>> questioned it the whole time. >> you questioned it. . >> are you sure 3%? >> the worst nonrecession gdp drop in 53 years. >> unbelievable. >> you know what? climate change. join us tomorrow. >> go pro. >> "squawk on the street" is next. good wednesday morning, welcome to "squawk on the street," simon and we've just received a stunning revision to q1 gdp, one of the worst nonrecession numbers in half a century. futures down as investers take stog of the number, durables a miss this monk, in fact, the worse miss of the year. europe in the red after selling in asia overnight.

we begin with the markets. additional pressure today after weaker gdp data, dow and s&p starting from a deficit after yesterday, the worst day in two weeks. >> supreme court expected to issue more decisions this morning, and we are awaiting the big one with the broadcasters. >> google's developers conference kicks off, rumors of a top box unveiled and a shareholder meeting. let's hope they make it on time. >> raising an outlook for the year, planning to double earnings in five years. all right, first up, government's first final revision of the gdp, economy contracted 2.9%, lower than the estimate of 1%, the fastest rate of decline since 2009. the data comes after the dow suffered the worst triple digit loss in a month, and s&p finished negative after hilting highs in the session. by comparison, down 2.9 sounds

bad, is bad, in 2008, only down 2.2. >> worst after that, though, didn't it? >> absolutely. that was the belly of the beast, and people make decisions whether or not that was -- whether the number is old. whether that's aged data. >> that's the debate today. that's what the research says, yes, several months old, but summing it up nicely, saying the biggest factor is the bar is set much lower for the next quarter coming off of such a weak number. everyone has high expectations for the next quarter with the warmer weather out, forecasts on wall street from 3% to 4%. interesting if they stick from a low base. >> it will give the doves on the market committee solace, they can be dovish at the margin because there's more to make up. have to get growth back before you put on weight, if you like. >> flies in the face of the data

from yesterday. new home sales, six-year high. municipal s adding jobs, but, david, this is what yellen means the data is noisy, right? goes from day-to-day. >> it is. i'm trying to understand exactly what people are setting the health care costs or health care, understand exactly what the feedback loop is that results -- >> health care spending. >> right, lack of it, we have to understand that or i felt like i did. >> people can't get to the doctor or the hip replacement. >> because of the weather? >> yes. >> you cancel surgeries. >> also, you had personal consumption revised lower to a pace of 1%. components were lower. it was a brutal winter, and numbers just get revised lower on that. durable goods you mentioned, disappointment headline, but you saw a gain of .7%. >> bringing in jack, executive

vice president and cio. good morning. >> good morning. >> tomorrow, people read thehead lines in the newspapers that the economy contracted almost 3%, and the stock market is almost a record high. they may think those two are incompatible. how do you resolve it for them. >> i'll get in the middle of the discussion right there with david and health care. it's not that people couldn't get to the doctor, but in the original estimates of gdp, they assume levels of spending as a result of the affordable care act. reports showed that original assumption was incorrect, and, therefore, spending on health care services revised down. that's the major impact on today's number. it's worse than expected, but came from the area in which we expected, but very quickly about markets, i find it impossible to justify selling stocks today because six months ago the economy was weak thanks to snow and less health care spending than we thought. >> hang on a minute.

hang on a minute. in the first three months of the year, regardless how we ration l rationalize it. this is the figure. sure, dan, the figures mean something, numbers contracted in the first quarter, and stocks are at a record high. how can that be? >> two things. first of all, it's not really the first quarter. be clear. it's january and february. march was much, much better than january and february, and april still. >> we cannot have a revisionist view of data. first three months of the year, overall, we contracted. >> it's not revisionist. march was better. ask any company. it's not revisionist. the quarter contracted, but march was better than february, and april better than march, and so on and so forth. i would remind you, second quarter of 2009 -- sorry, the first quarter was bad, but buying stocks in the second

quarter of 2009 was a good idea. >> jack, explain to us why stocks are at a record high when the biggest economy in the world contracted in the first quarter. >> sure. i mean, you know, you're right notwithstanding the downturn in the economy, cancelling 50,000 flights, our bank closed for two days out of 90, accounting for the 2 .8 there if you will on that basis, but i think that, you know, we've got a huge amount of liquidity. the fact is that, you know, on a free cash flow basis, stocks are substantially cheaper than bonds, and so we're finding money finding its way in the stock market. you know, on a price to sales basis, we are at the highest seen since the downturn, and so i will say valuations are somewhat stretched, but as long as liquidity keeps flowing, and that's what we'll continue to monitor, then we should see the path of least resistance for stocks is higher. >> dan, i know you're looking to earnings to drive future gains

in the u.s. stock market. we have talked before. you pointed to fedex, start of earnings season kicked off well. general mills disappointed today. how does it look to you? >> listen, jumping from what jack said in response to the question. i reject, partially, stocks are higher primarily because of liquidity. at the end of the day, driving stocks higher is earnings. we can quibble on the price paid for earnings. >> dan? >> yeah? >> if it was earnings, the target should have been up 2 10 % last year, not 30. money keeps piling in looking for yield, looking for risk because of -- >> it's a combination perhaps. >> sure. >> lower than inflation is the liquidity factor? >> sure, earnings up in 2011 when the market was flat. it's a combination. i don't mean to reject the argument, but the point to the question is we're about to hear

from companies themselves, and simon gets worked up about first quarter gdp he wants, but until there's facts on the ground that support lower stock prices, the buy remains to the upside. >> what is the bond market telling you? >> it's not valuation as the catalyst. i think it's other things besides valuation as the catalyst to take -- >> jack, talk about the ten-year yield now below 260. what does that tell you? is that sending the right signal on the economy or being distorted by the liquidity? >> well, no, i think you're right. you know, it's a natural reaction to the first quarter, no doubt about that, and we are not seeing the growth this new home sales we'd like, yeah, a bump up, but still operating 400,000 below what we would like to see, accounting for nearly 1.2 million missing jobs in the economy. yeah, we do need to see some growth. i would have expected economic

acceleration. we got just the opposite, and so i think the fact that the bond market certainly surprised me in yields to the downside, you know, will likely trend high e but we need to see some evidence that suggest yields need to go up from here. >> yeah, i guess the housing data accelerated in recent weeks which is a good sign. guys, thank you very much, dan and jack. >> thank you. supreme court expected to issue a number of decisions this morning, and one could involve the right to broadcast signals from the big broadcasters. we are joined from outside the court, and he has more. hampton? >> reporter: hey, david, crunch time, if you will, at the supreme court. single digits as far as the number of cases left undecided. some of the most controversial, as you have been mentioning for media and market watchers at the top of the list. the broadcast networks including cnbc, parent nbc universal,

basically suing the interpret startup for violating the copyright, aroi uses feeds of the internet without paying fees and charge subscribers a monthly fee. another face of high interest, hobby lobby versus sebellius, whether they can refuse to comply with the mandate in the affordable care act requiring employers to provide birth control. president obama's recessed appointments to the, this lrb a couple years ago, the focus of canning and nlrb,s tugal challenge to the president's power to make the appoinments when not in session. lower courts basically split on partisan lines on this issue. also, the justices may issue a ruling, very important to labor unions going forward. it's harris v. quinn and decides if it's constitutional for

unions to collect dues from all public and private employees they are hired to represent. eight home health care workers in illinois sue because they did not want to belong to the union and pay the dues. that's the short list. we've got cases pending about cell phone privacy as well as antiabortion protest buffer zones, a massachusetts law there. decisions today, could have decisions tomorrow, we could even go into next monday. david, back to you. >> thank you very much, hampton. of course, the area of decision has impact on the media companies, no doubt about that, we talked with the ceo what the reaction would be should broadcasters lose. it's unclear what will be the case. quite confident, in fact, they will have the winning argument. >> what's the plan b? >> well, plan b, conceivably,

create their own, possibly become cable companies, in other words cable distributors of programming in the sense of no longer using those broadcast air waves, but getting -- it's a model in the sense they are using the pieces they already accrue, of course, which we didn't expect five years ago, we didn't think the fees would be accruing to them, but to go that route. a pay service. >> huge implications as argued in court for cloud computing. if we download the hit single on itunes, is that performance? that's what they argue. implications could be huge p. >> right. people are talking about set top boxes and fiber there. we'll see, again, if it comes, likely happening in about 45 minutes. in the meantime, general mills out with earnings this morning as the battle over breakfast gets crowded. a look at the shift regarding

your meal, and adidas, the exclusive interview coming up. another look at the wicked revision down, gdp down 29. more "squawk on the street" in a moment. care what age you are.t take it on the way you always have. live healthy and take one a day women's 50+. a complete multivitamin with 7 antioxidants to support cell health. age? who cares.

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how stark changes are. here's the slump, coming from monthly data. they track it, we bounced off the bottom in the last four weeks, but deep declines, and for general mills, getting 20% of the revenues from cereal and from kellogg, the market leader, this is a huge change. the companies are having to pivot, and you hear a lot of

talk on the general mills call and kellogg's call lately, trying to innovate with snacks, getting people outside just of breakfast time. cereal is healthy. >> but it is not healthy. it's not been healthy. for years, they stacked it with sugar, and people had enough. even if you go in, try to find something without sugar in it, okay, it's better, but it's difficult to do. natural they liable them was not true. you know, and people heard enough, moved on. they don't want carbs or sugar stuffed down them. >> is that what is behind this? this is a decline, not just a lack of growth or growth slowing. this is a decline. >> like diet coke. >> surprising. >> for years, only accelerating, which is why the companies have to change. protein -- >> what's substituted? >> yogurt, the next breakfast habit.

yogurt absolutely exploded in this country. in 2003, 36% of americans over the age of 18 ate yogurt, now it's 49% across age groups, look at ages from an 18-year-old to a 65-year-old, greek yogurt is driving the growth in the category. >> low fats. low fats. >> a third of the business, a $4.3 billion industry. it's the private labels like chobani. they are trying to emphasize it. >> and now dannon emphasizing it as a midday snack, any time of the day. some of the volume levels, general mills, down 1.4. >> do you have details on how many people now skip breakfast? >> no, but i do have details on the fact that people eat breakfast out more. talk about breakfast burgers in

burger king, taco bell waffle tacos. more and more are going out for breakfast. look by day part at restaurant traffic, breakfast, lunch, dinner, after hours, and breakfast is the only one, check it out, that's posting growth right now across the restaurant space. >> does that include starbucks? >> yes, and that's why they are investing heavily in the food service business because this is where the traffic is. >> highly leveraged to employment because you're not going to get something out for breakfast if you're not on the way to work as mcdonald's argue. monsano reporting earnings. the company says they expect the seeds and trades business to continue driving growth. as a result, raising full year guidance to the upper end of the previously announced range and announced a $10 billion share buy back. look at shares of monsanto.

>> the buy back is the key part of the story. it it is significant. in fact, $6 billion above what people had been anticipating. the story is one of capital return. capital management, larry robins, frequent guest, friend of mine, on a number of times, emphasized to push the company to increase leverage and buy back. not give everything you want, but must've in that direction. expectation at one and a half times leverage, could be two and a half and buy more stock. this is moving in that direction. $10 billion over two years, again, the real headline here. you pointed out, the numbers, themselves, were kbiet strong for monsanto, looking for tax inversions. you got two themes here, the buy back, and, of course, that does not appear to be in the cards at this point. >> two mutually exclusive? >> no. there are, again, shareholders

who favor that as well beggivint means for the taxes, but there are antitrust questions, not that that deal's talked about at this points, but reports, i believe last week, or early this week, that, in fact, there were tal talks. when we come back, talking to art, see what's in the markets as we count down to the opening market. don't go away. the world is making things in new ways. ibm watson can help doctors make better decisions. to create a far more efficient system in terms of our generation. and we give music creation for the masses. big data generates that possibility. social has put the focus on individuals. discoveries. recipes. insights. better products. once you know, you can't un-know. it's a good day to make something new.

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week. huge round of applause for the lance corporal. let's bring in the director of floor operations with ubs to talk about not just yesterday's action, art, and what happened in the middle of the day, but the gdp number today. not a good revision by any means. health care, a big part of that. what was your take? >> well, it raises a concern we had and expressed before, and that is if the economy were to suddenly hit stall speed, and it's coming reasonably close, or if there was an event, what latitude does the fed have, you know? here we are still at 0. could they go back to qe? i think we are beginning to see some changes in there, the yield spread between -- i don't mean to do rick's job -- >> he does it pretty well. >> but the yield between the two and ten-year is the narrowest in a year. there's concerns out there about where fed policy's going to go

and the sharp down move in the gdp did nothing to erase that. >> so after the outside day yesterday, you think we have set ourselves up for a move down? >> well, historically, when you get an outside reversal in the manner that you got yesterday, the following couple days see continuing weakness, not huge, and it's not a hundred percent of the time, but more than half the time you see a little follow through on the downside. >> we can debate whether geopolitics affect the market, but the trigger everybody worries about is the timing of interest rate rises. the silver lining in the gdp data surely is they can hold off arguably on raising interest rates longer because the economy is simply smaller. >> and they have a benefit because the pce was not quite as sharp as everyone feared. it's been -- the problem -- >> that's the preferred inflation? >> right, and the concern, therefore, was that you might

wind up with stagflation, an economy going nowhere and pressure moving up. we'll see. if the bulls regroup and mount a rally again, the area the viewers should watch is the -- right around the 16,970, 16,980. we stopped there three times in the month of june. >> all right, art, thank you very much for that. >> my pleasure. opening bell moments away. stay with us. female announcer: time is running out to get the hottest deal on a new mattress. sleep train's 4th of july sale is ending soon. right now at sleep train, save $300 on beautyrest and posturepedic mattress sets. plus, pay no interest for 36 months

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or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. you're watching cnbc's "squawk on the street" live from the financial capital of the world, opening bell in just about 45 seconds. after the worst triple digit loss for the dow since may 20th, watching the macro today, gdp revised, the final revision down 29, the worst quarter since the recession, and, in fact, the worst q1 since 1958, which is hard to believe. a lot of that on the consumption stand point, particularly in

health care, so there's a big debate this morning to what degree the aca took effect on january 1 had an effect on spending consumption in the first quarter. year. he's the opening bell. the look at the big screen, owner and operator of a network of free staptding emergency rooms in the u.s. celebrating its ipo. the nasdaq celebrating materialize, 3-d printing service, and we'll talk with the ceo an "squawk alley." david, good to have you back, we had inversions conversations, and said, man, if only faber was here. >> we talked so many times in the morning, carl, with jim, and how many lawyers, people who traffic in transactions say, gosh, you can't imagine how many are looked at. that continues to be the case. we got a couple in the last few days, near 41, of course, i mentioned, the idea that

monsanto thought about doing an inversion, and another in the news this morning is and shooir, you know, the one-month period to convince the shareholders of shire, a u.k. base ed pharmaceutical company to reject the three offers from abbvie that occurred. there's an example. now, many say, as be medtronic over a week ago, strategy is really what's key here. it's the strategic rationale. let me tell you, we all know as well, that the effect of having not just the lower tax rate, as we've said many times, and while they need to do a lot of things to make it happen, but the ability to bring cash back to the country without it being

taxed at 35% of the going rate is also a key reason, and there are going to be more and more coming, i would expect, at least based on how many different conversations are going on to try to bring it to bear. >> so is it whether you get retroactive legislation on capitol hill? you can have a huge deal like this and find the rug is ripped from under you because they change the rules. >> the idea is hard to imagine. >> really? >> yes, absolutely, that it would impact deals that have already occurred is not something that many people believe will happen in legislation. the key is getting your deal done prior to any change in legislation that might actually be signed off by both houses and the president. >> which is itself dependent on the volume of deals that come through? they are not acting in a vacuum here. >> no. >> there's going to be more. i can tell you without a doubt.

pfizer got everybody's attention. that's gone away, at least for now. >> we talked walgreens yesterday. >> where that one, by the way, they did it for strategic rationale a long time ago, but the inversion is an incredible force. their shareholder base, yesterday, with the numbers not being great, is certainly clambering for that as a possibility. swiss, i believe, alliance groups is based. >> all right. keep your eye on pxd today and crude oil, pioneer given clearance on exports of what they call ultra lights crude oil, until now, not available to export in the country, could begin as soon as august pending official release from the government. that's going to make pioneer the fourth best performer on the s&p this morning behind monsanto ad

others. >> the department played down the effect, not exactly opening up the flood gates for oil exports in the country, but redefining the refine -- >> things that can be turned into diesels and jet fuels opposed to straight gasoline. >> clear winners from this. >> carl, as you mentioned, monsanto is the best performer this morning, otherwise a mixed day. the stock up 6%. we talked about it earlier, but, again, another theme that we've talked about so often over the last two or three years, extraordinary cheap capital, and the idea that many investors believe a number of companies are hording capital, and, therefore, using their balance sheets. monsanto rectifying that in the thoughts of the shareholders buying back $10 billion worth of stock. that's right, $10 billion over the next two years. spoke to larry robins earlier,

one of the big shareholders there who has been pushing for this saying this company could go up as high as 2 to 2.5 times leverage and buy back more stock. this is a theme we are hearing and they are putting a lot of that, call it dry powder, to work in terms of their balance sheet, which is being rewarded this morning by the shareholder base. >> a lot of deal talk, of course, as well. i mean, combining the two companies, it would be a seed. >> oh, that does not appear to be on the table any longer, although, one can't rule out future talks. i know nothing at this point, though, in terms of where that might stand. barnes & noble up more than 5%, splitting into two companies as that saga, david, continues into the next chapter. >> we know the nook has not succeeded. the old ceo out. mike hughes running the company, and, in fact, we're going to

speak with him, i believe, in an hour or so from now, an analyst call barnes & noble with an opportunity to ask questions about the decision to split into two. it gets confusing for people because they have split the businesses in a way. they've done microsoft deal, a number of deals, if you recall, but the stock is reacting positively this morning. we talk about barnes & noble, of course, it's not a market cap. what is it these days? i'll take a look. talking, i mean, 1.4 billion or something like that, not a big number. couple moves, cutting coach, taking the target from 38 to 31. we know hitting new lows after a rough investor day last week. restoration hardware, a stock cramer is hot on lately, takes the stock from 85 to 110 on rh. watch that retailer, and, finally, not just a good day for food in general. general mills, of course, with

the miss, missing the 72 cents estimate. whole foods, had to pay a penalty for overcharging customers in california is managing some action to the upside. >> that whole foods has been hit very, very hard so far this year. had a very rough quarter, struggling with increased competition in ogranics. >> a small fine, like, $300,000? >> general mills and kellogg, of course, earnings later into july continues to be in decline. not just those two, but packaged food in general. the reason the stocks held up, analysts tell me, as well as they have so far for 2014, is the fact that there's a lot of chatter that perhaps they are take out targets. we saw the bidding war for packaged food, hillshire farms, particularly in the breakfast segment where there could be consolidation. >> it was an $800,000 fine for

whole foods in california. >> for whole foods? >> yes. >> yeah. all right, after all of that, we have to mention two things. best day for the vix since april 10th, bouncing back from dormant action, and gold up today, 11 of 12 sessions, two-month high as of yesterday for gold. we'll see if that changes today. >> there was a headline in the journal why the market calm is breaking. that gets your attention with a triple digit move yesterday and rise in the vix. barclays surveyed investors, and geopolitical events were the top concern. it was china, emerging markets, but they found, obviously, when it comes to the situation in iraq and also in ukraine where the cease fire looks like it's on the brink of collapse. >> do you think volatility's back in the market? i don't see that. that's not what i see. i'm sorry. i don't see that. we continue on. >> the jury is out.

time will tell. >> thank you for that, carl. let's get to bob. action at post five, bob? >> three ipos pricing. priced 4.9 million shares, $22 was the high enof the range. largest network of independent emergency operators in the united states, 32 facilities and counting, up to 50 by the end of the year. around the corner, 5 million shares at $15, middle of the range, they do authorizations, sign on authorizations for health care companies, important to get secure sign-on for the companies here. that's waiting to price now and start trading. materialize on the nasdaq, that is a 3-d printing company, they enhance software services for 3-d printers, pricing at $12.

that will probably start trading in an hour. we mentioned president obama clearing exports of unrefined oil. that's a help to pxd. look at the refinders, they are down. remember, the keyword is here, clearing exports of unrefined oil, so the refiners in the united states are on the weak side. just a quick comment on general mills. i read parts of the report. it was interesting. you mentioned the miss on top and bottom line, but out of the way to say, promotional spending less effective than we planned. trying to say they are having a hard time pushing sugar. simon, you mentioned that. gross sales and income, short of mar joins. monsanto, the $10 billion buy back, it's a 63 billion market cap, that's 16 % of the company over two years. that's a huge number, much bigger than we see. finally, worried about low volume of stock trading? fcc worried as well.

ti finally, late yesterday, allowing trading in small cap stocks in increments other than a penny. the program would last for a year, three pilot programs, one allows trading of small cap stocks and a nickel. another program allows increm t increments of a penny and a nickel, and the other requires trading, dark pools, for better price improvement. they are worried about the high level of volume in dark pools. guys, i don't know if the program, trading small cap stocks in increments other than a penny succeeds in increasing volume, but everyone agrees that low volume is the problem, and nobody i know is on the street is opposed to having a pilot program to look into that. right now, 23.50 to $25 on the ipo. >> thank you. we mentioned it earlier, worth noting the news this morning, of course, in terms of abbvie making a formal offer again to

acquire shire. this would be an enormous deal. it's been rejected three times, and it's sticking at this point, at least, with the third offer. again, remember, we're talking about u.k. takeover law, a month to try to get something done, in which then they have to stand down, if you will. the current deal on the -- that's been offered is 20 pounds and 44 cents in cash and.79 shares for each shire share. this would be be an inversion for abbvie. they have. trying to engage for some time. this is, in fact, the third proposal. they do, in this morning's press release, go into detail about why they believe it would be beneficial for shire's shareholders, receiving, they say, an attractive currency, upside potential, approximately 23% participation in propelling equities. remember, you need to be above

20% to be an inversion. the new abbvie intends to maintain the investment great rating profile, significant cash flow generation, and it is their intent upon completion if it occurs to significantly increase level of share repurpose and maintain a strong commitment to growing the dividend. on june 16 th, they were rejected again, making the case it should stay private -- excuse me -- independent, and abbvie, perhaps, will need to go one more time to shareholders to see what the number is that will take them to the tail. this has implications for speculation that shire might, in fact, be a company to look to buy to avoid the clutches, but you need a shareholder vote in order for that to happen urn inversion, 50.1% have to approve it. hard to imagine what the proposal is that they would be able to get 50.1% of the

shareholders to approve a deal to acquire shire, and it is interesting to note, goldman sachs is advising in this case on the shire -- on the, excuse me, defense here as well. hard to imagine shire that that, in fact, would be the case, if there was interest, would not give the waiver to goldman sachs to do that. we'll follow this. just trying to get up to speed on everything that happened while i was gone. >> back in the saddle. >> wyoming was really nice, nice out there. chicago, another nice town. rick santelli at the cme group in chicago. >> a great time, just don't look at pension obligations. intraday of tens, doesn't it say it all? worst first quarter since the best looki ining chevy of 1958. the chart, you can see we're below significant consolidation

of yields between 257, 258, and 262. now, maybe the most important thing was brought up by my buddy, art. we talk about the yield curve. significant. flattening yield curve mean recession is imminent? does it mean people are thinking about the fed, what rates do on the market side before the fed does? i can't tell you that, but what i can tell you is everything in the market place reflects weak economic data. it's not geopolitical or weather. if you look at tens minus twos, this is the tightist the spread has been since june of 2013 in the 126 area. it's not the only one, look at fives versus tens, flattest in almost two years, august of 2012, around the 90 area. if we really want to look at something important, look at boom yields. there's a relative value trade. they traded down to 126, reflecting the dynamics of our market. quickly, three currency charts,

euro versus dollar, zoom, zoom, zoom to 136.5, dollar hit, yen hit, trading down, and how did that affect the dollar index? briefly on the intraday, it traded below or very close to, depending where you look, unchanged on the year. carl, david, back to you. all right, rick, thank you very much, rick santelli. medal of honor recipient is here, kyle carpenter, and we'll talk with him when "squawk on the street" comes right back. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

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call or click to open your fidelity account today. welcome back to "squawk on the street," honored to be joined by kyle carpenter, recipient of the congressional medal of honor, first time at the nyse. great to have you. >> thank you so much for having me. >> you had an amazing reception coming in today, and so many people know your story, and for those who do not, tell us about the bay in 2010, manning a rooftop position in afghanistan, a grenade lands.

what happens next? >> well, from eyewitnessing thes and forensic evidence recovered by a post blast analysis team, i made my way in and shielded my fellow marine from an enemy grenade blast. >> saving lives is the bottom line. >> yes, sir. >> president said when you got the award last week, you should not be alive, 40 surgery, reconstruction of your teeth, jaw, your eye, your arm. talk about the comeback. how is it possible now that you ran the marine marathon? >> well, i had many surgeries. i spent almost three years in the hospital at walter reid national military medical center, but with that said, my family, my community, people here, just the entire nation has just been so spoupportive. i had great people behind me. the medical staff truly, not

only does a great job -- i guess, putting me back together, but they truly, when the doors are closed, they truly care about you, but not just you, your family, talk you through it, and they make sure you are comfortable. they just -- it's just a great place to recover and heal. >> i don't need to tell you the criticism that the va got over the past few weeks. do you think that's a fair representation of the work they do for veterans? >> you know, my experience with the va, they care very much, and i think now is just a big push, which is a great thing they are doing to electronic medical records and really coming into the new era of technology and medicine, which, you know, takes time, obviously, and can't be fixed overnight, and as long as we're making strides to fix that, at least we're looking forward open trying to get better. >> all right. you're going to do appearances

today, letterman tonight. we meet a lot of people here, but nothing like meeting you. >> thank you. i really appreciate that. thank you so much. >> great to have you. >> all right, thank you. we are on watch for the supreme court decision on aereo. if that comes, could be soon. stay tuned. [ male announcer ] don't just visit miami. [ jackhammer pounding, horns honking ] [ siren wailing ] visit tripadvisor miami. [ bird chirping ] with millions of reviews, tripadvisor makes any destination better.

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. welcome back, i'm jackie deangless reporting from the. we have $106 a barrel, brent trading near $1 13, a couple issues impacting the market here, especially on the domestic price. we'll have a report from the department of energy on weekly inventories and expectations pushing prices down. a "wall street journal" report suggests two companies in the u.s. will start to export ultra light crude, and tradesers say this could actually lift prices long term. it starts a larger conversation about lifting the export ban in place for 40 years, but right now, this particular decision a very small amount of crude we're talking about. focussing on geopolitics as well, and, of course, they are watching what's happening in iraq, until there's news of an

actual supply disruption, they are not as concerned as they were over the last few days, but, again, more on oil at 10:30 when we get the number from the department of energy. sim simon, back over to you. >> thank you very much. i want to mention the reminers, valero in particular, a story saying millions of gallons of crude oil from shale formations in the country, not just north dakota, full of gases making it difficult to transport and process into fuel. valero dealing with the lighter fuel has problems in particular in the refineries in texas and oklahoma. one analyst put it, potentially the formations can pop like a bottle of champaigne, clearly, a concern how you handle this, how you transport this, and the additional cost of actually refining it. >> i would think that the refiners in general are hurt by the obama decision while it is a preliminary step, eventually, if forced to pay higher prices to

compete with international buyers for u.s. crude, that's the bottom line. >> potentially, yeah. >> pressure there. with that, after the weak data today, dow's hanging on to a 31 point gain, s&p 1953, and we're on the watch for the decision out of the building there, the supreme court of the united states, will they decide on aereo? we will find out in just a few minutes. [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] ♪ my mom makes hospitals you can hold in your hand. ♪ my mom can print amazing things right from her computer.

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. welcome back to "squawk on the street," we begin with the markets, ugly gdp number sent us into the red early. the economy shrinking nearly 3% from the first quarter, but the dow's back in the green. >> google's conference starts in san francisco, google cars, wearables, a multidevice world, but they are waking up to it this morning. >> taking a bite out of soccer sales, an exclusive interview with ceo of adidas. >> books and nooks, barnes & noble splitting in two companies, we have the exclusive

interview. first, a few minutes left before wrapping up the session, six controversial cases await the court's decision on cell phone privacy, on collective bargaining, executive powers, and, of course, the long awaited aereo decision whether the tv over the internet service violates copyright law. really, on the future of how we watch television. there will be decisions handed down today. they will come any moment. we are there, and we will bring you all the details as they trickle out here. in the meantime, despite a weak gdp number, stocks are higher this morning, dow trying to keep 17,000 in eyesight. let's bring in the chief inve investment strategist from black rock. russ, great to have you. >> thanks for having me back. >> you feel yesterday was an inflexion point in any way? >> not necessarily. the markets got a bit stretched. volatili volatility's low. bad news is treated -- an excuse

to sell by the market, but, yes, it was a modest selloff and given losses, we've not seen days where the dow is up or down much more than a percent. >> right. this must be session 48 or 49 in that respect. your reaction to the q1 number, and whether or not it's exaggerated? true reflection of the economy or not? >> i don't think it's a true reflection of the economy which i think is there is muted reactions to it today. a couple things, one, gdp numbers are backwards looking. everybody knows q1 was weak, know it was exacerbated by the weather, and most recent numbers suggest the economy's rebounding in q2. likely to continue to rebound in the second half of the year. i think they look past the number and focus, for example, on the upcoming june nonfarm payroll number. >> can you really extrapolate digging deep into today's first

quarter gdp number on what it says about momentum in q2, russ? >> the main thing is it was a brutal winner. when you cut much of the country under three feet of snow, it is hard to build things, that is going to drag down gdp. what happens is when you have that type of quarter, you bounce back strongly the next quarter. clearly, you have a free pass in q1. not a free pass this quarter. we have to see some improvement to justify this thesis that the u.s. is going to grow 2.5% or 3% in the back half of the year. >> i take issue with the idea it's not a true reflection of the economy. it is the best reflection of the economy that we can get, and it did contract in the first quarter. i understand why asset managers argue that asset prices should be this high do so on the basis of fundamentals, but the first quarter was not good however you choose to explain it away, and

any bounce back now has to be greater to make up for the contraction in the first quarter, and the one thing you can say, russ, for sure, is that this economy does not have the explosive growth that we were promised by the bulls that drove us up to the level of the stock market, surely. >> well, i agree with a lot of it. look, this is not an explosive economy. people that came in in 2014 with a very bullish view on the economy were clearly wrong. however, today is a good example. what's driven the market up is not optimism on the economy, although it's part of it, it's also benign monetary conditions. in some ways, numbers like today, numbers such as the weak durable goods number are at the margins supportive of equities continuing the thesis of the fed staying low for long, the other reason stocks are up as much as they have been. >> russ, a lot of people would say that actually this rally looks tired now. this is not a thumping game.

we're up marginally again on low vehicle consu volume. it's not a strong rally. complacency has to end, but how? >> i think complacency does end at some point, but you have to ask, volatility is low because credit conditions are accommodative. money is available, money is cheap. now, if we get a spike, if iraq blows up, that is a game changer, but in the absence of that, if we continue to have a benign environment, you're likely to be in one in which volatility is low, valuations are higher than they would otherwise be. >> russ, you mentioned durable goods orders this morning. to me, what that suggests is if we see 3 to 4% growth in the quarter, we have to see it without corporate investment spending. is that possible? >> excellent point. it's a reason i don't know that you'll get that strong a print. to my mind, if we're going to see app acceleration of the economy, it comes from increased cap x.

the one part of the q1 number i take seriously is personal consumption revised downward to is 1%, consistent with an economy if economy is better, wages are not. under that scenario, corporate spending has to do the heavy lifting. >> russ, that's the part of the report everyone's examining, consumption, specifically health care consumption on a quarter where the aca went in effect. can you draw a straight line from that policy to that data? >> look, this is complicated by a number of different factors, but, again, take out the one-quarter effect. look at the broader trend. four or five years into recovery, and you still have an environment in which personal consumption is growing 2% in real terms. that is significantly lower than the long term average of 33.5%.

some is due to leveraging, most is past us, but wages, if consumer spends more, they have to earn more. we've not seen that. that's the biggest head wooiind facing the economy today. >> a number of reports saying that's what yelp is looking for as well, russ? >> that's right. i think that's why the fed airs on the side of staying low for longer. job growth improved, but the participation rate, wage growth suggest a lot of spare capacity. >> one thing, russ, i mean, getting a 200-plus print on nonfarm got more important, right? do you agree with that? >> i agree with that. i think in particular given when the data will be released, thursday before july 4th, not a lot of people on the desk, could see a lot of volatility if the number deviates from that one way or another. >> we'll see, that would be five months in a row.

russ, thanks for guidance. >> thank you. okay, over to dom chu for a market flash. good morning. >> good morning, the oil refi refiners right now, the worst stocks are valero, and as originally reported by the "wall street journal" approved exports of certain types of oil products and concern is building that u.s. refiners have to compete and pay poly higher prices for crude they turn into things like gasoli gasoline, helping to drag shares down in today's tray, oil refiners, ones to watch today. back to you. >> thank you very much, dom chu. up next, benefitting from the business of the world cup. a live and exclusive interview with the ceo of adidas when we return. and "squawk on the street" is back in two. standard with an engine

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stock up sharply, obvio lly of course, and while you read the opinion, says, the court goes out of the way to make clear the ruling, does not endanger other technologies, but sweeping determinative in one wonders whether aereo will survive, and that's in question after this. >> there's no plan b. >> wonder what that means for investors. i mean, if this is the death now for aereo, and a win, certainly, for the broadcasters. >> cbs up over 6%, and fox, again, focus on those that do have a decent amount of revenues and earnings that come from their over the air broadcast business, and that, of course, pure plays, cbs, the purest, but, in fact, retransmission fees are a significant part of the business, not just

advertising from over the air broadcast, but stock also. up 1.7%, disney benefits, even though abc is a tiny part of the overall business. >> sure, but now the question is do they get more aggressive in negotiations over fees, how heavy do they get with the victory in their pocket? >> also important, the affiliates and station groups may have been the groups that were most impacted negatively. >> local ones. >> right. you have to keep an eye on shares. >> implications for nfl and mlb and contracts there? >> sure. they were part of the case. >> julia, you covered this from the beginning. we knew the arguments were tough on aereo, never a perfect indicator on the decision, but in this case, it was good. thoughts? >> i think the expectation was the broadcasters would win. what's interesting here is it looks like the court ruled that

in essence, aereo is like a cable company. by saying that, not an equipment provider, as a cable company, they are obligated to compensate the content provider for their fees. aereo argued they provided equipment in that it had all of the little tiny antennas. another thing here is the focus is on what the language is when it comes to cloud services because there's a lot of concern that a ruling about this in favor of the broadcasters would limit the way cloud services are used in the future, but just looking at the quick analysis of this saying that it is very specific it does not impact other technologies, so we'll continue to dig through this, but so far it looks like it should not impact cloud services, which there was a lot of concern about. >> all right, julia, thanks, david joining us this morning, just getting the decision itself, david, now, and we must decide whether aereo infringes

on this exclusive right. we conclude that it does. what does this mean for aereo and the broadcasters themselves? >> well, i think the broadcasters, look, at the end of the day, we have been of the view regardless of how the decision went, particularly for big cap companies like cbs or fox, it was not a huge issue because there's other remedies. i think it's a much bigger positive for the kind of pure play smaller broadcasters, very positive development for them in terms of their ability to drive retrans and, like, this was an overhang to the space investors can now get past. i think for aereo, itself, the reality is, you know, this was very binary, not a massive amount had gone into aereo, so, yes, it is painful, you know, and on some level, but i don't think it's fortunes in the grand

scheme of media mogul land have not been lost today. the options just did not turn out as they hoped it would. >> obviously, the market was not anticipated this completely, was it, david, otherwise cbs wouldn't be up 7% this morning. >> that's right. the reality was, i bet, had aereo, in fact, won, you would have seen an order of magnitude of gain, would have turn into sort of loss, and so this is about what we had expected. the issue was, the real challenge investers had around this case was that most of us did believe that aereo, that the court would not find for aereo and would for the broadcasters, buttal level of certainty was always like 75%. you felt good, but not 100% certainty. that's more dangerous for investers, right? they'd rather have certainty of yes or no, much tougher, oh,

pretty good odds that it's yes, but you never know. >> there had been a thought this would embolden court cutting, if they were a legal service. did you agree with that as a possibility, and, therefore, is there the reverse in this case? >> no. our view would be you have to be more tethered to the cord essentially because they diverted into cable networks. it would have accelerated a move towards, like, becoming the subscription model for broadcast. i think it would have been disruptive on some level, but at the end of the day, the broadcasters would not have stood still while the signal was, you know, taken from them for lack of a better term. >> dave, if you can, stay with us for a moment, let's disclose the court our parent company, nbc universal among the broadcasters opposing the claim before the court. hampton pearson, any thoughts on

the ruling and cloud in general? >> i'll read a few opinions saying the case asked whether aereo can show copyrighted programs the public way without obtaining a license, and the court majority says we agree with the networks, it cannot. at the heart of the opinion, he goes to the key argument that aereo tried to make, that it does not play shows for user until the user directs it to do so. that said, aereo transmits nothing, just the subscriber that transmits the program. the justices and justice breyer saying it makes too fine a point. he was delivering the opinion still when i came out here to join you. as far as getting into the meat of it and what it says of concerns in the future of the cloud, we'll wait to hear clarity. this was a tailored ruling to deal specifically with the aereo

situation. back to you. >> all right, hampton, stay with us. david banks with us. carl brought up the issue of fees. is this a loss for the consumer? >> well, no, i don't think it's a loss for the consumer. look, we've been of the view that if you think about the amount of investments in content that the broadcasters make, the average network, like, your parent company or cbs or abc or fox, these are companies that invest, you know, $3 to $4 billion a year in content versus the cable channels, it's a half billion to a billion dollars, something like that, and right now, broadcasters are paid, you know, basically in line for the signal with the cable channel. we think the consumer has two or three times the amount they are currently paying for a channel is a bargain. >> this was such a cheaper alternative and could have opened the door for more cheaper

alternatives. we hate paying high cable bills. >> i don't mind. >> well, i mean, it's a bigger question. at the end of the day, the model, you'd probably struggle to have the quality of content if you don't monetize it in the fashion that, i think, wall street is expecting the networks to monetize it in, and at any rate, again, what i would say is relative to the content that you're getting on the cable channel, i think it's a bargain, like, that's what the quantitative easing shows. >> can i drive you to a central rejection that the supreme court made of the case that aereo argued? >> sure. >> the idea that millions of individuals can down load what they want to watch themselves, it was not a rebroadcasting of what was going on. that was important. they said, if we download a hit

single in the cloud similarly, is that a public broadcast? the central rejection that the supreme court is making, what does that mean for technology? >> well, i think the subtlety is this, that if you -- it hinges on the definition of a public performance, and i think the subtlety is this, that probably that if you pay for the content in the first place, i don't think there's going to be a concern over downloading from the cloud. the issue was -- so if you and i down -- pay for something, and we download it at the same time, does the cloud qualify as the broadcaster? i don't think they're in violation of copyright laws because we download something we own, storing somewhere and downloading after we paid for it. i think the central issue was, did we own it in the first place? >> david? >> yes. >> forgive me, i have to go to

hampton with more. >> we have answers about the cloud and future technologies. in the opinion from the justices quoting we believe resolutions about cloud computes, remote storage dvr and other novel matters not now before us should await a case in which they are clearly presented. to be continued. >> hampson, thank you for that. david, that helps a little bit, doesn't it? >> i think it does. again, i think the subtlety in the way this is all going to kind of develop is, does the consumer own the content? if the consumer owns the content, then my guess is you'll, you know, ultimately, you'll be able to transmit that content in whatever way you want, but it must be clear that no copyright's been acquired to violate the content. we'll see what the next case brings us, and that will have a bearing on companies like amazon and, you know, the companies involved in the cloud. for now, i think there's a, you

know, a clear answer that it doesn't have a lot of bearing, and that the broadcast signals need to be protected from, you know, from this kind of technology. >> before we say good-bye, what happens to your models on retransmission fees, cable revenue, you name it? >> honestly, nothing. i mean, the -- the reality is we see broadcast on a trajectory from a dollar to $2 over the next couple of years for retranss, and probably a next leg up to that to maybe $3. we expect that to happen, and we're probably not adjusting our expectations. we just think when we go to meet with investers, they are likely to believe us now. >> yeah, well, david, we have to point out, you are positive on cbs for a long time. >> i have. >> not incorrectly, i add, but certainly, you know, quite positive on its prospects on this, perhaps more so than other

people. >> yeah. again, our belief is that cbs's content has been under monetized, and this validates that proposition i think and validates our position for a ramp in retransmission consent. >> david, thanks to you, julia, you get the last word in pouring through the decision. >> continuing to read the decision here, and it really reiterates this should not impact any emerging technologies. there's concern this would be bad as mentioned for the likes of drop box, legally acquired and purchased music or movies, it would not allow services to continue to give people access to them through the cloud, but this should not impact that. the supreme court was specific this would have a very narrow implication, very narrow implications. clearly, a win for the media giants, and it's interesting to see what aereo does now and if they are willing to pay some sort of fee to be able to continue operating.

>> all right, julia, thank you very much. we'll stay on top of the implications for the broad esthers aes casters, and aereo. barnes & noble splitting the company in two, and the ceo is here live for a first interview. go pro pricing its ipo today, known for small and extreme hardware, wear it on your body and share your point of view of the world. >> or strap it on as he tracks the floor, it's intern cam on cnbc.

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and find out more about our two-year price guarantee. comcast business. built for business. welcome back. of course, we did get that long awaited decision from the supreme court saying, hey, it's illegal. it is violating the copyrights of the broadcasters, as you can see, those that own broadcast networks are up including comcast, walt disney, cbs, up the most, and look at those with local stations because that's where we are really seeing play with investors with the most to lose with a different decision from the court. sinclaire up almost 14% up, tribune up, benefitting from the decision this morning that many expected, but certainly, as you

can see, not fully because not fully appreciated or expected by those investors in these company's stocks. also have a brief statement from the ceo of cbs in a number of interviews we've done in six months to a year, confidently predicted victory at the supreme court proved correct. saying we're pleased with today's decision, great news for content creators and their audiences. >> but what does that mean for the startups like aereo and the company raised almost a hundred million dollars. that's a big loss if the company goes bust as the ceo said, this was really it. >> this is probably it. when the supreme court says your business is illegal, you're going to have some issues. >> you got that right. meantime, almost 10:30 on the east coast. let's get to jackie deangelis. okay. we are waiting for the department of energy release

crude oil inventories, prices down domestically ahead of this, traders expect a draw of 2 million barrels a day, and api report showed a build of 4 million barrels. there's a conflict there. interesting to see how the number comes out, one of the issues we look at, refinery run rates, increase, meaning refineries use oil to create refined products, and we have a build of 1.7 billion barrels, in the face of expectations, and prices continue to decline. we are under $106 a barrel right now, $105.86. a lot of factors to consider, geopolitics, the wall street journal story on the u.s. and possibility of exporting the ultra light crude as well. traders digesting the news. i want to point out that brent prices are lower, closer to 113 now. traders are watching iraq, but waiting for any kind of news of an actual supply disruption.

there's not been any word of that just yet. right now, brent is backing off too. back to you. >> thank you very much, jackie deangelis. i want to draw your attention to an interview from the ap, going back in april, and, specifically, with the knowledge this case was before the court. they said your plan b, should the supreme court decide against you, answer simply, we don't have a plan b. they intend to answer questions directly, interested how he would be answering that today. >> been a great concern to the broadcasters and confident they might prevail in the supreme court, and nonetheless, investors not as confident, perhaps those who lead the companies, but now one wonders what happened. seems they are done. probably done. we have not heard from him directly. >> waiting for them. let's get to the cme with rick santelli. >> it's wednesday, and when it's

wednesday, it's jenkins jr., and i want to welcome my guest, thank you for timing the time wednesday morning. >> hi, rick. >> all right, you know, the president and administration has a share of negative headlines as of late whether it's foreign policy, irs, e-mails, the va, and it's on the latter one i want to talk a little about this morning. health care and the obamacare, affordable care act in the news again today because it affected the revisions to first quarter gdp regarding health care spending. i guess my question is, do you believe that the president in history will consider the affordable care act the premier legislation? what's your opinion. >> he's stuck with it as a major legacy whether he likes it or not. whether it's perceived as a victory, the verdict is out. i don't see how it can. it never made sense from obama's perspective. many secretly and not so secretly want a single payer plan.

>> i have to stop you right there. stop you right there. the reason i asked, single payer is part of it because i was really scratching my head, is this va scandal broke, i wanted to ask the question, many asked in an op-ed, why doesn't the president get the va to dove tail into the affordable care act? you know, wouldn't that help? with the mismanagement problems, how are they going to get ahead of this? why haven't they considered that option? >> no. the republicans are considering that option. you have all the veterans waiting in line for services, some are dying, some have been wait listed for six months, a year, two years. why not let them go in obamacare. >> why not? why is the president pushing this? >> well, his instincts are incohermit. he wants the va for the rest of us. puzzling why he didn't make sure the va worked for the people who

it is supposed to work for. this is an administration that concealed motives from the american people for a long time. >> telling me that the government and this administration in particular, not unique to this maybe, is that control is more important than success. take that and move forward in another area. gm's been in the fuse, since the government sold out shares within, what, three days of the all-time high, and all the recalls hit. my question there is something called cafe standards. corporate average fuel economy. is the government forcing companies like gm to make cars nobodiments? i have not seen a bolt on my road lately. why not make cars and trucks we want? why are they making little cars that don't sell or make gm profitable? >> yeah, gm does not make a car like the cobolt. they don't make it because they want to for profits, but to meet the fuel economy rules so they can sell the cars that make the

money. the problem was, why didn't they recall it from day one when everybody saw the glaring defect? everyone could see. early reviewers in the media could see, and the reason, i think, they didn't want to spend money on a car destined to lose money in the first place. >> crazy that the government wouldn't try to push the notion of profitability and enhance taxes and jobs. reading the paper indicates that. thank you for taking the time. >> my pleasure, good to be with you. >> let's discuss the huge issues hitting the wires. >> thank you very much. if you're just switching on, the supreme court declared the internet tv service, aereo, illegal. we'll bring you more on what that means for the broadcasters, and, of course, for those cutting the cord. first on cnbc interview with the

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some of them are things we want to slow down because it's capital involved, expansion, for example, but we are building out five cities right now. >> unclear if they build out more, of course, ceo of aereo. we have not heard since the supreme court deemed aereo an illegal service. that, of course, having a positive impact on the companies that own broadcasters and station groups as well. let's bring in reid hunt, former fcc chairman, to weigh in on this as well. good to have you, reed. give me your take on the supreme

court's decision. >> a really, really big win for broadcaste broadcasters. aereo has little chance of surviving in business, and got his hands caught in the regulatory cookie jar. >> are you surprised at all? did you expect it would go this way? >> yes, i did. >> why? >> because most of the justices have a track record here, usually predict how they come out on this keep of a decision, so you could count the votes and this came out the way that i thought and the way that a lot of broadcast lawyers thought. the broadcasters have a very difficult relationship with the cable company, but aereo tried to bypass all the rules and regulations, and the majority of the supreme court firmly said

that they were following what i call the quacks like a duck, it's a duck. aereo looks and feels like a cable company, so it's treated as a cable company meaning retransmissions and negotiations with the broadcasters that cable does, that's obligatory for aereo, which, according to aereo, probably puts aereo out of business. >> yeah, you know, when you were, of course, chair of the fcc, public interest is a key part of what you look after. i'm curious, here, we have the supreme court, they are not interested in public interest, but ruling on the law. reed, what's your sense? is this a public benefit, this decision, or perhaps something not in the benefit of the general consumer out there of video? >> public interest is not an eraser to erase all statutes.

broadcast has getting access to the people in the cable network, and that says it still exists, and you can't use the technological trick to bypass the rules and regulations. i think that's the very reasonable decision. i also think that the really, really, really big question is whether broadcasters get a fair deal from comcast, the merger proposed, but that was not relevant to the supreme court decision, and i think the supreme court made the right call. >> well, only, the fcc, your old agency, has a lot in front of it as you mentioned between time warner, at&t, direct, and i bet we'll bring you back, reed, always appreciate your time and your insight, reed hundt, former fcc chairman. not the only ruling from the court, ruling whether police can

search cell phones of the people they arrest. we are outside the court. good morning, pete. >> reporter: answer to that question is generally no, the supreme court in a surprisingly lopsided decision, 8-1, said the police have to get a search warrant before they search the cell phones of the people they arrest. this is a departure from the past law. the holdings of the court have been when you get arrested, the police search anything you have, your briefcase, your purse, your pockets, cigarette pack, but the supreme court said cell phones are different. they hold so much data. they are a different kind of thing, and in every case, the police have to get a search warrant before rummaging through it. there may be expectations said in the supreme court under circumstances, in other words, if there's a serious crime or in the heat of the moment, and you have to get into the cell phone to find whether there's critical piece of evidence that could prevent another crime, that kind of thing. that's the exception. the general rule is the police

will have to get a search warrant. on the aereo case, it's worth noting during the argument in this case, the justices seem very worried because of the statement made by the lawyer for aereo that the internet world was freaked out was the phrase he used by the potential impact on this of the cloud. that seemed to worry the court, but in the opinion today, they say the holding is limited, and it won't affect things people put in the cloud. a reason for that is most people who store materials in what's called a cloud, bought it or obtained it legally, in essence, paying the copyright fee. for aereo, the ceo of the said if the supreme court voted this way, it would probably doom the company. we asked aereo for comment. we have not heard from them yet, but begin the whole point was to engineer it in a certain way to get around the law with the supreme court saying that does not work, doesn't seem likely the company will continue. >> yeah, i was going to say i guess they could pay

retransmission fees. >> yes, and i asked about that. frankly, you know, it's a very slick technology. it really works very well. it's -- i would love to have it, except for the copyright fee problem, and i asked him about that, but, you know, the whole point, i think, one of the whole points of the investor scenario was they wanted to try to break the cable monopoly, not interested in just a service that pays the copy right fees and does business as usual. >> people shaking their heads, pete, at the business model headed towards a binary outcomb. thank you, pete. meantime, barnes & noble splitting into two companies, jokes about fiction and nonfiction. faber has the interview with the ceo in just a minute [ both ] when we arrived at our hotel in new york,

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that's why i always choose the fastest intern.r slow. [ male announcer ] with millions of reviews, the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. the ergs thos, the foundation of the company, was to create a parallel system that's a fair system, based on the internet model. if we don't succeed in that, we don't succeed in doing that, but, you know, we didn't start this to figure out a clever way. >> the ceo of aereo speaking previously on the network. breaking news, of course, this hour, the supreme court ruled in

favor of the broadcaster, and among them are our parent company, nbc universal, saying the service aereo provides is illegal. aereo, was, of course, funded in part by iac. let's go to becky for more on that. >> good morning, the month leading up to this, there was no shortage of people saying that everything was riding on this, including the key investor. he said in the past that things would be over if this did not happen. he's out of the country right now, but he does say i think it's a big loss for consumers wanting ining alternative to t bundle. we tried, but now it's over. those are the comments, it's over. he said leading into this if supreme court ruled against aereo, it would be over if the company, and that's what he said in the wake of the ruling as well. we tried, but it's over now. sim simon, back to you. >> more on the breaking news throughout the day here on cnbc. meantime, air france unveils

new seats in business class to better compete with british airways and the arms race in passenger luxury coming from the asian and the middle east airliners. in the overflight from paris, just few hours ago at jfk the gp ceo of air france klm was on board and arnold dejunia joins us now in a first on cnbc interview along with our own phil lebeau. alexander, let me kick off with you. what are you actually offering here now the passengers on air france in the premium cabins? >> yes, good morning. we are opening the new route from paris to new york using a 777 equipped with a new product, which is a top-class product. for the passengers in the u.s. we'll try this product and fly with us, you will come in totally a different atmosphere.

you will feel something which is luxury, attention. france is in the air in our aircraft. >> phil, join us. phil. >> mr. de juniac, you're sitting in the premium cabins, a mockup of it, and those are clearly an upgrade, but you've also been improving your economy seats. but part of that is using lightweight seitz. you've stripped out, basically about 1,000 pounds by moving to lightweight seats from your 777s. do you believe that on those trans-atlantic flights those lightweight seats will be effective in terms of comfort that people expect on a long flight? >> of course. when we change our seats, the weight is absolutely key because it influences the fuel consumption. so as you know, the fuel represents 30% of our costs. it's a key issue. so to have light seats. but we have made no compromise. you can be sure of it. and our new economy seats is much more comfortable than the

previous one. you will have a larger pitch for your knee. you have a broader careen and a high definition screen for the i.f.e. you have plugs for your smartphone. so it's a totally different seat and much more comfortable and elegant and with exceptional service. we have improved the meals. so i think that for our coach passengers they think that they are almost traveling in business class. >> we will see, sir. thank you for joining us. we have a busy news day. so i'm afraid we're going to have to keep it short. but we appreciate your time. alexandre de juniac, the ceo of air france klm. and of course our own phil lebeau. barnes & noble officially splitting into two companies. the ceo next on cnbc. [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ [ birds squawking ]

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because they've introduced startup new york... with the state creating dozens of tax-free zones where businesses pay no taxes for ten years. become the next business to discover the new new york. [ male announcer ] see if your business qualifies. shares of barnes & noble getting a boost this morning. the company's board giving management the okay to separate the retail and nook media businesses into two separate public companies. the company hopes to complete that split by the end of the first quarter of next year. joining us now on the phone is barnes & noble's ceo, mike hughesby. mike, good to have you with us. >> thanks, david. good to be with you. >> first off-y the decision to split the company in two? >> well, i think the decision's

been looked at for some period of time in terms of how to best structure the company to optimize shareholder value and the board decided recently that a separation of nook media, which as you know contains our nook consumer digital business and our college business, and the barnes & noble retail business is the best way to optimize shareholder value. >> but why is that the case? >> well, if you look at the businesses, i think they have different profiles going forward. the retail business, which is very solid and lately has shown signs of basically leveling off in terms of its sales, is a business that is a solid cash flow business, fairly predictable in terms of cash generation. and the other businesses have the opportunity to really grow. and exposing those to the capital markets will determine, you know, how that growth can be financed and the pace at which the growth can occur.

so one's a growth profile, one's in a more steady state cash generation profile. >> right. although mike, many would say the nook business is not growing at this point. in fact, it is in decline given it was unable to successfully compete with the likes of amazon and the kindle. you know, i'm curious, do you really think there's going to be an investor base willing to take on the risk of that business? >> well, that's something we'll find out now that we've made the decision to separate the businesses. and the answer to that is yes, i think there is. the assets that nook consumer has are relatively unique in the form of its digital content catalog, which is comprised of over 3 million titles domestically, and we're also expanding that catalog internationally. and what we've found is that in discussions with other large technology companies there's a very strong demand for that content as a way for them to accomplish their other objectives, whether it's selling hardware or, you know,

increasing the ecosystem for other purposes. >> michael, you mentioned of course the leveling out of the retail business. stabilization i think may have been the word you used. there are many out there who say really? barnes & noble retail is stable or growing? is that something you believe is sustainable? >> well, our chairman said it, and i think he's right, that this coming holiday in 2014 will be very telling. but you know, the prognostication last year at this time and for years before that was that the physical book market including barnes & noble was going to decline at a fairly healthy rate, and that just hasn't been the case. as we reported, the holiday season, which is where the lion's share of sales in retail occurs, was relatively flat. it was a .2% decline for core comp sales. and we've seen the same type of a trend absent the february weather, which we talk about in the press release, in our fourth quarter. so it's about -- the

sustainability will be proven over time, obviously, but right now the trends look that way. we're encouraged. let's put it that way. in terms of retail and its recent trends. >> i'm having some trouble here on mike unfortunately. >> david? >> i think i got you back. are you benefiting at all, mike, from the amazon battle with hachette in terms of authors like j.k. rowling or james patterson who are no longer -- or not available on that website, which of course controls as much as a third of the book market as easily as they would at a barnes & noble store? are you seeing a benefit? >> and he. we're seeing a lift of hachette sales in our stores and online. i'm not going goat into specific numbers, but our objective is to make sure our customers or any customers have the books in their hands as quickly as they want and as conveniently as they can get them. we've been supporting hachette

which is a good publishing partner of ours as well as their customers and authors. >> finally, mike, it was brought to my attention on twitter actually that you've been a seller of stock. i don't know if that's a force planned sale or what but i would like an explanation as to why you've been a seller of barnes & noble. >> well, that's not accurate. i've never sold any barnes & noble stock except for some vesting that i had where the restricted stock was withheld in order to satisfy the taxes on that vesting. i'm not -- in fact, we have an executive retention requirement that we'll disclose later that we just put in place. so i wouldn't be in a position to do that. >> all right. mike, we've got to leave it there. appreciate you joining us. mike huseby, cref barnes & noble. the company announcing it's going to split into two. of course it's going to be a while. these things take time.