>> the country kind of got pushed fatigue from w. so eight years of the president and after that you're telling me that another bush could be running and maybe in the -- it's so weird. you replace bush for obama and obama for another bush and running with a clinton. great to have you. >> thanks. >> that does it for us. time for "squawk on the street." ♪ welcome to "squawk on the street." i'm quintanilla with sara eisen, simon hobbs, and david faber. we close out the month of july with the dow hanging onto a 77-point gain for the year adding into the month of august. bonds are the story today as the q 2 employment cost index is the lowest gain on record and a sign that there is virtually no inflationary pressure after six years of zero rates. in our road map this morning,

two of the nation ooegs's biggest oil companies down. >> the clock is ticking for puerto rico. major bond payments due this weekend fwlchlt. >> and why netflix wants to be like pixar. we'll explain. >> as we enter the final trading day of the month, the s&p is up. the dow is higher by.7 and the nasdaq with gains. consumer staples, up more than 5% hitting tom intraday highs this week. although the 52-week low list everything from sugar to gold to platinum to copper to oats to the mexican peso to the aussie dollar. >> the dollar suffered the best month since january. the real story in terms of the action in july was in commodities. weaker. many of them reaching multiyear

lows. the dollar stronger and it's hard to imagine the s&p is managing to gain 2% in what was a bumpy ride earnings. overshadowing some of the concerns about china and about greece. >> earnings did it in big tech. amazon up 24% in the month. google up 23%. big question i guess for august becomes the fed. >> some would argue it's a function of m&a value. top month of the year for deals. the second best ever going back to january of 2000 and you look at the list of gainers, some of them are plays, speculative or not. >> chubb was the subject of that large deal and we've seen that continued pace of m&a that as you say has been largely unmatched in the past and many would see as a sign of confidence in the market although maybe getting a bit long in the tooth. that said i think we're going

to probably set up for a very busy fall because the same conditions are still in place. namely acquire stock prices typically respond positively. you can use catch which you're borrowing at virtually no interest rate at. it makes these deals accretive. much of it setting up for a positive cycle until it's not. >> or if interest goes go higher. >> or if they don't. >> or you see strategics start to stray into areas they shouldn't and things don't necessarily make logical sense in terms of acquisition. we haven't seen much of that. >> let's talk about what investors should be to fo kusing on. kristina, it's good to see you again. before we get into the trading environment. just the employment cost index. we usually don't pay much attention to this number but we know the fed is watching it and it's not good to see wages and

salaries only raise.2 %. >> this was a shocking prant.int. it's the worst we've seen in 33 years. in the past it's been more positive than what we've seen in average hourly earnings. the question is -- and there's much greater emphasis on next week's jobs report and average hourly earnings. what does that tell us? usually eci has been the more positive of the readings and we know that janet yellen is looking more wholistically at the job market. >> she's looking at the slack indicators like this and next friday. we're getting a narrative of the second quarter. yesterday's gdp better but not great. >> absolutely. >> what's the biggest risk now, that the fed moves too soon or too late? >> well the greatest risk is that the fed moves too soon. i think that's the way most see

it and that's perhaps the way most fomc members see it. there's risks in either direction. what we think is a few years out from now, it won't matter and even a year out from now, it won't matter when the fed moves. it's much more about the pace of moves. this is different from past rate hikes. it will be thoughtful and we're likely to see not a ladder like the past but a hill and plateau. >> their thoughtful to completing action is where we are. i mean what do they do with inflation if -- i mean the commodity index is down off the top my head about a third so far. so the headline inflation is going to go lower. possibly at the headline level. core inflation stripping out energy and food will be strong. what does the fed do with that? >> what we've seen in past statements in their minutes is they are apologists for inflation. they say in the short term it's

low but expectations are that it's going to return to our target rate. and so as long as they hang their hats on that it seems that they're freeing themselves up to act. >> but if you study inflation, it's a circulation motion that goes through the economy. it always needs wages in there to connect up all the various bits. if the wage function isn't working and it's not connecting you can't have sustainful inflation, can you? >> certainly but what we've seen is not terrible wage growth up until now. so the question is what happened and how important it's going to be to the fed in its deliberations deliberations. we may see that pushes them back to a december lift off although it remains september. but there's a lot of debate and deliberation at the next fomc meeting. >> the question is what does that mean for markets. the ten-year yield broke to 20 lower. the dollar is down about a

percent. >> it calls into question many who thought it was a done deal that we'd see an increase in september. >> did you think we were going to get that? >> we do and we still think that. that's our base case scenario. we'd say there's probably a 51% chance that as the september liftoff, and it's because the fomc is looking wholistically and saying we need to get started. it doesn't mean we'll accelerate quickly. >> kristina thanks for coming back. >> thanks for having me. >> the slump is crude is weighing on the nation's two largest oil companies, exxon mobile reported second quarter profit down 52% from a year ago. revenues were ahead of consensus. chevron said the upstream businesses were particularly hard hit. exxon reporting overall numbers of around $4 billion. i can remember the days not that

long ago, it seems, when they were reporting closer to 10 and that was by far a record for a quarter until apple has come along and eviscerated that. chevron, more of a messy report giving asset sales and charges but both stocks are going to see a bit of pressure. you can see it down around 2 % evenly, more or less as we head into the session. >> but it's always about the dividend with these guys and coming into the report in the first quarter, chevron was putting out four times as much cash than it was earning from the operation. the question is whaz more sustainful. goldman said in advance, you should sell chevron because it was not sustainable. and you should be buying exxon which they thought would be better able to protect. linked inn.

joining us on the phone is analyst mark may who currently has a neutral rating. welcome to the program. >> good morning. thanks for having me. >> the confusion seems to be over one of the recent acquisitions which was included in the figures for the first time and made them look a little bit more healthy than the underlying state. what are you telling clients now? >> the stock has had a nice rebound off of a disappointing q 1. ran up into the quarter. market was expecting a nice core organic beat and they did not get that. on the surface, the company did beat numbers but like you said the up side came from an acquisition which was not modelled correctly and if you look at the core it did not meet the bullish expectations. in addition, and maybe more importantly, the company lowered the guidance for the second half of the year. this is the second quarter in a row that the

rowed that company had to lower guidance. and i think where they trade, which is over 25 times for earnings, the fact that they're having to lower expectations and that growth is decelerating to the 30 the to 35% range versus 45 to 50% what we've seen recently, i think the valuation is just a little rich here relative to the growth and the trajectory. we're recommending clients sit on the sidelines on this one. >> there's a lot of new stuff going on with the acquisitions and obviously the move into china where they're getting more subscribers. what role was display advertising take within the business because that is down 30 % year on year. i mean is it the core or is it the periphery, and how involved is that with the move to mobile which a lot of people would say has been somewhat clumnk can i.

>> they're categorized as a network. advertising is a much smaller piece of the business and really one of the great things is they found a way of generating revenue using subscriptions and it's really more of an enterprise software company that is helping corporations with recruiting and with generating sales leads. advertising is not as prominent of a part of their business. so i think that the declines that you talked about, they are important. you know and they are a function of the move from desk top to mobile but in the -- >> it's not as impactful as with facebook. >> before we let you go can you throw us a couple of names from the internet space that you operate in. what people should think about this weekend maybe as they're getting into monday morning? >> what we are continuing to see is a shift in ads spent away from traditional media,

particularly television now is the next leg to really going to feel the pain of the internet. national brand advertisers are moving their budget to more internet where they can get reach as low as audience targeting. facebook is the key beneficiary there. that's really the name to own in the internet space. >> have a good weekend, mark. thank you for your time. >> mark may joining us from citi. >> netflix, the message they're sending out today but first a deadline looms for puerto rico. a closer look at the debt crisis and why it actually matters to it. take another look at the premarket. since 1900 when the dow was up through july the rest of the year is up about 74 % of the time. we'll see if the dow can hang onto these yearly losses of 77 points. back in a moment.

female announcer: right now at sleep train get up to 48 months interest-free financing on tempur-pedic. save hundreds on beautyrest. or choose $300 in free gifts with stearns & foster. the triple choice sale is on now at sleep train.

debt ridden puerto rico. tomorrow is the deadline to make bond payments and avoid a default. we have a lot more on the story we've been following for quite some time.

>> reporter: we're a day away from a debt. the first concrete evidence of puerto rico's financial turmoil that we've been hearing about. a hand full of puerto rican borrowers including a group of local towns have payments due august 1st. the smallest among them looks unable to pay the $58 million it owns and the parent entity the government development bank is also looking a fit iffy in terms of being able to pay. the bonds have been sinking. if a default occurs it'll affect a range. including franklin templeton and onner hiem oppenheimer. the lenders may have recourse in the new york court system but retail investors are less likely to enforce them.

so far the only limited progress has been made on that front. really unclear if or when we'll see a resolution. >> as they continue to lobby congress to try to allow chapter 9 bankruptcy. thank you. we'll keep an eye on it this weekend. up next wall street veteran art cashin joins us as we count you down to the opening bell. taking a look at futures looking to end july on a high note with dow futures up 30. we'll see what happens as we go into the opening bell. "squawk on the street" will be right back.

i asked my dentist if an electric toothbrush was going to clean better than a manual. he said sure... but don't get just any one. get one inspired by dentists. with a round brush head. go pro with oral-b. oral-b's rounded brush head cups your teeth to break up plaque and rotates to sweep it away. and oral-b delivers a clinically proven superior clean vs. sonicare diamond clean. my mouth feels super clean.

oral-b. know you're getting a superior clean. i'm never going back to a manual brush. seven out of ten power outages in the us are caused by weather. but utilities can now predict where the power will go out, within a few city blocks. working with ibm they're combining micro weather forecasts with detailed data from local sensors. to predict where outages are likely to occur. and send crews exactly where they're needed, when they're needed. ibm analytics from the internet of things is making energy smarter every day.

♪ just about ten minutes before the bell. let's bring in art cashin this morning at post nine. happy friday. >> happy friday. >> always good to see you. is this eci number the story of the day? >> i think it's the beginning of the story of the day. obviously it's had an impact on bond yields. we broke two and a quarter and we look like we want to really move below 2.20. i think the viewers want to keep an eye on that and also keep an eye on the oil price which i think is going to be significant. we had an interesting overnight in asia. china, they still haven't got it down pat. they raced in in the final hour and were unable to get it to plus territory. the real story is the baby

tigers, the thailands had a pretty good rally. earlier in the week there were concerns that we might be seeing a kind of tie box syndrome again. this was a great relief rally. i think that's pretty good. >> the month of august down four of the past five for an average of 2.5%. it's not been a good month. >> it has not, and i know i always sound like the bearer of bad news but you're heading into two of the toughest months both august and september, and as long as we're doing silly seasonals, friday has not been good for the market either. we've been down seven out of the last nine fridays and gold which i'm happy to report is up a little bit now has been a big sufferer of fridays, and the months. so let's see if they can continue. they're starting out a little bit better today. that is not the way they have ended upmost end of months. >> oil is not higher actually

on the back of this week. oil languishes. it's the worst month of 2015. haven't seen a month like this for oil since december. can the stock market rally if oil continues to be pressured lower? >> if it is pressured substantially lower, if wti breaks 46 i think that will have a negative impact. what we can't put up with here would be a rather extended correction because mutual fund cash is the lowest it's ever been. so if prices go lower and they get redemptions, that will mean they'll have to sell rather than use their cash to pay their redemptions. >> i didn't realize that. it's the lowest it's ever been? >> yes. >> well i think a couple of things, it's been noted by others that when cash doesn't reward you anything, you tend to avoid it so they put it to work. i don't think that it means that

they're aggressively bullish. i just think that the rate of return on it is not big. but it does make them somewhat vulnerable. >> but also the volatility is low. if it is low, you can go all in because the fed will support you through the end of the year might be the argument. >> the balance of the two. the only way you can get the return the two argue for that. my point is if things were to suddenly change it doesn't put them in a very secure position. >> for all the talk of higher interest rates and the fed moving if you look bas back one month, the best performing s&p sectors, consumer staples and utilities. do investors still need to have these kind of stocks in their portfolio in an environment where all we're talking about is the fed raising rates? >> well i'm not talking about the fed raising rates. i'm sticking with the idea that

i think that the situation both globally and domestically tenuous enough that the fed will probably not move. i know they want to. markets are beginning to price a little bit of an end but i think they'll too timid. >> and importantly, the rally on the bonds, as the bond stocks rally. that's the story of today with the yield on the ten-year. >> it's quite impressive. >> i always think, you know you can be a pretty good swimmer and we are, but if you have to carry somebody else, you're going to drown. that's a problem. >> that is a problem. you can maintain yourself but not everybody else. and that's what we see. i mean we've learned since 2008 that the markets and assets are inextricably linked together so i think that will make the fed push. my greatest argument relative to the fed is they've been warned by the imf and warned by the world bank and that makes it a

big, big step for them to go. >> i like the viewer who writes and says art, you are the bearer of bad news. >> well somebody has to carry it. >> have a good weekend. >> opening bell just a few moments ago.

i'm here at the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

can it make a dentist appointment when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ the answer is yes, it can. so, the question your customers are really asking is can your business deliver?

you're watching "squawk on the street" live from the financial capital of the world. we'll get the opening bell on this friday and the final day of july in a couple of minutes after the worst week since january for the dow last week. last week the dow hanging onto thin gains for the month. a dozen dow stocks are now in correction mode. everything from chevron to cat. dupont intel and exxon which just has the worst profit in six years. >> p&g not reacting well. i saw three firms lowering their target on procter & gamble. the dow was the worst performer.

the s&p managing to close higher by 2%. the nasdaq the real outperformer of almost 3% for the month. >> if you want growth that's where it is. it's google and facebook, and they have performed well sfwlchlt. >> about an hour ago we got the employment cost. the lowest growth since 1982 when the number one song in the country was olivia newton john's "physical". >> at my gym, they have pictures of women in their leg warmers. >> it's raising flags about janet yellen and the fed. we're looking for some inflation somewhere. it's not happening in commodities. >> it's data dependent. we're seeing buying of treasuries selling of the u.s. dollar. buying stocks and oil along with gold, oil at 48 .53.

down at the big board today, synchrony financial. celebrating the first anniversary of its ipo and over at the nasdaq the winners of the 2015 business plan competition for student entrepreneurs. a lot of earns that we didn't get to. no we got to linkedin but expedia and a bunch of others. >> expedia is up almost 8%. if you look at the results that they came through with last night and the core drivers within it it's always about hotel rooms and how many of those they can sell. hotel volume up 35% year on year. yes, expedia isn't getting the type of revenue or profitability as a result of foreign exchange and promotional activity. that's down 16. but international up 15%. you might look at ve video game

go. they can test in realtime whether the advertisements are working on television. you see a rebound there and what if is rebounding. and the big question with expedia is the anti-trust issues around them buying orbitz. not so much for the fact that it's difficult if you're trying to get a hotel room. it's more if you're a hotel owner and you're trying to sell your hotel rooms on the internet online. if the argument goes they can control more and more brands and it will force up the commission they're asking you for. >> also want to mention coca-cola enterprises fighting for the top spot in the s&p with expaid yo. the bottler, reporting they are in advanced talks to merge with

two other coca-cola bottlers. and the german bottlers as well. this would be very positive for not just coca-cola bottlers but also for coca-cola was the system would be more efficient. it would be able to cut costs and it would be more streamlined when it comes to the european distribution of coca-cola. that deal they say is in advanced talks. >> i saw the same reports. i have nothing to add except that we've seen this in the past in terms of the consolidation of the bottlers on pepsi's side as well. these have been previously owned sometimes by the companies. we'll see how it advances but the stock is up rather sharply. interesting to note, synchrony financial has been a successful run since it's been out from ge only about a year ago. ge shares not really doing much since having reported earnings but in the midst of selling so much of the rest of ge capital,

i wanted to mention that as well. sin ro synchrony has performed well. >> did you see the inport export -- in addition to threatening to leave connecticut due to local tax rates. a lot of push are from ge. and royal caribbean, a beat on the second quarter and raising the full year earnings per share. it has been a phenomenal performer over the last two years. that's the year today, but if we go back two years, they have stopped discounting their cruises, they say, in order, particularly in the caribbean, in order to fill the ships and the effect of that they hoped would be that people would buy at a higher price and book earlier. that appears to be bearing fruit if you see the yields. that's a two of-year chart.

>> am jenn revenue ahead raising their guidance for the full year. am brel doing well. and one of the names that's done well all year is electronic arts. 50% gains for the year. they do beat revenues ahead, but they raise shy of consensus despite all the enthusiasm for the star wars games. >> i thought there was a lot of anticipation for the battle front game which is coming out a month before the force awakens. you're the star wars geek among us so i guess that was a little bit disappointing. they also have the need for speed. >> i beg your part snn. >> need for speed, another highly anticipated videostream. >> exxon, a dollar a share. profit down 52%. lowest in six years.

output up about 3 .6 million barrels a day. cramer has been net bearish on crude. he said exxon would be the key of the week. >> i think 80 was the key price for him which is right around where we are. we all know what's been going on with the commodity it and how they respond. he's been critical in the past of exxon in terms of exploration and making new finds. one question continues to be will we see significant consolidation. is that a possibility? it's difficult to negotiate deals like that when you have the commodity moving around a lot. >> shell is doing a deal. >> it's a big deal. and we saw the layoffs as well announced yesterday. but also upstream just wondering whether there's one more big deal or even two to be done. i keep hearing it in energy. haven't seen any evidence of it. >> i want to mention capital

spending. 8.26 billion from 8.2 billion a year ago. they warned it would go down but that's the question. are we going to see another round of cost cuts on this latest leg lower in crude oil. >> ups has done a deal. $1.8 billion this morning. we spoke to and this was rumored earlier in the week. we spoke to the ceo on tuesday. he wouldn't talk about the deal coming but he did talk about what they were trying to do with acquisitions. take a listen. >> this is a continuation of the strategy we've talked about before. we look at opportunities that are out there, and do we have the present capabilities or do we need to add those capabilities. we look at geography, and it's a combination of things and our strategy has been a mixture of organic and nonorganic or

inorganic, and it will continue to be that way. so we're always actively looking. >> so the acquisition here is basically a broker of trucks. the fastest growing area of logistics is companies that want to hire trucks that are not within their own fleet and full trucks, not a ups half truck, a full truck to transport the cargo around the country. they are a broker, a technology company connecting with 35,000 contractors. they can address the area of the market. the fastest growing area. not buying any fleets. it's more a brokerage company. >> all right. exxon and chevron by far the worst performing dow components with the index down about 15. let's get to bob on the floor. >> reporter: as the stocks guy, i love to start the day talking about how important earnings are. unfortunately, that's not what's

important today. what's really important was the employment cost index numbers. the market moved on that news. take a look at the s&p futures. i don't normally put up the futures preopen but i want to show you what happened when the eci came out. we moved 8 points and maintained. that's a noticeable number. ten-year yields dive on this move. inflation is nowhere to be found in the way they're measuring the numbers and that is greatly reducing the chances of a september rate hike. that's why we see the move up in the markets and you can see it again in interest-rate sensitive sectors which would move when ten-year yields move down. guess what's leading today. the utilities and reits. e americaning emergeing markets are also better an interest rates. and the big earnings releases, exxon and chevron. chevron was a bit of a mess

because it was very complicated. i want to concentrate on the fact besides the weaker upstream profit they saw, the key for exxon is to look what they're doing with the cash they have. that's what the company wants everyone to focus on. right now they're conserving cash. they're cutting back capital spending and reducing the buyback. they've been a huge buyback company for 15 years. they did $1 billion in buybacks in the second quarter. they're cutting it to $500 million for the next quarter. they're not cutting the dividend. they're maintaining it at $0.73. it's start they are saying they're not cutting the dividend. look at the yields here in these big companies. shell, conoco chevron maintain their dividend as well. exxon mobile shell went out of the way in the call yesterday to say the dividend is safe. they repeated it several times.

so chevron, they were really a bit of a mess. they have write downs and project suspensions. it's complicated but all you need is look at is the earnings. $11. the estimate is $3 with the 80-cent miss today. those numbers are going to come down rather dramatically. let me note you mentioned, simon, royal caribbean. at a historic high as far as i can see on that. it's a historic high at $89 and the guidance was raised. april earnings were healthy and the guidance was healthy and continues to be well booked into the fall. when thing i want to note on tyco, revenues down 6 %. here is the company every day i point out one company getting killed on the dollar. revenues down 6% compared to a year ago. all of that was due to the strong dollar. >> major theme during earnings

season. thanks, bob. as bob said treasuries are one of the focal points. let's go to rick in chicago. >> reporter: good morning. it wasn't only interest rates. i'm starting where i saw the most aggressive behavior in the form of trade. that was foreign exchange. look at the dollar index. intraday, two-day, month today. this was big. this index, historically small change really does reflect a multitude of issues. we could see on interest rates it reflects the notion of pricing and prices but for the dollar in this big move and remember, it was down a quarter of a cent before i released that number at 8:30. it's now down about 1 and 11. close to a e penny drop. that most likely is investors thinking this is going to affect the fed. let's look at a two-year.

it's down seven basis points since the release that went from 73 to 66. ten-year down about five basis points from 2. 25 to 2.25. and we are slicing through some important levels should we close under 2.24 to 2.25. and the last chart, maybe this is the most fascinateing of all. a yield curve trade. we all know it's flattened on the fed this week. it's right back up on the employment cost index. back to you. >> thank you very much mr. santelli. the likelihood of getting significant corporate tax reform this year is probably pretty small and probably has been with each passing day that we get deeper into the presidential race that likelihood probably diminishes as well. something i've been talking about here for over two years at least, of course are the corporate inversions.

at first when i would report on them, it was to note that these corporations here in the u.s. were buying smaller companies overseas but then inverting, taking their jurisdiction overseas to afford themselves a lower tax rate and most importantly, access cash overseas and bring it back and do what they want with it without trying to pay the u.s. tax rate. also using the inver gents to lower their u.s. tax bill. they lower how much they're earning here to bring their overall tax rate down significantly. if you may recall this trend picked up a great deal of steam culminating when we had companies looking to buy others and treasury coming in and saying, this is getting out of hand, and we are going to do something to try to stop it but stop it well not really? they made it more difficult but

they made the playing feeltd more difficult to understand. you foreign companies have an advantage over our companies that haven't inverted. yesterday the senate sub committee did a hearing. first up the ceo of aller gan who sold out the activist a company that had a lower tax rate because it inverted. here's what he had to say. >> looking back i'm convinced that allergan today would have remained an independent american company had it not been for the disadvantage kpauz caused by the u.s. tax system. unless congress acts i believe that many more innovative american companies will be lost. >> in 2014 the ceo michael pearson stated we were able to get a corporate tax structure which took our tax to one that was 3.1% which we hope to

continue to work on and move lower. um do you understand how that infuriates americans? how much lower do you think you could get the rate than 3. 1%? something to nothing? >> that's the former ceo of valueeant that has a lower tax rate. i'll end with this quote. if there's a villain in the story, it's the u.s. tax code and frankly, it's washington. they're not going to fix it but it's just making things worse. >> rick's got chicago pmi. hey, rick. >> reporter: well chicago pmi on the current read zoomed up to 54.7. we're looking for a number under

51. consider this. prior to this seventh release of chicago, pmi, four out of the six for under 50. this is four out of seventh. this is the secondest highest read of the year. january was the first. and all of last year were above 50 and the lowest was a read of 53.6. a disappointing series but this particular number is a breakout number of sorts. we'll from people from the organization that does the surveys from about 45 minutes to break it all down. back to you. >> rick thank you very much for that. when we come back the man picked to become jcpenny's ceo steps in this weekend. dow down a quick 41 points and we're back in a moment. i thought you said you were gonna test drive this buick first. i am test driving it. for 24 hours. where's the salesperson?

at the dealership. nice buick! i guess that test-drive last night went well. actually, i'm still on it. you know, we're test-driving this buick for 24 hours, right?. yeah. so what are you doing? test-washing it. okay, well let me know when you're done, i'm gonna take it test-shopping. introducing the buick 24-hours of happiness test-drive. it's on your terms and a better way to take a test drive. ♪ ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great.

are you moving forward fast enough? everywhere you look, it strategy is now business strategy. and a partnership with hp can help you accelerate down a path created by people, technology and ideas. to move your company from what it is now... to what it needs to become. 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. at&t's innovative solutions connect machines and people... to keep your internet of things in-sync, in real-time. leaving you free to focus on what matters most. arvin ellison. marvin elle vonn. ellison.♪ >> this weekend a new era begins

at jcpenny. marvin ellison will become the third ceo in the past four years. kourtney reagan is in daily city california with the story this morning. >> reporter: good morning. that's right. marvin ellison has been working side by side with mike ullman for the past ten months as a board member. this is jcpenny's way of ensuring a smooth transition especially after ron johnson was ousted and mike ullman had to come back. prior to jcpenny, he was at target and home depot. most of the experience is in operations and logistics causing some concern about his lack of merchandising experience in soft goods but they aren't worried about it. they know ellison from the time at home depot. he connects well with the mass merchant consumer and he can always hire people in areas

where he's stress strong strong. while they crafted the current strategy and the upcoming holiday strategy ellison enherts a fragile retailer. at the peak they generated $32.3 billion in annual sales and just $12.2 billion in annual sales. they've shed 41% since ullman has returned to jcpenny. now, the company has set some pretty strong financial targets. some analysts are concerned they're so optimistic. some say what they have to do is maintain current momentum and step it up and improve profitability and free cash flow which that has proven hard today. he said he may make some strategic changes but change for

the sake of change is overrated. as a leader, he says he likes to provide clarity of the vision and strategy to everyone to employees and customers. he likes to put people first. most think he'll be a fresh perspective on jcpenny but some are not sure it's going to be a game changer. back to you guys. >> it's a big job. up next on the program, netflix, reid hastings taking a play from pixar's play book. we'll be right back. ♪a one, a two, a three percent cash back♪ next. there's gotta be a better way to find the right card. creditcards.com lets you compare hundreds of cards to find the one that's right for you. just search, compare, and apply at creditcards.com.

shares of netflix have more than doubled this here and the subscribership is on the rise but reed hastings is not resting. he says netflix wants to be a leader in content as well as streaming technology saying when you look at studios like pixar that combine great story telling and great technological aspects, that's where we want to be. he said we've been growing in our approach to original content. take "wet hot summer". the it's not black and white that either you own all of it or none it. interesting evolution in their

strategy on a week where hbo says they're going to take game of thrones for a few more years. it's all about the brand of your show. >> and binge watching. none of you are excited about that show? >> that's gone to amazon. top gear generates 350 million viewers a week. they should have grabbed that. >> netflix up 128% this this year. best performer. number two? amazon. >> way behind. >> yeah. almost half of that. >> when we come back some breaking news on consumer sentiment at the top of the hour followed by citi's chief strategist on where you should put your money right now. the dow is down 50 points. don't go away. j

i take prilosec otc each morning for my frequent heartburn. because it gives me... zero heartburn! prilosec otc. the number 1 doctor-recommended frequent heartburn medicine for 9 straight years. one pill each morning. 24 hours. zero heartburn. you total your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay levkovich.

good friday morning. welcome back to "squawk on the street." i'm quintanilla with sara eisen, simon hobbs, and david faber.

we close out the month with losses. dow is down almost 50 points. the s&p is down about a point. a lot of earnings to watch. >> this is our road map. the reason why the dow is down 51 is because exxon and chevron are out with earnings and both of them are in negative numbers. exxon posting the strongest profit in six years. >> and linkedin with sharp swings downside. an internet story. underlying fundamentals worrying investors investors. >> and new york times columnist will be here. this one on the -- this one on the $7.5 billion lesson microsoft learned from nokia. >> let's get over to rick santelli. we have breaking news. we don't have him quite yet but we're awaiting breaking news on

consumer sentiment. he broke in the last year chicago pmi after earlier data which was a little bit worst than expected on employment cost index. let's go to rick dow on consumer confidence. >> reporter: all right. we have some camera issues but not michigan issues. 93.1 read for july. we were looking for something closer to 94 but it's not a bad read especially following chicago. but all this does get dwarfed based on the historic small increase quarter over quarter, the employment cost index. 220 has been where tens have rested ever since that number. 54.7. 93.1 on michigan. back to you, sayre are.ra. >> the dow and the s&p in the red today. does this put a dent in the argument for the fed to raise

interest rates? clearly not if the dow is down 44. tobias, as we go into the weekends what's our take away this week? >> the earnings have been okay but people have been worried about some of the industrial companyingsies or the energy companies or the commodity companies in terms of the softness. this pmi number is interesting. chicago pmi looks strong. durables numbers have been pretty impressive but there's been weakening in other industrial data. people are looking at that and getting nervous. i'd have the look at the data in more detail. i'm not sure that one is that disturbing. >> let's deal with the oil majors. you can siend of see this coming. we were down almost 20% on the stocks coming in today's session

in the year. >> i think oil is a difficulty. and historically energy prices sell close to oil prices. not surprising. your revenues and earnings are impacted. i'm somewhat surprised that investors have been as -- how should i put it shocked by some of the results they've done. not just in generally but generally commodities. >> i guess it's the point where you say the dividend might be under some threat. the situation is so bad they can't cut their costs. chevron was paying out four times as much in dividends and capital investment in the first quarter as it received in cash. >> i would say that companies generally don't like to cut their dividends unless they're forced to. they might cut back on their buyback programs first. it's a bad headline to say you cut your dividend. it's less bad to not have a headline.

>> your note i want to change to the fed for a minute. you don't write about the fed very often when you forecast the stock market but you did write a lot about the fed now. are what are you telling your clients and what does history teach us about what to do? >> history isn't that bad. the one really bad year on the first fed rate hike was 1973. on january 15th, the fed raised rates. three days later the market peaked. every other time stocks did pretty well. the average move from that date of rate hike to the peak of the equity market was two years later. that was the average. again, the shortest other than that three-day was six months. and what happened in 1973? water gate. >> not the mention an embargo later that year. >> in january we had the water gate hearings begin. a couple months later, the vice president resigns, a couple

months later fall of saigon and then you get the oil embargo. >> but more than the history lesson this time is it is very different. even in china, they're bieguying stocks to try to support the market. it's a major time for central banks. if you look at some of the corporate noises that we've had, they are warning about this economy as well as others. >> so one of the things we did, and i think this is the note sara was talking about. we looked at unemployment. we looked at jobless claims cpi, even commodity prices and looked at where they are relative to fed funds and historically how they look. there's this clear chinuationdelineation. they keep talking about normalization because it is kind of abnormal relative to what you've seen in history and we

have weakness in commodities and people are worried about it but that tends to be more about a china story than a u.s. story. there's this view investors have that if commodities are weak inflation won't be a problem. people look at the cceci number but if you look at the number of employees looking for work it is clearly signaling that we're going to be getting wage inflation over the next couple of quarters. i'm of the belief that the fed kind of has to start to move in the terminology of normalization. not tightening. and there's a lot -- i don't think the world changes if you go from 0 zero to 5 basis point. that's a hard argument to make. >> when you hear people talking about a jarring on the markets, it's just semantics, isn't it? >> i don't generally argue with al

billionaires. you can have a backoff. if you look at the history, the bond market has usually been a good sign. the '87 crash is a good example. we're not seeing kind of this big break down in the bond market that signals a cigbig break down in equities. that doesn't mean i wouldn't want a job offer. >> blatant. >> speaking of arguing with billionaires carl icahn and others, all these titans of business saying the market is frothy or they're running out of eas or it's leaning on pillars like m&a. do you have a problem with that? >> i think you can make that argument in some areas. health care we don't like. we think the m&a story has become speculative and it's an

area that i wouldn't be chng. i don't think you can make that argument in areas like technology or in financials. >> i was just going to ask about the divergence between technology. the nasdaq s&p relative to the dow. where do you want to be? >> we probably want to look at more value as rates start to move higher it's -- it's secular growth you have to worry about. the incidence of diabetes doesn't change based on gdp but the demand for other products picks up. all you get is higher rates and discounting and working against you. compounding is a double edged sword. >> we'll leave it there. have a great weekend. >> currently the u.s. equity strategy of citi currently. >> speaking of technology

seeing volatile swings were linkedin. julia has been watching all this and joins us now. >> simon first linkedin shares surged in on better than expected with higher guidance for the rest of the year but then shares did an about face during an earnings call. the up swing wasn't due to an up swing in business but due to an acquisition. the company saying that the skills training company contributed $18 million in the second quarter, expecting lingd lingded inn to contribute money. that's up from the $40 million previously projected but the company's display ad fell. a bigger drop than in the prior quarter. the company saying advertising is an area where there is limited visibility and the growth rate of the premium

subscriptions business as well as hiring solutions is slowing. the ceo focussed on growth in china where they reached the $10 million milestone. he also talked about the global. >> we're excited about expanding the global footprint for linda. we think it's a good fit. and we're looking forward to being able to drive that expansion as soon as the integration is further down the road. >> he also talked about the product pipeline saying it's as strong as he's seen it in the last six years but that has not seemed to reensure investors. >> we'll see you soon julia. thanks a lot. let's discuss exxon and chevron. jackie at the new york america with more. >> not great earnings is the headline coming out today.

and exxon and chevron are taking a hit. down $0.50 at this point. around $48. that is a critical level of support when it comes to oil at this point. let's broaden out the conversation and talk about what she's companies have been telling us. we know from the refining side of things not only from big oil but from the refiners that earnings have actually been okay. and that is because there is strong demand for gasoline and diesel out in the market price right now but when it comes to oil, the big concern right now is demand in the second half of the year and that's why these companies are not only seeing their quarters hurt but they're going to be expecting to see the second half of the year be weak. that's what we've heard from the big companies, conocophilips yesterday. also a slew of layoffs in the industry. royal dutch shell and chevron announcing this week that they're laying off more people. not just blue collar rig workers out in the field. now we're talking about scientists and engineers as well. the big picture here is that lower oil prices domestically,

are hurting these companies. it is something that they're going to have to work onto try to reduce costs and streamline operations. obviously they're doing everything they can but there's only so much pain that they can actually take and this brings us to the broader question we've been asking. how low can we go into the second half of the year before we see production cuts come into play where oil prices rebound. a lot of analysts think we could get that three handle still even though we're in this new $45 to $50 range. something to watch is the stronger dollar. that have a big impact on oil. later today we'll get rig count numbers. are we adding numbers or sub strakting them? a lot of variables when it comes to the oil industry right now. back to you. >> we will see you at 1:00 if not before. thanks j thanks, jackie. when we come back more on the fallouts on the disappointing numbers from chevron and exxon.

want bladder leak underwear that moves like you do? try always discreet underwear and move, groove, wiggle giggle, swerve, curve. lift, shift, ride, glide hit your stride. only always discreet underwear has soft dual leak guard barriers to help stop leaks where they happen most

and a discreet fit that hugs your curves you barely feel it. always discreet underwear so bladder leaks can feel like no big deal. because hey, pee happens. get your free pair and valuable coupons at always discreet.com

it's been a tough year for chip makers as reports grow about declining sales. there are some bright spots. martin, it's good to see you again. good morning. >> good morning. thank you for mosting me today. >> you have revenue up 19. you beat i think your guidance was good. what is going on with you that's different from the other players? we keep hearing miserable things about supply and pricing. >> i think one of the headlines for the company and really it's a two to three-year-old story with a lot of opportunity in the years to come. it's an outperformance opportunity as a by-product of having the right products for the right technologies for our customers and our market price plais which is a marketplace defined by equipment. for us clean equipment is right in the sweet spot of enabling

the technology inflections of the industry, 3 d device and multiand advanced packageing. they're focussed on supporting their growth. exciting times for the company for sure. >> so some try to boil it down to as the chips get smaller, there are more steps in the etching process and that is going to lead for more demand for equipment like yours. is that right? >> i think that's a nice way to think about it. the substance of our company and our products in the supply chain is increasing in strategic relevance for our customers. we articulated in a meeting a $3 billion market expansion between now and the end of calendar 18. we are gaining market share as a by-product of the competitive strengths of the underlying products and services of the company. and this calendar year if we execute of the stated plans that we have will be the third

successive year of 20% growth and history is interesting and a moment of time to feel good about but the opportunity, i think, is even more exciting. and that's our primary focus today. >> the space has been exciting when it comes to m&a. broad come avago, three of the huge deals we've seen in the semi conductor world. how is the consolidation impacting the industry. and how do you view now that there are more leaner rivals in your space? >> i think consolidation is a natural part of responding to the challenges of the semi conductor industry and the supply chain, and you've seen a decent amount of evidence in the last three years, particularly there's been consolidation. reality in our business today, the top five customers represent 70% of the spending of fabrication equipment.

the director answer to your question is there are some big guys we need to support and respond to and consolidation, i think drives innovation. there's a healthy competitiveness. i would say there is less cyclicality as a result of the consolidation, but any one customer can now impact us and our peer group more significantly than ever before. i think less cyclicality and less variability on a quarter to quarter basis and our focus is on the long term profitable and sustainable growth of the company. >> britains get everywhere. they're everywhere in this country but putting that to one side, you're making the equipment and not the semi kun duck or thes. can you help us from the announcement of intel. they said they have a chip that is 1,000 times faster and stores ten times more data.

not as fast but it keeps the data when you switch it off. how important is this break through through? is it going to change your lives? >> it's a come menation from enterprise for more performance and more power management, lower cost devices. i don't think that reality is slowing down at all. and the solutions are now more diverse than ever so the days of the killer app, the days of the singular device that defines the reality of the semi conductor is long gone. and there are road maps of customers. the 3-d device architecture was a good example of that innovation innovation, and it has a place in the marketplace. we're excited about an opportunity to support those customers and others in turn

with their road maps. so more diversity, i would say, than ever before. exciting times. >> yeah. stocks had a nice two-year run. 60% gains. more than double the s&p. martin, please come back. >> thank you very much. >> when we come back, if you work in finance, this could change the way you communicate. a look at symphony, the new messaging system for banks, and chevron and exxon out with disappointing numbers this morning. we'll talk to an analyst fresh off the conference call to dig into the numbers next on "squawk on the street."

♪ >> well it's still in test mode but there are high expectations for sympathy. backed by 14 financial firms.

sympathy symphony is take aim at bloomberg messaging. mary thompson sat down with the ceo for more. >> reporter: for wall street. the service terminal costs about $20,000 per year. most use it for one reason to instant message. when symphony launches in september, it'll have a cost. some firms may take away a lot of people's bloombergs and save a lot of money. >> we are not building a bloomberg terminal. we are building a communication platform. >> with symphony the groups can access documents without constantly opening and closing attachments and immediately

connect with other users in the system across companies. they're saying symphony's backers provided input for the systems which they could use to replace the hodgepodge of systems they currently use to communicate. >> what they want us to do is to simplify the way they communicate internally and externally, but as we do so they want to make sure the data is protected and they want to make sure they're compliant with the regulations. >> they will track all activity by youusers, 50 companies use it now. monday there is a soft launch with more users and then in september we'll all be able to down load a test app for free. >> good stuff. when we come back, the $7.5 billion lesson microsoft learned from nokia. jim stewart will be ginning us with that.

we're back in just a moment. dent's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. to folks out there whose diabetic nerve pain... shoots and burns its way into your day, i hear you. to everyone with this pain that makes ordinary tasks extraordinarily painful, i hear you. make sure your doctor hears you too! i hear you because i was there when my dad suffered with diabetic nerve pain. if you have diabetes and burning, shooting pain in your feet or hands, don't suffer in silence! step on up and ask your doctor about diabetic nerve pain. tell 'em cedric sent you.

a new season brings a new look. a chance to try something different. this summer, challenge your preconceptions and experience a cadillac for yourself. ♪ take advantage of our summer offers. lease select cts models in stock the longest for around 399 per month.

good morning, everyone. here is your news update at this hour. zim baub way authorities say they will seek the extradition of a dentist who helped kill a lion. the cabinet says the government is taking the issue seriously and appreciates the international support it's received through social media.

>> an experimental eastbound lane vaccination is showing promise. within ten days of vaccination, the vaccine was 100% effective in protecting against the disease. california fire crews responding to another brush fire that is threatening structures in sacramento county. there are currently over a dozen fires burning in the state. and beijing has been chosen to host the 2022 winter olympics becoming the first city to be awarded the summer and winter games. it beat out a city in kazicanother. >> big oil is taking a major hit today. exxon and chevron missing

estimates. exxon reporting the lowest profit in six years. and it's even worse for chevron with the weakest earnings in 13. joining us now is an energy analyst at raymond james. a busy morning for you. trying to find out what they are reporting. where did you end up on chevron? >> a very messy quarter with all kinds of special items. so the headline earnings is $0.30. the street was $1.16. now, the clean number once we add back some of the special items, it's more like $0.60 but that's still, obviously, not great. that's half of what the street expected. now, we know that production was not the problem. that actually was up 2% year over year which is pretty good but clearly on the cost side they did not squeeze out quite

as much as i think some people expected. they are however, and both of these companies actually are showing the austerity that is really dominant across the value chain now. chevron's cap ex was down 16%. we've been saying this this entire herbings cycle. oil and gas companies cutting projects and rigs everything is cutting cut. and, of course these austerity measures carry with them the seeds of a future oil price recovery recovery. >> but in the meantime, maybe you can remind us of dividends that exxon and chevron are paying. for many people they're transfixed by whether or not the dividend streams are safe longer term. goldman put out an announcement

suggesting that people should sell chevron and buy exxon because longer term there was a big difference between the two as to whether the dividend stream and the growth were sustainable. would you agree with that? >> i don't. i think that in both cases the dividends are entirely safe. management teams of these two companies and in general, you know, oil and gas large gaps more broadly, they view -- it is inconceivable they'd cut the dividend based on mother's day prices -- commodity prices. in the last decade we've only seen dividends cut and that was bp after the worst u.s. spill in u.s. history, not based on anything that happened with oil prices. i think the dividends are entirely safe. what we have seen both companies do in addition to cutting cap

backs is exxon's buyback has now been cut by more than 80% since the beginning of the year. chevron's buyback has been halted altogether but the dividends really are priorlyity number one for these two companies. >> we'll let you get back to it. >> bullish news for windows 10. it has been installed on more than 14 million devices since launching wednesday. this coming off of a record loss last quarter partly due to write downs from the nokia deal flop. our next guest calling it a $7.5 million lesson. much of that write down was overlooked in an effort to look at how microsoft is reloading

itself. >> let's look at this for a second. first of all, i think calling it is's a lesson is nice. in the technology industry that's what a failure is a lesson. what did they get for their $7.5 billion? that's a huge number. this is bigger than the entire market cap of many companies and it went up in smoke in less than a year from a deal that even some people inside microsoft thought was pretty crazy at the time. but let's give microsoft a break here. many people aimed for the fat apple margin the huge global market. google failed. amazon failed. now microsoft has failed. they're in good company but this is a remarkable event. one person i talked to compared it to the extinction of the dinosaurs. >> to be fair the deal were nokia was doin underwn under balmer.

now nadella is in there and trying to transform the company. >> i think it made it easier for him to deal with it but you can't ignore the fact he was there when it happened. he voted against it but then came around and supported it. the strategy was they had to do it to keep their mobile first operating system. >> and you think they should have tried to make that work? >> no. i think they never should have done it. that's easy to say, though. >> that's exactly what -- the story at the time it was blatant. balmer wanted to save face because if nokia switched away from their mobile flat form no one around the world would have been running microsoft mobile. that would have been a major slap in the face. they bought it to save face didn't they? >> that's an awfully high price to save face. i don't think it was just that. >> i think they thought this is a strategy. we have to double town and stick

with it. and they did have support at the time. i mean many people have been lured by the apple model which is doing so well in this area but it's really only apple. even samsung has a big market share but they're not really even making money. what microsoft now has today. they have a new strategy. they disagreed with me aren't you embracing the google strategy. they did no. we're still making phones and other things and their wrist device, but nevertheless, they're going to make it available. they will run on everything. so they are moving clearly, in that direction. it's the only choice they have now but the mobile first strategy, it's over. they missed it and they con seed that. i think the question now is if they've learned this listen they say their lesson is we have to get ahead of it and innovate. the question is are they doing

that? that's where i run to the wrist. >> you think about the number of mega cap companies that are in the strategic retrenchment, some of the health care getting out of generics microsoft on phones google finding fiscal discipline. they're not plowing into the future the way they were five years ago. >> google is investing heavily in the future but you see a lot of the companies, you can mention ibm as well and they're kind of managing decline. and by the way, there's a long life in that sometimes. i mean ibm has made a lot of money. it hasn't been doing so well lately. it makes gestures toward trying to reinvent itself but it hasn't. and microsoft, another success with windows upgrade but how long is the windows dominant gran chiez going to last? maybe a long time but it's not a growth engine. the question is can they

succeed and get ahead of the next wave and history isn't really very encouraging. >> it has been an eventful tech quarter. netflix had a good quarter. apple disappointing. >> what i find fascinating about technology is it continues to be the single most innovative area in global business but it's filled with opportunity and peril. they rise and fall in this area with unbelievable speed. if somebody had said a year ago that nokia would be all but worthless a year later, i would have been dumbfounded, and you have to say if it can happen in smart phones it can happen in anything. i think that's why apple deserves a lot of credit. they act like they're constantly on a threat. we are dinosaurs. no matter how successful you are, if you're not careful, you will get hit by a meteor.

>> you should see the twitter feed. it's popping. >> always a glowing reaction to jim stewart. >> next on the program, a new ipo on deck. another fitness company planning to go public. plus kara swisher on what is link on at linkedin. that's later on "squawk alley".

don't look now, but lately steel stocks have been soaring. what is that rally telling us about the economy and should you buy up into this previously beaten up sector. more "squawk on the street" coming up next.

can it make a dentist appointment when my teeth are ready? ♪ ♪ can it tell the doctor how long you have to wear this thing? ♪ ♪ can it tell the flight attendant to please not wake me this time? ♪ ♪ the answer is yes, it can. so, the question your customers are really asking is can your business deliver? the fitness craze head wall street j sole cycle. they filed for an ipo. they launched back in 2006.

it operates 2838 studios. almost 50% revenue growth. we talked to the co-founder back in 2013 and asked her about the plan for the future. have a plan. >> we did a strategic partnership about two years ago and they are helping us expand. they are leaning on them for resources and capital and that's going great. but we have a big vision for soul cycle. we really see the potential of soul cycle going all over the world. and we have no ceiling that we've put on ourself at this point. >> all right. they are majority owned by equinox. going bigger as a fitness craze. mostly in new york and california but they are showing revenue growth. this is the sort of idea that it's not just an exercise class. it's more like a lifestyle phenomenon. >> yes. >> a cult. >> not a huge barrier to entry, though, is it putting bicycles

out and a bit of music. >> i don't know. they have fanatical fans. >> minimal spending on advertising, and the filing has been called a manifesto because they go into the cult aspect of the brand, but the idea that they can eventually move into the home has caught some people's attention. if soul cycle decided to start selling bikes you could put in into your home and started streaming. >> that's an interesting plan considering people go crazy to get in into these classes. >> you'd have to have a bigger apartment. let's go to rick. >> as everybody knows, there's been a lot of data today. and today, in particular, we saw the chicago purchasing manage improve. second reading above 50 for the year. alice, thank you for coming. 54 .7. we avoided three under 50s.

that means four for seven in terms of under 50 but it wasn't a bad headline read. >> and this report it looks really good at first glance. all components were good. we don't get that much and i'll give credit where it's due. a nice bump up in new orders. production up nice and we got what we talked about last night which was the inventory build. inventories up. we saw the start at the mid july and through the end of the month. we expect a little more going forward but some areas of concern here. and i want to start with the order backlogs. this is your gauge of future orders. it was up nice still in contraction. >> let's explain this. everything was up but just because you're up doesn't mean you're in expansion mode. these ups are in the red in terms of under 50. >> right. this is coming off of a five and a half low. this isn't impressive to me. >> if this isn't impressive and

it's important, how do we reconcile some of the new orders in production against the red numbers in terms of contraction? >> right. what we have to look at is em floimt employment is coming off of a five and a half year low. still in contraction. been in contraction four months this year and you have to correlate it to production. this production level is way too high for this. something has to give. >> it's like wine and steak. when you look at it in terms of pairings, the pairings don't add up. so let me summarize and make sure i'm thinking the same lines. if you take a first glance at the meat of the report you come soft conclusion the big inventory happy days will be here again. you say look at it in the context of all of the report. >> right. the other thing, employment, this means there is a lack of commitment toward jobs. even when you get new orders and your production is high there

is a lack of commitment because your order backlogs are low. there's nothing to lean on. and then the supplier deliveries. during the last fall when we were pumping along with the high 60s on the barometer, the supplier deliveries were getting choked. there was a huge bottle neck. you couldn't get your stuff. this is no good. >> so all that is over and we're still having issues. let's back and fill in the last minute or so. what i sense you're saying is that this report -- what did the respondents say? what's their opinion. >> overwhelmingly they're saying business is slow to flat. the other big thing is we are at a critical point. we've built our inventories and we'll continue to do that next month. the key thick is orders. are we going to continue to see this increase and the backlogs. >> we're out of time. al its, it's been conferral. one final note with the

employment cost index quarter over quarter change small and the questions asked about wages in your survey that were also rather down beat. i want to hook that in together. thanks alice. back to sara. >> thanks rick. up next tom brady's appeal of the suspension is coming no new york. the legal show down and what it means for the league. and it is the biggest gainer in the s&p. coca-cola enterprises up double digits. reports of merger talks between multiple bottlers in europe including one that is owned by coca-cola. stocks mixed overall on this last trading day of the month. an up month overall for the s&p, the dow and the nasdaq. "squawk on the street" is back in 2 two. ♪ 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. ugh! heartburn! no one burns on my watch! try alka-seltzer heartburn reliefchews. they work fast and don't taste chalky. mmm...amazing. i have heartburn.

alka-seltzer heartburn reliefchews. enjoy the relief. hi my name is tom. i'm raph. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here we're here and we've got your back. legalzoom. legal help is here.

we haven't heard from the court in a while. do you anticipate they'll say anything during camp? >> i can't speak for 90 players and another dozen or so coaches. just speak for myself >> final non-football question. did you happen to notice the

"cheaters look up" banner and your reaction to it yesterday? >> i don't know what you're talking about. >> didn't hear that plane? >> what plane? >> the ever enlightening and upbeat bill belichick, head coach for the new england patriots earlier this morning skirting questions about his star quarterback tom brady and the ongoing deflategate saga. the nfl players association is appealing his four-game suspension in federal court. last night the judge ordered both sides to tone down rhetoric and get together to reach a settlement. join us founder of steinberg sports and entertainment, lee steinberg. where do you think this goes from here? do you think the judge will have a significant impact on getting both sides to town down their rhetoric? >> i think so because this public relations fiasco is the last thing that either tom brady and the patriots need or the nfl

needs. this is the week the training camps open so all the discussion should be ecstatic joy that football is back and instead it's been dominated by tom brady. now, the preyedy and the union will try to get an injunction to allow him to practice and play until his lawsuit's resolved. it's tough to get an injunction but this has turned into the major sports story at the worst possible time in the same way that they released the first facts on the report the friday before super bowl week. so we're starting this season the way we ended last season which is with controversy. it's a no-win. >> yes. i have to admit to being somewhat baffled by this entire case to a certain extent but i listen to kraft the other day, we took it live on our air. he really went after the nfl and goodell. is there going to be more to

come, do you think, in that battle, given the influence that mr. kraft as owner of the patriots has and the fact that goodell has been under fire for not just this but of course ray rice and a number of other moves? >> so the nfl has been somewhat tone deaf in a variety of different cases here. normally they're right on point in terms of the fact that the nfl is in its primacy, it dominates american culture, and to have this happen with bob kraft, who is as respected and powerful an owner as there is and very close to goodell, this is inner warfare between people that normally would be great friends. this is a super bowl winning team which ought to be celebrated for that instead we're talking about cheating. >> don't both have to meet the rhetoric to be super high. brady is fighting for his imable and commercial future on the one hand and on the other side has

to show it's not tone deaf to someone destroying their phone records or phone in the same way it was tone deaf to domestic violence. both of them need this to run high and loud don't they? >> so you have to ask yourself why is brady fighting so voe vociferous vociferously. he had said last fall i like to throw a deflated ball you know i'm hypercompetitive, if for some reason this stepped over the line i'm really apologetic i didn't mean to it would have been over but every single news report conflates the name tom brady right now cheating and it keeps going over and over and over again on the repetitive news cycle, so unless he really thinks that he did nothing wrong, he's damaging his image right now. >> lee we have to leave it there. we'll be back to that no doubt about it. lee steinberg thank you. let's see what's up an quack alley with john.

>> linkedin down about 8% and apple due out with a new apple tv box perhaps later this year. what's going to be inside it? finally flet lyly lyly netflix, first wanted to be like hbo, now pixar? we'll check that and more coming up on "squawk alley." you may think you can put off checking out your medicare options until you're sixty-five but now is a good time to get the ball rolling. keep in mind medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans insured by unitedhealthcare insurance company come in. like all standardized medicare supplement insurance plans they could help pay some of what medicare doesn't, saving you in out-of-pocket medical costs. you've learned that taking informed steps

along the way really makes a difference later. that's what it means to go long™. call now and request this free [decision guide]. it's full of information on medicare and the range of aarp medicare supplement plans to choose from based on your needs and budget. all plans like these let you choose any doctor or hospital that accepts medicare patients and there are no network restrictions. unitedhealthcare insurance company has over thirty years experience and the commitment to roll along with you, keeping you on course. so call now and discover how an aarp medicare supplement plan could go long™ for you. these are the only medicare supplement insurance plans endorsed by aarp an organization serving the needs of people 50 and over for generations. plus, nine out of ten plan members surveyed say they would recommend their plan to a friend. remember, medicare doesn't cover everything. the rest is up to you.

call now, request your free [decision guide] and start gathering the information you need to help you keep rolling with confidence. go long™. ♪

good morning, it is 8:00 a.m. at linkedin headquarters in mountain view, california, it's 11:00 a.m. on wall street. "squawk alley" is live. ♪ >> welcome to "squawk alley" join us, kara switzer and julia boorstin and the dow is back to positive territory after a 50-point drop on