayer. pinnacle food do they not have to be bought by someone as mr. gamgourd checked out. bird's eye. we are seeing consolidation. unilever, [ inaudible ] all being motivated by one thing, you cannot win against the convinceal supermarkets they're too powerful. left, mass. these companies are in the end

all prey. >> not as a predator. >> global business. you can see conceivably, at very high multiples here, another bidder, i don't know, but my point is it's a global business. the key here, by the way, in the m&a side is, can they effectively hillshire get out of their pinnacle deal now as opposed to waiting for a shareholder vote either pay the breakup fee or do something to allow their bankers to move into full auction mode? >> don't forget pinnacle has a good yield, well run company, bird's eye a good business, duncan hines okay, and tyson, the price of grain has plummeted. union pacific on last night, the most bountiful year for corn. what do chicken eat? when i raised chicken, giving them corn, a fox ripped off their necks didn't bother to eat the rest of the chicken. what waste. >> foxes tend to do that. >> speaking of chicken i have

poppy's. i pronounce it poppy's because i'm from philadelphia. most pronounce it popeyes. the louisiana kitchen. perrigo? why, a knockoff maybe do the cialis and an inversion. >> they were early on in the inversion. popeyes. >> popeyes and perrigo. >> papa and perrigo. >> back here tomorrow. coming up a live and exclusive interview with netflix ceo reed hastings from the code conference in california. keep it right here.

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welcome back to "squawk on the street." i'm diana olick with breaking news from the realtors pending home sales up 0.4% from april. signed contracts to buy existing homes. a forward indicator of closed sales in may and june and that's a miss. the street was looking for a 2% gain on higher confidence and better weather in april. the realtors pending home sales index is now 9.2% lower than april of 2013. total sales for 2014 are now expected to be lower than 2013 regional sales up 0.6% in the northeast, up 5% in the midwest, month to month, down 0.6% in the south and down 2.9% in the west.

a lot of blame has been placed on higher mortgage rates this year than the spring of last year bit that's losing year as the average on the 30-year fixed fell to the lowest level since last june. investors are slowing down purchases and leaving the market to mortgage dependent buyers p not the rate but qualifying for the low rate keeping many buyers, first-time buyers, sidelined. back to you, simon. >> slowdown continues. thank you. and the meantime big news made at the code conference in california. apple confirming it is buying beats electronics for $3 billion. carl, of course, is live at the code conference which continues to be pretty eventful, carl. good morning. >> definitely especially with headlines like this, simon, probably the big one in terms of headlines out of the code conference. apple of course acquiring beats electronics. apple's biggest acquisition ever, $3 billion for a company with just 250,000 subs. it's going to be created almost

immediately and close by the end of the fiscal year in september. eddie cue who runs apple's media business and jimmy eiovine took to the stage last night. why would beats and iovine, who's been in the music industry 40 years, choose apple. here's what he said. >> we met the guys at apple and what we realized is that they get it. they know what we do. and they respect what we do, respect copyright, they respect the entire food chain. so that's why apple. we said, and since then i've always wanted to work with them. >> iovine candid, especially, given apple's reputation for secrecy, eddie cue was asked, okay, how does this relationship begin to manifest itself. here was his answer to that question. >> we have a lot of customers, we know what they listen to. we have a lot of algorithms, cur rags, we have a lot of customers that have an easy way to pay, a

great relationship with artists. deal directly with artists to give us incredible content. we work with them to market that content. so we think all of those things when you put them all together it's on steroids with us together. >> finally, he was asked whether or not this means apple is going to be more inquisitive in the future with larger deals. he said we never had a law that says thal shall not buy. the final question of what it means for the product pipeline down later in the year. eddie cue says it's the best pipeline, sara, he has seen in his 25 years at apple and, of course, that includes the ipad and the iphone. we'll have to see what the fall brings for that. back to you. >> yeah. certainly investors agree the stock is up today and has gained for the last four months. good to see you. see you later in the show for your conversations with netflix ceo. we're going to talk about apple and more perspective on what the beats deal means for apple and the stock price. tony, senior analyst at

bernstein, ranked number one in tech by institutional investor for five years in a row. raised his price target on apple to $700 from 615. good to see you, tony. >> good morning. >> sounds like you don't hate this deal but do call it strategically puzzling, why? >> my belief the music category is not growing and apple is investing in a business that ultimately, you know, is not, in my opinion, particularly forward looking. the deal is small for apple, $3 billion is a very large number, but in the context of apple, you know, that's three to four weeks of cash flow generation for them. so the cash flow is -- cash flow side of the deal is very small, but for me, i would have rather that they had taken that $3 billion and invested in something that i think is forward looking, like video potentially or like payments.

so that's really where the statement comes from. >> where some of your fellow analysts disagree, they were acquiring more than just the music business here and the hardware that comes along with that, but really it's about talent and the future collaboration that apple, that tim cook can have with jimmy iovine making products like video and television. >> i mean, certainly there's a price for talent. i think it's hard -- you know, if you put it in context, apple paid $400 million for nest and got steve jobs, paying $3 billion for this deal. the deal can stand on its own merits. the electronics business can be a very profitable business. my belief more than justifies the price paid. i don't have an issue with the price paid. i don't have an issue with their acquiring talent, but there's certainly talent there and acquiring that. i would rather they have been deploying this capital into something where there's more growth potential for the company

going forward than music. >> tony, i wonder if this is one of those occasions when investors, hugely respected analyst, i understand that, in a sense ignore the analyst community because by definition you have to be fact based, got to have figures to work with. this isn't about figures. this is about the intangible quality of what they can do together in the future. as eddie cue put it not about what we're doing today, it's about some of the parts being greater. you know, tim cook has spoken about a berlin wall he believes exists between silicon valley and l.a. and this is surely what iovine could break down. i would give you a concrete example. before netflix came through with "house of cards" it was trading at $99. as a result of that one content deal, it now trades at $400. it's reasonable that iovine could make similar deals in the future, don't you think?

>> yes. i think apple is about option value and they're an incredibly creative company and they've added additional creative people. and one can never put a price on option value. again, my contention or issue with the deal not about how it works financially. i can make the numbers work based on beats electronics. that's a high margin business. >> right. >> so it's not that. again, it's, you know, would we rather have seen something that feels more forward looking rather than reactive. apple has a $6.5 billion music business today in itunes and could apple have gone out and hired extremely talented people? perhaps not jimmy iovine but other people at a lower price and directed this capital somewhere else. >> in the meantime you have very important events moving forward. the stock split seven for one on monday and then this conference, developer conference in san francisco. when you hear eddie cue say, we've got the best pipeline to unveil this year that he's seen

in 25 years, are you changing your view of what those unknowns, what might come along? >> well, we're -- we feel pretty strongly that near term momentum in apple will be strong. raised our price target to $700 this week. it is along those lines, simon. we believe that we're going to have an iphone 6, we believe there will be at least one option with a larger screen. we think the price on that device might be higher which actually is very good for apple economic, a watch will be introduced, so the collective portfolio we think will be as strong as ever. the stock is highly anticipate paer to. as people get more comfortable about the timing and details around these products, we believe the stock will continue to appreciate. it's very inexpensive on a cash flow basis at current levels. >> trading at the highest price since october of 2012. thank you for weighing in on the beats deal and your thoughts on apple going up to $700 a share.

up next, an exclusive interview with netflix ceo reed hastings live from the code conference. "squawk on the street" will be right back. 3. 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. usaa. we know what it means to serve.

welcome back to "squawk on the street." we're live here at the code conference in rancho palos verdes in california with series

like "house of cards" and "orange is the new black" netflix accounts for a third of internet track. the streaming service wants to do away with fees charged by internet providers to deliver content and despite signing a web traffic deal with comcast, netflix ceo reed hastings hasn't been shy in criticizing the cable giant's bid to acquire time warner table to which comcast's ceo responded here on "squawk on the street" yesterday. take a listen. >> we don't want to charge netflix different than any other company but they do amount to a third of all the bits on the internet. we want to provide great experiences for our customers. we have to manage that traffic together with themp and the deal that we made was they reduce their expenses generally speaking over the life of the agreement and speed up the experience getting it to the internet so customer performance is better, they've saved money. i'm not sure why that isn't in

everyone's interest. >> and joining us exclusively this morning is reed hastings, founder and ceo of netflix and our julia joins us as well. good to see you. >> thank you. >> you heard what brian had to say. there seems to be the sense that we thought we had some kind of understanding when you agreed to pay those tolls and then days later you come out against this deal. did you have a change of heart? >> absolutely. when you think about the size coming together, if comcast is able to buy time warner cable, they'll have off the bat 40% of u.s. internet homes and then as dsl fades and cable grows, over 50% of the residential internet access will be controlled by comcast. they're great company, brian is a great guy, but do you really want 50% controlled by one company? >> he argues that you're just trying to offset, move your costs away from your own business model. you paid for postage all of those years and that it's a business decision for you, but

ideologically misguided. >> comcast would love to be the post office and have a national monopoly and collect on everything. that's not the way the internet works. the way the internet works free intercom activity between these different sources. so we look at it and say, okay, a third of the internet is customers using netflix so maybe we should get a third of the comcast revenue. if they want to give us a third of the revenue we'll pay a third of the cost happily. the revenue is larger than the cost. but really what's happening is they want to charge both the consumers, you know, 70, $80 a month and charge the providers on our side and that's what we're trying to stop. >> so brian is here, you've been around the conference, have you gotten a chance to sit down and talk? >> socially we're great friends. we fight and disagree, doesn't seem to make a difference, but he's great guy. >> has there been any advancements in the negotiations or conversations? >> nothing yet. we're really focused on this view of pure net neutrality, strong net neutrality, where you get the settlement-free interconnect, the issue we're

talking about, the no blocking, we think that's really important. so, you know, this will work out as we galvanize people to focus on strong net neutrality. >> let's pretend you made all provider utilities, classify them as utilities and pure net neutrality it would stifl innovation over the long term, true or not? >> that's hard to say. examples where you regulate and bad things happen later that you didn't expect. no one is excited about the idea of super regulation. we would like to see a market where comcast and others lead by saying we will lose strong net neutrali neutrality. we're not going to charge all the companies. >> the new net neutrality rules are under cruteny. what do you want the new era to look like? what should the balance of power be? >> comcast didn't really agree to them. they got imposed as merger condition when they bought nbc universal and that's what may happen this time with this

merger, the government may allow it to go through and impose this settlement-free interconnect, the strong net neutrality. so that may be how it works out. >> if it's a worse case scenario from your perspective and you get throttled by the providers, what's your plan b? >> there is no plan b if consumer can't get to netflix. then they're pretty frustrated. fortunately they've got their iphone, they've got, you know, internet at home, they've got lots of ways to access the internet and the consensus is how pretty strong the consumer should be able to access the services they paid for. >> well, speed for netflix has improved as a result of this deal. just as if i went to walmart and looking for a procter & gamble product i might see it at eye level because walmart gives me that same shelf space. is it different from that? >> it's a little different. it's recovered. if you look at other providers, cox, cable vision, they've been great consistently. google fiber. comcast fell off the truck and service got bad for those

subscribers and then it's recovered back to the level of the other guys. >> are your price increases a direct result of those tolls that you're now paying? >> no. our biggest costs are content. we're excited about the new content like "orange is the new black" and "house of cards." bo jack horseman like nothing you've seen before coming out later this summer. >> the last time you did a price increase doubling prices when you split up the streaming and dvd business it upset consumers. it was a debacle for netflix stock. how is this price increase different or is it? how is it going so far. >> only a $1 price increase and it's after three years and a great increase in our content. i think it's really quite different. we'll give a full update, only two or three weeks, we don't have current information. we'll give a full update on the earnings call in july. >> are you seeing impact on subscriber numbers in the past few weeks? >> it's over the long term, that pricing will matter.

never going to see that much in the short term and no storm, you know, say on twitter or something comparable to what we saw before. international expansion going to half a dozen markets in europe. some argue you face competitive pressures that people don't truly appreciate. german, for instance, outlets that have the rights to "house of cards" or hbo. it that story well understood? >> every market we're down 41 markets around the world and every market is unique. unique and strong set of competitors. when we enter the uk three years ago, there was love film, there's, you know, sky, i mean very intense competition. but we've done very well. we've continued to add more content, grow, and recently love film got out of streaming. i think we can have great success in europe. >> about 12 million of your 48 million users are overseas. when will we see that balance shift? what is the potential internationally? >> well, it's just like you would expect which is domestic is so large that on a percentage

growth rate not as fast and international because it's small is, you know, growing at terrific rates, so in terms of getting to 50/50 that might be three years out some like that. that would be really exciting for us. in the long term international should be bigger than domestic as it is for other web internet firms. >> do you think your business could be as big globally as hbo's is? >> hbo is $130 million globally. we're $48 million. we have a long way to go. but we certainly would like to see that happen. we're gunning for that. but they're growing also. it's hard to tell who's going to be the first one. >> easy to grow when sharing passwords. have you talked about that? that back and forth you had a few months ago? >> not that particular thing. we have lots of other stuff to talk about. >> go ahead. >> so in terms of content costs you said that's your biggest issue. you're competing with so many other players now. microsoft, amazon, apple, how can you keep those content costs under control when all that

competition is sure to push them up. >> yeah. the prices are definitely rising. never been a better time to be a writer or producer in hollywood with great television shows. so many bidders. traditionally the ones we competed with were fx and amc and hbo and showtime and now it's broadened to include all the internet firms. so it's just great for the talent and they're producing some amazing shows. >> speaking of which, only premiering and some of the other stories. shows you have coming including your personal tastes in a minute, more with netflix ceo reed hastings which devices he uses and what he's watching after a quick break. i make a lot of purchases for my business.

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welcome back to "squawk on the street." take a look at the consumer staples sector of the s&p 500. one of the best performing, in fact the best performing sector in the index today, now leading the consumer staples higher it's tyson foods on news that it offered $50 a share to buy hillshire brands topping a bid from pilgrim's pride. jm smucker, wall greene, hormel, avon, a great day with m&a outlooks in focus. now back off to sunny california where the company is out at the code conference. >> thanks so much, dom. some might consider netflix a consumer staple. we're back at the code conference with reed hastings, ceo of netflix. round two you talked about "orange is the new black" premiering june 6th. what can we expect? >> next friday showing up at midnight and it's amazing.

the writer has done, the fans are just going to love it. it's an amazing story. women in prison. >> i remember "house of cards" the percentage of subs who watched the whole thing in the first weekend. are you sensing that cult following for "orange?" ? >> absolutely. as a broader demographic for orange. "house of cards" appeals to everybody. "orange" is much broader. >> do you have a sense of the impact of the return of a show like that in terms of signing up new subscribers? >> we're hopeful but don't have a precise impact. so much of the netflix relationship with consumers is intangible, all these different shows and the expectation of future great shows. i mentioned bo jack horseman, it's a drama animated for adults. think family guy but for 30-year-olds this hollywood star, i mean it's like nothing you've ever seen. so it's very exciting. >> also risky to invest in all of these new shows, when making

a whole season at a time, how do you avoid this backfiring or overspending on these? >> i think if we don't have big original failure we're not trying hard enough. i keep pushing our team doing bolder things and at some point i'm sure they're going to jump the shark and i'll regret it. until we get there we should try new things and be bold. >> do you have in your head a limit to what you're willing to spend on content for say a particular series? >> not for a particular series. i mean, we're feeling our way along, willing to go big, but we'll try all kinds of different things. so we're very flexible. spend about $3 billion this year on content on a global basis. a big budget to try a lot of things. >> we got some rapid fire questions for you as well. first off what's in your netflix cue? >> "orange is the new black" and carlos, a mini series right now. >> how do you stream? what devices do you use to stream? >> i've got every device on the planet because i'm always trying to test it, my apple tv, row cu, chrome cast.

>> favorite app on your smartphone? >> strava tracks you when running. >> interesting. >> what do you consider to be the biggest threat to netflix at this stage? >> biggest threat is we get too comfortable. things are going well so we got to keep pushing and find new things. >> the word you use most often in your language these days, spectrum neutrality. >> no, no, no. none of those. we use content and shows and, you know, cultural change. >> i have to ask, with all this talk about global expansion, the cost of all this original content and license content, would you ever consider advertising? >> i don't think so. like hbo, which has never had adds we've never had ads. it's a part of our ad market. hulu does that, youtube does that, they have good shows. just a different business model. >> we've been asking just about everybody, who's been at this conference, their takeaways from what you've heard over the past 48 hours, things about china, mobile, monetization, what have

you learned? >> i learned my apple white headphones are old school and i have to get a beats headphones. >> you and me both. >> i haven't had beats headphones. i'm going to try them. >> what strikes you about that deal? $3 billion for this company with a quarter million subs. >> eddie cue saying he's been at apple 25 years and never seen such a good product portfolio as they have coming later this year. that's an incredible statement and makes me very excited. >> a lot of people debate wloog we're in a tech bubble. your stock is way up over the past 12 months, over 85%. the last time your stock was nearing those all-time highs you said the stock was overblown and you thought it was too high. what do you think now? >> it's hard to tell. sometimes, some days i wake up and think it is too high, other days it's going to go higher. the short-term guessing is hard. >> you gave an interview to the new yorker and told a story about long ago, offering i think was it -- what percentage of ownership was it in netflix to

blockbuster? was it 49? 49. >> offered them a minority share but we wanted the name blockbuster.com. they weren't going to give majority control from punks from silicon valley. no hope of success. >> how much of that is -- remains a learning tool for you? the idea there is some other punk out there now, who eventually will want to unseat you? >> not only there but they're at this conference. all the time scanning. that's what's so great about capitalism. people are always trying to take share and innovate. then it's up to us to stay exciting and do new things. >> who are you most concerned about, video, hulu the growth of its subscription service? >> there's no one. hulu is very formidable, growing very fast over 6 million now, depending on aero if they get national approval with the supreme court could turn into a competitor, piracy is a problem. so they're always coming at you.

>> to circle back one last time on the time warner cable deal, "the new york times" editorial board came out against it, "washington post" have been for it. do you sense either way which direction regulators will go eventually on this deal? >> i sense the public has a lot of questions because when you think of one company controlling a majority of the u.s. residential internet, that's something we've never dean what would be the controls and would a company like that tend to overcharge everybody. >> if you have to will you try to leverage or you accelerate public outrage over the deal if that's what it comes to. >> i don't know about public outrage but thought and discourse. i mean i think it's a big topic for society since the internet has become so important and if everything is going over the internet over the next five or ten years we are -- our whole society has a stake in what happens here. >> do you think the at&t/directv deal poses a threat. >> not for broadband.

that's not a broadband centric merger. >> we have to let you get inside, going to present, the final speaker at the code conference. thank you for stopping by here first. >> thank you. >> matching blazers too. reed hastings of netflix thank you for joining us. let's send it over to, let's see, i think -- back to post nine. >> thank you very much. great interview. enjoyed it. straight ahead on the show more from the code conference and hear what the ceo of qualcomm has to say about mobile technology and future of media how they could be involved in making driverless cars. we'll be right back.

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switch to comcast business internet and get two wifi networks included. comcast business built for business. the size of the economy shrank more than expected, treasuries rallying yet again as revised data end gaits gdp contracting at a rate of what will be 1% for the full year. joining us is mike, who joins us as head of u.s. rate strategy with rbc capital markets. welcome to the program. >> hi, thanks for having me. >> so before we get into the knitty gritty of this, we should highlight the driving down of the yields this year from 3% on the ten year to 2.41 means those that bet against growth and inflation have made an awful lot of money this year. >> that's right. even though we have seen inflation leaking a little bit higher lately and, you know,

other than the report growth going forward looks pretty strong, second quarter looks like about 3.5%. even though people have gotten the fundamental call right the price action has been wrong. >> keep getting the call on what the growth is going to be wrong. the vast majority of notes are explaining away what happened in the first quarter. one stand out to me. douglas from chat delane for exbelieves the ids is entering into recession and point the out analyst thought we would get growth of 2.6% in q1, we got minus 1. the direction is clear, isn't it, michael? >> well, the big surprise today was that inventories took 1.6% off of the growth rate. inventories notoriously volatile figure. i think everyone will be looking for inventories to add to the second quarter. that's why you're seeing second quarter estimates go up. if you adjust for that inventory move, you know, you're close to

1% in the first quarter for a quarter with really lousy weather that's not that awful. >> you see the problem that many people have, michael, is what this very strong surge in fixed income around the world means, you know, the moves that you have here are confirmed in europe at moment, dutch yields at a 500 year low, french yields 270 year low according to deutsch bank and suggesting this is the big short quite literally of the millennium or something has gone very wrong. something very scary is happening in the world at large. >> well, i think within europe, i think you're justified to have low yields right there. in the u.s. i think we've come too far right now. i think in the u.s., you've had what's a large part a technical move, shorts getting squeezed out, and everyone trying to come up with a fundamental ekts plan nags for this move. that's what people in research like me tend to do is try to come up with a fundamental reason to backfit the price

action. the explanation right now most people point to is this low terminal fed funds rate. there are reasons to think that the average level of fed funds will be lower in the future than they have been in the past, but the fed funds rate is never average. what happens is when the fed sees recession risks, it takes the funds rate way below average for a long time. when there's any inflation risk at all, they take that fed funds rate way above average. so -- >> michael, i want to cut you off. we're talking about recession risks but wall street is estimating 3 to 4% growth for the next quarter which is pretty strong. if you average the two, despite this negative 1% growth, we're still around 2% growth. i'm just wondering what you can extrapolate from today's report that sets us up for the next quarter. housing was a drag and business investment was a drag. wasn't just a build in inventory ps. >> the part of gdp that has the most momentum that tends to be the best signal is consumer

spending. it was bright in this. north of 3%. >> yeah. that's true. 3.1%. revised up from an initial 3% growth. i guess that sets us up pretty strongly. >> right. >> thank you very much. sorry. one last word then, michael. >> no. we do think it's not going to be great growth but limp along at 22.5% growth rate going forward and hard to justify 10-year yields at 2.50 with that. >> they are a short in your view? >> yes. >> good to see you. thank you for your time. michael joining us from rbc capital markets. >> let's head back out to california and the code conference because our own john it for sat down with the ceo of qualcomm covering everything from mobile tech to media. i thought it was interesting he was jumping on the bandwagon with driverless cars. >> well, it's not exactly a bandwagon. keep in mind steve mallen cough, newly minted this year ceo of

qualcomm, qualcomm the intel of the mobile market. you get the majority of the mobile chip revenue when looking at application processors, interesting dynamic, high-end smart phone growth has come down, he's had competition to deal with at the low end at the same time, so i asked him is that mobile marks tapping out, real growth there still, listen to what he had to say. >> compared to the growth over the last several years, which was actually in the probably 30% unit growth it's not going to be that high. but it's still going to be high. we've talked about this in terms of expecting double digit growth in our business. but remember, the smartphone is not done. in the next five years there will be 8 billion new smartphones that come on to the market which is actually more than the number of people on the planet right now and a big portion of those smartphones will actually have wearables sitting in a sea of sensors or interacting with cars. we look at this as just the

beginning of where we can take smart phone and smartphone technology. >> now, the biggest area where we see qualcomm challenged has been at the lower end, companies like media tech, who built cheaper processes for android phones, taking share in china and in india and places like that for a long time. but qualcomm over the past few quarters has shown strength in those areas. i asked him about taking on the spreads, the media tech, how they've managed to battle back. listen to what he had to say there. >> we have had strength there. we invested in a new channel, about 4 years ago, developing the ability to enable new customers, those are customers that tend to be in china but worldwide, really emerging market players, and what we're finding is now that the world is transitioning into lte, that's a very, very important channel for us. it's actually generating at the end of fiscal year '13 which i

gave data on last year, that's generating more than a billion dollars of revenue for us and that's growing rapidly. >> feel like china lte will be an opportunity for you at the become end of the year? >> we do. >> and that is the key. china lte pointing at that as a boost for the end of the year. look, they're not losing the world, those domestic smartphone makers. qualcomm feeling confident. back to you. >> john fortt, good stuff. look forward to more from you in the next hour. up next on "squawk on the street," the former chief technology officer of facebook. also the man who helped create google maps, the very -- brett taylor will be joining us live. coming up remember this. >> you said in the book that's when i knew the markets were rigged. it's disgusting you're trying to parse your words now. you can't say that. >> you are quoted that way if the book but -- >> let's walk through an example. >> do you believe it or not? because you said it. >> let me walk you through an

example. >> it's a yes or no question. >> i believe the markets are rigged. >> there you go. >> and you're a part -- >> amon javers has a big interview coming up later. >> hi. that's right. this is the trading floor of iex where they say the flash boys effect is in full effect here. they say they've doubled average volume from over 28 million shares a day in q1 to 62 million shares a day this month. we'll talk to brad cat sue yam ma in the new noon hour and the developments since flash boys came out. huh, 15 minutes could save you 15% or more on car insurance. everybody knows that. well, did you know that game show hosts should only host game shows?

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welcome back to "squawk on the street." shares of blackberry moving higher this morning. yesterday at the recode conference the ceo john chen said he was confident blackberry could be saved and put the chances of survival at 80%. that stock on that news up 4% in today's trade. back over to you. >> thank you very much. while apple's deal for beats is

taking the tech world, facebook's acquisition of the messaging service whatsapp for $19 billion may be facing anti-trust problems in europe. in fact, lawyers for mark zuckerberg have asked for a review to head off trouble. here for a cnbc exclusive is brett taylor the former chief technology officer at facebook and the ceo of a modern word processor that enables you to create documents on any device including your phone or tablet. we'll get to talk about the present business and what you're anxious to say there and do there and trying to achieve, but how do you think in almost two years since you've left facebook mark zuckerberg has been doing, in particular, what do you think of the whatsapp acquisition and the price that he paid, knowing what you do about technology? >> that's a great question. like everyone else the price of the acquisition was so high, i think we were all sort of marveling at it here in silicon valley. but i think the strategy behind the acquisition is really intelligent and really sound.

when we look at facebook, there's really four areas where people's usage of the product is sort of dominating. the first is news feed. the second is people's profile pages. the third is messaging. and the fourth is photos. and all four of those areas are extreme extreme extremely strategic to facebook's success. >> do you think there's a bubble in tech at the moment, that said? >> you know, i think that's a tough question. i think what we're seeing now is, the transition from the pc to the smartphone is so transformative and so inclusive, meaning more people have access to smartphones than ever had access to pcs and the internet previously is that there's so much growth that we're seeing growth of incredibly good companies, in addition to growth of not so good companies. i think we'll look back on this like we looked back on earlier silicon valley bubbles that gave us great companies like google

and, you know, amazon and questionable companies like pets.com and this current trend around mobile will be similar. some of the next great companies born in this new era in addition to some questionable companies as well. >> let's talk about the company you're birthing to pick up the metaphor there, slightly over 18 months into the creation, quip, and the launch of quip 2.0 now. just explain what you're doing here and what the cutting edge of the innovation is. >> that's a great question. our vision for quip is to create the next generation productivity suite. it's optimized for tablets, smartphones and the pc. the core thing we do differently is we it grate messaging and documents into a single product. so you can all work together on the same document and talk about it right there. so you don't need to bounce back and forth to e-mail, don't need e-mail attachments and get work done when you leave your office. the vision is you can run your

company from your phone and that's something executives in every company have already started to do and something we're doubling down on. >> it does sound exciting given the fact i use microsoft word and i think a lot of people do as well. wondering if you're positioning quip to be an acquisition target given the flurry of m&a we're seeing from facebook and google like you did your previous company that you founded, friend feed. >> i think that's a great question and there is a lot of interest in the space. our ambition, like most companies in the valley is to remain independent and create a company that endures over time and i hope that we are capable of doing that. you know, i think the thing that's so fun about silicon valley right now, the shift to smartphones and tablets. we're seeing, you know, incredibly rapid transition from the pc to smartphones and, you know, in my experience at facebook, for example, people's usage is literally shifting from the pc to the smartphone. the smartphone is cannibalizing the pc usage and i think that represents an opportunity for

start-ups like ours. i don't think companies like microsoft have the same stronghold over productivity software as they once did. >> they have launched more broadly which to a certain when. >> finally, given what you just said about the cutting edge of what you see technology what do you think investors should really wise up to. where do you think the next generation of big money or successful investments will be? >> you know, i think the big shift is probably towards people using multiple devices through the course of the day. "the new normal" is everyone has a laptop on their desk. a tablet on their coffee table and a smartphone in their purse or pocket. companies that really recognize that when you walk away from your desk you are continuing to get work done on this new device that's in your pocket. when you go home you pick up that tablet, continuing off from where you are in the office.

the software that can recognize that and make that transition seamless that's a software that will dominate the workplace over the next decade. that's where we hope to be. >> it's good to see you. brett taylor, ceo of quip. >> thank you for having me. >> a lot more tech talk coming up. google headline a strategic planning. we're back after a quick break. ♪

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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. welcome back to "squawk on the street". rick santelli here with the santelli exchange for thursday. you know we're all looking at rates and it seems to me when it comes to rates we need to be very open minded. look at a chart of the difference between ten year rates and ten year boom rates. often years you can clearly see something changed in 2012. you heard simon hobbs earlier, the dutch are gate. great historians. i used to follow a lot of business out of holland and the netherlands. they are historians whether it's about their own history, global history or financial history. so to see hundreds of years of records thrown out the window in terms of how low the rates are it really does mean something.

but we have to be open to change. now that you see that chart let's make it from march 1st. we've gone from 121 a difference a of 1.21 to 1.06, 1.07. if this continues to widen or excuse me, tighten back up it could mean maybe rates slow down to the down side so we want to pay attention. now, when it comes to rates, one of the big things i hear constantly, heard it four times today that the move in rates is technical. i think that's technically crazy, okay. it really is. for every seller there's a buyer. even more so. if he look at the year in rates started out at 3.03, currently at 2.41. maybe, maybe you could say that this move could have been people that were short getting out. short covering pushing rates down but certainly doesn't explain the sideways movement from february to a couple of weeks ago when we finally

settled below that 2.57 from february 3rd. i'm sorry. done fit the pattern in anyway. i think it's just an excuse. because many analysts, they love stocks, it's always sunny in stockland and always cloudy and overcast in bondland. not buying it. another issue that i think we need to talk about is volatility, leverage, and volume. we've heard a lot of experts talking of late that volume is low and volatility is low. you can see it in options in the treasuries in the vix. but i don't know that that's a good thing. as a matter of fact it's a combination of computers and all the central banks managing the markets but one thing i do know with low volume and low volatility, more and more leverage is put on, you still don't make a lot of money but does it increase fat tail risk. back to you simon hobbs. >> you know, rick, why they say it's a technical move because so many of them got it wrong. they thought at this stage rates would be accelerating higher and they are going in the wrong

direction. >> right. so that means that they were short the market. if they are getting out and that's the technical move then why do we see so much sideways movement in very orderly trade for months and months and months. this is what happens when you get a big short recovery move. it doesn't fit. capital e, excuse. >> still ahead the ceo of sonos will join us live at the code conference in california. with ink plus from chase like 60,000 bonus points when i spent $5,000 in the first 3 months after i opened my account. and i earn 5 times the rewards on internet, phone services and at office supply stores. with ink plus i can choose how to redeem my points. travel, gift cards even cash back. and my rewards points won't expire. so you can make owning business even more rewarding. ink from chase. so you can.

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it is 8:00 a.m. here at the code conference. 11:00 a.m. back on the east coast and "squawk alley" is live. ♪ welcome back to "squawk alley" as we continue our coverage from the code conference in california. joining us this morning