cnbc. i'm becky quick along with andrew ross sorkin and brian sullivan. joe is off this week. the fed is in focus today. the central bank set to begin a two-day meeting. most economists expect janet yellen and company to taper the fed's bond buying program by another $10 billion to $25 billion. steve liesman will join us with the exclusive fed survey coming up in the next hour. on today's economic calendar, we have the s&p case-shiller price home index coming out at 9:00 eastern. then an hour later, we get july consumer confidence. we have a flood of companies set to post quarterly results before the opening bell. get ready, folks. we've got pfizer, merck, etna, and siriusxm radio. after the bell, we'll hear from amgen, panera, american sxers. brian, we have to get ready because there is a flood. >> and a number of major companies have posted their results overseas.

profits at ubs stronger than analysts have been expecting. analysts paying attention to questions hanging over the bank. ubs has closed u.s. probes into its dark pool alternative trading system. the companies' cfo will join us live at 7:00 a.m. eastern time. meantime, bp posting a big jump in its quarterly profits driven by strong production numbers. however, the oil giant is warning further western sanctions on russia might hurt its business there. bp makes about a third of its crude oil output in russia. it is the single largest foreign investors in that country for its nearly 20% stake in state oil companies. and eu leaders are meeting to debate economic sanctions against russia. a new list of putin associations and businesses that will face tougher measures is expected tomorrow.

>> let's talk about a bit of other corporate news. u.s. investors are knew suing barclay's. the attorney general accused the bank of lying to customers regarding its electronic trading platform. the investor argues she lost money after the government filed a lawsuit against the bank's so-called dark pool trading venue last month. the two claims barclay's made false and misleading statements and didn't disclose material information regarding its operations. negotiations between bank of america and the justice department now may run into a bit of trouble. we've seen this with jpmorgan and others. the journal saying the big issue now whether the bank should pay a cash penalty for the dealings of countrywide and merrill lynch. bofa reportedly offered $13 billion to end the mortgage securities probe, but the doj is said to be demanding billions of dollars more. in the countrywide and the case and the merrill lynch case, it's a bit of a marriage -- what's

the phrase when you get married overnight? >> shotgun wedding? >> shotgun wedding. >> shotgun wedding is not technically when you get married overnight, i don't believe. shotgun marriage, isn't that when you have to get married? >> when you get married quickly. >> within nine months. >> but this was a shotgun wedding that was much faster than that at the behest arguably of the government at least in the case of merrill lynch. >> i'm not ignoring you, andrew. i'm looking at earnings. etna -- i don't want to say they're boosting their forecast. that would not be correct. however, they're narrowing their 2014 full year view to 654 a share. they had previously seen 635 to 655. >> they are raising the mid point. >> yeah, they're definitely moving that mean up, if you will. so 6.54 for the full year, that's up about 19 cents off the bottom of the earlier range.

i guess that's a fair way to say that. >> and we should point out that the street was looking for 654 before that. so the high end of the guidance is above where the street was. but, again, that mid range is about -- well, the mid range would be below where the street was right now. $1.69 adjusted versus the $1.60 the street was expected. came in with revenue better than spec'd. 14.5 billion. versus the 13.98 billion the street wag looking for. comments from the chairman and ceo. talking about how their business at this point speaks to the strengths of diversified portfolio of businesses and their ability to -- across many fronts. people have been wondering what's been happening with the affordable care act and how that plays into this. we'll get a chance to talk to mshg about all of that tomorrow. >> and here you go. so they are boosting officially their official revenue projection to at least 57 billion for the full year.

so eps bringing up the lower end of that range and boosting their operating revenue assumption for this year to at least $57 billion. they also adding that they continue to experience what they call moderate medical costs. it looks likes a lot of things firing on all cylinders for aetna, right? revenue coming in beating expectations by about $500 million and boosting their revenue for the year. >> talking about couventry synergies, looking at boosting production. and that should help for the full year, too. >> there you go. not bad. >> not a bad way to start the show. let's call the show right now. a beat for the year. >> let met give you bad news if you're an herbalife shareholder.

the productsmaker cut its outlook for the year just three months after it raised that view. the company's quarterly earnings missed the mark hurt by raised costs. er ba live shares soared last week after that presentation that he made, failing to convince investors. we had more in developments this morning, a story we first told you about on "squawk box" yesterday. reports say microsoft is being targeted by china in an anti-trust investigation. chinese officials paid a southern visit to the company's chinese offices. microsoft would be just the latest u.s. company to face scrutiny for china. qualcomm is facing penalties and could be forced to pay more than $11 billion when all is said and done. >> time for your global markets report on this tuesday morning. julia chatterley standing by. i have my fill this morning listening to you driving in. thank you very much. how are the markets looking on your side of the atlantic ocean?

>> good morning, guys. we're relatively unchanged, evenly split between the gainers and losers. the as you can see, we've managed to pull out of the red early on in the session. the german and the french markets relatively unchanged. managing to gain some ground. but we have been watching this morning is from the earnings in particular. i'll run you through some of the numbers here. deutsche bank right now, around 0.2%. a 16% year on year increase in pretax profits this morning. they said they want to be the last man standing on investment banking in europe. what's over-shadowing the use of future litigation costs right now.

if they want to be the last man standing flat year on year growth compared to some of the rivals in the u.s. we saw, what, 15% decline. so this is a bright spot for deutsche right now. over-shadowing the whole issue is the future for litigation costs, libor, you name it. ubs down 1.5%. a beat on the bottom line for ubs, we saw, goldman, citi calling this a solid set of results. it's down to weak client confidence. geosplits isn't helping, too. these impact barclay's, too. talking to regulators about that. bp lower by around 0.9%. they've impacted and come in

with a 34% rise in q2 profits. they have a 20% stake in class. lower production in q2. they've said production will be lower in q3, too. they've made a point of saying right now they're not seeing a sanction impact on themselves or on roznet. but they say if we do see a step up in sanctions, they could see an adverse impact right now. that stock right now lower by 0.9%. on that note, guys, i'll hand it back to you. >> we'll take a look right now and say that the futures, the dow closed higher by about 22 points. you'll see right now the nasdaq futures are down by just over a point. dow futures down by 8.5 points. s&p is down by close to 2 points. wti is down by 5 cents, $101.62.

also, the ten-year is worth watching here. mark grant pointed out yesterday that the spanish ten-year was trading at just about the same yield as the u.s. tenure. right now, the yields on the u.s. is at 2.469%. the yield on the spanish ten-year, 2.474. i ask you, gentlemen, would you rather own ten years of spanish debt or a ten-year in u.s. treasuries. if you can get the same yield on it, which one are you going to buy? which one is safer? >> you have to go to the u.s., not to be -- >> why? >> tv people like to act like we know everything, right? everything we say is sort of the rule. i have no idea. >> if it was my money, i would buy in the u.s., if you're looking over ten years. >> german yields -- by the way, the lovelily julia chatterley, i listen to her on the radio, "worldwide exchange," 5:00 a.m. eastern. german ten-year gains are the lowest since the five-year began. greece is coming to the markets in some kays with debt lower

than -- >> and where would you -- >> 40% unemployment in greece, no jobs. >> it wad pointed out yesterday that something has to give here because that makes no sense. >> let's take a look at the dollar. if you're watching the dollar, you're going to see at least at this point, euro is trading at 1.3433. gold prices of those who are playing along at home are higher this morning. up by 5.60. 1,308.90 an ounce. >> okay. let's go to tel aviv and talk about what's happening in israel. martin fletcher is there. take it away. >> well, it's been a rough night overnight. the israeli attacks on gaza with the heaviest pounding so far

over the last three weeks. attacking targets in gaza, they bombed the house, for instance, of the former palestinian prime minister doing great damage with that. they're targeting the leaders of the islamic militants have been doing all the time. they hit the power station, the only power station in gaza. palestinians anywhere are only getting three hours of electricity a day from that power station. now it's going to be even less. no comment from israelis why they hit the power station. the argument is continuing about who is responsible for the shelling yesterday of that share, a refugee camp killing the ten palestinians, most of them children. was that israelis who did it or palestinians who did it? there's this to and fro all the time. they're extending their operation last night. they say israel is going to

embark on what he called a prolonged operation in gaza. a clear message that israel is not going to be content just with as we've been reporting all the time finding and destroying the secret tunnel network. instead, they're going to go longer. they want to continue until the palestinians are demilitarized in gaza. that can only come through negotiations. but earth way, it appears the israelis are now beginning to embark on a longer, deeper penetration of gaza, which will lead to more deaths on both sides. israel is reeling after yesterday when the palestinians killed at least ten israeli soldiers. they killed five israeli soldiers. it was in an area where the israelis said there was no

longer a threat to palestinian tunnels. they believe they have found them all. they're very close to an israeli sentiment. they killed five israelis and then, for the loss of only one palestinian, the rest of that were able to get back into gaza. a bad day for israeli military. you can see on the prime minister's face last night. israel will continue deeper and longer in gaza. that portion directly in opposition to the appeal from president obama the night before. obama called appealing for an immediate unconditional cease-fire. >> martin within thank you very much. martin fleter, that is not the only place where we're seeing

u.s. tensions picking up. the united states is saying that russia violated a cold war treaty when it tested a prohibit in ground launch cruise missiles. washington is issuing immediate bilateral talks on the issue. this is incredibly important because this goes back to the end of the cold war. 1987 is when reagan signed the agreement with gorbachev. it was seen as, really, the beginning of the end of the cold war. and if there are violations in this, it just shows you how complicated things have become at this point. >> it's kind of a mess. >> yes, it is. talking about yesterday, we told you about that kurdish oiled that was here off the coast of texas. a u.s. judge signed an order to seize that order from the tanker. the judge acted on requests from the central government in iraq. it hadn't unloaded its disputed

cardio. iraq's central government says it has the claim to that cardio, arguing that it was sold by the regional government of kurdistan. this has been part of the splintering of iraq. we know the kurds have sent four tankers of oil. baghdad is putting the pressure on saying no. meantime, argentina's government making a last ditch effort to do i veteran default today. an argentine delegation will be in new york to meet with a court appointed mediator today. and one quick note here, we did this a couple of years ago. history says -- and it goes -- it's counterintuitive. when you think your country is going to default, you buy the equities. everybody tries to ditch out. but the smart money tends to go in. the dead service gets wiped out.

argentina's stock market, despite all the negative relates, is one of if not the single stock market this year. >> so a company that is able to leave itself and -- >> let's say you have a $1,000 credit card bill. you wipe it out. it's a negative on your credit rating. however, you now theoretically have the money and you can invest it in things investment in capital and whatever. >> i don't know who is buying into it. i understand the argentinean market has been hot. >> given the this whole debt experience, you would think people would flee. i guess if maybe you're a short-term investor, you would get out before the pop? >> look 59 greece, right? i don't know what's going to happen to argentina. and you can argue whether or not greece technically defaulted.

it's way too easy to even talk about that. think about this. the market has a very short memory. always. always, always. let's talk about another story in the news this morning. darden's clinton otis is stepping down from that company amid pressure from activists investors. companies will be celebrating the chairman or chief executive roles. the most did not come fast enough nor go as far as needed. >> when we come back this morning, it is the political divide of the future putting thousands of manufacturing jobs at risk. we will talk about that right after this. also, aetna rolling out results moments ago. earnings and revenue beating expectations and the company raising its ref knew guidance

for the year. the chairman and ceo will be our guest host on "squawk box" tomorrow. "squawk box" will be right back.

welcome back, everybody. today the national association manufacturing is releasing numbers. they say killing the export bank will put hundreds of high paying export jobs at risk. joining us noub is jay timmons, the president and ceo of the

national association of manufacturing. jay, this has been a hotly contested argument going back and forth this year. it was probably a surprise argument. it's rare that you would expect to see this much fight over the xm bank. but what did you find in this report? >> yeah. you wouldn't think there would be this kind of back and forth over something that creates jobs and returns money to the united states treasury. but what we found in this report is that our major trading partners are financing their export credit agencies that are far morrow bust rate than we are. countries like china, japan, korea, france, germany, even canada. so if we get rid of our xm bank, if we fail to reauthorize it, we're going to put the united states and the united states manufacturers at a serious competitive disadvantage. >> you know, there is a hearing today on capitol hill where they look into potential trouble, any problems at the xm bavng. what's happened there? are they going to be finding things on capitol hill today?

>> i don't know what they're going to find, but obviously if there's any im pro priorities, those issues should be dealt with like they should be at any government agency. but the ultimate issue is weather the xm bank, which is financed billions of dollars worth of projects for manufacturers, exports for manufacturers and its existence and has supported hundreds of thousands actually over a million jobs in the last five years alone, whether it's going to continue to exist in an economy that really can't afford too many hiccups. >> you know, jay, i have been surprised by the ire on this. i have been surprised by the fight going back and forth. but -- >> you and me both. >> i've tried to figure out what the critics really see here. and the only thing i can come to is that they're looking at crony capitalism. they think this is the government picking favorites. what do you say to that argument? >> the issue really is whether we're going to allow other countries to take away our economic leadership. if we get rid of the xm bank, we're going to disarm otherwise

economically in a unilateral way and that just doesn't make sense. so somebody is going to win when it comes to exports. it's either going to be the united states or it's going to be another country. and 95% of the world's consumers live outside the borders of the united states. so we should be doing everything we can to increase our exports opportunities around the world. and this really has nothing to do with picking winners and losers unless you want to say we want to pick the united states to be the winner. i think we all want to do that. and we need to get past this argument because this argument seems to be really a false argument. >> i'm not sure i disagree with you. i think i agree with you. but help me with this. what happens if i told you i wanted to double the size of the xm bank. would you be in favor of that? >> sure. >> i think what you have to do is you have to look at what your

competitors are doing around the world. china ma is financing over $100 billion of exports every year. when nine country ves more -- >> but nobody is happy about china doing what it's doing, right? >> it's not just china. >> no, it's brazil, we could go through a whole list. 59 other countries have this export critters. >> there are so many governments that are much more involved in business than there are in this country. the question is, are you arguing that the government should be even more involved than they are today? >> what i'm arguing is that we've got to make sure we have every single tool available to us. and if other countries have this very important tool, if we have this tool that we've had since the end of world war ii, by the way, if we give up this tool while other countries are strengthening this tool, that really sends i think a pretty bad message to the american people that we don't care about creating jobs in this country

and that we would like to let other countries create the jobs that we can have here in this country. >> so, jay, have you talked to congressman henserling about this? >> yeah. chairman henserling obviously has an opinion and we don't agree with it. if this piece of legislation gets to the floor of the house and the senate, we're very confident that it will pass and it will pass by large margins as it has in the past. but the issue is obviously it's gotten tied up in the partisan back and forth in washington. for no apparent reason like many other issues. and if we can simply get this to the floor, we think it's going to succeed. >> what are you odds you think it makes it to the floor? >> well, you know, there's all kinds of parliamentary procedures in washington ta you have to work around. my belief is that in the end, clear heads are going to prevail. we will see an extension of the xm bank.

and my hope is that it will be a multi year extension so that we don't have this uncertainty. we're losing deals right now because the banks' future is uncertain. so we've got companies reporting to us every single day that they're losing export financing or they're losing deals to other countries around the world, manufacturers in other countries. we've got to get this thing resolved. it needs to be long-term so that we have some certainty in the system. >> we should probably point out that this needs to be resolved by september and -- >> 64 had days before the bank ceases to exist. >> 64 days. by the way, congress is going on recess, i think they're league for four weeks starting next week. >> that's actually a good thing. because i think they're going to hear from their constituents back home. certainly small businesses, 3,000 small businesses that benefit from the bank. they're going to be hearing from their constituents back home that this is not something the american people want to see politics get in the way of

actually accomplishing. >> jay, thank you for joining us today. let us know how things are going. >> thank you. coming up, should investors panic? no. over the fed hiking rates sooner than later? that discussion is coming up next. and as we take a look at earnings, we are back right after this. ♪ ummercollection is here. ♪ ♪ during the cadillac summer's best event, lease this 2014 ats for around $299 a month

and make this the summer of style.

good morning. welcome back to "squawk box" right here on cnbc. i'm andrew ross sorkin along with becky quick. brian sullivan is with us this morning. joe has the week off. we've got some headlines for you. the chinese government has just issued a statement confirming an investigation into microsoft for a suspected monopoly. eunice yoon joins us now. she has the latest on that. we started talking about it yesterday and it's just happened moments ago. eunice. >> that's right. it was the government now that has confirmed that it suspects microsoft of a monopoly. in fact, they cited compatibility issues with microsoft windows and office software. they said that in many branchs, the authorities have been doing spot checks as was reported yesterday and that the inspector are investigating now the vice

president of microsoft here as well as the company's senior management in marketing and finance as well as other department personnel in china. so far, the authorities have said that they sooed seized various assets at microsoft offices and some of the government officials have said that they are hoping that microsoft will cooperate with this investigation. some of the people who they were interested in were not in beijing at the time of the investigation and so they are hoping that microsoft will cooperate. now, one other story that we have been watching closely and another one that was breaking late was the fact that a very powerful security chief named -- former security chief has been confirmed by the chinese government as being investigated. now, he is -- a lot of people have been waiting here for this announcement. he is a very, very senior level member of the communist party.

and many people have believed that this is now just another level in which the government is taking its anti-corruption drive. guys. >> all right, eunice, thank you very much. eunice yoon. we mentioned earlier about the kurdish oil tanker sitting off the coast of texas. a judge signing the order to seize ta crude at the behest of the central government in iraq. michelle joins us now with more on who was planning to buy this kurdish crude. >> good morning, becky. the buyer is a company called tamlai trading. according to documents that we've seen, they used a london ship broker back on july 17th to begin the process of saying this crude is coming in and we would like to unload it in texas. now, as you point out. tamlay may never get custody of the oil because a u.s. judge has ordered officials to seize that

at the behest of the iraqi government who says they own that crude oil. so this is turning into a big international dispute at this point. what we don't know is very much about tamlay trading. they appear to have offices in dubai and moscow and a very simple google search reveals that they have traded in russian crude. and what they were ultimately going to do with this oil still isn't clear. unload it in texas, but to do what with it exactly refine it on the behalf of the board room for what purpose at this point. we are all curious to see whether or not it was an american company ultimately that was going to be involved because then this would literally be turning their noses at the state department who the policy st they don't think the kurds should be selling oil, either. tamlay appears to be the buyer of this oil that we've seen. >> the purchaser is said to know

that they were running a real risk of not being able to receive that oil. do you think this was a test run? >> it is quite possible. you would think they would know this crude had been problematic. there have been suggestons that there's a bigger company behind this trying to see whether or not this can be deny. the question about the legality isn't quite clear. there sunt seem to be anything officially illegal about there except for the dispute coming out of the iraqi national government. so there could be something bigger at work here. we're going to have to wait and see. >> mirnl caruso cabrera, thank you. we have some results from goldman sachs crossing the streets right now. goldman sachs is upgrading costco to a buy, but taking it one step further and adding it to their conviction buy list and raising the target to $136 a

share. that's about a 16% gain from where the stock is right now at $117 a share. >> cramer has always been a big supporter of coastco. >> a lot of people are. in that same call, goldman is downgrading walmart. but here is the thing. they're downgrading walmart to a neutral. they're targeted to 83 bucks. stocks at 75. but still eight bucks a share more than walmart is right now. they're cutting it neutral. basically, walmart's current strategic plan, which is to grow, is going to continue to erode return on capital. so goldman upgrading costco. >> so it didn't have anything to do with the merger yesterday 37. >> the note is 40 pages long. i'm on page 2. >> but it's knot in the headlines. when you mentioned that first, i thought it might have been based on what happened yesterday. >> so did i. walmart, they're downgrading. i don't like those kind of

walls. whatever. more about costco, adding convicti conviction. not a lot of lists get pushed that much. speaking of the markets, it's a flat start to the week. but the real nieshgs have yet to again. eve got personings, investments. that's two cards full and ed keon, portfolio manager. thank you very much both of you for getting up so early this morning. appreciate that. >> thanks for having me. >> for a quantitative perspective, are the markets fairley valued, undervalued or overvalued? >> one word, fairley valued. two words, actually. so if you look at the bulk of measures, you know, i would say

we're not at stress levels, but things aren't as difficult as they used to be. normally, the signal of doom or the death nell for the market is when we get to a p/e ratio closer to 20. >> we're close. >> we're at 16 or -- >> yeah, on a ceiling basis, the last time i looked it was about 19 1/2. ford is only more important. we've seen the earnings do well. >> great, great earnings. normally the market looks more extensive right now because the e is -- you know, it's depressed and about to reaccelerate. so i think if you aren't in that mid cycle phase of the market, the multiples on the markets should be higher than where it is today. what do you think of that? >> well, i have -- you know, let's ask ed.

ed, nobody cares what i think. ed, what do you think? >> i think the thing about this market is it's still doing better than most people expect it. i think the same thing is true with the economy and the same thing is true with the corporate earnings. the market is very good at turning consensus expect theations to a coherent set of prices. to do better than the market, you have to figure out how is the consensus going to be wrong or how is it going to change over time? and my feeling is that we are still underplaying how well the american economy is going to do over the next couple of years and how well earnings are going to do over the next couple of years. i think that's been true for a while. i think it's still true. >> it's been a long time coming with that. every day on cnbc, someone comes on and predicts that we're going to have a 10% or 20% correction or worse. if you compare that to the late 1990s when you had a great run in the stock market, every day people are coming on saying we go higher and higher and higher. so the expectations are relatively modest for the

fundamentals. do you think that's try with the brought marketses 12347. >> that may be true, but i also think it's healthy that we've had these rolling series of corrections. you see some of the technology names have gotten taken down after a great run. so i think that's a healthy sign and i think it means that we're going to have this bull market ksh it's going to last for quite a bit longer. >> under your logic, isn't, isn't it healthy that people are wrong? your point is if everybody came on the show and had the same market views, i'd run to the hill. >> that's right. if you look at history, we're in the middle, but we're not getting the bump in valuations you would normally expect if people were exuberant. i think most of the people i talk to are nervous, worried,

anxious. and i think that's keeping prices in check, and that means that this market could go on longer. >> my sense is people are waiting to buy, they're waiting for that interview point. and that means that better entry point may get away from us. capital pullbacks didn't happen too often last year. >> as soon as it went to 6%, people jumped in the game. >> you have new money in the game, yes. >> one thing quads look at a lot is consensus expectationses for earnings. this year, the census becomes intact. so i think the fundamentals that drive the market are valuations

and earnings. i think they're going to be pretty strong here. >> who can blame people for being nerve justice? i know you're not behavioral psychologists, but once bitten, twice shy. if you've been in this market 15 plus years, you've seen two disasters, right, after the tech bubble and after the bear/lehman blow up in 2008. who can blame people for being nervous? sgliem working on something called the post post cycle of investing. there hasn't been that many things, thank god, but i would suggest vaguely reminiscent of the 1950s where you go through the great depression and world war ii. there was a lot of anxiety coming out of the post war period. yet the 1950s turned out to be the greatest period to invest in u.s. stocks ever. so i think you may end up with this cycle lasting longer than most people think and that

partial anxiety sets it up. because investing, if you look at capital spending, it's still very low levels. profits were up. so there's still potential energy in this economy that i think is going to last for a while. >> thank you both for coming in. >> thank you. >> positive energy. we're getting a lot of positive earnings this morning. >> we'll test it. >> that's post anxiety based on expectingations. when we come back, the company's ceo traveling rivals white undergoing the price. >> aetna's chairman will be joining us tomorrow for a "squawk box" exclusive.

welcome back. we've got pfizer, merck and u.p.s. all expected during the 7:00 a.m. hour. we will bring those numbers as soon as they're released. and then the case-shiller home price index at 9:00 a.m. eastern time with an increase of 0.3%, at least that's what's expected. we will get the number and tell you about it. and the markets get a read on consumer confidence from the conference board coming up at 10:00 a.m. eastern time. that, ladies and gentlemen, is today's squawk planner. when we return, donald sterling rejected in court. will this finally clear the way for the sale of l.a. clippers? we've got that story when we return. and sharknado 2, the next one is

about to touch down on the sci-fi network. one of the stars is going to join us. squawknado returns after the break. estion: can you keep your lifestyle in retirement? i don't want to think about the alternative. i don't even know how to answer that. i mean, no one knows how long their money is going to last. i try not to worry, but you worry. what happens when your paychecks stop? because everyone has retirement questions. ameriprise created the exclusive confident retirement approach. to get the real answers you need. start building your confident retirement today. we do? i took the trash out. i know. and thank you so much for that. i think we should get a medicare supplement insurance plan. right now? [ male announcer ] whether you're new to medicare or not, you may know it only covers about 80% of your part b medical expenses.

it's up to you to pay the difference. so think about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they help cover some of what medicare doesn't pay and could really save you in out-of-pocket medical costs. call now. with a medicare supplement plan, you'll be able to stay with your doctor. oh, you know, i love that guy. mm-hmm. [ male announcer ] these types of plans let you visit any doctor or hospital that accepts medicare patients. and there are no networks. you do your push-ups today? prepare to be amazed. [ male announcer ] don't wait. call today to request your free decision guide and find the aarp medicare supplement plan to go the distance with you. go long.

we stathat the kid on thehought back of the bus might have a song that he has in his head but he just can't get out. with the technology of cloud, we change all that. i can sing something into my device, up to the cloud it goes, back down it comes, sounding better. we break down the walls of creation and we give music creation for the masses.

♪ ♪ unlock the creativity in anyone. with the ibm cloud. the ibm cloud is the cloud for business. welcome back, everybody, 6:52 in the east. let's do a little sports news, shall we? a judge ruling against donald

sterling. that clears the way of the sale of the l.a. clippers to former microsoft ceo steve ballmer. the judge sided with shearling's estranged wife shelly and negotiated a deal with balmer after she took control of a family trust. donald sterling was banned from the league about making offensive remarks about african-americans. he's vowing to fight the nba until his death. apparently the judge effectively concluding that alzheimer's or he's obviously not stable. it was a, from a legal perspective, for an hour-long ruling, it was -- i read some of the transcripts. it was a legal smackdown. >> the one thing, also, is that while he can appeal this decision i think the judge explicitly put in something that says the sale can go ahead in the meantime. the judge won't be halting the sale, which is awesome. >> steve ballmer. be a happy guy. well for $2 billion. that's what happiness costs you. >> he's a basketball fanatic. >> he is. he'll be -- he's just fine. we should also tell you about

t-mobile, trash talking its largest competitors, again. company unveiling a new family plan yesterday undercutting at&t and verizon on price. ceo announcing a limited time offer, a family of four can receive unlimited talk, text, and up to ten gigabytes of data for $100 a month. compared the new plan to at&t's best-ever mobile share plan. he wrote on t-mobile's blog, it infuriates me that they're selling this to hard-working families who could use that money for more important things and they have the nerve to call it best-ever pricing. i just couldn't stand by without speaking up and calling them on their b.s. he also took a shot at verizon and sprint saying, yes, at&t's best-ever ploy is terrible, but, big red and the family aren't any better. >> friends and family plan. >> friends and family plan. >> the thing that's so crazy about this is people have wondered for a long time if this whole ploy is just to drive down the margins to the point that

somebody buys him. because a lot of people say it's an unsustainable model. >> they can't make money doing it this way? i thought the margin, on at&t and verizon is so high that i would think actually you could probably come up -- i don't know. i don't know enough. >> i don't know. >> to be dangerous on this particular subject. >> all right. then we'll stop talking about it. when we come back this morning, the exclusive results of the cnbc fed survey as janet yellen kicks off a two-day central bank feast in washington. also, our guest host today is blackrock's chief investment strategist for fixed income jeff rosenberg. he will tell us what he's watching in this action packed week for the markets. "squawk box" will be right back. good morning. ..

a wild week for wall street.

and it's only tuesday. quarterly results pouring in. pfizer, merck, u.p.s. and twitter all on deck. the federal reserve kicking off a two-day meeting today. we will have the results of cnbc's exclusive fed survey straight ahead. >> and the ceo wake-up call is set. the chief of hilton worldwide showing us the futures of hotel check-ins. second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. we do have the results from merck. that's just hitting the wires. looks like the company's coming in with better than expected results. company reporting an adjusted number of 85 cents. that compares with the street's expectations of 81 cents. also beating in terms of revenue. sales came in at $10.9 billion versus the $10.6 billion that the street had been expecting. the company's also issuing some guidance from the year. they are talking about a gap eps

target of somewhere between $3.43 to $3.53. that does include some items of six to nine cents and it's excluding potential results in terms of the venezuelan bolivar devaluation and other items. but the street right now is at 7:48. so if you're looking at that if the street's considering those with the items in it it looks like it would be around the midpoint of where it is now, $3.48 the estimate. 3 $43 to $3.53 is where they see the year. >> second beat of the morning. you've got aetna, now you've got merck as well. pfizer is crossing the tape. guys give me a second, i'm going to look this up and we'll figure out where we are. pfizer second quarter results, 58 cents a share. >> so a penny better than exp t expected. >> thank you. >> also taking a look at the revenue coming in. a little bit better as well, $12.8 billion versus $12.46 that the street was expecting. so you're talking about the two big drug companies here this morning both beating on the top and bottom lines, merck and pfizer. take a look you'll see pfizer

right now is trading at $1.66. or up 1.6% up 50 cents, $30.60 the last trade on that and brian what happened with merck? where is it trading? looks like it's a little bit higher, too. i'm getting an indication of $58.16 to $59 versus the $57.97 close. >> three big names this morning, aetna, merck, pfizer, we've got three beats. aetna raising guidance. merck saying it could beat. it's raising the top end of the guidance, as well. pfizer with a beat. the sales numbers look a little bit better than expected to your point. so when we talk about the macro market like we just did earlier, we look at the price to earnings ratio. if that comes up the valuation of the market goes down. the bigger denominator lowers -- and we have seen that almost every company now got to be close to 80% of the s&p 500 that have reported have beaten the street. >> we should also point out that it has turned the market this morning. dow and pfizer -- sorry, merck and pfizer both dow components.

the dow futures are indicated up by about 26 points. that comes when we walked in this morning they were indicated down by about 10 points. so you've seen a swing through the morning- >> swamt, becky. wait a minute. are you suggesting that earnings still matter to the stock market? >> i think they do. i think they do. >> because -- >> heaviest week of earnings and the street's paying attention. >> because we have heard, rightfully so for the last few years the fed is everything. right? no maybe the fed is goosing the economy and goosing earnings. you can make the fed argument about everything but it would be an interesting day today, and i think refreshing, if indeed that we went higher simply because earnings went up because at the end of the day, folks, a stock, as we all know, is merely supposed to be the future of value of earnings. that's what a stock is supposed to do. being -- >> depends in large part on what the fed is doing because it matters -- >> that's a nice segue to our next topic which is that the federal reserve convening a two-day fomc meeting in washington today that could

impact, maybe earnings don't matter. maybe this is what matters. steve liesman joins us with the findings of cnbc's exclusive fed survey ahead of that meeting. steve? >> why does it have to be one or the other, andrew? why can't it all matter? earnings very important, revenue really important and the fed important. what we see in the cnbc fed survey, good agreement about this year. increasingly less agreement about what happens next year. show you the first chart about the average expected balance sheet. it's moved up from 4.16 in the april survey to 480 right now. what does that 480 mean? means that the market is exactly on board with what the fed is expected to do. 10 billion taper this meeting. 10 billion september, 15 in october. ending qe as we know it. that would give you a 480 billion increase in the balance sheet. now, a big change here on 2015. previously in our april survey they expected a decrease next year but then there was all this talk from guys like new york fed president bill dudley maybe we shouldn't sell assets. so now it seems about even next year. half of our respondents in the

april survey expecting a decrease in the balance sheet, now only 14%. let's move on now and take a look at whether or not people are in agreement with the current pace of taper. only 8% think the fed should taper more slowly. and then when you look at what's happened here, increasing agreement with the pace of taper. three quarters of our 36 responders include economists and fund managers. think the fed should taper at the current pace and 19% down from 40%, about half think the fed should taper more -- should taper faster. now looking at the timetable, the first rate hike seen in august 2015, the plurality is july, by the way, and the first balance sheet reduction, december 2015. the plurality actually a month later in january, 2016. a change in the fed funds forecast. up 0.21 is the forecast for december 2014, and then if you look at 2015, it's gone up to 1%. that's pretty much in line with the average of the where the fed

funds futures market is. we asked a funny question, work with me, we asked people, if you're wrong about the fed, how will you be wrong? will the fed be more dovish, more hawkish or the risk balanced? you can see the risks are balanced for 2014 but not so much 2015. what you see is that about 49% expect that if they're wrong, the fed will be more dovish than they expect next year, and it's about 30% that think the fed could be more hawkish. what you see basically is pretty good agreement in the blue about what happens this year. less agreement, which is what you'd expect going forward, about what happens in 2015. guys, in the next hour, we're going to come back and talk about what the people think, how this whole monetary policy is going to end. will it end badly? or will it end smoothly? that's the next -- >> all right. >> excellent. >> steve, sit down. we're going to talk about this. >> because there's a really bright guy right at the table here. >> there is. >> and i don't mean brian. >> ooh. >> not that he's not bright but he's not the bright guy of which i spoke, of whom i spoke. >> let's talk about the person

you were referring to. >> the person i was referring to. >> jeff rosenberg. fortunately we do have him for the next two hours. >> he's a market master. >> chief investment strategist for income at blackrock and a "squawk" market master. you heard what steve was just talking about. most of these economists think that if they are wrong, it's because the dove will be more -- the fed will be more dovish than they expect. >> that's exactly what i took away from that. that's the most interesting thing. >> it's a risk problem. >> it's a great question and also reflects what's going on in the market. you mentioned where is the market relative to those expectations, and the bond market is pricing not to the fomc, the market is pricing to a very dovish member of the fomc called janet yellen, and so it's a much more benign expectation. a more dovish expectation in the market right now than what the median of the fomc might -- >> meaning if the fed moves though, if they are a little more hawkish -- >> it will be surprising -- >> you'll see some big shifts. >> oh, no doubt about that. >> but is the spanish market

pricing that, jeff? if you look around the world they're talking about -- if you look around the world, interest rates are low. and i have been trying to puzzle over what i think -- because there are people out there talk about market manipulation by the fed. where would interest rates be in the absence of the fed. is there a reason why interest rates would be soaring if the fed wasn't doing qe? >> you know, it's -- you don't know because there's such a big -- it's counterfactual such a big impact that they have. but clearly the fed controls the short end of the interest rates. what's unique this time with quantitative easing is their effect on the long end. and so that has been the big surprise this year, why is the long end rallied so much. there's a lot of reasons for that. we'll get in to that conversation. but interest rates are much lower than they otherwise would be at this stage in the economic recovery. i think that is really the debate. and the debate is, really whether or not the fed is ahead of the curve, at the right spot or behind the curve. many people, myself included, that look at the rate of

economic progress, we're doing $275,000 jobs over the last three months. we're going to talk about the jobs report later on today, i'm sure -- >> pushback, if i gave you the following scenario, average growth over the past six months of zero. year over year inflation 1.5%, 1.6%. the u-6 over 12% in terms of total labor in the economy, give me an interest rate. is that a 3% interest rate? or is that a 2. 5% or a 2%? >> the interest rate that matters is the real interest rate. >> true. >> and the real interest is rate is minus 1.5%, minus 2%. that economy that you're just talking about, the economy whether it's u-6 or u-3, whether the broader based measures of unemployment, narrow based measures of unemployment, the economy is growing slowly but it is not growing the way it didn't grow in the crisis. in the crisis we needed persistent negative interest rates. we no longer need negative 2%

interest rates in a massive sized balance sheet. at one point we did need that. we had the threat of financial crisis, the threat of deflation. we're so far past that. >> you're -- >> absolutely. >> what should rates be right now? >> rates should be -- i think they should be exiting, and we could stand a zero interest rate in real terms. >> real. >> i think we'd see more campers in that camp, jeff. i love your line of questioning steve because you've got to the far point earnings are up, we could hit the fed's unemployment target by the end of the year. okay. jobs are up, and they've been growing, there's been some inflationary signs, the cpi was not out of control last time, we've seen some commodity price come down, still, what's the risk, forget about the camp, what's the risk of janet yellen is really stuck by the end of the year? >> when you mean really stuck, meaning -- >> continuing to put money into the economy via low rates but yet we're at the point, steve's point, that things should not be

where they are. >> well, there's a real risk of that happening. and that's really what divides the market and divides the economy right now. the fed is focused on and what they're focusing our attention on is wages. we don't know how to measure labor markets so we're going to measure the effective labor markets by looking at wages. the risk is that the measures that the fed focuses on are very lagging indicators of wages. wages and wage inflation is already lagging indicators. but if you use the most lagging indicators of that, which basically an eci, employment cost index actually comes out this thursday so it will be an important economic report the risk is that they're going to pick the most lagging indicator, and therefore, by design, be behind the curve. >> jeff, where would the stock market be, the stock market, i know that's not your business, but the stock market be if we raised interest rates? right now? >> we're just talking about that. >> but -- i mean, how far down would we come or would we not? >> if you look at sort of typical interest rate cycle inflection points and what the immediate market reaction has been, it's around a 5% to 10% average kind of 8% decline

around that period of shift in monetary policy. doesn't mean that the market has a persistent decline. just means that the digestion of going from policy accommodation to policy tightening is usually about, you know, how will the transition be managed. historically, the transition is difficult to manage for the stock market. >> i want to make a very big point. this is a story that you highlighted yesterday. the big macro story in the earnings reports is the revenue numbers. i don't know if this is a trend that beginning, but the revenue is running 5.5% above year-ago levels, and it's been awhile since we've had the growth in revenue outstripping the growth in earnings. all of the earnings have previously come from paring down, efficiencies -- >> byebacks, balance sheet manipulation. >> making stuff up. >> if the top line is truly growing and it's more than a one quarter phenomenon, which we don't know because we have lousy revenue growth last quarter --

>> but do we even look at the gdp at this point? i mean -- >> i don't know. >> i think you could almost throw out -- >> -- confidence which i talked to an official about the first quarter and they said they had no idea why gdp declined 3% in the first quarter. >> they don't know if it was weather -- >> they don't know what it was. echoed by every economist i talk to on wall street they have no clue. >> and wednesday we get second quarter gdp. >> right. >> and you're also going to get the annual revision. so a lot of -- >> maybe we get -- >> threat -- >> maybe that first quarter gets revised. >> anyway -- >> but i feel like to jeff's points it's about market expect igss and what you just pointed out with the economist, no matter what happens in second quart eer gdp people will almos discount those numbers too. so you'll have a longer period of time where the market's in flux, people aren't sure about what's really happening. >> i think if the notion becomes earnings and revenue the market can focus on that -- >> the revenue is real. >> revenue is -- >> that's what we said yesterday. somebody rightfully point out --

>> you recognize earnings. >> you could sell everything into a warehouse in macau -- >> it's weird to see every company doing that. for one or two companies sure you can do that. but not for 70% of the s&p 500. >> i just threw that out for the cynics -- for all the cynics in the audience. >> we heard the cynicism. we heard it. >> that's a good point on second quarter, because second quarter you're getting a bounceback from first quarter. maybe you got to wait for third quarter. both for earnings as well as gdp to see the clarity. the fed may be waiting for that as well before they take more action. >> jeff's going to be with us for the rest of the show. steve we'll see you back here in a little bit. >> great story at 8:30, will it end badly or will it end well. >> you have the answer? >> i have the answer. >> that's worth sticking around for. >> you can read the survey. >> i can guess the answer. it's an amazing answer, counterintuitive answer which means it's all going to end well. >> why don't we just give it now? >> no. >> swiss banking giant ubs rolling out its results. the cfo will check in with us next and chen the ceo of hilton

worldwide getting a "squawk" wake-up call. find out how the hotel giant plans to revolutionize the hotel experience. i'm interested in this one, "squawk box" returning in just a moment. in a world that's changing faster than ever, we believe outshining the competition tomorrow quires 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. if energy could come from anything?. or if power could go anywhere? or if light could seek out the dark?

what would happen if that happens? anything.

welcome back to "squawk box"

everybody. if you are just waking up this morning we have had a number of quarterly reports to digest today. we've had two dow components coming in today. merck with 85 cents a share. that was four cents better than the street was expecting. revenue also topping the street's consensus. and pfizer the other dow component earnings beating the street by a penny. revenue also above the street. earlier in the morning we had aetna's earnings. better than expected by 9 cents a share. the health insurer says that results were helped by last year's acquisition of medicare and medicaid provider coventry health care. aetna raising forecast for the full year profit and for customer growth and by the way we should mention the ceo will be joining us tomorrow morning at 8:00 eastern time. if you take a look at the futures after all of this all of these earnings reports helping things out. we saw some red arrows but those two dow components in particular really boosting the dow futures. right now indicated up by about 37 points above fair value. they were down by about 10

points below fair value when we started. >> ubs out with second quarter earnings earlier this morning. profits better than expected continuing the trend that we have seen recently but there are some questions hanging over the stock, the bank disclosing u.s. probes into its dark pool trading system. joining us from zurich, switzerland for a cnbc exclusive is tom naratil, ubs chief financial officer and a member of our global cfo council. our guest host jeff rosenberg of blackrock is also here with us, as well. tom thank you very much for joining us on cnbc. define the u.s. market for us right now because we're just highlighting record highs for stocks, there rates are low, bond yields are low here and globally how would you characterize the american economy and markets right now. >> thanks brian when we look at the u.s. economy we feel actually quite good about the growth that we see. actually when we look at what we're advising our clients to do

u.s. equities and canadian equities are where we're quite favorable. also the theme of north american energy is one that we're very focused on. if you look across the world the rest of the world, including europe, is not proceeding and growing at the same pace as the u.s. and as a result our clients are still holding an excess amount of cash. >> can you help us make sense of what is going on in europe with regards to interest rates? i mean i don't want to bore our audience but when i see spanish beyond yield at 2.4, same as us, germany below that. greece coming to market chiefly, tom, it's hard not to look at what the interest rates are saying about the european market and thinking there is some big disconnect here. what are we missing? >> i don't think you're missing anything, brian. i think that you're highlighting one of the questions and concerns that our clients see. first of all, is that with you

know sovereign debt yields at historical lows, fixed income is that their asset class of choice. the potential for anacin kronous set of moves where you have one central bank the largest and most influential globally potentially going on a tightening cycle when another in europe might be on an easing cycle certainly that type is where investors have a lot of questions and one of the things that's positive in our wealth management business because clients are looking to us for advice. >> jeff rosenberg from blackrock. we have a lot of financial advisers watching the program. maybe you could talk a little bit about the wealth management, america's results. >> okay, yeah, thanks for that question, jeff. our financial advisers and wealth management america are really doing a fantastic job for us. we had a great milestone that we achieved in wealth management america this quarter. we surpassed a trillion dollars

in invested assets that our advisers managed. that's an increase of a quarter of a trillion over just three years ago. productivity for our financial advisers is the highest in the industry and at a record high at $1.1 million. and we've got a business that generates more than a billion dollars in pretax profit a year so we're very happy with our performance in wma. >> tom, i've got a couple of questions away from the earnings and a little bit more macro one related to your firm and then a bit of a broader question. tell us where the settlements stand. you did have a settlement about tax evasion with germany. there are a couple more coming. what's happening? >> sure, andrew. on litigation, i don't think you can talk to anyone, ceo or cfo in the banking industry today without bringing up the topic of litigation, and regulatory actions. and what we're doing is trying to put all the matters of the past behind us, as quickly and responsibly as we can.

and you see that we did, as you noted, settle the matter regarding cross border in germany that we announced this morning. as we look at other issues, certainly the fx issue and issues regarding high frequency trading and equity trading are ones the industry will have to face over the course of the next few quarters and perhaps maybe the next couple years. >> tom are heads going to roll on any of these? >> look, i think on this one, andrew, we've taken action where we found individuals who've been responsible for behavior that is not in line with our conduct standards. we've done that in the past, and we'll do so in the future. >> all right. tom. it was a real pleasure to have you on cnbc this morning. tom naratil, ubs. thank you very much. >> okay. coming up, the pawn stars thinking big from the hit tv show on the history channel, to building a shopping center.

what is rick harrison up to now? we're going to find out when "squawk box" returns. chocolate is very individual. white chocolate lovers don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their chocolate. we needed a scalable cloud solution allowing them to

select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. the ibm cloud is the cloud for business. frothere's no reasonn average 17 we can't manufacture in shuthe united states.

here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. we knew we needed to grow internationally, we also knew that it was much more complicated to deal with. i can't imagine having executed what we've executed without having citi side by side with us. their global expertise was critical to our international expansion into asia, into europe and into canada. so today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that american made bag within a few days in singapore. citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. if it can be done here in san francisco, it can be done anywhere in america.

welcome back to "squawk box." you can hear the conversations during the commercial breaks. the pawn stars, not porn stars, the pawn stars on history channel are doubling down on their popularity and success with a real estate venture. rick harrison, co-owner of the gold and silver pawn shop in las vegas is trying to build a shopping center, pawn star plaza. it would have more than a dozen shops and six restaurants. harrison estimates the cost for this project to be about $2 million. >> when we come back today, the business of bank settlements. eric denala once served new york during the investment crisis. now he's helping banks. we'll join us right after this. we're also expecting u.p.s. to report. also it will give us a good hint as to what's happening in the economy right now. "squawk box" will be right back. don't just visit san francisco.

(water dripping and pipes clanging) visit tripadvisor san francisco. (soothing sound of a shower) with millions of reviews, tripadvisor makes any destination better. and cialis for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure.

do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial.

ask your doctor about cialis for daily use ♪ i voted for culture... ...with a 'k.' how are you? i voted for plausible deniability. i didn't kill her, david. and i voted for decisive military action. ♪ america, you cast your votes. now, go to xfinity on demand and select the people's hotlist to see this summer's top 100 shows and movies. i voted! welcome back to "squawk

box." first on -- on cnbc, first in business worldwide. that's how we say it. i'm andrew ross sorkin. becky quick over here. brian sullivan is in for joe today. checking out futures at this hour. we do have some green arrows after some decent earnings this morning. dow looks like it will open about 38 points higher, s&p a little over 3 points, nasdaq up over 8 points. earnings boosting the markets. merck's earnings and revenue beating the street. the company says sales of its newer drugs mostly offset declining sales for those facing generic competition. pfizer posting better than expected results. u.s. giant dropped its bid to buy astrazeneca in made and made strategic adjustments to try to improve sales. also aetna posting earnings of $1.69 ex-items beating estimates by nine cents, revenues also topping the street and aetna also raising its forecast for full-year profit and customer growth. aetna's ceo is going to be our guest host tomorrow morning. >> also with an uptick in bank

settlements we seem to be living in an enforcement oriented realm. he represents clients throughout the financial services sector, and you of course know him as new york's former superintendent of insurance, he was there during the financial crisis. our guest host again today is jeff rosenberg and he's with us, too. but eric thanks for coming in today. >> it's good to be here. thank you. >> i just wonder when you've gone from one seat to the next, gone from the superintendent of insurance to now seeing things on the private side, how does your perspective change? what do you think differently about things? knowing what you know? >> well, i think there's big changes that have occurred that also make the seat sort of being in a different place now. there has been an increase, i think the real head line's been a tremendous increase in the states getting involved in areas that they did not traditionally get so involved in. in terms of regulation and kind of a regulatory approach that's very enforcement oriented. you see between 9 attorney general's offices and new york in particular -- >> and ohio. i get ohio and new york a lot.

>> california, and my former agency combined with the banking department. so the state banking department combining with the insurance department created the department of financial 16ss for new york state. that's become a very, very powerful force. many of the staff is from the attorney general's office. when the governor was the ag. that staff has moved over. they have an enforcement division. and they have focused a great deal on the banking side. >> and is that a force for good or a force for evil? >> well, it's a force. let's be very, very clear. they've put up i think close to a billion dollars in fines in a very, very short period. and they're focused to a large degree has been the foreign banks. sort of ask why? well because these banks are actually, they're licensed by the states to a large degree. so they don't always have a national charter. or if they do, in order to be operating with their foreign branches they have a new york state license. and so that's the ultimate kind of dynamic. and they consider themselves dfs the primary regulator. >> that's a really interesting

point. i want to go back to that. the reason we are seeing all these foreign banks getting heavily fined is because that's where the states have much more power and influence? that's where they become the official regulator? >> i think it's a very, very different dynamic. so they're really actually the prudential regulator, not just the enforcement official, so they're in their world in a very invasive, very serious kind of operational way. but then on top of that their emphasis is sort of consumer protection, because of what we said before, that's sort of a state-based expertise. and so they have both that kind of enforcement approach, plus the ultimate hammer, which is they grant the license, right? and you see that in niece cases, there's been debate about whether they're going to revoke the license, et cetera, the charter. that makes it a very, very kind of terrifying new world approach. this is a new world for a lot of these banks which is kind of showing up and dealing with a state regulator with a very, very different perspective. >> let me ask you, though, because we sit here and see the head lines again and again about the fines that have come out and we know that the public wants to

make sure that they fix the problems of what happened and what caused the financial crisis. but a lot of times we try and figure out if this is legitimate in terms of the fines that are being set up or if this is a shakedown. i don't know, what do you think? >> well i think -- i think i mean here's what i'm seeing now. it's sort of a different perspective. when you're in the private sector now and you're on this show, you think the financial crisis is kind of old news and we're getting past and the markets have picked up. but when you actually deal with kind of elected officials, and the populous and the voters they're going to be very, very responsive to that and polling will show that people still kind of want some accountability. there's still a belief that it hasn't all shaken out yet. and so i think that this is very, very reflective of that. the superintendent of the department of financial services has given speeches where his view is, he called it groundhog day. it keeps on coming back. it hasn't completed yet. we're seeing new issues.

and i think those issues are interesting to me, because a lot of them are very operational. they were the things that both insurance companies and banks would not have thought would have raked in these huge fines and headlines. they're not like absolutely like stealing and cheating kind of you know after riis. they're much more what was traditionally thought of something you could quietly resolve with a regulator on a compliance issue and turned into now billion dollar headlines. how much more do you think we have? is there five more years? ten more years? are there -- what level of fines are we going to see? you know, you said that we don't we haven't seen enough. so the question what is it that would be a turning point if there ever would be? >> i think what the politics of this is, is that there is a turning point. here's what the turning point starts to look like. the markets pick up. people start to hire more. there starts to become more of a sort of jobs driven market. and then what starts to happen is the politicians frankly start to respond to that. and the banks then are viewed as an opportunity. they give liquidity, they give

people their first opportunity to buy a home or a car. and the dynamics around kind of what the relationship is with the regulators, as opposed to the enforcement official changes a lot in those environments. so i think, you know, you're going to see across the year some of this. but also the other thing to be honest about is that when you come out of the state system, and i was the insurance regulator, and now the state department of financial services, they want a legitimate seat at a table with other regulators. so a little bit of this is also kind of establishing themselves, saying we're on par with the occ, with the fed, with the cfpb. we can regulate these banks. >> do you think there are too many regulators? i mean industry often says there's this alphabet soup of regulators. on the other side they say there's competition, competition is good because it's forcing everybody to try to jump in front of the next guy. >> right. so there's two versions -- there's sort of two theories about this. there's a plurality version that competition is good and arguably the financial crisis proved one thing, at least on the insurance side, we had 50 state insurance

regulators, which you think that's got to be chaos. from a solvency perspective, insurance did extremely well throughout the crisis, as you recall. i mean, aig aside -- but it was not about insurance. it was about sort of the operating at the holding company level and activities that were not really insurance activities. >> but who was responsible for -- >> well that is a -- that's, that's to the previous point which is there was kind of an alphabet soup around aig that missed some of the primary upper holding level activity and that was actually a federal regulator. but it is true that there is -- that there is criticism around that. but my view still is that, actually, i don't think there's too many regulators. i think there can be better coordination. i think that the efforts through the treasury and the fed to establish who is the primary regulator -- >> that's the -- >> there needs -- >> better regular -- >> needs to be a leader correct. i agree with that. >> and you think that we will get to that point? >> i think we're getting to that over the largest institutions.

so as some institutions get designated systemically important the fed becomes the lead regulator. in all of the insurance companies, there's generally a lead state regulator, et cetera. >> do you think the banks would pay as much if they actually went to court? >> i think that they probably could end up paying less. but -- >> how much less? >> well the problem is they may pay less financially, maybe some not insignificant percentage but the ultimate hammer is they could get delicensed. they could get put in the box for a year or more and not be able to do business. and that, of course, is ruinous. so i don't think, actually, i think there's a dynamic. yes, we've seen over time, some people have gone to trial with the attorney general's office to good results. generally individuals, right? because they have the ultimate risk, right? i mean and institutions very hard to go forward. i mean, you know, that's -- when i'm on private side now i constantly think about this. like i would love to give advice and say we have a great case here you have a winnable case you don't have a bad state of mind you have no -- you didn't

intend to do anything wrong. but along the way you're going to rack up huge legal fees and there's always going to be the chance that they're going to get you in an entirely different way. remember if you fight the regulator and go and win, you still have now 50 years of regulatory togetherness. >> right. >> just quickly sorry on your question i know we got to go, will dodd-frank ever be finished? and what will it look like? and why is the s.e.c.'s budget almost doubled in the last ten years but it appears that enforcement necessarily hasn't gotten any better? >> i think dodd-frank will eventually get finished. the devil is in the details. creating regulation is much harder in some ways and nuanced that creating legislation. i think the s.e.c.'s budget doubled because frankly people really criticized them and they came this close to being engs tinge wished, frankly, on the last crisis. so i think they've been given a lot more and i think enforcement has been pretty active. no one can say they've not been robust at the s.e.c. on activity

and the enforcement area. >> eric want to thank you for coming in. >> thank you. good to be here. thank you. >> all right. coming up are you checking in any time soon? a hilton hotel. there is an app for that. you can make reservations, special requests, check in, check out right from your phone. what does it mean for sales? ceo of hilton worldwide will join us next. and at the top of the hour, pfizer and merck earnings are out. they both beat. we're going to talk about the future of pharma, maybe more about the tax inversion issue, and drugs in the pipeline all when "squawk box" rolls on right after this short break. in a world that's changing faster than ever, we believe outshining the competition tomorrow quires 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. thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life.

[ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪

yyyup. with xfinity internet soyour family can use all their devices at once. works anywhere in the house. even in the garage. max what's going on? we're doing a tech startup. we're going public! [cheering] the fastest in-home wifi for your entire family. only from xfinity. welcome back to "squawk box" everybody. china's globe trotting businessman are on track to top global spending by 2016 overtaking the united states. business travel spending in china has soared over the last decade. mainland business has spent $225 billion on travel in 2013. that was up from just $32 billion in 2000. they logged an average growth of 16.2% over those years. spending by the u.s. peers has been more subdued in comparison. at 1.1% annually since the year 2000, asia pacific is already

the largest business travel region in the world, making up 38% of global business travel. >> on the same topic, hilton worldwide plans to revolutionize the hotel experience. the first hospitality company to enable digital check-in, room selection, and customization all from your smartphone. joining us on this announcement, christopher nasatety, chairman and ceo of hilton worldwide. i acompletely psyched about this. i am going to be able to go on my iphone, choose the room, check in. does that mean i never have to talk to anybody on the way in? >> that's right. eventually. right now what we're rolling out and by the end of this year we'll have everywhere in the world is e-check-in with room selection with the ability to upgrade your room or order amenities in your room, prearrival. when you then get to the hotel to check in, because we have your honors number, all you have to do is go to the desk and get a key. you don't even have to have i.d. or any -- or a credit card or

anything because we already have all that information. but what will be coming very soon, and we're going to start rolling out in 2015, and over the next couple years we'll have globally, is the next step in the process, which is going to be the most important, which is straight through. so using your iphone, your android, whatever personal digital device you have you'll be able to check in, you'll be able to select your room, order amenities, upgrades, you'll be able to check out, you'll also be able to use it to get in to your room. >> so it will actually unlock the door? >> it will actually unlock the door. that's something we've been testing probably for the last three years. >> wow. >> we've developed a proprietary technology that's connected to all of our back end systems and we will start in january rolling it out. four of our brands will be rolled out throughout the entire u.s. next year, and in the following year to two we'll be able to capture the whole rest of the world. the idea is, we want to serve all our customers everywhere around the world as best we can,

so it's not about testing this. we've been testing this for five years. not doing it across our system of 4200-plus hotels -- >> what's the technology cost that you've invested in this thus far? >> well, we -- starting in 2007 when we went private, we had to rebuild our entire technological infrastructure so we spent about $550 million in the last seven years rebuilding the whole technology infrastructure. that's the real bulk of the spend was to get all of the back end systems and the backbone of our technology systems connected in a way that we can leverage -- >> can you -- >> -- we have incremental investments but, really in the tens of millions. >> can you imagine savings in all of this? i imagine there might be less need for people at the front desk in the future. >> there are clearly, you know, not in the immediate future but over time there are clearly efficiencies. i think the idea is hospitality is always going to involve

people. we're a business of people serving people. so you're going to have people in these hotels. but you'll clearly see in the not too distant future where there will be future people needed at the front desk. the idea is there are obviously deficiencies but there's an opportunity to reposition and reallocate some of those resources to doing things that make our customers' experience a better experience overall. >> are there going to be certain rooms that are going to be blocked off for better customers than others? even the same category of room, meaning you don't want to be close to the elevator so that's going to be available -- >> if we had the time i'd show you on my iphone because i have it, this is live. i've been using it. you can go on right now, if you book with us, and select a room that you want, if you want to be by the pool, you want to be by the elevator, you want to be by the vending machines, icemaker, can you do that right now. and for our best customers, our highest level of honors customers the upgrades that they become accustomed to will be available and actually will be

suggested when that they come on and try and book on their room map. >> christopher thank you for joining us. >> you bet. >> i'm going to download the app and try it myself. >> you're going to love it. it's really exciting. >> thank you, christopher. beckys got some new >> brian and i have been looking at the u.p.s. earnings. correct me $1.21 an adjusted number is below -- >> u.p.s. is a big miss all around. >> below the $1.25 that the street was expecting on this. looked like the revenue number was slightly above 14.27 billion versus the 14.11 billion. but their guidance for the full year is below, too. >> yeah, they're cutting their guidance. they see the full year 4950 to five bucks the estimate is 5.09. so a miss on the quarter at least on eps. they did say package cost increased. to your point, revenue was better than expected. 2.6 million package deliveries per day average during the quarter that's up by about 200,000 over last year. >> yes. i think like 7% because of e-commerce we were talking

earlier about how much we -- >> you're addicted to lon yien slopping. >> yes. i never go -- >> u.p.s. loves you. >> they do say that part of what they're doing, though, is 2014 they say is the year that they're investing for the customer, they're providing new capabilities, expanding capacities to try to ensure that u.p.s. meets the rapidly growing needs of the marketplace. you can expect probably all around this table people are ordering more and more online. i know amazon is my first place i go for just about anything. the stock is down by about 2%. again, though, you might understand that they're doing some more investing to try and just keep up with this strong growth that they're seeing maybe offer the longer haul investors have been a little bit in the past. >> you know i think we get on the quarter it was a miss for the quarter. there is a cut for the full year but when you look and i went back and i thought well how has u.p.s. done over the last couple of years. they did 12.2 billion in sales in the same quarter four years ago. so really a 2 billion, roughly $2 billion jump in four years in sales.

that's about 16% gain in sales over four years. so i think if you take a longer dated view, not just of u.p.s., but any other company, you could see that they've done well. i mean, things have gotten a lot better, we are getting -- but we'll see if the market cuts them a break today based on the package numbers -- >> i don't -- but again if you're looking just ideas of what's happening with the economy, revenue did come in a little better than expected. but again, i don't know if we can use this as the same proxy as we used to. we always used u.p.s. and fedex as a proxy for the broader economy but i do think there are shifts taking place as more people are ordering more online and i don't know how much you can read into that. >> you've got to go through the balance sheet because if you look at higher costs, higher costs and jeff, jump in here any time if you want, higher costs can be a good or a bad thing. >> let me tell you more about the costs. the company is saying that they plan to increase their 2014 operating expense for capacity and projects to a total of $175 million. that's good spending. >> that's a good spend. that's the point higher cost if it's gas, that's bad because it's just a spend but if you're

building more warehouses, hiring more people, and maybe paying the people you've got more, that is a good spend, and it shows optimism about the economy. >> and the cfo is making some comments about this. they say the initiatives will increase operating expenses this year but will provide financial benefits for years to come. so we'll see if that actually comes to fruition. >> and on this point, this focus on revenues and then the earnings, for the economy, it's much more about the revenue piece but also the cap-ex piece and also throughout earnings is very important because cap-ex has been the missing ingredient to the extent that we've seen ceos talk more about cap-ex it's actually good -- >> by the way cap-ex leads to job creation which is also good news. >> it's an accelerator for the economy. you typically see it after you see confidence effect and that helps to give you a boost to economic growth from the current level that you're at. >> all right. when we come back on "squawk box," roughly 50 s&p companies reporting today. we'll give you a list of stocks to watch ahead of the open. and in the next hour we'll be previewing twitter's quarterly results.

those numbers will be out after the bell so can this stock outperform facebook for the remainder of the year? we'll speak to an analyst in just a bit. ♪ ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style.

♪ i voted for culture... ...with a 'k.' how are you? i voted for plausible deniability. i didn't kill her, david. and i voted for decisive military action. ♪ america, you cast your votes. now, go to xfinity on demand and select the people's hotlist to see this summer's top 100 shows and movies. i voted! close being in on eight clock in the morning. aetna, their earnings and revenue beat the street to help insure also raising full year guidance. aetna ceo will be the guest host

of "squawk box" tomorrow morning. sirius xm shares trading higher. the satellite radio operator's revenue topping estimates as the number of subscribers rose 5%. sirius raising its full-year revenue forecast if you're listening on sirius on your way to work, we love you. shares of herbalife trading sharply lower. the productsmaker cutting its sales outlook for the year three months after it raised its view. the quarterly earnings missed quality's mark, hurt by a jump in cost. and bp posting a big jump in profits but warning further sanctions on russia might hurt its business there. remember bp is the biggest foreign investor in russia with its nearly 20% stake in the oil company rosneft. and herbalife, maybe we even talked about whether or not ackman while losing his bet badly is he doing damage to the brand from a sales perspective? maybe -- did mom and pop know bill ackman? do they care? probably not. but you never know.

>> oh, by default he's doing some damage to the brand. >> we know ackman because we're in the financial media. does bob selling herbalife in dallas know who bill ackman is? >> i think bob who is -- anybody who is in to herbalife is in to -- they're on google trying to find out everything about what's going on. >> bob is stuck on i-35 right now headed to fort worth. bob we love you. thanks for listening. >> when we return a check on big pharma merck and pfizer reporting earlier this morning an outlook for the sector. we've got that next and then we get you primed up for the government jobs report with the ceo of paychecks and their latest small business index. "squawk box" returns right after this. stimated that 30% of the traffic in a city is caused by people looking for parking. that's remarkable that so much energy is, is wasted. streetline has looked at the problem of parking, which has not been looked at for the last 30, 40 years. we wanted to rethink that whole industry, so we go and put out these sensors in each parking spot and then there's a mesh network that takes this information,

sends it over the internet so you can go find exactly where those open parking spots are. the collaboration with citi was important for providing us the necessary financing; allow this small start up to go provide a service to municipalities. citi has been an incredible source of advice, how to engage with municipalities, how to structure deals, and as we think about internationally citi is there every step of the way. so the end result is you reduce congestion, you reduce pollution and you provide a service to merchants, and that certainly is huge.

but parallel parking isn't one you do a lof them.ings great. you're either too far from the curb. or too close to other cars... it's just a matter of time until you rip some guy's bumper off. so, here are your choices: take the bus. or get liberty mutual insurance. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. see car insurance in a whole new light. call

liberty mutual insurance. making sense of merck and pfizer. we're going to break down quarterly results and talk big pharma deals. >> what's a better buy now? twitter or facebook? we'll preview tonight's earnings from the little blue bird and get you to weigh in on which stock is a better buy. >> plus the ceo of acom on that company's latest acquisition and the ceo of paychex on the state of small business. all this as the final hour of "squawk box" begins right now.

welcome back to "squawk box" right here on cnbc first in business worldwide. i'm andrew ross sorkin along with becky quick and brian sullivan. in studio jeff rosenberg, blackrock chief investment strategist for fixed income. let's get to our top story today. earnings and the economy, the fed set to begin a two-day meeting. most economists expect janet yellen and company to taper the fed's bond buying program by another $10 billion to $25 billion. steve liesman is going to join us with more findings of that exclusive cnbc fed survey in the next half an hour. also in earnings news this morning, drug giants pfizer and merck both posting better than expected quarterly results. we're going to have more on those two stocks with industry analysts barbara ryan in just a minute. first let's look at u.p.s. the shipping company's earnings falling four cents short of estimates. revenues topping consensus. revenues per package dropped despite price increases and all

of those amazon packages that seem to be winding up on my doorstep. >> they did say the mix led to that 2% drop in the revenue they bring in per package. but also problem for the full year is they're going to be investing more in some of their warehouses and other things happening alone the way. >> just tweeted out that i thought it was a, if you could have an example of a, quote, good miss, maybe this was it, because it wasn't because of higher gas. you know, buybacks and dividends are great for investors. but it's nice to see a company taking some money, and perhaps like building a factory that might -- >> or investing for peak season. >> christmas. >> christmas is just around the corner. it's been a rough time for any of these companies trying to keep up with the online demand, keep up with what's been happening. >> we've got to get or you guys -- 2:00 p.m. eastern, 11:00 p.m. pacific maybe we'll get the ceo. we'll get the ceo of waste mngment on. i mean all these -- you and i were talking about boxes, boxes, boxes. on the streets everywhere recycling. this has got to be -- >> we've talked about

>> sector derivative impact. >> we've asked him about it. and it has led to increased revenue -- >> the -- >> i raced cars with a guy who reports and i can't confirm this, the guy knows he has a lot of money, invented bubble wrap and he sold the package like 30 years ago the dude doesn't appear to work. good for him. now big pharma joining us for reaction, merck and pfizer this morning, fti consulting managing director also a cnbc contributor, barbara, good morning. and cnbc's meg tirrell, also on set with us, as well. barbara your immediate reaction to aetna and merck, they look good from our macro headlines -- >> yeah, i think that pfizer actually beat revenues for the first time, in i can't remember when. both companies beat earnings, and we see merck raising guidance today. and i think, you know, what's really important is that this group continues to outperform and a fair number of drivers,

once is that innovation was said to be dead. and what we're seeing is tremendous innovation, not just in large pharma but in biotech. we've seen generous returns of cash to investors by both of these companies, as well as large cap pharma. and a high level, obviously, of m&a which i'm sure we'll talk about this morning. >> yeah, if we had to look at the drug -- i don't know how much time you had, barbara. i saw some of the drugs were down. some were up. is there any trend that we can discern from earnings season just so far this year? not this quarter, about what types of products are working, and which ones are not? >> well, i think that, you know, it's actually become a line item in managed care, obviously for -- and that gilead -- >> the world's most expensive -- >> the most expensive drug >> but it got the attention. $1,000 a pill.

>> this cost $84,000. so it's important to differentiate. >> good point. what we're seeing both from merck, as well as pfizer, bristol-myers and others, are these new immunooncology drugs which are hundreds of thousands of dollars but clearly are fundamentally changing. the treatment paradigm in oncology. >> can i ask you a public policy question away from the results just for one second, the inversion topic which gets me crazy? >> great. >> tell me this. the argument from the pharma companies that are pursuing inversions say we just cannot be competitive unless we do this. doesn't have the same tax regime that mylan does so we have to go do this. is that right? is that wrong? if they don't, if they don't do the deal are they going to get taken over by foreign competitor? is that a real argument? >> here's the thing -- >> you're in the middle of it. >> it is a global industry. right? everybody is competing for the same people, the same r&d, the

same opportunities, and fundamentally, u.s. companies, u.s.-based companies, are at a disadvantage because of our tax code. >> right. >> and the less money that's paid in taxes, the moren inny that goes to innovation. and i think that it is a scathing indictment of our tax policy that we are losing companies that are fundamentally global innovators because we can't get our tax strategy right. and i don't think that we have to be at the same level as ireland. but by the same token we are just so fundamentally out of whack. you know, pfizer has 46 billion dollars in unrepatriated earnings outside of this country. abbvie is now going to be able to access $10 billion of their own capital. >> if you're talking about something more than just dealing with flat tax rates. you're not talking about going from 35% to 28%. you're talking about the

repatriation issue. you're talking about whether we should be charged twice. >> i think you're right. they're both fundamental issues that we have to, i think, address. we see the consequences of not addressing it. >> but i want to understand -- >> the consequences that i see of not addressing it thus far are american companies buying smaller companies abroad, and pretending that they live there. that's the consequence i see at the moment. i don't see or i've yet to see somebody argue to me in earnest that they can't compete on price because somehow, you know, they're paying so much more in taxes that all of a sudden they're charging dramatically lower prices that they can't actually invest in r&d and therefore are being held back. is the money -- all of a sudden are we going to see r&d budgets go up dramatically because they're abroad? those are the things i'm curious about. >> i understand what you're saying. i think the issue is that, obviously investors expect for the risks that they -- these

companies are taking in r&d that they generate handsome return -- >> so are we talking about boosting stock prices -- >> no, no, no. because this is a consolidating industry. >> right. >> and everything was not invented internally. so we just see merck, it's fundamentally relates to the cost of capital. >> and the other point, andrew wrote a column about this in the "new york times" today taking a look at some of the things that go back and forth, but because of your column, anheuser-busch, miller, both bought by foreign companies. also american power conversion was emerson was trying to buy it back in 2006, it lost out to schneider electric because it was more valuable to schneider electric because they didn't have the same issue of having to pay taxes twice on things. and so the revenue is worth more. >> i think it's another point that you make which is u.s. companies buying companies outside the united states to invert but the reality is, u.s. companies are going to be acquired because their earnings

are underrepresented by their domicile. so, you know, we need to get this right. and again, nobody's talking about we have to lower tax rates to 10% or 12%. >> would 28% work, though? >> i think if you talk to somebody like, you know, the cfo of pfizer, which obviously you know, tried to acquire astrazeneca i think that the companies like pfizer would say, yes, that is a major, major advantage. >> megan i'll tell you, i think mylan, she has a current effective tax rate of 25%. >> and pfizer at 28. >> right. you go to right now under the obama proposal of the manufactured top rate would be 25%. i don't think that keeps you here. because she believes that she's going to the high teens, because of this transaction. so then the question actually becomes what does -- what is -- yes, pfizer would take 28% right at this moment. but in a year or two when they figure out how to do it in ireland for less they're going to want that. >> i think he brings up a really good point which is bringing the cash back -- >> that's a separate --

>> almost a much bigger issue to some of these companies because these taxes are piling up. they don't want to take on more debt to be able to fund them. >> it's sure show so i'm certainly not going to steal the conversation. but let me steal the conversation. i understand the tax inversions are a big deal, they're a political hot button topic write now. i would like to bring it back to why we're doing tax inversions, why are we seeing the consolidation? it seems to me this is an industry that is out of ideas, that we're not going to see another lipitor in our lifetime, and to me, the value in a drug company is creating drugs that benefit mankind that also can be sold at a nice profit. is that over? because now we're talking about tax inversions. whatever happened to creating these miracle drugs that are going to cure cancer, because cancer death rates, by the way, in some cancers, haven't gone down in 30 years, despite hundreds of billions of dollars in spending. >> okay. so -- >> my best friend died of brain cancer about four years ago so i

get fired up about it. 37 years old. >> let me just say this one of the companies we're talking about this morning, merck, ken fraser became the ceo in december of 2011. in january of 2012 drug stocks were miserably out of favor and the world said they'll never innovate again. they've developed all the great drugs, game over, shut it down. and ken stood up and it wasn't easy at the time, and took a bullet for the near-term earnings in order to invest in r&d and what we're talking about now in addition to inversions is a dramatic increase in valuations for pharma and biotech companies led by a high level of innovation. and we can look in oncology, we can look in hepatitis-c, we can look in arthritis, we can look in a variety of different areas to see that that's true. >> just want to make one final point on inversions. but -- >> why are we talking about inversions? every company in america -- i hate inversions.

i do think it's unpatriotic. every company in america is based in wilmington, delaware, to take advantage of their weird bankruptcy code. >> if you have $2 million or more and you want to renounce your citizenship in the united states as an individual, you actually have to pro-tepretend if all of your wealth is being liquidated and pay income taxes on all of your wealth, one shot to leave. and my view is if you want to leave the country, leave the country. >> the problem is they get bought by somebody else and they're leaving the country, they're not only leaving the country they're taking the jobs with them, too because they're no longer be based here and you know when you be bought by a foreign company the first thing you're face something massive layoffs. it happened at miller and at anheuser-busch. >> if you show me those examples in the drug industry i would -- >> that's -- >> but it's not a regular thing. it hasn't happened yet. >> but let me make -- >> we just -- >> let me just say one thing you know, back to that topic, which is, you know, perego acquiring

elan, they will now have the ability, based on a lower cost of capital, and feed on the street in europe to expand its model globally. it has not taken any employees, or any tax revenue out of this country. but is able to grow that company at a much greater rate than they would have been before which allows them to reinvest in all the geographies that they're in. >> look we all want some form of a tax reform. we're not against that. >> up next, can the little blue bird, twitter, beat wall street expectations? we're going to preview their earnings which come out tonight. we've also got an exclusive with the ceo of twitter and julia boorstin after the bell. and get ready to vote. the "squawk box" realtime poll will be open in just a couple of minutes. logon to cnbc.com/vote, and tell us which stock is a better buy, and which social media platform you use more. facebook or twitter.

i can predict the results right now. we're back in a minute. being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. then boom... what happened? stress, fun, bad habits kids, now what? let's build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. introducing the sleep number bed with sleepiqtm technology. it tracks your sleep and tells you how to adjust for a good, better and an awesome night. the difference? try adjusting up or down. you'll know cuz sleep iq™ tells you. only at a sleep number store, mattresses with sleepiq start at just $999.98.

know better sleep with sleep number. in a we believe outshining the competition tomorrow quires 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.

welcome back, everybody. our guest host again today jeff rosenberg, chief investment strategist for fixed income at blackrock. also a "squawk" market master. i know what you think about what's going to happen with rates but we haven't pushed you to the point to what do you do if you're an investor? you're looking at all of this realizing that the fed may be more dovish. may not be raising rates soon. what do you do with your money when you're looking for investment? >> i think a lot of things that both the fed, bank of england, people talk about financial complacency, so i think what financial complacency means for investors is are they being complacent in their portfolios, particularly when we think about what's going on in fixed income on the bond side of investing. what you have for the last six years is a persistent period of zero interest rates. and very successful strategies. what has been successful, reaching for yield. all right. so policymakers talk about it. they're concerned about it, i think investors have got a little complacent around that. >> meaning they're not recognizing that there are risks when you start reaching for

yield and they could get burned by it? >> especially when, after six years of reaching, what has happened to those yields? you had tremendous compression in risky assets. corporate bonds, high yield emerging market asset classes when there's no cushion, when there's financial complacency it means you should take another look at your portfolio. >> are you the fixed income guy who's telling people not to put any money in bonds at this point? >> i am. and i've been saying that for a long time. it's that you have to rethink how you put your money in bonds. two years ago that was taking less interest rate risk and taking more credit risk. this year, perversely it's actually the opposite. it's taking less credit risk, and taking more interest rate risk, particularly where you take your interest rate risk. the most surprising consensus call we had this year is the back end of the yield curve would be the best part of the yield curve to be in when we started the year 3%, ten-year treasuries, that's not a bad yield in this growth environment. >> but you wouldn't be telling somebody to put a huge chunk of

their assets in treasuries at this point? >> well, it's about -- >> you're exactly right. most investors, what have they done? they've gone into the front end of the yield curve? the short duration trade has been the preferred trade, particularly after what happened last year. my concern about that is you look where we're going, most obvious thing in the world. this year is a transition year. we're leaving quantitative easing, we're having a debate about when interest rates are going to go higher. but here's the most important thing. when you get to that point in the interest rate cycle, where are the biggest increases in interest rates to be found? in the short end of the curve. this is where everybody thinks they're safe. so yes, there's not a lot of price risk there. but you're exposed to the areas of the yield curve where you're going to see the biggest increases in rates, and i think people are going to be surprised by the volatility, the losses that they can see and what they think are very safe investments. it's really about rethinking what's going on with short duration, front end strategy. >> jeff's going to be with us

for the rest of the show. >> okay. twitter will -- talk about twitter in just a minute. but we're that going to talk about dwighter. we're going to talk about twitter after the "squawk" poll facebook twitter what's a better investment which platform do you use. right? and also whether or not it's a good investment. we'll probably talk about twitter -- >> you're not a fan anymore? you've given up on twitter? >> no, no, i use it. let me be clear. i use twitter. it's great for what we do. we are in the sort of self-right promotional business. i mean i hate to say that. twitter, if they don't engage everybody else, they got some problems. >> we will be having dick costolo of twitter later on today. we'll be talking more in just a minute. be sprayed to be made. and making something stronger... will mean making it lighter.

one day, factories will work with the cloud. one day... is today.

thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life.

welcome back to "squawk box." twitter set to post results this afternoon. the stock is down 40% so far this year. joining us now is the global head of internet and media research at cantor fitzgerald. good morning to you. help us through this. in terms of understanding what to do and by the way, i should tell you we do have some folks who are playing along at home

and we want to know which stock is better to buy right now, facebook or twitter. a realtime poll is open. you can go to cnbc.com/vote right now and tell us what you think and if you listen to this conversation, maybe you'll change your vote a couple of times. anyway, back to the interview. your sense of what we're going to hear this afternoon. >> so a couple things, first of all we think it's all going to be about user growth and usage engagement. you mentioned facebook. between the two, let me help you. for us, facebook is still the much more attract iive name her. although i think depending how twitter changes the platform over time it could become a really interesting investment opportunity as well. >> what do you have to see in terms of numbers to put this over the goal line? all right so let's put that in perspective. back in the fourth quarter, they added about 9 million new users,

and added about 14 million so that's in the right projectly. we would like to see something at least equal to what they did in q1 or even a little better. they have the advantage of the world cup, a whole slew of international vie cease that usually increases that kind of usage we do expect to see some improvement in user metric, some improvement in engagement, as well. the typical user is not spending all that much time on twitter, spending five minutes. contrast that with facebook where they're spending about 40 minutes. >> you have not said a word about ad revenue growth. what is the number that you need to see? >> we're at about 115% growth. out of the 280 to 285 million --

>> how much -- they grew about 100% in the first quarter. >> at some point these triple digit numbers are going to be very hard to annualize and we think we're going to be seeing slight deceleration of the rate. but growing triple digits puts twitter as the fastest grower in the space. if >> if you had a dollar you'd put your money on facebook over twitter? >> correct at this point we could, yes. >> those are the two -- where would you put it if you could go broader, google, others? so google is a topic of ours, as well, for 2014. linked in has been interesting to us, particularly after the big drop where it dropped it's coming back. we think that's going to have a decent quarter and there are enough vectors of growth to accelerate the growth trend. >> i don't know if you can see the screen as we're talking tweer asking this question, which social platform do you use more and right now it's almost,

well twitter seems to be winning. does that -- >> you know what? i've been watching that go back and forth, too. that's why i was calling the control room. the first question that we were asking that we've already stopped asking was which stock would you buy right now, facebook or twitter? started out with twitter with a massive majority. ended up being very close but i think it was facebook, 51, twitter 49. i think maybe it was 20 or 30 votes that were swinging it that rapidly. it was over 3500 votes. there are a lot of people weighing in very quickly to try to say which one of these platforms they use more frequently. >> maybe we've changed -- >> maybe part of that has to do with the fact that twitter went from 60 or 70 dollars down to 30 so there's a lot more interest down here. facebook is trading at a 52-week high. that could justify part of what you're seeing. >> there's over 5,000 voters already on the second question that we've only had for a minute and a half. which social platform do you use more frequently. >> it's close to 50/50. what's your target on the twitter side?

>> it's $40, and we'll reassess after the close tonight. >> thank you for joining us this morning. appreciate it very much. >> a small buy. >> a programming note, twitter ceo dicko costolo is going to on closing bell. janet yellen arriving at the fed just minutes ago. steve liesman is going to run through the numbers and get some reaction from our guest host jeff rosenberg with blackrock. also tomorrow on "squawk box" our guest host is going to be aetna ceo. we're going to get exclusive reaction to the company's quarterly results and his thoughts on the nation's health care system.

the ca♪illac summer collection is here. ♪ during the cadillac summer's best event,

lease this 2014 ats for around $299 a month and make this the summer of style. ♪ i voted for culture... ...with a 'k.'

how are you? i voted for plausible deniability. i didn't kill her, david. and i voted for decisive military action. ♪ america, you cast your votes. now, go to xfinity on demand and select the people's hotlist to see this summer's top 100 shows and movies. i voted! good tuesday morning. 8:30 here in the east. let's look at some stocks in the news this morning. costco, goldman sachs adding it to its conviction buy list saying it sees earnings growth reaccelerating for costco. that has given the stock a boost in the premarket is up about 2%. meantime stand and poor's parent mcgraw-hill financial reporting $1.06 per share beating estimates by seven cents. the company's results were

helped by an increase in its ratings business thanks to a boost in bond offerings by u.s. companies. and darden restaurant shares are jumping this morning following the announcement that ceo clarence otis will leave the company. that is just the latest development in the push by activist shareholder starburg value push for change in the restaurant chain. and, guys, this is a name i just tweeted this out, a win for wind. windstream it's a name we probably never talk about. the stock is up 15% in the premarket. they're going to spin off, this is an old wire line operator. one of these wire line companies, you know, we never talk about anymore. they're going to spin off part of their telecom business, into a reit. now windstream holdings up 15%. it's already up 37% before this move. and it pays a 9.5% dividend. so windstream -- all these companies we talk about all the time, windstream, at least this year, has been one of the greatest wealth generators in the stock market. not bad for kind of a old school business. >> yeah.

andrew? >> hi. >> hi, how you doing? >> this is shaping up to be a huge week for ipos. deal logic says it could be the busiest one for financial public offerings since august of 2000. about 25 companies set to go public, most notably synchrony financial which is the credit card unit of general electric. that's a new name i think. ipo is expected today include contrafect, and spark energy, a retail energy service company. >> doomsdayers and soothsayers are pretty much split on how the fed's easy money policy will end. badly. steve liesman joins us with the results of cnbc's exclusive fed survey. also our guest host jeff rosenberg is the chief investment strategy for fixed income at blackrock and a "squawk" master. but steve, take it away first. >> i've been waiting to ask this question for a long time. not sure why i haven't but we asked people when this period of extraordinary monetary policy ends, how will it end? will it end badly? or will it end smoothly?

and the results surprised me. about, you know, 25%, a quarter of our 36 respondents say the odds are even it could end either way. smoothly, 34%. badly, 34% as well. so there is a tie in the market. you want to understand why this market is where it is, because you have this tie between those bracing for how do we define badly? a recession? a stock market crash, or high inflation? so 34% and 34%. a third of each of our respondents saying that. let's move on and take a look at the next screen here. how much slack is there in the economy? a big, big determinant of where fed policy will be. and you can see about 49%, 48% say there's a lot of slack when it comes to labor. and some is about under 40% there. but some of the production capacity, they say there's some, so pretty much agreement with janet yellen on this issue here. that there's a lot of labor slack in the economy. moving on, taking a look at the next screen. fed policy is too easy about 49%.

and just over 40% say it's just right. and not many people think it's too tight. so, increasingly when i look at the commentary, i see people saying that the fed is behind the curve. bob ruska, frequent guest on "squawk" says the fed is lagging, getting behind the inflation eight ball. john kotar says the current improvements say the fed should be raising rates by late this year. that's six months ahead of the forecast. hugh johnson one of the doves in there says if an acceleration occurs it is quite manageable using reverse repos and a variety of other tools. >> here's what i don't get. >> you look so confused, becky. >> this is not surprising me. who is the too tight? >> well, the too tight -- >> i was wondering that, as well. >> that i don't get but what in terms of -- whether this ends badly or whether it ends well were there any time parameters put on any of this? i've been thinking about this at some point every side is going to claim victory, saying i was right. if it's a decade out, and there's a market crash, you

could tie it back to this. if it's -- >> right. >> but is there a time frame or is there anything that happens -- >> we couldn't define the question. but how would you like me to do it? i just wanted the basic sense of default, in their brain, when they think about how this ends, does it end badly, does it -- specifically want to put a time frame on it. >> it's more about the respondent who is answering the question than about the question or about the actual reality of what's happened because i think at some point everybody's going to be taking victory laps. like we were right. it was successful and then the other side's going to say it was a crash. >> so in other words you're right in the sense that the next recession could be blamed on the prior policy. >> no matter what. >> however, if we don't have, let's say there's a reaction, where the fed begins to raise rates and the market crashes. well that's a victory for those who said that the market is artificially propped up, and there's no earnings -- >> here's the more likely crash scenario that that people who think things are going to end badly think they think that the fed is not going to raise rates, and the bond vigilantes are

going to be the ones who force them to raise rates and how do you measure that and how do you measure the upheaval? we know that things are going to get more volatile. how do you measure who was right in all of this? >> first of all, jeff has a great take on this. i want to get to that in just a second. i'm interested in what this means for the current scenario. because becky, when i do these surveys, i don't care if people are right in the future. i care what they think now about the future and how that governs their current behavior. so if a third of the market believes this will end badly, does that mean they are being protective, or does it mean they're being risk averse? we defined it as either high invasion, a rescission, or a market krags, or some combination of -- >> but see -- >> that's it. >> from my -- >> okay because and this is right up your alley buddy -- if the stock market drops, right, i'm 100% equities in our 401(k). i'm 43 years old. my dad is mostly in bonds.

he wouldn't mind seeing the stock market go down a little bit if it meant bond yields go up, so he can get a little more risk free return. >> absolutely. the question is hard to pose but i think the more interesting sort of takeaway, you look at all the questions, the market is evenly split. it's split on whether they're too tight. whether they're too easy. whether there's slack, whether there's not. whether it's going to end badly. and that's what makes a market. and that's why -- >> that's what makes low volatility. >> what's interesting is that isn't what makes low volatility but it makes high volatility. half of those people are going to be wrong. >> but nobody's trading. the point is is there's low volatility because things have settled out. there's an even marketplace. >> can i introduce a concept here which is if a third of the market thinks this ends badly does that back up one of the criticisms of the fed? that the current policy is holding back current growth in that there's fear of the unknown and that people who are not taking actions in a more normal

policy setting, they would otherwise take because of that very strong fear of how this unwinds? >> you know i think there's a big disconnect between what monetary policy has done for the real economy, and what monetary policy has done for the financial economy. i think it's pretty clear that monetary policy has been underwhelming when it comes to the performances of the real economy. where it has been really effective is in the performance of the financial economy. >> we don't have time. when you look at the earnings and the revenues -- >> we don't have time but you're wrong. >> i'm wrong. >> he's got time. >> i'll answer that. >> he can answer later. i think it's showing up in the real economy through company earnings. >> and we are getting that. you're getting a bit of an acceleration -- >> plenty -- >> got to go. >> got to go. >> thank you. jeff is staying with us. another groundbreaking acquisition for a construction giant aecom the second one in three weeks. the company's ceo will join us next.

first a little news out of apple the company announcing it's updating its mac book pro with retina display to have faster process processors, and double the memory. also announcing a lower starting price for the 15 inch notebook. ? try alka seltzer reliefchews. they work just as fast and taste better than tums smoothies assorted fruit. mmm. amazing. yeah, i get that a lot. alka seltzer heartburn reliefchews. enjoy the relief. we stathat the kid on thehought back of the bus might have a song that he has in his head but he just can't get out. with the technology of cloud, we change all that. i can sing something into my device, up to the cloud it goes, back down it comes, sounding better. we break down the walls of creation and we give music creation for the masses. ♪ ♪ unlock the creativity in anyone. with the ibm cloud. the ibm cloud is the cloud for business.

♪ "first day of my life" by bright eyes ♪ you're not just looking for a house. you're looking for a place for your life to happen.

welcome back to "squawk box," uber and air bnb are courting business travelers. they cut deals with concur.

uber and air bnb also announcing new versions of their apps this week trying to appeal to corporate cliengss. so, pretty cool stuff. >> try to submit an expense for your travels, and your cfo is like who is barbara jones, and why are you staying there? you know. it's easy to put -- >> you know, for -- >> like a random person's apartment. >> all right. i get that. >> i don't see business travelers, by the way, really using air bnb. in certain instances but if you're a road warrior, what's the point? >> we've got big deal news in the infrastructure space this morning, for the second time in two weeks, aecom the world's biggest engineering design firm is in a deal buying hunt construction group. again it just announced the buying of urs in an all-cash multibillion dollar deal just a couple of weeks ago. joining us is michael burke, president and ceo of aecom technology. mike, good to chat with you. two times, two deals, two weeks. why this deal now? why the spending spree?

>> well, good morning, brian. you know, first of all, as you've heard us say before, our core strategy is to create the premier fully integrated infrastructure firm in the world. and clearly, this is something that fulfills that strategy. hunt is a -- one of the best construction firms in the world. in sports, aviation, and health care. and we also designed facilities in that space. so bringing the two together is the right strategy. >> yet, hunt, they built probably some of the stadiums or parts of that many of our viewers will go sit in to watch their favorite sports team. but two deals in two weeks. did it just happen that way? or is this literally the time for you guys to strike? >> well, brian, first of all it's more of a coincidence than anything. we started talking to hunt almost a year ago. we started working on the urs transaction almost six months ago. so, it's more of a coincidence that the timing is within two

weeks. but, it does help us aggressively move to complete our strategy, and these two acquisitions entirely fit within that strategy to bring these fully integrated services to the at this time. >> you know, i asked you when you came on about urs, how do you manage a big company, and the integration, now you're taking on yet another company. give our viewers, give your shareholders right now on this platform, mike, confidence that you and your management team can, one deal is hard enough. now you got to integrate two, and execute on our current business. >> yes. brian that's a great question. one of the things that we pride ourselves on is the management team of aecom has completed about 40 acquisitions over the last ten years as well as the urs team has completed a number of very large transactions and integrated them quite well over that period of time. we have with the combination of the two management teams a great management team that is well experienced in integration. has been through this before. and our clients are saying this

is exactly what we need is to integrate both the design and the build offering to the. so our clients are asking for it. our employees are asking for it. and we have the experience to do that. so we're quite confident that we will integrate these two transactions quite well, and fulfill our strategy. >> after years of false hope, and false promise about infrastructure investment, is this -- and these two deals, a sign that you firmly believe, mike, that finally, this country and private public whoever is going to pay for it, is going to get its act to the and start to make significant infrastructure improvements? >> yes, brian. i believe that we're seeing all the right signs for a resurgence in the infrastructure market both here in the united states, as well as around the world. we are bringing, as you've heard me mention in the past, brian, we are bringing private sector money to the public sector. we are seeing a whole host of jurisdictions around the country, that are putting in place special tax assessments, los angeles is a great example

here in my hometown. where we've added a half a percent to our sales tax, entirely to fund transportation infrastructure in this city. so we're seeing special use fees, we're seeing tax dollars, and we're seeing specific funds that are being dedicated to infrastructure. so i think the time is right, brian. >> michael burke, ceo of aecom technology. ticker there acm. second deal in two weeks. mike, we do appreciate you getting up early for us this morning. >> thank you, brian. >> okay coming up, jim cramer live from the new york stock exchange. we'll give you his take on this morning's earnings from pfizer and merck, plus much, much more. and then later the latest jobs survey from paychex. we're going to have paychex ceo join us to talk jobs and the economy when "squawk box" returns. greenline do for you? just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can.

so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review. take them on the way you always have.

live healthy and take one a day men's 50+. a complete multivitamin with 7 antioxidants to support cell health. age? who cares. yyyup. with xfinity internet soyour family can use all their devices at once. works anywhere in the house. even in the garage. max what's going on? we're doing a tech startup. we're going public! [cheering] the fastest in-home wifi for your entire family.

let's get down to the new york stock exchange, jim cramer joins us right now to talk a little bit more about what's been happening with earnings season. jim, this morning we already heard from merck, from aetna, from pfizer, all of them being on the top and the bottom line. what do you think? >> well i think that these drug companies, it's funny, pfizer's number was really nothing to write home about. and it doesn't matter if people like pfizer and they think they're going to do an acquisition, a lot of assets. merck beats it. merck has singles and doubles drugs. merck has been doing a lot of

right things. neither of these companies really impresses me but it seems to be that the market right now wants to go with those. maybe the market is taking its cue from bonds and thinking housing is really, really weak and that retail sales have is r and housing prices are stalled. you were talking about the spanish bond yields, but the industrials hate them right now. just hates them. >> let me ask you about u.p.s., because we are getting our heads around it, because it missed on beating the revenue, but the company said it is investing to make sure that it is trying to put more on peak season and is that good or bad spending? >> well, i thought that, look, u.p.s. came out and said, well, anything that is going to be guidedowns, they are not created equall, but it was a really good move by u.p.s. i want to buy the stock.

when i say i want to buy the stock, i mean that people are going to make themselves right all day. they will sell at 98 and sell on 100 and finish at 99 and i want to take the other side of the trade, because it is a great american company well behind the country, and they just want to spend in order to be a better company and other companies are firing. >> that is what i am so glad to hear it from you, and we were guessing earlier, but it is nice to hear it from you. is this a gauge of the economy or more of the e commerce and people shopping online than in stores? >> yes, a genesis of the walmart downgrade. i was surprised. nothing in the cost can eco upgrade and i like cost eco, but nothing that made me feel like they had to do it. walmart comparisons are easy and made by buyback, but the

companies like windstream and a company that is a great yielder and then a sudden hidden asset, and sending up scenturylink and frontier and these are the stories where people are creating value, where we didn't think that there was any. it is very, very exciting. >> thank you, jim. all right. coming up, the ceo of paychex will join us with the latest small business index, and the predecessor to hiring. tomorrow on "squawk box" your host is aetna, and we will get exclusive reaction to the quarterly reports coming up this morning, and we will have a lot to do with the chairman and ceo mark bertolini. in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax. which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov

if energy could come from anything?. or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything.

paychex is showing a small increase in the month of july showing that employment growth is picking back up. join g joining us is the president and the ceo of paychex, and our guest host is blackrock's jeff rosenberg along was, and marty, tell us about the numbers and what did you actual ly find? >> well, we had a little uptick from the june number and this is consistent. becky, all year, right through the first seven months, we is are have had positive over 100 on the index, which is slow steady sustained growth in the small business employment growth

coming from the paychex index. >> how do you put together that index, marty? >> well, we take 350,000 of the clients and it is on the same store kind of sales and so what the growth rate of the hiring is from last year to this year, and we see that growth rate, and the change of growth of hiring and it is indexed back to 2004 where the original index is set up, and it is under 50 employees, so it is a great sense. of course, 95% of all businesses in the u.s. have under 50 employees, so it a great indicator of the economy. >> and so you look at the breakdown of the mountain area and the west north central is the biggest growth. >> yes, north dakota is the second oil-producing state behind texas, and so energy is helping that central northwest area, and then in the mountain still near the top covering housing from utah so forth, and

so the mountain and the northwest central are the strongest. >> if you look at areas like california and maybe around texas and the southern states, what happened? >> well, it is slowing down a lit areal bit. one of the things that you look at here is that they have had some of the areas have had more growth early on after the recession, in the last years or so, and so this year it is starting to slowdown, and so it is still positive. if you look at the lead states, washington and if you look at some the head cities, san francisco, still in the top four for its growth rate, but the real leaders are houston and dallas pushing the best growth in the small business hiring. >> marty, this is jeff rosenberg, and i'm not sure if you can see this on the index, but are you getting information on the wages and ib come? >> yeah, jeff. we don't report it as part of the index, but we are seeing a 2% increase in net pay year over year right now in small business and the smaller thing that we

are seeing that is interesting is that we are digging deeper into the jobs that are growing and it is discretionary services like pet care services, an laundry service, and that is important because diskoresh can their income starting to be spent in these eareas. and marty, we had the ceo coming on to check into the hotel on iphone and we were thinking of what is going to happen to the person at the front desk, so what is going to happen with the computers taking over some of the jobs? how real is it? >> well, there is a level of personal service that you want, but you can see that technology is playing a important role, and it is always going to be as it is in paychex, a combination of technology and innovation in the products, but you have to have the personal service, and in the end, it is important about the people-side of the business and

you will see a shift. as you see in the jobs in san francisco and some of those west coast, new i.t., and new, those are the jobs that are driving the information technology is pushing a lot of the jobs, and so i think that you will see a shift, but there is always going to be personal service needed with technology in my opinion. >> and marty, safe to say you are optimistic for what you are are seeing in the index? >> yes, because it is sustain and consistent growth rate in the small business hiring and it has dipped a little, but back up in july and consistent. and certainly good to see that is it is spread out across the country, and so while there are leads in the central north and mountain the region, there are cities growing across the country sort of spread out. >> thank you, marty, for join g ing us. >> thanks for having me. >> okay. >> we are almost out of time, and we have to thank you.

>> thank you. >> and what are we going see in the next two days? >> well, the revisions are important, and watch the eci thursday and we talked about wages which is why i asked him the question friday and then of course, the meeting and we won't see much of the emeeting, but the change is elevated characteristic of unemployment is the key then. >> thank you, jeff, for being here. brian sullivan, thank you for being here. >> thank you. end of the run. >> it has been fun. >> join us tomorrow. "squawk on the street" begins right now. good tuesday morning and we welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber. some of the earnings are a miss at u.p.s. and a two-day fed emeeting begins and case schilling index is out, and we will talk to the head robert shiller. and do you raise or affirm the guidance today and the 10-year yields are 2, 4,