back. >> i'm just hoping on a lot of fronts, our public sector gets out of the way and lets the ingenuity of american business get our economy going again. >> there with you. hope so. >> great having you today. thank you very much, steve miller. never gets old for us. join us monday, and "squawk on the street" is next. good friday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and dave faber, and the premarket relatively indecisive here, wells fargo kicks off financials today. ten years around 2.52, evans and lock hart on tape this afternoon, and europe trying to recover some of yesterday's losses, while we obviously watch portugal as well. road map begins with wells

fargo. results matching estimates, citing improvements in the economy, especially housing. >> as i reported last week, loralar confirming they are in merger talks, a deal could be monday. >> in the wake of the session, icahn's reportedly promoting caution. >> nadella promises change is coming to microsoft. >> wells fargo recorded profit of 1.01, in line, and john stump says the results reflect quality driven by an improven economy especially in the housing market and cited the bank's continued risk discipline among the big met trirics and that fell again quarter on quarter as banks are squeezed by low rates, but mortgage originations up quarter on quarter, nothing like last year. >> $11 billion quarter to quarter increase in mortgage originations, 1.1 trillion

dollar deposits. >> that took my breath away. 1.1 trillion. >> you see that number, and first thing you think, okay, did they put the number of 0s correctly? that's why it's not considered to be up to snuff. they have too much money. >> we all wish we had the problem. down five basis points, looking for down one. i don't want to focus on it because everyone else is, but this is a juggernaut and the credit numbers are fantastic, bullish, and if people are not satisfied with this, they will not be with other banks. >> up 9% since the last time they reported so people had hope coming in. it's the first time in at least six quarters they have it beaten on aps. >> there was a period it went up

a great deal because warren buff buffet, but there's a number, this net interest income, guys looked for 10.99, came in at 10.3, okay, different from what people were looking for, but forest through the trees, carl, wells fargo, dominant bank, takes profit, just buy it. >> up $500 million release for the allowance of the credit losses in the second quarter. that can, obviously, help the bottom line number, and some say as dimon said years back, i don't count that towards real earnings. probably regrets saying that. loan charts improving. loans 90 days or more past due and accruing, in other words, improving, less of them, and credit losses 13.8 billion as of the end of june down from 14.4. metrics moving in the right

direction. >> yes. >> the size of the bank is enormous, but the complexity is not. >> thank you, right. >> it's important to draw the distinction between complexity of financial institutions, not nearly as big as well, but they do a handful of things really big. >> interesting, big journal story about how if you're big, but focused, you're going to be rewarded rather than big and st. paul sprawling. >> this is a community bank, nationwide, this is -- all the different lines read like what potter did, okay, maybe what bailey did. not as successful as potter. >> i think i know what you're talking about. >> oh, my god, is there anyone you cannot do? >> he doesn't. >> that is so good, so good. >> total employment down year on year because of the mortgage market. >> yeah, when you look at the employment numbers nationwide, you realize this industry actually was the first quarter that the insurance industry had

a big increase in labor, but the banks are becoming much more savvy with technology, and, again, a comeback, people are going to say, well, wait a second, wells down today, won't they all be down? i say wells had unbelievable performance. if you're going to sell all the banks off this, that's silly. the banks are well behind the rest of the market. >> all right. let's move on to other stories, of course, covering tobacco companies, ren nelds american, and lorillard, and if they agree to buy, that puts cigarette brands under one roof. they discuss the assets of part of the deal, of course, something that we told you about, actually originally back on april 29th. now not to take away from my competitors who many of them had the story, and the ft was talking about talks between these companies prior to that, but it was april 29th when we reported on it being significant in terms of talks.

they've come and gone since then, but last thursday that we told you it was coming and coming soon. that continues to be the case. >> and, you know, great work. great work. >> i mean -- >> sorry? >> i was going to say we have a piece of tape. >> they have not yet fully negotiated terms, complexity of the deal means it's once again knocked off course for some time, but at this point, it seems to have a good deal of momentum pointing to the announcement, call it, to be safe, before the end of this month. >> lorillard in which they buy. >> it's easy for me to say it's great than for -- just to run the tape, but i liked the tape. thank you. >> they told me to go to the tape so i went to the tape. >> congratulations. >> but let's not forget there's a lot of complexity here. by the way, if i could offer the terms here, i'd like to do it. i'm not in a position to really give you something that i think would be accurate. you know, bonny, the analyst at

wells fargo has been good on this from the beginning. she's still looking for -- what are we talking? perhaps, originally as high as 80. now, most of the other analysts don't see that, could be 80 bucks a share, that was an early note on this. of course, a lot of synergies here potentially, but the divestitures will be significant, could be as much as $7 billion coming from reynolds and lorillard. they will buy more to keep ownership, at least 42%. there's a lot of agreements here, a lot of documents and decisions that have to be made between now and potentially monday when we could see a deal that has been discussed certainly in the press for quite some time. >> is there a constellation of brands here? in other words, someone who benefits because, yes, divest -- >> imperial. >> may be that winner. they become number three conceivably with the brands

they'll have to buy so that this thing passes antitrust muster, otherwise, it would not be able to and still will get a stuff look from the regulators. >> the gateway product i like, the e-cig, how much is that driving things? lorillard is known as the e-cig company. >> i don't know. it's not come up in the brief conversations i had with people around this action. >> i feel like bogart. >> with the lorillard ceos, the only ceo who smoked one of those on the floor of the exchange. >> never smoked a cigarette, but when i put that in my mouth, i just want to take up camels, filter free camels. >> you'll take capacity out of the system. >> that's why everyone wins. >> what that happens, everyone wins. shares of reynolds up, and lorillard up a little more as expected. that's always important. don't they they won't watch that closely. adverse reactions could knock

things off. that's clearly not going to be the case. they are already past the point of negotiating many of the terms here again. i can't give you specifics as many people who tweet saying, come on, david, tell us what the number is. >> they wanted dave to give the numbers before the deal, after the deal. >> when he's good and ready, that's when they get the numbers. >> darn right. >> markets coming off the volatile session seeing the dow fall by 18 0 points before recooping the losses, finishing down 7. carl telling them, it's time to be cautious about the u.s. stock markets. we have a great year, but i'm being selective about companies i purchase. that reminds you of nervous time from david tepper, and wilbur ross has been in the cellar this year. >> it's not a market year, i don't think. there's certain stocks in certain segments doing incredible. oil and gas doing incredibly well. biotech with a big comeback, but

the idea you trade the market is not a terrific idea. what i i want to be careful of, go back to teper, it's nervous times. unless certain events occur. that's not just idle chatter. events occurred, and he got bull ir. i wish people say, okay, what's it make you to like things again? a 10 % decline? bigger earnings? that's the thing that makes it so it's more valuable for our viewers at home. >> yeah. >> well, yesterday, of course, to the extent that people are nervous, they seized on portuguese bank that's having real issues. >> yes. >> and then wondered whether yet again we talk about contaigon and revisit the idea. it seemed like a one off, and then throughout the day the market repaired itself from the damage that took place, but it begs to question, a reexamination of portugal's gdp, debt to gdp and spain is not

completely out of the woods and italy, all that debt that country has. >> right. >> you know, you tend to go down the roads again if you're nervous. >> i had tremendous advantage yesterday because i was under an thee sha the whole time this was happening, and -- >> hand surgery. >> hand surgery, yes, and what was amazing to me was that when i found out the market was down 180 and futures so negative, of course, i was not kind of there during the period, but, like, wait a second, wait a second, the futures create this vacuum and the european markets go down, and suddenly everyone panics here. please, think about it. our banks so much stronger and markets stronger. the natural impact of your european is, wow, i should buy things in america. not i should sell everything. don't forget. that's a cross market flow that comes here as they try to exit their not great market that always is teetering ongoing back in recession, so stop selling

our companies on banks that are not well capitalized over there. >> talking about exits, of course, and we know what the fed is thinking, and to those who look at that well trod chart showing the feds' balance sheet moving as the market moves up, shouldn't that give you pause? again, if you want to be nervous, more people willing to be right now. >> i think, fist of all, they should be a seller of bonds, stop buying bonds, and yesterday the author on ten-year was hit 2.4 and change. i want to worry about substantive things when we have them all next week when earnings come. if the companies guide and save us like we had retailers, i mean, if we're taking our cue from lumber liquidators, timber! >> how would you not be here when it was tractor supply. >> a day built for you. >> i told dr. bob, this is not the day for surgery. lumber liquidators blew it. he said, no, we need restoration in your fingers.

>> didn't stop you from "mad money." >> easy come, easy go. who cares. >> when we return, microsoft's ceo nadella blunt about the direction seen for the company issuing a challenge to the employees. did you read his manifesto? >> we did. we'll tell you what it said. we'll finish up one of the worst week for the major averages since april 11th, back in a minute.

after almost six months on the job, microsoft's ceo, nadella has a message prt workers of the tech giant. his message is clear, bold, ambitious, and really get behind the core that is unique to us. this after nadella issued an e-mail to employees hinting at changes that might result in a leaner microsoft, and the times argues it's fuelling the rumor mill on layoffs and others focusing commitment to xbox, which some you suggest you sell or spend? >> i felt that at one point because i think it's worth a great deal and gaming market is terrific. they have been marketing their products now as individual xbox.

i think they are kind of going away from traditional this is my kro soft, this is windows. the word "bull" used almost as much as the word cloud when the people speak. be bull as if steve balmer was not boll. that famed speech he gave in england at oxford was talking about how he was not bold enough, too limited, and i think this is totally in keeping with what this man has been saying, and amy hood said, don't be afraid to make big moves. >> i know some of the larger or more important shareholders who would love to see him be bold by shutting down nokia. will that happen? >> no, i don't think you can do that. have you noticed blackberry up to 11? a huge story. >> yeah. microsoft reports on july 22 and promised more detail, not just

about nokia, but how to achieve a flatter organization if that's what this is about. >> look, old tech is doing incredibly well. i mean, yesterday -- even during the decline yesterday, you saw the western digitals, microsoft, intel, which do well. i think you got the cover the great earnings do a lot of things with great earnings. >> yeah. what was another clue to that was mcadam in sun valley yesterday saying the quarter was good. >> that scoop came out there, here's the number. >> we're only 50% better than you thought on wall street. they are doing well. acquisitions coming. you get a good yield. people say, well, ross says the market's a little exceptive. icahn says be careful, and verizon is an example of a prudent stock making a good amount of money. >> and you have a 4.2% dividend yield. >> i know, after tack, wow. >> and managing to crack 40 and

holding, right? that was another victory of sorts. >> this is a company that people are just misvaluing. i just think it's much -- >> you do? >> acquisitions should ye 3 is what i'm thinking. the only way to yield three is cut your dividend. >> not going to happen. >> no. dpl there . >> added a lot of debt to the cash flow, and they said yesterday, as i reported previously, they are not interested in a satellite company or trying to buy dish or something like that. they are still digesting, though. it was 110 billion, 120 billion, whatever the number was, big money spent there. >> when you look at what the fed did and who was opportunistic, they correctly played the yield. >> in terms of big waves. >> obviously, at large, it's been the story. >> yes. >> hundreds of companies opportunistic in terms of capital allocation and using debt markets to fuel whatever it

might be, but that gets to some concerns for those who are nervous. kenya, kenya yields 5.5%, all right. >> on the run kenya? >> just to the point that, you know. >> remember, they use the cheap money to buy and be allocated overseas or are trw's case, lower tax rates in germany, a lot of stuff to be said which is that we're in that phase of the buyout business where you can buy a company that you don't like and do better. >> i mean do you think the companies -- some of the acquisitio acquisitions, like, i don't like the company, but i like the mail drop. >> that's the inversions. that's one of the criticisms of them. are they really strategically based at all or more about competing with your other competitors who already inverted? you have to. >> there should be a better test. you speak with jack lew next week. i think there's a lot of embarrassment in washington, but

they don't want to admit it. embarrassment in the fact that you're making our companies less competitive, sending money overseas, but we're all -- we have such disagreement in washington we can't get a highway bill. so how are we going to do something complex like tax reform? tax reform. >> bridge too far for now. next, mad dash and opening bell on this friday. a look at futures, dow and s&p still positive for the month despite the car nanage this wee. back in a minute. (vo) watching. waiting. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours.

in india we have 400 million people who don't have electricity and i just figured that it's time i do something about it. what we're doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. i think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when it's needed by the consumer. a smarter energy system is made with the ibm cloud.

before we get to the last trading session of the week. been a tough one for those positive on the market. >> yeah. >> this man is playing in pain for the mad dash. >> like mr. t forecasts for rocky, right? pain. pain calling for pain. david, you remember seven for seven from the college days? i don't know, perhaps not. gap is seven for seven, and banana republic and flag ship store had minus 7 comp stores, saved a third seven by old navy with a plus seven. this causes, again, people to pause and say, is it the funk of the consumer? i mean, could gap be that bad? all i can say is that retail has become one of the toughest businesses out there and unless you have the right merchandise mix and right price point or not against amazon, perhaps you're

going to be facing month-to-month problems. >> one of the tougher businesses to invest in now as well given volatility we see. it came back from dreary years, but it's one month up and down. >> it's not an investble sector right now, however, as gasoline comes down, because it turns out that inflation is noisy, thank you janet yellen for the term, hey, consumer has more money in the pocket, start shopping again. it's not like they are avoiding the mall. all i can say is that i've never seen it in my career of watching retailers so biforcated. the rth and etfs hurt you. some are doing well, some are doing poorly. >> very tough. hardly investble at this point. we have stocks that are investal opening three minutes from now.

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"squawk on the street," opening bell in a minute or so. putting the week in perspective, dow down a percent, nasdaq 2 %, europe down almost double that. alcoa from earlier in the week, a clean beat. you like the wells' numbers today, even though they meet estimates. >> wells meets -- alcoa a serious beat, and analysts recognize the stock is -- it's a cyclical commodity play to one with secular growth with a lower cost commodity attached to it. that's really what you knee to see. you have to see multiple things to drive the stock here, and alcoa gave it to you. our markets up big going into the month. >> yes, yes. >> you know, it's okay to see profit taking. >> also four of the last five julys have been positive. by a pretty good amount. historically, we're not in a bad season of the year. >> right. >> let's look at the opening

bell here, s&p at the top of the screen as we head into the weekend, final session of the week. at the big board, north star, asset management celebrating its spinoff of north star realty finance at the nasdaq, sky blue sc, new jersey franchise in the national women's soccer league doing the honors. very nice. >> i was a coach there a long time. >> a couple high profile downgrades today, wells cuts pg to a market perform. price target goes to 85.87. lack of progress despite management's doubled efforts. weakened share trends, more vulnerable than ever, competitive promotions. >> i'm glad you brought that up. it takes our breath away. are you kidding me? still no progress? still beat by the other guy? people really felt there was something big in the works here, and it's not happened yet.

remember mcdonald left the company, came back, where is the beef? mcdonald now running the va. >> va, that's right. >> yeah, yeah, we have not discussed that. >> mr. mcdonald, when you say something like this man could come in, do good, the va, no good -- my father swears by the va in philadelphia. be careful. mcdonald was not that bad in the end. he -- >> well, if they continue to have rougher going, that makes him look better. >> yes, yes, easy comparison. good point. >> png, tide had a great tweet in reference to the lebron watch. everyone wonders if he's going back to cleveland. we can clean the dust from any uniform, hashtag just in case. they are aware. >> i like the pods. i don't know what you use, but i like the pod. >> yeah. >> what do you use?

>> i do the laundry a lot. >> oh, god. this is going to hurt. my laundry for days will be hurt by this. when you fold, you need both hands. >> amazon, despite the ftc lawsuit in which they allege the company made it too easy for kids to make purchases when using a mobile app, the second biggest gainer on the s&p today. had. >> had a rough week. >> in the red. >> started rough with your documentary reairing, which airs again sunday at 9:00 for a quick plug. >> please watch. >> if you have a watch, you understand why people like the company. does not have great earnings. >> but relentless and pushing ahead with the idea of drones, even though some question whether that comes to fruition or is it more of a -- not a pr stunt but reminder of how they are willing to go anywhere and try and think about anything. >> it is. >> the stock is up strong.

>> it's up. it's funny, i don't know if you saw the front page of "washington post," will net flick survive? >> skating on a razor blade is how they stated it. >> oh, i wonder who opens the washington post. >> oh, that's interesting. >> no doubt. he only spends -- my reporting he spends an hour a week on the washington post, an hour. >> how many weeks does he binge on netflix? i don't know, but that story, if you read it, it's about netflix and whether the search -- i don't know if you watch "orange is the new black" how far along you are, better than ever. >> a lot of emmy's. whirlpool spending a billion dollars to get a majority stake in the counterpart, beef up manufacturing, a big gainer after worries about housing yesterday and lumber liquidators' story. >> they have substantial brazil

exposure, and they've been like the team, but they never gave up in latin america, and this is good, did head to head against electrolux. i like whirlpool, but a great american manufacturers moving in europe, i like the stock very much. >> talked about microsoft in the program, and the news came out or memo out yesterday and the market reacted. today, shares down a bit. i would note that rick sherland came out with a note saying, generally he thinks the letter is a message to employees putting them on notice they want to make organizational changes to reduce layers of management. he's confused by the comments about focus since he mentioned focus, but then goes on to articulate how they need to be in devices like the surface, hardware, and xbox so we don't know what he means exactly, if he's keeping existing

businesses. >> they are focusly unfocused. that is a lot of things to focus on. >> yes, yes. >> if you broke up a bank, how much value comes out. just on the strength of the note, if you had three focused divisions. the utility of microsoft, the cloud business, and you had xbox, put skype in there, no doubt that stock wouldn't be at 55 or 60? i don't know where you put nokia in the reorganization i announced. >> get rid of it. get it out. >> they sell wells in the open, jim. despite recommendations not to. >> well, look, it's going to go down because wells is supposed to do no wrong. i happen to think the john's mortgage number is the tail of the tape, it's fabulous, hung up on the net interest margin, interest rates have not gone up during this period, and people need to see the 10-year at 2.7,

2.8 to raise numbers. if you sell on this, you're a trader and you don't deserve the stock. you don't deserve the stock if you're a seller. >> okay. go ahead, david. >> no, lorillard shares as we expected are up rather sharply. >> can we play that tape? >> 5.5%. >> can we play the tape? >> no, that was awkward, sorry. they told me to do it. lorillard shares up again. we'll see. i don't want to stress it too many times, but there's complexity. when the deal comes out, talking about four companies involved to begin with. it's not just reynolds buying lorillard, but imperial, bats owning 42% or buy more to make sure that it can stay at at least 42%. unclear to me whether they are going above that. there's a lot of moving parts. >> right. >> you have the regulatory front, not just anti-trust, but

the states and everything else. i mean, it's a lot. >> we're talking about vice tonight on "mad money." >> vice? >> yeah, vice, and consolidation in vice industry, whether it's liquor, beer, tobacco, it's really rather amazing, companies that are -- look at the beer market, i mean, now you got craft beer, ipas, not a big ipa fan. >> i'm not either, very hoppy. >> yes, but the concentration in the industry -- >> it is. the deal for jim beam. >> a brilliant deal. >> large deal. >> they are a great brand and can blow it out worldwide, and so i think that -- these deals are fabulous for the companies that are involved and consolidation raises prices. sorry, it just does. >> wildfibefore we move on, qua cut from the buy list, catalysts taking place, and reiterated a

buy on twitter, keeping the 5 2 target, user engagement will grow accelerating based on innovation, management changes, and this is noda's old home. >> a lot of positive social media note saying the quarters will be good. be careful, expectations have got ahead in these. on the qualcom, there's an amazing number, and when you read the qualcom downgrade, not a sell or hold, they trimmed numbers, a lot of this has to do with an apple transition for qualcomm. i would be careful selling. it's so loved, something they hang on to here, always. >> all right. dow's down 27, and mary thompson's on the floor for us today. hey, mary. >> a quiet start to the choppy week for the markets. interesting movement at the open. we saw the dow lower, moving up higher, dropped 30 points in the last couple minute, and there's a bid for the nasdaq thanks in

part to some strength in tech, although semiconductors turned lower. really, across the board, only area of strength right now are the retailers, energy banks, as well as drug stocks lower in what's been a tough week. as i said, s&p, nasdaq, and russell on track track for the worst weekly performance since april of this year, dow down last three of four sessions, not looking perky now up above 35 points, today, we are steadier because europe steadied in the wake of the concerns of the portugal bank yesterday, a muted session in asia overnight. the sectors to watch today. throughout the week people call for a possible correction coming in the u.s. you saw investors taking a defensive tone. as a result, utilities and telecom among the best performing sectors, they are mixed right now, and telecom higher, and facilities under pressure. financials down despite numbers from wells fargo, which was good, and they said it would be

the first quarter they do not show improving earnings, but they did, increase in net income, and investers are not reacting well, by bidding lower and under pressure. consumer discretionary, watch that as well. there's commentary from the retail space, and in particular, the lower end where things look a little shaky. the latest company to come in and kind of support that, the lower end consumer is not doing well is rent-a-center coming in warning on the second quarter saying their clients are not benefitting from any improvement in the macro economic environment. its shares, as you can see, down 10% in early trade. what's working in retail, of course, seems to be the internet retailers, channel adviser wrote in the blog june same store sales strong at amazon, up over 30% in large part of sales of the new fire phone and ebay showing strength, same store sales up 12% in june.

mortgage insurers, this group under pressure today after the regulator of fannie mae and freddie mac proposed new liquidity rules for the entities. they are saying they are erroneous, requires the companies to have 5 . 6% liquid assets of exposed risk. they are concerned the companies can want pay in the event of crisis. these are companies whose insurance you buy if not able to put 20 % down on your home. your mortgage. there you see, all down across the board right now. markets are lower across the board as well. the nasdaq, higher, turning lower, dow off 38 points, back to you. >> thank you, mary thompson, the bond pits with rick santelli this friday at the cme. hey, rick. >> hi, carl, on a day not defined by data, actually a week that was not defined by data,

the treasury market continues to digest a multitude of factors, not the least of which is the activity in europe and eurozone this week. we're down two basis points on the day as we see in the chart, and open the chart to early february, and a couple things pop out at you. first of all, down 12 on the week, settle at 264, and we are flirting potentially with the lowest closes since the end of may as we bump off low 250s 51. sere that in the your brain, the dollar-yen is now breaking out, dollar disadvantage on this trade to the lowest levels on a closing basis since very early february, and the correlation there has been going on and off debating who is leading who for most of 2014. look at the big alternative market, that is, in fact, affecting us, look at the boons,

hovering at 120. big chart going back years plus demonstrates how we are several basis points from potentially testing all-time historic low closes with boons. look at etf, hyg, breaking down and making sense. it's flirting with some of the lowest closes since the beginning of june, and the last chart is the euroversus the dollar. now, this is not a very exciting chart, but think of the negative excitement going on in europe, it certainly seems to be comfortable at what some put part as a lofty level holding, of course, solidly at these levels. back to you, carl. ? rick, talk to you later, rick santelli. when we return, latest on the problems in portugal and bank at the center of them. the country's capital with a live report, and later on "squawk alley," brian rogers, a veteran value investor oversees more than 700 billion in assets. dow's down 30.

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reinsuring investors that the trouble, the bank saw stock plunge 19% over structural issues. steve joins us this morning from lisbon with the latest. good morning, steve. >> reporter: good morning, carl. this is fascinating showing how on tends to hope, despite the risk, taking bonds and equities off the world especially in southern europe. there's a multitude of issues at every single level potentially the next problem. this one was not a problem, but it was the holding company it owned, the holding company that

owned the company that owned the company cha owned the bank. here inlies the problem. the fact it could be a default of the company at santo international and along the line that affects bankers, and it's worrying because we have a lack of regulation, a lack of clarity in europe about the banking sector. all these years along the line, i spoke to the former prime minister of portugal saying we're still don't have a regulator as of yet in control of banking regulations, and we have o passty in a holding company in luxumberg that creates that, real worries there, and santo raised a billion euros a month ago, raised 65 cents in the euro, and now lower, 50 cents to the euro. confidence is damaged aggressively. is it a sector that is stunningly overleveraged, still concerns despite money raising

about levels of call in the sector, and they've got a lot of exposure to a nonfinancial corporate sector here in portugal with a debt of 255% of the size of gdp. we look at the public financing. they have improved, carl, really have. we had a deficit last year of 4.9%, and next year, 4.25%. that's the good news. bad news is unemployment at 15%, debt to gdp in the public sector of 130%. there's no growth. supposed to get 1% growth this year, that's the big achievem t achievement, but in the first quarter, it's minus.7 of 1%. the selloff may have been warranted, may have not, but there's no lee way in the system, everyone is gang busters buying bonds, equities, high valuations on spanish, portuguese, greek, irish debt, and, indeed, that financials, and the fact is it's not taking

into consideration the negatives going around. when i was here in 2011, the bonds traded 15, 16% despite the crisis and selloff, trading up 4%. is that right? the regulation level and economy level and broader banking level and individual nuances of crazy holding companies, no wonder investors are spooked with a nonpayment capacity of a bond. interesting situation. this may not be the crisis this time around, but brings to light there's a lot of tension still here in europe. back to you. >> thank you for that, steve sedgewick, watching the story, and people are asking, jim, if the ecb bank registration cues big enough in worst case scenario? too early for the questions or not? >> no, but it will be. europe is challenged here, not cleaning up the balance sheets. read "stress test" by tim geithner, and you'll realize why many bankers hated him.

he forced raising of capitals, take charges, and you don't get surprises from banks these days. >> right. to be fair the banks are in better shape in europe than two years ago, have raised some capital, and, of course, there's draghi who said whatever it takes. >> whatever it takes, malcome x, right? >> all been fine since. >> stanley fisher talked the other day. >> a speech. >> the bubble so to speak, but big watcher of our network, a delightful man, one of the greatest more learned central bankers. glad we have him. >> very nice. we'll get trading with jim in a moment, dow down 34, and "squawk on the street"'s coming right back. 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.

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time for cramer and stock trading. >> you know, sometimes when you see one upgrade, you say, oh, maybe something going on. two upgrades in a row. royal dutch, deutsche bank wednesday upgrades, today jpmorgan. not royal dutch. what's going on here? ill the new ceo is really

starting to change this, which has been a lot of people felt one of the worse run isle companies, so many assets to up lock here, and i think it's a great call. i hope it comes down like the other oils so others buy it at home cheaply. royal dutch, the one big oil company the major everyone is startsing to talk about and like. chevron down, exxon played out, but royal dutch is the play. >> why? >> because the ceo basically said, look, we'll do whatever's necessary to make money here. there's a lot of fat in a company like royal dutch. they have a lot of great assets, can do a lot of things. bp had so many assets we did not know about, and royal dutch has more assets. i think the new ceo means business. ben van -- he's my guy, he's my guy. >> he's a guy. >> i like him. i don't know if he watches the show. i mean, but, you know, hi.

if you are. hi. >> maybe heave give us a pronouncer if he does watches. >> go with the royal dutch. tonight, we go to vices, gambling and looking at rumchata, the drink takingle country by storm. we have the maker on, and whether it's fireball, there is just a movement in liquor, a whole reordering of what people like to drink. we're on it. private company. >> a little happy hour. >> we may have to because if i don't get something to throbbing this, maybe rumchata is the answer. >> yeah, before we go, we should note that today marks three years that david, you, and me have been not maybe at this desk, but on this show at this

time, and it strikes me we've watched europe happen and get better. we were here for the facebook ipo. the twitter ipo. the m&a boom, energy boom, sent you to the field on the docks, and we'll be here for alibaba. an amazing three years. >> i love this show and working with you guys. actually, you know, henry will not hate that, but -- >> amen, baby. >> it's fun. >> the best. >> back at you. >> see you tonight, jim, "mad money" 6:00 p.m. the world cup, adidas, a big winner, and talking to the global head of futbol in a moment. aall our money. kid: do you pay him? dad: of course. kid: how much? dad: i don't know exactly. kid: what if you're not happy? does he have to pay you back? dad: nope. kid: why not? dad: it doesn't work that way. kid: why not? vo: are you asking enough questions about the way your wealth is managed?

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welcome back to "squawk on the street," and road map begins with tobacco talks. reynolds american and lorillard confirms the talks, david reported on it last week and has more details. >> plus, tensions rise in the middle east, we'll talk to the former ambassador to israel and how we should react. >> adidas winning big in the world cup sponsoring the teams in the final, and we'll talk

about just how much the company stands to benefit. >> all right, we've been reporting, of course, on potential consolidation of the tobacco industry for many months, back in april 29 i talked about talks between the parties. talks have come and gone a bit, and thursday we said things were very much on track for an announcement we could get as soon as, well, maybe monday, in fact, at this point, and all the companies giving other press reports of the potential deal that occur late yesterday have now come out and confirmed that they are in talks. that being, of course, reynolds in talks to buy lorillard and reynolds and lorillard may have to divest assets to imperial tobacco, and that's the giant u.k. based company that owns 42% of reynolds and would help to engineer the deal, if you will, and also wants to keep its ownership position at the same level so needs to buy more of reynolds. as you imagine, a great deal of

complexity involved there, not getting to the other things to be debts with in terms of various agreements, documents, and decisions, but they hope to wrap it up as soon as this weekend to have an announcement monday. we'll see. certainly not going to be discouraged this morning by the performance both of lorillard, although, i don't have a price here that i feel comfortable sharing in terms where this thing may end up. analysts, depends who you listen to. bonny, very good on this entire potential transaction would think high 70s, i think, said as high as $80 a share. morgan stanley says fair value for lorillard is 68. we'll see. many people guessing. we'll have a 7 in front of it, but we'll see. synergyings are taking capacity out of the industry, and although, frankly, divested assets, some question whether you get a high a multiple for those, and, therefore, paying a higher multiple to get in if you're reynolds and divesti init a lower multiple, perhaps good

for imperial tobacco. we have consolidation coming long in the making amongst our bigger companies. menthol the key for lorillard as well as e-cigs making a lot of progress, certainly presents at least a growth opportunity for the future. >> you know, interesting steve miller was on "squawk box," used to be on the board of reynolds, and i asked about regulatory hurdles here. it's going to be a giant of a tobacco company, and he said, no, they've leave them alone, putsing pressure on these guys for so many years. >> why $7 billion in divested brands from both companies is going to be very important. they are crafting that as a response to any regulatory impediments they may have faced, doesn't mean they won't get a tough time, but on the antitrust front, it's the key to it, yeah. >> mean time, u.s. stock looks like are lower, nasdaq higher,

fractional losses, yesterday icahn said, quote, in my mind, time to be cautious about u.s. stock markets, a great year, but being selective about the companies i purchase. for more thoughts on the markets, let's bring in brine, chief investment strategist, fred dickson with da davidson company. brian belski, a week like this turns out to be the worst week for stocks since back in april. you're not worried. reading the mid year review, a bull market, very much alive, brian, not spooked by the action this week? >> no, and, in fact, we've been expecting that. putting out reports like that, you're coined as a big bull from the media, but clients know as we go out and market all over the world we've been calling for a pullback now for a while. we continue to be very comfortable with our 1900 target on the s&p this year, which, oh, by the way, is one of the lowest

on the street. over the last five years, the most high on the street. we think this is a simple case of the bulls kind of catching up to where we've been for a while, number one, and number two, the market needs to have a bit of a breather. it's very normal to have this type of a response after a huge move last year, and we think a counter intuitive move first six months of this year, very much needed and healthy and very much on track for our 15 to 20-year secular bull market in the u.s. stock. >> fred, perhaps portugal is not a concern for u.s. stocks to weigh us down at all, but should investors take a lesson from what we saw this week, and that is, there is still volatility out there whether it's the u.s. banking system or economy. >> well, first, we have volatility, good morning, and good morning to our friend, brian. what we're seeing is a market, i think, right now is shifting to an enthusiastic, but careful. i know the word "caution" was used earlier, but we look at it in a careful way.

we have like brian long term bulls on the market, periods of consolidation that come in, you know, in the third, fourth, fifth year of the bull market. they are normal. what happened in portugal is what i consider a mild -- very, very quick passing summer market thunderstorm. probably be more financial -- >> fred -- >> more financial jitters -- yes? >> is that how investors proceed going forward, buy the dip on bad news because you'll get rewarded? >> i think investors need to be careful what they buy in the dif looking for areas that had somewhat oversold. energy, financials, industrials stand out in our mind at this point as places to go and put new money in, but i think they'll be rewarded. will be a rocky road between now and year end. i agree with that. what we see ahead of us is election jitters, fed timing jitters, and, of course, our worry not so much as portugal, but more middle east.

israel, hamas, and what's happening in iraq. those are in front of us. next week is the key. we're going to get big earnings reports, started off okay this week, and i think at the end of next week, investors feel better. we have pockets of opportunity that we exploit. >> brian, you know, if you're welcoming some sort of tradeable correction, fine in the major averages, but what do you do with something like the russell where, obviously; the pain is more acute? >> great question, carl. here's what we would say. small cap stocks can't have it both ways. remember the last 10 or 12 years, small caps significantly out performed large cap, and we've seen two cycles during that time frame. sickle one was about credit momentu momentums, emerging markets, and cycle two was the cash in domestic recovery. small caps can't go up forever. there's a fundamental pullback because of the valuation disparity with respect to the russell and s&p 500. we think there's a bitter time and more timely time to by

russell stocks, especially russell value into the second half of the year. we're squarely pointed more towards large cap, especially the garp type of issues within growth at a regional price in the s&p 500, namely the same areas fred talked about, but also industrials, tech, financials especially, and we think we'll have energy at a cheaper price, especially heading into 20115. >> quickly, brian, an overweight bullish signal on financials after wells today. most are not optimistic about them. >> absolutely not because fear is leading everyone's decisions on financials. you cannot base your investment decisions on emotion or fear from a fundamental perspective. these companies are structurally different than five years ago. i don't know if you noticed or not, but five years ago was five years ago. we're acting like we're in the depths of the depression in our business in the financial services, and it's creating the

greatest entry point with respect to banks and financial services in my 25-year career. >> all right. there's passion on the financials. good so see you both on the margs this morning. >> thank you. >> over to dom chu. >> all right, here's a financial, right? this is mgic investment radian group, all three stocks move lower as the federal housing finance agency authority, fhfa issues proposals to tighten requirements for the private insurers that do business with fannie mae and freddie mac saying that the proposed rule helps improve insurers have sufficient liquid assets to pay claims. basically, carl, mortgage getting more stringent requirements leading to declines. back to you. >> thank you a lot. the al sun valley conference wrapping up, we are there live, and kayla your interview on the front page of "usa today money"

well done. what's it like going into the weekend? >> reporter: thank you so much for that, carl. interesting interview, shots caught on the wrong side of that, basically a preannouncement to earnings of the upside. some said on twitter after the interview, a solid subscriber postpaid verizon expected for the second quarter. they have been challenge by t-mobile and at&t as well to add new subscribers for the quarter. we'll hear more about verizon, i know, next hour. as we go into the weekends in sun valley, this is ma crow topics, politics, my lphilanthr but the rest of the week is tech and a select few startups and private companies invited every year, the golden ticket to hobnob with media and tech moguls, and well-known investors, some companies here for a second or third time, that's pinterest, drop box, ceos stuck by the side of the capital investors, and mum to reporters

as well, but they've been here before because a lot wore vintage editions of the alan and company vests. alanments the companies' business if and when they go public. there's companies far closer to the event than what i mentioned. first data led by ceo is here for the first time, company just got a big investment from kkr. they are expected to go public again in the next year or so. lending club, a company that we've covered a lot on "squawk on the street" a specialty finance company that offers consumer loans are expected to go public by the end of the year. the ceo is here as well for the first time, and he'll be presenting to the audience tomorrow morning and other startups here for the first time. quite a captive audience for the company looking to go public, looking to get a lot of blue chip money into the stock once they do. other companies that we've seen

here, wayfayer, cloudera, zulily here, already public, and interesting one, though, carl, is this company called eppi systems, a 3-d printing company, doesn't have a website or logo, backed by sacoya and started by a semiindustry professor at unc. doing a demo today. teem of today is technology, and people here are excited to see how that works given how little we know about that company. >> that's going to be interesting to watch. some of the times we mentioned the companies, and then a year later, we go back to the tape and telling viewers we told you about it first. we'll hear more from you later on today including the cio of tero. when we return, tensions rise in the middle east as they increase military assault on gaza, and the former ambassador weighs in on just how the u.s. should respond."

squawk on the street" will be right back. if frustration and paperwork decrease... the gap begins to close. so let's simplify things. let's close the gap between people and care.

israel continuing its air assault in gaza overnight targeting hundreds of sites and underground tunnels as the islamic group targets deeper into israel warning airlines today that the main airport in tel-aviv is a target and the

president promises u.s. help in negotiating a cease fire. here to help on the situation is the former u.s. ambassador to israel and now a professor at prin princeton. they say a cease fire is not on the agenda, what could the u.s. do? >> caller: at the moment, not much can be done other than making an offer. israel still has in mind to degrade hamas' military capabilities, considering a ground inkurgs into gaza, and they have concerns about rockets launched from lebanon and threat against the airport increases israel's concerns so right now, i think, a cease fire is not on the horizon. >> defense minister quoted as saying we have many days of fighting ahead of us. when people talk about a ground incursion, that means many things. what do you see as most likely? how much force could they put into that? how many boots on the ground?

>> well, they mobilized according to the press more than 20,000 reservists. that's in addition to the standing army which means that they certainly have capability to put in a fairly large presence. that said, it's more likely that they would go in with very targeted objectives. what the israelis do not want is to be bogged down in urban w warfare in gaza, a heavily populated area, and that would lead to tremendous israeli casualti casualties. you may see specific targeted incursions, but i doubt you're talking about retaking the gaza strip in some large operation. >> yeah, mr. ambassador, unfortunately, you've seen this so many times before, clashes between israel and hamas, what feels different is the rockets reach deeper in israel threatening tel-aviv and jerusalem. is hamas more sophisticated, and

what's behind that? >> caller: no question they used the last couple years since the last fight in 2012 to enhance the arsenal increasing the range of the rockets and diversity of the rockets, and that makes the challenge for israel even greater at the moment. it also complicates the search for a cease fire. the israelis are not going to want to stop fighting until they believe they have setback hamas enough and have detoured hamas from restarting hostilities against soon. hamas, of course, wants to remain standing so as to demonstrate its viability for the arab street, and so both sides right now are looking more to hurt each other than to find a way out of the crisis. >> the airport threat is interesting. anybody who's flown in or out of there know it's not easy to get in or out.

how serious do you take it? >> caller: it's a major threat. most fly over the west bank anyway, and so if hamas believes they have the capability of reaching that from gaza and if there are hamas operatives in the west bank as i'm sure there are, the real question is only how does israel deal with the threat? now, there are israeli aircrafts carrying counter measures, but foreign aircrafts often don't, and it's hard to contemplate given the way they are situated, hard to contemplate avoiding the landing route over the west bank. it's a human problem for the state of israel. >> we'll see what happens over the weekend, tense no matter what. thank you for your time. >> caller: okay, thank you. >> ambassador daniel kurtzer joining us on the phone. >> up next, adidas scoring at the world cup sponsoring both final teams this week.

he'll joins live after the break. ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer.

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investors in tobacco stocks, particularly in lorillard trying to figure out what a deal for the company will look like should it come as soon as monday as we've been reporting. i've been trying to figure that out as well. can't tell you a price at this point, but can give sense based on a number of conversations i've had it is likely any deal would not be in the mid to high 70s for this company. some people, at least arguing or making the point that the market has this pretty much right right now. what's that imply? implies a deal perhaps in the low 70s, and, again, i don't know for certain, in the low 07s, a discount, and any deal takes nine months, you get dividends along the way as well, an inherent spread in the deal, but, again, those looking for something perhaps as high as 75 or more likely to be disapointed

as we watch lorillard shares this morning, and don't know exactly what reynolds will do if and when a deal is announced, but both a cash and strok transaction so the performance of that currency is important. we want to get that out there, though, as people try to trade the stocks or try to figure out what the ultimate value delivered will be if and when we get that deal. >> good update. keep them coming. >> i'll try. >> david faber doing what he does best. adidas sponsors both teams in the final this weekend, argentina and germany. joining us now is the global head of football for adidas of brazil. thank you for joining us. >> caller: thank you. >> tell me, no matter who wins, you've got a win here. who do you root for? arigentina or germany? >> caller: i think from the business point of view, i think we have to be happy and -- this

is perfect brand -- sunday, teams the stadium, and so from a company point of view, for us, it's argentina or germany, but from the personal appointment of view, being germany, i have that preference, no doubt about that. >> the connection is shaky, we'll triy to work on that, by interesting to note that nike grew double digits in western europe, grew 20 % in western europe, some say they are cutting into the market share in soccer, biggest in europe, but on the home turf, obviously, a big win because the world cup winner sees a bigger boost, and

there's record shares. >> nike had a great quarter, revenue up 1 1, every geographic region up other than japan, and we'll see world cup can only add in the short term. when we come back, despite the controversy over gm recall, sales are holding strong. turns out it's almost entirely because of the brand the company had all but given up on. jim stuart of the new york times is live with that story in just a moment.

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despite recalls and negativity associated with gm, auto maker sales rose 1% last month. how are they weathering the scandal? next guest says it's entirely because of the oldest automobile brand in north america. buick on set with us this morning, routinely the best dress the guest all week, jim stuart, with the new york times. >> giving you a run for the money. >> as well as a cnbc contributor and pulitzer prize winner. >> nice to be here. >> buick, why? >> i was puzzled. somewhat amazed gm is doing well given the barrage of ad publicity. the numbers, it's all buick. buick is out of there, they would be having problems. buick, i mean, my dad drove a big park avenue, and my sister still has it on the road, but i

thought that was the demographic, and the more you look into it, they quietly -- done an amazing job of rebill g i rebuilding the brand, there's new vehicles, younger demographic, good performance, good gas mileage. that's what they are doing right. >> wasn't tiger a spokesman? a while ago, but the effort to young it up has been going on for a while. >> ads target that directly, sponsors the ncaa basketball tournament for the younger demographic, college educated fans tunes in, smart, smart play there. i think it's working. i interviewed a number of customers. they are not bothered by the recall thing and that involves cars off the road. some still on the road, but stopped making them years ago. the current models are not the ones with these ignition problems. >> recalls seem to go on and on and on. is the company, do you think, better after for it for being

cautious, putting in place safety precautions or not? >> we'll see how it turns out. gm handled this really well. they are bending over wac wards. one customer said it's like flying an airline after a crash. you know everything has been double and tripped checked. it's probably the best time from a safety standpoint to be going -- i think they are trying to get ahead of it, stay ahead of it, overdo the recalls, and send the imagine we're going to make sure everything is okay. >> there's. some analysts who've postulated the recalls peaked, and the company has not gone far to walk it back. do you think that's true? >> they didn't say anything like that to me when i was talking to them, but i think, you know, i mean, how many more can they recall? the numbers are so huge. staggering. just going to bring everything in for a check? >> why hasn't that resinated with the consumer? why do you think sales hold up so well? >> again, two things here. one, they are saying these

recalls do not affect new models, and secondly, they are being ceo tra careful. some say the government is over them because they had a big stake and scrutinizing them, but it happened to toyota, ford, and it happens to everyone. recalls are a fact of life, trust the company to do the right thing. >> you have thoughts on portugal, but the ownership structure of the bank is not well understood? >> well, i'll be honest, i don't understand it. i mean, it's the most complicated thing i've seen in the banking system, which may be a problem. >> that play be overstated. >> may be. tried to dig in, what happened, the sweeping statements, like the eurozone crisis is back. as far as i can tell, it may not involve the bank. the parent company owns real estate, a hotel chain, each of which could be in trouble. i don't know from what i read if it is about the banking system. again, eng markets are hot. people looking for the excuse to

sell, but people don't understand this. >> looks like an anomaly to you rather than a symptom of something more worry sm within the banking system of europe? >> i don't know at this point. i don't know enough to say it's a banking crisis. i don't know that it is involving the bank. it needs more study, but i think the market, based on the bank issue overreacted. >> but to your point, there's a higher level of nervousness, let's say, for a variety of reasons. >> yes. >> do you discount those, other reasons people may be nervous in focusing or over focusing on events like what occurred in portug portugal? >> you can't expect a major crisis to go away overnight. good to be vigilant, but on the other hand, the irony is developed europe is one of the least over valued places in the world for equities right now. the multiplings there by historic norms, developed europe is, you know, probably a good buy. it's odd to me that's where they bore the bankrupt of the l

selling. i think there's other places more over valued than that. >> we'll find out. best case now is negative gdp in europe for the quarter. they had issues. >> they have a lot of issues, i agree. >> the higher euro does not help export economies, even germany. >> no. >> good to see you, see you next time. jim stuart of the new york times. >> stanley fisher making interesting comments about the markets and the economy. cnbc's senior economics reporter has more on that. stevings his comments were on banking and financial regulation. >> it was, and it was the q&a that made the comments here in the first speech as a fed vice chair, saying the fed doesn't see an equity bubble at the moment, but that it keeps looking. >> at present, we don't face know very serious macro -- any

serious problems, there's a general concern how strongly the equity markets are, but i don't think -- i think when you're dealing with equity, the stock market can go down without producing a financial crisis. people say the reason that it was in 2001 was that it was in equity price bubble, and that was much easier to deal with. we keep looking. we have not found anything big yet. now, you know, there's people who disagree with that so keep checking and listening to what other people say, and if you were to decide that you didn't have accurate prudential measures, and there was a problem, you have to think of using the interest rate. >> it's unclear if he's signaling anymore willingness to use interest rates to combat asset bubbles.

yelp down played the option in a recent speech. both emphasized the need to use regulatory tools, fisher said it there, before interest rates, that's pressuring banks to reduce exposure or leverage housing that would appear to be overvalued. the governor bank of israel pushed banks to reduce housing exposure, but that was paired with help from the government for young families hurt by higher rates and higher prices. to the extent to which monetary policy contribute to financial straight is a long running debate whether it should take steam out of the markets. if you run out of all other options, then the fed could have no choice but to raise rates and take the froth out of markets. carl? >> all right, steve, thank you very much. your thoughts, i know you love to cover all things fed and fischer. >> maybe, steve, you can stick around for this, heard more speeches from the federal reserve lately on financial stability, on bubbles, and how

the fed will not do much about that. i would think that the real move for the fed is higher wages, the consensus translating into the rate, and we really want comments from stan and yelp on that. >> we have this debate a, and if companies enlarge their pool, do they need to pay higher wages, a shortage to high someone out of work for six to ten months? >> i think for sure that -- well, first of all, i talked to some labor experts, and they complain about lack of skilled workers, and bl the complains are more widespread and more real than in the past. you're right. the question becomes what is the obligation of businesses to get out this or the need for business to get out there and train workers to do things they want to do. my guess is that things are more specialized today, and if they don't find workers because the universities or jobs are not training people, so -- the best

places i've seen are places i visited, some places down south like charlotte, north carolina where businesses work with government work with the universities it create the right baylor pool, and that, i think, is the future. >> look at the history at the bank of israel in particular, the first major central banker minor maybe to lower interest rates after the stock market wiped out so much money before lehman, and one of the first emerging markets to raise rates when things looked better. a different ball game at the fed, isn't it? >> yeah, what's interesting is listening to him recount what he did with the prudential thing, bringing bankers in, you know, get rid of this stuff. i don't know that that works here in the united states much, and maybe not so much control of the central bank of the banks that are out this, if they could do that, but that's certainly where the future is. i think you're comment is interesting. well, why are they talking about this right now? my guess is there's a lot of

talk on the other side that markets look frothy, but notice the definition of a bubble may be different from yours at home. what the fed cares about is when it blows up, does it create a financial crisis? that is his metric, and he doesn't see that right now. >> all i know is there's a lot of talk about ma crow prudential, the word of the moment. >> yes, thanks, steve. >> dom chu, highest level for amazon since the spring. >> going from macro to micro, right? stock higher on the company's latest initiatives on cloud computing, unveiling products for the successful web services business, that's their server business, and they asked the faa, the federal aviation administration for permission to conduct outdoor drone tests outside seattle headquarters. shares up 4%. it's volatile so on down days,

turns for the worst, but up 4% today. back to you. >> up next, a mover in the session, and wells fargo in the red but off earlier lows after results were above line. see what the ceo says on the conference call after the break. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase. like 50,000 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 a business even more rewarding. ink from chase. so you can. my motheit's delicious. toffee in the world. so now we've turned her toffee into a business. my goal was to take an idea and make it happen.

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> wells fargo, first of the big banks to report saying second quarter profit in line with estimates, revenues above consensus, and dom chu has details on that and company's earnings. hey, dom. >> that's right, carl. headlines first. the stock down about a percent in trading so far, hovering at the lows. there was reports of 1.01, in line with estimates, revenues at

2 1.1 billion, slightly ahead of what wall street expected. the interesting part about loan originations, 37 47 billion worth this quarter, 11 billion better than the last quarter, but at the same time last year, that loan number was 112 billion, significantly lower, refinancing boom pretty much took a little bit of a backseat in the current rate environment. wells fargo makes one out of every six home loans in america, a huge len dor. the profit margin the bank makes on lending, 3.15 percent, and profit mar gyp is compressing. wells fargo sees the economic recovery as uneven, but sees many indicators of growing parts of the economy. the housing recovery remains on track. the conference call started 20 minutes ago. in that conference call so far,

they talked about the idea that loan growth is broad based for the company both on the consumer and commercial side, also on the private banking side of things, and also, though, that the spring home selling season has been less than anticipated, but still better than that first quarter because of the weather concerns. pipeline for loan growth better going into the third quarter than going into the past quarter, and that they are not seeing the break out return to pre-crisis levels of the idea of home ownership. interesting headlines from the conference call. remember, guys, wells fargo is america's most valuable bank. it's worth 270 billion dollars. there's been a lot of investor sentiment around the company as one that weathered the storm better than other financial institutions. those are the headlines right now, getting back to the call and bring you details as available, but for right now, shares just off session lows in today's trade. back to you. >> out performed other financials so far this year. thanks, always good to get remarks on housing as the top

mortgage lender. the best known billionaires scolding congress speaking out for immigration reform in a brand new new york times op-ed. i wonder if anyone listens. >> clearly this is not an op-ed line we see every day. all on one by line advocating reform, saying this town doesn't have the act together to pass immigration reform or legislation that matters to americans. here's a sample of their argument. they say the three of us vary in politics and differ in the prem preferences of the bill, but could come together to draft a bill acceptable to each of us. they go on to talk about technology and engineering students forced to leave the country if they came from somewhere else after they graduated from american universities, they'd like to see that fixed and foreigners who

have as sets to invest in the united states to be allowed to come in under some sort of provisional regime. what's going on, guys, is a battle between different wings of the republican party over whether or not republicans are going to support any immigration reform this year or not. people think it's dead anyway in washington, but you hear this commentary from conservative tea party republicans who derive those they view as chamber of commerce republicans who are in support of immigration, tea party folks say we want to stick to the constitution, stick with the law, and we want to secure the bod border. a real divide whether billionaires advocate helps or hurts the cause remains to be seen. >> interesting. still ahead, ka rrg a swisher joins us today in reaction to the letter to the microsoft employees. we'll talk about it after a quick break.

hop over to the cme group

with the santelli exchange with rick santelli. >> hi, carl. of course, this morning, ira here comparing highlights of stanley fisher's speech. i remember reading things like this many decades ago in college. interesting. but the long and short of it is, it doesn't seem he's exactly on the same freeway as janet yellen. your thoughts? >> definitely. he talks about the limitations of the financials and only tried in smaller economies. >> stop. macro prudential. basically regulations to try to change outcomes. >> correct. some can affect the overall system, which is good, and some are directed to look at definite asset classes and takes the ball away from raising interest rates, because in the fed's own words, raise interest rates, gets into all the cracks rather than that at an asset level. >> take it one at a time. works in smaller economy es. makes sense. you're telling me a handful of very smart people, many of which never worked outside of

government or agency, can't probably control something like the u.s., might have better control for a country like israel? >> if you try to squeeze can one sector in a problematic situation, like alan greenspan used to say, i can't raise margin rates. remember back in the irrational exuberance age. can't do that. it was politically -- >> getting at the real crux of this. okay? if you don't like the outcome, isn't this about outcomes? they don't want to raise rates because the feedback might bite a rationing of credit. isn't this all their own doing in essence? why can't a central bank of a country and large and top of the heap as the u.s. just have a more fluid process? why do they always have to be, meaning the fed, ironclad one way or the other? so they raise rates a bit, if they get negative feedback, adjust again. what's wrong with that? >> this is the logical outcome of that ridiculous dual mandate

they talk about. it's ridiculous. it allows the fed, they're never wrong. >> ping-pong back and forth. >> they're never wrong. absolute, heads i win, tails i win. they can't be wrong. whatever they do, they're always answering to something. janet yellen, by own admission, does not want to raise interest rates, because she thinks the fallout will be more disastrous than letting these things -- and applying the macro prudential tools, which butts heads with the cis. the most interesting battle as the bs, central bankers battles against draghi and yellen and others, in the way, because they're pushing they should start raising rates to head off the potential financial instability. >> if the federal reserve is so nervous about a reality of the marketplace, why don't they just close all of the exchanges and have an interest rate fix, a foreign exchange fix? this really makes very little sense. >> they're afraid -- they seem to be afraid of letting the market have its way. now, let's think about what's

happening. last year we had the taper tantrum. may-june, now the june fed pulled back 50 billion of buy-inss per month. should probably end is all. what are you afraid of? >> exactly. i asked that over a year and a half ago. what are they afraid of? i'm not sure. in the end, the marketplace really does work. i think we need to get back to the real basics. janet yellen, are you listening? back to you, carl. >> all right. i'll pick it up, rick santelli. hopefully she is listening to that conversation. coming up, why sharing company lift debuting in parts of new york city. the ceo, new york taxi commission, limousine service will be joining us livg on "squawk alley" with her take on the new competition to uber. we'll be right back. keeping yom the healthcare you deserve. at humana, we believe if healthcare changes, if it becomes simpler... if frustration and paperwork decrease...

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tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. take the next step. talk to your doctor. this is humira at work. xwooshgs welcome back to "squawk on the street." what's happening on the -- as a result, trimming its q2 and fisk's 2014 earnings and seams estimates. across the board, the firm kept its neutral rating on the stock. down towards session lows, off by about 5% on the day, carl.

back to you. >> interesting. thanks, dom. brings to mind p & g down graded. call c qualcomm, retailer in for a second day of pain. >> with the "new york times," choice of old media, i don't mean that in a disparaging way, trying to figure out the digital future. pure plays, timing, news corp. or soon to be tribune also spinning off its print-related assets into is a separate company. >> on retail, next week a big and important one. sales tuesday. and fed talk dominating the conversation on the markets, janet yellen testifying tuesday and wednesday on capitol hill, after the good jobs reports. we'll see how they ing cha chan tone, if she does. we're going to play a drinking game. drink every time we hear macro prudential. >> heard it today for the first time. >> in the hospital by now. >> all over the place. we mentioned gap, not covered a lot.

june comp down, too. old navy pretty good. >> right. >> but the gap, namesake and banana. >> down 7, i believe, what we earlier -- what do you make of retail, sara? >> a mixed bag. right? retail, according to the container store. meanwhile, costco results better. family dollar, not so hot. their own problems. we'll get a lot more next week in terms of earnings. gearing up for hundreds of companies in the next two weeks. >> let the madness begin. see you later on. it is 8:00 a.m. at microsoft headquarters in redman, washington, almost 11:00 a.m. on the east coast. "squawk alley" is live. ♪

good morning. welcome to "squawk alley." joining us this morning from the annual alan and company conference in sun valley, kayla tausche. on the newsline, kara swisher, go executive eder for rico, wish you were with us on set. we'll make it work through the magic of tv. start with microsort, citing adella writing a 3,000 beige memo to his employees giving an interview to the "wall street journal" as well reiterating many themes heard since in a dello took over as ceo. seems to be laying groundwork for major change including possible layoffs. that's the read in some circles. kara, what do you make of that? and idea of committing to the x bosse e box. >> he's got to make these statements. 1yu69 gotten there, and gotten there after a few months, had time tonk