tv Squawk on the Street CNBC July 1, 2015 9:00am-11:01am EDT
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proposing changes. the fda cited concern over e cigarettes that related to nicotine poisonings in young children. i'm glad they're doing this but i think long term there's going to be a lot more going on with electronic cigarettes. >> addicts. some people say stop the nicotine addiction. what does it do for you? >> have a wonderful weekend, everybody. that does it for us. right now it's time for "squawk on the street." good morning. we are live from the new york stock exchange. let's give you a look at futures, and they are looking up. looking up. why? well, you know why. something on greece and who knows. hope springs eternal. all right. take a look at the ten-year note yield. it gives us a sense as to where things are moving. we are up. off the lows on the yield.
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of course therefore, price goes down. dollar index, you see it there as well. a bit stronger this morning. how are things in europe you ask in i will tell you. strong. the dax 2.5% gain. cac up almost 2% and the uk having a positive day if you are on the market. it starts with greece this morning. the prime minister sends a letter agreeing to a bailout on slightly different terms. is this all too little too late? plus the first day of the second half. adp data better than expected ahead of a jobs report tomorrow. the dow wraps up the month of june down just over 2% and ensuring a deal. ace buys chubb keeping the chubb name but, of course it is the ultimate inversion, as i like to say, selling out to a company that is based in zurich.
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both stocks are up sharply. the accretion numbers very strong. jim and i will have a lot more on that. futures up sharply on hopes for a greek debt deal. the prime minister says athens could accept the bailout offer if things were changed. this all comes one day after the s&p eked out a first half gain and the dow turned in the first back to back losses since early 200 but we're in the mode of will they won't they? could they, can they do they don't they? >> futures up seven ticks at 5:00 when a financial times story about a memo that says we'll agree to the terms somewhat, then spikes the futures and they quickly double. europe turns. i have to tell you, i think it's just one more piece. there's nothing new here because the germans say, listen for the
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referendum referendum, but it shows because the dollar getting stronger shows me that there is some give by greece because the dollar was getting weaker versus the euro because there was a lot of feeling that if you kicked greece out you're left with an entirely disciplined group of countries that makes you want to own the euro. the dollar tells you everything. >> it tells you a lot. euro group conference call at 11:30 eastern time. >> i tried to get the pin number. >> can't get that one. we'll see if anything comes out of this. we'll watch it closely. who knows. still sunday is still the referendum as of now. >> right, and the referendum we don't know -- >> trading days this week. >> we don't know what the referendum is going to look like. we know there is a sense you could pull the referendum if you wanted to but when the germans said we're not going to wait. you have to have the referendum, are the germans betting the
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government calls or call the referendum and we'll come to the table? no matter what. the fact is, the greeks don't have the money and that's what matters. and when -- if the greeks only owed a couple billion euros, it's the greek's problem. but it's more so it's the creditor's problem. >> really a fantastic piece last night saying greece has done a remarkable job and it's the europeans that have to blink. and as you said the other day, greece has agreed to a lot. it's not like greece is just sitting there saying we're a bunch of deadbeats. some get us. greece has tried and failed. austerity failed. they say they didn't pay the taxes but whatever. >> let's get on the ground for us in greece and get the latest on what to expect and see what's going on. >> so far that referendum is
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still on even though there are rumors it could be called off. i think it's still on because we want to show you something that's happened in the last hour. the ministry of finance is on the other side of the plaza and now there's a huge poster hanging from it in greek and international to everyone can see it. it says no no to blackmail and austerity. they continue to encourage the greek people to vote no in the sunday referendum which still appears to be on. you guys were making reference to this letter that the prime minister put out this morning. you guys asked at the beginning is it too little too late? yes. it is way too little and too late. greece's program expired last night. there's nothing to extend and according to the ecb, if greece isn't in a program, they can't
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help them out. so we think capital controls are in place for weeks if not months. this country now needs to negotiate a new agreement, and when times are good that takes at least a month, so things are going to be very bad. we are waiting to see what the prime minister says. he's expected to speak. we're waiting for the euro group. we're waiting to see what the ecb does as well today. the other big event, some banks opened for pensioners. it's heart breaking. hundreds and thousands lining up to get 120 euros. the retired in this country, because some of them aren't elderly even though they are retired, originally told they would get all of their pension. then they were told they would get 240 euros of their pension, today when they got their they got 120 euros of their pension. it's tough to watch these people suffering as a result of the banks being shut down.
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and the economy when you talk to business people coming to a screeching halt, listen to the founder of i group which is a greek holding company. >> if you look at it the end of the day you're looking at machinery, farm constitutepharmaceuticals. all these are imported. we'll start facing shortages and where you get the second wave which is even worse for the economy. >> reporter: that's why capital controls are so punishing to this country. they import so much. our taxi driver told us he imported baby formula for his child. he wants to make sure he has enough to get through capital control. >> thanks as always. none of this doing any good for the greek economy. >> it's stopped. >> let's get to our own economy. adp says the private sector added better than expected jobs
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last month. this ahead of the government's june employment report being released tomorrow because of the fourth of july holiday. not a bad number. >> there is a lot of chatter now that at the end of july the fed could make a move. i'm not kidding. i think that's ridiculous. that's what we're hearing if the number is strong. keep that in mind. people will say what's the point but if greece isn't resolved nothing happens. >> do you have a number in mind? there's an under, over? >> it could be 300. the economy is very strong. and by the way. >> it is. what happened? i thought it wasn't. >> housing. we have a housing shortage in the country now. very significant. >> we want to be built on more than one leg. >> we do not, if you look at the rail carloadings, there are other businesses not doing well. the rails are suffering and
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that's commerce. but we have to accept that this one part of the economy punches. >> i think we had hockey stick at the end of june. i think there is strength in higher hiring but not in the economy. it's counterentu ty. >> this is a big one. ace has agreed to acquire khubb, $28.3 billion in cash and stock. valuing it at more because ace shares are up. i think it's a 20% premium over the all time high. ace shareholders will adopt the chubb and remain a swiss firm. tax jurisdiction there as well. they are increasing the board of directors i think to 1. they're adding four members from
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chubb's board. there's a ceo at chubb that's 66 years old. this deal came together very quickly. i think they're even discussing it on the conference call. a couple of weeks. i think there was a letter sent on june 10th by case. ceo to ceo and they got this thing done. i only mention it because there is -- it's highly unlikely there would be an overbid but if there was one, the one name is buffet and he doesn't do that. warren doesn't break up deals. >> they tend to want to buy at a discount. this is at a premium. when i saw this i just i screamed. why? because chubb is a quintessential boutique well this is it. you, when you finally reach a certain status in life, you insure with chubb, and i
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remember my late father saying chubb pays. in other words, here's your check. you know? that ma tees it's worth x? here's your check. and this is one of the premier new jersey companies. it took my breath away. greenberg is smart. >> 60 years old. son of hank greenberg of aig, brother of jeff who mcclelen. he's grown the company through acquisition and organically while chubb has gone another direction. this by far the largest deal they will have done. >> huge deal. we had the towers deal yesterday. this is a monumental keeldeal. if we didn't have the international stuff, we would be sitting here saying how did that happen? how did chubb get taken over.
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the answer is evan greenberg is trying to put together -- >> a world class insurer. >> he's doing it. >> there is the tax aspect of it. it's not the driving force but it is interesting to note on the inversion question which we've discussed. i brought here years ago and many loopholes were closed. now what's hatching is the ultimate inversion. you sell because you can't compete because it's not a level playing field. if you're dealing with a company with a lower tax jurisdiction, they're advantaged. so we're starting to see that. i'm not sure what benefit that brings to the u.s. economy by having our economy sell out to foreign companies. there isn't any. >> no. >> you wonder what was the point of it all. the inversions may not have been great in a way, but maybe just lowering corporate taxes as much as some are opposed to that,
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it's like how do you get a level playing field. >> st. jude came on and said how do we compete with medtronic? they can compete on science but in the end, the tax code is more important than the science right now. it's crazy. >> it advantages the company in a great way. allergan for pfizer they're inverted. that's a key thing here and we have to watch this. yesterday's deal towers that was also done. the reason you took a haircut if you're a towers shareholder is so they can invert. >> it made sense. i think allergan is building the pre mere premier growth pharma company. you can raise numbers. >> chubb will have 22,000 employees in the u.s. they hope and they're talking
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about growing their revenue base in the u.s. with inversions what we're seeing is you aren't paying u.s. taxes on what's made but you can lower your u.s. tax bill or your earnings so that your tax bill comes down in the u.s. and you can pay that lower rate even on u.s. earned money. >> how about taking the name of chubb. >> why not? high class name. >> it's synonymous with we're the best. it's who you go to when you have expensive things to insure. >> a shares are up sharply. this has been the rule rather than the exception. >> that's what tells me the deal is brilliant. >> they are talking about, for accretion, right away and by year three, double digit accretion to eps and accretion to return on equity and return on investment also expected to exceed ace's cost of capital in two years.
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double digit returns by year three. the market reacting positively in this cash and stock deal. 62.93 in cash and some shares. it's a 7.5% move up in ace. it's. >> it's a sleepy wednesday. not like merger monday. people say it's just chubb because we've got negotiations in europe. no. this is huge and positive. >> let's get out to ford out with the auto sales for fun. phil. >> reporter: thank you very much. ford with an increase of 1 .6% last month. that was better than the ed monday's estimate of 1 %. when you look at ford in the month, suvs along with trucks as it always is really the big dreyer driver for ford. suv sales up 1.8%. the ford explorer up 30% last
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month clearly showing that with moderate gas prices people are still rotating into cross overs and suvs. we want to point this out because jim, i remember when you had a plymouth chrysler. last month for the first time ever fiat outsold ford at dealerships, not including corporate fleet sales but it is significant that the first time ever outselling ford in monthly retail sales. we will get gm numbers in a little bit and right now most people believe we're looking at 17 .5 as the monthly sales pace. >> that is monumental. we can't just gloss over that. how much of it is the jeep which has become the hot car in this country? >> up 25% last month. if you look at it they have
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been marching out with a new model or a refreshed model whether it's the grand cherokee or the wrangler whatever it is and all of those have been spot on in terms of appeal to the consumer out there. it helps obviously, that there is a rotation back into suvs and people are more interested in them now than they have been probably in ten or 15 years but you've got to have the styling, jim, and they've got it. right now they have it spot on with the jeep brand and that's reflected in the jeep sales jumping. >> you know it has to be true if phil says it. >> i priced a jeep. it was more expensive than a similar lexus. >> wow. >> amazing. >> phil will be with us i think we have gm in a little bit. he turned the brand into a global power house. nike announcing a chairman will step down. what is next for what could be the most iconic sportswear brand in the world. also taking aim at apple, hugo
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barra on the international expansion strategy. here's another look at the futures. looking like we're going to have a strong open. a lot more from post nine after this. when you're not confident you have complete visibility into your business, it can quickly become the only thing you think about. that's where at&t can help. with innovative solutions that connect machines and people... to keep your internet of things in-sync, in real-time. leaving you free to focus on what matters most. behold, these are two wind turbines. can you spot the difference? the wind farm on the right was created using digital models and real world location-based specs that taught it how to follow the wind. so while the ones on
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futures are up this morning. let's call it on greek optimism. whatever that means. maybe, maybe there's going to be a new deal? maybe not. very difficult for us to tell you. we'll know more as the day goes on perhaps. the referendum still scheduled for sunday but all this talk is beneficial for the broader markets. up next y. cramer's mad dash as we count down to the opening bell. like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.
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a little bit more than six minutes before the opening bell. let's get to the mad dash. >> this is amazing. constellation brands. rob sands, this guy is amazing. he got ka row in a and ma dell low. >> they should have taken an equity stake. i'm kidding. warrants. they created an enormous amount of value. they executed and the divestitures that had to take place. >> and carona and madella remain the faster growing beers. they also bought a wine company. this is joseph wagner who owned it. david, that's the founder of kamis. the family. the wagner family is the founder. last served if you remember at a 500-person wedding that
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occurred in april. >> you had great wine. you really did. constellation brands. another one, rob sands well done. david, facebook. is there a day now that there isn't love shown for facebook. is it amazing? today is canner. a huge amount of advertising, this this is it. the mobile advertising is going to facebook. it's not new -- >> this is a hard thesis. they get paid to say that? >> i get paid. >> but you've been saying it for a while. we talk about the pie and more of it going to facebook. it's a pretty simple idea. >> i'm still using the 350 number. aintend to take my numbers to 4. if you put a three number on four 120 is the price target. that's what you hear next.
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you're watching "squawk on the street." we're live from the financial capital of the world. the opening bell in less than a minute. this is when i turn to my long time friend and ask what's the key to the market today. what is it? >> i am going to say jpmorgan. >> which has been a key for you. >> yes. we need to see it break out. interest rates are going back up. and that company has got to be the leader in the dow. it's done terrifically and i think it can power higher and that's the one to watch. i would say nike but that's a coronation of the new ceo to be
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chairman, mark parker and a hero from the days when i ran competitively and we had to stop. that's how the oregon system where i'm proud to say that i am from. >> wow. good crowd today hear at the opening bell. take a look at the realtime exchange. expecting it to look a lot more green than red given the futures. here at the big board, those applause for baxalta. it's celebrating its spin off from baxter international. >> this represented great value. this is a really good franchise. it's fast. it's a blood mo nop louse. they've always had the best blood franchise. baxter, the last quarter was very good. people are too negative on this split off. it's bringing real value.
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>> and at the naz dock a medical technology company that sells total and customizable knee implants. >> they are on the show tonight. it's not all one size fits all. they will do a 3-d knee for you. >> you don't have any fake parts yet, do you? >> my competitive running days destroyed by knees by -- >> you'll eventually have them. >> well i always ran with nike. nike, that's not anymore. it's a basketball shoe now. a $200, $300 shoe. which is more amazing a franchise, the i love lucy franchise or the jordan franchise for nike? >> let's go to gm sales for june. >> gm sales dropping 3% last month. that was a little weaker than
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the estimate of a decline of 0.6%. before you look at the number and say here we go sales are falling off. keep in mind it's a strong pace. it's a comparison with june of last year. take a look at truck sales, the chevy silverado up 18.4% last month and as a whole n general motors is estimating the monthly sales pace will come in. and chrysler puts the pace this month at 17.5%. we're looking at the sales pace probably in the 17.4, maybe even 17.5%. any way you slice it that's a strong month for auto sales. >> autos and housing, big job creators. phil, once again, showing you this is a moment where there is tremendous strength and it's not let up even though people felt
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he had peaked in auto sales. it's still strong. >> we haven't talked as often about the benefit from lower gasoline prices. phil referenced sales of suvs which are benefits from lower gasoline prices but in terms of the consumer, we haven't had that talk. >> we haven't had it because visa has said there has been no -- they've made the point and he has -- he said only a little has been spent. i think it's a big deal and it's home depot. you're spending on your house because the value of your house is going up. that is a principle behind this rally. ceo of wells will tell you that this is a good moment for the consumer because housing is looking up. >> you mentioned nike of course, we should come to what the story is really about here. people forget nike is a controlled company. you don't think of it as often as you might of some other companies such as a facebook or
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a fox, or a google but nike also a controlled company. under armour also. >> they just put that through. >> but he does it in an interesting way, phil knight with a separate company that has voting members with five members on the board of directors. he wants parker to become chairman to take his place which one would expect his designated people would make happen. >> there was a period when nike wasn't that well run. knight and then another fellow and now parker this was the best single quarter of any company. i've talked about some of the bad quarters. this nike quarter was the best in terms of tremendous growth in germany. tremendous growth in europe and china, but most importantly it was not one of the constant currency quarters. they just didn't have to tell it that way. that's how strong their business
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is. a lot of that is the internationalization of basketball. a lot of it is the destruction of adidas and a lot of it is the endorsements, and then they are in bed with the nfl and it's working. >> a lot of it is working for nike. >> mark booker a great runner. >> five votes assigned to the board of directors of swoosh. two initially are held by knight. he owns 15% but controls the board. and then mark parker has a vote. allen rath and ondon hoe. he has a good board. what who else is on the board? >> tim cook. you mention that name and you hear it. >> on cue, the bells go off. we have a downgrade or removal of star bucks from the conviction buy list over at
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goldman sachs this morning. this is another great american. there schultz. >> it has been a remarkable run. should you take profits in star bucks? it's been a great run. how are you going to get back in in sayrera eisen talking this morning on twitter about the price of coffee going down. here's what's important about star bucs. it's international. the only company that hasn't stumbled in country is star bucks nature they understand the parents. >> goldmans still very bullish on the stocks. they say the fundamental view remains unchanged. >> the conviction buy goes to bloomin'. now, that's to me. >> what? >> bloomin'. i saw that. bloomin' brands. >> you take the conviction buy, they -- that's a very interesting rollout of the
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restaurants. why? because they said cheesecake factories would sell. cheesecake factory, they have a menu that is not necessarily to make you obese. they have a very good menu that's a little lighter but more importantly this is the group that's been the beneficiary. darden has been remarkable. became more of a financial engineering company. >> creating a reit. general mills. their stock is down. the company reporting earnings, adjusted 75 cents a share. that was 4 cents above estimates. the stronger dollar playing a role in that. >> annies did well. it's run by a man named ken powell. he is maybe one of the most transparent terrific ceos. it's a group that's part of the
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pantry. here's what he said. right up there, the first quote operating performance is mixed. when have you ever read a ceo that has just said call it what it was. it is mixed. ken powell is that kind of ceo. i salute him even though he's been dealt a hand of brands that people are tired of but not as tired as they are of conagra brands and they go up. >> consistently telling the truth even if it's not a nice truth can get you fired though. >> it can? i hope he's not fired. i understand. the board of directors might say. >> they are oftentimes shading everything to the positive. how often have we had a conversation with a ceo where there's nothing bad to say. >> i have said to powell that we should have bought hanes. >> it's not too late. >> i think ken ought to pick up the phone and call and get a deal done and general mills goes
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to 64 like that. it's not alchemy. it's plant-based foods. >> plant-based foods. let's go back to insurance. a shares are up sharply. 8.5%. it's the big deal of the day. almost $28 billion for krub chub, a well-known american name. $62.93 a share in cash and.01698 shares. >> did you say stocks up 3.5%. i think some of that might be a belief that there's less price competition. i don't agree with that. some of that is the franchisers is worth a little bit more. we pay them every single month. i had a huge travellers policy.
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i wish i could call jay and knock that thing down but that's not the thing he does. i can't do it because i'm on t talking to you but there is a sense that any time there's consolidation in the insurance industry, maybe you're payments have to go higher. >> these guys line up well. they don't compete. they believe that their business in the u.s. is going to be benefitted from the combination that revenue growth will accelerate. >> and, look, in fairness to the insurers, at times there's just been a tremendous price war. this is not like the airlines where they merged and suddenly when you fly to wherever you're flying how is it $1500 to dayton, ohio. >> not to mention another $25 for every one of your bags if you're lucky. >> and for spirit air, they're charging you to use the name spirit. >> let's get to bob on the floor.
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crowded floor this morning. what's moving? >> financials, tech we're doing really well. most of the major sectors are up. one or two to the downside. europe on the hopes for some further progress in the greece situation is moving. germany germany, france and spain put them up. you can argue greece is going to close. we have an etf for greece. that's trading up about 10% right now. people say we don't know what's going on. aback of greece trades here. this is the primary listing for it. take a look. this is where it trades, nbg, national bank of greece is up 10%. it's moving and was yesterday as well. we have action in greece. we know what's going on in terms of how we're pricing the market. you have ask if yourself what use the eurozone want right now in they don't want to deal with tsipras. they want to get rid of him.
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they're fed up. you engineer a way to close the banks and go out and tell citizens a no vote on sunday there's a vote against the euro and then you ignore the latest proposal. they say there's no basis for negotiations with greece. ignoring tsipras. you work under the idea that a yes vote means you get a national unity government and now there's new people to make a deal with. we don't know what tsipras wants. he says he wants to stay in the euro, but people don't believe it. i think you'll see more proposals before this referendum on sunday if that actually happens. let's take a look at what's going on over at china. we've had another 8% swing on a daily basis in shanghai. it's been two 10% swings from highs to low. another one today started quietly in the session in the morning and in the afternoon fell down. there were crazy rumors about
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short-selling by foreigners that were denied by the government. a lot of volatility there. you were mentioning the a steal.ce deal, this was a huge deal. all of the property casualty guys are up fractionally on that. let's talk a little bit about the start of the first trading day. we normally get a little more volume and that's where we're getting. we asked what happens in the first day of the third quarter and not surprisingly it's positive 85% of the time with an average return of.44 % which is a little bit less than what we've seeing right now. not surprisingly, some winners. consumers are generally the big movers. consumer discretionary are positive 85% of the time with fractional games. that's significant. dow is up 166 points right now. highs for the morning. back to you.
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>> the rally, based on chubb may be based on puerto rico. it's down 15. >> there's talks about the electric utility reaching some sort of a deal with deals in puerto rico but not necessarily. let's go check on things with rick santelli. >> reporter: good morning. any chart that you want to look at to see what's going on in the markets today, look at when the alarm clock went off for the markets. it was about 5:00 a.m. eastern. check it out. look at the spike in all the following 24-hour charts. pretty much the same thing. actually a little bit before 5:00 a.m. eastern. look at the euro versus the dollar, a big pop up. bund yields, big pop up. look at the dax, big pop up. our ten-year yields big pop up.
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as a matter of fact, at 242, we're only about a half dozen base points away from the yield of the year. let's take a little bit longer term view. we know that the curve even though flattening seems to be most associated with federal reserve or any central bank that's looking to tighten, that isn't the case lately. look at 30-year bobdsnds. they are much closer to challenging the high yield of the year. they're only a couple of basis points away. and if you want to look at the yield curve, we almost have to open it up to give you a true pictures. tens minus twos for three years. there was a lot of flattening. the inevitable looked like it was approaching but with the most talked about normalization in rates the curve is steepening. does that mean there is no fed? absolutely not. remember just because the
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yields arelong yields are going up faeser than the short yields doesn't mean its -- >> let's get the eia. let's go to jackie. republic >> reporter: equities are getting a rally. a couple of issues to consider here. we had api data out last night that was bearish. that's set the stage for the numbers. builds at this time of year in crude and gas not along with seasonal patterns and would break the streak we've seen of draws coming through since may. also estimates on the street that opec oil output is rising to more than 32 million barrels a day. to top it all off, you have a stronger dollar today and that is adding more pressure to crude. if we get a close under $58
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today, that's key. that's the low end of this very tight range that we've been trading in for quite some time. we'll be back with the thurms. >> thank you very much. coming up just on time for the long holiday weekend. we have gian fulgoni. take a look at the markets. very strong. right now. but who knows. we're back after this.
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bit weaker. italy 54.1. i'm saying the backdrop x greece, pretty good. you can say ex-greece, that's ridiculous but it looked like the end of the world. >> toward the end of the day things felt not particularly good. >> and you got the puerto rican thing. >> and china also. but there's a larger argument here which is the multiples are fairly high. that we haven't seen what earnings are going to look like. you need things to pick up in the u.s. economy if we are going to justify the levels we are currently having. m&a, we'll see a lot more of it but it feels a little topee. debt markets you know, carl icahn going on about high yield. high yield and equities are often links. >> a strong dollar to going to make it to so you hear number
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cut. we haven't heard that a lot this year. the dollar is too strong. it's just too strong. >> yeah but it's only going to potentially get stronger. >> don't know that. don't know what's going to happen. 50/50 deal. >> all right. we're going to come back after this break and get jim stop trading. more "squawk on the street" right after this. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. ♪ those who have served our nation have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.
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trading. >> this morning nxpi is the best. that's the deer field communications. that makes you be able to wave your watch and buy your cup of coffee at star bucks. that also drives up corvo and avago and also sky works. these are all parts of your cell phone. the cell phone remains strong. >> look at the performance overall of that stock in particular. up almost 50%. >> i've had them on air. it's what intel didn't do. it's the guts of exciting part
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of your cell phone, and sky works does the same. the rf micro, these are inquisitive companies with a little inversion. the inversion story is going to be the great story of the treasury department not being able to get it together. >> there's a lot more to be told there. there is. well we don't have time now because we have to ask you what's on mad tonight. >> there's a sense that the casino stocks are bottoming in china. we have a company that rang the nasdaq bell and we have pay chex. i find that it's an exciting time for that company if rates go higher. if it doesn't, it has a good human resources business. i liked fitbit. everybody hated it. it was right to like. >> you were right no like it. >> you're off tomorrow?
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is that a secret? i'm asking. i didn't know the answer. >> maybe i'll work then and just shock you. >> coming up breaking news in construction spending. we're back after this. music: etta james "at last" (plays throughout) sometimes, at last doesn't happen at first. ♪ your dad just kissed my mom. turning two worlds into one takes love. helping protect that world takes state farm. when you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about.
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good morning and welcome back to "squawk on the street." stocks surging on the first day of the second half of the year as you can see. led by financials a strong adp report suggesting the economy at a better than expected 237,000 jobs in june. the dollar is higher sending most commodities into negative territory. >> and breaking news on manufacturing in the let's go to chicago and rick santelli with the numbers. >> we'll start in order. let's look at may construction spending. it was up.8. better than we were looking for. almost twice as much but last
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month it was up 2.2. that was a barn burner. it got retized to up 2.1. but maybe it did best expectations for the year the high water mark was 2.1. if we look at something a bit more recent let's look at june ism. knowing chicago was weak this is a little bit stronger than expected. we're looking for a number just north of 53. we ended up a little bit further north at 53.5. but 53.5 how does that stack up? actually, it ties the best read for the year which was january, december of last year. like pretty much month of last year was much stronger. december happened to be 55.1. we'll continue to monitor. we saw stories in other publications saying that the
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greek government tsipras cave. that seemed to be a catalyst for big moves that we'll continue to monitor throughout the day. >> it's a much stronger dollar. and stocks may be higher but as rick points out the eurozone leaders reacting with skepticism to the letter from the prime minister accepting the offer with tax increases and a $29 billion loan to cover the debt payments. we are live in athens with the very latest. it doesn't seem to have gone down terribly well at home michelle. >> reporter: no. very cool reception from the creditors. ice cold. almost meaningless, it seems. in fact, it just so happens today that there was a meeting about the german budget which was carried live here on greek state television. i guess that makes sense because
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greece is part of the german budget, and within the context of that meeting, it became clear the germans said no negotiations until this referendum. you demanded this referendum. okay. you hold that referendum. we want to know what the greek people want and then we'll start to talk almost calling the bluff. there had been rumors we might call off the referendum. that doesn't appear to be anything close to what's going to happen at this point, and then add to that one of the finance ministers after the euro group meeting tweeted out saying this is -- i'm afraid that the greek bangs night not reopen with the euro as the currency in case the referendum on sunday ends with a no. once again they're putting this in the context of the referendum sunday is a vote of whether or not you want to stay in the euro or not. in the meantime, the pensioners lined up all this morning to get their 120 euros because the capital controls remain in place and really continued to crush
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the greek economy. back to you. >> okay. michelle, thank you very much. let's bring in kate kelly who joins us from puerto rico no less with some breaking news. kate. >> reporter: good morning. news out moments ago that prepa, the electric power authority in puerto rico which is one of the biggest borrows and one of the more troubled borrowers in terms of the lack of ability to pay them looks like they've reached a temporary agreement with creditors to come forward and pay the debt service and principal payments they owe today which comes to about 416 million. they're going to pay in part with certain bond insurers. they don't name them. it was reported overnight but we didn't know the details. but certain revenue bonds have agreed to buy short term bridge
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loans which need to be repaid by december 15th. this is a classic kick the can down the road to help pay thing longer term debt. it's a fix for today. they're made a forbearance agreement to help reach a locker term solution. we have a parallel announcement from the bondholder group saying they look forward to further collaboration. a bit of progress here. this is a $400 million chunk of the $2 billion in debt in principal payments due today. an important step forward but not a complete resolution. >> but a positive development from puerto rico. thanks very much. btd besides watching the double debt, we're watching the first trading day of the second half of the year. and a big day for economic data. steve liesman has been watching all the data ahead of the jobs report. it looks pretty good. >> i feel like i'm in a
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different world from what kate kelly and michelle are in. it's the mirror image when you think about it. these countries going down and having all these troubles over there. in the u.s. we continue to register this bounceback from that soft first quarter and the ism data and the construction spending data. let's do construction first. private spending up. residential up. overall up 8.2% in terms of total spent on construction compared to a year ago. we saw it in housing data. and onto the ism, 5 6 on new orders. employment surging, 55.5 giving us some sense of optimism for tomorrow's report. also the adp report raising hopes of the economy continuing and igniting hopes for a strong payroll report. here's the number ofs. 237 on adp. they revised up a little bit.
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good sector surging ahead. good construction gains and also manufacturing gains. s is -- services powering most of it. the three month a.j. of adp now above 200,000 for the first time. it supports that the economy is improving. ubs, i want to turn your attention to the split here. you see the large business has been underneath or below the small business. this has been powered by small business hiring. there are a lot of reasons for that. we had fao economics. there's the split. you can see that's small business outpacing large business. fao says the u.s. economy is leaning hard on small firms where benefits and work rules are not as beneficial. the larger firms are involved in
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international trade and they've been hurt by the dollar as well as perhaps by lower oil prices. adp has been running about 60,000 behind the bls report with the divergence increasing recently. that could be part of what could raise expectations for the government's report tomorrow morning. >> looking good ahead of tomorrow. wanted to get to stan fisher's comments yesterday which you reported. i thought they were an important optimistic take on the economy which is notable. what does the fed do about this divergence divergence. >> there's been a change. we had bray nard a couple of weeks ago who came out and said the rebound ain't so great compared to the soft first quarter, and then you saw the data come out and it's been stronger. and fischer was the first person to put it into an optimistic framework here.
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he did back off saying it would happen this year but did sort on on the other side say we're going to talk about rate hikes at every meeting. people should be aware it was said the possibility of settlement is on the table. i think you can take a break in august but i would come back and be at your desk sitting up right in september. >> it feels like we can't take vacation this summer because of all the news. >> you can but just be available. wherever you are, i'm going to call you. >> sounds good. it is the first trading day of the second half starting with a bang. the dow is up ahead of the june jobs report amid persistent greek drama. ben, the economic data for this country is solid. that's more important for corporate earnings than u.s. stocks than what's happening in greece? >> there are a number of bright spots on display in the u.s. economy this morning.
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the u.s. consumer i guess we're getting consumer confidence, and the hughes housing market which i think has been heating up. and i think going into the jobs market report tomorrow that puts us in good status. >> and stocks have had a lousy quarter. first down quarter for the s&p in ten. buying opportunity? >> i think earnings look a little bit rich but i think they're proned to revision up given the fundamentals of the economy. >> you worried about multiples? there are signs that things feel a little topee, and when i talk to people who manage money, that's their reason for caution. >> i think multiples seem slightly rich but there's a lot that's going to put the sales into markets, you know put the wind into the sales of markets. i think lots of how we view the
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economic data should be filtered through what's going on in the fed's mind and i think this sets us up for a little bit more tilting toward lift off in september versus december. but i think the fed needs to see a lot of positive data in order to shift the balance to september, and that is totally consistent with what we've been seeing the last few weeks. >> do you really believe fisher when he says that might raise rates in discussion in they're going to discuss it. they want everybody to know they're going to discuss it. they want everybody to think they're behind the curve so the bond market doesn't get scared. >> i think the committee has signalled there's a willingness to go in september. the data is consistent with it and i think an important point is part of the fed's communication has been to smooth through pivots in monetary policy with sort of relatively dovish rhetoric. i view this balancing act of
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really positive data somewhat dovish communication as completely consistent with a pivot in monetary policy. >> does greece matter to the markets or the fed? our figures saying it could cost the eurozone a quarter of a trillion dollars. the fed has looked at everything as a reason to not raise rates. why ignore greece? >> i think everything we've seen has been validating of market expectations that greece is not going to exit the eurozone. we've seen financial conditions not only the euro area but specific euro countries everywhere outside of greece financial conditions are looser now than in the past six to twelve months. i'd argue it's really handicapping all the possible outcomes in a reasonable manner. >> the other worry is china which closed down another 5%. these wild swings in the chinese
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equity market. cause for alarm in the u.s.? >> i think what that is is that correction in the chinese stock market is becoming a slump as we've seen over the past two weeks and continuing to this week. that reflecting a balancing act in china between economic activity and monetary policy which has been propping up the economy. and we've seen that policy response has been defensive and has mixed results. >> and it almost doubled in fairness. >> it's still up 20% on the year, but i think that calls into question china's role. >> monetary policies the theme of the day. thanks for joining us. global strategist for jpmorgan. >> up next financials are one of the best performing sectors so far this quarter. they are leading the rally day
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but it's a different picture when you look at the first half as a whole. how should you play the sector in the second half of the year. that's complicated. more "squawk on the street" when we come back. ♪ [music] ♪ jackie's heart attack didn't come with a warning. today her doctor has her on a bayer aspirin regimen
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second half especially for the big banks which appear to be going for a breakout. we have mergers and acquisitions which means they're set for record fees. more than $1 trillion in announced bills and $850 billion of those will close in the next six months. direct tv and atv reportedly expected to close as soon as next week. and investment banks will rack up $5 billion in fees give or take for deals that you have some deals that will get scrapped, some announced. all and all $5 billion is nothing to sniff at. how the market reacts to interest rates. higher interest rates means banks can charge more and loans and banks that issue more loans will become more lucrative. we crunched some of the numbers on how much each of these big
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banks revenue depends on net interest income which is what they collect from loans. citigroup, 58% of their revenues come from this followed by wells fargo and bank of america. cost incurred by bad loans can offset the cost of bad loans. wells fargo has the safest port fo folio. wells performing the best before and after historic fed rate hikes since the 1980s. analysts picks are across the board. morgan stanley has been on the show. -- clsa likes city group and jpmorgan but the common theme is this is a sector that's been beaten down for a long time. it's largely undervalued compared to the market and there are several catalysts around the
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corner. >> i wonder if there's a misstep. what we saw in 2011 is banks were hit the hardest. >> i think since that time all of these banks have been paring back their exposure to countries like greece. you see the exposure coming down in a big way over the last few years. once burned twice shy. >> even the the major european banks have cut back. >> good point. up nec, this fourth of july expected to be one of the biggest travel weekends of the year. find out just how much money americans are pouring into online travel these days informal we'll be right back.
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agencies to make their reservations. joining us now is the co-founder, gian full cony. this year very different from the kind of research you're coming out this. nowadays seven out of ten people on the internet are visiting travel sites. it's a different world. >> it is. and i think, again, it's an example of the internet providing consumers with terrific services. it's very easy for them to use the online travel agencies and to compare prices and features and services. and then pick the one that suits them best. but an interesting point is that they tend to then book at the brand sites. and the brand sites do a lot more business than and actual booking dollars than the otas. >> i guess where the online travel agencies where they really make their money is in the hotels. and according to your data the
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hotel sites themselves get 16% of online travel bookings the oti 10%. i guess if you want to use your loyalty points you have to book directly with the hotel sites. >> exactly. i think that's probably even more important with the airlines given that it's a higher cost obviously than the hotel, generally. but i think there's another factor with air travel which is that if you have to change your schedule, i think it's probably a lot easier to do that if you book directly through the airline sites than through the otas. i went through that hassle myself one time. >> people on the television and financial circles and people in the street talk a lot about air b and b and the inroads it's making clearly a huge growth driver at the moment. i didn't realize that actually vacation rentals by owner, arrival site owned by home away actually gets twice as many visitors as air b and b.
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? it does but it's not growing anywhere near as fast. it has more visitors but if you look at the growth rate the air bnb growth rate was running 250 % over a year ago, and you may have seen they just finished another round of financing with an unbelievable valuation. it's exciting times in the travel industry, i think. >> what does that all this mean the fact that there are soo so many more ways to do this. do consumers get better prices for this? >> i don't think there's any question about it. i think with air travel, just the same as if you look at general retail buying products. the internet has put pricing in the hands of the consumer. that's another reason why the branded travel sites want to see the booking occurring on their own sites. they don't have to pay the
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commission to the otas and the airlines have seemed to have done a better job of keeping the booking. >> they're attempting to withdrawal their pricing and schedules from the online agencies. they don't want the transparency transparency. >> it's kind of a love hate relationship. on the one hand, you want to be in the considerations that when the consumer is considering travel. but at the same time, you hate to lose that commission that you have to pay the otas. so it's kind of love hate if you will. >> big commissions for sure. it's nice to see you. we are heading into the travel weekend. >> when we come back we'll talk to the former u.s. ambassador of greece about the likelihood of a grexit. he'll be joining us after the break.
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announcement live when it happens. iran's prime minister telling reporters that talks between iran and the six world powers has been taking progress and will continue to do so. he said there is no deadline. tens of thousands marching for free elections in hong kong. they marked the anniversary of the hand over the china. and it comes after the veto of a proposal that triggered violent protests. and the ceo of nike is stepping down. knight is 77 and plans to still stay involved with the company. he will transfer most of his nike stock to a limited a little bit company. that's the up date for this hour. back to you. >> welcome back to "squawk on the street." we are reporting from the floor.
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the number a build, 2.4 billion barrels. that's what we were expecting. there's why there's so much pressure on oil prices this morning. what's interesting here gasoline seeing a draw of 1.8 billion barrels. that is probably because of summer driving demand. triple a reporting more people hitting the road this fourth since 2007. a little bit of conflicting data. in terms of pricing, trading at $58.20. a close under $58 would be par moupt mount. >> breaking news here on donald trump. macy's announces that it is the latest to tump the relationship with donald trump. macy's says it's a company that calls for diversity and inclusion. we welcome all customers and respect for the dignity of all people. it's a corner stone of our culture. donald trump taking more heat
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and more corporate fallout for the comments he made about mexican americans and immigration when he announced that he is running for president. just the latest after severing ties with donald trump. other companies including nbc. may di's is the latest. we are losing ground on the rally. currently up 114 points on the dow. angela merkel telling the german parliament that nothing is possible until the referendum on sunday and europe must not seek compromise at athens at any cost. earlier in an emergency session, the finance minister said the current greek government is not a trustworthy partner for talks. there's a national address in which they are talking about the needs to deliver on a sustainable solution which for him presumably means there
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should be further debt forgiveness or rescheduling of the debt. for the moment, it doesn't look like anything is happening with the creditors. most of them saying they have to wait for sunday's referendum. joining us is the former u.s. ambassador to greece. welcome to the program. >> thank you. >> so the finance ministers at the eurozone are due to meet in about or to teleconference in an hour's time. even that has been delayed for six hours due to scheduling problems that they appear to have or they say they have. what is going on here. the rest of the eurozone's heart doesn't seem to be in it at the moment. >> well, i think there's a lot of political maneuvering right now. i think most people agree it's probably a bad idea to move forward with the referendum. it's going to paint greece into a corner and probably the negotiations with europe are not going to be improved as a result of this. i think there's a lot of interest in a number of the european countries to see if there's a way to move forward
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before the referendum but the germans and some others are saying they've called the vote. let's wait and see where we're going to go with it? . >> why is it? because they believe it can be a game changer? presumably if they vote yes on sunday, the existing administration could fail which appear some of them would like. if they vote no then arguably the european central bank can pull the rug from under the greek banks. something will shift, will it not, after the weekend? >> yeah but i think if you look at the fundamentals as opposed to the play by play it's a dire situation in any case over the medium term which is the reality however this referendum turns out. most greeks are voting against austerity. that's why this government got into power. they're not interested in continuing the austerity measures. at the same time the germans in a recent poll 75% of them said
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they don't want to give anymore concessions. you have a battle that's lined up regardless of how this vote takes place and if it's a yes vote for the bailout off the the hardship that the greeks have gone through this week there's very few people that think the greek government, either this one or the next one will be able to maintain a fiscal program along the lines of the imf program cha that will result in 1% of a surplus this year and 2% and 3% the next two years. >> in the meantime we say pensioners cueing because those without credit and debit cards are able to get some cash out, i think it was 120 euros. roughly $134. the german finance minister said it's sad about what the greek government is doing to their own
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people. should we be blaming the greek government or the creditors? >> well, i think there's plenty of blame to go around. right now what's happening at this moment it falls on the shoulders of the greek government. it was a monumental miscalculation to call for this referendum before they knew how it was going to turn out. but at the same time the european creditors have really made a mess of this over the last five years in trying to push forward a program that requires such an austerity measure on the people that are really unsustainable and after five years, you can't keep the political momentum for that. i think there was a miscalculation. i feel like we're focusing on the market reaction. should we be talking more about the gee owe political ramifications if greek exits the euro. we heard them say they're activity involved in
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conversations and it's in the best interest for greece to stay in the euro. what would happen if it left the euro? doesn't that open the opportunity for russia or china or terrorism in the middle east? >> absolutely. economically it's not a good idea to take a chance and see what happens. more importantly, on the security front greece is a member of both the european union and nato. if things fall apart and they are angry and upset, they can play a real spoilers in both these institutions and you have issues like russia and sanctions on russia and eastern europe. you have issues like iran. you have terrorism issues where
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it's a back door from people in the middle east to the european union. if they don't monitor that you could will characters working their way to the rest of europe and eventually to the united states. greece, by the way, has a travel visa with the united states. you can fly to the united states if your greek, not foreign, without a visa. >> for a holiday, not to come and work here. >> yeah but i'm saying it probably won't be hard with greece falls apart to find a passport and find your way to the united states even if you're not a true greek by some way, so this is an important country where we have an important relationship security economic, and political side. it's not just the issue that it's only 2 % of the gpd and we can manage without it. >> good to have the advice and analysis. thank you for joining us. the former u.s. ambassador to
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athens. ? when we come back several big name companies, a ceo shuffle that starts today. what's driving ceo turn over this year and does it spell trouble in the c suite? more on that story when "squawk on the street" comes right back. we live in a pick and choose world. choose choose choose. but at bedtime? ...why settle for this? enter sleep number... don't miss the lowest prices of the season, going on now. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow!
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including hart ford financial. and cincinnati financial up as well. remember, financials under performed earlier this week as debt concerns in greece and puerto rico put that sector under pressure. but today a nice bit of a nouns bounce. we'll see if it has staying power. >> breaking news with phil. >> we've got toyota june auto sales coming in better than expected. an increase of 4 %. the street or others in the industry were expecting an increase of 2.7% toyota better than expected with sales up 4 % last month as with auto makers what's driving the sales, suv demand. it was up 15% for toyota and we've seen this time and again. that's where the sale surmg is going on. crossovers and suvs are red hot. the estimate for the industry last month for a total sales
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pace looks to be around 17.3 or 17.4 million at this point. >> america loves their suvs and trucks. an official changing to the guard at a number of big companies. taking a look at who's out and who's in various c suites. >> a number of new faces but ceo turnover was down 13 through may. a nod to the stock market's record levels and an improving economy. james murdoch takes over. the older murdoch will remain as chairman at the firm. >> and at boeing a transition like murdoch's expected and engineered by the board. and dorsey returns as ceo of twitter replacing dick costolo who stepped down amid growing concerns of management of the
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microblogging site. retirement is usually the number one departure but resignations are number two. they are spurred by pressure from activist investors who have less patience for ceos who don't hold the pace. and at toys r us a bet on former ceo of hertz to replaced a long time ceo of lubman forced aside by activists. overseas we have two other changes. taking the reigns at two european banking giants. last year the conference board says the average tenure of the ceos ten years. and nike ceo stepping down and
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donna karan stepping down as chief designer. >> for both the end of an era. >> let's take you back to athens. we are watching the prime minister address the nation. you just tweeted he looks tired. he may be the only person that's sleeping less than you in greece. >> reporter: he did look exhausted as he addressed the country. it was pretty anti-cliematicanti-climatic. we've been waiting all day. he stuck to the same line. they'll hold the referendum on sunday. he wants the greek people to vote no. don't worry. it's not a vote tbt staying in or out of the euro. if you vote no i'll have a better negotiating position. no change in his position even as he apparently had submitted this all right, agreeing to so many concessions overnight. so we're going to goo into this
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referendum on sunday and we'll see what the greek people say. the rest of europe is saying this is a vote about whether or not you want to stay in the euro inform if you accept it you stay in the euro. if you don't, let's see what happens after that. >> quickly, is there any indication of where the people stand in we watched the demonstrations. you had one for the yes camp yesterday behind you. it looked much bigger than the day before. is there any sort of sense or feeling that the tide has turned away from the prime minister and his popularity among the greek population? >> yes. after the banks were closed, there absolutely was a sense of that. one poll came out today that when they put all the numbers today over four days of polling that suggested that the no would win. this was in a progovernment newspaper. they also said the nos were much higher on saturday own sunday and once the banks shut down the nos became much less and started to shift.
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that's an assumption that the longer the banks are shut down, the more willing the people are going to be to vote yes instead. we'll see. at some point that could turn and they could become angrier and maybe it goes in the other direction. right now there's a belief that the vote as shifted away from the prime minister. >> what do we take away from this? what is your judgment on what he's now doing? what was the all right about if it wasn't going to gain any traction in the euro group? is that the euro group's fault or is he trying to make it look at home as if he's trying to do everything he can in the knowledge that it will get nowhere in order, potentially, to save his own government come sunday? >> potential >> reporter: potentially. i don't know who he's getting advice from at this point. when you look at the letter that was submitted, one you know the process, crazy requests. i want a new bailout government. i want it to run for this long.
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we need new this and that. it doesn't get done in a week. in good times, it takes a month when everybody is getting along. and they're not. maybe he's trying to convince the greek people he's doing everything possible, but it seems too little too late. >> i think you'd better settle down. joining us live there from athens. good work. >> let's go to rick in chicago for the san telly exchange this morning. >> thanks. i'd like to welcome my guest j jim. we never where we're going to go. we were discussing what bugs us a little bit. the first issue i would guess is that you find july 1st an important date that bugs both of us. maybe you can proceed. >> today is day one of year seven of the recovery. the recession ended in 2009 yet economists tend to use the word
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healing. the economy is about to take off. we're in year seven. this is the economy we have. it is a 2% disappointing slow growth not recession economy. and that the prospects that we're going3% growth or something great coming just around the corner this is the seventh year i've heard them say that it hasn't worked out yet. this he don't get it this is what we have right now. >> another issue that's never discussed is the current programs in place, a variety of them, we'll lump them into one. bailouts, they created a scenario where the very affluent and the very too big to fail banks have done pretty well and tax collections are about capital gains as you pointed out. we've had record tax collections, but instead of laying the landscape into more fertile recovery, it was diverted into more government spending. is this something you'd like to comment on? >> the biggest driver of the deficit and taxes is capital
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gains. since the 1986 tax act. they go up and down. we've had asset prices go up a lot. especially -- >> a lot and they've made a lot of capital gains they've paid to the government. instead of paying down the deficit. we've increased the size of government which has been a drag on the economy as well too and unfortunately there's a keynesian thought that it's necessary and needed in this economy, more government. but think that that more government goes into my first comment, why do you think we keep stumbling along at 2% 2.5% whether it's monetary or fiscal policy we think we need more government. that might be the drag on the economy, not the solution. >> our treasury secretary jack lew and it's not uncommon, has an opinion about what's going on with greece and considering the role he plays in the cabinet that makes sense. if had you to assess his comment, do you have any remarks or opinions about them? >> i think he should stay out of the greece situation, it is a european situation as well. and i think to the larger issue that we've heard, you hear it on
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this network a lot. people confidently telling us greece is not a problem, it will get resolved. some get angry when you ask them about greece there's nothing there for investors to worry about. actually there is and what it might be it's not priced in if things were to get messy there. what is priced in in greece is that everything will work itself out at the 11th hour you've got a little bit of upside. we haven't given back nearly monday's gains but we've got a lot of down side if things don't go well with the referendum this weekend. or whatever negotiations we might hear about in the next couple of days. we're beyond our time. >> don't you think the people of greece have a right to referendum? granted the timing might be off? >> it's a democracy and the people have a right to vote whatever they want. absolutely they should have that right. >> sarah simon, back to you. >> thank you very much. rick santelli. general mills reporting earnings this morning, profit beat but sales fell flat.
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slowing growth a huge sticking point for the entire packaged food industry as consumers shift to fresh and healthy foods, i had a chance to sit down with jason ackerman, the ceo and co-founder about fresh direct and about that and how crowded his industry has become online grocery delivery. something he's been doing for a decade. have a listen. >> we've been competing against food retailers since the very beginning and there's so much room to convert people to online and it's so underpenetrated. there's a lot of room for people to play. >> how fast is that conversion happening. people not going to their grocery stores ordering online instead. >> it's steadily going up. people are getting more and more comfortable ordering food online. the idea of ordering feed is something people have gotten more comfortable with we see an increase in demand steadily. >> what have you seen in terms of your market share with all of these other players now in the game. big players. >> we've seen our market share grow every quarter for the last ten years, we now one of the largest food retailers in new
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york city online or offline. >> how are you expanding, disrupting your mod toll stay ahead and innovate? >> it's making it easier for consumers to shop. the speed at which you can transact. a lot our loyal customers through purchases and data you can get through the shopping experience for $100 order in less than four or five minutes. >> we know that consumers have changed the way they eat. the way they consume. we're talking about it at the conference, they want fresh healthy, they want natural ingredients what trends are you seeing that might be somewhat surprising. >> we saw more quinoa salad than tuna salad. there's a huge push towards health and wellness so people don't sit down that much and eat big meals so healthy grazing is a lot of what people want and they do care where the food comes from. >> what's the long-term plan for fresh direct? would you consider selling the
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company to a bigger company? ipoing? expanding across the nation? >> yes, those are all possibilities. >> you're a former investment banker so clearly you're thinking about the end game and the co-founder of this company. >> the industry is $700 billion for food and restaurants at $500 billion. so there's a trillion dollars of food to go after and we're having a ton of fun innovating and being a private company. we have to take a long-term perspective in the market. we're excited about what we're building. >> the grocery market in this entire country is what $600 billion? >> 700 billion, correct. >> how much of that is happening online? and where will the number be in ten years? >> more of it online tends to be more in the urban centers, you can see penetration range from 1% to 6%. if you look at other countries like the united kingdom, they're upwards of 7% 8% and a lot of talk of it going to 15. we believe long-term in the urban markets you'll see close to 15% penetration is possible. >> what's happening as the
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kroger'ses of the world get into the business themselves? what edge do you have? >> our edge is our sourcing organization, we work directly with farms and we can get products from a farm to someone's home faster than a retailer and that gives us the advantage on quality and having the right products for sale and that's what we compete on having the best quality freshness and prices. >> how competitive are you on prices versus the local grocery? >> we're very competitive. our quality is best in the marketplace and very competitive on price. >> what's your outlook on pricing? >> there will continue to be pressure particularly on the nonvalue side of the business. things like bottled water and things like where everyone can do it i think there will be commoditization of home delivery. so we tend to focus on places where a consumer can tell the difference between products because on the other side of the equation pretty much anyone can do it. >> and he does claim to be competitive on prices simon which is what fresh direct gets
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a bad reputation for charging higher than others he says not true, we've got the quality and the price. >> let's send it over to jon fortt. >> we'll continue to talk markets in greece with the major indices up about half a percent, at twitter there's an official changing of the guard with dick costolo handing over the reins to jack dorsey. hear what he says will be the next ceo's biggest challenge. and xiao mi hugo barra to talk about the expansion of that company ahead.
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