world. >> encrypt that. >> that's why -- >> get ready for that world. freedom will win out, as it always does. okay? >> yes. >> why you think this is freedom? >> i hope so. >> becky, thanks. you're the nice one here. >> good to see you. >> high bar. make sure you join us tomorrow. right now time for "squawk on the street." good morning and welcome to "squawk on the street." i'm kelly evans with simon hobbs and michael santoli live from post nine at the new york stock exchange. futures looking for a lower open. the dow implied to open lower by 63 points. the s&p 500 giving up six. the nasdaq ten. european markets kicking off their shortened trading week after the easter monday holiday yesterday and doing s in negative territory. the dax down about 0.4%. declines for the ftse 100 about

the same. france bucking the trend, up about 0.3. the ten-year note, a gauge of risk sentiment across the markets. the yield falling. wti crude, almost down 3% today. the latest s&p case-shiller home price report has been released. prices nationally up 5.4% in january from a year earlier. our road map starts today with apple. the fbi dropping its case reported it was able to break into the san bernardino gunman's phone. we talk to apple experts about what this means for online security, apple customers and laws going forward. >> and fed anticipation day. john williams urging the central bank to stay on track with rate hikes. janet yellen speaks this afternoon. how hawkish will she be? >> and reports out that jetblue and alaska air planning to bid on virgin american.

the hijacker of an egyptairplane has been arrested and taken into custody. nancy holgrave has the latest. >> reporter: about five hours after this unfolded, the alleged hijacker on board the aircraft has been taken into custody. officials are working to determine his exact identity and motives. sources have said that during the negotiation period with the alleged hijacker, he appeared unstable and for about the first three hours of the negotiations he had asked to see a woman who they believed could be his ex-wife. now, we have not been able to confirm that specifically as other sources said he went on to talk about the removal of freeing some female prisoners in egypt as well. nevertheless, sources telling nbc that he did seem unstable. some authorities have named him

as seif eldin mustafa. we are still trying to work out his exact identity. other sources said he was asking for amnesty and to speak to officials from the eu. the good news here is that we do know all passengers on board are now safe and that the incident has come to an end. a lot of mystery and confusion surrounding the motives. guys? >> memories of the 1970s, nancy, thank you. the government says it has cracked the iphone of one of the san bernardino shooters without apple's help. as a result, it's dropping its legal case aimed at forcing the f company to aid the fbi in unlocking the phone. as a result of the government's

dismissal, neither of those things owe kurd, this case never should have been brought says apple. this is a stunning revelation. >> in a way we thought this might be the outcome. it doesn't solve the actual question it gives everybody a way out of this near-term fight but only to set up a constitutional battle really over the privacy and security of your phone. >> it always seemed that there was sense that the stakes in this case were overstated on both sides. that the absolute need to get this information, the impossibility of doing it without apple's help seemed like it was perhaps more than the facts really merited. as you say, it just does defer the issue down the road for some other case or some other process to figure out. >> it arguably swings the case 180 degrees now. apple presumably may pursue the doj and the fbi saying what is the back door? this is our consumer technology.

we need to know what you have found in order that we can close this with perhaps an update to the operating system. according to the "washington post," there is a route they normally take relatively quietly under which the security forces would inform apple they found this flaw, or this back door. the question is how far apple will go in the other direction. >> especially because the company made such a pitch to consumers saying use our phone because we have the best level of encryption. >> want to quote from the "journal" saying the first round of fbi versus apple has handed the key queion to congress. either the 4th amendment permits warranted searches in the digital era or companies can put themselves and criminals above the law. >> welcome to the program, thank

you for sparing the time. >> thank you. >> what is your view here on this revelation? >> i think this has always been a case about precedent, not about privacy. apple didn't want to set a precedent about having to write code at the direction of our government or any government or entity that wants to access an apple device. so it's bad for business, as apple said. it sets a bad precedent and takes us to a dark place. so, i'm glad it's over. but it was a -- you're right, it's just a deferral. >> for many consumers arguably it's not over. now a third party has come forward and they can crack the iphone. presumably commercially that's damaging for apple. there has to be a commercial response. whether they come through with a higher grade of technology on the new iphones, which has been much of the discussion. >> correct. and they will. they will. make no mistake about it.

no code, no device is unbreakable. complete, answbsolute privacy i not achievable. >> andy, apple has stated that. that they did not ever profess that their devices could not be cracked without their own help. where does that leave apple in terms of its brand and the message that it wants to send to consumers about its priorities when it comes to these issues. >> i think this case put its priority with american free enterprise. that's a good thing. their image stands clear right now. they did not have to stand in the way of intelligence gathering that might help prevent terrorism. that's good, too. there is the security issue. it's just going to be -- they're going to have to continue ton a cycle of constant continuous improvement to get to a point where it's unhackable. that's really a point that's not achievable. >> andy, there are fervant views

on both sides of this argument deeply felt by a number of people. watching this conversation, there will be those who say apple should have opened the phone, that this country is at war with terrorists and on a war footing you have to take control. >> if apple decides to write code or a backdoor at the direction of our government that means they set precedent that another government or entity could ask apple to develop some kind of technology that might take us to a negative place. it seems like a good thing now with terrorism. it could be a bad thing for us in the future with some other question or direction from the government. >> i wonder, as apple already worked to tighten access to its cloud, one of the first things officials were able to access in

this case, then with the new phones launching later this year and going forward, should we expect again a heightened level of encryption and more difficult path again for law enforcement? >> absolutely. we will get better and better at encryption. but it's a never ending cycle to get to perfection because it's not possible. as soon as we create something, a hacker can hack into it. >> an early start for you, andy. thank you very much for your time. >> thank you. coming up, wall street's bracing for a big speech today from janet yellen. will she give any hints about a rate hike timetable in. also john sculley weighing in on the fbi unlocking the iphone. and let's take a look at futures. 21 minutes until we start trading on the floor of the new york stock exchange. the indication is for a slightly lower open.

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york. steve liesman is here with a preview of what we might hear from the chair. steve? >> kelly, a much anticipated speech by janet yellen. hopefully given more guidance to the market. not on how many rate hikes this year. that's decided in terms of the median estimate for the fed, probably two. but when? when do we get the next one? in the lead-up to the speech, shortly after the meeting about ten days or so ago, you had a bunch of fed guys come out and say april is a possibility. john williams of san francisco, denny lockhart from atlanta, if the economic data cooperates, jim bullard from st. louis and esther george, a voter who dissented at the last meeting. she wanted to raise rates back in march. that becomes one of the questions for janet yellen. we hope she will answer today. april or sometime later, after the fomc meeting last week, the market priced in september. you have the global growth weakness, she emphasized that,

versus generally better u.s. growth. yesterday as we reported the street took down the expectat n expectations for first quarter gdp, yet we had a strong jobs report from february. expecting a strong jobs report from march. how does she balance these conflicting signals? and there's the great inflation debate. kicking up on the core there, up above 2.3%. 2.34. while the core continues to come down. so, just some of the things we're looking for, how concerned is she about inflation? how does she judge u.s. growth and the risks from overseas? we have those decent housing numbers this morning. that weighs in as well. >> we'll have more on that in just a moment, steve. >> steve, what is the cutting edge of the discussion here? i think goldman sachs has a report out suggesting that actually the manufacturing sector on that index could turn

positive above 50 for t firhe time in a long time towards the end of the week. is the edge of the conversation, the cutting edge now interest rates may be rising and inflation may be rising faster than the market anticipated and that then becomes the market concern? >> you know, simon, the market will worry about something. you know, i've long maintained, if rates are going up for the right reason, it is less than a concern than the concern that the fed is making a mistake. if you have a manufacturing turnaround that adds to the better numbers we have in housing, what should be but aren't decent consumer spending numbers, you get a few more cylinders of the economy firing, then of course you should have higher rates. but it comes along with better growth and profits. >> home prices continuing to rise in january. a sign of things to come for the rest of 2016. the shiller home price report showing prices up 5.4%

nationally verses a year earlier. joining us now is david blitzer chairman of the index committee. david, the home prices have been doing quite well lately. maybe the sales volume is not back to boom time levels but prices are what does that tell you? >> it tells me that home prices are rising very rapidly, twice the rate of inflation. there is very, very supply. four, five months supply in the market now which is quite low. that's one of the reasons home prices have been going up. behind that we are still not building very many single family homes. in february we got construction numbers looking better. but february is in the winter where we don't build up in the northeast. we have seen home prices very song. i think they'll continue to be strong. if that's something the fed looks at, i suspect it is, it's something that will figure int their argument and it probably

points to a little bit of inflation around the corner. >> david, the way you framed that out there with prices rising largely because of lack of supply means the underlying activity level is not particularly high, therefore housing as a driver of the economy may not have such a great effect relative to prior cycles. how does that build into your outlook and the fed's? >> the piece of housing that drives the economy is new home construction. that finally in the last few years began to look better. but it's still very, very difficult. very weak. second of all, one thing that seems to be happening in the housing market is a lot of people feeling better, people wanting to trade up to a bigger highways, nicer house, in better neighborhoods. one is supply, and it's still not easy to get fipsing.

ba financing. banks have not forgotten about ten years ago. >> david, i wanted to weigh in on another way home prices weigh in to the economy, and that's through confidence. you see when home prices are up, consumers end up being more confidence. hopefully that can drive some spending as well. in the first quarter in january you had a big fall off in the stock market. you got to wonder if some of the rise in the home value may offset that. >> i think it will. there are more people -- more homeowners than stockholders in the united states, by in large. for those homeowners it's a big chunk of their wealth. they ought to feel a little richer now than a month ago. certainly richer than they did a year ago by 5.5%. which may not be boom times, but certainly could make people feel a bit more relaxed. it's a boost for confidence. and i think overall the u.s. economy looks better than most

people suspected at this point. too much noise from the political campaign among other things, but down the road some of the hawks of the fed may turn out to be good forecasters. >> david, you mentioned what is happening with the availability of credit. particularly for young people or for students or former students who have big student loans. the other way of looking at the housing market is in order to lift the boats successfully and lift the volume, you have to have people coming in to the bottom of the market as first-time buyers. what is their experience at the moment? you mentioned financial condition u what is their availability of credit, and how can we allow them in to push everybody else up? >> there is definitely a problem. there's a recent fed study that looked at first-time home buyers, especially those under the age of 35 or 40. it goes through all kinds of issues, neighborhoods, family

formations, own up and down. number one issue is getting credit and the big problem there is outstanding debt. whether it's student debt or credit card debt. it's a real concern. those people are not being able to come into the market. that's a concern for the way people feel about the country, but clearly an issue for the housing market. the irony is that you go back 10, 12 years right before the financial crisis and the collapse, these same kind of people had no trouble getting cred credit. and they got in trouble. this time, they're not in trouble after getting the credit, they're in trouble trying to get the credit. >> thank you. >> thank you. up next, art cashin will join us as we count you down to the opening ten minutes of trade this tuesday morning. or stop to find a bathroom? cialis for daily use is approved to treat

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let's bring in art cashin, director of floor operations, of course, for ubs what do you think will characterize the session today? >> obviously nothing happens until yellen speaks. last time i checked the volume in the european markets are 30%, 40% lower than normal. >> yesterday was a real low volume day. >> but it was a semi-holiday around the world. easter monday you had a lot of people. now everybody is open again. and they're not trading because they want to see where yellen comes. i think a lot of the fed discussion may end up relating to how the polls are going in the united kingdom because the june session for the fomc is

about four days before that vote. if the polls show it lopsided, then the fed might try to be more aggressive thinking they won't influence things. if it's neck and neck that will hold the fed back. >> it's really interesting you should make that commentary. didn't we go through this with china when they said hang on a minute, we won't raise rates, let's see what market does, and in a sense they missed the opportunity in their view? they should have gone earlier. they were trying to play catch u up. >> it can be a great economic event. it's not just political. it can have a wide variety of implications. if there is a spot, an opening, it may be the september meeting. >> you know, it's interesting

that you say there may not be an opportunity april seems like a long shot. is there some sense out there that markets are calm now. we have to seize the opportunity when markets are not in full panic mode to hold that possibility out there that april could be on the table. >> i think. if you look at the market's prediction of what they'll do, one of the reasons the markets come is because they don't move. >> april was supposedly inconceivable because of the huge revision to the gdp data. >> absolutely. when the atlanta fed moved gdp down under 1% that froze everybody in place. >> 2000 matter for the s&p? >> only because it's right about where the 200-day moving average is. so, the round number not necessarily. if you get down to 1990, could be a problem. >> nice to see you, art. have a good trading session. opening bell just minutes away. three hours from janet yellen.

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welcome back. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell is set to ring in just about a minute, brought to you by wwe. a company whose done the over the top streaming business quite nicely. a couple things to keep an eye on. we had the yen rallying or weakening, and we'll hear from janet yellen in a couple hours. >> this market has been pulling back, going sideways, but not a lot of selling intensity after that 12% rally. do you have any conviction coming into the market on either side yet? >> we have housing data. prices are up 5%. case-shiller index telling us that. we heard from david blitzer a moment ago talking about a shortage in availability of

homes. leonard beating the top and bottom line as people continue to watch their orders and the backlogs those are generating here. wrest wrest wrestlemania ringing the bell here, at the nasdaq, ccrc. >> world wrestling entertainment is an overweight. they say these guys are well positioned to navigate the future of tv through their internet based network. they think they'll get to 4 million paid subscribers moving forward. that's a fairly good investment. >> hard to miss the profile spat between comcast and fox. the question is are people willing to pay up $6 a month for access to the yankees and other

things? >> this may be the break point where sports rights cost exceeds peoples appetites for them. we had these skirmishes before, whether it is cbs, which was important for the nfl coverage. i don't know this will be that final decisive battle. but it is very interesting. >> checking in on a couple of housing names. leonard, the biggest gainer in the s&p. there is comcast. we mentioned the top and bottom line in the earnings report before the bell today. wh lennar up today. >> mccormick spice, earnings beat today. they say the effective currency will be lessened on the company going out the rest of the year which is intuitive. this stock is up 25% in the past year. up 14% year to date. nothing ever changes with the business. just grows slowly. it shows peoples appetite for these boring dividend yield

paying consumer stocks. they all look expensive, but so far today mccormick was set to do better. >> salt, pepper, paprika. >> mccormick bidding for an operation in the uk. twice it has been rebuffed there. over the weekend it was report the that they might have a rival bidder for that. so not only where they locked out for the purchase twice in the beginning rounds, but ultimately a higher offer may come through and they won't be an acquirer in the uk. >> checking out shares of chipotle. those were downgraded to underfer founde underperform. year to date only down 3%. of course they have been struggling to regain their footing and become a more compelling case for people to get involved seeing their reputational damage and sales damage from all the health issues they've had. >> the street struggling with that question. how much is the normal run of

business going to come back. the stock, for as much as it was down, it never got cheap. relative to other restaurant companies, it became a normally valued stock for a growth business. that's still an open question. >> oil is in negative territory today, down over 3%. barclays is warning in general the underlying fundamentals do not support the rally we've had, and there may be a rush to the exit, i believe is the expression they use. the energy plays sfshgsplays, it the s&p 500 is something to look at. >> oil and gas exploration space, production space, if you're into permian, those companies are faring so much better. that's the low-cost area than other parts of the country. >> $40 or thereabouts for crude oil feels better. we had this huge rally off the bottom. it seems like a normal range. a tremendous amount of north american production, can't make

money at 40. >> also seems interesting that crude is under pressure even though the dollar has been soft. we're not getting a soft dollar stronger bid for crude or for gold. >> can we check virgin america? this is an interesting story. a report last week that richard branson and some private equity colleagues may be looking to exit virgin america and it is up at the open. you will see the rally we had coming out of last week. "journal" reporting that jetblue and alaska may be keen bidders, which is interesting that you would have consolidation at the cut price level of the industry. many people thought delta, already a branson partner across the atlantic with virgin atlantic, might be interested. it would appear because of the slot argument going on at dallas love field. we'll come back to that. the virgin america earning statement and on the conference kul th

call they spent a lot of time on the southwest pressure in the dallas area. they opened up 18 of the 20 slots. delta did attempt to chalgts that in the squlooifrnlgtsdz sglooifrnlgtsdz 12k3w4r50i6r7b8g9sr that. >> also interesting there's some suggestion this could be the mark of the next wave of airline consolidation. we already went through the phase that brought us from eight big guys down to the four big guys. scooping them up into the larger ones or just combining some of them. >> it's like banks, once you got up to the mega bank level, all the consolidation happened on a smaller scale. >> so what happens to the brand? the loyalists will lament the fact that this brand is going away, people feel it sets itself apart. >> that's why you would argue it going to the delta portfolio. already delta is behaving like a hotel owner with different

brands, with the transatlantic operation. it would appear delta is not -- oh, my. >> very scary. >> wow. >> i was worried those were bear masks, is this a rat? >> it's a sheep. >> bears not allowed here on the floor of the new york stock exchan exchange. >> there are plenty of sheep in the market all the time. >> what do they say? never short a dull tape. we heard art cashin eluding to this. everybody is waiting to hear from janet yellen. gdp downgrade. he doesn't think april is on the table. as you were saying, maybe the call market gives you the opportunity. >> i think the bar is high for april. i understand the fed's willingness and interest, yet janet yellen is interested in keeping dissent out there and willing to go if circumstances

merit it. >> she's always more dovish. >> usually. >> the number of articles that are contradictory on whether there is a revolt on the down side or upside within the fed. i would have thought that would be the main area of concern. that would be the excuse to sell if you think the rally put us vulnerable. >> what is the nut of the argument right now? what defines a hawk or a dove? two hikes this year. we don't get up to 1% of the fed funds funds, it happens in april, june or september. that's the terrain we're arguing over. >> bob pisani has more on what's moving this morning. >> mild to the downside. you're right, we're all waiting for janet yellen. volumes yesterday among the lightest of the year. we're seeing a bit of action in the commodity which is unusual because the dollar is not doing much today. crude down 3% now. copper is also a bit weak. this is not across all the

commodities. aluminum and some base metals flat or slightly on the upside. you can see some of the usual names here, like anadarko, the exploration and production space, devon, marathon, chevron down about 1%. dow is down a bit more than the s&p because of the weakness in energy. drillers are weak today. some of the deep sea drillers, transocean down 6%. there was a comment yesterday from the ceo after a conference saying that the rig rates may not climb until 2019 or 2020. i suspect that's weighing on the deep drilling stocks like diamond, ensco and mobile. freepo freeport-mcmoran and vale all

down. today we saw some of the numbers for home reports, deliveries up 12% for lennar, that's a good number. new orders were up 10%. but the dollar orders, the dollar value of the orders they got were up 16%. they had a record average sale price, $365,000. that's quite a high number. i think it was 320,000 in the last quarter. selling more expensive homes. more importantly, this is the most important thing for home builders, gross margin was very strong. 22.7%. it held up. there were some concerns they might have to sacrifice the margin for growth a bit. they are not. and i can tell you as the son of a home builder, gross margin the important number. the main reason that stock is up 3.5%. talking about ipos later today. 11:20 eastern time, we've been waiting for the ipo market to open. it's been six weeks since the market has turned around. we've been anticipating big moves up in the ipos in the next

week or so it hasn't happened so far. 11:20 eastern time, we will be talking about why the ipo market is not yet open. mike, back to you. >> thank you very much. for more on today's early movers, let's go up to bertha coom coombs. >> apple is holding things up, despite all the controversies in its showdown with the fbi, the stock has done well for the month. up about 9%. it's now positive year to date with today's move. beyond that, it's a sea of red. particularly when you look at chip stocks. though technically the semiconductor index is also strong. has moved up about 6% for the month of march. it's above technical indicators like moving averages. today we're seeing a downgrade. maybe some time to take money off the table there.

micron today also seeing a downgrade. watch microchip and nxpi, morgan stanley thinks they may be among the best candidates for a possible takeover. e-bay today getting downgraded at barclays, seeing some weak fundamentals ahead. and biotechs continually under pressure despite a few standouts like keryx which had strong trial results on a drug to treat anemia in certain kidney diseased patients. back to you. >> thank you. we are down 99 points on the dow. slightly bigger open than we expected led by boeing and 3m. rick what do you see? >> we're seeing rates dip a bit. if you look at an intraday of tense, we are under yesterday's low yields in tens. we're covering in the mid 180s. and if you open up year to date a couple things should jump out at you. it looks like this market turned

and was unable to surpass 2%. maybe more importantly what we are seeing is ten-year note rates on the day janet yellen is speaking do not seem to have much horsepower to the upside. maybe there's several reasons. as you look at that chart and think about maybe that it's turned, look at a year to date of two-year which would be more responsive and sensitive to the fed outlook in terms of their path. you can see it also seems like it has turned with more buying coming in and pushing rates down. something counter intuitive to a normalization cap that many believe the fed may be forced to take. the turn is from a higher level, which reflects the yield curve flatness. if you want to get a handle on how things are changing, let's look at the relationship between our tens and the european tens. whether this is handicapping the v divergences of policy, we don't know how wide those divergences

might be, we'll get more clues when janet yellen speaks today, it's calibrated on that year to date at the upper end which means the difference between those two yields is some of the widest differences we've seen all year. you want context, open the chart up for ten years, it's a lofty air. the last chart, the dollar index and the euro versus the dollar are mirror images each other. in this case the euro has subtle differences on the charts that make everything clearer. you want to talk about an area that's important, look at that double spike at 113. whether you crack through it and settle above it on a closing basis or distance yourself lower, it's a twin peak every technician on this floor is monitoring closely. wanted to draw everybody's attention to what's happening in sunedison this morning. according to market watch, the stock opening below $1 a share

for the first time since 1995 the s.e.c. looking into liquidity disclosures. shares trading at 84 cents. market cap of 266 million. a name trading at about $33 and change at its most recent 52-week high. a closer look at oil prices, jackie deangelis joins us from the nymex. >> as michael santoli pointed out earlier, the market is looking for conviction today. if you're looking for it in oil i will not find it. we're seeing a 3% slide as we start the session here. fundamentals in focus. we will get inventories tomorrow from the department of energy. looking for a 3 million barrel a week build. total stocks at still record levels. when you come back to supply and demand, the story is a crude one. we will hear from the api after

the close today. the dollar in focus as we hear from janet yellen today. this has a big impact on commodities. we started stronger and we are pulling back. if we get more of a hawkish tone and short-term we see that dollar strengthen, it will put pressure on the commodities complex. the wti price down almost 8% in a week. only up 13% in the last month. giving back some of those gains. technical level to watch to the down side right now, 37 bucks. if we breach that, more downside pressure. back to you. >> all right. up next, former apple ceo john sculley on the next phase of the company's encryption battle with the government. what he would do if he were in tim cook's shows. "squawk on the street" back in two. the first stock index ♪ (musiwas createdoughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average.

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apple. i sat back and have seen how good tim cook and apple have handled this. they held up on principle. they said privacy and secure data on an iphone was something they would stand behind. they said they were not opposed to a third party coming in and helping the fbi, which i believe the israeli company called celebright, a mobile forensics software company has been able to do. it's a very, very big win for tim cook and his team. >> all the same now, john, the public and any users, any potential customers who are concerned with this issue first know these phones can be cracked. >> here's what's important. there will always be better encryption and always be better hackers. this is not going away.

tim cook said we need clarity in the law going back to the old r tsht t pwrits law is not a good thing. and this was a 5c, not the most recent model. apple did not gave in to giving the fbi a back door into the iphone. remember, most of apple sales of the ifsh iphone are in the u.s. encryption will get better, hackhack hack hackers will get better, but apple handled this well. >> but they have found a back door to the iphone, does apple

pursue the doj through the courts asking them to show the back door so they can patch it out? isn't that a logical extension of their position? >> i don't think so. i think that apple knows that hackers are getting better and better and they have to keep improving encryption address everyone else in the high-tech industry knows those issues will be around for a long time. i don't think am needs anything from the justice department or the fbi. they can just try to improve encryption overtime. this will be a constant project. this is not like it gets solved once and they can forget about it. it will go on and on and on. the key thing is they didn't allow the fbi to bully them into giving a backdoor into this particular iphone at this particular time. that's a big deal, particularly in china. >> if apple and the rest of the

industry wishes not to rely on this 18th century law that was going to make them unlock this phone, what is the mechanism for trying to settle this? is the fbi going to wait for a different or better case to try and push this same issue again? have the courts figure it out? will it be taken up by some other means? >> i have no idea what the fbi will do. i suspect they'd like to have a precedent. maybe they'll pursue something in the future. for the time being, this thing will go quiet. i think apple will work to make its security better. and my guess is the fbi will work harder to find third parties that can help them crack not only the iphone but other mobile devices. this is not the end of the story. >> to your point, john, 57% of the public we surveyed said they agree with apple's stance, support the company. and that increased in the last couple of months. thank you for joining us this

morning. >> thank you. >> john sculley, former ceo of apple. coming up, the chinese upping the ante in the bidding war for starwood. at what point should marriott say this is too pricey? "squawk on the street" will be right back. [dad] i wear a dozen different hats

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welcome back. earlier we mentioned mccormick spices trading at an all-time high. it's not alone. so too are general mills, coke, going back to its ipo in 1919, tyson foods, all of these new-all time highs. what is the common theme. >> you find most of these products in most kitchens in the country. there's a sense that investors only want to buy aggressively things that have the perception of safety around them. dividend yields, yes, they're hurt by the rising dollar to the extent it's still going to rise. but that's no big deal. i've been writing recently what i call the grandma portfolio, people are giving too much credit to these companies for trying to weather anything. but they're almost like corporate bonds disguised as stocks. >> may also be about pricing power. if you believe inflation is coming back into the economy,

game-changing for them if they can raise prices. >> an inflation hedge. they can eventually raise prices. >> all-time highs there. coming up, breaking news on consumer confidence and more reaction to the fbi dropping its case against apple.

good tuesday morning. welcome back to "squawk on the street," i'm kelly evans, along with simon hobbs, sara eisen, and mike santoli. carl and david are off this morning. let's look at the markets. a weaker open for stocks, off the lows already. the dow down 55 points. s&p is down 4.5. transports down a couple points. the vix is slightly higher. small caps are slightly lower. wti crude down 3% in the session today. breaking news on consumer confidence. let's get to that with rick santelli at the cme. >> thanks. rememb remember, there's two-ways to look at numbers what we expect and the last batch of comparisons. march read, consumer confidence, 96.2. we were looking at a read of

93.5 to 94. beat that. last month, 92.2 was revised to 94. that's good news. now, when was the last time we had a number higher than 96.2? in january, when it was 97.8. better than expected. sequentially better, upward revision comping back towards the beginning of the year not that long ago. interest rates are covering at the lowest levels, should they close there since the first week of march but coming off the lows. 1.86 the last trade on ten-year note yields. simon? >> thank you, sir. in a couple hours janet yellen will speak in new york on the state of the economy and monetary policy. steve liesman joins us live with what we can expect. thinking become to the article that you wrote the end of last week which got a lot of attention suggesting she was having difficulty keeping the hawks at bay. >> yeah it's interesting. what we saw was dovish fomc and

a dovish fed chair from the meeting which caused the markets to really think rate hikes would come later in the year. then just after that, not a week went by before you had four or five presidents saying they were looking for april. i wanted to share with come commentary as the markets wait. deutsche bank says while they may reiterate that april remains a live meeting, we doubt that she will send a strong signal that the fed may hike next month. compare it with nomura, core cpi and manufacturing data has zone signs of recovery eventually which could add to the risk of a sudden turn in the fed's view on the economic outlook. and mark zandi, the economy is pretty close to full employment. it's not consistent with where

rates are today? so does janet yellen lean to the later side? you have risks of global growth, elevated in the last meeting. relatively stronger u.s. growth. however gdp was marked down, and we're looking for strong doves. a lot of cross-currents, none the least is which when you have inflation up towards the fed goal but a headline number that remains weak. it's up to janet yellen now to see if she'll step forward and lead this market into a place where they understand why the fed may hike. speaking of understanding, we may get a bit closer to understanding the fed tomorrow morning on "squawk box" when we have charles evans, the chicago fed president joining us for an exclusive interview. sara? >> thank you, steve liesman. as we await janet yellen, the san francisco fed president spoke this morning in asia, john williams. he expressed his views on the

economy. he said other economic fates do not spell our own. my view is essentially let's stay on track, let's not get sidelined by the noise and distracti distraction commentary can sometime cause. joining us is mark olsen, former fed governor. williams was talking about the international developments, which the fed did introduce into its statement a few weeks ago. how worried should the fed be about what's happening overseas? >> it's an excellent question what the fed tends to do is look at the global economies to the extent they affect the u.s. economy. in terms of what janet yellen might say today, my guess is they might talk about the impact of foreign economies. what she will not do is address directly the dollar. but she may talk about the impact of foreign economies. but the normal -- there are two conflicting trends here. one you have the desire for a normalization, but on the other

hand the inflationary pressure is thought to be particular weak at this point. not one see reaching 2% for core pce in 2016. so i think that's -- those are the competing pressures. >> as this debate goes on, i get it that it's healthy for there to be discussion and disagreement among the economists inside the fed. that's good. we need that to make policies. is it spilling out too much in the open? does janet yellen need to reassert today that she's in charge? and she runs the fed? >> i don't believe that she needs to reassert that. i don't think within the committee that her leadership is challenged. her real challenge is getting a consensus. what they will do, in every meeting, no fed chair that i've ever been aware of has ever tried to move forward without a

good consensus. you have three moving parts. you have the action that day, the possibility of a meeting eight weeks out and the statement that's produced. among those three, you can get pretty close to a consensus. she could have one declining vote, maybe two, three, that would be a problem. >> it's not so much the votes. it's not the dissents. the dissents are a normal part of the fed. it's this fed speak, this overly communicative fed when it comes to sending a message to the markets on the path of interest rates. there does seem to be confusion. >> that's why i think the idea is to keep your eye on inflationary pressure. the fed revised its long-term expectation to describe inflationary pressure as symmetric, meaning below 2% is as bad as above 2%.

that's giving them a lot of room but it's helped define where they're going. >> mark, that does seem to be the case. i think fed officials seem to have room on either side. a lot of what we're talking about here is the nature of ambiguous signals at a time when policy is somewhere near an inflection point or had one in december. isn't it really coming down to some degree a judgment call? because stanley fischer, the vice chair, had been talking about core cp doesn't have to get back to 2%, we just have to have confidence it will get there. maybe that's why the markets think like this and it's more of a judgment call. >> i think you're right. the consumer confidence numbers you came out with will contribute to that. we'll have another job growth number between now and the next meeting. that will make a difference. and i think if oil stabilizes, and then you can see the opportunity for inflationary pressure to build, all of those will make a difference. remember, the next meeting is

four weeks out. >> let's pin you down, mark. are you saying that the data and mainly the inflation data will pressure janet yellen and the fed to move faster than they would want to when it comes to raising interest rates? >> i don't think it will pressure them to move faster, i think it's the inverse. if they see the pressure, if they see inflation coming back to where they see a more normalized rate that will be a go signal. >> we'll see what she says today. mark olsen, thanks for joining us. >> >> thanks for having me. up next, the government cracking the san bernardino shooter's phone without apple's help. the fbi dropping its case. find out what this means for online security and laws in the future when "squawk on the street" comes back. you're an at&t small business expert? sure am. my staff could use your help staying in touch with customers. at&t can help you stay connected. am i seeing double? no ma'am. our at&t 'buy one get one free' makes it easier for your staff to send appointment reminders to your customers...

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man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time. man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems.

the fbi dropping its case against apple after saying it was able to access the phone's contents with the help of an unidentified private third party. this conclusion of a rare public fight between the u.s. government and a large corporation perhaps the latest in the fight of security.

this is your expertise. do you think inside apple there's a sense of relief this is over or a sense of concern that defuse can hack into the iphone. >> i think more the concern. they dodged the first bullet. they stood up. i think they surprised the government by fighting back. not only resisting in court but making it a public issue. making it a conversation. for apple the question is where do they go from here? clearly the government has a way to get into the phones and apple wants to know is this something that makes their customers vulnerable. >> should the fbi share with apple how they did it? this is something that happens a lot in government intelligence when they find ways into computer systems. the question is -- they ask, gee, is this a great way for us to get into peoples data? you know, so that we can use it to get information or is it something that we should notify the company, where the

vulnerability is to protect their customers. and in a sense protect our national security. >> they don't need to notify everybody because we know they got the court case. we know they have a back door into the iphone. on principle, doesn't apple's case mean they have go back to the doj and fbi and pursue them through the courts, and say you opened our iphone, there is a back door, we want to know what it is. >> that's tricky because the fbi close td the case. >> but apple can open a new case. >> it's a tricky question. they would have to start from scratch and make new precedence to do that. i don't think anybody has said that, you found a vulnerabilities, please tell us what it is. >> it would be normal practice to inform them. >> it isn't normal practice. normal practice is -- i once

went to the nsa and had them explain to me how they do it. they say we find a vulnerabilities and we discuss. is this so bad, for instance that we found a big gap in windows that people can exploit? when i went to the nsa, they were patting themselves on the back for saying here's a flaw that we found in windows -- >> why wouldn't they? >> because they want the information. this has been going on for years. they feel their priority is getting the information, not protecting our information. >> do you think that apple feels like it probably knows how they got in? >> i don't think apple does. there's any number of ways. could be something very specific to this operating system and the way if defuse has a phone in hand, if they could do that. just bypass the numbers you have to press, or something more serious. a more general flaw where the

government can flip and get into your phone. >> i wonder if that's in the next iteration of the cloud, will apple be able to prevent this from happening? >> that's why the government might be shooting itself in the foot. now apple is saying, gee, we have to make these things stronger. from the government's point of view is apple will say we'll use the same system in our cloud. right now apple can give the government the information if they want information they store on the cloud. they have the key to that. whether if they set it up that they can't get that information. >> is it any surprise that the government dropped the case? clearly as the fbi director indicated, they were setting precedence here. could they not have pursued it in the courts, see if they could win that and the law of the land

would be laid down for everybody. >> who could be a worse perpetrator than the gunmen who shot all these people in san bernardino. everyone would want that information. and they bet heavily that apple would back down on that. public opinion would force apple. but apple was so strong. tim cook made it -- besides an issue about apple, he made it a moral issue and he's getting traction on that. >> just to continue the thought, are you suggesting they were so surprised about the resistance they got from apple that they don't want to pursue the case anymore and create precedence? >> that's what happened, they dropped the case. >> they dropped the case because there's another way in. >> people in the security industry feel they could have always gotten into the phone. that the nsa knows ways to do this. they're super sophisticated. instead of exploring every possible way to get into the phone, they said, hey, let's get

this precedent in hand, we won't have do this exotic thing. >> the bottom line is we'll have to set a precedent. this battle may be over but the issue is far from resolved. what have we learned from -- it did get into the public discourse what have we learned for the next time this happens? >> we're further along in the conversation. by the way, this argument down to the exact words people use was fought in the 1990s. it was called the crypto wars. the government had a clipper chip that would bypass any big solution. we'll have to adjudicate this again because there's no way to make these systems vulnerable so the government can access them and keep people safe at the same time. >> we'll have you back. >> thank you. >> steven levy. >> now to hampton pearson in d.c. >> we've had our first significant post scalia 4-4 split in one of the more high

profile cases of this term. the court splitting down the middle on a challenge really to a vital source of funds for organized labor affirming a lower court ruling that allows california to force non-union workers to pay fees to public employee unions. the case was frederick versus the california teachers association. the court flsplitting 4-4, leavg inpact a 1974 legal precedent that allows such fees. for the moment, the california system in place remains in place. and this case, again, is the first sort of post-scalia high-profile case where you've seen a 4-4 split where the lower court ruling stays intact. that's a situation we have here. back to you guys. >> hampton, i guess that means for the teachers who want to fight this, they'll have to

start all over again? does this end this particular case? >> the lower court ruling stands in california. this was a challenge that organized labor was concerned about and those on the other side nationwide, had we had a reversal, for example. >> right. hampton, thank you very much. hampton pearson on the supreme court this morning. ahead of next week's wisconsin prime minister, scott walker endorsing ted cruz for the gop nomination. saying the texas senator is in the best position to win the november presidential election. pandora's founder returning as ceo. is that a good thing for the business? we'll talk to an analyst who says the transition reveals inherent flaws in the company's strategy. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options.

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will the shift help put the streaming service back on the path to growth? joining us is andy hargreaves. you cover a host of these companies from cable to sirius, where does pandora fit in terms of making this change and hoping that gives it a brighter future. >> i'm not totally sure what changes they're making, to be honest. it's funny because they're saying they're sticking with the strategy as it stands right now. i haven't been a huge fan of that strategy. but it's odd because the ceo has just left was the architect of that. seemingly we're in the midst of some sort of transition, it's not totally clear what it is. >> i would love to hear it from your point of view. this is a company that has invested in trying to move beyond radio. at the same time it's bringing back its founder. what do you think the vision is here for pandora? >> yeah. that's the confusing part. they've been in the midst of transitioning towards an

on-demand subscription service, ala spotify. they're bringing back one of the founders that started the music genome project that will suggest they're going back to a more concentrated business model focusing on radio and artist marketing, which is an interesting business in a lot of ways better for them. at least so far they said they're sticking with the push towards on demand. i think it would be better to go back towards a concentrated model where they have differentiation. >> bigger picture, is the lesson that maybe there isn't enough revenue and profit and people willing to pay up to have multiple business models work out in this world? >> i think the lesson is you're dealing with limited suppliers in music and if you don't have massive, massive distribution you have not much negotiating leverage. they'll suck the profitability

out of your business. that's the case no matter if you have an established radio business or not. the only way to break through and make money is to be the biggest and baddest. it's difficult if you're pandora to compete with spotify with that. >> i wonder if this could be a buyout target. would you think a bigger more cash-rich tech company would be interested? >> it's certainly possible. i think the assets they have are massive engagement in the u.s. especially on mobile. and what i think is a pretty attractive advertising unit. it's really difficult to capture peoples attention on mobile for an extended period of time, which is what you need to deliver an advertised branded message. and they have that with

30-second spots or 60-second spots. >> do you feel their fair value is $7 a share? >> that's still our estimate. it's based on dcf and -- yeah, that's our best guest for 12 months out. >> shares trading a little bit over $9 today. appreciate it. >> thanks for having me. when we come back, controversy in north carolina over the state's ban on transgender bathrooms. san francisco, seattle and new york city are banning employee travel to that state. the aclu filing a lawsuit. how is it affecting business there? more on that story when we come back.

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. good morning. i'm sue herera, here is your cnbc news update. an egyptian man who hijacked an egyptair plane has surrendered and he has been taken into custody. it follows after he released all the passengers and crew. minutes before the arrest, local tv footage showed several people disembarking from the aircraft. officials don't think it had anything do with terrorism. two people were killed after a suicide bomber blew himself up in baghdad. it took place in rush hour in a local square where day laborers were gathering to look for work.

six anti-trum prp protester were arrested last night in wisconsin. they were arrested after they refused to leave the hotel lobby. and the mayors of brussels and paris leading a minute of silence for the victims of the terrorist attacks in brussels and whlahore, pakistan. you're up to date. that's the news update at this hour. simon, back down to you. >> thank you very much. the clash continues between guaranteeing rights to religious freedoms while not d discriminating against the lgbt community. in north carolina activists are filing a federal lawsuit challenging a state override to a city waiver for transgender people to use restrooms of their own choosing. but that governor's standing firm on his signing of his law

last week. >> i respect people having the right to challenge any law, whether it be in north carolina or the federal government or local government. so i respect any type of challenge. the thing i don't respect is the amount of distortion and misinformation and frankly demagoguing, not only towards this bill but smearing our state when this bill changes no discrimination rights in any city in north carolina or for any corporation in north carolina. >> there are, of course, a number of big names within the business lobby. microsoft, redhat, bayer critical of the law. joining us at post nine, bayer's senior vice president ray curran. >> good to see you again. >> strong rebuttal there from the governor, demagoguery. how would react to that? >> we believe this is bigger than north carolina. this has to do what society as a

whole and america stands for. we don't believe in any level of discrimination or impact on equality on our employees. we work hard to make sure our policies and procedures in the united states are equal across the board to all of our organizations we have and all the people who work for us. >> what are you saying to local states? talk us through the conversation happening behind closed doors. >> let's take it outside the closed doors, that's where it needs to be. this has to be about dialogue. this can't be pushing a bill through within 12 hours. we have a strong presence down in north carolina. thousands of employees and their family part of the community. for us, when we look at this question of whether you'll pull up stakes and leave, exact opposite. we want to have a dialogue to say let's make sure you have all the information correct. this law has passed, but there's still time to have dialogue about it. >> and the response was?

>> we're still waiting to see how the governor responds to that. our company has been around for 150 years. bayer is a company you know and trust well. think of all the changes in laws that have taken place over the last 150 years. a lot of laws passed previously no longer exist. and this particular law, yes, it passed, but it doesn't mean it's right. >> there's two things going on in north carolina. religious freedom bill that the governor just vetoed, correct? and then the question about the bathrooms, correct? >> we believe, again, this is much bigger than just one specific law. america is built on innovation and equality. we are leading the world in equal rights across the globe. when we have moments like this, where all of a sudden there's a step backwards and the direction that we're taking as a society, we have to make sure that we challenge those. looking back 50 years ago, it was government pushing businesses. now it's business saying wait a

second, government, let's look at this thing. we're employing thousands of people across the country. we want to attract and retain the best people in the country. >> how can you do that if you don't boycott and threaten to leave costing the state billions of dollars. >> this is where i come in the opportunity to sit with the governor of any state, legislature of any state. federal government and say let's have a conversation. let's make sure it's based on fact and not behind closed doors. >> the right to religious freedom is real and tangible in this country. people hold it dear to themselves. this is a difficult time for a large number of people. it can feel like suddenly -- a lot of the businesses were quiet for a long time when very, very bad things happen. they were not at the forefront of this conversation. now everybody is jumping on the band wagon. maybe rightly so, but to those minorities it feels tough. if you look at what tim cook said a year ago when he came

out, he said god gave me one of the greatest gifts that is possible. being gay has given me a deeper understanding of what it means to be in the minority and what it means to be empathetic. is there not a greater role from the lgbt community to come back, go into the communities and have a bigger dialogue than those companies trying to exit the state? in the world in which we live, they will get together on social media and those groups could become angry and then they show up in an electoral sense. we need greater dialogue. >> we do. we have 24 employee resource groups, i sponsor two of them, and we want more dialogue from our employees, so therefore i can turn around, with my team of government relations experts go into the states go into the federal government and make sure our voice is heard. do it collaboratively.

that's not what's happened in north carolina, has it? that's how you started this interview. >> correct. >> you've not yet had that conversation. we find ourselves in position where the governor is now going on nbc and saying some things that don't advance the discussion between the two sides. >> simon, we were surprised by the law. no doubt. it went through in 12 hours. let's be clear, we have, as mentioned, thousands of employees in north carolina. significant science presence down there, operations presence down there. we're part of that community. we'll make sure we have a dialogue. the governor is pro business the last few years we worked with him. the opportunity here is for dialogue. we must do what's right. >> georgia yesterday strevetoed their legislation. >> let's get back down to hampton pearson with news on

volkswagen. >> more huge legal problems with volkswagen and federal regulators. the federal trade commission this morning filing a suit against volkswagen for falsely advertising that hundreds of thousands of its diesel vehicles were environmentally friendly when secretly they were emitting excess pollution. that lawsuit was filed in district court in san francisco. saying the u.s. consumer suffered billions of dollars in injury as a result of the deception. vw in other issues with regulators admitted to using undeclared software that allowed some 580,000 diesel vehicles bought since 2009 to emit up to 40 times legally allowable pollution. on another front, we have the justice department suing volkswagen for $46 billion in january for violating the environmental laws. and 500 other similar lawsuits related to excess emissions,

along with suits from various states. april 21st is the deadline for vw to come up with a remedy for vehicles. a spokesperson for vw saying of the ftc complaint that they received the complaint and they continue to cooperate with all u.s. regulators. back to you. >> hampton pearson, thank you very much. it is hard to keep track of all those lawsuits piling up. andrew casperson is being accused of faking investments. the former blackstone executive was charged with securities and wire fraud yesterday. kayla tausche has been following this story. >> andrew casperson was fired two weeks ago from his job from a unit of pjt partners, formerly known of blackstone. it helped investors buy and sell stakes in private equity firms. in that role casperson is alleged to have scammed one client into putting $25 million into what he marketed as a new

investment which didn't exist. and much of it was routed to a perm brokerage account of his. he had planned to defraud investors out of $75 million more when the firm and authorities began their investigations. the investigations led to charges of wire fraud. casperson supposedly built shell companies, fake websites and e-mail address the to carry out this scheme. at this point it is believed casperson acted alone and communicated to clients the confidence in that fact want we still don't know who were the as-yet unnamed charitable foundation and private equity firms involved as victims in this scam. where did the money go? prosecutors monday said they couldn't find the money that was routed to his personal account what would motivate casperson to

go to such lengths? his father, sold beneficial corporation. from that windfall he became a philanthropist and major gop donor. he took his life about six years ago amid cancer. the family said they could not pay the $20 million bail. the $5 million bail is secured by caspersen's two properties. the next hearing is scheduled for april 26th this is a live investigation both by prosecutors and the firm as they seek to get to the bottom of exactly what happened here. >> figure out where that money went, like you said. kayla, thank you. see you shortly. coming up, starwood getting a higher offer from anbang. will marriott respond? what is next in the battle for starwood after the break.

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and lower medical costs. take control of your health at cigna dot com slash take control. . welcome back to "squawk on the street." looking at the markets now, energy stocks really the worst sector so far today. energy coming up 1% lower and still leading s&p 500 decliners. this as oil drops to the lowest level in nearly two weeks. dragging the energy sector down, names like ensco, transocean, diamond off shore and chesapeake, all off by 5% and 7%. energy this month is up about

7%. we'll see if that continues in today's trading. let's get over to the cme group. rick santelli with the santelli exchange. rick. >> thanks. we have a special guest today. in my opinion, a man who understood and wrote some great pieces on the crisis and reforming the gses, which is the topic today. welcome josh rosner to the santelli exchange. >> thank you very much for having me. how are you? >> very good. first, let's talk about any lessons we should have learned regarding the gses. in my world on trading floors, there's an adage when the government gets involved in finance whether it's through education or housing, sometimes bad things happen. what lesson should we have learned from the crisis? >> the lessons we should have learned is there is nothing that replaces capital. that the government should make sure that losses are apportioned on the private markets, not on the public. and that at the end of the day you have a housing industrial complex which remains too strong

in washington and looks for as way of avoiding real banking. >> you believe in the privatization and recapitalization on the government-sponsored enterprise like fannie and freddie. explain. >> if you think about it, the word government-sponsored enterprise has become a filthy term on washington and main street. but at the end of the day our water, gas, electric, our sewer, utilities are government-sponsored enterprises. if it's an industry a good that we recognize has to have a purpose. in the case of the gses it was intended to be, when liquidity dried up in private markets there would be the ability of the banks to make loans and sell them back to fannie and freddie. they didn't do that and were massively undercapitalized.

i believe private markets should be the majority, but adequately capitalized, i'm talking 4.5% or so capital really well capitalized gses who transfer the risk back into the markets and collect a fee is the right answer. it's also the most logical, cheapest and keeps the primary and secondary markets separate so the utility function can be there. you can argue that we should have real boom and bust cycles, there should be no secondary market. we can disagree on that. at the end of the day if we agree there's a utility function we need to make sure it's neither controlled by washington or the primary market industry. >> josh, it always sounds great. we don't have a lot of time left. my problem is always is that it works well until the crisis, which you mentioned, where another feature is supposed to kick in during crisis

politicians like to tinker and the public is too scared to push back. i thank you for your thoughts. we will come back and talk more about taxpayer protections. simon hobbs, all yours. >> thank you very much. the battle between marriott and china's anbang for control of starwood continues with the anbang-led consortium yesterday or over the weekend effectively raising its offer to $14 billion in cash. is marriott likely to increase its stock and cash offer or bow out? let's bring in patrick scholes and david lobe also joins us. gentlemen, good morning. patrick, i'm on the starwood website. i can't see that they still come through recommending this offer from the chinese. in other words, they still have not been able to satisfy themselves on the due diligence, on a day when the papers are full of articles questioning the

voracity of anbang's bid. is this significant that they've still not been able to recommend is officially as a superior proposal? >> absolutely. if you're a starwood shareholder you want assurance that the mof money you're going to get will be there at the end of the day. that's a gray area. on top of that there's both u.s. and possibly chinese regulations that this has to pass through. again, that creates a higher degree of risk that if you go with anbang you may not get paid at the end of the day. david, marriott yesterday released a statement in which they said look, is the funding there? shareholders be careful. at the same time talked about, as patrick suggested, problems getting regulatory review from china, and in this country and on this proximity argument, are the starwood hotels too near

military places. >> i think it s the sifi reviewa i think there's at least some thought that chinese owning american businesses is fine as long as there isn't a real credible national security risk but there could possibly be one in this case. imagine access not just to customer data bases but to all of the wifi and hotels and to immediate yuls where businesses is conducted. there's companies and government officials that won want to stay there if owned by a chinese company. >> the argument is if it's individual hotels that they own in question they can sell those off. so you're raising a much bigger problem. if they say we don't want you to be the service provider, the operator of the starwood network

around the world, could they say that? >> they certainly could. they have the power to veto this deal. that doesn't mean they will. but they certain sli the power to do that. >> patrick, let's say there isn't a problem with it. let's say the cash is there and they got through, people expect them to get through the process without any difficulty. what's the next play? do they need this? could they afford this at a higher price? >> i think what marriott could have done is put out a sub se convention press release instructing them the wiring instructions to send them $450 million. >> which is the new break up fee, $450 million. >> correct. correct. this pricing is now getting frothy and historically buying at peak or near peak multiples typically does not end well. i would prefer marriott did not

raise significantly at this point. >> david, briefly, what would your advice be to marriott? >> i think marriott did the right thing yesterday in saying take a look at our deal. it was a way to signal that they're not going any higher so a agree that they're happy to take the $450 million as a consolation prize and walk away and see if the deal closes and if it doesn't, maybe marriott comes back. >> thank you for the analysis. thank you both. >> up next on the show, we'll take you behind the wheel of the 2016 car of the year. squawk on the street will be right back.

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. it is time to go behind the wheel of the car of the year. it is parked at cnbc's headquaters with robert frank. >> good morning, sarah. this was just named as the car of the year. it's sort of like the power ranking for millionaires: more expensive cars like portia and bentley and the 488 gtb is the

lead horse in ferrari's growth plans as a newly public company. this car by the way does zero to 60 in 3 seconds. it puts out about 660 horsepower. top speeds over 200 miles per hour. but this is a comfortable easy car to drive that turns into a race car. price is $240,000. the waiting list for this car is now about two years long. that suggests that super car sales continue to power through the slowing growth and the stock market weakness right now. now ferrari today, the stock is flat. still down from the highs after the ipos to come back from a little on its lows in february but today guys, i would much rather own the car than the stock. back over to you. >> briefly robert how was it on

the potholes near hq? is it still low slung. >> it was but it was comfortable. i didn't feel like the car was going to bash the holes but there are a lot of potholes around here. i took it slower. i'll try the palisades later. >> you the best job. thank you. let's send it over to john forte for what's coming up on squawk alley. >> well, coming up on squawk alley, we have the congressman that's going to talk security with us. apple versus fbi. he has been an outspoken voice on that. also why the freeze in ipos and in away related now that we see pandora's founders. what's the track records of founders that come back as ceo. all that and more coming up on squawk alley.

some say "free the whales." for them, nothing else is acceptable. but nothing could be worse for the whales. most of the orcas at seaworld were born here. sending them into the wild wouldn't be noble. it could be fatal. when they freed keiko, the killer whale of movie fame, the effort was a failure and he perished. but we also understand that times have changed. today, people are concerned about the world's largest animals like never before. so we too must change. that's why the orcas in our care will be the last generation at seaworld. there will be no more breeding. we're also phasing out orca theatrical shows. they'll continue to receive the highest standard of care available anywhere. and guests can come to see them simply being their majestic selves. inspiring the next generation of people to love them as you do.

good morning, it's 8:00 a.m. at apple headquaters and 11:00 a.m. here on wall street and squawk alley is live. ♪